Kaiser Permanente’s Nestor Jarquin says collaboration with clinicians is the secret sauce for the organization’s supply chain.
Nestor Jarquin may look at physician engagement with the supply chain a bit differently than most. A healthy sign of collaboration to him isn’t when everybody is on the same page at the start of the process. He believes it’s when clinicians and supply chain leaders can actually sit down and debate during their meetings – from the clinician’s product preferences to the business ramifications those choices will create for the organization.
“Those kind of collaborations – where they are open to dialogue – give you a good feeling about how connected you are to the clinical group,” said Jarquin, strategic sourcing sr. category manager, surgical, Kaiser Permanente.
Indeed, Jarquin doesn’t take for granted that Kaiser Permanente clinicians are open to having a business dialogue about the products and instruments they use. “Those dialogues are hard,” he said. “But in our culture, it’s not argumentative, it’s collaborative. The clinicians understand that on the supply chain side, we’ll always honor and respect their clinical expertise and opinions. Conversely, they understand and respect the business paradigm. It’s a unique blend between the two perspectives.”
Kaiser Permanente’s seasoned physicians know the market and the organization’s business practices and can put that mindset to use when making clinical decisions. That cohesion helps the organization come to a solution that’s ultimately meaningful for the patient and the business.
More than just moving boxes
Jarquin describes his career in supply chain as a “winding path.” While in college, he worked at a major medical center as an orderly. In that role, he became interested in the science of caring for patients, beyond just ordering and stocking supplies. He would eventually secure a managerial role at that medical center and become involved in the supplies for the entire organization. From there, he worked as a director in materials management at several different institutions.
Those roles involved traditional supply chain responsibilities for the ordering, stocking, and delivery of supplies throughout the entire medical center or hospital. He gained experience in supply management, contract management, and in some of the institutions, stakeholder management. He worked beyond the purchase order, collaborating with clinicians to better understand their needs and requirements, and how the products were being used, an aspect of the work that appealed to him.
In October 2006, Jarquin joined Kaiser Permanente’s supply chain department. He admits he didn’t totally know what to expect working for the organization and how its supply chain operated. “When you’re outside of Kaiser Permanente, you always wonder how they do what they do,” he said.
Jarquin marveled at the connectivity of the supply chain to its end users. Supply chain wasn’t just about moving boxes; it touched the entire procurement cycle. Although there are different departments, they’re still part of one family and fully engaged in the entire buy-to-pay process. “From strategic sourcing to receiving, payment, inventorying, and picking – all that falls within supply chain,” he said. “We see the whole continuum.”
Kaiser Permanente’s supply chain team relies on one another to ensure they have a successful strategy to deploy – in whatever category they’re talking about. “I’m directly linked to the storeroom clerk and the clinical end user,” Jarquin said. “I don’t see that happening throughout healthcare in general. We’re a single supply chain. We’re all connected and we benefit from that. All the way from that storeroom clerk who needs to order a particular item, to me and strategic sourcing who are trying to ensure we’re making the right decision based upon clinical evidence and outcomes. The fact that we’re a part of that cycle from buy to pay gives us a different perspective from most organizations.”
Kaiser Permanente’s “secret sauce”
He also noticed early on how aligned the organization’s supply chain team was with clinicians. “It’s our secret sauce,” Jarquin said.
Indeed, supply chain leaders often have a delicate balance to make between clinical necessity, qualitative outcomes, and cost. There are some categories that, qualitatively, have similar device options, but one company has a business model that portrays it as being unique in the market, when in fact it’s not. And, if it’s a physician preference item, supply chain has to weigh that consideration heavily into its purchasing decision.
Recently, there was one category where Kaiser Permanente ended up with a favorable proposal that made sense both clinically and financially. What encouraged Jarquin was how in sync the clinicians were about the decision-making process they had built together. “I knew our clinicians wanted these products, but all things being equal, they were not willing for the company to pay X amount more. They told us that they had to help reduce the cost of care here. That was our constant message.”
Eventually, the company agreed to a proposal with Kaiser Permanente. Jarquin was able to give the clinicians something they wanted and hadn’t had in quite some time. “It happened because our clinicians understand our model,” he said. “They understand the cost. It goes back to our culture, which is all about tying the business, outcomes, and cost together. We’re trying to keep our costs down so that the cost of membership for Kaiser Permanente is kept to a competitive space. It was only because of a mutual understanding with our clinicians that we were able to do something like that.”
Sustainability and lifecycle management
Because of its alignment with clinicians, Kaiser Permanente can tackle big initiatives. For instance, the organization has lofty sustainability goals. “We have tremendous goals in reducing waste, eliminating the use of plastics, being stewards of our resources, etc.,” said Jarquin. “All of our category managers are driven by those metrics and have individual goals to go out and affect the environment positively.”
In 2020, Kaiser Permanente became the first U.S. health care organization certified as carbon neutral, and they have continued to maintain the certification annually. In 2022, they publicly stated their goal of reaching net-zero emissions by 2050. Sustainability is a key part of Kaiser Permanente’s procurement collaboration, and new suppliers are selected based in part on their environmental commitments. Kaiser Permanente also works with existing suppliers on their greenhouse gas reduction goals, innovation, and process improvement to drive action and accountability.
According to its 2022 “Sustainability & Responsibility” report, just over half – 51% – of Kaiser Permanente’s nonhazardous waste was collected for recycling, reuse, and composting in 2022, including:
- More than 39,000 tons of waste collected for recycling.
- More than 2,700 tons of organic waste collected for composting, a 55% increase over 2021.
- More than 3,200 tons of cardboard waste collected for recycling.
- More than 1,375 tons of electronic waste collected for reuse or recycling.
In addition, over 1,290 tons of plastic waste was avoided by the use of reusable sharps containers. Over the years, through programs to recycle single-use devices, Kaiser Permanente has diverted 1.2 million devices to be re-manufactured instead of thrown away, Jarquin said.
Kaiser Permanente’s clinical groups are also heavily involved in sustainability efforts. “As we go through our reviews and discussions with clinicians, they’re saying, ‘Hey, that’s made out of plastic. Can we do something with it? That’s a single-use device scope with precious metals in it. Do we have to throw it away?’ Sustainability is a part of our requirements, even with the clinical groups,” Jarquin said.
Eyes wide open
For almost two years following COVID, Jarquin gave up his day job to work on sourcing material
and supplies in the market at large, both domestic and international. “We had to prepare ourselves for the unknown.”
Jarquin and his team learned how the international supply chain market operated, how products came across the water, and how they were validated. He was surprised by the delicate nature of the international raw material market and how one disruption could lead to issues throughout the supply chain. For example, during this time, Jarquin observed one overseas manufacturing plant that started hoarding a particular commodity. This resulted in a domino effect throughout multiple product categories. Jarquin’s team discovered that there weren’t enough protections in that international market, both from a supply chain resiliency side and a qualitative side.
“We didn’t know that until we dove into the international market,” he said. “It was a realization that you have to go into this with your eyes wide open and work with the diligence that any other Fortune 500 company would when looking at its supply chain. Get into those details. Bring people onto your team who know what questions to ask. That’s what we’ve built over the years.”
As a result, Kaiser Permanente is now staffed and equipped to take a deeper look at manufacturers’ supply chains, especially with certain product lines like PPE and surgical instruments. Not only are they asking suppliers if they can ship the product, but they want to know things like where the product is manufactured, what the raw material source is and where the supplier gets it, and how the supplier is making its own supply chain resilient so that when (not if) the next pandemic hits, they be will able to continue to produce.
“Now we’re including language in our contracts that sort of changes the definition of force majeure,” said Jarquin. “What we’re saying is that a pandemic is not a force majeure event. It’s an event that you need to plan for. So, what are you doing to plan for that event?”
Kaiser Permanente has also developed its own product quality department within its sourcing structure that includes a director of medical device quality who gets into the details of quality processes in design and manufacturing. “Not clinical quality, but medical device quality,” said Jarquin. “How do you validate? How do you test? This person is well versed in ISO certifications and testing. They have developed a policy that tells the manufacturers their obligations around quality specific to Kaiser Permanente in addition to the FDA.”
The pandemic opened everybody’s eyes to the need to do things differently in supply chain. There’s now more of an appetite for increased transparency across the board. On the hospital or healthcare side, transparency has meant being clear about what their needs and requirements are for a category beyond just an RFP. It can no longer be “three bids and a whirl of dust” to determine which supplier to go with, Jarquin said. “It’s more, ‘This is my situation, these are my requirements, and here are my asks. Can you provide those?’”
In turn, suppliers are being asked about their inventory levels, manufacturing locations, product testing, and certifications. “In the past, health systems just sort of accepted those things without really asking,” Jarquin said. “Now we’re validating some of the requirements that we always assumed were there.”
“It’s not just about bids,” Jarquin continued. “What are we trying to do? What are we trying to achieve? If we can make that shift on both sides, providers and suppliers, I think we can meet in the middle. Just remember why we’re in this. We’re here to provide care.”
Driving value
Jarquin believes the U.S. healthcare system would benefit from moving away from episodic care to more holistic principles around the value of care. “It’s more about managing the lives of the patient from both sides of the equation, clinical and business.” Instead of focusing on volume, value-based care would free up clinicians to focus more on improved outcomes. Instead of revenue, manufacturers could focus on evidence that their product line is going to provide a different state, whether it’s a better outcome, shortened length of stay, or even a better cost.
Why should supply chain care about that? “Because of the fact that the products, equipment, and services we source and distribute are all part of the patient journey in some form or fashion. So, if you’re more about episodic versus the holistic view of managing the overall care of the patient, you’re not seeing the forest for the trees,” Jarquin said. “You’re not seeing that end state for the patient.”
In the last several years, many companies that supply products to Kaiser Permanente have had to adjust their supply chains, which has resulted in disruptions. Kaiser Permanente’s supply chain team and clinicians have come together as a group to determine whether certain alternate products meet clinical practices while the supply chain recovers for its regular product orders. Some disruptions continue even through today. “The challenging part is, some of these supply chain constraints were sole-source devices in the sense that they’re the only thing in the market out there for particular procedures. So, this forces us to look at options and workflow differences, collaborating with our clinicians.”
Kaiser Permanente has three-year contract cycles. So, in essence, 18 months after signing a contract, Jarquin and his team have to revisit it. They’re already thinking about and preparing for 2026. “I have to study,” he said. “I have to become an expert in new technology every year and be able to understand our requirements and project those requirements to the supplier base.”
Fortunately, Jarquin doesn’t have far to look when seeing the impact he and his team have on the health of patients. It’s one of the most rewarding parts of his job, and something that keeps him going two decades plus into his career.
“The fact that I’m so closely aligned with clinicians means I can see the impact,” he said. “Every year, it’s a new challenge, and I can say there’s never a dull moment in this particular category.”
Kaiser Permanente’s Footprint
Kaiser Permanente is one of the nation’s leading not-for-profit health plans, serving nearly 12.5 million members. Kaiser Permanente has 40 hospitals, 614 medical offices, 24,605 physicians, 73,618 nurses, and 223,883 employees, according to the latest figures.