Online Auction Designed to Lower Hospitals’ Energy Costs

By Chambers, Heather

Hospitals are notorious energy users, running lights all day and night, using high-powered equipment, and keeping operating rooms cool.

But energy management initiatives often take a back seat to more pressing medical concerns, such as patient care and equipment needs.

A new energy initiative aimed at helping hospitals cut their energy costs between 6 percent and 12 percent is designed to change the status quo.

San Diego-based hospital purchasing group Premier Inc., which serves more than 2,000 hospitals and medical centers, has joined forces with Practice Greenhealth, an Arlington, Va.-based organization that counsels health care providers on “green” practices, to lead the industry’s first online energy auction.

Nicholas DeDominicis, director of the health care clean energy exchange at Practice Greenhealth, describes the auction as a kind of “reverse eBay.” Hospitals will seek bids among multiple energy suppliers to blend their energy use with a mix of fossil fuels and greener options, such as renewable energy certificates and carbon offsets.

The initiative comes at a time when cash-strapped hospitals are seeing double-digit hikes in energy costs.

“We knew energy prices were really squeezing hospital budgets,” DeDominicis said. “In some regions of the country, we’re seeing 60 percent increases in the past three years. When they take that kind of a hit on their energy budget, it really hurts them quite a bit.”

According to the Environmental Protection Agency, the health care industry could save 30 percent of the $6.5 billion it spends annually on energy use without sacrificing quality of care by employing greener practices.

DeDominicis says the online energy auction makes sense because hospitals can lock in prices over time as energy costs rise, allowing them to reduce their energy bills and mix their energy usage with clean technologies.

The trick is being able to identify and describe energy needs with enough specificity so providers can bid for the client’s business, says Michael Shames, executive director of the San Diego- based nonprofit Utility Consumers’ Action Network, a consumer watchdog.

Sign Letter

DeDominicis says hospitals will sign a letter of authorization allowing electrical utilities to provide them with six-month data measuring their energy use.

It remains unanswered whether local hospitals will take to the program.

Mike Alkire, president of Premier Purchasing Partners LP, a division of Premier Inc., says it is premature to name any San Diego program participants.

“Right now, the primary focus will be on electricity providers and all natural gas providers,” he said.

Shames says local hospitals have taken an aggressive approach to finding ways of reducing energy costs because prices in San Diego are comparatively high.

“I’m not so sure that they’re not already preaching to a pretty sophisticated choir,” he said.

DeDominicis reasoned that the auction would create a highly competitive environment among suppliers that would drive down costs considerably.

“We want to create the financial bandwidth so that they’ll use more green power and reduce energy,” he said.

Copyright San Diego Business Journal Jun 16, 2008

(c) 2008 San Diego Business Journal. Provided by ProQuest Information and Learning. All rights Reserved.