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Resiliency in Health Care

The prevalence of severe weather in recent years is a growing concern for the health care industry. Hospitals and health care networks are looking for new energy management options designed to help prevent and mitigate power disruptions.

In this four-part interview, representatives from Novant Health and Duke Energy One take an in-depth look at the current state of resiliency in health care systems. In addition to discussing challenges of adopting new technologies, they also explore evolving business models, finance options and what is on the horizon for the health care industry.

This interview is based on episode eight of the Beyond the Meter podcast, hosted by Smart Energy Decisions founder John Failla. It has been edited for length and clarity.

Guests:

  • Matt Stiene, vice president of construction and engineering at Novant Health, an integrated health care network with nearly 30,000 employees at 700 locations across four states
  • Eric Bennett, Duke Energy key segment manager for health care and pharmaceutical segments

 

Part 1: Resiliency

When it comes to sustainability, many sectors focus on reducing energy costs and sourcing renewable energy. But in the health care industry, resiliency is quickly becoming one of the top drivers of energy management programs.

emergency

Within the past 15 years, the impact of Hurricane Katrina and Superstorm Sandy on hospital systems has shown the importance of power resiliency both during and after times of crisis.

“In times of crisis, hospitals became the beacon of hope for the community,” Stiene said. “While it’s unfortunate that disasters had to drive some of this work, I think health care systems are better off because of it.”

“The need for resiliency needs to be there,” Eric Bennett added, “not only for the hospital, but primarily for the patients.”

How Novant Health addresses resiliency in its facilities:

Matt Stiene: For any new facility we build, we install emergency generation capacity capable of backing up the entire building with N+1 redundancy. Our typical configuration is to have one generator that can run everything in the entire facility as well as an identical generator sitting next to it, ready to take over if necessary.

We’ve continued to make improvements in existing facilities to have the same level of resiliency. We’ve also added capacity to install additional backup generators should one of our primary generators experience an issue during operation.

When possible, Novant Health tries to obtain multiple electric services from two different substations that are automatically switched from our utility provider. So, if we lost one power feed from a power provider, it automatically transfers to the second feed before transitioning to generator power.

Speaking to resiliency in the health care industry:

Matt Stiene: Ultimately, a lot of compliance for health care ties back to required regulations from Centers for Medicare & Medicaid Services (CMS).

The National Fire Protection Association does a good job of staying current with the latest technology. The challenge for health care operators is that although there are newer codes available, we’re still held to the standard that’s been adopted by the federal government.

Change comes slowly in every business vertical. Health care facilities can be a bit slow to change because of the nature of what we do.

We have to ensure buildings run 24/7 all the time. There is no ability to have downtime. When a system works and functions well, the hospital facilities teams like it – and they don’t like to change.

Regarding COVID-19’s impact:

Matt Stiene: If anything, COVID probably showed the need for increased energy management budgets. In March and early April, we were planning for a projected surge. We didn’t know when it was coming, but everyone thought it was coming.

As we were looking at areas in facilities to potentially use as surge units, or places to have additional capacity for patients, one of the first questions I was asked was, “Does that space have emergency power?” If the space didn’t have emergency power, it generally got eliminated from the conversation.

What’s interesting is that COVID did not have a specific negative impact on the projects that helped with our energy management and resiliency efforts. In some cases, it probably elevated the need and importance of some of our systems because as we were preparing for potential surges in patients, the building infrastructure was a significant component of that planning.

 

Part 2: Financing Energy Projects

Investments in a new energy infrastructure don’t happen overnight. They require cross-departmental collaboration as well as buy-in from senior leadership.

When talking with health care executives, Stiene said, facilities and sustainability managers must be able to easily explain complicated building systems and their impact on efficiency and patient care. Additionally, those conversations need to happen ongoing and often – even before making a request.

“Some of them may be more focused on the equipment side of the house. Some of them may be more focused on the numbers, and others want to know all they can about the operations,” Bennett added. “At the end of the day, all stakeholders need to be satisfied and committed to the solution.”

At Novant Health, Stiene added, they typically evaluate financing investments in energy projects by looking closely at the risks involved.

“Is the risk from replacing portions of the HVAC system or is the risk from failing roofs or elevators? How does that risk compare to the risk associated with not putting money in the energy infrastructure?” he said. “You need to evaluate the risk to your patients as you determine which project is the highest priority.”

How Novant Health is funding its innovative battery storage project:

Matt Stiene: My charge to Duke Energy [One] was – I’m willing to do the battery project. I’m willing to lease you the land that the battery will sit on at a nominal fee, but I need you to make the cost of the project the same monthly facility charge I have at other facilities that have multiple services. That’s ultimately where we were able to land.

The project initially started with an investment by Duke Energy [One], an investment by Novant Health and that upfront capital investment. That project would have had to fit into the priorities of every other capital project across the enterprise. Finding a way for us to install the additional redundancy makes it 100% Duke Energy [One’s] responsibility.

What I pay is very similar to what I pay at facilities that already have two primary services from Duke Energy [One]. That made it palatable to us because a small portion of property was used for this process.

Regarding third-party finance or Energy as a Service programs impact on constrained budgets:

Eric Bennett: The international pandemic has increased the value of the concept of blank-as-a-service, or in this case Energy as a Service. There are many hospitals out there where budgets have been constrained.

That does not necessarily mean they don’t have capital on hand. However, it does mean they’re choosing to preserve capital and maybe go through a few more checks and balances before they deploy it.

Energy as a Service brings together the elements of capital funding design, build, and OEM (Operations and Maintenance) for projects. We’ve seen this take off in the pharmaceutical segment, whereas in the health care and hospital segment, it is still in its infancy.

 

Part 3: Sustainability

When it comes to energy investments, Novant Health strives to meet aggressive energy savings and consumption reduction targets.

“We have to meet a two-year simple payback. If we can get it paid back in two years, we generally have the ability to move forward with the project,” Stiene said.

But with the overall health care industry serving as a major contributor of greenhouse gases, Stiene said sustainability efforts in the greater health care industry may change significantly during the next three to five years.

“As the need for hospitals and health care to become more sustainable grows over time, I think you will see hospitals invest in larger-scale energy projects that don’t have as quick a payback,” he said. “I think that shows where health care is today in its sustainability journey.”

The role of renewables in Novant Health’s energy management strategy:

Matt Stiene: Generally speaking, we can buy regular grid power for less than we can buy renewables. So how do I make the case that we need to be more sustainable and include more renewables in our program?

On the flip side of all that, we’re going to continue to be pushed to reduce our carbon footprint and reduce our greenhouse gas emissions. Unless I use renewables, I can only take them so far by consumption-reduction efforts.

I think the greatest challenge is going to be how do we incorporate cheap power and renewables – or cheap power in reduction to greenhouse gas emissions – which will be a requirement if not externally, at least internally at some point? So how do we manage those two components to find the right solution for all of us?

If we’re really going to fulfill our mission, looking at how we become more sustainable, reducing our waste, reducing our water consumption and reducing our carbon-generated fuel consumption are some things that we owe to ourselves and the communities we serve.

Regarding employee and community environmental concerns:

Matt Stiene: We have done more in the last four or five years than we probably did in the first four or five years I was here. I think you’ll continue to see that moving forward.

Right now, a lot of our pressure comes from our own team members who are not just asking, but demanding, “What are we doing for sustainability? What are we doing for recycling?”

Recycling comes up regularly because it’s very common for people at home. But then, how are we reducing our greenhouse gas emissions? How are we reducing our carbon footprint?

Particularly, as renewables are discussed more frequently in the community, and the availability of them becomes more prevalent, I think we’ll see pressures both from our team, our patients and from our governing boards to spend more time working on sustainability.

One thing about ESG guidelines: Whether it’s from a private equity firm category that they use to grade different businesses or an investment firm, from what I see in the health care segment, it’s not going away.

 

Part 4: Looking Toward the Future

When creating an energy management strategy, organizations are increasingly looking toward the future. In doing so, there’s been a renewed focus on adopting new technologies to enhance resiliency.

In the U.S. alone, Bennett said, the microgrid industry is expected to grow by $10 billion in the next seven to nine years.

“The health care community itself would represent the fifth-largest greenhouse gas emitter in the world. I firmly believe that sustainability, microgrids, renewable power, etc. have a place in health care, but getting through some of the regulatory challenges is the first step,” he said. “The other step is the health care community needs to want to make that change going forward.”

At Novant Health, Stiene said, they are working with Duke Energy [One] on an on-site battery storage project intended to increase the resiliency of the hospital as well as some of Duke Energy [One’s] infrastructure in the area.

“That’s one area where we are working with a utility to increase the resiliency of our system based on new technology that doesn’t preclude me from having to install my generator,” Stiene said. “I would say most health systems today are looking for a variety of resiliency options. They’re not just looking for a Plan A and Plan B — they’re looking at Plans C and D.”

 

Energy management strategies over the next 12-18 months:

Matt Stiene: I think in the next 12 to 18 months, there will be a continued focus on consumption reduction. Depending on how power plays out, there will be continued work to look at renewables.

There have been several proposed natural gas pipelines that have not been able to be built that have constricted the natural gas capacity in the Carolinas, so there is a fair amount of our power that we’re getting by coal.

Whether or not that becomes a bigger priority, I’m not sure, but we’ll definitely be focused on building operations and reducing our consumption as much as possible, and then continuing to explore alternatives like renewables and trying to figure out how they fit into the overall equation.

Eric Bennett: I firmly believe that “as a service” – whether it’s Energy as a Service, heat and cooling as a service, etc. – will start to make strides in health care. I think one of the emerging trends in health care that is going to come forward rather rapidly is telemed.

There are many hospitals out there that have telemed programs in place and literally had to dust them off and make them a little bit more robust in light of the COVID-19 pandemic. I see that as a hot industry going forward in the next five to 10 years.

One of the lessons learned throughout the pandemic is that patients are thinking twice before planning a trip to an urgent care or emergency department for fear of contacting the virus.  These types of decisions are beginning to drive the growth of telemed or telehealth going forward. I think we will continue to see activity with mergers and acquisitions.

I’m sure Matt can attest that it’s very competitive out there for patients – Novant Health included. Many of the larger hospital organizations out there are looking to position themselves as best as possible going forward.re looking at the new technologies, emerging technologies like fuel cells. We are speaking about the electric vehicles. We are seriously looking at the fuel cells development and kiosk-based solar panels. We are expecting even better efficiency from there. We will not hesitate to implement that as soon as numbers are right.

Butch already mentioned that we couldn’t expect full financing this year, at least. So, what we’re starting to do is, we started to talk to the developers about trial versions of their technology. Just to check how it works, and I hope that we will implement some thermal spray technology before the end of this year. We don’t know if we can do this, but we are speaking with developers of the technologies. The rest of the Christmas list this year is limited with money, which are leftovers from our energy fund that we hope to obtain.

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