By JULIE MINDA
About 20% of small businesses have closed either temporarily or permanently during the COVID-19 pandemic. And small businesses that were owned by immigrants, women, and Black, Latino and Asian people experienced sharper cash balance declines and higher closure rates during the pandemic than those owned by white nonimmigrants.
That is according to the Healthcare Anchor Network organization, which in June announced that a dozen of its member health systems have committed to increase their spending with minority- and women-owned businesses, to the tune of at least $1 billion collectively through 2026. Bon Secours Mercy Health, CommonSpirit Health and Providence St. Joseph Health are among the systems that have signed the "Impact Purchasing Commitment."
Signatories also will increase their spending with small businesses that are locally based, employee-owned, cooperatively owned or that are nonprofit. The signatories commit to working with their vendors to create hiring pipelines in low-income communities. And participating health systems will increase environmentally sustainable purchasing.
The extent of the changes the systems will be making as part of this commitment "is a big lift, but the work is grounded in our mission, vision and values," says Ali Santore, senior vice president of government affairs and social responsibility for Providence St. Joseph Health.
Noah Dunlap is Bon Secours Mercy system director of insight, innovation and the project management office. He says, "We believe this economic infusion could lead to health improvements" in poor communities, as dollars paid to local vendors go into the paychecks of community members with a potential downstream impact on the social determinants of health.
Kathryn Carpenter, CommonSpirit vice president of sourcing and contracting, says diversifying the vendor roster is "not just moral and good, it is necessary for us" as a smart business practice.
Pre-pandemic, staff of Los Angeles-based Homeboy Industries disassembles a printer, preparing the metals and plastics for remanufacturing. CommonSpirit Health's California Hospital Medical Center in Los Angeles contracted with Homeboy in February for electronics recycling as part of its impact investing strategy.
Upping the ante
Several dozen health systems —including three Catholic providers — founded the Healthcare Anchor Network about five years ago. This organization guides its 60 members in better positioning themselves as anchors in their communities. The health systems share information with one another on how to use leadership initiatives, innovation, local hiring, local purchasing, community investing and other activity to ground themselves in their service areas and build up struggling communities, explains Pablo Bravo Vial, CommonSpirit system vice president of community health.
Those that have signed on to the Impact Purchasing Commitment have agreed to specific purchasing strategies and to dollar figures for their increased spending with minority-owned, women-owned and local businesses, and particularly those in economically struggling communities. Dunlap says the 50-hospital Bon Secours Mercy will be increasing its spending with these vendors and contractors "by tens of millions" over the next five years. Santore of Providence says the figures each member has agreed to amount to a "big, audacious goal" that will require each to make significant changes.
Telling the story
The Bon Secours Mercy, CommonSpirit and Providence representatives say their systems are assessing how they're already doing when it comes to this impact investing, developing and implementing standardized policies and protocols to be used throughout their systems for improving practices, creating or improving systems for collecting and analyzing relevant data, categorizing all current vendors through an impact investing lens and developing strategies for making enhancements.
Sr. Mary Ellen Leciejewski, OP, CommonSpirit vice president of environmental sustainability, notes that creating the systemwide data collection and analysis systems is essential to establish a baseline against goals and identify where improvement is needed. She says, "Data really does help you tell your story better, that is one of the reasons that we went into some of the platforms we have. We had great anecdotal information and stories, but once we got some platforms in there with the data — that just showed us where we're at and are we getting better or not?"
Analytics, artificial intelligence
About two years ago, Bon Secours Mercy contracted with Cincinnati-based Versatex, a minority-owned company that manages vendor relations for large organizations. Gerald Sparkman, chief executive of Versatex, says his company is working with Bon Secours Mercy in all its markets across seven states to manage relationships with most of its small vendors, including those that are minority-owned, women-owned and locally owned. Sparkman says most of these vendors provide contracted services, such as cleaning, electrical work, plumbing and landscaping at Bon Secours Mercy facilities.
Bon Secours Mercy has worked with Versatex to establish a database of most of its existing small vendors — there currently are about 400 in the database. The database includes information related to the health system's impact investing goals, such as whether the vendors are minority-owned, women-owned, locally based and environmentally responsible. Versatex also is standardizing contracts with all these vendors and establishing methods for Bon Secours Mercy to provide feedback on the vendors' performance.
Versatex will determine how well Bon Secours Mercy's purchasing activities are lining up with its impact investment goals and commitments, and aid the health system in making needed adjustments. This may include switching out vendors, increasing or decreasing spending with existing vendors and seeking contract alterations with some vendors.
Versatex is advising Bon Secours Mercy's vendors on how to improve the products or services they deliver and advising the health system on investments it can make to promote the growth of select vendors, says Sparkman. For instance, if analytics reveal that a janitorial company would pair well with a carpet cleaning company, under a merger, Sparkman might advise that and might recommend Bon Secours Mercy provide capital to help the merged company complete the deal and build out its services.
The ministry representatives whose systems are doubling down on impact investing concede there are challenges. Dunlap of Bon Secours Mercy says there will be disruption of some preexisting vendor relationships. Santore of Providence says people in the purchasing departments of Providence facilities will need to adjust to new practices and protocols.
CommonSpirit's Carpenter adds it is difficult for large systems to strike a balance between the highly efficient, money-saving centralized purchasing formats that focus on massive contracts with large multinational companies and the localized, small-scale contracts that are the focus of this impact investing strategy. Sometimes it costs more to go with the small vendor that is minority-owned and based in a struggling community. But, Carpenter says, it is healthy from a business standpoint to have a mix of large and small vendors, and to diversify how products and services are purchased.
Sparkman, the Bon Secours Mercy business partner, says in the end the efforts are about "helping the people who work and live in our zip codes."
Survey: Pandemic hit small businesses hard — especially those owned by minorities
The vast majority of small businesses saw sharp declines in their financial health during the worst of the pandemic, with minority-owned businesses faring worse than their white counterparts. That is according to a survey of businesses with fewer than 500 employees, fielded about a year ago by the Small Business Credit Survey.
Among the nearly 9,700 firms nationwide responding to the survey, 78% reported declines in revenues in the 12 months prior to the survey period. That survey was administered in September and October of 2020. Nearly half of the survey respondents said they reduced their workforces between the fall of 2019 and the fall of 2020. Some businesses were hampered because employees fearing infection left their jobs.
A higher percentage of Asian-owned and Black-owned small businesses said their financial condition was "fair" or "poor" in the fall of 2020 as compared to non-minority respondents. Generally, 57% of respondents characterized their financial condition this way, while 79% of Asian-owned firms and 77% of Black-owned firms did.
The pandemic impacted the operations of 95% of survey respondents. About one in four respondents said they closed their businesses temporarily; 56% said they reduced their operations; and 48% said they modified their operations. (Respondents could choose more than one response option to this question.)
More than 90% of respondents said they sought emergency funding to weather the pandemic. The federal Paycheck Protection Program was the most commonly used aid source — 82% of respondents applied for that funding. According to the executive summary of the survey, 77% of applicants received all of the funding they sought.
Noah Dunlap, Bon Secours Mercy Health system director of insight, innovation and the project management office, says while many small businesses accessed government aid to stem losses, many, including minority-owned service businesses, have been flailing because they do not have financial reserves to fall back on once the aid is spent. Demand for certain services has not rebounded to pre-pandemic levels. For example, corporate cleaning companies lost much business when offices sent workers home to telecommute and no longer required daily cleaning services. Because of the rise of the Delta variant of COVID, many businesses have yet to reopen their offices.
— JULIE MINDA