Healthcare’s New Energy Paradigm

Over the last decade, America’s commercial sector has embraced sustainability at breakneck speed. According to Bloomberg Intelligence, by 2025 global ESG assets may account for one-third of all assets under management surpassing $50 trillion. The healthcare subsector has bucked the trend. This matters because inpatient healthcare is ranked by the Environmental Protection Agency as the second largest commercial energy user in the U.S. and is responsible for 8.5% of all greenhouse gas emissions. 

However, a paradigm shift has begun. In November 2022, a U.S. Department of Health and Human Services (HHS) delegation to the United Nations Climate Conference (COP27) announced that more than 100 healthcare organizations have signed the Health Sector Climate Pledge. The Pledge represents the largest ever sustainability commitment from the healthcare industry. Over 1,080 federal and private facilities equating to ~15% of all U.S. hospitals have committed to:

1. Reduce organizational emissions 50% by 2030
2. Achieve net-zero by 2050
3. Designate an executive-level lead in 2023
4. Conduct a Scope 3 (supply chain) emissions inventory by the end of 2024
5. Develop and release a climate resilience plan for continuous operations by the end of 2023
   

Not to be outdone, The Joint Commission (TJC), itself a signatory to the Pledge, released its own proposal for healthcare sustainability standards in March 2023 noting that “Hospitals need to take action to minimize their carbon footprints as they care for patients.” Since most state governments recognize TJC accreditation as a condition of licensure for the receipt of Medicaid and Medicare reimbursements, the following mandates are non-negotiable for more than 22,000 healthcare facilities and programs accredited by TJC:

1. Hospital leaders must designate an individual responsible for the oversight of activities to reduce greenhouse gas emissions in coordination with clinical and facility representatives.
2. Hospitals must measure three or more of the following:  
         -Energy use
         -Purchased energy (electricity and steam)
         -Anesthetic gas use
         -Pressurized metered dose inhaler use
         -Fleet vehicle gasoline consumption
         -Solid waste disposal to landfills or through incineration
3. Hospitals must develop written goals and action plans to reduce greenhouse gas emissions in three or more areas that they have measured.
4. At least annually, hospitals must analyze their sustainability measures to determine whether they are meeting goals and revise plans if goals are not achieved or sustained.

Days after the TJC sustainability announcement, the U.S. Centers for Medicare and Medicaid Services (CMS) released a categorical waiver on March 31, 2023 approving the use of microgrids as emergency power. While microgrid assets like solar PV, battery storage, and fuel cells have been installed to help hospitals increase sustainability and reduce energy costs, CMS has until now not allowed these assets to displace diesel generators as emergency power. Hospitals can finally align their emergency power strategies with their sustainability strategies.

These commitments are no easy feat. Writing in the April 2023 edition of Health Facilities Management magazine, Gordon Howie, President of the American Society for Healthcare Engineering(ASHE) states, “Environmental sustainability and decarbonization can be daunting concepts, and there is no cookie-cutter approach to tackling them. The work cannot and will not be done by a single individual, facility, or organization. It will take the entire healthcare field to pitch in and do their part to reduce our carbon footprint.”

So, where do healthcare organizations begin?

Step 1: Recognize Healthcare’s Impact

Walt Vernon, a decorated leader in the healthcare field, noted in April 2023 that sustainability mandates have created notable pushback. He states, “I have seen arguments that sustainability has nothing to do with clinical quality and, even if it did, it’s too hard and expensive for many organizations to do.”

There is no denying that a significant transformation is taking place in healthcare that will require both human and financial capital. However, as Don Berwick, former Director of CMS and founder of the Institute for Healthcare Improvement (IHI) notes, when IHI created their definition of clinical quality, they were not aware of the carbon problem. Don suggests it is time to add a new dimension to the definition of clinical quality: climate impacts of patient encounters. With respect to accelerating impacts of climate change he comments" physics does not negotiate."

Step 2: Benchmark Energy Cost, Use & Emissions

Accurate energy tracking helps hospitals identify underperforming buildings, verify the effectiveness of projects, and identify opportunities to improve. Under the Pledge, federal health systems are obligated by Executive Order 14057 to use 2008 as the baseline year for emissions reductions. HHS encourages private sector stakeholders to do the same. Popular benchmarking platforms include ENERGYSTAR Portfolio Manager and Energy to Care. To track Scope 3 emissions, a more robust benchmarking solution is required, which Endurant can help identify.

Large hospitals may already be benchmarking their facilities to comply with state and/or municipal legislation. For instance, beginning in 2018, California’s AB-802 mandates stated that all facilities over 50,000 square feet must submit annual energy usage to the California Energy Commission. Dozens of mandates like this exist across the country. Healthcare leaders should check with their facilities and compliance departments to determine whether benchmarking efforts have already begun.

Step 3: Implement Energy Efficiency & Microgrid Technologies

The cleanest and cheapest energy is the energy you do not use. With retro- and continuous commissioning, advanced LED lighting, and installing geothermal heat pumps for example, facilities can reduce their energy needs. Kara Brooks, Senior Associate Director of Sustainability at ASHE, encourages facilities to tackle small issues first. “Then they can start to gain momentum and see some return on their investments.” To do this, a comprehensive assessment of a facility’s energy infrastructure is required. For instance, after CommonSpirit Health conducted systemwide assessments and deployed a retrocommissioning program, it discovered a backlog of infrastructure requiring upgrades. This information helped prioritize investments with decarbonization in mind.

Once low hanging fruit is tackled, larger initiatives can be pursued. To address the balance of their energy load, healthcare leaders are turning to microgrids. Unlike diesel generators, microgrids operate 24/7 to:

• Reduce Cost: Microgrids provide budget certainty by avoiding escalating utility rates and minimizing demand charges.
• Provide Resiliency: When the grid goes down, microgrid assets keep operating. Depending on the asset mix, microgrids can power a facility indefinitely.
• Increase Sustainability: Clean energy infrastructure helps organizations meet their sustainability obligations while improving the air quality in communities they serve.

In one case, Trinity Health leveraged a power purchase agreement (PPA) to deploy a 1.5 MW fuel cell at St. Mary’s Hospital in Waterford, Connecticut with creative funding and new incentives offered by the Inflation Reduction Act (IRA).

Endurant is helping healthcare systems implement similar projects. Our technology agnostic approach means facilities only pursue the most advantageous asset mix. With off-balance sheet funding solutions, microgrid assets are now easier to access than ever before. The IRA rules now allow nonprofits to elect direct pay (i.e., cash) equal to the value of energy tax credits, enabling more hospitals to monetize these incentives.

In summary, the healthcare industry is undergoing a significant change in the way it relates to energy, sustainability, and emergency power compliance. Endurant’s objective expertise, national footprint, and proven project performance are helping hospitals meet Pledge goals, prepare for TJC compliance, and implement new methods of emergency power generation.

If your facility is looking for a long-term partner to navigate the complexity, Endurant is ready to help.