Green Healthcare Facilities: An Overview of Initial Capital Costs and Operational Benefits


Green Healthcare Facilities: An Overview of Initial Capital Costs and Operational Benefits

This article will take an overview of the relationship between initial capital costs and the operational benefits that accrue from the additional costs of “going green”, the data being taken from healthcare facilities in the United States of America.

In 2011, an American trade magazine, Health Facilities Management reported: “Hospitals increasingly are embracing the idea that going greener is cost-effective over the long run. 60 percent were evaluating the costs and benefit of green construction methods for most or all projects, up sharply from a year earlier.”

However, questions still remain about the higher initial costs to achieve LEED certification-doubts about whether the performance of the hospital has quantifiably improved with the higher initial cost of green features and uncertainty about the value proposition-direct and indirect benefits associated with LEED certification.

A study was done in 2012 to get more clarity on this issue. The majority of respondents believe that initial green capital costs have decreased over the previous 5 years, and they further believe that there is no significant cost difference between green hospitals and standard hospitals today. Healthcare facility projects were reporting zero initial cost green building premiums and were delivering a LEED-certified project within budget.

There was a growing expertise of design and construction teams in green hospital design, and there was a consistent theme articulated by the study respondents: achieving LEED Silver-certification was the no extra cost performance baseline and standard practice for many design and construction firms. They felt in future LEED Gold-certification will become the new baseline.

Why healthcare organizations choose to go for LEED certification has many reasons; understanding what influences their decisions can reveal the value proposition for healthcare providers. They were asked to rank seven reasons, the top three of which were as follow, in order of importance:

  1. Civic Leadership
  2. Occupant Health and Safety
  3. Community Benefit

Strategies that improve indoor air quality and staff respite were found to be important to project teams and providers. Also driving these studies is a business and marketing advantage. 40 percent of the respondents stated that the hospital gained a competitive advantage from achieving LEED certification.

The respondents were asked to define what they meant by a capital cost premium. The most common definition given was “an increase in the established project budget”. In this 2012 study, one-third reported a zero percent increase in budget cost. Another important question raised by this study was whether there is a relationship between economy of scale/facility size and initial cost. The researchers found that for hospital greater than 100,000 sq. ft. The average increase in initial cost was less than 1 percent, or 0.67 percent. For hospitals less than 100,000 sq. ft. the figure was 2.1 percent. (These are both average figures for 13 sampled hospitals).

The study posed this question: What is the value of LEED certification compared to simply building to a “LEED equivalent” and forgoing certification? Design and construction teams note that owners are increasingly asking to “design to LEED standards” without engaging in certification processes, even though LEED certification costs are somewhere in the range of 0.05 to 1 percent of a hospital’s total construction budget, while depending on its size. Sometimes owners or design and construction teams reluctant to put in the effort required to navigate the relatively rigorous LEED certification process will identify higher costs as a deterrent.

Some participants included the costs of energy modelling and enhanced commissioning. But in fact, energy modelling is the key to understanding the energy impact of design decision-making regardless of any LEED certification intent. Likewise, enhanced commissioning ensures that building operators understand how to operate sustainable systems, and that the projected savings are actually realized. The fees associated with both of these can be significant, but definitely cost-effective.

This study quantified the initial cost increase of LEED certified healthcare buildings, but that is only one aspect of establishing the value proposition. There are also operational savings associated with energy, water, site planning and material selection strategies. There are also human and environmental health benefits. Operational benefits provide hospitals with a financial return on investment. A common trend expressed among the respondents is a groundswell in healthcare organizations’ interest to reduce operational utility costs by optimizing energy and water systems. The sampled hospitals reported cost-savings to the local municipality from stormwater-related reductions, along with innovative on-site management through strategies such as pervious paving and infiltration planters.

For many healthcare organizations, measuring impacts on staff was important, with measurements of retention rates, absenteeism and increased staff satisfaction. Hospitals are also evaluating patient-related impacts, such as patient and staff satisfaction and changes to the average length of stay attributable to their sustainable buildings. For both healthcare organizations and design firms, the relationship of the built environment on improved patient outcomes and staff well-being and performance is the most important benefit to be understood and will likely guide healthcare design research for years to come.

In conclusion, the aim of this study was to provide the US healthcare industry with current empirical data on the initial cost increase associated with LEED certified hospitals. While the cost difference between green and standard hospital construction in the US is minimal, the environmental and resource-use differences can be substantial.

The data showed that the initial extra cost for green design is generally lower than commonly perceived and can approach zero cost when integrated into the basis of design and budget at the earliest design phase. When considering mission statements of healthcare organizations, along with the due diligence, accountability, and third-party verification provided by the LEED review process, LEED certification is in fact one of the more sound investments a hospital can make, delivering measurable economic, environmental, and human health benefits.

 

The author is Hussain Varawalla, Healthcare Architect, based in Mumbai, India and can be reached at hussain@healthcarearchitecture.in

 

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