Additional Benefits

A MORE EXPANSIVE NOTION OF ROI
  • Improve overall community health and well-being
  • Become a provider of choice
  • Meet other strategic goals, such as sustainability

Improve overall community health and well-being

Variables to measure:
  • Spend with local, diverse businesses
  • Number of local, diverse vendors with hospital/health system contracts
  • Living wage jobs created from increased business with the hospital/health system
  • Community health measures
Ways to increase impact:
  • Include provisions around better wages and health benefits in RFPs
  • Expand employee-owned businesses and worker-owned cooperatives, or other inclusive business structures
  • Concentrate on neighborhoods most affected by unemployment and disinvestment
  • Focus on populations most impacted by health disparities

An important benefit of inclusive, local purchasing initiatives is that they channel dollars into the same communities that comprise the health system and hospital patient base. Improvements in the financial well-being of these communities can in turn facilitate community health improvement. In essence, purchasing becomes another avenue that the hospital can utilize to achieve its mission of improving the health of the surrounding community. Tim Martin, manager of supplier diversity contracting at CHRISTUS Health, based in Irving, Texas, described how this is a critical element underpinning their program: “Look back to our vision and mission statement. Although we view things from a national perspective, our main objective is serving customers in the communities we have responsibility for and we have to look at our impact on those communities. The DNA of our supplier diversity program fits well into the DNA of the organization…Our program is based on the community and the population, as well as system goals.”1Tim Martin, interview by David Zuckerman and Katie Parker, February 19, 2016.

Seen this way, local and diverse purchasing is not simply an additional program, but rather a new way of doing business that acknowledges the many ways a health system can positively affect the surrounding community. Standley at UH explains: “It’s a proactive repositioning of the organization’s business model. It’s not just the right thing to do, it’s going back and revisiting the mission of the hospital. The hospital is originally here to respond to healthcare needs…For the most part, that has been defined as what comes in. We’ll treat what comes in. Not: can we get out there and stop what’s causing this behavior? That’s the jump, that’s the big move.”2Steve Standley, interview by Ted Howard, October 1, 2016.

By focusing procurement dollars that are already budgeted for regular hospital expenses on the same communities that make up the patient base, and specifically those facing the greatest health disparities, health systems can shift existing resources to a proactive prevention approach. This is especially important as the healthcare reimbursement shifts from “volume to value” and hospitals are held accountable for the health of the populations they serve. Leveraging operations dollars for the overall mission of health improvement can help institutions stay ahead of this shift.

Become a provider of choice

Variables to measure
  • Number of diverse and local vendors
  • Market share
  • Internal and external surveys assessing perception of the hospital’s role in the community
Ways to increase impact
  • Link supplier diversity to broader community engagement efforts

“Consumers do business with organizations who do business with them,” explained Gray when discussing the benefits of Grady’s procurement initiatives.3Todd Gray, interview by David Zuckerman and Katie Parker, January 25, 2016. An important outcome of local, diverse spending initiatives is that they can elevate the profile of the hospital in the community. As the hospital increases its footprint in terms of local spending, it also increases the number of residents who come into contact with the hospital. “When those people get ill, they are going to remember ‘I received that contract from Parkland,’” said Indria Hollingsworth-Thomas, the supplier diversity director at Parkland Hospital and Health System in Dallas, Texas. “They will say, ‘this is where I want to get my healthcare.’ Our leadership saw the benefit of strengthening our community partnerships and took steps to ensure supply diversity was elevated and included in Parkland’s 2020 Strategic Plan…We needed to focus on inclusion. We needed to focus on doing business with diverse suppliers, because we wanted to build those relationships,” she explained.4Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016, transcript. Outreach to new vendors can also serve as outreach for the hospital in general. And once the hospital has a reputation for doing business in the community, it can help make the hospital stand out.

Local and diverse purchasing initiatives can make hospitals employers of choice for the community, just as they are healthcare providers of choice for their patients. Levine describes how UH’s reputation for community engagement and working with local companies is a draw for physicians and employees. “One of our selling points is that we have these initiatives and that we look to create opportunities for local companies.” UH has built education about the program into their recruitment strategy.5Mary Beth Levine, interview by David Zuckerman and Katie Parker, May 10, 2016. According to Standley, questions about UH’s supplier diversity program dominate the town hall meetings that CEO Tom Zenty hosts with employees. They have found that younger employees, in particular, come with a set of expectations around community engagement, and UH living its stated values appeals to them.6Steve Standley, interview by Ted Howard, October 2, 2016.

Hospitals also benefit from being located in thriving communities. Referring to large institutions and businesses located in Baltimore, Grant from Johns Hopkins said: “when Baltimore suffers, we all suffer.” Especially for health systems that rely on patients coming in from out of town, a thriving local business community can increase the hospital’s appeal. Johns Hopkins sees its supplier diversity program as a way to make Baltimore a more thriving city that attracts patients.7Kenneth Grant, interview by David Zuckerman and Katie Parker, Baltimore, MD, February 5, 2016.

 

Meet other strategic goals, such as sustainability

Variables to measure
  • Institutional sustainability goals
  • Variables around the environmental impact of purchases, including transportation miles, chemicals used, and waste disposal
Ways to increase impact
  • Work with business incubators and local vendors to customize products and services to meet sustainability goals

Local and diverse spending can help hospitals meet other strategic goals, such as increased sustainability and institutional diversity. The benefit of linking these efforts to procurement initiatives is two-fold: it leverages the resources of the supply chain and procurement departments to meet other institutional goals, and it provides further justification for working with local vendors that help achieve these strategic goals. In addition, factoring in values such as environmental sustainability can increase the value proposition for working with local vendors.

For Cleveland Clinic, in Cleveland, Ohio, the decision to source locally with the Evergreen Cooperatives was a “triple win:” helping them provide local economic impact, achieve their mission, and reach their environmental goals. For example, Cleveland Clinic is working with one of the Evergreen enterprises, Evergreen Energy Solutions, which focuses on environmental retrofits and sustainable construction, on an LED light bulb retrofit project. This initiative will allow the Cleveland Clinic to meet its energy reduction and sustainability goals, while also providing enough work for fifteen jobs over a two-year period.8Andi Jacobs, Hermione Malone, Christine Foley, and Neil Gamble, interview by David Zuckerman, Cleveland, OH, January 12, 2016. In this case, the Evergreen businesses were designed with an environmental focus. In other cases, depending on the sustainability and environmental goals of the health system, local vendors might be flexible and willing to incorporate sustainability into their business plans and product designs.

Another way to achieve cost savings is to focus on the total cost of ownership. For many healthcare medical devices, products, and services, there are hidden costs that are not always reflected in the price and may not be considered when institutions are making procurement decisions. The Practice Greenhealth Cost of Ownership Calculator and toolkit allows for the comparison of four purchasing scenarios, factoring in energy, water, waste, and cleaning and sterilization costs to help healthcare providers evaluate the total cost of goods and services and the the return on investment. To learn more visit: practicegreenhealth.org/initiatives/gsc/tco

Savings

KEY BENEFITS TO YOUR BOTTOMLINE

  • Create a more efficient and resilient supply chain
  • Decrease community need for and use of uncompensated care
  • Leverage philanthropic and public resources

References   [ + ]

1. Tim Martin, interview by David Zuckerman and Katie Parker, February 19, 2016.
2. Steve Standley, interview by Ted Howard, October 1, 2016.
3. Todd Gray, interview by David Zuckerman and Katie Parker, January 25, 2016.
4. Indria Hollingsworth-Thomas, interview by David Zuckerman and Katie Parker, January 21, 2016, transcript.
5. Mary Beth Levine, interview by David Zuckerman and Katie Parker, May 10, 2016.
6. Steve Standley, interview by Ted Howard, October 2, 2016.
7. Kenneth Grant, interview by David Zuckerman and Katie Parker, Baltimore, MD, February 5, 2016.
8. Andi Jacobs, Hermione Malone, Christine Foley, and Neil Gamble, interview by David Zuckerman, Cleveland, OH, January 12, 2016.