Johnson & Johnson

For a Greener Supply Chain: Information Hospitals Can Actually Use

Wanted for a Greener Supply Chain: Information Hospitals Can Actually Use

While the number of hospitals interested in greening their supply chains has been growing rapidly in recent years, progress has been slow. And that’s not surprising, given the complexity of hospital procurement. At Johns Hopkins Medical Institutions, for example, 14 buyers purchase supplies for cleaning, building maintenance, the cafeteria, labs and physical therapy in addition to a vast range of medical supplies — including sutures, syringes, catheters, pacemakers, blood products and radioactive materials, to name just a few categories. One of the 14 handles everything from paper goods and stationery to motor vehicles and computer equipment.

The vast majority of hospital supplies — 72% according to the Healthcare Supply Chain Association — are purchased through group purchasing organizations (GPOs). GPOs are able to negotiate lower pricing for the goods and services their member hospitals buy; provide the information hospitals need to compare products and make buying decisions; and reduce the cost of purchasing itself by helping members manage the purchasing process.

What GPOs have not been able to provide is actionable information on sustainability — and it’s not for lack of trying.

Kaiser Permanente helped jumpstart the move towards environmental purchasing. As the nation’s largest not-for-profit health plan, it created its Environmentally Preferable Purchasing (EPP) policy in 2006. Four years later, the organization, which has 10.2 million members and $62.7 billion in operating revenue, embedded its EPP principles into the purchasing process by creating a Sustainability Scorecard.

Rather than relying on the morass of eco-labels and product descriptions that were available, Kaiser developed a list of well-defined and standardized questions. Any supplier of medical and surgical products that wanted to be considered by the supply chain team had to answer all the EPP questions as part of the bidding process.

The Scorecard allowed Kaiser to look beyond the basics of price, quality and availability. By incorporating the EPP information into its purchasing system, the health plan was able to add sustainability to the list of key attributes it considered when making decisions about which products to buy. “And when you’re looking at so many products, it turns out in many cases that what pulls one product ahead of the others is its environmental attributes,” said Kathy Gerwig, Kaiser’s environmental stewardship officer and vice president of employee safety, health and wellness.

Suppliers took notice and responded not just with data but also with innovative new products. The benefit to Kaiser has been substantial, allowing the health care giant to reduce energy use, waste and chemicals of concern throughout all 38 of its hospitals, and save millions of dollars in the process.

Cooperation or Competition?

Kaiser also partnered with Practice Greenhealth (PGH) and Health Care Without Harm (HCWH) to make the EPP questions widely available throughout the industry. The two nonprofits used Kaiser’s success stories to start persuading GPOs to make the EPP questions part of the normal bidding process.

The work dragged on for years, said Gary Cohen, co-founder and president of HCWH and Practice Greenhealth. The problem was that the GPOs saw each other as competitors and weren’t willing to collaborate. So PGH and HCWH approached each GPO individually.” “We would go to Premier and say, ‘you should ask these questions,’ and we would go to Novation and say, ‘you should ask these questions’,” explained Cohen. “Then we said, this is pretty inefficient. Let’s just get them all together and agree on a common set of questions that they don’t have to compete on.”

Beth Eckl, director of the environmental purchasing program at Practice Greenhealth, managed to bring all the major GPOs together. And after working with them for a year, the group finally agreed on a common set of questions, which, according to Cohen, “was pretty modest. It’s not like a comprehensive set of questions in any way, but at least we got them to agree.”

Since then, explained Kevin Lewis, national program coordinator at Premier Inc., one of the nation’s largest GPOs, “Every time a contract comes up to bid, the request for information (RFI) that goes out to suppliers also includes EPP attribute questions.”

It turns out that collecting sustainability data is difficult and turning it into useful information is even more of a challenge. As things stand now, the questionnaire that is sent to suppliers is “literally just a blank spreadsheet asking specifics,” said Lewis. “And this spreadsheet has to be repeatedly filled out by the suppliers every year, so it’s extremely manual for anyone who has to fill it out and extremely manual for anyone who wants to run analytics on it.”

Inquiry Overload

The result, for some suppliers, is thousands of sustainability questions streaming in every month from a dizzying array of health care clients. According to Dustin Heiler, market and business developer at furniture maker Steelcase, “There are some weeks that colleagues and I spend all our time answering questions.” And because the same list of questions is generally included in RFIs for multiple product categories, Heiler explained, “Sometimes the questions are on point and sometimes they’re out in left field.” A question about radioactivity might be relevant to a product used in nuclear medicine, but meaningless to any of the products Steelcase manufactures, for example.

Suppliers, who receive questions about sustainability not just from GPOs but also directly from hospitals and from architects and designers employed by hospitals, find this repetitive and sometimes irrelevant work both frustrating and expensive. According to an analysis by MindClick, a company now developing an EPP-based health care database, the top 100 suppliers to U.S. hospitals spend about $25 million each year collecting and submitting sustainability data.

And that $25 million is contributing very little to the greening of health care supply chains. Because the EPP answers are sitting in thousands of unconnected spreadsheets, there is no practical way for the GPOs to integrate the sustainability data into their systems. So while hospitals technically have access to the EPP questionnaire responses, they are unable to factor them into their purchasing decisions. “The GPOs are collecting the information,” said Cohen, “but it’s not like it’s trickling down to the people who actually write contracts.”

Bright Spots

Progress has been made in some isolated segments of purchasing, food being one of the most prominent. According to Seema Wadhwa, assistant vice president for sustainability and wellness for Inova Health System, “As an industry, with HCWH, we started a food roundtable and invited the major suppliers to sit down with the major hospital systems, and we said we need this data, and if we work on it collectively, we won’t be asking you guys for unique definitions or sets of data.” The effort paid off.

When Morrison Healthcare, one of the major food suppliers for hospitals, heard that three of its biggest clients — Tenet Health (84 hospitals), Inova (five hospitals) and Adventist HealthCare system (35 hospitals) — were all asking for the same information, it responded with a fast-track action plan. Speaking specifically about Inova’s partnership with Morrison, Wadhwa said, “We’re now able to get that data. And over the last eight months, I’ve been able to get quarterly reports on key indicators, and that’s a tool that I’ve been able to use.”

“But when it comes to the broad-range portfolio of the supply chain,” Wadhwa is quick to add, the same leverage doesn’t exist. “EPP is the biggest challenge,” she said. “Over the past five years, the ability to benchmark how many products that Inova is purchasing have a sustainability element, and what those products are, has been the holy grail.” For now, however, all the EPP data that is being so laboriously collected is “just sitting in a database in the shadows,” said Lewis.

But things are changing. An industry-wide effort to bring the potentially valuable EPP data into the light, in the form of an easily accessible index, is now underway. Wadhwa, for one, noted, “There’s no way we could do it on our own. I’m extremely excited about it.”

Citing Knowledge@Wharton

Close


For Personal use:

Please use the following citations to quote for personal use:

MLA

"For a Greener Supply Chain: Information Hospitals Can Actually Use." Knowledge@Wharton. The Wharton School, University of Pennsylvania, 11 May, 2016. Web. 26 May, 2017 <http://knowledge.wharton.upenn.edu/article/wanted-greener-supply-chain-information-hospitals-can-actually-use/>

APA

For a Greener Supply Chain: Information Hospitals Can Actually Use. Knowledge@Wharton (2016, May 11). Retrieved from http://knowledge.wharton.upenn.edu/article/wanted-greener-supply-chain-information-hospitals-can-actually-use/

Chicago

"For a Greener Supply Chain: Information Hospitals Can Actually Use" Knowledge@Wharton, May 11, 2016,
accessed May 26, 2017. http://knowledge.wharton.upenn.edu/article/wanted-greener-supply-chain-information-hospitals-can-actually-use/


For Educational/Business use:

Please contact us for repurposing articles, podcasts, or videos using our content licensing contact form.