In a little more than a decade, the Winston-Salem, North Carolina-based healthcare provider’s diverse-supplier purchasing has morphed from a low-priority, poorly tracked effort into a strategic, data-driven $500+ million program involving over 400 suppliers.
That dramatic growth mirrors Novant Health’s aggressive expansion. The not-for-profit company, which traces its roots to 1891, was formed by the 1997 merger of two North Carolina health systems. Its integrated system now includes 14 medical centers, along with outpatient surgery centers, medical plazas and diagnostic facilities in 529 locations in Georgia, North and South Carolina, and Virginia.
Novant Health’s continuing expansion is challenging the company’s efforts to track and source diverse suppliers in key areas, including real estate and construction, financial services, information technology, and services and supplies.
“We need to stay ahead of that growth curve,” said Kevin J. Price, director of supplier diversity and performance. “Our larger suppliers, like Johnson & Johnson, are helping us identify diverse suppliers that can help meet our goals—and that’s as close to a best practice as you can get.”
It’s no coincidence that Novant Health’s diverse spend has increased 340 percent since 2006, the same year the company recruited Price to launch its diverse supplier initiative. The former commercial banker brought extensive experience in community development and working with minority-owned businesses, along with master’s degrees in business and health administration from North Carolina’s Pfeiffer University.
Because he reports directly to the company’s supply chain senior vice president, with a dotted line to the executive vice president for diversity and inclusion, Price can drive Novant Health’s diverse-supplier strategy enterprise-wide.
“A huge distinction for Novant Health is that I can influence diverse purchasing by connecting goals to sourcing managers’ compensation,” he explained. “And I can tap into the resources we need to tell our story internally and marshal resources to partner with outside advocacy groups.”
The Right Structure for the Job
Supporting diverse procurement efforts internally are a supplier work group and the senior-level Diversity Action Committee (DAC).
The work group includes vice presidents, directors and managers representing legal, risk management, finance, pharmacy and other departments. Members play a tactical role by staffing trade shows and supplier sourcing events, reviewing sourcing opportunities from a diversity perspective, and advising suppliers on how to navigate the company’s supply chain. The DAC, which includes four divisional senior vice presidents and the chief diversity and inclusion officer, sets the company’s diverse procurement strategy and goals.
But even with those resources, increasing the ranks of diverse suppliers hasn’t been without its challenges, particularly for clinical products and services.
“On the non-clinical side, we’ve done well educating business units about diversity and inclusion,” said Price, a native of Greensboro, North Carolina. “But it’s been ‘stretch work’ getting clinical staff to understand how supplier diversity fits into our strategic imperatives and how it helps us become more competitive. It’s not top-of-mind for clinicians who are focused on safety and quality care.”
While the company’s purchasing sometimes requires national sourcing, Novant Health is determined to procure locally, which is a win-win for everyone. “We want to do business with companies that operate locally, that hire from our local communities and that use Novant Health as their healthcare provider. This economically strengthens our communities. In banking, we called it community reinvestment.”
Novant Health has made a priority of recruiting minority and, more recently, LGBT-owned companies. It is working closely with the Hispanic Contractors Association of the Carolinas, Latin American Chamber of Commerce of Charlotte and the Carolinas-Virginia Minority Supplier Development Council to grow local and healthcare-related minority businesses. It also is aggressively pursuing veteran-owned firms.
“There are several military bases in North and South Carolina, Virginia and Georgia and many servicemembers are becoming business owners after they end active duty,” stated Price, a U.S. Army veteran. “We need to seek them out.”
Developing Contract-Ready Suppliers
Small businesses face two key challenges when pursuing business opportunities in a specialized industry like healthcare. The first is growing their firms so they can compete. Second, is understanding how to work with large integrated healthcare providers like Novant Health. An innovative minority executive training partnership with the Tuck School of Business at Dartmouth College is providing a solution to both.
“We needed a capacity-building program focusing on contracting with hospitals and understanding the language and sourcing cycles we use in the industry,” explained Price. “We first considered developing a program internally but thought it wouldn’t be an efficient use of limited resources. We found the best option in partnering with Dartmouth, which runs the oldest executive training program for minority business owners.”
In 2014, Price, along with Healthcare Supplier Diversity Alliance (HSDA) colleagues Mark Cartwright of Vizient, the country’s largest healthcare performance improvement company, and Angela Wilkes, HSDA founder and president and chief executive of A.T. Wilkes & Associates, convinced the Tuck School to integrate a healthcare supply chain component into its program. The catch: HSDA would need to secure scholarship funds and recruit 25 students, representing half of the class, from healthcare-related companies, and they succeeded. This year, HSDA is recruiting the entire class for the fourth healthcare program, which begins in November.
Partnering for Success
In July 2016, the company opened a $26 million Women’s Center at the Novant Health Matthews Medical Center in North Carolina. The new facility signaled more than a hometown success story for African American-owned R.J. Leeper Construction and woman-owned Rodgers Builders. It set a new best practice for using diverse suppliers on major capital projects.
“The Women’s Center was the first time that two minority-owned firms built a sizeable project for us,” said Price. “While we insist that our larger contractors bring in diverse partners, we let them decide who to work with because it has to be a cultural fit and a long-term growth opportunity for them.”
Price predicted that projects like the Women’s Center soon will be measured not only by return on investment but by community economic impact, including job creation and other multiplier benefits.
“It’s great announcing you’re building a new facility, but the community’s going to ask who’s doing the work,” stated Price. “That’s where supplier diversity provides an advantage.”
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