New Orleans-based Bernhard, one of the largest privately-owned engineering, mechanical and electrical contractors in America with strong ties to Arkansas, is at the forefront of energy management in the health care space. The company, which focuses its expertise on health care entities, is a leading purveyor of Energy as a Service (EaaS).
“UAMS has been our largest Arkansas health care customer for a long time, but we do a lot of work through our legacy divisions for Washington Regional in Northwest Arkansas, we do a lot of work for Baptist here in Little Rock,” said Rob Guthrie, vice president of development. “Some of the smaller ones, like Jefferson Regional (in Pine Bluff), we’ve done work for in the past and continue to work with today.”
“As a Service” business models began with the introduction of cloud computing. Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Software as a Service (SaaS) were among the earliest applications of the concept, essentially providing network services and software applications by subscription or on demand, thus eliminating much of the capital investment previously required.
Guthrie illustrated the concept as the difference between record stores of days gone by and today’s streaming music services.
“If you wanted a record you would spend a lump sum upfront and in exchange you would get this tactile, physical disc,” he said. “The exchange of value is complete, but you have the burden of maintaining that product; if you drop it in the parking lot on the way out, tough luck. You also have risk of loss through functional obsolescence. So, if the cassette that you bought becomes obsolete – say, they stop putting cassette decks in cars three years later – your product has lost value because of that.”
“If you take Spotify as an example, all of the burdens of ownership are transferred away from the consumer to the vendor. Spotify has the burden of maintaining the database of songs, not you. Spotify has the risk of loss, they have the risk of managing it, they have the obligation to keep the catalog of music up-to-date.”
“If the consumer can shift those burdens to the counterparty, and still extract the same value from the product at a reasonable cost of subscription, the data shows the consumer will subscribe.”
The “as a Service” model has quickly collected a number of applications under this general umbrella. Energy as a Service is one such burgeoning application that, while still relatively nascent, has industry watchers’ full attention. Raconteur Magazine put the concept on the cover of its “Future of Energy” issue last February, summarized in the not-so-subtle headline “Energy-as-a-Service Will Transform the Sector.”
To explain the business model, Guthrie again used an example from the entertainment sector.
“Imagine that Netflix came to your house and said, ‘You’ve got 300 DVDs here. I’m going to pay you for the right to use those DVDs,’” he said. “You now have an opportunity to essentially monetize your DVD collection by selling the right to use those DVDs to Netflix.”
“That is pretty much what we do on the Energy as a Service side; we purchase the right to use certain energy infrastructure from hospitals. This allows the hospital to monetize its assets, transfer risk, renew infrastructure and substantially reduce its energy costs through a subscription-based program.”
Bernhard has been notably successful in leveraging this business model, currently serving 1,400 hospitals nationwide. The financial impact of the EaaS model – Bernhard calculates savings of $50 million in operating expenses every year for the healthcare facilities it serves –has helped it open an aggressive new chapter.
The company recently entered into an agreement with industry partner ProStar Energy Solutions of Texas to provide EaaS to members of Nashville-based HealthTrust Purchasing Group, L.P. That membership includes more than 1,600 hospitals and health systems and more than 43,000 other member locations including ambulatory surgery centers, physician practices, long-term care and alternate care sites.
“It’s the biggest endorsement that we’ve ever gotten and I think Prostar would say the same thing,” Guthrie said. “But I would say more so that it’s big for HealthTrust to exclusively endorse a single vendor for this type of transaction. That’s what makes it significant from a national prospective.”
Besides the impact on Arkansas client hospitals, Bernhard’s fortunes also impact the Natural State by virtue of its engineering division being located in Little Rock. That division, which was born through the acquisition of TME, employs around 300 people, Guthrie said.
“A lot of our people within the company call the Little Rock headquarters HQ2,” he said. “It’s our second-biggest office. We do have DNA very clearly in the state (of Arkansas).”