Success Stories: Analytics

February 27, 2017

Hospital Energy Members Adopt Best Energy Practices to Drive Significant Budget Savings

Hospitals are among the largest and most intensive consumers of energy in the United States. While positive efforts are being made to curb energy demand, most hospitals continue to pay more than necessary for market energy supply by using outmoded purchasing methods. The good news is that Hospital Energy, the nation’s leading energy procurement organization for healthcare, has drafted new AHA/ASHE best practices that drive significant savings through financial management of energy procurement. 

Best Practice

These best practice standards call for:

1. Financial analytics to manage market risk and capture savings;
2. Internal alignment of facilities, finance and supply chain staff around a central strategy; and
3. Aggregation of spend with other hospitals to drive down supplier margins.

Two hospitals that were among the first to adopt these best practices were in the neighboring states of Pennsylvania and Ohio.

Using Analytics to manage energy

At WellSpan Health, a growing multi-hospital network based in southern central Pennsylvania, the transition from a traditional bid-based, fixed-rate procurement method to an actively managed market approach has yielded savings of $2.1 million over the current contract term. WellSpan began by organizing a multidisciplinary committee consisting of the chief financial officer, chief operating officer, treasury vice president and key facility directors. The committee actively manages the electricity and natural gas spend using market analytics developed and provided by Hospital Energy. 

Additionally, WellSpan joined a large Hospital Energy aggregation network and was able to reduce electricity supplier fees by 50 percent. Next, WellSpan began using statistical market analysis to identify savings opportunities in the forward markets. This led to a new contract design in which the health system layers its energy purchasing over time. With Hospital Energy’s support, WellSpan now manages its energy spend much as it does any other market-sensitive assets and liabilities.

Market forecasts lower costs

At the same time, OhioHealth, a 12 hospital IDN based in Columbus, Ohio, has revitalized its energy management by implementing all three best practice principles: alignment of a multi-disciplinary energy committee; aggregation of its market spend; and financial analytics to identify savings.  “The market forecasting and analytics were the key difference in reducing OhioHealth’s energy procurement costs by more than $600,000 over the past year”, said Alan Nelson, VP Treasury of OhioHealth. “Even more importantly, the health system has transitioned to managing energy using a team approach.” 

learn how analytics and best practices can help you

“Hospital Energy’s mission is to drive savings for our members. Over the last decade, we have worked to improve our national energy program. While we are confident every Hospital Energy member can find benefit regardless of market conditions, we haven’t stopped working to improve." said Mark Mininberg, Hospital Energy CEO. 

Contact Us to learn more about how Hospital Energy can help improve your energy procurement process.