Strategies to leverage health care purchasing power toward sustainability and a healthier future
(This blog is part two of a three-part series on sustainable procurement in the health care sector. You can read the first blog here.)
The challenge: How do you shift $745 billion in spend toward sustainability?
In less than 10 years, the global medical device market will reach between $745 billion and $800 billion. In the U.S. alone, health care organizations spent over $176 billion on medical devices in 2020. These totals do not include capital equipment and purchased services, amounting to enormous purchasing power across the health care sector to leverage toward positive social and environmental change.
It may seem like a daunting challenge to think that health care organizations can leverage their entire economic weight toward sustainability and that all supplies, equipment and services can be scrutinized for sustainability performance. However, health care organizations – on the front lines of promoting wellness and taking care of people, should consider using their purchasing power to make significant strides toward sustainability.
Today, much like in the organic section of a grocery store, products in health care are simply labeled “green” or not. However, when you look around the grocery store, why shouldn’t all products and the companies that provide them be scrutinized for social and environmental responsibility? Many consumers have strong beliefs in sustainability and would love to have more transparency about products and the companies that produce them in order to feel confident about aligning their spending with their values. Health care organizations should do the same.
It is ironic that health care institutions may spend money on materials that contain potentially cancer-causing chemicals. Why buy respiratory therapy products from manufacturers polluting the air and causing more asthma attacks? Embracing sustainability not only makes sense because of the commitment to “do no harm,” but also because it is financially advantageous.
Many hospitals taking care of patients in low socioeconomic areas of the U.S., do not have a positive operating margin. They lose money due to low Medicare and Medicaid reimbursements, providing large amounts of charity care and writing off bad debt. Purchasing decisions that do not take sustainability into account exacerbate social and environmental harm, create more illness and unnecessarily bring more patients into the hospital for care. A single inpatient visit for asthma typically costs hospitals at least $5,000 per admission, for example.
The solution: Integrate sustainability into everyday decision-making.
Historically, many health care organizations have found it challenging to scrutinize their supply, equipment and services spend credibly and reliably for social and environmental impacts. This is often due to a lack of access to efficient, standardized sustainability data to consider when making purchasing decisions. Thankfully, many organizations are establishing multidisciplinary value analysis committees to thoroughly evaluate changes in purchasing using a roundtable methodology. Serving as a gatekeeper to changes in spending by the organization, value analysis committees serve as a critical point of access to integrate consideration of social and environmental responsibility of products, equipment and services in a seamless way.
As shown in a recent case study evaluating unsafe chemicals in supplies used on high-risk patients, adding questions regarding sustainability to a “360-degree” value analysis model provides a seat at the table for the organization to consistently validate whether their purchasing decisions are aligned with social and environmental responsibility.
By consistently scrutinizing social and environmental impact in all purchasing decisions, health care organizations can leverage their total purchasing power to influence suppliers and vendors to lower their carbon emissions, use safer chemicals, reduce waste, and also improve diversity and social responsibility. Using a multidisciplinary divide-and-conquer approach to answer the 360-degree value analysis questions also creates more cohesive decision-making and comfort among subject matter experts that the organization is aligning its spend with their values. Patients would be surprised at how few of the 360-degree questions above are evaluated, so there is much improvement to be made.
The power of positive reviews
When you look at products online, what is the first thing you look for after noticing the price? The reviews. Just as 5-star ratings are increasingly relied upon to signal quality and positive feedback beyond price, 5-leaf ratings provide immediate feedback on sustainability. Adding easy-to-read visual cues, such as a 5-leaf sustainability rating used in the case study below, helps key stakeholders quickly identify and gauge sustainability performance as a quality of the supplies, equipment and services they use. Similar to a 5-star rating found across many online platforms today, a 5-leaf rating allows key stakeholders and purchasing decision-makers to quickly identify if there are any concerns regarding sustainability.
We are all forced to make many rapid decisions each day, and that includes staff within health care organizations. A 5-leaf rating would give stakeholders a familiar, standardized and convenient way to quickly identify and compare sustainability performance in concert with their typical purchasing behavior. Ratings and reputations are important, the higher the ratings the better. This rating system for sustainability creates a new competitive differentiator for suppliers and vendors to compete for consumers and health care organizations that value social and environmental responsibility.
The future: Strengthening policy with digitization.
Fortunately, many health care organizations are beginning to include social and environmental responsibility to their corporate policies. Purchasing policies should be no exception. The challenge – indicated by over 260 eco-labels out there today – is determining what sustainability data is credible and should be used, and standardizing multiple points of sustainability data in an efficient way. Data is used to drive so many decisions and measure performance across organizations today; the consistent monitoring of in-depth sustainability performance should be no different.
As seen in the recent case study, leveraging Vizient’s database of environmentally preferred attributes on over 600,000 products, applying 360-degree value analysis and 5-leaf sustainability ratings in decision-making, there is great potential to help strengthen policy and shift spend toward sustainability in a data-driven way.
The Vizient Environmental Advisory Council, made up of multiple health care organizations nationwide, recently invited all Vizient member hospitals to prioritize the following four key environmentally preferred initiatives:
- Adopt Vizient’s standardized environmentally preferred attributes, which are rooted in safer chemical utilization, waste reduction and the disclosure of product characteristics.
- Collaborate and educate suppliers on the preferred attributes and their importance.
- Incorporate environmentally preferred criteria such as product/service availability, attribute compliance and supplier-specific data into periodic business review.
- Promote the transparency of supplier-submitted data to expedite the adoption of environmentally preferred products and services.
In our next and final blog, we will look at how health care organizations can modernize their enterprise strategic goals, organizational structure, analytics and control tower dashboard reporting to achieve ongoing, tangible success in sustainable procurement.