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Energy-Efficient Choices Preserve Hospital Margins

Karen Minich-Pourshadi, for HealthLeaders Media, March 6, 2013

Designers concentrated on using energy-efficient and environmentally responsible materials, says McDevitt, such as recycled mirrors and seashells in the terrazzo floor of the hospital. It also used local materials wherever possible, selected recycled raw materials for construction, and recycled 30%–40% of its construction project waste materials to help reduce the environmental footprint of the project.

Even the orientation of the building was factored into its ability to conserve energy. The building uses a north-south orientation that, when paired with the structure's large glass windows, allows plenty of natural light into the building, increasing warmth and light for the facility.

Also, 30% more energy-efficient mechanical systems were installed and an innovative heating and cooling system was added. The hospital's heating and cooling mechanism collects 30,000 gallons of condensation from its air conditioning system and recycles it for irrigation and to cool equipment. The facility also uses a rooftop garden with native sedum to provide insulation and oxygenation for the building. The design is energy efficient, requires less maintenance, and provides long-term cost savings.

"Typically our existing plant [of 700,000 square feet] costs us $3 million per year; this new plant is large at 700,000 square feet of space and is using 20% less energy," says McDevitt. The new facility is so efficient that the older structure is now getting much of its heating and cooling energy from the new one. "Because of our green projects we have a raw energy cost savings of 25% in our overall campus. This has really been a big win for us."

The project succeeded on an environmental level and a financial one, McDevitt says. The internal rate of return for many of the projects selected far exceeded the 6%-7% rate of return over and above operations that the organization was aiming for, hitting rates of return of as much as 20%-30%.

Sunny bottom line
While Children's of Alabama expects to see long-term returns for its energy investment, it still needs to use some of its own capital spending budget to help develop its building. However, at other organizations, getting healthcare leaders to consider energy conservation projects in lieu of clinical projects can be a challenging discussion. Finding a creative way to finance the energy conservation pursuits can eliminate the discussion and free up capital dollars for other efforts.

"Hospitals need to invest in medical equipment so when capital is allocated, that's usually where it goes," says Robert Mulcahy, vice president of facilities and environment of care at Saint Peter's University Hospital in New Brunswick, N.J. "There never seems to be enough money to invest into these green projects as aggressively as we need to."

However, Mulcahy knew there could be real financial savings in energy reductions for his 478-licensed-bed hospital if the $448 million net revenue organization could find a way to make the capital investment. With a tight capital budget, though, the organization had no intention of pursuing an energy conservation operations project—that is, until PSE&G, a Newark, NJ-based utility company offered a program that when combined with a federal grant would underwrite 90% of a $9 million solar-panel project and cost Saint Peter's just $1 million in capital dollars to complete.

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1 comments on "Energy-Efficient Choices Preserve Hospital Margins"


Sarah (3/9/2013 at 5:06 PM)
I love that the medical industry is moving in this industry. I would love to hospitals use 'green roofs' more often - eco conscious and will save money. Could even grow vegetables on the roof. Green roofs fit well within eco-conservation, reducing costs, heat and greenhouse gases, and it makes all the young hippies happy. :-)