Funding Resiliency: Turning Plans into Action
In Embracing Resiliency: Paving the Way to Sustainable Healthcare, we explored how healthcare facilities can identify vulnerabilities, strengthen critical systems, and maintain consistent operations in the face of growing environmental and economic pressures.
This article continues that conversation by focusing on funding resiliency, the financial support that helps turn plans into measurable progress. Across the country, healthcare organizations are rethinking how they invest in modernization. Fortunately, emerging funding and financing strategies are making it possible to upgrade aging infrastructure, reduce energy costs, and strengthen reliability while staying focused on patient care.
Building a Foundation Through ESPCs
Energy Savings Performance Contracts, or ESPCs, offer a proven way for healthcare facilities to address infrastructure needs without relying on upfront capital. Through this model, improvements are funded through verified energy and operational savings, allowing facilities to upgrade systems while preserving capital.
Typical ESPC projects include HVAC and central plant modernization, advanced controls, renewable energy integration, and other upgrades that improve efficiency and reliability. Many organizations also use ESPCs to build redundancy into critical systems.
Working with a reputable Energy Services Company, or ESCO, is essential to achieving lasting results. An experienced ESCO can accurately model savings, manage performance risk, and provide measurements and verification throughout the life of the contract. This disciplined approach allows healthcare facilities to control costs, ensure accountability, and reinvest savings in initiatives that improve care delivery.
Expanding Impact Through Incentives and Funding Pathways
Recent legislation, including the Inflation Reduction Act (IRA), has created powerful opportunities to expand project scope and accelerate timelines. Through the direct pay provision under the Section 48 Investment Tax Credit, nonprofit healthcare systems can receive payments that offset the cost of qualified energy projects. The Section 179D Energy Efficient Commercial Buildings Deduction offers additional savings for upgrades based on the building's square footage and the level of energy savings achieved.
Property Assessed Clean Energy financing, or PACE, is another option now available in most states and has supported more than $1 billion in energy-related projects since 2008. PACE provides long-term financing for energy efficiency and renewable energy improvements with limited upfront cost. In some states it is delivered through Energy Project Assessment Districts, or EPADs, which serve as the local mechanism for offering the same type of financing. Both PACE and EPAD programs allow facilities to repay project costs through a voluntary property assessment, which can help hospitals move forward with upgrades even when capital is constrained.
These incentives can be combined with other funding sources such as state and local programs, utility rebates, or grants. Public tools like the Database of State Incentives for Renewables and Efficiency (DSIRE), the American Hospital Association’s Sustainability Roadmap, and ASHE’s funding resources can also help healthcare leaders identify programs that align with their goals.
Decision-makers should always consult their tax and legal advisors before finalizing project structures to confirm eligibility and compliance1.
Bringing it All Together
By combining multiple funding strategies, the results can be transformative. One regional medical center facing rising energy costs, aging HVAC systems, and limited backup capacity used a layered approach to move its plans forward. By combining an ESPC with Inflation Reduction Act (IRA) incentives and a local utility rebate, the facility secured funding for a $4 million modernization project that replaced outdated chillers, improved humidity control, and added system redundancy for critical care areas.
The effort reduced annual utility costs by roughly $400,000 while lowering carbon emissions and maintenance expenses. More importantly, it created a dependable, efficient facility and a funding model that continues to deliver value. This type of integrated approach demonstrates how thoughtful financial planning can strengthen resiliency, elevate performance, and improve the patient care environment.
Sustaining Progress
Funding resiliency is not a one-time initiative, but instead a continuous process of evaluating needs, capturing available resources, and reinvesting in improvements that enhance the patient care environment and community well-being. As funding and financing opportunities evolve, healthcare facilities that combine multiple strategies to support resiliency projects will be best equipped to maintain dependable, high-performing, and sustainable healthcare environments now and into the future.
(1): Trane does not provide tax, legal, or accounting advice. This material is for informational purposes only and it should not be relied on for tax, legal, or accounting advice. Tax law is subject to continual change. All decisions are your responsibility, and you should consult your own tax, legal, and accounting advisors. Trane disclaims any responsibility for actions taken on the material presented.