How Retrofits Can Reduce the Cost of Healthcare

With all of the media attention paid of late to the rollout of the Affordable Care Act (aka Obamacare), it’d be easy to miss a related, if seemingly mundane, development: the recent release of the U.S. Department of Energy’s Advanced Energy Retrofit Guide for Healthcare Facilities. Of all the challenges facing the nation’s healthcare system, one of the most pervasive—yet solvable—is its incredible energy consumption. U.S. healthcare facilities spend $8.8 billion per year on energy.

Connecticut’s Greenwich Hospital was one facility contributing to that colossal number. On the U.S. government’s 1–100 rating scale for ENERGY STAR (a score of 75 or higher is required for ENERGY STAR designation), Greenwich Hospital scored a disappointing 47, indicating plenty of room for improvement. The hospital implemented a deep energy retrofit and the results speak for themselves: Greenwich saved more than 1.7 million kWh and $303,000 of electricity per year, nearly doubled its ENERGY STAR rating to 88, and reduced its overall energy consumption by 35 percent with a less-than-six-month payback on the effort.

According to the Advanced Energy Retrofit Guide, such opportunities to save more than 30 percent of the energy cost in many hospitals abound. And because the retrofit value isn’t limited to just the energy savings, demand for retrofits should be strong. Healthcare retrofits provide numerous other benefits ranging from improved equipment longevity to decreased patient recovery times to a more attractive brand.

Co-written by RMI, the Advanced Energy Retrofit Guide is part of a series that provides retrofit guidance specific to various commercial property types. One of the biggest barriers to eliminating wasteful energy spending is a lack of reliable and actionable energy retrofit data and guidance. The Advanced Energy Retrofit Guides address this gap by providing recommendations tailored to specific property types for effectively evaluating, planning, and implementing energy efficiency measures. The guides also provide detailed case studies demonstrating how organizations have successfully implemented similar measures.

Energy Use in Healthcare Facilities

Healthcare facilities are one of the most energy-intensive facilities in the U.S. According to the 2003 Commercial Building Energy Consumption Survey (CBECS), the average hospital spends $675,000 on energy costs annually, exceeding the per-building energy costs of other building types by a factor of 10. The energy use intensity for hospitals is approximately 250 kBtu per square foot, ranking just behind the food service sector. To put that in context, the energy use intensity of hospitals is nearly three times that of a typical office building.

Energy Savings Opportunity

The energy cost savings potential in healthcare facilities ranges from 10% to 32%, according to an analysis completed of “typical” facilities in five different climate zones. The Advanced Energy Retrofit Guide analysis broke down this savings potential into two steps.

The first step towards energy savings in healthcare facilities is to fix what isn’t working right, known as existing building commissioning, or EBCx. EBCx consists of developing a detailed understanding of the buildings systems and operations, followed by targeted upgrades and changes to optimize those systems. These upgrades can include improvements in operation and controls for ventilation, lighting, plug loads, the building envelope, water heating, space heating, and space cooling. Limiting these improvements to those that were both widely applicable and cost-effective, the Advanced Energy Retrofit Guide for Healthcare Facilities shows that EBCx can reduce energy cost 6–12% within a set of sample facilities.

Beyond commissioning the existing system, building retrofits that replace equipment and components offer even more opportunities for healthcare facilities looking to reduce their energy consumption. Although individual retrofits can produce significant savings on their own, complementary benefits can be gained by upgrading multiple systems. As noted in the report, “if lighting and HVAC systems are replaced, the HVAC system designer can take into account the reduced cooling load achieved by the lighting retrofit, resulting in a smaller cooling system.”

Although retrofits can require significant capital investments, these projects become financially attractive if timed to coincide with other deadlines or requirements. For example, purchasing an energy-efficient furnace becomes much more financially attractive if the hospital’s furnace is scheduled to be replaced anyway. Considering only simple and cost-effective measures, the Advanced Energy Retrofit Guide for Healthcare Facilities presents a recommended retrofit package within sample facilities that reduces energy cost 4–21% (in addition to the EBCx savings).

Retrofit Benefits

Well-planned and executed retrofits can create significantly more value than the energy cost savings. Analogous to the simple maintenance activities you can do with your car, the simple, low-cost efforts of EBCx increases the life of costly equipment in addition to making it run more efficiently.

Even bigger values can come from retrofits that improve the air quality of the hospital or introduce daylight into patient rooms. Lawrence Berkeley National Laboratory documented that air quality improvements can reduce the transmission of airborne illnesses within hospitals. In addition, multiple recent studies have found a decreased length of stay for patients in rooms with daylighting compared to artificial lighting. The Economics of Biophilia report by Terrapin Bright Green indicated that if all patients in the U.S. recovering from major surgeries had access to daylighting, the reduced time at the hospital would amount to an annual $93 million savings (and who doesn’t want to go home from the hospital sooner?).

Attractively daylit and well-ventilated hospitals with a low-carbon footprint may attract skilled doctors and nurses as well. Moreover, we live in an era of patient empowerment, one in which they have the choice of where and by whom to be treated. In this era, “green” hospitals may become one deciding factor alongside traditional factors such as the reputation and track record of the physician doing the procedure. For example, Gundersen Health System has developed an entire program branded “Envision” that demonstrates its commitment to a clean energy future and 100% energy independence. Last year, healthcare giant Kaiser Permanente committed to a 30% carbon emissions reduction by 2030. Such audacious commitments tend to shape public perceptions and the organization’s brand.

While an enormous amount of energy cost is currently being wasted by the healthcare industry, it appears that the demand for cost-effective energy savings is growing. The Advanced Energy Retrofit Guide for Healthcare Facilities will help meet that demand and accelerate the trend.

A version of this article also appeared on Greenbiz.