Much has been written about the advantages of designing and building facilities—including healthcare facilities—to be sustainable or green. Proponents of green building argue that green building is not only justified because of the healthcare industry's core mission of protecting human health, but also because of the more hard-headed operational considerations. They contend that green building promotes objectively better patient outcomes and improves professional and staff efficiency. They also point to potentially large cost savings due to increased efficiency in the use of water, energy, and other resources.

These claims may well be true. Moreover, they are likely to be increasingly valid as industry participants gain greater experience in effective greening, initial cost premiums for greening are reduced, and the cost of energy, water, and other resources increases.

Meanwhile, though, governments are not waiting for further hard data to justify greening. They are increasingly passing legislation that requires a broader and broader range of buildings to meet identified green goals, and that offers financial and other incentives for meeting such green goals. This article briefly discusses these developing requirements and incentives, which healthcare facility managers should now take into account whether or not they are fully convinced of the intrinsic financial, marketing, and other benefits of greening.

Mandatory green building laws are proliferating at a great rate

There has been a veritable explosion of federal, state, and local laws aimed at promoting green goals. Initially, these laws tended to apply only to public buildings, or to buildings that were being financed using public funds. For example, at least 12 federal agencies have required that new federal buildings and federally funded projects achieve LEED certification. The 2007 Energy Independence and Security Act also requires that federal buildings be designed to reduce fossil-fuel-generated energy consumption progressively over the years, as compared with a benchmark established as of fiscal 2003 (ultimately achieving carbon neutrality by 2030; See § 305(a)(3) of the Energy Conservation and Production Act (42 U.S.C. 6834(a)(3), as amended in 2007). In late 2007, the Office of Federal Procurement Policy also proposed new government-wide “green purchasing policies and affirmative procurement programs” for all government contracts and acquisition.1 The intention of these new federal policies is to give preference to green products and services, to green buildings when the government leases facilities, and to construction contractors who follow green practices. For the government's purposes, green is measured using a variety of different yardsticks and definitions, including LEED certification at various levels, EnergyStar awards (administered by EPA), and products designated by the Federal Energy Management Program.

Despite strong federal policies mandating or favoring green practices, there is no comprehensive federal regulatory framework governing the greening of U.S. building design and construction. Much of the burgeoning green building legislation is, instead, coming from the states and municipalities. At least 15 states and 90 municipalities now specifically require that new construction of public or publicly funded buildings achieve LEED certification. The legislators are also tending to phase in higher standards, including requiring that, after a specified period, all publicly funded buildings be LEED certified at the Silver level or higher.2 Some have, moreover, begun to expand their regulations to apply to private sector buildings as well.

One prominent example of this is California's new Green Building Standards Code (California Code of Regulations, Title 24, Part 11). The code, initially enacted to be voluntary, will become mandatory in 2010. It covers “every building or structure or any appurtenances connected or attached to such building structures throughout the State of California.” The new code allows existing state agencies currently overseeing construction of specific kinds—such as the Office of Statewide Health Planning and Development (OSHPD)—to continue to oversee that construction. Thus, the OSHPD was authorized to adopt only identified portions of the overall code as applicable to general acute care hospitals, acute psychiatric hospitals, skilled nursing facilities, and intermediate-care facilities. The portions that OSHPD has elected to adopt, though, include a broad range of mandatory green requirements on building commissioning, use of EnergyStar equipment and appliances, building orientation, construction waste diversion, selection of green materials, building acoustics, sustainable site selection, and stormwater runoff.

While the specific requirements imposed on healthcare facilities may not be particularly severe under the new code, the state's willingness to reach out to regulate private sector uses, including healthcare facilities, is something that the healthcare industry cannot ignore. This is particularly true given the increasing state and local legislative activity to regulate carbon emissions from buildings, as well as strong federal, state, and local policies to promote energy efficiency for both financial and political reasons. While hospital energy costs are generally dwarfed by other costs (such as those for professional staff and specialized equipment), healthcare facilities are famously heavy energy users. Healthcare, per se, may have been out of the governmental greening cross-hairs thus far, due to the heavy technical and regulatory burdens such institutions already face, but that is increasingly likely to change, and it is increasingly likely that green requirements will be imposed on them as well.

Financial and other incentives have also proliferated

As federal, state, and local governments have passed mandatory green building laws, they have also offered a wide variety of incentives to build green. These incentives include priority for plan approval and permitting purposes, density bonuses, rebates of building permit fees, grants to help fund green development costs, green building tax credits, property tax or income tax credits, free technical assistance in greening efforts, loans, and loan guarantees. In addition, many utilities offer rebates and similar incentives for installation of more energy-efficient equipment and other energy conservation measures.

While a number of the incentives are aimed at residential or commercial developers, many also offer benefits to healthcare facilities—even though they may not be explicitly listed in the legislation as among the beneficiaries. For instance, an applicable incentive may be labeled as one for nonprofits, institutions, or commercial projects, and not specifically for healthcare facilities, even though they qualify. An excellent example of what such incentives can be, and how they can benefit a healthcare project, is provided by the Providence Newberg Medical Center, in Newberg, Oregon.

The medical center's planners estimated that they would incur a first-cost premium of about $550,000 to go green, but did not have the added funds available in their budget. The medical center, completed in 2006, nevertheless became the first hospital in the United States to earn a LEED Gold certification. It did this, in part, by hunting down and using available financial incentives. One incentive was from the Energy Trust of Oregon, an entity created by the Oregon Public Utility Commission and funded by state-mandated charges on customers of the state's largest utilities. The Energy Trust supplied a grant of $199,858 for specified energy efficiency improvements, meeting the Trust's own published performance measures. Another increment came from the Portland General Electric's Earth Advantage Program. Earth Advantage supplied $156,000 to fund a generator upgrade. Additional grants from other sources funded energy modeling, financial analysis, building commissioning, and an eco-charette. Finally, Oregon's Office of Energy allowed the project a $141,969 Business Energy Tax Credit. This was of benefit, even though the hospital was a nonprofit, because Oregon permitted nonprofits to transfer their tax credits through to another taxable organization, in exchange for the net present value of the credits. The project's total green incentives totaled nearly the entire estimated first-cost premium, and made it easy to justify the greening effort.3 Providence Portland, part of the same healthcare system, similarly obtained a $217,278 Energy Trust incentive in 2007, for major renovation of its central utility plant (See Case Study, EnergyTrust of Oregon, Inc., available at http://www.energytrust.org).

The Providence projects, while notable, are far from the only examples of third-party incentives available for healthcare greening. Minnesota Power gave St. Mary's/Duluth Clinic rebates for reducing peak load by upgrading to energy-efficient mechanical equipment. Austin Energy assisted Dell Children's Medical Center in building a 2.5 MW natural gas-fired turbine generator with absorption chillers, heat-recovery equipment to produce steam, and back-up equipment. The hospital's parent thus avoided building its own central plant, and saved $6.8 million, much of which was reinvested in other green measures.4 Sierra View District Hospital in California obtained low-interest loans and grants from the California Energy Commission for lighting refits, chiller and cooling tower replacement, and installation of high-efficiency motors. The Energy Partnership Program also provides technical assistance to eligible applicants (including hospitals), including energy audits, design review, and assistance in developing equipment performance specifications. Some further illustrations of incentives for which hospitals have been eligible include:

  • a West Virginia Development Office lighting grants program offering lighting analysis and a matching grants of up to $30,000 for lighting improvements;

  • a utility rebate by Northern Utilities in New Hampshire for 50% of the cost of installing energy-efficient equipment of specified types (up to $50,000), 50% of the cost of a scoping study (up to $7,500), and certain other equipment rebates;

  • New York State's $mart Loan Program, providing commercial and institutional facilities interest rate reductions on loans by participating lenders for energy-efficiency improvements meeting Energy $mart requirements (currently subject to a maximum loan of $1.5 million);

  • Florida's Renewable Energy Technologies Grants Program, offering matching grants for projects relating to renewable energy technologies; and

  • New York State's cost-shared assistance for retro-commissioning of existing buildings and commissioning of new buildings, and related incentives (expressly available to hospitals, among others, with current limits in the New Construction Program of $400,000 per building).

These and many other available incentives can be identified by searching online databases, such as the Database of State Incentives for Renewables and Energy (DSIRE)(http://www.dsireusa.org) the LEED Initiatives data maintained, and regularly updated on the U.S. Green Building Council's Web site.

Conclusions

Healthcare facilities have, for many reasons, been relatively slow to join the green movement. But, given the increasingly aggressive development of green legal requirements, and the availability of potentially significant financial incentives, healthcare facilities should now consider greening each time they embark on a new project or major renovation. Taking advantage of available incentives can make it easier to justify greening on purely financial terms (even setting aside legal requirements), so healthcare facilities should seek out such incentives in their normal project planning. To be really effective, the project team must develop a game plan early in planning to identify possible green incentives for the project, carefully research the particular green standards that the programs would apply, and apply early for available incentives. The planners must take into account that each city, county, utility district, and state tends to tailor incentives to its own particular needs and resources. Moreover, incentive programs tend to change quickly over time. One program can end and another can begin with the same or different requirements, and funding for programs can run out. So a project team must do detailed research each time it embarks on a project, and for each location in which a project is to be located. But the effort to go green, and to seek financial incentives to help pay for the effort, has now become prudent for every forward-looking healthcare facility. HD

Joyce K. Hackenbrach is a Partner at Pepper Hamilton, LLP.

For more information, visit http://www.pepperlaw.com.

References

  1. Office of Federal Procurement Policy; Acquisition of Green Products and Services, Proposed policy letter on the acquisition of green products and services, 72 Fed. Reg. 73,904 (December 28, 2007) (“Proposed Green Products and Services Acquisition Policy”), available at http://edocket.access.gpo.gov/2007/pdf/e7-25211.pdf.
  2. See, e.g., Ordinance 2008-93 passed by the Anchorage, Alaska Assembly (municipal buildings), Resolution 08-0371 passed by the Stockton, California City Council (municipal and private non-residential buildings exceeding a stated size); San Francisco Green Building Ordinance (signed in August 2008, requiring LEED certification of residential and commercial buildings over a stated size, Silver certification of commercial buildings over a stated size, as of January 1, 2009, and Gold certification for those buildings as of January 1, 2012.
  3. Zimmerman G, Healthy Grants Help Justify Green, Green Health Care (August 2007)(available at http://www.facilitiesnet.com/bom/article/asp?id=7216&keywords=green+building); Providence Health System, “The Nation's Greenest Hospital,” available at http://www. providence.org/yamhill/new_medial_center/green/htm); Providence Newberg Medical Center Project Overview, available at http://www.betterbricks.com.
  4. Cassidy R, 14 Steps to Greener Hospitals, Building Design and Construction (Feb. 8, 2006)(available at http://www.bdcnetwork.com/article/CA6305831.html).
Healthcare Design 2008 December;8(12):16-18