Kaiser Applies New Green Scorecard to $1B Medical Supply Chain

Kaiser Applies New Green Scorecard to $1B Medical Supply Chain

In a move affecting more than $1 billion in goods each year, Kaiser Permanente is now requiring its suppliers to provide environmental data on all medical equipment and products purchased by the largest managed care organization in the U.S.

Kaiser Permanente took the wraps off its Sustainability Scorecard system today -- a process that makes considerations about the environmental impacts of producing, obtaining, using and disposing of medical products as integral to decisionmaking in purchasing as product performance, effectiveness and cost.

While acknowledging that sustainability data is factored into purchasing decisions by others in the health care industry, Kaiser says its system is the largest of its kind -- in terms of the breadth of materials involved, the number and geographical range of the facilities covered, the sheer size of the spend and the potential influence on purchasing by the healthcare industry.

{related_content}Kaiser's environmental review covers goods from gauze to MRIs -- any medical products and equipment used in hospitals, medical offices and other facilities operated by organization.

With the scorecard, "we can now ask what's the environmental and human health impacts of these products," said Robert Gotto, executive director in Kaiser Permanente's Procurement & Supply group. "We're setting a national standard across the organization."

The environmental review process also is likely to influence the purchasing of as much as $10 billion in medical products in the industry before year's end. Kaiser says Broadlane, the HMO's main supply chain partner, will adopt the scorecard in September and roll it out among its other clients, whose spending amounts to $9 billion.

The program is the latest sustainability initiative by Kaiser and a key development in the healthcare industry, which is often criticized for not making greater efforts to improve its environmental responsibility.

Kaiser, whose total purchasing comes to about $14 billion a year, already has an environmentally preferable purchasing policy that guides spending. The sustainability scorecard process, however, makes the organization's demand for environmental data a blanket requirement for medical product suppliers. It also makes it incumbent upon the organization to evaluate the data that's returned, thereby making comparative ratings of products and their suppliers.

The evaluation cycle takes 12 to 18 months and involves distribution of the sustainability scorecards to suppliers, issuing a request for proposals (RFPs), receiving returns of environmental data as well as RFPs, evaluating the proposals and the products, and awarding contracts, Gotto said.

Kaiser medical suppliers started getting the scorecards last October and the first contracts resulting from the process were awarded in April.

"I'm always asked what's the cost impact involved," Gotto said, "and we've found that there is absolutely a cost impact to this type of program, but one that's very positive."

Kaiser estimates that it is saving $20 million annually as a result of switching to more environmentally friendly products in 2009, even before its scorecard was fully in place. The organization anticipates further savings with the new program.

Medical staff have readily embraced the environmental review concept, Gotto said, pointing to a pilot that involved a nine-month evaluation of autoclavable endoscopy camera heads -- camera heads used in surgery that can be sterilized with steam rather than chemicals.

The performance and cost of the autoclavable units were similar to that of others, but use of the autoclavable camera heads ultimately reduced the amount the equipment needed for upkeep and eliminated exposure to sterilization chemicals by all involved with the units.

For the medical staff taking part in the evaluation, the decision turned on the environmental factors. "it was fascinating to see that the surgeons saw this as a point of major importance," Gotto said. That input resulted in a $100 million contract for the new equipment over a five-year period, he said.

Kaiser and its purchasing criteria are also likely to have an influence on the design and manufacture of medical products. The organization has already spurred change among some of its best suppliers.

Four years ago, Kaiser wanted carpeting without PVC backing to eliminate the "gassing off" of the material in facilities. At the time, none was manufactured, Gotto said, "so we put a challenge out to the marketplace."

It took two years for the market to respond, he said, but by 2008 Kaiser had carpeting made from 100 percent recycled material with no PVC content, and similar products are now available across the flooring industry.

In contracts that saved a million dollars, Kaiser worked with suppliers to obtain furniture fabric with the lowest chemical content available and struck a deal that essentially "defined a roadmap for them (the suppliers) to get to zero." Gotto said.

Certainly, as Walmart has demonstrated to its and the retail industry's mutual advantage, size and spend helped Kaiser leverage change. But there's an even more basic principle at work behind such deals, Gotto said.

"If you don't ask, you don't get," he said.

Kaiser plans to apply its Sustainability Scorecard -- an accelerated and product-focused evaluation system compared to Walmart's broad Sustainability Index -- to other goods it purchases. Kaiser also plans to later share its results with the healthcare industry, Gotto said.

More information about the Sustainability Scorecard and Kaiser's other environmental initiatives is available at www.kp.org/green.

Image courtesy of Kaiser Permanente.