Economics, Energy, Environment at HCD.10

Posted on December 7, 2010


Economics, energy and the environment (E3) was the topic for an investigation into how the economics of energy will change the healthcare environment. Results were presented in a seminar at the Healthcare Design Conference 2010 last month. The baseline data for this investigation is a survey that proved healthcare administrators have a distorted and underestimated sense of how much energy costs will rise between 2010 and 2025; energy costs are expected to double.

This immediately shifts the focus to how to save money on the utility side of a healthcare facility. I learned a staggering fact:  $1 saved in energy costs (or any out-of-pocket expense) equals $25 in hospital revenue. All dollars are not equal on the balance sheet. On a case study hospital, energy savings after an energy audit and systems overhaul translated to $11/sf, which translates to $7 million a year for an “average” 288 bed hospital.

Another survey by the presenter uncovered the fact that the number one operations worry among hospital system administrators about the future of their hospital is the reliability of infrastructure. Yet a hypocrisy exists:  when it comes to purchasing equipment and materials, first cost always trumps system sustainability or longevity. This unfortunate byproduct is a consequence of a capital budget mindset applied to an operations budget; managers are rewarded for capital budget cost savings, rather than operations cost savings—even though as described above operations dollars saved go directly to the bottom line and equate to 25x more than capital cost savings which must generate multiples of revenue.

The bottom line is facilities need to account for life cycle costing and should look into the Energy Star program for a primer. An Energy Star hospital measures current hospital energy performance against a comparable baseline to see if savings and efficiency are being achieved. Surprisingly, an “average” hospital uses 440,000 BTUs/sf/year, while an Energy Star hospital of the same spec’s uses 96,000 BTU/sf/year, about 78% less.

Kim Shinn, a sustainable design veteran who has provided a wealth of data on the business of green design, was in the audience in the question-and-answer part of the session. He noted the most influential parts of a benchmarking exercise for a facility will target five key areas:

  1. Retroactive commissioning – to address present performance against the past, and to plan for future performance
  2. Lighting levels – lights add tremendous energy load to a facility, and chosing efficient lamps is a great first start
  3. Supplemental activities – addressing the roof, window tinting and glazing, caulking and insulation all help
  4. Air handling – building in flexibility into the air distribution system with VAV and proper drives saves money
  5. Right-size chiller – buying excess capacity offers big savings and has a ripple effect through the whole HVAC system

This session was empowering, but also challenged attendees to ask manufacturers of devices to help designers sell owners on better systems and components. Designers need to be proactive in a negotiating role between the owner and component manufacturers. Find out how to couch the discussion in metrics and measurable data that is important and digestible by the owner.

As I have written before, it is getting more attention, but energy savings is not the sexy part of running a hospital; it is forgotten, unsung and inscrutable to many. No one wants to talk about it. It may be yeoman’s work, but a well-managed energy system has a huge effect on hospital bottom lines, and in some ways, a compounding effect:  a right-sized system uses less duct, smaller component, takes less infrastructure, requires less maintenance, uses less square footage…and this all trickles back to the benefit of the facility’s bottom line.