Hospitals are at the center of the health care transition

The U.S. health care industry is undergoing significant change due to high cost of care and the industry wide efforts to reduce these costs. Hospitals are at the center of this unprecedented convergence of changes the affect how patients receive care, how doctors and hospitals are paid to provide care, and how sustainability and “going green” is a big part of the solution.

By Greg Murphy, Market Development Manager, Institutions July 5, 2016

Although the U.S. health care system is extremely complex to navigate, the underlying problem is straightforward. The costs for individuals to receive care keeps going up, whether it’s what an employer pays to the insurance companies, what the insurance companies pay to the hospitals and doctors, or what individuals pay for deductibles and co-payments.

According to the Centers for Medicare and Medicaid Services (CMS) National Health Expenditure projections, the amount spent on health care in the U.S. is estimated to be $3.4 trillion in 2016. This is 18% of the entire U.S. gross domestic product (GDP). This means that about $1 of every $5 we spend is for health care services.

This is the first time ever that the spending per person in the U.S. has reached $10,000 per year. This is more than any other western country. You would think that with this much spending on health care, the U.S. would be the healthiest country in the world, but that is not the case. According to a report by The Commonwealth Fund, the U.S. had worse outcomes on several population health measures than their international peer countries.

It’s reasonable to expect that as our health care system continues on this path it will have an impact on those bearing the costs—consumers and the government. With costs rising, more of the burden is being shifted to individuals through higher deductibles and employers having employees pay a portion of their health care coverage.

This means that as consumers we have less to spend on other things. This impacts the growth of retail sales, the amount people put into savings, and even larger purchases like cars and homes. The result is a fundamental drag on economic vitality and growth.

The other impact of the cost of health care is on government services. According to the Congressional Budget Office, through Medicare and Medicaid, the U.S. government spends almost $1 trillion to pay for health care services for the poor and elderly. As the government spends more and more on health care, which is growing at a faster rate than the economy, there is less money available to spend on other programs like infrastructure and education.

Affordable Care Act

In 2010 the Patient Protection and Affordable Care Act (ACA) was enacted to take a broad and significant step toward restructuring the health care industry in an effort to improve care and reduce costs.

Among the many areas of the health care puzzle to be affected is how doctors and hospitals provide service to patients and how they get paid for those services. With the overall goal of improving patient outcomes while at the same time reducing cost, the ACA fundamentally changed the payment model for doctors and hospitals from a fee-for-service to a value-based model.

This means that instead of each doctor getting paid a set fee for the individual service they provide, all the doctors involved with a patient’s care are paid based on the quality of care and the outcome for the patient. This shifts the focus for the providers from volume to value and holds them accountable for the results.

This new payment model will be phased in by CMS to test and validate the best way to make this change. As this progresses and the system becomes more stable, the private insurers will start to implement similar changes to how they pay hospitals and doctors. The result will be a gradual transition to the new value-based model, changing how the money flows in the health care industry.

What Does This Mean for Hospitals?

So what is the impact on hospitals from the ACA and the rising health care costs in general? Most hospital executives today agree that one of their biggest concerns is how to reduce cost. They realize that with the changes coming from the ACA, the amount they receive from Medicare and Medicaid is under downward pressure and the costs to provide services are continuing to rise. The result is that their profit and operating margins are getting squeezed and they were already low to begin with. For hospitals, one of their top priorities is to manage the transition to new payment models and to reduce cost in all aspects of the hospital.

With the ever-present focus on cost reduction, hospitals are looking to build upon growing sustainability plans to support their cost reduction efforts. With hospitals and health care provider’s increasing commitment to population health and the wellness of the communities they serve, the ability to reduce, reuse, and renew resources is vital.

As these efforts are improving overall wellness, what many hospitals are finding is that their sustainability programs are actually good for the bottom line. With guidance from organizations like Practice Greenhealth and the Healthier Hospitals Initiative, savings are being realized from a wide range of recycling and reduction programs.

Energy Use in the Hospitals

One of the primary areas that hospitals turn to for cost reduction is energy use because it is such a big part of the overall cost to run a hospital. According the U.S. Energy Information Administration, hospitals use more energy per square foot than other commercial building types:

"Hospitals tend to consume more energy per square foot than other buildings in the commercial sector, such as offices, retail stores, or educational buildings. They are open 24 hours a day; occupied by thousands of employees, patients, and visitors; and often employ sophisticated heating, ventilation, and air conditioning (HVAC) systems to control temperatures and air flow. In addition, many energy-intensive activities occur in these buildings: laundry, medical and lab equipment use, sterilization, computer and server use, food service, and refrigeration."

In order to uncover every area for potential savings, hospitals are looking at all of the systems that are big energy users—like lighting, air conditioning, heating—as well as water consumption and waste reduction.

So what does this have to do with steam? Most hospitals have well-established, everyday uses for the steam generated by their systems. This includes hot water production, humidification, and sterilization.

Plant Steam:

Building Heat: interior comfort heat and snow melt in parking lots and roofs

Domestic Hot Water: kitchen, laundry, showers, baths, faucets

Clean Steam:

Sterilization: Surgical equipment

Humidification: Maintain strict humidity levels in critical treatment areas.

At a time when hospitals are trying to save every dollar possible, an efficient and well-maintained steam system can produce substantial savings.

In order to deliver the most impact for every dollar spent on the steam system, it’s best to know how much energy the steam system is delivering to each application and process by applying effective measurement and monitoring techniques. This will help identify areas of low performance and waste so improvement can be made to retain as much thermal energy as possible in the system for re-use.

By implementing regular maintenance, repair, and upgrade schedules, the system can run as efficiently as possible. Always measure baseline use and performance results to show how system improvements can make a big difference in energy use.

– Greg Murphy, Market Development Manager for Spirax Sarco. The article originally published in Spirax Sarco SteamNews Magazine. Spirax Sarco is a CFE Media content partner.