This is an excerpt from Medically Necessary, a health care supply chain newsletter. Subscribe here.
The trend: As hospital systems aim to reduce their carbon emissions and other pollutants, they’re pushing manufacturers, distributors and other suppliers to adopt more aggressive environmental goals.
Last year, Kaiser Permanente became the first U.S. hospital system to reduce its net carbon emissions to zero by cutting its own energy use and investing in projects that remove carbon from the atmosphere to offset remaining impacts. Other health systems hope to follow suit.
These types of environmental goals are becoming mainstream, according to Beth Schenk, executive director of environmental stewardship at Providence.
“There’s been a movement in the U.S. for a while for health care to stop being part of the problem. We take that seriously,” she told FreightWaves. “We are here to create healthier communities, not less healthy communities.”
The supply chain is an enormous part of a hospital’s carbon footprint, and these policies are already influencing suppliers.
In many cases, the push for more sustainability in health care procurement dovetails with efforts to make the supply chain more transparent and resilient.
The pandemic pushed health care organizations to gather more information about supply chain risks, but some hospitals are simultaneously collecting data about environmental impacts.
“The answer is not, ‘let’s tackle the carbon footprint problem or the waste problem … or the resiliency problem or the shortage problem,” Karen Conway, who works on supply chain issues for the health care data company GHX, told FreightWaves. “Let’s look at how the whole system works.”
The numbers: The health care industry is a major contributor to greenhouse gas emissions, and the impact appears to be getting worse.
Last year, a research team estimated that greenhouse gas emissions from the U.S. health care industry rose about 6% from 2010 to 2018. The U.S. health industry emitted more greenhouse gas per capita than any other industrialized country. The health care industry accounted for about 8.5% of the total U.S. greenhouse gas emissions, according to the study.
For many hospital systems, the supply chain is by far the largest component of their total carbon footprint. Earlier this year, a study in the medical journal The Lancet estimated that the supply chain accounted for 62% of NHS’ carbon footprint. Providence recently estimated that supplies the organization buys account for about 38% of the total carbon footprint.
Some companies within the health care supply chain report that they’re already making progress on goals to reduce carbon emissions.
Medical distributor Cardinal Health lowered emissions by more than 22% between 2018 and 2020, although part of that reduction was due to the economic slowdown caused by COVID-19. Distributor McKesson decreased carbon emissions by about 8% between 2019 and 2020, according to a recent company report.
The challenge: In many cases, large U.S.-based companies, such as major medical distributors, are eager to collaborate with health care systems on sustainability goals, according to Schenk.
The bigger challenge is collecting reliable information about sustainability from smaller suppliers that are half a world away. They may not have the capability to evaluate that type of information or they may be resistant to share it.
“The suppliers may not know. … They don’t know because it’s really complex,” she said. “It’s complex to know what stuff is made of. What are the processes to make it? What do they put in packaging? How do they get it to us?”
That’s part of the reason why Providence is initially working on environmental goals with its group purchasing organization, its main distributor and its 20 largest suppliers.
Intermountain Healthcare, a 24-hospital system in the West, has hired an outside firm to collect data from vendors about supply chain resilience as well as environmental sustainability.
At an Association for Health Care Resource and Materials Management (AHRMM) conference this week, Shane Hughes, supplier and community relations director for Intermountain, said that process has been a challenge.
“We’ve seen some great success,” he said at the conference. “But that process of reaching out to specific suppliers and asking for detailed information regarding products, regarding locations of specific manufacturing sites hasn’t been easy.”
It’s hard for a single organization with these kinds of policies to make a big impact on the whole supply chain, Conway said. But it’s becoming much more common for hospitals to seek this kind of information and that collective impact goes much further.
“Hospitals are demanding data upstream from their suppliers,” Conway said. “Not only how are you mitigating risk upstream so you don’t have a supply shortage, but what are you doing in terms of diverse suppliers and … environmental impact?”
The opportunity: Several hospital systems, including Intermountain, Kaiser Permanente and Providence, are also combining sustainability goals with efforts to spend more money with local businesses or companies owned by women, people of color or other disadvantaged groups.
In March, the Health Care Anchor Network launched the Impact Purchasing Agreement, a commitment from 12 health systems to consider economic, social and environmental factors when making purchases.
At the AHRMM conference, Mary Beth Lang, chief supply chain and procurement officer for Kaiser Permanente, said this policy isn’t supposed to be a handout. She argues it’s good business.
“We have to think beyond just the contract price and look at the entire end-to-end impact of the products that we source,” she said at the conference. “We’re not going to pay more for a product because it’s sustainable or because it’s from a diverse supplier. But we do look at … the value of that product, and make sure that we’re focused on healthy lives.”
The cost: Schenk also argues there’s a business case for setting sustainability goals. Reusable products last longer and don’t have any disposal costs, and reducing energy usage results in savings quickly.
“There’s a lot of cost savings, when you are more efficient when you save energy,” she said. “There are practical functional reasons that are related both to better operations … and lower risk.”
Those savings were a major motivation for UCLA Medical Center’s decision to switch from disposable to reusable isolation gowns in 2012. At the AHRMM conference, Victor Mitry, UCLA’s assistant director of logistics and materials management, said the change saves the organization about $450,000 per year. A 2012 study also found that, over their full life cycle, reusable gowns required much less energy and water than disposable gowns.
Mitry also said the reusable gowns helped the organization avoid shortages during the pandemic.
“A lot of our supply chain dropped right beneath our feet. … We were panicking,” he said at the conference. “The only good thing that we had … was the reusable gowns.”
What’s next? The number of hospitals considering climate change or environmental impact in purchasing decisions is growing, but Schenk says there are still several external factors that will hold back these efforts.
Hospitals and their suppliers both rely on electricity generated by burning fossil fuels. It will be hard to mitigate that until power grids switch to renewable energy sources. She’s also hoping to see more infrastructure for electric vehicles, which could reduce Providence’s impact from transportation.
But for the moment, her main focus is working with suppliers to reduce the carbon footprint of Providence’s supply chain. That’s where she can have an impact now.
“Without really making some headway there. I don’t see how we’re going to make enough of an impact,” she said. “We really need to work with our governments, local municipalities and our business partners.”