SMI Supplier Diversity Playbook - Appendix

Definitions and exerts within the Supplier Diversity Playbook and outlined below are provided from:

The Healthcare Anchor Network member “Fiscal Year 2023 Data Companion” guide.

“Inclusive, Local Sourcing, Purchasing for People and Planet.” Part of the Hospitals Aligned for Healthy Communities toolkit series Fall 2016 | David Zuckerman and Katie Parker | The Democracy Collaborative

Disclaimer: SMI is not endorsing resources and is only providing them as references.

Chapter 1. Setting the Stage, Building a Successful Supplier Diversity Program
Sources Referenced

1. NHE Fact Sheet CMS
2. AHA 2023 Cost of Caring
3. Can Hospitals Heal America’s Communities? “All in for Mission” is the Emerging Model for Impact (Takoma Park, MD: The Democracy Collaborative, 2015)
4. ASPE HHS
5. Boston Medical Center Sustainability Bond( ESG)
6. World Health Organization Healthy Equity
7. CDC Racism and Health
8. CDC Core Commitment to Health Equity
9. Community Health Needs Assesement, IRS
10. Gartner Top 25 Global Supply Chain
11. US News Health Equity Measures
12. Gartner Six Strategies to a Resilient Supply Chain: Gartner’s Healthcare Supply Chain Top 25
13. Michigan Minority Supplier Development Council 333 Years to Parity
14. 5 Steps in Change Management, Harvard Business Review Change Management

Definitions

Environmental Social Governance (ESG) Environmental, social, and governance (ESG) refers to the three central factors in measuring the sustainability and societal impact of an investment in a company or business.

Environmental

Reducing greenhouse gas emissions

Conserving natural resources

Minimizing waste

Energy and water reduction

Social (Consideration of people & relationships)

Customer satisfaction

Data protection and privacy

Gender and diversity

Employee engagement

Community relations

Human rights

Labor standards

Social responsibility broadly speaking

Governance

Standards of accountability and transparency in business operations

Board composition and diversity

Audit committee structure

Bribery and corruption

Executive compensation

Definitions below are from The Healthcare Anchor Network member “Fiscal Year 2023 Data Companion” guide unless otherwise indicated.

Supplier Diversity refers to an organization’s supplier base and the degree to which those businesses are owned by diverse suppliers. The industry standard for a supplier to be recognized as diverse is that it be at least 51% owned, managed, and operated by minorities, women, veterans, or other designated groups that have historically been underrepresented in industry supply chains.

Supplier Diversity Certifications Defined

Minority-Owned Business Enterprise (MBE) is a designation for businesses that are at least 51 percent owned, operated and controlled by one or more people who are African-American, Hispanic,Asian American or Native American. MBE can be certified by local, state or federal agencies. National certification is also offered through the National Minority Supplier Development Council (NMSDC).

Women-Owned Business Enterprise (WBE) is a national certification for women-owned businesses. The Women’s Business Enterprise National Council (WBENC) oversees the certification that is widely accepted by corporate and nonprofit organizations as well as local, state and federal agencies.

Veteran-Owned Business Enterprise (VBE) are at least 51 percent of the business must be directly and unconditionally owned by one or more veteran(s) or service-disabled veteran(s).The veteran owner(s) must have full control over the day-to-day management, decision-making, and strategic policy of the business.

Small Business Enterprise (SBE) indicates whether a business concern is eligible for assistance from the SBA. Indicates whether the business is small, usually certified by a federal, state, or local government agency or organization as having met all of the government standards that award eligibility.

Disadvantaged Business Enterprise (DBE) certified businesses meet government standard eligibility as women, minorities, disabled, and other disadvantaged businesses as a result of economic disadvantages concerning education, employment, residence or business location or social disadvantage and lack of business training. The business must be at least 51 percent owned by one or more people who are socially and economically disadvantaged. Certification requirements are met through a federal, state or local government agencies.

LGBT Business Enterprise (LGBTBE) indicates whether a business is at least 51 percent owned, operated, managed, and controlled by LGBT person(s) who are either U.S. citizens or lawful permanent residents. Exercises independence from any non-LGBT business enterprise.

Historically Under-Utilized Business Zones (HUBZone) is a federal designation for a small business at least 51 percent owned and controlled by U.S. citizens, or a Community Development Corporation, an agricultural cooperative, or an Indian tribe (including Alaska Native Corporations). The firm’s principal office (the location where the greatest number of employees perform their work, excluding contract sites) must be in a HUBZone. 35 percent of the firm’s total workforce must reside in a HUBZone.

Social Determinants of Health: The World Health Organization defines the social determinants of health as “the conditions in which people are born, grow, work, live, and age.” They represent the wider set of forces and systems shaping the conditions of daily life that drive health outcomes, such as inequality, social mobility, community stability, and the quality of civic life. Sometimes referred to as “upstream” determinants, research indicates that up to 50 percent of the factors that contribute to health are social and economic.

Health equity refers to the notion that all people should be able to achieve their highest level of health, regardless of their race, gender, class, sexual orientation, or other identities. Achieving health equity requires addressing the systemic factors shaping the social determinants of health.

Industry Partner: SMI to provide

Healthcare Provider: SMI to provide

Supplier diversity refers to an institution’s vendor base, and the degree to which the businesses institutions procure from are owned by diverse suppliers. It has developed as an industry term to refer to working with businesses that are at least 51% owned, managed, and operated by businesses owned by minorities, women, veterans, or other designated groups that have historically been underrepresented in industry supply chains. Many institutions require third-party certification for participation in their supplier diversity programs.

Health The World Health Organization’s definition of health: is “a state of complete physical, mental, and social well-being, and not merely the absence of disease or infirmity.” Health equity refers to the notion that all people should be able to achieve their highest level of health, regardless of their race, gender, class, sexual orientation, or other identities. Achieving health equity requires addressing the systemic factors shaping the social determinants of health.13

Community Health Needs Assessment (CHNA) is a research process non-profit hospitals must implement as part of their community-benefit reporting. Instituted by the Affordable Care Act of 2010, CHNAs must be completed by hospitals and health systems every three years and identify the most pressing community health concerns.

Anchor Institutions are nonprofit or public institutions that are firmly rooted in their locales, including hospitals, universities, local governments, and utilities. These institutions often have a social or charitable purpose, and unlike for-profit corporations that can relocate, are place-based and tend to stay put. As such, they have a vested self-interest in helping to ensure that the communities in which they are based are safe, vibrant, healthy, and stable.1 Anchor Mission A commitment to consciously apply the long-term, place-based economic power of the institution, in combination with its human and intellectual resources, to better the long-term welfare of the community in which the institution is anchored.2

Executive Leaders are the senior leaders of the organization responsible and accountable for budgeting, people management, and operating practices.

Group Purchasing Organization (GPO) A Group Purchasing Organization (GPO) is an entity that aggregates purchasing volume with the objective of achieving cost savings for its members by negotiating deals with vendors, distributors, and manufacturers.† Participating institutions engage in a contract with a GPO by becoming members, and agreeing to direct a certain percentage of their spending through the organization rather than engaging in contracts directly. According to the Healthcare Supply Chain Association, more than 70% of purchases that U.S. hospitals make are done through GPO contracts. A GPO is one type of Supply Chain Integrator.

Tier Two Spend is the dollar amount of operating expenses and capital non-construction related expenses that was spent during the fiscal year with vendors that are suppliers to your health system’s direct vendors (may or may not be subcontractors).

Inclusion Resource Groups (IRG) or Employee Resource Groups are voluntary committees typically led by Diversity, Equity and Inclusion focused on a shared background or interest and aim to foster inclusion, cultivate diversity and create resources and support for diverse employees.

Chapter 2. Getting Started with Supplier Diversity Self-Assessment and Goal Setting

Supplier Diversity Maturity Model (picture- see excel file for full maturity model)

Supply Chain Integrators or Entrepreneurial Support Organization For the purposes of this toolkit, the terms Supply Chain Integrators or Entrepreneurial Support Organization refers to organizations that strengthen the capacity of small, local, diverse, and/or employee-owned businesses to serve institutional purchasers. In this context, these organizations include technical assistance providers, business incubators, organizations that help connect businesses to capital, and supplier development councils.

Addressable Spend (as defined by the Healthcare Anchor Network): Total Spend minus the expense categories listed below. Construction expenses should be separated out and not be included in this count, as outlined in the category list below:

Construction Spend

Construction-related capital expenses

Compensation

Salaries and wages (including overtime and bonuses)

Resident and board member compensation

Fringe benefits

Medical director fees

Government Transfer Payments

All other taxes

Hospital and tax assessment

Financial Accounting Concepts

Bad debt

Depreciation and amortization

Interest payments

Purchasing Categories

Claims costs

Utilities

Sponsorships

Prime pharmaceutical distributor

Retail pharmacy

Spend with non-profits (including hospitals)

Blood, OPO (Organ procurement organization)

Optional Exclusions:

Independent physician groups

Building leases

Business employee expenses (e.g. miles, meals, and expenses)

Total Spend (as defined by HAN) is the summed dollar amount of all operating, capital and construction expenses incurred during the fiscal year with direct suppliers to your health system, minus the expense categories listed below:

Compensation

Salaries and wages (including overtime and bonuses)

Resident and board member compensation

Fringe benefits

Medical director feeds

Government Transfer Payments

All other taxes

Hospital and tax assessment

Financial Accounting Concepts

Bad debt

Depreciation and amortization

Interest payments

Impact Purchasing Scorecard- Supplier Diversity

Example of how you could track your data at an organizational level including

Tier 1 and Tier 2 diverse supplier spend.

Below is an example of the marketing success of your program:

Chapter 3. Measure What Matters, Supplier Diversity Definitions and Metrics

Definitions

Addressable Spend (as defined by the Healthcare Anchor Network): Total Spend minus the expense categories listed below. Construction expenses should be separated out and not be included in this count, as outlined in the category list below:

Construction Spend

Construction-related capital expenses

Compensation

Salaries and wages (including overtime and bonuses)

Resident and board member compensation

Fringe benefits

Medical director fees

Government Transfer Payments

All other taxes

Hospital and tax assessment

Financial Accounting Concepts

Bad debt

Depreciation and amortization

Interest payments

Purchasing Categories

Claims costs

Utilities

Sponsorships

Prime pharmaceutical distributor

Retail pharmacy

Spend with non-profits (including hospitals)

Blood, OPO (Organ procurement organization)

Optional Exclusions :

Independent physician groups

Building leases

Business employee expenses (e.g. miles, meals, and expenses)

Supplier Diversity Definitions to know:

Tier One Suppliers Tier-one (or prime) suppliers refer to vendors that institutions directly contract with when procuring a good or service.

Tier One Spend is the summed dollar amount of all operating, capital, AND construction expenses incurred during the fiscal year with direct vendors to your health system,

Tier Two Suppliers refer to vendors that tier one supplier’s subcontract with in order to fulfill the contract. Subtracting requirements can encourage tier one vendors to work with and mentor local and diverse suppliers.

Tier Two Spend is the dollar amount of operating expenses and capital non-construction related expenses that was spent during the fiscal year with vendors that are suppliers to your health system’s direct vendors (may or may not be subcontractors).

Supplier Diversity refers to an institution’s strategy to include diverse suppliers into its supply chain and procure from diverse suppliers. More specifically, Supplier diversity refers to an institution’s vendor base, and the degree to which the businesses institutions procure from are owned by diverse suppliers. It has developed as an industry term to refer to working with businesses that are at least 51% owned, managed, and operated by businesses owned by minorities, women, veterans, or other designated groups that have historically been underrepresented in industry supply chains. In short, Supplier Diversity refers to an institution’s strategy to include diverse suppliers in its supply chain.

Diverse Supplier Certifying Organizations validate the status of diverse-owned businesses, provide support in their growth and development and connect businesses with one another for potential contracting opportunities. Many of these organizations have regional affiliates that can be found on their websites.

Group Purchasing Organization (GPO) A Group Purchasing Organization (GPO) is an entity that aggregates purchasing volume with the objective of achieving cost savings for its members by negotiating deals with vendors, distributors, and manufacturers. Participating institutions engage in a contract with a GPO by becoming members, and agreeing to direct a certain percentage of their spending through the organization rather than engaging in contracts directly. According to the Healthcare Supply Chain Association, more than 70% of purchases that U.S. hospitals make are done through GPO contracts. A GPO is one type of Supply Chain Integrator (see definition below).

Supply Chain Integrators or Entrepreneurial Support Organization For the purposes of this toolkit, the terms Supply Chain Integrators or Entrepreneurial Support Organization refers to organizations that strengthen the capacity of small, local, diverse, and/or employee-owned businesses to serve institutional purchasers. In this context, these organizations include technical assistance providers, business incubators, organizations that help connect businesses to capital, and supplier development councils.

Equity and Underserved Communities Health & Health Equity More than just the absence of illness, these toolkits utilize the World Health Organization’s definition of health, “a state of complete physical, mental, and social well-being, and not merely the absence of disease or infirmity.” Health equity refers to the notion that all people should be able to achieve their highest level of health, regardless of their race, gender, class, sexual orientation, or other identities. Achieving health equity requires addressing the systemic factors shaping the social determinants of health.

Third-Party Verification is a third-party process of a diverse supplier to verify the efficacy of the business ownership and is conducted by approved organizations.

Small Business status is determined by their business size in comparison to their corresponding NAICS code listed in the business’s SAM profile.

Split Business/Set Aside Contracts according to the SBA:” To help provide a level playing field for small businesses, the government limits competition for certain contracts to small businesses. Those contracts are called “small business set-asides,” and they help small businesses compete for and win federal contracts.”

Mentor-Protégé Program A mentor-protégé program connects large vendors with smaller local and diverse vendors in order to provide training and capacity-building opportunities. More commonly employed in construction, mentor protégé programs help build capacity across the supply chain, as protégés receive coaching around important business practices, such as putting together bids and organizing the back office. Programs can take the form of informal mentorships, which encourage relationships between tier-one and tier-two suppliers (see below), or formalized programs where the health system acts as a matchmaker and facilitator.

Procurement, Purchasing and Sourcing Purchasing and sourcing refer to different stages of the procurement process, or the way in which institutions procure items. Although each of these terms has its own specific parameters and functions, in this toolkit we use them interchangeably to refer to activities that are part of the supply chain, or the entire process of procuring items from identifying needed goods and services to distributing them within the hospital.

Example 1. Below f how you could track your data at an organizational level including Tier 1 and Tier 2 diverse supplier spend⁵.

Example 2. Below is an example of the marketing success of your program⁵:

Example 3. Supplier Diversity Dashboard Example from Federal Government Small Business Contracting Goals.

Example- Federal Government Dashboard: https://d2d.gsa.gov/report/supplier-base-dashboard

Chapter Four. Internal Engagement for Growing Supplier Diversity
Sources Referenced

Pew Research “Diversity, Equity and Inclusion in the Workplace” 2023.

https://www.pewresearch.org/social-trends/2023/05/17/diversity-equity-and-inclusion-in-the-workplace/

Kaiser Permanente’s “Impact Spending website” https://supplier.kp.org/impactspending/what-we-do/supplier-diversity/

Target 2022 Sustainability Report https://corporate.target.com/sustainability-governance/governance-and-reporting/reporting-progress/archive

Chapter 5 Developing Strategic Partnerships

Table 1. Current Partner Engagement Mapping, identify existing external partners your organization is partnered with.

Table 2. Identify your external partners, cultivate a list of potential external partners and who the internal contact is within your organization.

Chapter 6. Diverse Supplier Development and Capacity Building

Table 3. Template of criteria needed to identify potential opportunities for inclusion of diverse suppliers in upcoming contracts.

Chapter 7. Available Technology Solutions




Table 1. Table of questions to ask technology suppliers

Name of Technology Platform	Technology Platform is Diverse Ownership (Y/N)	Technology Platform is a Third-Party Certified Diverse Suppliers (Y/N)	Technology Platform Ability to Perform Data Scrub (Y/N)	Number of Diverse Supplier certifications Included	Technology Platform includes a Supplier Diversity Dashboard (Y/N)	Frequency of Platform Updates	Includes a Diverse Supplier Directory (Y/N)	Technology Platform Ability to Integrate into ERP (Y/N)
Example 1	Y	Y	N	N/A	Y	Quarterly	Y	Y
Example 2	N	N	Y	100	N	Ad Hoc	Y	Y
Example3	Y	N	N	N/A	Y	Quarterly	N	N

Table 4. Sample of questions to ask technology suppliers

Name of Technology Platform	Technology Platform is Diverse Ownership (Y/N)	Technology Platform is a Third-Party Certified Diverse Suppliers (Y/N)	Technology Platform Ability to Perform Data Scrub (Y/N)	Number of Diverse Supplier Certifications Included	Technology Platform includes a Supplier Diversity Dashboard (Y/N)	Frequency of Platform Updates	Includes a Diverse Supplier Directory (Y/N)	Technology Platform Ability to Integrate into ERP (Y/N)
Example 1	Y	Y	Y	N/A	Y	Quarterly	Y	Y
Example 2	N	N	Y	100	N	Ad Hoc	Y	Y
Example 3	Y	N	N	N/A	Y	Quarterly	N	N

Examples of successful web platforms from the HAN Inclusive, Local Sourcing Toolkit Pages 111-115

1. MD Anderson Cancer Center, based in Houston, Texas MD Anderson maintains a website that vendors can access even before registering with the institution. All bids over $50,000 are listed publicly, ensuring that all local vendors may access bids and review requirements. The website also includes historical information, which local small business development centers can use to create mock bids with businesses to help them learn about the Request for Proposal process. The website also includes details on how to make an appointment with MD Anderson staff members. It features important resources for Historically Underutilized Businesses (HUBs), including information on how to become a HUB, templates for the required HUB subcontracting plan, along with an instructional video, and state goals for HUB spending.

Above: webpage for MD Anderson’s HUB & Federal Small Business Program

Above: webpage listing open bid opportunities at MD Anderson

Chapter 8. Strategic Sourcing RFP Requirements for Suppliers

Visual Example 1. Impact Purchasing Integration into the Sourcing Process

Visual Example 2. Supplier Diversity Technology Integration into the Sourcing Process

Visual Example 3. Equity in Sourcing, end-to-end process

Table 5. Evaluate your Bid Process

Review bids submitted to determine if diverse vendors are included in the process. With this information, you can further explore if your lack of diverse suppliers is due to participation or other factors. Understanding their current participation can help identify whether your efforts, to begin with, should be focused on outreach or capacity building.

Table 6. Evaluate upcoming contracting opportunities

The first step to integrating diverse suppliers into your sourcing process is identifying potential opportunities for engagement. A great place to start is inquiring with your purchasing department what their contract renewal process is. Determine if you’re able to pull contract data by expiration date. Leverage the list of goods and services below as a starting place to determine upcoming bid opportunities for diverse suppliers.

Table 4. Image from Hospital-Toolkits-Inclusive-Local-Sourcing.pdf page 80

Table 7. Supplier RFP Response Scoring Criteria

The supplier RFP responses scoring criteria provide a measurable process to evaluate performance in key areas.

Table 8. Supplier Diversity Weighted Scoring Criteria and Scoring Examples

The scoring above outlines the importance of these components to the overall supplier diversity program. These components can be populated by utilizing the RFP questionnaire for suppliers and the Likert scale to compare efforts between companies. According to the example above, Supplier A has a stronger program.

Many successful procurement departments create weighted scorecards to standardize the evaluation of suppliers and inform decisions. Best practice would include supplier diversity as one of the measurable faucets to awarding a bid. For example, supplier diversity as a factor in weighting supplier responses could look like:

Based upon the criteria above, Supplier A had a better overall supplier diversity score and total score. It’s likely that they would be awarded the bid.

Questionnaire 1. Internal evaluation of your procurement policies and practices

Key categories to evaluate to within your procurement practices to integrate supplier diversity include:

Bid process

Diverse supplier development

Net payment terms

Net payment periods & invoicing system

Procurement targets

Staff development and evaluation

Types of certifications accepted.

Once you’ve identified your current approach, you can explore opportunities to continue to integrate supplier diversity language.

Questionnaire 2. Future contracting opportunities

List potential future procurement opportunities below for diverse vendors. These could include new facilities, retrofits, increasing sustainability through retrofits, etc.

Questionnaire 3. Feedback Questions to Engage Diverse Suppliers in Process Improvement

Identify vendors from underserved communities that are already present in your area. Either by yourself or working through a community partner, conduct focus groups or interviews with these diverse vendors to assess how they perceive working with your institution:

What do vendors like and dislike?

What do vendors think your institution does well?

What could be improved?

What are the barriers to doing business with your institution?

Are vendors equipped to provide invoices that are compatible with your internal invoicing system?

Are vendors paid in a timely enough manner?

Are vendors satisfied with the existing technical assistance support in your community? If not, where do they believe further investment is necessary?

Are vendors aware of upcoming contracting opportunities?

Is your current system for submitting bids easy to navigate?

Are smaller vendors aware of any tier 2 or subcontracting goals?

Do vendors know who to engage at the institution around contracting opportunities?

What are the other gaps?

Questionnaire 4. RFP Questionnaire for Suppliers

A sample list of questions organized by categories to provide to suppliers for an RFP or RFI. These questions provide a clear understanding of their current supplier diversity programming. This is a different way of sending out information to the supplier. Once a response is received, place the information into Table 1. Supplier RFP Response Scoring Criteria to compare multiple supplier responses.