New Orleans area hospitals should think local to boost small businesses, report finds

Katherine Sayre
unversity medical center University Medical Center, New Orleans
University Medical Center, New Orleans' much-anticipated new public hospital, has postponed its expected opening from May to Aug. 1, photographed April 7, 2015. Leaders of LCMC Health, the private company that will manage the new $1.1 billion hospital, were already in discussion about the possible delay before Gov. Bobby Jindal's budget proposal last month to keep financing flat for LSU's privatized hospitals, said state Rep. Walt Leger III, D-New Orleans. (Photo by David Grunfeld, | The Times-Picayune) (Photo by David Grunfeld, |The Times-Picayune))

Mitch Walker started Diamond Medical Group distributors in New Orleans three years ago after nearly two decades selling pharmaceuticals and medical equipment.

The company's big break came with the newly built New Orleans East Hospital. The medical distribution and manufacturing company won a competitive bid to supply equipment, beds, stretchers, scrub sinks, surgery tables and more to the medical center that opened last year. 

Despite making a name for the company, securing new business has required a lot of knocking on doors, seeking out decision-makers and advocating for Diamond Medical's ability to get the work done, in an attempt to compete with hospitals' long-standing, national suppliers, he said.

"We're still the new kid on the block," Walker said. "I'm from New Orleans. Our company is located here in New Orleans, and at the end of the day we want to be able to do business with New Orleans hospitals."

According to a new study, New Orleans area hospitals spend $1.5 billion every year on goods and services as some of the largest institutions in the city with the deepest roots. New Orleans' own small and minority-owned businesses are frequently left out of the high-dollar game. 

It will take changing the culture and practices of an entire local industry to change that fact, the study found. 

The New Orleans Business Alliance, the city's economic development arm, called for a three-month study by Washington-based The Democracy Collaborative and DMM & Associates in New Orleans examining linking small business with big medical.

The results released this week were based on interviews with 170 people in the local medical industry. 

Ted Howard, The Democracy Collaborative executive director, said there's a willingness to shift focus to local businesses from hospitals' top brass -- especially if they can be shown it won't increase their costs.

The idea is for hospitals to become "anchor institutions," an urban development strategy that aims to build local wealth using the economic power of a city's universities and medical institutions. 

The Democracy Collaborative has worked in development of anchor institutions in Cleveland in an area where the Cleveland Clinic, Case Western Reserve University and other hospitals and cultural centers are located.

The New Orleans-focused study suggests hospitals start with tracking local spending, creating a supply chain inclusion program and setting goals for local contracting. Hospitals can more broadly get the word out by distributing contract opportunities through the city's Office of Supplier Diversity website and organizations that assist small businesses or holding information sessions.

"This is the beginning of a true culture shift in how we do business in New Orleans," said Margaret Montgomery-Richard with DMM & Associates.

The study recommends bringing together all of the stakeholders to make those changes, including the Business Alliance, city leaders and small business support groups.

"After careful analysis, we have concluded that New Orleans has all of the ingredients necessary for a successful anchor development initiative and that the opportunity for greater small business-healthcare partnerships is compelling," the study says.

Walker said he found an advocate in Good Work Network, a nonprofit business development group for minority- and women-owned businesses. The key, he said, is finding out about potential contracts that match what his company offers.

Diamond Medical, a certified minority-owned company, doesn't want any special advantages, Walker said. He wants the chance to tell hospitals when his company can beat the prices of hospitals' current suppliers. Diamond Medical, which recently expanded to manufacturing supplies in addition to wholesale distribution, includes his wife, a business partner and two sales reps.  

"Give us the opporutnity to present what we can do," he said. "We sell what they use every day."

In the study, New Orleans East Hospital stood out as an institution with a supply chain inclusion program focused on local businesses. Tulane Medical Center and the VA Hospital also have inclusions programs.

Meanwhile, other major institutions in New Orleans -- Interim LSU, Children's Medical Center, Touro, Ochsner Medical Center and Ochsner Baptist -- don't have formal inclusion programs, according to the report. 

"A hospital's appetite for local procurement is often influenced by its geographic footprint," the study notes. "Hospitals with a multi-state footprint may prefer to work with large-scale regional or national vendors. Similarly, hospitals receiving government funding may be legally required to meet certain diverse vendor targets and prevented from considering others."

Veteran Affairs, for example, is required to meet goals for minority-owned, veterans-owned and women-owned businesses, but are legally prevented from making a preference based on geography. 

Hospital spending is poised to grow with the $2 billion medical complex in Mid-City under construction that includes University Medical Center and a VA hospital. 

Melissa Ehlinger, NOLA Business Alliance interim president and CEO, said her group will continue the conversation with stakeholders as they develop an anchor institution strategy. 

"This is a huge opportunity that we can't let pass," Ehlinger said. "We really want to take the lead on facilitating those connections."

The $100,000 study in New Orleans was funded by a grant from JPMorgan Chase.

NOLA Anchor Institutions Study