Hospital Microgrids get the Go-Ahead from the Centers for Medicare and Medicaid Services


an illustration of a colorful city with a focus on the hospital at the center

With patient health at stake, a power outage poses major risks to hospitals. Emergency backup power systems are essential for hospitals when prolonged power outages occur. Although advances in technology have expanded options for backup power systems, the majority of hospitals continue to use diesel generators for emergency backup power. This is largely because the Centers for Medicare and Medicaid Services (CMS) only reimburse a hospital for health care costs if the hospital uses generators or battery systems for emergency backup power.

However, a recent decision by CMS allows hospitals that use microgrids to be eligible for health care costs reimbursement. This decision opens the door for more hospitals to use microgrid systems to protect their facilities and patients.   

A microgrid is a small-scale energy system that contains interconnected loads and distributed energy resources (DERs). These DERs include solar panels, wind turbines, fuel cells, batteries, and other renewable energy technologies. Microgrids are different from backup generators because they can proactively disconnect from the grid at a moment’s notice and “island” themselves to operate separately. Increased reliability for extended periods of time, the seamless maintenance of power, and reduced energy costs and emissions, make microgrids a viable option for backup power at hospitals. We discussed the potential benefits of microgrids for hospitals in a prior article.

CMS recognized these benefits as their new regulations permit hospitals to use a health care microgrid system (HCMS) for normal and emergency power. An HCMS can supply power from any individual DER or combination of DERs. The renewable resources in an HCMS must comply with the National Fire Protection Association (NFPA) Health Care Facilities Code (NFPA 99), the 2023 edition of the National Electric Code (NFPA 70), and associated references.

New and existing hospitals, who comply with CMS and NFPA requirements, must elect to use a categorical waiver and document the use of an HCMS to CMS. A survey entrance conference is held where the survey team will review the documented decision and verify that the HCMS complies with the applicable requirements. Once the survey team confirms that the required level of patient protection is met, the hospital is deemed to meet the standards and is able to receive reimbursement.

The installation of an HCMS provides reliability and resiliency while reducing costs and greenhouse gas emissions associated with fossil fuels. On top of this, federal Investment Tax Credits under the Inflation Reduction Act (IRA) enable nonprofits, including some hospitals, to receive direct pay benefits that make energy costs and construction of microgrids cheaper. See Article on the benefits of the IRA for non-profits here.

In light of increasing weather emergencies, the CMS decision to include microgrids as a viable backup power option for hospitals, in combination with IRA incentives, ensures the well-being of patients, pocketbooks, and the planet.

For more information on hospital microgrids see:

*Co-authored by Paige Trent, Energy Fellow (Not Yet Licensed to Practice Law)

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