In the recent speech on Wednesday September 9, 2009 by President Obama on the White House Health Care plan, he opened the door for constructive recommendations from both sides of the aisle on ways to reduce costs. One solution is to find the tactics that have the absolute highest return on investment to save money. America has the ability to leverage the exiting capabilities and technologies in the private sector to reduce the magnitude of Health Care costs. One company may have uncovered an opportunity for savings potential that has an impact on the US deficit, energy independence, and health care costs. The savings may far exceed their expectations. The article published on August 21st, profiles the company LED Saving Solutions that is offering $100 Million in high-tech LED (Light Emitting Diode) bulbs to 100 hospitals. The new technology will apparently reduce the lighting electricity cost by 80%. Hospitals disproportionally use a lot more of their electricity on lighting than other types of properties, because a majority of the lights are almost always on. With 50% of the electricity cost going towards lighting, the savings potential is massive. Over the program period the savings would exceed $350 Million and there is ZERO upfront cost to the hospitals. See Article
By the President’s math in his speech, this single private sector initiative could have a hand in a trillion dollar impact on the US deficit over time, because the existing Government Community Hospitals could take advantage of the offer and avoid the need to borrow money that adds to the growing federal deficit. If the premise stands that the LED lighting saves 80% on electricity costs and that the bulbs last an incredible 50,000 to 80,000 or more hours, then the next question is how many privately owned and government hospitals are in America and what is the potential savings impact if a program like the LED Savings Solutions were to scale across more than the 100 hospitals in the pilot program.
Question #1: How Many Hospitals are in the US?
Answer: Over 5,000
According to the American Hospital Association (AHA) 2007 report there are 5,708 registered hospitals in the US. Of the total public and private sector number, there are 1,111 State and Local Government Community Hospitals and 213 Federal Government Hospitals. The simple addition brings the total number of public sector hospital to 1,324.
Question #2: How Much Could They Save by Switching to LED Lighting
Each hospital can save about $40,000 a month or $500,000 a year without any up-front cost. The program is funded through a savings share initiative where the hospitals only pay a portion of the savings when they actually see the reduced kilowatt consumption each month. If they take the LED Savings Solutions zero upfront cost program then the half million is net to bottom line, but if they elect to purchase the bulbs outright then the savings is over $1 Million a year. At the half million in savings level…if 1,000 of the government hospitals participated in the lighting retrofit, the annual savings would be $500,000,000. Half a billion dollars is no small figure when it comes to year over year annual savings.
As a cross check, the same American Hospital Association (AHA) report includes $583,252,288,000 (over 500 Billion) as the operating expenses for community hospitals. That is over half a trillion annually. Hospitals make up a significant percentage of health care costs: “hospitals are just one component of health care costs, accounting for about one-third of total health care spending nationally.”
Perhaps LED lighting is one of the ‘silver bullets’ in the fight against rising health care costs as well as climate change. The numbers seem to say YES. Now the question is…What else may lie in the math when it comes to cost containment for US health care?
