Healthcare organizations spend more than $5 billion each year on energy to care for patients, according to the U.S. Department of Energy, Energy Information Administration. The Consortium for Energy Efficiency reports that heating, ventilation, and air conditioning (HVAC) systems comprise approximately 45% of a typical healthcare facility’s energy use.

Clearly the opportunity to net substantial savings on energy costs is substantial. But how can hospitals and other healthcare organizations unlock the full potential of their facilities to add value to their organizations? Even if they are currently utilizing a number of energy efficiency strategies, can they find even more ways to get added value out of their building assets?

Hospital boards and administrators who use an asset management strategy are doing just that. By bringing a strategic and long-term viewpoint to the ownership of their healthcare facilities-one that involves balancing the current costs of operation and maintenance with the future cost of replacement-they are optimizing building systems performance and delivering economic benefits for their organizations.

Employing an asset management strategy for hospitals

A sound asset management strategy begins with a well-defined standard of service that states in measurable terms how the asset will perform; including a minimum condition grade that appropriately reflects the level of impact if the asset fails. This clear definition of what the facility’s performance should be brings discipline to the process, which helps focus efforts and drive results.

When Gundersen Lutheran Health System set out to reduce energy consumption, they aimed for a reduction of 20% or more in less than two years. This was the standard of service they defined. The health system, headquartered in La Crosse, Wisconsin, is on target to achieve that goal.

Working with their Energy Services Company, Gundersen Lutheran started the process by auditing and analyzing its heating and cooling systems, lighting, and employee behavior. Armed with the knowledge that this analysis provided, it was able to identify some low-cost and, in some cases, no-cost measures to improve efficiency and reduce energy demand. Managing its assets in such a way will lead the organization to ultimately save approximately $800,000 a year in energy costs and is the first step in the health system’s plan to achieve its goal of becoming 100% energy independent by 2014.

Utilize a “life-cycle cost” analysis

In addition to a defined standard of service, an asset management strategy takes a whole-life, or life-cycle cost (LCC) approach, also known as total cost of ownership (TCO). Throughout the life of an asset such as building systems equipment, multiple service calls, fixes, and other interventions will be employed to sustain the standard of service that was initially agreed upon. Keeping a record of all past expenditures, along with a forecast of expenditures needed to sustain the standard of service into the future provides a good framework for decision making about ways to minimize whole-life cost of existing equipment and future investment.

Traditionally, bids for HVAC upgrades are solicited on a “first cost” basis. In these cases, the requests for proposals (RFPs) ask vendors to present their lowest possible pricing for the initial acquisition of their recommended equipment. Using a “first cost” basis to determine the bid outcome on the purchase of supplies or commodities is fine and acceptable.

But a major HVAC project is a capital asset: The installation will likely see some five decades of service, represents a substantial investment of funding, and the upfront cost of HVAC components often represent only 5% of the overall investment in terms of total cost of ownership over 20 or more years.

Rather than base the bid process on a “first cost” RFP, a more strategic and long-term asset management-based alternative is an RFP requiring each bid to include a LCC analysis.

The LCC of an asset is “the total discounted dollar cost of owning, operating, maintaining, and disposing of a building or a building system” over a period of time, according to The National Institute of Standards and Technology (NIST) Handbook.

Bid processes incorporating a LCC analysis help administrators determine the best value for its dollars among the alternatives. Factors to include within a LCC analysis are:

• Utilities: Address various existing utility schedules

• Energy consumption and demand: Optimize for efficiency to reduce energy costs

• Installation and commissioning: Integrated solution, standardization from one provider, and a robust system to accommodate for varying in-house skills and staff turnover

• Long-term reliability: Operate at peak efficiency throughout lifetime, eliminate system shutdowns, and use noncorrosive materials for use in harsh environments

• Annual maintenance, repair, operations (cost, frequency, preventive maintenance) including: Non-labor-intensive system tracking and monitoring, option for cost-effective outsourcing, service calls, and parts, and a provider availability of skilled technicians

• High-performance environment factors including: Indoor air quality (IAQ), filtration, pressurization, airflow, and acoustics
  

  Photo courtesy of Gundersen Lutheran
  Gundersen Lutheran has several hundred exhaust fans of various uses and sizes on its campuses. Gundersen Lutheran’s Jeff Rich, executive director, Efficiency Improvement; Corey Zarecki, efficiency improvement leader; and John Schleifer, supervisor, Facility Operations are part of the retrocommissioning process to schedule the fans to run only when needed and reduce energy consumption

• System controls integration and flexibility including: Centralized command and control; precise temperature and humidity control; ease of changing settings; control of critical core functions such as laundry, pharmacy, security; and ease and efficiency of testing and balancing equipment

• Modernization and necessary system upgrades

• Financing costs

Optimize for best efficiency

A hospital’s 24/7 energy demands include lighting, medical equipment, sterilization, security, laundry, and food preparation, as well as HVAC systems governing stringent temperature, humidity control, and air-circulation requirements with rates that often double or triple those of commercial buildings.

Upgrading existing or installing new HVAC and control systems allows hospitals to meet new regulatory standards, implement the latest innovations in technology, and improve environmental conditions for the benefit of patients and caregivers-especially in the two key areas of IAQ and acoustics. Importantly, HVAC improvements can also be designed to yield significant economic savings in terms of energy, resources, and money.

Web-based building automation systems are a sound investment. They manage daily operations like reporting on status of buildings, systems and equipment, scheduling by room, building or enterprise data collection and analysis, troubleshooting, and alarm management. They also provide a common view of energy-use patterns across multiple structures or facilities, enabling better decision-making, increasing performance, and easing integration.

New developments in HVAC systems using open, standard communications, and browser-based user interfaces offer increased flexibility and tighter energy management. These systems easily integrate into existing local area networks (LANs) to streamline a hospital’s approach to energy management.

Standardize, standardize, standardize

There are approximately 5,900 hospitals throughout the United States and no two are alike. Likewise, within each hospital, each wing or structure will likely differ from the next.

Built on an “as needed” basis, each individual upgrade, wing, or structure that comprises a modern healthcare center often represents a variety of building techniques, designs, and technology appropriate for the time of its construction and original use. Each new or upgraded environmental system is likely as varied as the specific addition or new construction itself. Across a healthcare center or campus, all that variety can create a challenge in terms of asset management.

The solution is to simplify.

Large corporations often centralize the management of key assets, such as their information technology (IT) systems with a single systems platform or vendor. By the same token, many integrated delivery networks have derived significant benefits by aligning all of their organizations’ processes and practices across the entire system. The benefits include simplification in terms of management, maintenance, upgrades, and security, as well as great advantages in cost control.

Hospital administrators can likewise standardize HVAC systems on a facility- or campus-wide basis to reduce the inefficiencies of managing multiple systems, components, and technologies from a variety of vendors.

Doing so may immediately reduce process costs and possibly labor costs. Working with a single HVAC vendor may free maintenance and operating personnel from the requirement to manage, and master, a variety of systems from a variety of vendors-and instead concentrate their efforts to gain deeper expertise with one manufacturer.

Administrators can leverage future centralized purchases and their long-term relationship with a single vendor to win larger prepurchase vendor discounts.

Value asset management

Hospital administrators employing asset-management strategies when undertaking environmental system upgrades are proactive in their efforts to optimize the value of their hospital facilities-both as high-performance centers of healing for their patients, as well as important and lasting assets to their community. HD

Laura Rygielski is Director of the Healthcare Vertical Market at Trane, a business of Ingersoll Rand. Healthcare Design 2009 July;9(7):16-22