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CARBON FOOTPRINT
Hospitals Declare War on Energy Inefficiency

The health care industry steps with a heavy footprint. There are still critical issues for health care systems as they consider ways to reduce their carbon footprint, use resources more efficiently, reduce costs and improve patient and community health. Accounting for nearly a tenth of the country’s carbon-dioxide emissions and facing rising energy costs, climate change legislation and outdated 24/7 facilities, the health care industry is embracing energy efficiency as a viable and cost effective path to improve margins and reduce the impacts from their own building operations. “Every dollar saved on energy costs is a dollar that is devoted to improving medical care for our patients,” declared Dr. Herbert Pardes, president and CEO of New York Presbyterian Hospital.1

It is time for health care CEOs and facility managers to
boldly embrace sustainability management and make changes
that lead to a stronger balance sheet and a healthier planet.

In the United States the health care sector ranks second, after fast food, as the most energyintensive industry, spending $8.5 billion on energy every year.2 Hospitals alone spend roughly $5 billion a year on energy costs. Given that hospitals have high-energy demands for heating and cooling; ventilation and lighting; and plug loads, they consume almost twice the energy per square foot as traditional office space and produce more than 30 pounds of CO2 per square foot.3 Moreover, the Department of Energy (DOE) reports that hospital energy costs have risen 56% from $3.89 per square foot in 2003 to $6.07 per square foot in 2008 with no end in sight.4

Leading health care systems now recognize that to provide the highest quality care, they have an ethical responsibility to contribute to health—inside and outside hospital walls. This means taking concerted action to reduce CO2 emissions that lead to complications in health. Forward-thinking health care CEOs are making a strong business case for energy efficiency as a cornerstone of their sustainability policies. They are considering the economic and social impacts of their facilities. As a result, health care thought leaders have adopted a broad, systems-wide approach to sustainability. The result: energy management now sits side-by-side with clinical and financial governance.

Yet, there are many health care organizations that are acting too slowly or falling short on execution. Many have not integrated sustainability into their business functions nor developed a plan to measure, track and report their sustainability efforts. Furthermore, many organizations are focused on individual projects rather than developing a process to change systemwide business practices that impact their sustainability footprint. They are still asking whether or not dedicating effort and staff towards strategic resource management (SRM) is a good business investment and are struggling to create and manage organization- wide sustainability initiatives.

Reducing Global Emissions is a Health Issue
While health systems typically focus on the needs of their local communities, their impact on the environment is global. Given the correlation between warmer temperatures and rising carbon dioxide, the health care industry’s mission must account for environmental consequences beyond the hospital and far beyond their communities.

To measure the health impacts of carbon dioxide emissions, Practice Greenhealth has developed the Energy Impact Calculator (EIC). Based on the U.S Environmental Protection Agency’s (EPA) analysis of power plant emissions of sulphur dioxide, nitrous oxide and mercury, the EIC estimates premature deaths, chronic bronchitis, asthma attacks and more by kilowatts per year used by hospitals. According to Practice Greenhealth, “A typical 200-bed hospital in the coal-powered Midwest using seven million kWh is responsible for more than $1 million/year in negative societal public health impacts ($0.14kWh) and $107,000/year ($0.01532/kWh) in direct health care costs.”5

Reducing Costs
To reduce costs, health care systems are focusing on energy. The American Society for Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) and Johnson Controls released a study in 2008 showing that health care executives place a higher priority on energy efficiency than executives in other industries. 59% responded that the need to control costs is a greater motivator than environmental responsibility.6

For a hospital operating at a 3% margin, energy savings of $200,000 equals more than $6 million in revenue. Dr. Peter Glynn, former CEO of Kingston General Hospital in Ontario, Canada supports the business case for sustainability: “With limited resources available for direct patient care, it’s vital that hospitals investigate all possible opportunities to find operating savings. We’re pleased that this [energy efficiency] initiative has found efficiencies that will help us spend less on energy. The bottom line is that more money is available for patient care and clinical programs. We see this as a win-win situation for the environment and the patients we serve.”7

Health Care Systems Take Action
For more than four years, the Northwest Energy Efficiency Alliance, (NEEA), through its BetterBricks initiative, has been helping executives and facility managers at leading Northwest hospitals and health systems take a more strategic approach to energy and resource use. Facility teams are finding they can reduce energy costs, which typically represent up to 3% of a hospital’s operating budget, by 10% – 30% at little or no cost.

One prime example is Legacy Health in Oregon. The Legacy facility management team, overseeing six facilities totaling 3.5 million square feet, has been working on a strategic resource management plan for the past three years, yielding potential and realized savings of more than 23 million kWh or $1.3 million per year. Facility managers at one of their hospitals, Legacy Salmon Creek, identified opportunities that are expected to reduce annual energy costs by 15% – 20%, or roughly $250,000 per year.

Another Northwest hospital system, Providence Health and Services, which operates 18 facilities, adopted an energy management initiative in 2002 to reduce energy costs an additional 10% over five years. In 2004, the system was named ENERGY STAR® Partner of the Year for the results achieved through this initiative. Providence reduced system-wide energy use by 5.7% in 2008, even as the square footage of its facilities increased by 17.4%. The organization has saved more than $13 million since establishing a formal energy office in 2004.

Lessons Learned
NEEA’s BetterBricks initiative has developed several critical success factors for reducing carbon and energy use in health care facilities. These form the basis of a Strategic Energy Management Plan (SEMP), which should include several elements.

Executive management must lead the sustainability effort and it must be viewed as a long-term process rather than a discrete project. In a report by MIT Sloan Management Review detailing how to institutionalize a sustainability agenda throughout an organization, corporate and thought leaders were adamant that “top-down vision, commitment and leadership were critical for success—and the absence of top-down commitment was one of the greatest impediments to successful execution.”8

A Strategic Resource Manager must drive the sustainability process. One of the most important commitments executives can make is to invest in a Strategic Resource Manager (SRM). To be most effective, the SRM should report to finance or operations, working closely with facility managers and executives alike to manage energy resources, which includes tracking and reporting energy savings.

Strategic energy management requires systemic business change. Energy management must be embedded into key business practices. Practice change covers all applications of energy management—starting with no- cost/low-cost tuneups for existing equipment and systems and extending to new construction and major renovations; financial analysis and procurement practices; and measurement and reporting of results.

Explicit performance goals motivate change and sustain organizational commitment. Clear performance objectives accelerate decisive action, document success and allow for course corrections as needed. Explicit goals motivate change and sustain organizational commitment.

Alliances are critical for success. Organizations pursuing long-term energy management must build alliances with stakeholders, suppliers, utilities, regulators and influencers to fill in gaps in technical or operational capabilities.

A 2009 article in the Harvard Business Review titled, “Why Sustainability is now the Key Driver of Innovation,” makes a bold statement that “only companies that make sustainability a goal will achieve competitive advantage.”9 For companies and health care organizations alike, becoming environmentally friendly can lower costs and increase revenues. For any health care organization this is even more imperative. Sustainability supports its mission of providing the highest quality care. Writing for The Lancet, Margaret Chan of the World Health Organization (WHO) notes, “Cutting greenhouse gas emissions can represent a mutually reinforcing opportunity to reduce climate change and to improve public health.”10

The savings from sustainability programs at health care systems are well documented. Most efficiency investments yield returns of 10% or more. There is no doubt that reducing carbon emissions is a major force to be reckoned with—one that will determine how health care systems think, act, manage and compete. It is time for health care CEOs and facility managers to boldly embrace sustainability management and make changes that lead to a stronger balance sheet and a healthier planet.

Jennifer Stout is the hospitals and healthcare market manager for Northwest Energy Efficiency Alliance’s BetterBricks Initiative.

1 ENERGY STAR Success Story: NY-Presbyterian Hospital
2 Healthy Hospitals, Healthy Planet, Healthy People: Addressing Climate Change in Healthcare Settings; World
Healthcare Organization and Health Care without Harm
3 U.S. Department of Energy
4 U.S. Department of Energy: Energy Efficiency and Your Hospital’s Bottom Line
5 Calculate how your energy use impacts health: Practice Greenhealth’s Healthcare Energy Impact Calculator (EIC)
6 Healthcare Executives Place Higher Priority on Energy Efficiency Than Others, Research Shows; Energy Weekly News, August 4, 2008
7 Kingston General Hospital Remedies High Energy Costs, Natural Resources Canada
8 The Business of Sustainability, MIT Sloan Management Review
9 Why Sustainability is now the Key Driver of Innovation, Harvard Business Review
10 Cutting Carbon, Improving Health, The Lancet, Vol. 374, December 5, 2009

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