Sustainability and Fiscal Sensibility
Maintaining an ecofriendly supply chain puts the ‘eco’ in economics.
In supply chain management, it often all comes down to the financial bottom line. So how does a health system balance environmental responsibility with the challenges of ensuring ready and affordable access to the materials and equipment necessary for its day-to-day operations?
Health systems trying to minimize their impact on the environment while lowering costs and retaining a competitive advantage are finding it is possible to create a sustainable supply chain and still be responsive to financial obligations.
Justin Graves, interim director of materials management, logistics and sustainability and leader of the green team at the University of Maryland Medical Center, acknowledges that purchasing is often driven by clinical need and cost savings, but the hospital is seeing success incorporating sustainability into its supply chain.
Through its environmentally preferable purchasing plan, UMMC works toward responsible use of resources by sourcing safer and more earth-friendly products and reducing overall waste in its system. Participating in Practice Greenhealth’s Greening the Supply Chain Initiative, the medical center has implemented a green cleaning policy and integrated sustainability principles into its product value analysis process.
“Value analysis is the process we vet all of our products through. We look at all implications—financial, logistical, waste, total downstream cost of the item and environmental impact,” said Graves.
While environmental issues are in mind when creating a sustainable supply chain, all businesses, even not-for-profit hospitals, must keep their eyes on the bottom line. In a free market economy, there are always other businesses that are more than happy to supply services cheaper and faster.
“When you’re a billion-plus dollar organization you have to be very serious about where you spend your money. A couple of wrong turns and you can be out of business,” said Karl Blomback, vice president of supply chain, decision support, business intelligence, distribution, receiving and charge master at Hackensack University Medical Center.
Companies can’t give up their competitive advantage to become sustainable or they won’t be in business for long. There must be tangible benefits from green supply chain initiatives in addition to environmental conservation.
The good news is that there is often a direct financial benefit to creating a sustainable supply chain beyond the positive public perception that comes with being ecofriendly. Sustainability can help direct purchasing decisions in a way that will provide benefits for both the business and the environment.
No More Burning Through Budgets
HackensackUMC was one of the first hospitals in the country to implement a policy banning flame retardants in furniture. It was not only safer for the environment, it was also 30 percent cheaper. On one $260,000 project, the hospital saved $50,000 by going flame retardant free, said Kyle Tafuri, senior sustainability advisor at HackensackUMC.
And that is just one example. From purchasing more energy-efficient equipment to eliminating waste, there are many areas where hospitals can save money through a sustainable supply chain. “A big part of what we have been doing in the past few years is looking for items that can be recycled and reused,” said UMC’s Graves, “and that is one less item we have to manage in our waste stream and pay for.”
Single-use medical devices that would once have been sent directly to the landfill are now often cleaned, disassembled, tested, sharpened, sterilized and repackaged. “You have to see past what the vendor is saying because they want their sales. As soon as I can feel comfortable that they are cleaning something as well as a brand new item, I’m all for it,” said HackensackUMC’s Blomback. “It may hurt their sales, but it helps us in a financial way and keeps waste out of landfills.”
Medical device reprocessing has allowed HackensackUMC to reduce medical waste by approximately 13,000 pounds in 2015 and to cut medical waste by 50 percent in addition to the significant financial benefit on the device itself: Reprocessed medical devices are often half the price of that same item new.
Monitoring is essential to the success of a sustainable supply chain. Metrics can illustrate in clear, easy-to-understand ways both the success of a sustainable supply chain and areas where more work is needed. Metrics can also help quantify just how much money particular sustainability initiatives are adding to benefiting the bottom line.
“Metrics help us get a sense of where we stand now and how we are progressing. When we present this to leadership we want to be concise and to the point. Numbers can tell the story much more quickly,” said Tafuri.
HackensackUMC tracks metrics in-house, but it has also hired an outside company that collects information from its vendors and produces eye-friendly reports broken down by vendor and product category.
But metrics are not only useful in convincing senior management of the benefits of sustainability; they can also help motivate front-line employees to do their part in making the sustainable supply chain a success by showing them how their small part in the sustainability chain affects the system as a whole. “The supply chain is big and involves multiple pieces and people,” said Graves. He knows not everyone is as attuned as others, and aligning priorities is everyone’s challenge.
For example, everyone wants to protect the environment in abstract terms, but when a nurse on
7 South chooses to put a potentially repurposable item in a reprocessing bin instead of the trash or a red bag and learns that through the efforts of like-minded individuals, the hospital as a whole has kept thousands of pounds of waste out of a landfill, it makes them a stakeholder in the sustainable supply chain and they are more likely to feel pride in the hospital’s sustainability efforts and take that extra step in the future.
UMMC produces reports tailored to individual items and hospital units. For example, a pulse oximeter has the most savings potential. The hospital is able to break collections down by each nursing unit and see how many were used and how many were collected.
“If you look at it globally, it’s hard to appreciate their influence on the numbers, but if you break it down to the local level that staff can see and associate with their area, it is very effective to drive compliance,” said Graves. And it’s been successful. Collection compliance in January 2016 for that device was 49 percent; by April the numbers were up to 61 percent. “We’ve shown steady improvement,” said Graves.
The Importance of Open Communications
With the large number of items in a hospital’s supply chain, how does a supply chain manager decide which areas to focus on? Safer chemicals are always a priority because of patient safety, said Tafuri, and reducing waste is an easy target because all businesses want to save money. “We also work with Practice Greenhealth to see what the major priorities are.”
UMMC has a list of particular chemicals they are concerned about, including no-go chemicals like mercury. “We are always asking if a safer alternative exists,” said Graves. Reprocessing is a major source of savings, but it is limited to what the reprocessor has been approved by the FDA to reprocess. “We compare a reprocessor’s list with what we actually use. If it is on their list and we use it, we reprocess it,” said Graves.
But meeting goals can be problematic because of the difficulty in discovering exactly what is green, said Graves. “Manufacturer claims need to be validated, and with 80,000 products in the medical center, it’s difficult to evaluate all of them for environmental attributes.” UMMC’s group purchasing organization helps with this. They try to discover what is actually green and who is making the claim.
It also helps to have a dedicated sustainable supply chain leader who can see and understand all aspects of the process. Cost reductions associated with greening the supply chain can fund dedicated positions whose expertise can recognize and implement policies that can drive further cost reductions.
“In many ways, sustainability can be self-funded internally with savings we see from medical waste reductions and recycling. Those savings are how we have justified the cost of having a sustainability position that can manage resources and suppliers more efficiently,” said Graves.
A sustainable approach requires cooperation and collaboration not only internally, from management and between departments, but also externally from suppliers, distributors and all phases of the supply chain.
Having a sustainable supply chain also affects a hospital’s relationship with its supplier, said Graves. “We push back when they are presenting a new product; it becomes part of the conversation.”
For example, packaging has brought big savings. “We just have to throw it away,” he said. “Less packaging is better for the environment and less we both have to pay to dispose of.” Graves said they have had success on reducing packaging and also points out the great success that the entire health care sector has had convincing suppliers to provide safer chemicals.
Tafuri agrees and adds that implementing a sustainable supply chain requires more open lines of communication and in some cases, closer relationships with all parts of the supply chain. HackensackUMC’s GPO helped convince suppliers and distributors to be more receptive to the hospital’s needs. The purchasing department green team brings in companies to discuss sustainability. Both sides give presentations on their sustainability programs and they learn from each other. One of HackensackUMC’s vendors is even onsite a couple of times a week helping with education on proper waste disposal.
Using a supply chain model that values social and environmental concerns can certainly help protect natural resources and safeguard the environment, but it is more than that. It affects all partners in the supply chain, as well as influencing all departments in a medical center and having a profound effect on patient care. It offers an opportunity to cut costs, improve efficiency and enhance public relations.
“Some initiatives that save money may cost a little bit more, but you want to do things the right way. Sustainability is in line with our principles and mission as a hospital,” said Tafuri.
Karl Blomback Really Hates Waste
“I’m one of those guys who goes into a restaurant and says ‘don’t give me that bag because all I’m going to do is turn around and throw it away,’” said Karl Blomback, Hackensack University Medical Center’s vice president of supply chain.
And while he’s always hated to see a waste of resources, he wasn’t always sold on green sustainability initiatives. Blomback’s primary job is to reduce cost in his organization, and his initial perception was that going green would take a lot of work and yield very little return. He was also involved in some reprocessing at a previous job that was not very successful.
Soon, however, he realized that often hospitals had no idea what their costs were. And after transitioning into supply chain and seeing the waste and expense, he recalls thinking, “Someone with some common sense could really make a difference.”
Once he saw that making the supply chain more sustainable was not only better for the environment and patients, but could actually save money in many areas, Blomback got the hospital’s executive leadership engaged in sustainability and convinced them to create a sustainability network.
HackensackUMC’s Senior Sustainability Advisor Kyle Tafuri is Blomback’s biggest fan. “Karl saves a lot of money for the hospital,” said Tafuri. “He’s very supportive of the purchasing department green team and allows us the freedom to be part of these initiatives and to succeed.”
And the feelings are mutual. Blomback gives a lot of credit to his green team and Tafuri. “When you have someone who is so passionate about it, it makes it a lot easier for you. If all he needs is a little of my support, and I can move obstacles out of the way or get a company in here and negotiate the contract, I’m happy to do it. It’s good for the environment and good for the hospital.”
Having high-level buy-in for sustainable supply chain management was just
what the team at HackensackUMC needed.