Success Stories: Best Practice
March 2, 2016
Catholic Contracting Group Members Drive $6.7 M in Energy Savings by Adopting Best Practices
Health systems are challenged to continue reducing energy costs through smarter market purchasing and physical energy asset development. This requires the adoption of best practices that go beyond traditional auction methods of market sourcing and procurement.
Several members of Catholic Contracting Group (CCG) were able to realize significant savings by adopting best practices in energy procurement. These best practice standards, crafted by Hospital Energy, recognize that energy is a financial market. This means that participants should move beyond traditional bid purchasing and embrace financial market management methods. The standard is based on three principles:
- Aggregation of facility energy spend to drive down supplier margins
- Alignment of finance, facilities, and supply chain staff to guide decisions
- Analytics to support active market management
As a result of following best practices, several CCG member systems are experiencing not only lower costs, but a significant improvement in system collaboration around energy procurement and management.
SSM Health of St. Louis, adopted a system-wide natural gas program for 20 hospitals across four states and saved $3 million in 2015-2016 supply costs. “While savings are important, I think the process Hospital Energy helped create and implement is more vital,” said the System Treasurer & Chief Investment Officer at SSM Health in St. Louis, Missouri. “That process, led by our Corporate Manager of Purchased Services and our Facilities leaders, resulted in a cultural change for us. Energy purchasing was transformed from an individual hospital-level activity to a system-wide initiative. We now act strategically as a united system. Finance and treasury work alongside our facilities experts to coordinate aggregated buys based on the detailed analytics and recommendations that Hospital Energy provides us.”
Another system, the largest Catholic health system in Illinois, continued its strong performance and reduced 2015 electricity purchasing costs by nearly $1.8 million.
A third health system, a 45 hospital group spanning ten states, recently joined CCG and adopted the best practice program to unify its system energy purchasing, which had previously been managed at the facility level. The new program is managed by a committee consisting of Treasury, Supply Chain and Facilities leaders. The committee’s market strategy yielded a $1.7 million reduction for the Florida hospitals for 2016, with additional facilities rolling into the program this year.
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