Surging energy costs are putting the squeeze on hospitals like never before—scrambling budgets, sometimes tripling gas and electric bills and siphoning off cash that might otherwise be used for needed capital projects. 

The good news: There are untapped conservation opportunities galore to help soften the impact.

Far beyond hospital walls, sharply higher costs for energy have shot up the list of concerns for the American public and businesses alike in recent months. Consumers upset about $3-a-gallon gasoline have nothing on facility managers, however, with hospital numbers-crunching having become an increasingly grim chore. Hospitals’ energy expenses have now increased by 50 percent in the past three to four years, according to Mike Kuechenmeister, director of plant operations for St. Luke Hospitals in the Cincinnati suburbs of Fort Thomas and Florence, Ky.

“If somebody had told me five years ago when (natural) gas cost $2 or $3 a unit that we’d be paying $7 or $8, I would never have believed it,” Kuechenmeister says. “Juggling budgets with less is a daily challenge.”

He has lots of company. A survey of hospitals nationwide by Health Facilities Management and the American Society for Healthcare Engineering (ASHE) found that 91 percent reported higher energy costs over the previous year, and more than half cited increases in the double-digit percentages. For one hospital in every six or seven, the jump in costs was more than 25 percent. And that was before the big leap in energy commodity prices this spring.

While energy costs may be at unprecedented levels, conservation efforts are rising, too, according to the online energy use survey conducted for Health Facilities Management and ASHE in March by Perception Solutions Inc., Aurora, Ill.

Ninety-three percent of respondents reported that they will be implementing energy-savings initiatives in their construction/renovation projects for the next three years, and many related successes from a wide range of tactics in combating energy costs from day-to-day operations. Another encouraging sign for advocates of conservation efforts: The overwhelming majority (76 percent) of facility managers said the prime responsibility for auditing energy costs in their organizations lies with them. (Another 11 percent said administration/finance had the prime responsibility for auditing hospital energy costs, while 8 percent, 3 percent and 2 percent cited an outsource firm, “other” and materials management/purchasing, respectively.)

The survey results clearly show that facility managers already have leaped two common hurdles in tackling energy conservation, according to Dale Woodin, deputy executive director of ASHE: establishing interest in the problem and taking ownership of it. “People are taking a hands-on approach through audits and good ideas for energy saving, including turning things off and moving out of low-occupancy or high-energy-use areas,” he says.

Nevertheless, the survey confirmed big gaps in the collective effort. Only 43 percent say supply-side management was a consideration in their hospital’s energy program; 30 percent say they set an energy budget and performance targets and monitored them annually; and just 23 percent say their hospitals performed energy audits. The survey results, based on responses from 736 hospitals, carry a margin of error of plus or minus 5 percent.

“High performance doesn’t happen by accident,” says Clark Reed, program manager for the Environmental Protection Agency’s ENERGY STAR initiative, who thinks hospitals’ energy management programs need to grow. “The best hospitals are ones that have developed a comprehensive management program that enables them to assess energy performance, set goals and evaluate success. It’s about putting the right people and systems into place that make energy management everyone’s business.”

Energy efficiency in NYC

Organizations interested in a full array of energy conservation measures can look to New York-Presbyterian Hospital, New York City, which last year knocked 14 percent off its energy tab through various cost-saving programs. Much of its progress has come since 2003, when senior management created a full-time management position to handle energy-related issues.

Jennifer Kearney, the energy programs manager, says the hospital has gone after energy in terms of both costs and consumption. From the cost side, it established long-term relationships with reliable suppliers and used its size and credit rating as leverage to negotiate favorable unit costs. It also establishes a budget and sticks to it.

Consumptionwise, Presbyterian spent $1.1 million over the last two years to modernize all 11,000 light fixtures in two facilities, gaining annual savings of $400,000. It similarly saved $415,000 a year through a chiller project that cost $3 million. Other initiatives have included installing direct digital controls and HVAC projects.

“Sometimes you feel like you’re emptying out the ocean with a teaspoon,” Kearney says. “But when you put it all together, we’re doing about $1.4 million a year in energy cost savings from our conservation projects.”

Most hospitals can’t make the investments in energy savings that New York-Presbyterian does. Money-related reasons were among those given most often in response to a survey question asking why recommended energy-saving measures hadn’t been implemented, including 37 percent who reported a lack of funds. Additionally, 31 percent cited other priorities, 26 percent said the payback period was judged to be too long, 23 percent said operations and maintenance budgets were underfunded and 16 percent cited lack of senior management commitment and support.

But even for the cash-crunched, Woodin says there are plenty of low-tech, lower-cost actions that can be effective—many of them summarized below. “Some of the fundamental things that have been around forever end up saving you the most money,” he says.

Shortened paybacks

William Morgan, ASHE president and engineering manager at St. Alphonsus Regional Medical Center in Boise, Idaho, saw his facility’s gas bill triple last winter in the wake of the Gulf Coast hurricanes that caused prices to spike.

The increase, amounting to hundreds of thousands of dollars, was unbudgeted and came on so fast it was difficult to make his senior leadership team understand the impact. But he sees the trend as a chance for change at both his institution—where work on an energy management plan was accelerated—and nationwide because hospitals are likelier to fund energy-conservation projects.

“There is some positive to it,” he says. “With the increase in energy, it gives us an opportunity with a little more effort on our parts—working with vendors and others—to put together packages that have more payback and a lot more enticement for those capital dollars. Things that would have had a seven-year payback would now have a one- or two-year payback.”

A majority of hospital buildings are relatively old; 67 percent of survey respondents said their main buildings on average were more than 20 years old. Reed says that, just as buying expensive energy control systems doesn’t guarantee top performance if not operated properly, old buildings can be among the best performers when maintained well.

When upgrading an existing health care facility, the ENERGY STAR program recommends an integrated strategy that could save twice as much energy as typical approaches—starting with recommissioning, which can save 5 percent to 15 percent of energy just by optimizing building control systems and improving operations in maintenance. The first three stages—recommissioning, lighting and supplemental load reductions—address reducing heating, cooling and electrical loads. Once those loads have been reduced, hospitals can upgrade their HVAC equipment and fan systems to meet current loads and optimize performance.

The nation’s most energy-efficient hospitals use about 30 percent less energy than their competitors, according to Reed—an advantage that sky-high prices may be compounding. “Now that prices are on the rise nationally, more hospitals are going to see they’re sitting on top of a gold mine in energy savings,” he says.

Routine steps

As a simple—and free—first step toward energy savings, Kearney recommends signing up for the ENERGY STAR Partnership, which provides members with a series of technical and consulting resources to put an energy management plan together. (For more, go to www.energystar.gov/index.cfm?c=healthcare.bus_healthcare.)

After that, Kuechenmeister strongly advises bringing in an engineering firm to ensure that cooling and heating equipment is calibrated properly, rebalancing air flows throughout the hospital. While that can be expensive, he says it should bring a return on investment in two years or less.

ASHE also recommends a mechanical and electrical assessment and a simple walk-through inspection that may reveal areas where lighting or equipment have been left on unnecessarily or service levels can be reduced. Unused areas and little-used rooms should be closed off with blinds or shades drawn and climate-controlled air reduced or eliminated. Storage rooms should not be heated unless necessary.

Other simple measures include cleaning lamps and reflectors regularly, replacing lamps and filters at the recommended time intervals, regularly checking for and repairing leaks, checking that thermostats and timers are accurate and correctly set, and seeing that automatic controls function properly.

Lighting up

Lighting consumes 22 percent of electrical energy in hospitals, according to Reed, and many facilities managers are taking advantage of a relatively easy way to reduce costs. Most facilities have moved from incandescent to fluorescent lighting over the past decade and many are installing high-efficiency systems in new construction.

In fact, 38 percent of respondents selected lighting control and retrofit as an operational energy savings project they had implemented in the past three years, ranking it higher than improved operation and maintenance procedures (37 percent) and water conservation measures (21 percent). Additionally, lighting retrofits were listed as the top energy-saving initiative lined up for construction/renovation projects in the next three years.

Popular recent strategies include taking advantage of load management options such as daylight harvesting, occupancy control and manual dimming. Using sensors for smaller rooms also is an increasingly used option.

Taming the ‘power monsters’

Centrifugal chillers are, as Woodin puts it, “the power monsters in the boiler room.” But their potential energy efficiency has improved significantly with recent advances in control systems. The new systems are microprocessor-based and can perform functions that were not possible with electromechanical systems. That enables chiller controls to be coordinated with energy management systems and the chiller operation to be matched with building needs. In addition to considering such new systems, experts recommend installing variable-speed drives on the chilled-water pumping system wherever possible.

Chiller plant replacement/optimization/centralization was the most frequently cited energy-saving capital project in the survey, with 35 percent of the respondents saying they implemented one over the past three years. Moreover, another 30 percent of the respondents expect to undertake a chiller project in the next three years.

In addition to overhauling its boiler operation, St. Luke’s Hospital in Bethlehem, Pa., undertook an optimization program on its chillers that helps control pump and cooling-tower capacity. Steve Rosati, manager of facility systems said it cost $90,000 and is delivering an annual return of $40,000 to $60,000.

An Anchorage hospital, the Alaska Native Medical Center, took a suggestion from an energy audit and installed a groundwater cooling system that operates from May to October, sending groundwater through a plate-frame heat exchanger that has chilled glycol on the other side. The hospital added a well, circulating pumping/piping and the heat exchanger for $460,000, resulting in annual electricity savings of about $50,000 versus the cost of operating large mechanical chillers. Jerry Hendrickson, the hospital facilities engineer, says the system “worked out a little better than we expected” but still has only a nine-year return, longer than the projects generated by the previous energy audit.

“Last time we did the easy ones,” Hendrickson says. “Now we’re into the sticky ones that involve more capital, more capital investment, longer-term return, more vulnerability to utility rates and (depend on) availability of technology,” he says.

Boiler upgrades

Along with chillers, boilers consume most of the energy in hospital buildings so it is important for organizations to inspect them regularly and spend enough to keep them running as efficiently as possible.

By monitoring multiple points on steam systems, facility managers can detect performance reductions that occur slowly over a period of years. Boilers should be inspected for scale deposits, accumulation of sediment or boiler compounds on waterside surfaces.

St. Luke’s replaced its 53-year-old boilers for just over $1 million last year and realized a 19 percent improvement in efficiency. Concluding that associated processes such as surge tanks and feedwater were wasting energy, too, St. Luke’s also went to a plant optimization system that enables pumps to be controlled and reduces the amount of water used. Rosati says the project should pay for itself in five years or less.

St. Joseph’s Hospital in Chippewa Falls, Wis., had aging boilers, too, when it hired a contractor to determine whether they should be replaced. The three-decade-old burners were found to be in good condition, but St. Joseph’s invested in new burners and flue turbulators to make them more efficient, providing for a more even distribution of heat. The boiler efficiency project cost $29,000 and was on track this spring for a less than one-year payback. “It was a worthwhile project any way you look at it,” says Roger Elliott, coordinator of plant services.

Other engineering directors reported that good water treatment is essential to maintain peak performance and will also extend boiler life and help avoid costly repairs.

Supply side strategies

Fifty-seven percent of the respondents said supply-side management was not part of their hospital’s energy program, so it is probably not surprising that 41 percent said they accepted fuel surcharges without challenge. However, another 15 percent said they negotiated a time limit or cap for fuel surcharges, 5 percent refused to pay a surcharge and 4 percent threatened a change of vendor if a fuel surcharge was not rescinded. (Thirty-one percent reported not experiencing a fuel surcharge.)

Moreover, using competitive bidding, negotiations or the leverage of a group to obtain better utility rates has been helpful to several hospitals.

For instance, Lynchburg (Va.) General Hospital gets a more cost-effective price for natural gas by putting its contract out for bid to suppliers every year. Savings have been a modest $31,000 over five years but still worth the effort, says David Van Donsel, the operations manager. “We hope that we are identifying some times when the market is down in locking up our gas supplies for the colder months,” he says.

Saint Francis Hospital and Medical Center in Hartford, Conn., negotiated directly with electricity suppliers, saving $6.3 million over three years. “We’re still going to incur a sizable increase for 2007-2012,” says Robert Falaguerra, vice president for facilities support services and construction. “However, everything’s relative. We saved a lot of money over those first few years.”

Other successes

Experts say installing submetering equipment can provide one of the highest returns of investment of any utility expenditure. David Stymiest, senior consultant for compliance and facilities management at Smith Seckman Reid in Slidell, La., cites the example of a leak in a water line to the parking garages at a facility where he worked that was detected only via a time-of-use water meter that showed weekend use. “People who are professionals in the energy management business have all heard the cliche, ‘You can’t manage what you don’t measure,’ ” he says. “And it’s a cliche because in this case, it’s very true.”

Among other successful strategies, OSF Health System of Peoria, Ill., helped ensure that its six medical centers would be operated at the lowest energy costs possible by emphasizing return on investment during a collaborative design process with the architect and engineer. “It takes a commitment to the savings,” says Edward McKenzie, OSF’s corporate facilities engineer. “The key is the team effort and having someone perform the analysis on the life-cycle cost versus the first cost.”

Weatherization was a key element of a three-year energy conservation program at Franciscan Skemp Mayo Healthcare in La Crosse, Wis., which Rajendra Shah, director of facility services, says has resulted in modest utility cost savings. Film on windows was replaced and a roof maintenance program was developed while the hospital separately took such steps as installing variable frequency drives on air handling units, fan motors and medical air pumps.

Long-term goals

Despite all the options, there’s no quick fix available to completely offset skyrocketing costs in the short term. Facility managers who have been working at energy conservation for a few years say the potential for savings gets less as each big project is picked off.

“The difficult thing now is there’s no low-hanging fruit,” says Elliott. “It all helps. But the big heyday with this stuff was several years ago, because everybody had all this technology from back in the ’50s.”

Like many of his counterparts at other hospitals, though, Elliott keeps “pecking away”—reviewing consultants’ suggestions, studying new technology and analyzing potential paybacks.

Facility managers have little choice but to stay on the lookout for energy savings wherever they can be found. Putting an energy management plan in place and being aggressive about conservation in the face of the run-up in energy costs is paramount, Morgan says, because “it’s going to get worse before it gets better. It’s going to hit us—it’s going to hit us hard.” 

Dave Carpenter is a Chicago-based freelance writer who frequently covers the health care industry. Suzanna Hoppszallern is senior editor of data and research for Health Facilities Management’s sister publication, Hospitals & Health Networks.

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