BERWYN, IL – In an era when energy is growing more expensive and environmental awareness is a hot topic, a Chicago-area health system is taking steps to reduce its carbon footprint while saving thousands of dollars in energy costs.
The Ingalls Health System, based in south suburban Chicago, recently realized an $840,000 savings on a purchase of renewable electricity and natural gas. The system’s administrators purchased 5 percent of their total electricity from renewable, or “green,” energy sources in an innovative “reverse auction process.”
Vincent Pryor, chief financial officer at Ingalls, said the health system has learned to view energy use and purchasing as a financing decision, rather than simply a function of operations.
“Rather than buying energy as a commodity in the open market, we proposed an energy volume to providers who participated in the reverse auction,” he said. “We included brown energy (non-renewable) suppliers in the auction as well as green energy sellers, and it was very exciting because all the suppliers knew what the price point was and how low they had to go to beat their competitors.”
As a result of the reverse auction, Ingalls signed a 36-month contract for electricity, during which the health system will realize an estimated $375,000 savings when compared to a traditional paper-based procurement process. Ingalls will also save an estimated $460,000 over a 17-month natural gas contract.
Ingalls participates in the Premier healthcare alliance’s SPHERE collaborative, which focuses on reducing the healthcare industry’s energy use and greenhouse gas emissions. Premier led the auction, in collaboration with Practice Greenhealth and its Healthcare Clean Energy Exchange.
“We created the Healthcare Clean Energy Exchange to provide a procurement tool so hospitals could address climate change issues,” said Nicholas DeDominicis, director of HCEE at Practice Greenhealth. “Our main goal is to optimize the procurement process so hospitals can realize financial savings to purchase green energy.”
DeDominicis said healthcare ranks as the second most energy-intensive industry in the United States, spending more than $6.5 billion each year while experiencing double-digit cost increases. He cited EPA research indicating that 30 percent of this energy use could be reduced without sacrificing quality of care through the use of renewable sources, such as solar, hydroelectric and wind power.
Gina Pugliese, vice president of the Premier Safety Institute, said energy suppliers don’t often want to participate in a reverse auction process because it drives the price down significantly.
“In traditional RFPs, renewable energy is more expensive, but with the online reverse auction process, suppliers are willing to go much lower,” she said. “I think it’s important that we educate hospitals on how this works, and help them figure out how to save some of their dollars."