ESG and Supply Chain Risk Management and Resiliency
Activating Healthcare as a Community Asset
David Zuckerman is president and founder of Healthcare Anchor Network (HAN), launched in 2017 as a national thought leader on the role of health systems as anchor institutions in building community wealth and inclusive economic development. He sat down for a conversation with Modern Healthcare Custom Media about how supplier diversification is integral to health systems’ mission of improving health and lives.
What lessons have been learned from lack of supplier/vendor diversification in healthcare?
We’ve learned there needs to be a level of intentionality by health systems if we’re going to increase spend with diverse suppliers, meaning they cross the continuum of the different certifications that exist. Organizations that have made the commitment in terms of staff resources and embedding within organizational priorities have been able to move the needle more quickly on seeing their spend with those businesses increase.
What is the advantage of prioritizing increased spend with diverse suppliers?
In addition to being one way healthcare can create economic opportunity for communities that have been historically either disinvested in, discriminated against or otherwise left out of the process, it expands the aperture of businesses that can meet healthcare institutions’ needs. A business that is also diverse-owned or [mindful of] its footprint might be better at meeting their needs over the long term. In terms of personal connection and relationship, they might be more responsive than a larger vendor that just sees [the healthcare partner] as another account. So, I think [we can] look beyond just this being the right thing to do, but also think about how working with a wider set of vendors can be a win-win for resiliency of the supply chain and in creating better quality and cost for an institution.
Healthcare Anchor Network created the Impact Purchasing Commitment in partnership with Health Care Without Harm, an organization working to transform healthcare worldwide to reduce its environmental footprint, and Practice Greenhealth, the leader on healthcare sustainability with more than 1,400 hospital and health system partners.
Where should health systems begin with efforts to improve supplier diversification?
[First is tracking current spend with diverse businesses] and second is coming up with an intentional strategy around who you’ll partner with to increase your spend. That could be resourcing an FTE to identify existing diverse-owned businesses, building relationships and identifying what categories of spend you want to make sure that these businesses are effectively competing for over time. But it might also be expanding your own universe of who those businesses are—working with chambers of commerce or within entities like GPOs to encourage them to set up or strengthen supplier diversity councils and their own outreach to diverse vendors. A healthcare system also needs to be creative in terms of ensuring that their own payment terms aren’t prohibitive for small and diverse businesses. Think creatively about how we can help those businesses access capital or certain requirements we insist vendors have to do business with us, and help break down those barriers.
As health systems work to build up diverse pipelines, how can they exert influence within their existing partnerships to ensure accountability and transparency regarding impact?
HAN created the Impact Purchasing Commitment, a framework for how a health system can lean in to the many ESG areas. The first commitment requires that vendors submit to them their own supplier diversity spend, so we can track not just what the health system is doing directly, but how its largest vendors are spending with diverse businesses. If this request is coming from more and more health systems to the same vendors, it continues to illustrate it’s a priority for healthcare. Another component of the commitment was that healthcare should work with some of its large, tier one vendors to create hiring pipelines into specific communities of need that health systems serve—and to ensure that they were quality jobs. One example was Intermountain’s work with Becton Dickinson to create a new program in Salt Lake City for providing a living wage, retirement options and comprehensive health benefits to these targeted hires. This is a way systems can work collaboratively with their largest vendors to say, ‘This is a priority for us. We want you to have this shared priority, and it’s something we’re going to take into consideration when we make decisions.’
What are strategies for gaining internal alignment on supply chain diversification?
An organization needs to have an accountable executive for this priority, as well as a program manager who is part of implementing the day-to-day work and execution. Over time, it’s key to ensure it doesn’t live with a single point person within the organization but is distributed among the supply chain team. Organizations at the forefront of this have it built into KPIs, bonuses and compensation.
Several systems have this reported out on some frequency to their board of directors and set it as an organizational priority at that level, which helps to provide the insurance that this is a priority and everyday resources should be put toward it. There should be internal policy built into purchasing evaluation criteria and contracts, and supplier diversity requirements and goals in performance reviews. All these strategies work toward ensuring that the organization is aligned and [accountable].
How do you predict regulations will influence the need to build diverse supply chains?
I think we’re most likely to see regulation or guidance specific to supplier diversity and economic opportunity strategies at the state level. In California last year, requirements were passed that healthcare systems over a certain size had to track and report their supplier diversity spend. We’re seeing some legislation like that moving in other states as well. It’s an opportunity for health systems to be proactively thinking through how they would approach leveraging the resources to support more robust supplier diversity strategies.
Can you share some strong, real-world examples of collaboration between providers and suppliers/vendors that can serve as models for health systems looking to take similar action?
A really interesting one is the Children’s Hospital of Philadelphia’s community asthma prevention program, which was focused on eliminating sources of asthma triggers in homes with patients suffering from childhood asthma. Embedded within that effort was an intentional strategy to help local diverse contractors and businesses get certified, as well as complete the activities that that effort was trying to address. They did recently reach their milestone of repairing 100 homes, making them free of asthma triggers and using diverse vendors to make that happen.
One other example is Kaiser Permanente, which has done a lot of work in this space. They’ve worked with ICCC about building capacity for diverse vendors—many of which are not going to work directly with Kaiser. They’ve taken this very broad perspective of building capacity for minority-owned businesses that go beyond their own supply chain, which is very, I think, thoughtful and something that we should encourage: ensuring that there’s a clear business win here for your organization, but also that we are strengthening the ecosystem that these businesses are situated. Increasing economic opportunity broadly is going to really ensure that we’re addressing existing disparities over time.
What can healthcare organizations do today to prepare for transformation of the supply chain?
Take a holistic approach. What we’ve found with our Anchor Mission approach is that power comes from connecting dots between many different parts of the organization that had been working on initiatives in their own silos and not always threading together the benefits they could have realized together, as part of a holistic strategy to improve community health. Think about this as activating healthcare as a community asset—bringing the ESG frame into healthcare’s work around being a more intentional anchor institution and addressing the community conditions that create poor health in the first place. That is where we get to the next level of impact and make it sustainable over the long term.
COVID-19 has served as a wake-up call for the healthcare industry to re-think how they approach the supply chain. Modern Healthcare Custom Media spoke with supply chain executives at leading health systems about how they are transforming the way their departments approach the supply chain to ensure it can weather current and future challenges and unexpected shortages.
The supply chain accounts for the largest percentage of healthcare’s carbon footprint–71%–and therefore, much can be done to improve environmental sustainability. Hospitals and health systems are also becoming more inclined to allocate portions of their supply chain budget to supporting locally owned vendors as well as minority-owned and women-owned businesses. This feature explores the work of leading health systems in these areas.
The 2021 Practice Greenhealth Benchmark Report spotlights how healthcare organizations are advancing their environmental purchasing strategies, as well as where there are opportunities to deepen commitments.