The Energy Bill Your Finance Team Isn’t Managing

The Energy Bill Your Finance Team Isn’t Managing

By Alan Eber, CEO, Eneration

Wisconsin health systems closed 2024 with operating margins of just 2.2 percent, according to the Wisconsin Hospital Association. One in four hospitals in the state operated at a loss. In that environment, every controllable cost deserves scrutiny.
There is one cost that rarely gets scrutinized.
Energy costs consume between one and three percent of a hospital’s total operating budget, which sounds manageable until you look at it from the other direction. The U.S. Department of Energy and the American Society for Healthcare Engineering estimate that figure represents 15 percent or more of a hospital’s annual profits. At a 2.2 percent operating margin, every $100,000 in energy savings is the financial equivalent of $4.5 million in new revenue.
Most hospital executive teams are not managing energy with anything close to that level of attention.

Why Energy Gets Ignored

The reason is structural. Energy costs live in the facilities budget. They get paid month after month without a crisis attached to them, so they rarely surface in the boardroom. Unlike labor or supply chain, there is no benchmark meeting, no variance review, no one asking why the number went up 8 percent last quarter.
There is also a widespread assumption that buildings are running efficiently if the lights are on and equipment is functioning. No alarms means no problems. That assumption is expensive, and it applies whether a facility was built last year or thirty years ago.
Older buildings carry the obvious risks: aging mechanical equipment, outdated controls, and deferred maintenance that quietly compounds. But newer buildings are not exempt. A LEED Gold certified hospital in Minnesota, built to modern sustainability standards, was benchmarked against comparable facilities and found to be consuming significantly more energy than its peers. A hospital in southern Wisconsin, less than a year old, had more than $50,000 in annual energy savings identified during an initial assessment. The building was working. It just was not working efficiently, and no one had established a performance baseline to know the difference.
New does not mean optimized. And the absence of a crisis does not mean the opportunity is not there.

Where Eneration Comes From

Eneration was built by the team that created Gundersen Health System’s energy program in La Crosse, Wisconsin. In 2014, after eight years of focused effort, Gundersen became the first health system in the United States to achieve energy independence, producing as much energy as it consumed. That program generates $6 million in annual savings and reduced emissions by 80 percent.
The insight from that work was not technical. It was organizational. Energy efficiency in healthcare is not primarily a facilities problem. It is a financial strategy that most health systems do not have anyone accountable for executing. Eneration was founded to fill that gap, exclusively for hospitals and health systems.

What We Actually Do

Eneration works with hospitals to reduce energy costs 10 to 30 percent, typically within six months, with no upfront capital required from the health system.
We establish a performance baseline, identify where energy is being wasted, implement improvements, and measure the results. We are paid from a portion of the savings we generate. If the savings are not there, we are not paid. The financial risk sits with us, not the health system.
For organizations operating on thin margins with limited capital budgets, that structure matters. There is no budget approval required, no capital allocation, no competing with a building project or equipment purchase for funding. The program is designed to fit the financial reality of healthcare today.

Real Results: Cumberland Health

One of Eneration’s engagements illustrates the point directly. Cumberland Health, a community hospital in northwestern Wisconsin, was facing a familiar challenge: energy inefficiencies were quietly driving up operating costs even in a relatively new facility. Through Eneration’s shared savings model, with no upfront capital required from the hospital, the engagement delivered results within six months. Cumberland Health is now on track to save more than $50,000 annually.
That is not a large number in isolation. At Wisconsin health system margins of 2.2 percent, it is the equivalent of more than $2 million in new revenue. And it came from a building that, by most measures, appeared to be running fine.
Full case study: eneration.com/cumberland-health-1

The Savings Are Already There

The most common response we hear from hospital leaders after their first energy analysis is some version of: “I had no idea.”
Not because they were not paying attention. Because energy has never been the thing anyone was paid to pay attention to, even as it quietly consumed a meaningful share of the margin they were working so hard to protect.
At Wisconsin health system margins, $100,000 in annual energy savings is $4.5 million in revenue equivalent. For a mid-sized regional hospital, the opportunity is often several times that.
The savings are already in your building. The question is whether anyone is looking for them.

Eneration offers a complimentary energy analysis for Wisconsin hospitals and health systems. To find out what may be hiding in your facility, visit eneration.com or contact us at info@eneration.com.