Many Americans worry about the rising costs of healthcare. However, few know about the rising costs of healthcare facility management.
Healthcare facilities like hospitals, clinics, and medical offices face enormous expenses regarding operations and overhead. Energy costs by themself can easily reach over $2 million annually. For a large hospital, it means the difference between millions of dollars each year on electricity, heating, and other utilities.
With so many expenses, most healthcare facilities are eager to reduce their energy bills.
This article covers the primary operation and energy costs for healthcare facilities and provides steps to cut those expenses. With the right strategy, hospitals and clinics can funnel more of their budgets into patient care and medical services.
Your Small Business Deserves BIG Savings
Make the switch. Shop competitive rates from leading providers in minutes.
Table of Contents
The Major Operating Expenses for Healthcare Facilities
The average hospital operating expenses are $18 million per year. And energy costs often total $600,000 to $2 million per year.
Some of the most significant hospital operating expenses are:
- Facility Maintenance and Upkeep: Keeping buildings, equipment, and grounds in good working order through maintenance and repairs. Hospital operating expenses examples in this category include HVAC system upkeep, parking lot repairs, janitor services, pest control, and more. For a 200-bed hospital, maintenance and repairs often cost $3 million or more per year, about 15% of the total budget.
- Medical Supplies and Equipment: Providing quality patient care means stocking the latest medical technology and disposable items like gloves, gowns, and syringes. This makes up 1 to 3% of the total operating expenses.
- Insurance Premiums: Healthcare facilities require several types of insurance, like general liability, professional liability, property, and workers’ compensation. Premiums continue to rise faster than inflation, becoming a significant portion of the budget. For a typical 200+ bed hospital, annual insurance premiums can total over $7 million , about 35-38% of total operating expenses.
- Marketing and Advertising: In an increasingly competitive healthcare landscape, facilities spend anywhere from 1-2% of budget on branding, digital marketing, TV/radio ads, billboards, and other promotional efforts.
- Payroll and Staffing: Human resources are often the most significant expense for service industries like healthcare. Salaries, benefits, training, and other staffing costs add up quickly. Personnel costs can range from 45-55% of the total budget for many facilities.
- Utility Expenses: Energy costs account for 5 to 10% of a hospital’s entire budget. Keeping the lights on and the facilities heated and cooled around the clock leads to high electricity, gas, water, and trash bills.
Healthcare operating expenses have increased by a staggering 17.5% between 2019 and 2022. This is due to increased costs of equipment, more patients, and patients staying longer, as well as general inflation and recession.
What Factors Increase Healthcare Energy Expenses
Healthcare facilities require vast amounts of electricity, heating, and cooling to care for patients 24/7. This leads to high utility bills that can be difficult for healthcare operations management to control.
Some of the most significant factors driving up energy costs include:
- Old, Inefficient Buildings and Equipment: Many hospitals and clinics are older buildings with poor insulation, leaks, drafty windows, and outdated HVAC systems. These inefficient systems require more energy to keep the building comfortable.
- High Demand for Electricity: Medical equipment, lighting, and computing systems draw a lot of power. High-demand devices like MRI machines specifically have intense energy needs. Also, hospitals and clinics often run around the clock, requiring constant heating, cooling, lighting, and power.
- Additional Buildings: Large medical centers may have multiple buildings for different specialties like imaging, surgery, research, etc. More buildings means more total energy needed across the campus.
- Changing Regulations: Evolving building codes and health/safety regulations sometimes require renovations that raise energy use or expenses.
- Medical advances and technology: While medical advances can improve our health and extend our lives, they can also lead to increased medical spending and rising costs. Up to half of medical cost increases are from the new technologies or increased use of older ones.
- Population aging and disease prevalence: As the population ages and the amount of chronic diseases increases, the demand for healthcare services and energy use also rises.
- Administrative regulations and billing: The complex and fragmented nature of the U.S. healthcare system requires costly administrative help for billing, reimbursements, staffing, training, and software.
One of the major factors of the rising healthcare costs in the U.S. is rising hospital expenses.
Managing healthcare costs requires optimizing equipment, operations, and the facilities themselves. With the right solutions, hospitals can divert savings back into patient care and staff benefits.
Strategies for Reducing Healthcare Facility Energy Expenses
What are some ways of reducing operating costs in healthcare? With utility costs amounting to millions annually, healthcare facilities must control energy costs.
First, conduct an electricity usage audit. Look at your recent energy bills and costs.
Then, tackle easy and low-cost upgrades. Change out old equipment with ENERGY STAR-certified models like LED lights, efficient HVAC systems, and smart appliances.
Next, install advanced energy management systems that optimize when devices switch on/off based on real-time usage.
It’s also helpful to assess on-site laundry, kitchens, and labs to tweak cycles and minimize resource waste. Auditing utility bills can identify usage spikes, odd fluctuations, and opportunities to change electric rates or providers.
Get staff involved in reporting energy waste and sustainability goals. Small efforts add up when employees work together.
Consider comparing your healthcare commercial electricity rates at our energy marketplace. Simply put in your ZIP Code to see the best options in your area.
Expense Management for Hospitals Takeaways
Healthcare organizations can improve the quality of patient care while taming costs and growing the bottom line. But, it requires a facility-wide approach spearheaded by leadership.
The right changes dramatically impact patient outcomes, team satisfaction, operation expenses, and even the healthcare industry as a whole.
Stay tuned for more ways to save energy and money on your electricity bills from ElectricityRates.com.