Cost, of course, is a big issue for hospitals today. The healthcare industry hasn’t suffered quite as much as have others during the country’s economic slowdown. But revenues are still down at many hospitals.
Consumers can’t ignore a broken leg, of course. They’ll still need treatment for that. But they might skip elective surgeries or procedures until they feel more confident in their own bank accounts. This has impacted the bottom line at many medical providers across the country.
Because of this, the manufacturers of onsite power equipment must address the cost and return on investment that comes with such systems. “Cost is the biggest obstacle we face,” says Surdykowski. “We have to demonstrate the bottom line and the payback period. Once they see how short the payback period is, hospital officials are usually more eager.”
Hospital officials need to know that they’ll be saving enough money on energy costs with an onsite system to justify the sometimes-high, upfront costs. Manufacturers can ease cost concerns by showing them facility managers and decision-makers how quickly the energy savings and reduced operating costs can pile up once they install an onsite system.
If manufacturers can show hospital officials that it will take, say, just six years for these savings to cover the costs of installation and setup, they’ll be far more likely to close a sale. “The payback period for a flywheel is three to four years,” says Surdykowski. “That’s a pretty short payback period, and it certainly eases concerns hospital administrators have over the cost.”
Once onsite power manufacturers get past the cost issue, they’ll need to address several other concerns that hospitals might have.
Hospitals need to determine, for instance, which type of onsite system they want. Diesel generators remain a reliable way to provide backup power within 10 seconds of a utility failure, Matuseski says. At the same time, many hospitals are choosing CHP systems—because they can save money by capturing and using waste heat—and natural gas generators.
“The choice is often driven by economics,” says Matuseski. “If you can provide a reasonable return on investment it makes sense to put in a system.”
Taufer says that the job of onsite power manufacturers is to focus hospital officials on certain key elements. First, hospital officials need to make sure that any power solution they choose helps the facility improve the service it provides to its patients. Second, onsite power should improve the safety of the facility. For instance, a power source might ensure that hallways, stairwells and entrances remain lit even if the public utility suffers an extended outage.
“Are you improving safety? That is something that all hospitals need to consider,” says Taufer. “Will your onsite power solution address the safety of the occupants and the well-being of your patients?”
Next, of course, hospitals need to consider the reliability factor. Will their onsite power solution ensure that the hospital doesn’t suffer an interruption of service or continuity?
“If you’re in an area that is apt to suffer weather disturbances, will onsite generation give you the ability to island from your utility?” asks Taufer. “If it does, it gives you increased reliability. It doesn’t expose a hospital to any type of interruption from utility power.”
Then, of course, there is efficiency. Hospitals can shave significant dollars off their operating costs by investing in onsite power generation.
The challenge for manufacturers, though, is that sometimes it’s difficult to convince the board members overseeing a hospital—not just the facility managers—that the energy savings and reduced operating costs will make up for the upfront costs of purchasing onsite generation equipment.
Many board members will insist that a hospital first spend dollars on patient care and treatment. Boosting energy efficiency, they argue, should be far down the list, especially when hospitals are struggling with slashed budgets.
“In a hospital, the investment dollars are always supposed to be funneled toward helping the patient,” says Taufer. “If you are adding medical equipment or surgical suites, it’s easy to see the connection between spending and improving patient care. When you’re looking at energy efficiency, it’s harder to justify that investment.”
Again, the job of educating hospital officials and board members falls on manufacturers. They need to show these decision-makers that an investment in energy efficiency can actually help boost their patient care, Taufer says.
Taufer says that every dollar that a hospital spends on energy or efficiency gains equals $20 of revenue that comes to facilities from medical services. This is the equation that hospital officials need to understand, he adds.
“By putting your business case out there and looking at the revenue equivalent of how that savings of $20 can be reinvested in providing healthcare, you are now tying together energy efficiency and patient care,” says Taufer. “Simply put, hospitals by improving their energy efficiency will have more dollars to invest in healthcare services.”