Burdened at every level to find ways to competitively deliver high-quality care, in an optimal environment, using less resources.
By: Janet Lively and Angie Stokes
For hospitals and healthcare systems, remaining continually competitive means providing superior healthcare, which requires significant investment in top physicians, clinical staff and medical equipment. It also means improving or maintaining high HCAHPS scores, margin and driving cost out of your business. While not as glamorous, utilities and infrastructure can either enhance or impede the items above. Most administrators identify with the fact that most of their facility infrastructure assets are at, or beyond, their expected normal useful life; introducing unnecessary risk, compromised service and compliance, adding to the cost of business and detracting from the ability to deliver quality care.
With a handful of exceptions, most hospitals with aging infrastructure annually allocate capital to cover deferred maintenance; in other cases, there may simply be under-leveraged newer facilities. These cases provide a unique opportunity to address rising utility costs and aging infrastructure through self-liquidating programs, paid for through energy savings. This cost avoidance not only enables this type of program, but its benefits compound over time, combatting the impending annual utility cost escalation (projected to be as much as 20 percent in the next five years).
Energy Enables Investment
The objective – to fund deferred infrastructure investment through energy savings initiatives. By thinking about energy savings as a funding mechanism you can identify and alleviate the most painful asset problems across your system or campus. Tailored solutions reduce operating costs, improve performance and dependability, ensure compliance, mitigate risk and elevate the environment of care. Within your energy spending portfolio, HVAC, Hot, Chilled and Domestic Water Systems (equipment and controls) and lighting account for approximately 85 percent of your costs. In other words, if your annual utility bill is $1,000,000, these factors account for $850,000 of that expense.
This approach challenges the notion that it’s less costly to fix on fail or delay purchasing of more efficient equipment until nearly unavoidable. Progressive organizations recognize there are real cost implications for doing nothing; they found they were spending money on increasing utility costs, maintenance and capital investments and losing energy efficiency with outdated systems. It is undeniable that cutting the delta between cost increases and efficiency is real, and that the realized cost avoidance figures could be reallocated toward infrastructure upgrades. It requires organizations to look at the total cost of ownership, not first cost.
Driving Forces Beyond Our Control
The global energy markets are experiencing dynamic changes; many not seen in decades. Federal agency legislation has changed the game with respect to the coal market and the aging grid dependent upon it. This, of course, drives the price of electricity up. While Kentucky utility costs have been traditionally low, compared to other markets, the looming conversion of coal-fired to gas-fired utility production across the state will drive electricity costs higher. Meanwhile, domestic production of natural gas has stabilized and delivers record-low prices. This enables healthcare organizations to reallocate and reduce their costs, through the creative usage of this resource, with innovative approaches and new technologies.
Gain Control with Innovation and Technology
The genesis of an energy initiative leverages the energy potential to address the asset needs. By coupling energy conservation measures that address both infrastructure needs and those that generate energy savings, hospitals can proactively manage their energy and put funds once restricted for capital into more mission critical investments.
One such method creatively uses methods such as combined cycle to capture and repurpose energy lost in traditional applications. Pardon a little engineering speak – hospitals have both thermal and electrical loads (electricity and heat needs). You buy electric from a provider and typically the thermal load is supplied by a boiler. In this example, what if you could generate your electricity necessary to run chillers and capture lost (wasted energy) heat for the boiler, increasing efficiency by as much as 30 percent.
Benefits of Energy Initiatives
Energy improvement initiatives can achieve the following objectives for hospitals and healthcare systems:
- Reduce risk (areas of compliance and equipment failure).
- Address capacity or redundancy.
- Gain new and reliable infrastructure assets.
- Control cost (energy, maintenance, capital).
- Elevate maintenance and engineering productivity.
- Improve performance.
- Reduce of energy consumption.
- Reduce annual capital and operational investment requirements for infrastructure.
- Maximize your future energy position.
Attacking these opportunities garners projected savings that not only addresses, in some cases, millions of dollars in aging assets, but positions you to combat imminent energy changes.
There are many methods to capture savings, lower your operating, maintenance and capital costs. The paradigm shift is to look at energy differently. To see it as a vehicle to self-liquidate, mitigate price increases and risk, address infrastructure needs and reallocate funds and human resources toward delivering healthcare.
-Janet Lively is in business development at Harshaw Trane and Angie Stokes is healthcare account executive at Harshaw Trane.
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