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January 21, 2016 12:00 AM

Low gas prices fuel hospital savings

Adam Rubenfire
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    The prices seen at one pump in North Plainfield, N.J.

    Consumers have rejoiced since gas prices dipped below $2 a gallon. Experts say hospitals are also happy about the low cost of oil, since it means significant savings on fuel for their vehicle fleets and petroleum products for their heating systems.

    Crude oil prices have stayed below $30 a barrel since mid-January. Drivers, as of Thursday, were paying an average of $1.86 a gallon across the country.

    Hospitals that run their own ambulance services are likely seeing significant fuel savings, but many hospitals also have fleets of vehicles for deliveries, security and maintenance personnel.

    “Fuel in general is one of the single largest expenses for a hospital,” said Rob Scheffer, senior vice president of operations for ABM Healthcare Support Services, which provides engineering services and other types of support to hospitals.

    Salt Lake City-based Intermountain Healthcare has 700 vehicles across its 22-hospital system, most of which run on gasoline, according to Intermountain spokesman Daron Cowley, who added that while the system knows it's saving money, it hasn't yet calculated how much.

    If fuel prices stay low, it could encourage more hospitals to invest in in-house distribution vehicles, said JoAnne Levy, vice president of supply chain operations for ROi, a St. Louis-based supply chain organization that serves Mercy health system and several other health systems.

    Depending on their size, trucks or vans may run on diesel fuel instead of gasoline. While diesel prices aren't averaging per gallon prices as low as gasoline's, they're still very low at $2.12 a gallon, as of Thursday. That's 27% lower than a year ago.

    James O'Connor, vice president of supply chain management at Detroit-based Henry Ford Health System, said he's seen savings in transportation costs, but also suggested that petroleum costs have and will continue to have a significant impact in mitigating inflation for medical supplies that use petroleum-based plastic.

    Hospitals also use gas for boilers, which provide heat, or to power electric generator equipment. Nearly all hospitals use steam in some way or another, said Scheffer.

    The price of natural gas used for heating has also been low over the past couple of months, dropping sharply in mid-December, and trending much lower than usual over the past year.

    Scheffer estimated that 75% of ABM's customers employ a dual fuel strategy, switching between natural gas and varying amounts of petroleum products to run their boilers. He said many ABM engineers have been making the switch to petroleum over the last year. Engineers are also switching to petroleum because it's readily available—supply can become an issue in the winter.

    “Hospitals are very adept at switching from natural gas, which is less efficient than regular fuel,” Scheffer said. “They're adept at going back and forth and monitoring the market and costs.”

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