How the Arizona IDN grows its local spend, onboards three hospitals and focuses on utilization.
By Daniel Beaird
The Phoenix area is one of the fastest growing metro areas in the country, adding over 600,000 people from 2010 to 2020 for a total of almost 5 million residents. And in the winter, snowbirds from the U.S. and Canada travel to Arizona and effectively double the population of cities like Scottsdale, where HonorHealth is headquartered.
Many of those Canadians like to get their medical procedures done in Arizona too, making HonorHealth, one of Arizona’s largest nonprofit health systems, very busy. The Arizona IDN fluctuates between $120 million and $160 million a year in capital projects.
Its vision is simple – to be the partner of choice in transforming healthcare for its communities, driven by its values and a commitment to delivering the best experiences and services to its patients and communities.
Supplier diversity program takes off
Mark Dozier and his strategic sourcing and engagement team at HonorHealth handle about $1.6 billion in spend annually. They launched their own supplier diversity program in 2022 with a clear objective to increase partnerships with Minority Business Enterprises (MBEs) and keep some of its spend in state.
“We wanted to help local businesses, strengthen them and help the communities of Phoenix,” said Dozier. “So many diverse minority business enterprises are local. They’re in your state.”
Two years later, HonorHealth was named Large Corporation of the Year by the Healthcare Supplier Diversity Alliance and Owens & Minor for its efforts in advancing supplier diversity. It’s a crucial initiative toward inclusivity and community engagement in healthcare.
“I love our culture at Honor,” Dozier said. “Our slogan is honor above all, and integrity is so important in what we do. It’s a together mindset.”
HonorHealth has boosted its supplier diversity program and has grown its MBE contracting spend from $37 million to $70 million in just three years.
“We set up an easy way for diversifiers to interact with us on our website, to share their story and their catalog,” he said. “We didn’t hire additional staff for it. We’ve been chipping away at it organically and it’s been going well. We’re pleased with the progress we’ve made.”
HonorHealth benchmarks best practices for supplier diversity from other IDNs, increases its diverse spending each year and provides information to suppliers on supplier diversity when requested. A baseline was set in 2022 and a policy procedure rolled out in 2023.
“We didn’t want it to be a flash in the pan,” Dozier explained. “We want it to be significant 10 years from now and that’s ingrained in the processes.”
Dozier rolled out a similar program at a clinic in Minnesota for his previous employer, so he understood it needed to be methodical to make sure it’s sustainable. He attended a conference and workshop on supplier diversity held by Detroit-based Henry Ford Health, and also drew inspiration from Pittsburgh-based UPMC’s program.
“You have to really understand it and believe in it,” he said. “Why is it important? Why should we do it? How does it impact local vendors?”
He says for every $100 spent locally, $45 is recirculated locally. If that same $100 is spent with a national company, only $13 remains in state. “That statistic is a game changer,” he said. “Of course, with stents, hips and knees, you have to have all that to run the hospital and that’s from Fortune 500 companies. But there are a lot of products and services you can buy local and recirculate spend in your communities.”
It takes patience. Local vendors aren’t a machine like their larger counterparts. They don’t have the resources or legal processes to help them with the RFP journey. But that’s part of not rushing the process, Dozier says.
“Don’t try to do too much too soon but just keep chipping away,” he advised. “We’re adding diverse suppliers every year and growing the number of vendors. It just requires patience.”
Onboarding three Steward hospitals
HonorHealth recently purchased three hospitals and a free-standing ED in the Phoenix Valley from Steward, stemming from its bankruptcy. The hospitals come from a for-profit culture and HonorHealth is transitioning them to its contracts and systems.
“It will take months to get them acclimated to our clinical value analysis processes and how we make decisions on technology,” Dozier said. “We have different technology councils and capital process. They had to move to Epic, our electronic medical record, and that’s a massive change for these hospitals.”
There are over 100 HonorHealth employees bringing these hospitals up to speed and Dozier says it’s been both stressful and exciting.
“Their old culture didn’t offer a lot of choice or input on product decisions,” he said. “So, on exam gloves, they got one option. On surgery gloves, one option. Drug balloons, one option. One hip and knee option.”
HonorHealth has more cardiology manufacturers, orthopedic vendors and usually more of everything. That makes physicians and clinicians excited.
“At Honor, we’re more open to providing additional products of choice for our surgeons. That’s one way we get them to come work for us,” Dozier said. “We’re bringing the nurses and staff from Steward into our process. Our value analysis team meets monthly, and these three hospitals are excited to have a voice now, to be a part of the decision-making process.”
Utilization is the future
Part of that process is utilization. Dozier says it’s the future at HonorHealth and the key to change with so much focus on price.
“There’s a bigger opportunity with utilization but it takes more partnership,” he said. “You can have a double-digit impact, 10-12%, on your expenses.”
For price, supply chain just works with the vendor. But for utilization, it works with frontline users in the OR, ED, Cardiology and Nursing. This relies on good data and HonorHealth internally benchmarks its 10 hospitals on product usage or service.
“We have three to five utilization projects this year,” Dozier explained. “We really think it’s a bigger bang for the buck than just price at the pump. If your preference cards are correct and up to date in surgery, the impact on reducing waste is big.”
But like most others in healthcare, staff turnover affects HonorHealth and that can hurt implementation time. Having an adequately trained staff in clinical and the capacity to work on utilization is a challenge.
“It’s extra time to think, look at the data, have meetings, come back with fresh data and show that we really want to partner with service lines on utilization,” Dozier said.
That’s where HonorHealth’s value analysis teams help. The peri-op value analysis team has 25 OR nurses on it, for example, and is a great resource. And HonorHealth asks major suppliers to help with utilization too.
“We talk to our top suppliers and ask how we can utilize their product per OR procedure, per OR room, and per patient bed. There are many denominators you can use to slice and dice,” he said. “How do we compare to other IDNs?”
Dozier says they ask that in quarterly business reviews, but manufacturers rarely have that information. And that’s information that HonorHealth would like to have. It would help to utilize products and have the right mix.
“We’re pushing for that information. They can blind it. They can say, here are three IDNs and here is their utilization usage of drug- eluting stents or whatever it is,” he said. “We’re going to keep knocking on that door until we get some manufacturers to work with us on that.”
Measuring the team’s success and appreciation
Each value analysis team at HonorHealth has a financial target for the year and presents it to senior leadership. They present two times a year and Dozier thinks it’s important.
“They get to show their work, why it’s important, and they feel valued by our senior executives,” Dozier said.
HonorHealth’s total value scorecard tracks the department’s value to the organization, measuring savings from conversions, savings from new contracts and additional rebates. Last year, it marked $34 million on the total value scorecard.
Beyond the financials, HonorHealth’s Strategic Sourcing & Engagement team builds what Dozier calls stickiness through its fun squad and team-building events like socials, potluck lunches, pie contests, celebrating birthdays, and other competitions.
“When you have a great team, you want to keep them,” he said. “You want to make it more fun working together. Our Fun Squad’s activities keep our team looser, connected, and happier. The impact has been significant.”