Twelve Hospitals Save $14.5 Million in Energy Using Healthcare Alliance Aggregation Strategies

 Twelve hospitals have saved $14.5 million on electricity and natural gas as part of the Premier healthcare alliance’s energy program.

The Premier member hospitals collaborated based on their state and/or local municipality allowances to buy electricity and natural gas. By aggregating the volume of their energy spending, these members will see cost savings ranging from more than $350,000 at a small 200 bed hospital to more than $3.3 million at an expanding 600 bed hospital over the next one to five years. The hospitals worked with Hospital Energy, an organizer of national member energy procurement aggregation.

With more than $8 billion spent in it each year, healthcare ranks as the country's second most energy-intensive industry. And, hospitals are the sector's largest energy consumer and producer of greenhouse gases. The industry's reliance on conventional, non-renewable energy sources (oil, coal) contributes disproportionately to the emission of greenhouse gases, driving climate change and impacting public health from air pollution.

“Given today’s financial pressures on hospital reimbursement and our obligation to perform due diligence with major contract negotiations while furthering environmental stewardship, I would highly recommend participating in Premier’s energy program,” said Mark J. Lorenz, associate administrator for Nemours/Alfred I. duPont Hospital for Children in Wilmington, Del. “In doing so, the costs and time associated with a large RFP process can be reduced and providers can also benefit from increased knowledge of the market to make more informed choices including green energy options.”

Premier’s energy program bridges the gap between contracted suppliers, purchased services, and the unique energy needs of hospitals. With a contracting category specific to the procurement of energy and a facility’s environmental services lines of business, Premier’s energy contract reach and offerings help providers meet the challenges of making the right purchasing decisions for their individual care sites.

Nemours saved more than 25 percent on its electric energy rate – almost $1.1 million annually over the next three years. Lorenz noted that the children’s hospital also had the flexibility to lock in energy only, include ancillary expenses, or go with an all-inclusive rate.

“In the face of reform and measures intended to reduce healthcare spending, hospitals must identify opportunities to lower energy use and costs. We are mutually committed to making changes that improve community health and reduce expenses while having a positive impact on the environment as we pursue energy innovations and partner with providers to identify and implement practical solutions," said Premier Director of product planning Steve F. Sawyer.

Contracted suppliers broker energy on behalf of Premier members using various sourcing techniques and models to identify utility index market rate discount savings and aggregation buy opportunities. The key factor influencing better rates is the number of members willing to aggregate purchases. These agreements are part of Premier’s overall energy initiative in collaboration with members and industry partners to offer publicly available tools, resources and education on energy saving strategies.

By participating in coordinated, volume-driven purchasing, providers large and small can find opportunities for cost savings, whether in negotiating value-adds or bottom-line dollars saved. Over the past two years, Premier member hospitals have identified more than $165 million in savings by purchasing quality products and services at low costs by participating in group buys. Specific to Premier’s energy program, last year two group buys supported wind energy, and energy conservation and management.

Additionally within PremierConnect, an integrated technology platform used by Premier members, is Premier’s energy program community, where providers can share learning and current information about energy usage. With the world’s largest social healthcare network, providers across the nation interactively collaborate in PremierConnect communities to accelerate the adoption of best practices that improve health overall.

Because of its commitment to environmentally preferable purchasing and sustainability best practices, the Premier alliance has been named a "Champion for Change" award recipient by Practice Greenhealth for the past ten years.