Hospitals and other healthcare facilities all have major business expenses, including electricity. Some hospitals think they are doing everything they can to reduce spending in the category, but it’s not until they work through a detailed energy audit that they can uncover how to truly cut costs.
Before we explore the two different kinds of energy audits (billing and consumption-based audits), let’s take a look at average hospital electric costs.
According to the US Energy Information Administration, the average yearly cost of power per square foot for hospitals in North America is approximately $2.84 for electricity and $0.94 for natural gas. For example, a typical 200,000-square-foot hospital with 50 beds in the US might spend around $680,000 or $13,611 per bed annually on electricity and natural gas.
Though the average electric bill will vary depending on the size, consumption practices of the hospital, and the ratio of electricity and natural gas, these numbers give us a good estimate to work from.
Hospital electric bills are known to be higher than other commercial buildings per square foot for a variety of reasons including their continuous hours of operation, large amounts of equipment, and the need to maintain an appropriate temperature for patients. For the average hospital, lighting, heating, and hot water usage make up roughly 61–79 percent of their total energy costs depending on the climate they operate in. As a result, it is important for hospitals to consider different ways to manage these costs.
As mentioned above, there are two different kinds of energy audits – energy billing audits and energy consumption audits. Let’s first explore energy billing audits since savings can be found without implementing any new technology or usage methods by conducting one.
The first type of energy audit is a billing-based energy audit. These are the types of audits that we perform at P3 Cost Analysts.
During an energy billing audit, we look for errors, overcharges, and opportunities for savings on your energy expenses that do not involve capital expenditure. We use our industry expertise to do a deep tariff and billing analysis looking for hidden overcharges and savings opportunities, but we’re not recommending things such as LED lights, motion sensor light switches, and other capital improvements that can lower consumption. We are strictly looking for financial savings hidden in the invoices as a result of vendor overcharges and errors.
Below, we explore the benefits of conducting an energy billing audit and how P3 Cost Analysts find savings due to overcharges or errors on your electric bills.
By taking a look at your current energy contracts, our team of auditors can compare your pricing against industry data points that the average customer doesn’t have access to. If they find that you are overpaying for the level of service you need, they can negotiate better contract terms with your energy supplier in deregulated markets. You might also be surprised to know that there are often ways to negotiate better energy rates even in monopoly energy markets.
Through a detailed audit of your energy invoices, auditors can uncover many different types of overcharges or errors that commonly occur within the billing process. Once these overcharges or errors are found, our team of auditors can bring their findings to your energy supplier and begin getting you the credits back that you deserve.
Energy tariffs are extremely complex and hard to understand for the average customer. In many cases, customers will be functioning under the wrong tariffs which costs them more money. Expert auditors will understand which tariffs you should function under and will help you reap the benefits of doing so.
To see a detailed explanation of all the possible overcharges and areas we can help you can read our energy auditing white paper.
The other type of energy audit is a consumption-based one. During a consumption-based energy audit, an energy auditing firm will take a look at a hospital’s total energy usage and recommend ways to reduce its consumption. There are hundreds of companies that run these types of audits and can recommend a myriad of different devices and products to prevent energy waste.
Though a consumption-based energy audit can be useful, many of the recommended solutions can also be quite capital intensive. For those hospitals looking to find savings on energy through a risk-free process, they’ll have to conduct a detailed energy billing audit.
We kick off our client relationship with a 20-minute meeting to outline our shared savings agreement and the materials we need to get started. This typically includes copies of invoices, contracts, and other authorization documents.
During the onboarding phase, we will access 12–36 months’ worth of our client’s invoices. How far back we go depends on the statute of limitations within their state.
Our team begins thoroughly analyzing these invoices looking for any overcharges, unnecessary fees, and other billing errors. Typically, we will update our clients on a weekly or bi-weekly basis to share our findings and deliver savings as we go. On average, it can take four to six weeks to bring our findings to our clients and then another four to six weeks to implement the savings.
Through our service, auditing is not a one-and-done process. We will audit and manage invoices on a monthly basis to keep savings intact and to look for any additional overcharges and errors.
P3 Cost Analysts worked with a large hospital that needed help managing its telecom and utility expenses. Since this hospital was spending around $3,000,000 annually on these services, it wanted to utilize the expertise of P3 in order to find ways it could cut these costs.
As with all of our clients, we provided the hospital with a risk-free expense audit to find out how its money was being spent and where savings could be found. Through our audit, we were able to correct many errors that went back a number of years and also found savings in regards to incorrect tariff usage.
Throughout our engagement with this hospital, it was able to save over $400,000 on telecom and utilities and received a $65,000 refund due to the errors and overcharges we corrected.
As we’ve seen, there are two different types of energy audits. A P3 energy billing audit serves as a way for hospitals to uncover areas of saving in this cost category. A P3 energy audit includes looking at a hospital’s invoices and contracts to find overcharges, billing errors, and opportunities to negotiate better contractual terms with energy vendors. An audit will also uncover whether or not your hospital is functioning under the correct energy tariffs, which is vital for optimizing spending in this category.
The other type of energy audit involves analyzing a hospital’s overall consumption practices, looking for areas of improvement. This can include finding ways to implement new technologies that improve energy efficiency, encouraging better energy usage practices, outlining usage goals, and forming strategies to better track energy usage.
For you to truly understand your energy expenses and uncover savings within your energy contracts and invoices, you should work with a team of experts to work through a detailed energy billing audit.
If you’re interested in conducting an energy billing audit for your hospital or healthcare system, our team at P3 Cost Analysts is ready and able to help. To schedule your free expense audit, contact us today!