By Sydney Grube, MBA ’26
This article was written in response to a class discussion in the EDGE Seminar class at Duke University’s Fuqua School of Business in Fall 2025. This article voices one student’s perspective and does not necessarily represent the views of Duke University.
Coming from a healthcare delivery background, I haven’t spent much time thinking about energy. During my first year as an MBA student, I dove into all the healthcare business electives I could. But as a second-year student this year, I decided to branch out and explore new industries and get outside of my comfort zone by engaging with passionate people from different backgrounds. Taking the EDGE Seminar class this Fall was part of that journey.
The Seminar opened my eyes to an important opportunity: healthcare managers ought to spend some time and energy (no pun intended) thinking about energy efficiency. Although healthcare facilities only account for 4% of commercial floorspace, they account for 9% of energy consumption among all commercial buildings. Health systems, primarily in-patient facilities, are energy-intensive, as they are 24/7 facilities that depend on an adequate supply of power for the provision of both patient care and critical systems support. As hospitals are mainly not-for-profit and operate on slim margins (3-4%), it is paramount for them to conserve costs where they can do so without risking patient safety.
There are multiple reasons for this. The first is because utilities can account for up to 10% of a hospital’s total annual budget. With healthcare costs rising, any waste from energy inefficiency is often passed on either directly or indirectly to the patient. The second reason is because healthcare is mainly a brick-and-mortar business with aging facilities. Although data on the age of hospitals is hard to come by, a 2017 analysis by the American Hospital Association (AHA) estimated that the average age of hospitals in the US increased from 8.6 years in 1994 to 11.5 years in 2015. Further, a study by Brightly found that U.S. healthcare facilities had deferred about 41% of their maintenance and would need $243 billion to complete the backlog.
The primary drivers of wasted energy for hospitals are poor insulation, drafty windows, outdated HVAC systems, inefficient lighting and medical equipment, and lack of internal roles and workflows that assess inefficient energy usage. A key question is: how can health systems update their facilities to improve energy efficiency, given their small amount of free cash flow for investment?
Health systems can take advantage of policy incentives at the state and local level, including the Commercial Property Assessed Clean Energy (C-PACE) financing tool, which allows property owners to finance the upfront cost for qualified energy, water, resilience, and public benefit projects with funding through a voluntary assessment on the property tax bill. As of 2022, 38 states including the District of Columbia have active PACE programs, totaling $4B across 2,900 projects. Green Banks and third-party financiers typically provide the capital for PACE projects, and the local government collects payments and acts as a remitter. The investments are then paid off over the useful life of the equipment with lower interest rates when compared to commercial loans.
The PACE program would de-risk energy improvement initiatives for health systems. The savings from lower utility bills could help the hospital pay back the principal for energy efficiency improvements such as new HVAC systems, weatherization, and LED installation.
Healthcare executives may not think of energy management as a priority issue, but it represents an untapped opportunity. Energy waste is both costly and risky. By leveraging tools like C-PACE financing, health systems could reduce expenses, modernize facilities, and build resilience without compromising patient care. This alignment between healthcare and energy creates a promising path for innovation at the intersection of two essential industries.
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