Many hospital administrators want to go beyond treating the sick to healing the lingering economic wounds in their communities.
By buying from businesses owned by minorities and women, these hospital executives aim to put their financial muscle to work doing good far beyond the walls of their institutions. Bringing diversity to purchasing also scores points with federal grantmakers and other officials, who request such information on applications for financial support for research and other programs.
In some communities, hospitals have publicly committed to ambitious minority procurement targets. In Detroit, for example, some of the largest health systems have said they would spend 20% to 25% of their local supply budgets with minority-owned businesses by 2000, up from single-digit percentages just a few years ago.
Even willing and diligent purchasing agents, however, sometimes have trouble finding suitable companies, either locally or farther afield.
Enter World Healthcare Systems, a Chattanooga, Tenn.-based company founded by former hospital administrator Sylvester "Skip" Reeder. His firm is out to make the matches easier.
World Healthcare, started last year, finds worthy medical and surgical supply companies and markets their wares via contracts with group purchasing organizations.
"Our philosophy is that 51% of our partners will be minorities" and women, Reeder says. That lofty target is impossible now because minorities or women own only one-third of his company's suppliers, he concedes.
But World Healthcare is acting to improve matters, directly investing in suppliers to give them a boost onto the national stage.
Reeder, 51, stepped down under pressure as chief executive officer of Erlanger Medical Center, now Erlanger Health System, Chattanooga, in May 1998 after the public hospital projected a $26 million loss for the fiscal year (May 25, 1998, p. 4).
Reeder serves as chairman and CEO of World Healthcare. His partner is A. Hamid Andalib, a Chattanooga restaurateur and a close friend.
The pair are the sole owners of World Healthcare and have sunk $1 million of their own money into the company, Reeder says. They have spent more than $200,000 on computer systems alone.
"We developed the infrastructure before we sold any product," Reeder explains, "because we wanted the groups to understand that we are a company that can own product and that has staying power."
The purchasing groups hold the keys to World Healthcare's success.
In fact, Reeder says his company will not sell directly to hospitals unless they are independent of all groups.
Through the group contracts, hospitals and their affiliated facilities, including doctors' offices, can buy the goods-ranging from tongue depressors to safety syringes-and have them delivered through their preferred distributors.
Last week Premier, a 1,700-hospital purchasing group based in San Diego, announced a five-year agreement with World Healthcare, the company's first. It is expected to yield nearly $100 million in purchasing volume over five years.
"This provides convenient access to these small companies rather than the buyers having to search them out individually," says Nancy Darr, vice president of planning and development at Premier Purchasing Partners.
"Diversity programs that are most successful don't just focus on giving a contract," Premier's Darr says. "It's about long-term economic development."
Likewise, Peter Wiersma, a member of World Healthcare's advisory board, called the company's strategy mature and impressive. Wiersma is a veteran of supplier diversity initiatives with a not-for-profit company called Asian, which is based in San Francisco and certifies businesses owned by minorities and women.
"Usually when an industry gets into this, they tend to look at it as a buying function, and very often that's as far as people will go," he says.
But if enough suppliers don't fit the diversity bill, he says, you have to grow them. "It took me five years to convince certain companies to do that," yet World Healthcare and its supporters are starting with that approach, Wiersma says.
World Healthcare and its potential customers take pains to point out that the company is not just a minority-owned agent of mass-produced goods. Unlike brokers, World Healthcare assumes substantial financial risk by taking legal title to the products and selling them under the company's label.
Reeder's plan appears to be sitting well with potential buyers.
"There is a perception that some companies in the diversity industry are a front, basically just adding cost," says Frank Fernandez, vice president and corporate director at Baptist Health System of South Florida, a Premier shareholder based in Miami. "That model is out there," he says, "but World Healthcare is totally and completely different."
Many executives at health systems feel a special obligation to do more to help their communities.
"We need to demonstrate that we're good corporate citizens," says Gary Gilliam, vice president for logistics at Texas Health Resources, Irving, Texas.
"One way to do that is to use purchasing patterns that reflect our patient and community populations."
Last year, 14-hospital Texas Health bought about $14 million in goods and services from businesses owned by minorities and women.
"This new (Premier) program," Gilliam says, "will help us improve those numbers and will make it easier and more consistent to manage."