Three reasons sustainability can't wait

Why so urgent? Narrowing margins, competitive edge, and population health.

Currently, more than half of corporations in the United States have prioritized environmental sustainability in their businesses by offering green products and services, and by requiring environmental data from their vendors and service providers. They have recognized the strategic benefits of sustainability: leaner and more efficient operations, recruitment and retention of top talent, reduced environmental impact on the community, and positive branding.

Historically, when it comes to sustainable practices, the health care industry has lagged behind due to a lack of environmental expertise, difficulty in altering established processes, and safety concerns. But with 8% of U.S. greenhouse gas emissions coming from the health care sector—and a growing need to look at every creative cost savings opportunity—many hospital executives have started looking at environmental sustainability as a business and moral necessity.

“[Sustainability in hospitals is] a big issue and a strong trend, and I think it’s the right thing to do. It’s pleasing that’s the direction everyone is taking.”
-Aurelio Posada, Architectural Designer and Competition Judge

Three forces driving hospital sustainability efforts

In response, The Advisory Board Company has launched the Health Care Sustainability Initiative, a pro-bono research program designed to help hospitals reduce their negative impact on the environment in a way that is positive for their bottom line. Our research team spoke with executives and sustainability directors at 68 institutions to understand how sustainability programs have developed across the past decade and how top hospital decision makers are thinking about sustainability.

We have identified three key reasons for the growing importance of sustainability in hospitals: cost savings, stakeholder engagement, and population health.

1. Cost savings

The financial return from sustainability initiatives such as energy efficiency and waste management projects has traditionally been a motivator for hospitals. The Health Care Sustainability Initiative has gone further, identifying 10 “low-hanging fruit” opportunities across energy, sourcing, and waste that will save your hospital money while driving positive environmental impact.

10 opportunities to go greenMost hospital green teams tackle recycling and waste reduction as their first initiative. These projects range from purchasing reusable sharps containers to educating staff on what constitutes regulated medical waste. Such projects require minimal financial investment; are highly visible among staff and patients; and have a clear, almost immediate return on investment through lower waste management bills for the hospital. After proving financial gains to the C-suite, hospital green teams typically move into more resource-intensive areas, such as energy efficiency and supply chain optimization where they can see even greater savings.

Across industries, energy efficiency is an easy win. Hospitals that have invested money into retrocommissioning, lighting, and HVAC systems have seen millions of dollars of savings. The average annual energy cost per patient bed per year is over $13,000. By working with local utilities, engineers, and consultants, hospitals can see drastic savings while reducing their environmental impact. The average 100,000-square-foot hospital sees approximately $34,000 in annual savings just through this type of commissioning.

In October 2014, Gunderson Health System became the first health system to create more energy than it uses, saving $2 million per year in energy costs. Energy efficiency investments are essentially risk-free, requiring only the initial investment dollars. Such facility-related changes avoid the need for staff buy-in and behavior modification.

Supply chain optimization offers further potential for savings. The most progressive hospitals are already thinking about how they reduce packaging via bulk ordering, reformulating OR packs to omit all but the most commonly used instruments, or changing their supply methodology to reduce waste of expired items. Supply chain optimization is good for the wallet and good the world: lean purchasing reduces wasted materials that would end up in landfill, cuts emissions from processing this waste, and eliminates transport of unused items.

2. Stakeholder engagement

Hospital executives have capitalized on a growing awareness among their staff and community of the importance of environmental stewardship. Staff members who strive to have a minimal environmental impact in their personal lives want to see these same values upheld in the hospital setting. Employees at thousands of hospitals donate their personal time to starting recycling programs, lobbying for bike commuter infrastructure, purchasing greener cleaning products, and other similar projects.

In order to recruit and retain talent from today’s millennial workforce who want more than just a paycheck, institutions must be good environmental stewards and respond to staff demands for sustainable initiatives.

Beyond staff recruitment and retention, hospital executives have realized that implementing and communicating about sustainability efforts will be critical to winning health care consumers. We know that 75% of consumers are more likely to buy a product or service if the company makes an effort to be sustainable. Anecdotal evidence also speaks to patients’ preference for sustainable organizations.

“You don’t get bonus points for LEED certification now. More and more, sustainability is becoming an expectation from families and board members who say it is near and dear to their hearts.”
-CEO, Lancaster Children’s Hospital

For elective and non-emergent care, patients want to support sustainable providers on a moral level. They want to receive care at institutions that have optimal healing environments incorporating natural lighting, healthy food, and non-toxic chemicals.

3. Population health

With the health care delivery model shifting to a population health approach, providers are increasingly rewarded for maintaining a healthy patient population, both inside and outside the hospital. Hospital leaders must ensure their operations support healthy communities.

“Climate change is also a health issue, [and] the health impacts are already being experienced by our communities, our members.”
-Chief energy officer, Kaiser Permanente

Carbon emissions tie closely to health outcomes and the number of emergency department visits. That means $1.1 million in negative health impact resulting from the emissions from a typical coal-powered, 200-bed hospital.

Progressive hospital leaders, realizing the growing need for emission reduction, have planned their facilities accordingly. Kaiser Permanente just made the largest clean energy purchase in health care, signing three contracts to buy electricity from wind- and sun-powered electricity plants to reduce carbon emissions at its health care facilities.

Health and the environment tie closely together—through emissions and toxins, hospitals can have a huge impact on the health and safety of their service areas.

What’s next? 10 easy ways to improve.

Our research has found that hospital leaders believe that, from both a mission and margin standpoint, they must prioritize environmental sustainability. However, because they always have competing priorities, most industry leaders consider this area important but not urgent.

For this reason, our team has developed 10 easy-to-use guides on how to take the first step in reducing the environmental footprint of your hospital, while also reducing costs. We would love to support you in these efforts, so please take advantage of these resources, or email sustainability@advisory.com for information on how we can help in a more customized way.

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