The events of 2020, from the pandemic to the “Black Lives Matter” movement, sharpened our focus on issues of health equity and racial disparities. And once again, supply chain leaders are going above and beyond more traditional approaches to address the challenges.
The stats tell the story best: The hospitalization and death rates from COVID-19 are 2 to 3.3% higher among Blacks, Native Americans and Hispanics compared to Whites. That’s because underlying co-morbidities that increase the severity of the disease: Hypertension, obesity and diabetes are much more prevalent in lower-income and minority populations.
In June, I had the pleasure of leading a discussion on the evolving role of supply chain to combat health disparities with four procurement leaders at the Virtual National Health Equity Summit (www.healthequitysummit.com):
· Motz Feinberg, Vice President Supply Chain, Cedars-Sinai Health System
· Shaleta Dunn, Senior Director Strategic Programs, Supplier Diversity, Vizient
· Dameka Miller, Vice President, Strategic Sourcing and Value Analysis, Trinity Health
· Régine Honoré Villain, Chief Supply Chain Officer, Ochsner Health System
Below are some of the key recommendations from that discussion:
1. Expand the definition of supplier diversity
For years, procurement leaders across industries have tracked their spend with diverse suppliers, defined historically as companies that are woman-, veteran- or minority-owned, although that definition has been expanded to include ownership by lesbian, gay, bisexual and transgender individuals, veterans disabled in service and those qualifying as small businesses. Primarily, that data has been used for grant applications and other required community impact reports.
Today, the value of that data is getting attention at the highest levels of healthcare systems, from executive leadership and boards of trustees. With the continued move to value (and more reimbursement tied to keeping people healthy and out of the hospital), they recognize that the well-being of their healthcare systems will depend in large part on the health of the populations they serve. Instead of only measuring spend with “diverse” suppliers, leadership is asking: How much is being spent locally and how is that contributing to economic development, especially in disadvantaged communities?
2. Practice your multiplication tables
Measuring local impact goes beyond just what is spent with local suppliers. A key principle of economic development is the multiplier effect, or in other words, understanding how different types of direct investments generate additional impacts. For example, money spent with a non-local, diverse supplier leaves the community, while the same amount of money spent with a local supplier supports both employment and the tax base of the community. The multiplier effect is measured both in direct terms (e.g., generation of jobs at the supplier) and indirect (additional jobs created at companies supporting the supplier). There is an additional benefit when employees of those companies use their wages to spend and invest locally.
3. Play connect the dots
What happens when there is not a local diverse source for a product or service you need to buy? That’s when you connect the dots and act as a matchmaker between the companies that have what you need and local resources that can assist in its acquisition, delivery, storage, use, disposal, etc. Organizations, including the group purchasing organization Vizient, help identify local resources and connect them with potential healthcare customers or with larger non-local suppliers with which they could do business, while the Health Anchor Network helps hospital members develop strategies to create more sustainable local economies.
Doing business with local suppliers can also be a benefit for larger suppliers that are increasingly being asked by their customers to share what they are doing to increase their spending with upstream diverse suppliers. In some places, like California, there are new regulations requiring hospitals of a certain size to annually report how much they spend with diverse suppliers.
4. Build the business case
Creating an effective local and diverse procurement program does not happen overnight. Trinity Health has been building out the necessary infrastructure for years. The effort began by understanding its current level of local impact purchasing and then outlining what it would take to expand the program and the anticipated return on that investment. With strong board support, Trinity was able to reallocate workloads in order to assess system needs and engage with local diverse suppliers.
For Cedars-Sinai Health System, the new California regulation served as a catalyst to create an ambassador program to internally promote the value of local impact purchasing and align it with the hospital’s overarching diversity initiatives. As a community hospital system without the resources of much larger systems, Cedars-Sinai is also aligning with other local community hospitals to strengthen their networking reach and purchasing power.
5. Do it yourself
In the midst of the pandemic, Ochsner saw an additional opportunity. Faced with exponential increases in demand for personal protective equipment (PPE), the Louisiana health system decided to become its own manufacturer. Through a joint venture, Ochsner is investing millions in a local manufacturing facility that is expected to create approximately 1,200 direct jobs and another 1,000 indirect jobs.
The pandemic has created hardship for many, exposing the harsh socio-economic realities that contribute to health disparities. At the same time, it has elevated the strategic role of the healthcare supply chain. As healthcare systems across the country seek to increase the diversity of their boards by recruiting people of color, they, too, can strengthen health equity by attracting leaders who understand the potential for the supply chain to create healthier communities for all.
