Purchasing Power and Impact Spending

How Kaiser Permanente leverages its purchasing power to create a more equitable and healthy society through working with local, diverse suppliers

October 2021 – The Journal of Healthcare Contracting

Mary Beth Lang

Kaiser Permanente’s spending decisions are aimed at building healthy, equitable and sustainable economies. They address economic and environmental disparities and create positive health outcomes through three focus areas: supplier diversity, sustainability and economic impact.

“We help address inequities by making deliberate choices about the purchases we make – from hospital supplies to countless other goods and services,” said Mary Beth Lang, chief of supply chain and procurement for Kaiser Permanente. “This focus on impact spending involves seeking out and using small suppliers and businesses owned by women, people of color and other underrepresented groups as a way to improve the economic health and well-being of the communities we serve and contribute to their success and resilience.”

Kaiser Permanente is an active member of local, regional and national organizations chartered to advance business opportunities, support and advocate for the growth and welfare of small, minority, women, LGBTQ+, veteran and disabled-owned business enterprises, and connect them to corporate members and their buyers.

To make a larger impact in equitable spending across the industry and to improve community health throughout the country, Kaiser Permanente worked with Healthcare Anchor Network to create an industry initiative: the Impact Purchasing Commitment. Kaiser Permanente and 11 other hospitals and health systems signed on.

The Impact Purchasing Commitment includes collectively increasing spending with Minority and Women Owned Business Enterprises (MWBEs) as well as local and employee-owned, cooperatively owned and/or nonprofit-owned enterprises, by at least $1 billion over five years. The institutions also agree to work with at least two of their large existing vendors to create hiring pipelines in the disinvested communities that they serve and to commit to specific sustainable procurement goals.

“Participants who signed the commitment promise to help build healthy, equitable and climate-resilient local economies with how they spend their dollars,” Lang said. “Improving the health of our members and the communities we serve is core to our mission and the work we do every day. This focus is heightened during a pandemic that is disproportionately affecting both low-income individuals and communities of color.”

Kaiser Permanente’s diverse supplier spend

Kaiser Permanente increased its spend with diverse suppliers by 27% in 2020 to $2.56 billion. It also spurred $510 million in diverse spending by suppliers on their behalf in 2020.

Its approach includes collaboration with community anchors and large-scale purchasers to optimize collective impact. It provides capacity-building opportunities for diverse and local entrepreneurs in its footprint to create wealth and employment and targets local spending to invigorate local markets.

“Organizations can make an impact in their communities by applying a sustainability and social impact lens to their procurement practices,” Lang said. “I encourage all organizations to leverage their organizational assets and shift their spending strategies in order to create a more equitable society.”

Kaiser Permanente promotes organizations to get started on their impact spending journey through:

  • Using vendors with sustainable products and practices, when possible, to reduce climate impact and harmful pollutants.
  • Contracting with women-owned and minority-owned vendors to address gender, racial and economic inequity created by historical disinvestment and discrimination.
  • Using local vendors, when possible, to improve the economy within the local community.
  • Supporting community wealth-building by working with or fostering employee-owned enterprises to promote financial security.

“I encourage and invite all health systems to join us in leveraging their purchasing power to improve the health of communities by signing the Impact Purchasing Commitment,” Lang said. “There is an undeniable urgency – that now, more than ever, we as anchors – need to hold ourselves and each other accountable by reimagining our procurement practices so that we’re leveraging our assets and purchasing power collectively to build
an inclusive economy.”

Upstream determinants of health

“Healthcare is a foundational component of equity,” Lang declared. “The health implications for the individuals and communities we serve, as a result of the economic consequences brought on by the pandemic, are unlike anything we’ve ever seen.”

Lang added that health status is directly correlated to the socioeconomic and environmental upstream determinants of health. “We cannot solve for one without addressing the other,” Lang said.

Local spending aims to have a multiplier effect beyond just one purchase that can increase local economic activity. “When local businesses are awarded contracts, they are able to employ local residents and provide stable wages that allow employees to consistently afford food, housing, healthcare and other necessities,” Lang said.

Kaiser Permanente’s strategy focuses on partnerships and an impact beyond its own walls. “It focuses on collaborations as drivers and amplifiers of meaningful and measurable commitments that advance concrete business strategies that both strengthen and create equitable local economies.”

Its partnership with the Initiative for a Competitive Inner City (ICIC), Kaiser Permanente supports the Inner City Capital Connections (ICCC) Program, an executive education and training program for small businesses with the goal of promoting economic prosperity in underserved communities. During the past four years, the Kaiser Permanente-sponsored ICCC program has trained 1,043 businesses over 14 cohorts. Of those, 61% were minority-owned businesses and 56% were women-owned businesses. Participants witnessed an average revenue growth of 45% with $67 million total capital raised and 1,361 jobs created.

And the pandemic only bolstered the program. In 2020, 776 businesses participated with 73% being minority-owned businesses and 60% being owned by women. “We are in precipitous moment. One that will go down in history,” Lang concluded. “It is impossible to do this work alone. As such, we have a responsibility to ourselves, each other and our communities to be bold in our thinking and actions, innovative in our practices, and collaborative in our work.”

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