Yokl: Should MMs Take Control of Their Hospital’s Energy Cost?

I have often talked about materials managers expanding their “savings span,” or span of control on their expense outliers (i.e., transcription services, credit and collections, postage, legal, laundry/linen, energy, telecommunications, etc.). If materials managers don’t control these expenses effectively – who will? 

Right now, there is a big opportunity to save on your healthcare organization’s energy cost by as much as 20% by locking in low fixed rates and a low variable rate that reduces your exposure to price spikes for your hospitals’, systems’ or IDNs’ natural gas and electricity rates especially in the Northeast where deregulation is in full swing. 

And if you want to go a step further, I just read about one healthcare system (St Luke’s Hospital and Health Network in Bethlehem, Pa.) that saved $1 million in electricity costs using renewable energy sources.  St. Luke’s material management department led the way in this effort to partner with World Energy Exchange to buy energy more efficiently.  It was time well spent, as St. Luke’s saved 10 percent on their overall electricity cost.

Traditionally, the responsibility for energy sourcing has been left to your hospital’s engineer. However, the time should have passed when one individual makes all of your hospital’s multi-million dollar energy decisions.  Considering that your hospital’s energy cost averages $1.67 for electricity and .48 for natural gas per square foot (or $4,376 per occupied bed) a team approach is needed to source, bid, and then negotiate your hospital’s energy requirements and delivery agreements for any given year.

Based on industry best practices, materials management is the ideal facilitator in the purchase of any organization’s energy requirements. The same basic purchasing skills needed to buy a CAT scanner can be easily translated into buying all of your utilities.  That is why, first and foremost, MMs should be controlling all of your hospital’s energy costs.  Why leave this job to lesser skilled individuals?

Robert T. Yokl

Chief Value Strategist

Strategic Value Analysis® in Healthcare


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