Eighteen months ago, Congress and President Joe Biden set aside billions of dollars in funding and tax incentives for sustainability and decarbonization efforts. Take-up in the healthcare industry has lagged.
The energy-intensive sector is responsible for an estimated 8.5% of U.S. carbon emissions, and its supply chain generates excessive waste and pollution. Hospitals are particularly vulnerable to the effects of climate change, which was associated with 72% of evacuations from 2000 to 2017, according to a study from Case Western Reserve University. Yet few health systems have concocted plans to tap the federal dollars.
Related: How energy tax incentives, grants could save hospitals billions
The Inflation Reduction Act provides billions of dollars in direct funding and tax incentives that health systems can use to finance climate resiliency and renewable energy infrastructure projects such as micro-grids, solar energy and electric vehicles. Many opportunities rolled out this year and notably are available to nonprofit organizations and local governments through direct payments for qualified investments. Projects must be underway by Dec. 31, 2024, to qualify, leaving health systems with a year remaining to plan and break ground.
Health systems say they need advice from the Treasury Department about the tax incentives and which projects are eligible. Some have tapped into preexisting programs the Inflation Reduction Act enlarged to install and expand micro-grids and to receive tax deductions for construction projects that improve energy efficiency, said Kara Brooks, senior associate director of sustainability at the American Hospital Association's American Society for Health Care Engineering.
Some of the available grants and tax credits will disappear at the end of next year, but health systems are awaiting further guidance from federal regulators and intend to advance projects, Brooks said.
View from the ground
Health systems and trade associations such as Oakland, California-based Kaiser Permanente, Ontario, California-based Prime Healthcare and the AHA are combing through the requirements to see where they may qualify. For some companies, this requires hiring consultants, which could deter low-margin and safety-net facilities from participating. In addition, many are looking into whether they can apply the incentives to existing projects rather than commit to new ones.
Nonprofit integrated health system Kaiser Permanente, which says it's been carbon neutral since 2020, has used the expansion of the Investment Tax Credit for solar generation to expand its on-site solar program. According to a spokesperson, Kaiser Permanente has 110 locations that use on-site solar power. The company is still reviewing whether direct payment opportunities align with projects slated for next year.
Prime Healthcare is evaluating initiatives that could tap into the Inflation Reduction Act across its 45-hospital, for-profit portfolio. Nonprofit Memorial Hermann Health System of Houston, known for its work in energy efficiency and emissions reductions, said the incentives don’t apply to any of its upcoming projects and it has no plans to utilize them. Bozeman Health, a nonprofit integrated health system in Montana, said it is not using the funding.
Trade associations such as the AHA and America's Essential Hospitals expect more hospitals to issue formal plans next year.
Last year, hundreds of healthcare organizations joined the White House climate pledge, promising to halve emissions by 2030 and achieve net zero by 2050. To lead that effort, the Health and Human Services Department revived the Office of Climate Change and Health Equity to push hospitals to decarbonize and to address climate change's harmful effects on health.
Although HHS was not allotted direct funding under the Inflation Reduction Act toward those goals, it’s working to align opportunities from other departments with healthcare systems, said Office of Climate Change and Health Equity Director Dr. John Balbus.
Earlier this year, the climate change office created a tool to help organizations access grants and tax incentives. Balbus has also conducted webinars and virtual meetings to share information with healthcare leaders, with a special emphasis on community health centers and safety-net hospitals, he said.
