Sixty-seven percent of healthcare CEOs list financial challenges as their number one concern and 75% of senior decision-makers believe energy costs are the least controllable business cost. Meanwhile, U.S. hospitals are the second most energy-intensive commercial space type, making the impact of unstable energy prices and of savings from energy efficiency investments particularly significant.
Hospitals nationwide have been able to demonstrate that energy investments can create healthier hospitals — both for the environment and the bottom line. Facility managers today can position energy as a controllable cost that, when well managed, can produce significant energy savings. ENERGY STAR partners effectively make the business case for energy performance investments by positioning energy as an investment-grade opportunity, using online financial tools to support their planning, and making an effective pitch that speaks in executive terms and aligns with the hospital’s core mission.
Outlined below are examples and best practices from ENERGY STAR partners who have successfully made a pitch to their administrators and senior executives for energy improvements.
Lawrence Memorial Hospital (LMH) , a 173-bed not-for-profit hospital located in Lawrence, Kansas, has expanded and been renovated numerous times since its founding in 1921. Dedicated to improving the health of the community, LMH invests all excess revenues in services, equipment, and facilities which further their mission. LMH joined ENERGY STAR in 2006 and immediately began benchmarking to quantify the impact of previous energy reduction initiatives, and set goals for future improvements.
During a major renovation and expansion project during 1995–1998, Skanda Skandaverl, Director, Facilities Management, identified a potential energy investment opportunity to replace the existing facility’s chiller, motors, and air handlers. He worked with his energy service company (ESCO) to determine the potential energy savings that would result from upgrading this building equipment with energy-efficient replacements. In order to present this to his CEO, Mr. Skandaverl calculated the internal rate of return (IRR), simple payback, net present value (NPV), and annual cost savings. He prepared graphs demonstrating the existing cost to maintain operations at status quo and his projected costs with upgrades. He delivered a 20-minute presentation to the CEO, explaining both the anticipated cost savings and improvements in comfort that would result from investments in energy-efficient equipment. He tied these aggregate savings back to the hospital’s mission and described how these investments could actually generate new revenue that could be reinvested into patient care. His CEO was convinced by the presentation and approved of the energy-efficient upgrade package. The result: When construction finished in 1998, LMH had added 95,000 square feet but experienced no increase in energy consumption. The success of this project paved the way for future projects and approvals from the CEO. For example, Lawrence Memorial Hospital is currently in the midst of another expansion, scheduled for completion in 2009, that includes $6.5M in energy investments for a new energy plant, equipment, and smart controls.
“You’ve got to try your best to make an effective argument for energy efficiency every time you see the opportunity. These investments continue to pay you back over time. By making a succinct presentation in terms that resonated with the CEO, we have built trust and a strong relationship over time. He knows that when I present an idea, it has been vetted, tested, and is well-positioned to generate the savings I estimate.”
New York-Presbyterian Hospital (NYPH) , a leading academic medical center affiliated with two of the nation’s top medical colleges: Columbia University College of Physicians and Surgeons and Weill Cornell Medical College, delivers comprehensive medical services to residents of New York City and its surrounding boroughs. An ENERGY STAR Partner since 2005 and three-time Partner of the Year winner, NYPH established and has successfully met rigorous energy savings targets since embarking on its energy management initiatives.
After joining the NYPH team in 2003, Jennifer Kearney, Director of Energy Programs, set out to identify and present energy savings opportunities internally. To help target those efforts, she began with energy audits to determine the best opportunities for improving efficiency in various facilities. Those audits, combined with benchmarking and prioritizing the ratings using the US EPA’s Energy Performance Rating System, enabled her to determine which campuses could benefit most from capital improvements.
Ms. Kearney also pursued state grant funds to help pay for these improvements. By doing so, she showed her upper management that her recommended investment was very competitive. That is, all investments compete for limited funding. In this case, Ms. Kearney’s recommended investments came with funding that would otherwise not be given to the institution from the state, making it more desirable from an investment standpoint.
The audits, prioritized ratings, and state funds, combined with an in-depth technical understanding of the benefits of energy performance improvements helped Ms. Kearney to build a meaningful case to upper management. To do so, she collected the anticipated annual savings, NPV, IRR, and simple payback, and prepared this information in clear, concise graphs. She offered a cost-benefit analysis. She also graphically showed the potential impacts based on current energy prices, as well as how her proposed energy investments could mitigate future price hikes. Instead of describing the technologies, Ms. Kearney’s presentation succinctly demonstrated that energy upgrades contribute to the organization’s operational success.
Since then, energy investments have become part of the organization’s culture and are more readily approved. As Jennifer Kearney describes:
“Facility managers can make an effective pitch to senior leadership through a few key steps, but the most important of all is to switch from “tech talk” to “money talk”. Speaking in the language that senior leaders understand will go along way in being heard.”