Program Design Strategies

Best practices for establishing a buy-local initiative

Strategies

  • Focus on “moveable spend”
  • Leverage upcoming construction and capital expansion projects
  • Align with other strategic initiatives, such as sustainability efforts
  • Unbundle contracts and carve out opportunities for new diverse and local vendors
  • Create a full-time coordinator role

Focus on “moveable spend”

Certain categories of spend are easier to procure locally than others. By starting programs with a focus on these spending categories, institutions can refine and institutionalize processes to further facilitate local spending. Moreover, “easy wins” can help to build momentum for the program.

Suggestions for first places to start include:

  • Construction
  • Facility services
  • Janitorial services
  • Distribution
  • Printing
  • Information technology
  • Advertising and graphic design
  • Food
  • Energy efficiency and renewable energy

Another factor to consider is the degree to which personal preference factors into purchasing decisions. “Look at areas where people wouldn’t notice if you switched vendors. Preference is a major barrier,” explained Indria Hollingsworth-Thomas, director of supplier diversity at Parkland Health and Hospital System in Dallas, Texas.1Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016.

Steve Standley, chief administrative officer at University Hospitals in Cleveland, Ohio, echoed a similar sentiment, emphasizing that it is strategic to focus on products where people do not have a brand preference, which tends to be the case with more specialized medical supplies. Concentrating on goods and services that are “brand agnostic” can be an easier sell—for example, categories such as pharmacy distribution, kits and tray distribution and surgical decontamination.

These same categories are also advantageous for another reason: There are clear benefits to having these critical services localized. As Standley points out, “If there’s a snowstorm, I can still get the supplies. If they were going to come from Chicago, it’s a different story.”2Steve Standley, interview by Ted Howard, October 2, 2016.

Spend that appears to be unmovable because it is locked in contract for a number of years should still be incorporated into planning.

Spend that appears to be unmovable because it is locked in contract for a number of years should still be incorporated into planning. Part of the initial data scrub should be to identify when lead contracts will come up and which are most strategic to source locally.3Steve Standley, interview by Ted Howard, October 3, 2016. The interim time can be used to conduct research, vet possible vendors, and even engage in business incubation. Having this longer term approach can help sustain efforts after the easier switches happen.

 

Leverage upcoming construction and capital expansion projects

Construction projects, and other large capital expansion initiatives such as renovations, are prime opportunities for growing a local and diverse spending initiative. Not only is this a key area of relatively easily “moveable spend”, but there are many best practices from healthcare and other industries to encourage participation of diverse and local vendors in construction projects. Moreover, setting ambitious local and diverse spending with large projects, which can be very public and likely require consent from a public entity, can be an important way to increase community support. Capital expansion projects also tend to coincide with strategic planning, and thus also represent a point at which leadership can articulate goals and vision around shifting purchasing practices.

The Medical University of South Carolina (MUSC), based in Charleston, South Carolina, utilized this strategy. They leveraged a construction project to double-down on their commitment to working with diverse vendors, focusing on those based in South Carolina. In 2014, MUSC announced a $350 million dollar project to construct a new children’s hospital and women’s pavilion. Leadership immediately recognized the procurement opportunities this project could offer to minority- and women-owned business enterprises (MWBEs), from the construction itself, to information technology contracts, to the sale of equipment.

MUSC emphasized that these opportunities would set a new standard of doing business with MWBE and local vendors. After a vendor outreach event focused on the project in October 2014, Regine Villain, MUSC chief supply chain officer, emphasized this, stating in a press release: “It was also important to reach outside MUSC to get the input and participation from key community stakeholders. MUSC has tenure within the community; it was only right to continue to promote local and minority vendors. We recognized that we needed to reach out to minority vendors and let them know: ‘We want to know what you do.’”4Mikie Hayes, “MUSC, Minority Vendors Building Relationships,” The Catalyst, Charleston, SC: Medical University of South Carolina, October 2, 2014, academicdepartments.musc.edu/catalyst/archives/2014/10-3Business.html.

The construction bid was awarded to a construction management team made up of a national building firm, a local firm, and a local MWBE firm. In their bid, the firm included a provision that 30 percent of the contract would go to MWBE and/or small businesses. The MWBE in the management company then hosted an eight-week training program, which included general business development capacity building and specific information about the procurement process. Fifty small MWBEs participated. This process then enabled the firm to do matchmaking between these businesses and larger construction vendors, so that they could be in compliance with the 70/30 percent breakdown in contracts.

Anton Gunn, the executive director of community health innovation and chief diversity officer at MUSC, emphasized the importance of these contracting partnerships for building future capacity. For instance, the project had over $10 million in contracts for dry wall. Although the prime vendors bidding on the project were not minority-owned, they were encouraged to partner with minority-owned construction firms who had never done healthcare in the drywall space. This mentor-protégé approach would ensure that minority-owned construction firms were poised to take on future contracts with the health system, after the completion of the project.5Anton Gunn, interview by David Zuckerman, May 24, 2016.

Another health system utilizing this strategy of leveraging upcoming capital projects is University Hospitals in Cleveland, Ohio. For more information about this example, refer to the Case Studies section of this toolkit.

 

More resources:

A network of organizations already exists for hospitals to incorporate environmental sustainability into their purchasing decisions. Health Care Without Harm (HCWH) and Practice Greenhealth (PGH) are two organizations at the intersection of human and environmental health. They are galvanizing a national learning network of over 1,200 hospitals working to execute tested strategies to leverage their purchasing to support the health of the communities they serve. HCWH and PGH offer multiple tools and resources to help institutions achieve sustainability goals. These include the following:

Environmentally Preferable Purchasing (EPP) resources

PGH brings a focus to selecting  healthcare products with reduced environmental and human health impacts that are vital to healthcare. Environmentally Preferable Purchasing (EPP) is the act of purchasing products/services whose impacts have been considered and found to be less damaging to the environment and human health when compared to competing products/services. EPP can be the key to saving money and reducing waste while meeting the needs of patients. For EPP tools and additional information, see: practicegreenhealth.org

Greenhealth Exchange

Greenhealth Exchange (GX) is a purchasing cooperative created by PGH, HCWH, and leading health systems committed to sustainability. The goal of GX is to make buying products and services that are good for people, the planet, and the bottom line easier for its members. GX helps to track hospital member spend and report the environmental, health, and community benefits associated with purchases. The GX Innovation hub works to spark innovation in the supply chain, including in areas such as local food system growth or greener product development. For more information, see: www.greenhealthexchange.org

Healthier Hospitals program

Healthier Hospitals, a free program of PGH, offers powerful resources to advance procurement changes and sustainability in healthcare. The program provides a suite of tools to help hospitals get started on goal setting, implementation, and measuring progress towards purchasing and programmatic goals. In addition to multi-tiered goals, participants of Healthier Hospitals have access to tracking tools, case studies, and a comprehensive get-started guide. Participating institutions set the goal to increase the percentage of local food purchases by 5 percent annually or achieve the goal of 20 percent total. For more information about this program, see: www.healthierhospitals.org

Environmental Excellence Awards

The Environmental Excellence Awards established by PGH have become an industry standard within healthcare procurement and sustainability, recognizing institutions at varying stages of sustainability initiatives. The awards serve as a strong communication vehicle to celebrate accomplishments in creating healthier hospital environments, and encourage innovation. Awards range from the Circles of Excellence, which recognize hospitals for outstanding performance in one specific area of expertise, to a Top 25 Environmental Excellence award presented to the twenty-five hospitals that have best met key performance indicator targets and scored the highest across ten categories. For more information on the Environmental Excellence Awards, see: practicegreenhealth.org/awards

Align with other strategic initiatives

Localizing purchasing can help meet institutional strategic goals in sustainability and healthy eating. Tying procurement efforts to these goals not only helps increase internal support for the goals, but also positions procurement as a strategy to address community health needs, such as nutrition and carbon emissions.

Localizing food procurement

Many healthcare institutions are recognizing the alignment between local food and their sustainability and nutrition goals. Buying local food can help decrease inputs into industrial food production that drive poor health, such as fossil-fuel based fertilizers, antibiotics for livestock, pesticides, and carbon emissions. In addition, the transparency of local sourcing helps ensure sustainable practices and reduce added ingredients to processed foods, such as extra sodium and added fat.6For more information about the health effects of food procurement, see: Health Care Without Harm, noharm-uscanada.org/issues/us-canada/healthy-food-health-care.

Reduction of sodium in patient meals has been a significant driver for Charleston Area Medical Center’s local food-purchasing program in Charleston, West Virginia. Boston Medical Center (BMC) in Boston, Massachusetts has taken a similar approach in their local seafood purchasing. Since sodium is a major contributor to hypertension, BMC nutrition staff were concerned about the amount of it in the processed food they were purchasing. Specifically, industrially produced meat tends to be higher in sodium content due to added preservatives. To address this, BMC started purchasing from local fisherman for locally caught fish with no added sodium. BMC is able to pay the fisherman fifty cents more per pound than they would get at other markets, and they purchase underutilized species that helps encourage sustainable fishing practices.

“The only fuel used is from the fishing boat, and then to the hospital. And we get ultra-fresh, low-sodium, high-protein product…The remnants from the trimming are transferred to an on-site plant and made into liquid organic fertilizer,” explained Leo LaRosa, the director of infrastructure and utility management at BMC, when discussing the environmental benefits of the program. The hospital is also considering being a central distribution point for a community-supported agriculture (CSA) distribution program, where community members could purchase seafood and support the local fishing community.7Leo LaRosa, interview by David Zuckerman and Katie Parker, October 3, 2015.

Local food purchasing can be an especially important tool for hospitals to support the local economy. Responding to the identification of unemployment as a pressing community health need, Charleston Area Medical Center’s local food value chain program explicitly seeks to transform the regional economy and provide good jobs for area residents.8For more information, see: the Charleston Area Medical Center case study in this toolkit.

Similarly, Concord Hospital, based in Concord, New Hampshire, sees local food purchasing as an important way to support the local economy. Tom Serafin, the director of food and nutrition services for over twenty years, described his approach: “It was never about a carbon footprint, or healthier meals, or the issues people are pushing today. It was always about supporting the local economy and keeping the dollars in. If you are a major institution providing service to an area, why wouldn’t you want to help the people who you serve?” Compared to other purchases in their supply chain, food spending is an area with a significant amount of discretion. Moreover, there was flexibility to adjust the menu to offer food that was locally available. “We have to serve food, but we don’t need to serve chicken. Whereas in other areas of the hospital, you have to use a specific product, or specific formulation,” noted Serafin.9Tom Serafin, interview by David Zuckerman and Katie Parker, October 29, 2015.

By buying local food, hospitals help grow the capacity of local food vendors. In Concord, Serafin worked with a local salsa company, supporting them in packaging their salsa in four ounce cups so that it could be more easily distributed in the hospital cafeteria.10Tom Serafin, interview by David Zuckerman and Katie Parker, October 29, 2015. In relation, over the years the business has grown significantly, and the owner has moved to a larger location and hired more staff.

Health systems can also supply other resources to help build local food vendor capacity. University of Vermont Medical Center in Burlington, Vermont has provided technical assistance around product development to vendors, written letters of support for grants, and even donated capital for greenhouses and other equipment.

Local purchasing can support sustainability initiatives. Cleveland Clinic in Cleveland, Ohio has used local procurement to boost its sustainability programs. For instance, they contracted with Evergreen Energy Solutions, a local worker-owned cooperative focused on green construction, to undertake one of the largest healthcare LED lightbulb retrofits in the country. This project supports this worker-owned cooperative that hires from low-income communities of color while at the same time helping Cleveland Clinic achieve its sustainability goals and reduce costs. “Health of the community—including economic and environmental health—is integral to our mission,” explained Jon Utech, the senior director of Cleveland Clinic’s office for a healthy environment.11Jon Utech, “Local Purchasing,” presentation, Cleveland, OH, January 12, 2016. For more information about Evergreen Solutions and the other worker-owned businesses that are part of Evergreen Cooperatives, see: the University Hospitals case study and the “Building Capacity” section in this toolkit.
Another area of strategic overlap is with health equity and population health initiatives. St. Francis Hospital and Medical Center based in Hartford, Connecticut has made this connection explicit by connecting their supplier diversity initiative to health equity goals. Tatiana Paredes oversees the supplier diversity program and her position’s title is “coordinator of supplier diversity, health equity and inclusion.”
Increasingly, efforts to diversify the supply chain are connected to efforts to address community needs and increase hospital staff diversity and cultural competency of care. The mission of the program makes this connection to community explicit: “Through Supplier Diversity, our aim is to create a mutually beneficial long-term social and economic impact in the communities we serve.”12Saint Francis Hospital and Medical Center, “Supplier Diversity,” website accessed October, 2016, www.stfranciscare.org/Supplier_Diversity.aspx; “On the Fast Track to Success,” The Source, Third Quarter 2016, 54.

More resources:

 The Healthy Food in Health Care program

The Healthy Food in Health Care program, of Health Care Without Harm, guides hospitals towards a transition from a price-based to a value-based food system. The program connects health systems to small- and medium-sized farms that employ responsible practices, helping to drive purchasing from these farms and, in turn, support a stable local economy. Resources the program provides to participating health institutions include: background information about the overlap between food sourcing and health, procurement guides for sustainably raised meat, poultry, and seafood, a “how to” guide, and information on healthcare’s role in supporting organic purchasing.

Another focus of the program is to shift the economic model of food so the production costs are split more evenly between farmers, retailers, wholesalers, and consumers. The long-term vision is that this will result in more economically stable local producers and fairer prices for consumers, For more information, see: healthyfoodinhealthcare.org

Kaiser Permanente (KP), one of the nation’s largest nonprofit health plans and integrated care consortium based in Oakland, California, also makes the explicit connection between their supplier diversity program and community health. The mission of their supplier diversity program is: “to ensure the dollars spent by Kaiser Permanente contribute to the economic health and reflect the diversity of the communities we serve.”13Doing Business with Us,” Supplier Diversity, Kaiser Permanente, website accessed August, 2016. supplierdiversity.kp.org/doing-business.html

They have maintained this focus even as they have grown significantly, with revenues of more than $60 billion. KP is currently the only healthcare provider member of the “Billion Dollar Roundtable,” a group of large corporations that commit to directing at least one billion dollars of their purchasing to minority- and women-owned business enterprises.14“Kaiser Permanente First Health Care Provider and Health Plan Named to Billion Dollar Roundtable,” Kaiser Permanente News & Views, Kaiser Permanente, August 12, 2014, share.kaiserpermanente.org/article/kaiser-permanente-first-health-care-provider-and-health-plan-named-to-billion-dollar-roundtable/. Although the initiative overall has a national focus, KP has instituted programs to help support producers based in California, including a resource for California suppliers to simplify and quicken the invoicing process.15For more information, see: supplierdiversity.kp.org/doing-business.html. KP is currently undertaking planning on how it can more intentionally drive its significant annual spending into communities it directly serves.

 

Unbundle contracts and carve out opportunities for new, local vendors

To streamline processes and lower costs, procurement departments often “bundle” contracts, putting multiple goods and services in the same bid for proposals. But this can create barriers for local and diverse firms that may be able to fill one specific part of the contract, but not the services outside of their scope.

Breaking contracts into component parts increases the likelihood that smaller firms can put together bids. Moreover, smaller contracts provide an onboarding opportunity, allowing vendors to familiarize themselves with the hospital’s procurement process. Often, unbundling bids can even produce cost savings, as the bidding process for each good or service is more competitive. Unbundling contracts and breaking apart projects is a strategy employed heavily at University Hospitals in Cleveland, Ohio.16Mary Beth Levine, interview by David Zuckerman and Katie Parker, May 10, 2016.

Key responsibilities for a staff position focused on inclusive, local and sustainable sourcing include:
    • Coordinate initial data scrub and ensure data infrastructure is adequate
    • Solicit input for goal-setting process
    • Solicit input on supply chain needs
    • Work to create database of local, diverse and sustainable suppliers
    • Conduct internal education with department managers
    • Coordinate supply chain meetings to discuss barriers and progress
    • Track progress on goals and report to leadership
    • Troubleshoot with managers when goals are not being met
    • Conduct vendor outreach and connect with new, local vendors
    • Serve as first contact point for interested vendors
    • Create materials for vendors interested in working with institution
    • Develop partnerships with local business organizations and other anchor institutions

Create full-time coordinator role

Although local and diverse spending typically has little impact on the price an institution pays for goods or services, it can require more staff time—especially at the onset when health systems will need to create new vendor relationships. Often, supply chain managers have limited capacity beyond the day-to-day functions of procurement. Hiring a full-time coordinator ensures that some of the broader tasks necessary for starting an initiative—the initial data scrub, goal setting, coordination among departments, and outside partnerships—do not fall to the wayside.

A best practice is to situate this position within supply chain, and not within a staff group on diversity, explained Howard Elliott, a supplier diversity consultant based in Cincinnati, Ohio. This placement helps convey within the organization that this is a business imperative, and it helps ensure there is someone who can focus on accountability across departments.17Howard Elliott, interview by David Zuckerman and Katie Parker, January 15, 2016, Cincinnati, OH

Critical Strategies

Core elements of localizing your spend

  • Shift from lowest price to best value
  • Establish local/diverse spending goals
  • Embed goals into RFPs & contracting processes
  • Conduct outreach & education ...

Partnership strategies

Tools to scale local purchasing efforts

  • Develop partnerships with the local business community
  • Leverage long-term contracts with distributors, aggregators, and contractors to achieve procurement goals

Critical Strategies

Core elements of localizing your spend

  • Shift from lowest price to best value
  • Establish local/diverse spending goals
  • Embed goals into RFPs & contracting processes
  • Conduct outreach & education ...

Partnership strategies

Tools to scale local purchasing efforts

  • Develop partnerships with the local business community
  • Leverage long-term contracts with distributors, aggregators, and contractors to achieve procurement goals

References   [ + ]

1. Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016.
2. Steve Standley, interview by Ted Howard, October 2, 2016.
3. Steve Standley, interview by Ted Howard, October 3, 2016.
4. Mikie Hayes, “MUSC, Minority Vendors Building Relationships,” The Catalyst, Charleston, SC: Medical University of South Carolina, October 2, 2014, academicdepartments.musc.edu/catalyst/archives/2014/10-3Business.html.
5. Anton Gunn, interview by David Zuckerman, May 24, 2016.
6. For more information about the health effects of food procurement, see: Health Care Without Harm, noharm-uscanada.org/issues/us-canada/healthy-food-health-care.
7. Leo LaRosa, interview by David Zuckerman and Katie Parker, October 3, 2015.
8. For more information, see: the Charleston Area Medical Center case study in this toolkit.
9, 10. Tom Serafin, interview by David Zuckerman and Katie Parker, October 29, 2015.
11. Jon Utech, “Local Purchasing,” presentation, Cleveland, OH, January 12, 2016. For more information about Evergreen Solutions and the other worker-owned businesses that are part of Evergreen Cooperatives, see: the University Hospitals case study and the “Building Capacity” section in this toolkit.
12. Saint Francis Hospital and Medical Center, “Supplier Diversity,” website accessed October, 2016, www.stfranciscare.org/Supplier_Diversity.aspx; “On the Fast Track to Success,” The Source, Third Quarter 2016, 54.
13. Doing Business with Us,” Supplier Diversity, Kaiser Permanente, website accessed August, 2016. supplierdiversity.kp.org/doing-business.html
14. “Kaiser Permanente First Health Care Provider and Health Plan Named to Billion Dollar Roundtable,” Kaiser Permanente News & Views, Kaiser Permanente, August 12, 2014, share.kaiserpermanente.org/article/kaiser-permanente-first-health-care-provider-and-health-plan-named-to-billion-dollar-roundtable/.
15. For more information, see: supplierdiversity.kp.org/doing-business.html.
16. Mary Beth Levine, interview by David Zuckerman and Katie Parker, May 10, 2016.
17. Howard Elliott, interview by David Zuckerman and Katie Parker, January 15, 2016, Cincinnati, OH