12 hospitals save nearly $14.5M on future electricity, natural gas purchases Last Updated: July 24, 2014
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Established in 1940, Nemours is an internationally recognized children’s health system that owns and operates the Nemours/Alfred I. duPont Hospital for Children in Wilmington, DE, along with major pediatric specialty clinics in Delaware, Florida, Pennsylvania and New Jersey. In October 2012, it opened the full-service Nemours Children’s Hospital in Orlando, FL. Nemours/Alfred I. duPont Hospital for Children is ranked among the best children’s hospitals in the nation by U.S. News & World Report.

Challenge

Hospitals use a lot of energy. The U.S. Energy Information Administration says large hospital buildings accounted for 5.5% of the total delivered energy used by the commercial sector in 2007, up from 4.3% in 2003. In the face of reform and measures intended to reduce healthcare spending, hospitals must identify opportunities to lower energy use and costs.

Premier in 2011 introduced an improved energy program and a new contracting category, procurement of energy, part of the facilities and environmental services lines of business, to further enhance Premier’s energy contract reach and purchased services offerings to help members meet the challenges of this complex area. Contracted suppliers broker energy on behalf of members using various sourcing techniques and models to identify utility index market rate discount savings and aggregation buy opportunities. The key factor influencing better rates is the number of members willing to aggregate purchases.

Solution

Twelve hospitals representing 7 Premier members across the U.S. took advantage of an aggregation opportunity, joining forces based on state/local municipality allowances to buy electricity and natural gas. They worked with Hospital Energy, 1 of 5 suppliers on contract with Premier and the market leader in organizing national member energy procurement aggregation.

Nemours/Alfred I. duPont Hospital for Children associate administrator Mark J. Lorenz said, “The process provided a degree of detailed analysis and consultation that brought us a better understanding of the risks and opportunities in the market. It also brought into the RFP process suppliers that we otherwise may not have had access to. Most important, the process and independent counseling imparted knowledge about the energy markets so that our decisions were informed. We were able to move beyond simply a rate to understanding.”

Result

  • The 12 hospitals saved $14.5 million on purchases of electricity and natural gas for periods ranging from 12 to 65 months.
  • Nemours/Alfred I. duPont Hospital for Children in Wilmington, DE, saved more than 25% on its electric energy rate – almost $1.1 million annually and nearly $3.3 million for three years. Lorenz noted that the children’s hospital also had the flexibility to lock in energy only, to include ancillary expenses, or to go with an all-inclusive rate.

“Our team is passionate about driving down member costs, particularly by pursuing energy innovations and partnering with members to identify and implement practical energy solutions,” said Premier director of product planning Steve F. Sawyer.