In Year of 1972, in the United Nations World Conference About the Human Environment, In

Abstract Number: 003-0381

Title of the Paper: THE SUPPLY CHAIN MANAGEMENT AND THE

DEVELOPMENT OF SUSTAINABILITY IN THE HEALTH CARE INDUSTRY IN

BRAZIL

Sixteenth Annual Conference of POMS, Chicago, IL, April 29 - May 2, 2005.

For each author, please provide the following information:

Name: Vital de Oliveira Ribeiro Filho

Institution: Escola de Administração de Empresas de São Paulo - Fundação Getúlio

Vargas - EAESP FGV

Address: Avenida Nove de Julho, 2029, 10 andar

E-mail: [email protected]

Phone: 55 11 32817780

Cell: 55 11 99750497

Fax: 55 11 30313686 THE SUPPLY CHAIN MANAGEMENT AND THE DEVELOPMENT OF

SUSTAINABILITY IN THE HEALTH CARE INDUSTRY IN BRAZIL

Vital of Oliveira Ribeiro Filho

1. Summary

The health assistance sector has been under pressure for improvements in the waste management and in other environmental aspects. In Brazil, the actions in this area have been limited by a lack of resources and knowledge, however, the search for treatment systems for health care services dangerous residues increases progressively, while less onerous and more rational measures, involving reduction or residue recycling, are less widespread. In this work, we analyze the health industry value chain, highlighting health care services and their relations with levels above and below, with the aim of identifying aspects that make improvements, in the environmental performance of the sector, easier or more difficult. This analysis was compared with some of the most used managerial environmental administration models and with two successful international projects. We conclude with the suggestion that, these models as much as the successful experiences, require cooperation and integration along the productive chain and that other studies are necessary to subsidize the optimization of these findings and to establish models for the integrated development of environmental sustainability in health care sector in

Brazil. 2. Introduction

In 1972, in the United Nations Conference on the Human Environment, in Stockholm, the

Brazilian government defended the view that the pollution control was a hindrance to progress, and articulated the coming of polluting industries for the city of Cubatão, in São Paulo. In 1992

Brazil hosted the United Nations Conference on Environment and Development, the biggest already accomplished until then. During this interval of twenty years, and mostly in the 13 years that followed, the Brazilian Government and industries have developed an increasing perception that the damages of pollution can be greater than the costs of avoiding it and that natural resources shortage can jeopardize the survival of certain industries. More than the direct effects of environmental implications of its activities, industries have faced pressures from consumers, government and public in general, for a more responsible environmental position. This group of factors has led to the gradual recognition that the environmental management must become necessarily part of business and that nowadays, acquires strategic importance and value, directly related to intangibles assets, like image, reputation and brand value.

However, as suggested by Vinha (2003), internalization of the sustainable development concept hasn’t progressed in the same way in all industrial sectors, being more evident in the companies exposed to a biggest environmental pressure, either by the inherent environmental risks of the activity, or by its size, reaching mostly to the petroleum, chemical, paper and pulp, automotive and electronic industry sectors. These industries have become pioneers in Total

Quality Environmental Management (TQEM), echo-efficiency and environmental certification models adoption. A study developed by Hoffman (1997) sustains that companies of petroleum and chemical sectors that had developed merely “cosmetic” or symbolic actions, where the sustainable development concept was used in a way which the author classified it as heretical, just to soften the social pressures or to reply to the environmental regulation. This same study concluded that after some time these measures evolved through the incorporation of a new dogma in the cognitive level, expressed in the corporative mission and integrated to the strategic planning.

This determination of certain industrial sectors concerning the environmental matters evidences the existence of a larger vulnerability, what some authors have been calling as “high ecological sensibility”. This work doesn’t intend to achieve a deep analysis, neither of the degree of ecological sensibility nor the level of environmental pressures that affects the health care industry. Nonetheless, what we wish to emphasize is the increasing interest that environmental implications of health assistance activities have had all over the world in the last two decades. In

Brazil, this concern can be observed by the number of researches and technical publications, as well as the attention of the media as a whole, dissemination of specific courses, equipment and service supply increase and the number of health organizations that seek environmental quality certification. This phenomenon is also reflected in the environmental and sanitary legislation that in the last decade has added several specific regulations for the health sector, including aspects related to solid waste, effluents and gaseous emissions.

Hart (1995) used the resources based view to conclude that, in the long term, the perspective of obtaining competitive advantage will depend on the companies’ ability to operate in environments of high ecological sensibility. Nevertheless, even in industries where the environmental management is well developed, internalization of sustainable principles is rarely enough to induce the vendors or buyers to get involved, making feasible a better environmental performance of the value chain. The notion that the innovations, that leads to the environmental performance improvement, demand integrated actions to turn all the value chain more sustainable, and consequently more competitive, reducing costs and increasing the aggregate value, has just started being exploited in the environmental administration area. According to Vinha (2003), the analysis of the history of environmental accidents demonstrate that, in most cases, the responsibility assigned to hired professionals, evidencing that the company didn't generate internally specific capabilities to execute or to supervise these operations, making wrong choices, incompatible with their commitments.

Our interest in the health care value chain is justified by its complexity and by the diversity of the involved environmental aspects. These factors, associated to the lack of studies about the environmental management in this area, has motivated this work, which main concerns are: a) the need to develop low cost solutions, compatible with the Brazilian health system investment capacity; b) the seek for a systematic approach, based on incremental improvements of sustainability, reducing the need of “end of pipe” corrective measures, generally more uneconomical and less effective than alternatives like residues reduction or recycling, for example.

3. Objectives and methodology

The objective of this work is to map the health care value chain in Brazil in order to identify how the increase of environmental demands and pressures tends to affect relationships between the several levels and more specifically the relationships between hospitals, their suppliers, users and payers. Besides that, it aims to study how some of the most widespread environmental management models and instruments depend on the collaboration of value chain players so as to make its implementation feasible, according to sustainable development principles.

The methodology adopted in this work is based on a bibliographical and documental research, followed by analysis and comparison of this data. We initially analyze some theoretical aspects about the sustainable development principles followed by some considerations of strategic aspects of supply and value chain management and its relations with environmental administration models and techniques. In the following part of our work, we analyze the characteristics and the relations in the Brazilian health industry value chain through the bibliographical information and data obtained on the sites of the Public National Health System

(Sistema Único de Saúde – SUS) and of the Supplemental Health National Agency (Agência

Nacional de Saúde Suplementar – ANS). Finally, these results were confronted with an analysis of the characteristics from the projects “Health Care Without Harm” and “Hospitals for Health

Environment” obtained from their sites on the Internet.

4. Theoretical references

Sustainable development

The environmental challenges that humanity faces nowadays have been searched and largely documented. There is an increasing perception that the environmental problems are not restricted just to certain industries or defined regions, and its causes are not limited to the located accidents or inadequate practices, either. Barbieri (2002) analyzes the evolution of environmental conscience in three stages: 1) perception of environmental problems as located phenomena, due to ignorance, negligence or fraud, motivating actions of reactive, corrective and repressive nature like prohibitions and fines; 2) environmental degradation noticed as generalized, as a result of the problems already mentioned in the previous stage, added to the inadequate resources administration, motivating the development of government intervention instruments aiming pollution prevention and productive system improvements such as, emission standards and environmental impact studies for enterprises licensing; 3) conscience of environmental degradation diffusion as a planetary problem, that reaches everybody, it widens the understanding that the causes of environmental degradation, besides those aspects mentioned above, are also tied to production and consumption models, to the national state policy and development goals and to the relations between rich and poor countries.

This new environmental conscience moves away from exclusively ecological approaches, limited to the physical and biological environments preservation and advances in the sustainable development concept that incorporates the social, political and cultural dimensions. According to

United Nations Commission on Sustainable Development – CSD (1991) “Sustainable development is the one that meets the needs of the present without compromising the ability of future generations to meet their own needs”. This concept consolidated definitively in the United

Nations Conference on Environment and Development, held in Rio de Janeiro in 1992, in which the Agenda 21 was approved, emphasizing the idea that environment and development must be treated jointly.

The systematization presented above explains how the evolution, from reactive attitudes to preventive ones, wasn’t enough to avoid the progressive aggravation of environmental conditions in the entire planet. The idea about sustainability that emerges in this context presupposes more profound changes, involving production models, distribution and consumption in accordance with new requisites imposed by the society, translated in modifications in the existing public demands and in the new environmental and development policies.

The environment management in the value chain: pressures and opportunities

The productive chains have been receiving an increasing attention from authors in production and operation areas. According to Chopra and Meindl (2004), the supply chain includes all parts involved, direct or indirectly, in achieving the needs of the final client. The concept of achieving these needs, however embracing, has been extended to contemplate other interest groups. Schmidheiny, in his book Changing Course (1996), defends the idea that stockholders try to obtain future return of their investments in the same proportion as they crave for revenues at present. In fact, these short term and punctual strategies, aiming exclusively for the maximization of the return to the investors have been questioned for not incorporating stakeholders vision, turning business more vulnerable to crises such as environmental disasters and NGO’s accusations among others. Stakeholders incorporation in the business strategy can vary from the information divulgement to interest groups till the involvement of these groups in new products development or the company commitment with external audit and certification processes.

Changes in the business environment always imply in threats and opportunities. For many industries, sticking to the environmental legislation or to the consumers’ expectations represents an opportunity to increase the company’s competitiveness, either by the exploitation of a better image, or by the economic results of a better environmental performance. We must consider, however, that the production processes involve, in larger or smaller degree, transactions between several vendors and consumers that are part of the value chain. Alterations in production demand the adaptation and, frequently, the collaboration of other involved parts. Therefore, the initiatives looking for a better environmental performance of a specific chain element keeps close relations with the environmental performance of all other elements. In fact, we can say that, in the modern conception of “extended enterprise”, the companies with larger visibility, valuable brands, or that exercise a leading position in the chain, tend to be more demanded and, therefore have bigger interest in the environmental performance of all the chain.

The products environmental performance, although dependent on several criteria for its measure, has proved influence on the consumer’s behavior. This influence has been evaluated in researches performed in several countries. In the USA, 75% of consumers state that their purchase decisions are affected by the company environmental reputation and 80% would accept pay more for environmentally less aggressive goods (Drumwright, 1994). According to research of the Environment Department of United Kingdom, environmental degradation is the third largest population’s concern, overcome just by the unemployment and health problems. In the same research, 62% of the interviewees indicated that they would agree to pay more for products environmentally more efficient and 87% would like having more information about environmental impacts caused by products and services (Lamming 1996).

Other pressure source is based on rules and legislation, which have become progressively more rigorous and restrictive all over the world. In Brazil, following the world tendency, the

National Counsel of Environment (Conselho Nacional do Meio Ambiente – CONAMA) has been regulating practically all the activities that pollute as well as the use of natural resources and the main environmental risks. The “polluter pays principle” and the post-consumption responsibility or responsibility extended of the producer have been increasingly applied in the regulation of specific sectors, like the battery residues containing heavy metals, lamps containing mercury and tires in general. Also, the penalties imposed by the environmental regulation became more rigorous, especially after the approval of the Federal Law number 9.605/1998 (Law of Crimes

Against the Environment) and by the intensification of Public Ministry’s actions through the

Environmental Courts.

We must recognize, however, that some important areas are still not properly regulated in

Brazilian Law, such as the solid waste matters, that has been regarded in a dispersed way in a vast variety of federal, state and municipal regulations (Benjamin, 1999).

According to Porter (1995), the companies must be seeking continually innovative solutions for the pressures imposed by the competitors, by the clients and by the regulators. In this sense, he argues that adequate elaborated environmental rules are able to stimulate innovations that reduce the total costs of a product or increase its value.

Several authors argue about the need to manage the environmental policy of a company to connect it to their suppliers (Rosen, Beckman and Bercovitz 2003, Faruk , Lamming, Cousins and Bowen 2002, Kumar and Dissel 1996, Lloyd 1994). Lamming and Hampson (1996) highlight the environmental administration techniques diffusion above and below in the supply chain as the most effective form of developing the environmental performance in an industry.

In general, the environmental improvements in the productive processes are divided in two groups: reduction in the resources consumption or reduction in pollution generation.

Frequently, actions that aim at one of these goals also reflect positively on the other. This relation is more evident when the residues and effluents reduction happens simultaneously with the natural resource economy, or when the residue’s recycling replaces the need of raw materials or energy consumption. On the other hand, it is important to consider that reduction of residues or resources implemented in a chain stage can eventually reflect, in a negative form, on other productive process stages, or even on the environmental implications involved in the product utilization or when it is discarded at the end of its lifetime. An effective answer to the doubts and divergences in the environmental impacts evaluation of productive chains, as well as of specific products, are Life Cycle Assessment (LCA) models.

The LCA system is a more and more standardized method, used to quantify the environmental performance of a product, from the raw materials extraction, the energy consumption and other materials, as well as the generation of residues, effluents and emissions, from the production until the end of its lifetime, including its utilization by the consumers during the whole life period and its residues or recycling. One of the first experiences in LCA arose in the USA in 1965 aiming to compare environmental impacts of disposable to returnable soft-drink bottles. During the 70’s, the studies on alternative energy sources became frequent due to petroleum crisis, but just in the middle 80’s, LCA studies became more systematic, mostly in some European countries motivated by the European Community directive that demanded larger control on victual packing. Since then, LCA has become an increasing concern in the public policies as in the companies’ strategies. At the beginning of 1990, the need to standardize the evaluation methods and mostly the databases and ways to present results, the International

Standard Organization (ISO) initiated the elaboration of the 14.000 standard series which include the standards ISO 14.040 to 14.043 that are all about life cycle assessment (general principles, inventories, impact and interpretation evaluation).

The LCA demonstrates that one company is, at the same time, consumer of products and services from third parties, and supplier of its own customers, which, frequently, are also suppliers of their respective customers. This fact leads us to a supply chain concept, which can be as comprising as the operations market itself, the total business environment where operation strategies are developed (Slack, 2002). This process demonstrate the strategic importance of the relations between the elements of this network and the firm capability development, what Slack called the fit between the company’s resources and processes and the requirements of its market positioning.

A similar approach, developed by Fine (1999), emphasizes the dynamics of value creation for the customer through the competence management inside the extended enterprises concept that includes, besides the company itself, its supply chain, its distribution chain and its alliances chain. According to Fine, who mentions in his book “Clockspeed” several environmental improvement experiences involving the supply chain, the company is like a capability chain, itself in constant evolution, including its capabilities, plus the capabilities of all those who negotiate with it. The health care value chain in Brazil

The organizations that provide health care, like hospitals, medical centers, emergency hospitals, etc., represent, for the big public, the minority with larger visibility of a complex and widespread value chain. This chain, in general, follows the common standards to all of the productive systems, but as we will see, it distinguishes considerably in several aspects. In the next part of this work, we will describe these differences and analyze how they could be considered in the formulation of integrated strategies that intends to improve the environmental performance in the health industry in Brazil.

Based on the product and service physical flows, the health care value chain starts with the processes of research, development, production and distribution of a vast range of materials, all of them need to be gathered, together with the several service suppliers, to enable the health service providers integrate these elements in the disease treatments, rehabilitation, prevention or diagnosis activities. Besides the upstream side, the value chain also includes the downstream composed by the patients, the system operators and the payers.

Whenever we analyze the health system, considering the different modalities adopted for each country, we observe a variable participation of the public and private sectors in its operation, as well as different degrees of government responsibilities in the financing of health system offered to the population. In Brazil, the main provider of health assistance is a public system named SUS (Sistema Único de Saúde), coordinated by the federal government and managed in a decentralized way by the states and municipal districts. The SUS provides medical assistance, in public establishments and hired services, the integral health coverage for more than 75% of

Brazilian population and is fully financed by the government. The remaining 25% of the demand corresponds to the private assistance known as supplemental health system. This system involves organizations that act as intermediary in the health system financing. They are health assistance organizations and financial institutions that sell health insurances. Besides these, other institutions, such as worker associations or private foundations also act in financial intermediating between consumers and health services, constituting a universe of about two thousand organizations acting in Brazil.

Consequently, just a very small part of the population, a high-income portion of it, chooses freely and makes the direct payment for private services.

We present a version of the diagram of the health care value chain below, proposed by

Burns, in which we have made some adjustments in order to represent the Brazilian situation.

Illustration 1: Simplified representation of health care value chain in Brazil

Payers Intermediaries Providers Distributors Producers

Government; SUS – public Hospitals; Distributors; Drug; Device; Employers; system managers Doctors; Wholesalers Medical-Surgical Individuals Benefit Clinics; manufacturers managers; Diagnosis Health services; insurance; Pharmacies Health operators

Adapted from “The Wharton Study of Health Care Value Chain”, Burns (2002) Relations between Providers, Intermediaries and Payers

In the last decades, the health care costs have been progressively increasing. This phenomenon is mostly attributed to the increasing complexity and technological sophistication of the means employed, but also considerably motivated by the coverage expansion reaching a bigger number of social groups of the population and by social and demographic factors, including the alteration of the epidemiological profile as a result of the aging process of Brazilian population. As a consequence of this, the health system started coexisting with increasing pressures for cost reductions and for efficiency and quality increase.

It is a fact that the health care value chain behavior is directly influenced by public policy.

It is a strongly regulated sector in practically all countries, and the adopted models assume varied configurations, mostly regarding the government participation level in the market financing and regulation, and regarding the public or private organizations proportion in the several segments that constitute the system such as: basic assistance, emergency assistance, hospital assistance, public health programs, high cost or high complexity procedures and medication policies, among others.

In Brazil, the health policy manager and, therefore, the responsible for the resource distribution is the Health Public System (SUS). SUS started being configured with the sanitary movement, at the end of the 80’s, working on premises as the constitutional principle that health provision is everyone’s right and the State’s duty (Brazil 1988). Other basis established in the system regulation (Brazil 1990) impose the principles of equity, wholeness and equality to the assistance access, and establish the sole and decentralized management model in state and municipal levels, as well as financing and social control mechanisms. SUS has been seeking, through the improvement of its operational rules, to establish itself as a modern administration model, that contains several mechanisms destinated to stimulate the productivity and effectiveness among providers, even through evaluation and remuneration methods to services provided by private or public entities. The resources for SUS financing, in its larger part, come from the union budget. On the other hand, the system operation is regional or local (Elias, Marques and Mendes, 2001).

In Brazil, the public expenses with health have been constant, a little above 3% of the

GDP. Because of the resource restrictions, the universal access principle must be submitted to the prioritization and rationalization process, which far from being just a technical process has strong political components (Akerman, 1995). In spite of these boundaries, SUS achieves an extensive coverage, and is the biggest high technology assistance backer in the country, reaching the coverage of 90% of the population in high complexity attention (Ministério da Saúde, 2000).

In the supplemental health system, the private health operators tend to seek demand control mechanisms aiming to preserve profitability and business competitiveness. As a result of this, a challenge between operators and service providers comes up, motivated by market competition. This conflict tends to pressure the operators to reduce the service quality or quantity or to seek to select clients that demand fewer services. On the other hand, the providers, pressured by the costs, tend to “push” unnecessary or more lucrative services. This conflict is mediated by the rules determined by the Supplemental Health National Agency (Agência

Nacional de Saúde Suplementar – ANS) that establishes, according to the Law 9.656/98, a reference plan, defining minimum conditions for the coverage being offered, as well as price conditions and contract control (ANS 2004). In spite of the strong regulation, the system couldn’t avoid distortions in the health service consumption. According the Brazilian Institute of

Geographical Statistics - IBGE (1998), the consulting numbers a year between one group that uses the private health system and the other that uses only the public system is, on an average, more than twice, and its admission number is about 15% larger.

Summarizing, in a simplified form, we can say that the relations between payers, operators and providers in Brazilian health value chain are typical so that customers and suppliers dispute the best conditions in the transaction. However, the final user, the patient, takes part of the transaction just indirectly. So, it is an atypical market in the sense that, in SUS, or in the supplemental health system, the price , as a factor, doesn't influence directly the user's choice and it is not a demand-limiting factor, either. In the analysis of Malik (2001), it is clear that even the definition of “need in health” has been a challenge for the economists who study the sector. In the same way, the idea of demand has its sense of desire for consumption modified, as well as the circumstances where it arises. And the offer can't be faced in a conventional form, under the risk of transforming the health in a traditional market with a reliance breakage between doctor and patient, unnecessary consumption of medical services and the involved risks.

These characteristics of health market help us to understand why the middlemen, including the government, in the case of SUS, have a strong position in the chain. It may be explained due to its bigger control on the link with the user. We can say that, in the Brazilian health care value chain, the client develops a long-term relation with the middleman, which initiates before the need of assistance, and it will be continued after this. In the supplemental health system, all the negotiation happens with the intermediaries, not with the providers, and in the public system, SUS, there is no other alternative for the user. Considering the control on the financial resources, once again the operators hold some advantage regarding the providers, however the legislation minimizes this unbalance.

On the other hand, some providers can get stronger position in the chain for developing strategic capabilities that can be related to the public recognition of excellence in assistance. For example, the exclusiveness in supplying services for being the unique health service supplier available in certain region. These factors tend to increase their power in the negotiation, enabling these providers to become especially strong in their chain. Some examples are, in the system

SUS, the extra-big hospitals, because of their assistance capacity, the academic hospitals or the specialized institutes, because of their differentiated capabilities, or the small non profitable health organizations, as the small health care centers, because of their strategic location, and in cities where there isn’t any other available services. In the private system, the strategic advantages concentrate on health services that conquered public's recognition by their excellence and quality, and that consequently become attractive for the operators that offer these services in their packages, establishing a referential of quality to capture of customers' attention.

Relations among health service Providers, Distributors and Producers

Taking into account the health service providers’ point of view in the value chain, the section upstream is significantly more varied and widespread than downstream, which was analyzed in the previous item.

Even in a simplified way, it is important to consider the relations between both levels that characterize all value chain, first, where the value aggregation occurs by the transformation of inputs in outputs in the firm level and second, where the value creation occurs by the transfer of products and services between suppliers, distributors and consumers in the inter-firms level. This approach is especially useful to explain what carries a firm to accomplish, or not, economic transactions or strategic alliances with others firms, according to their abilities of aggregating value and the way these abilities are implemented and evaluated. We believe that, owing to the central position that health care providers, especially hospitals, occupy and to the chain configuration, providers depend on the competences domain in both levels. We can observe that, besides the clinical competence, that was traditionally the differential of best health institutions, the competence in the relation in a value chain administration becomes increasingly more critical for the survival of these organizations. This phenomenon can be largely attributed to the growing technological sophistication that characterizes the medicine evolution, broadening knowledge diversity, pressuring costs and increasing investment levels and business risks.

The necessary resources to the productive processes must be supplied in the necessary quantity and quality, at the right time and at the smallest cost. A characteristic that differentiates the service sector, of which the health care is part, is just that the final product is intangible and that we can’t stock it. For instance, it can't store surgeries to distribute them according to the demand. In the health area this characteristic becomes even more critical because it involves procedures in which postponement is not usually allowed and the variations in the demand can not always be properly foreseen or absorbed.

The resources used in the health assistance involve the physical facilities and the materials, divided into permanent and for consumption. We should consider also the consumption of water, electricity, fuel and gases, in significant quantities of big hospitals. According to Vecina

(1998), the expenses with material for consumption in hospitals represent an average of about

20% of the current expenses and they represent the amount of 3.000 to 6.000 items, acquired with more frequency.

The material resource management in hospitals acquires strategic importance because the lack or failure in a number of products can cause damage to health or even risk to patients’ lives.

In these cases, purchase policies that privilege the products availability are used, to the detriment of financial advantages that could be obtained with larger turn rates, smaller levels of stocks or better conditions in the negotiations with the suppliers. Another aspect of material management in hospitals results from what Burns (2002) defined as: “Purchasing is not an organizational competence of hospitals but rather a domain of non-business people… product demand is based heavily on the clinical preference of physicians rooted in their medical training, not on any formal cost-benefit analyses or budgetary constraint”. Even considering the differences between North American, portrayed by Burns, and

Brazilian realities, this characteristic prevails in hospital purchase systems in general, maybe due to health professionals’ high level of specialization and procedures’ diversity, which complicates the integration of the administrative function, especially the purchase area, to the production activities. Aiming to minimize this matter, Vecina (1998) suggests a model for material management divided into four subsystems: 1) Normalization; 2) Control; 3) Acquisition and 4)

Storage. In this model, the Normalization subsystem has the important function of interpreting the needs of hospital areas, classifying the material and establishing a standardization that, at the same time, determines the quality specifications and restricts the diversity to an acceptable level, compatible with the material policy established by the institution.

The environmental implications of material consumption are directly felt in the residues generation. The products and material consumption is a result of the way the production processes are planned and executed, consequently, any initiative directed to the reduction of the residues or others effluents and emissions, depends on the combination of efforts of material and process management. This approach cannot only increase the environmental performance far beyond the residue reduction in health services, but can also affect positively all supplier and manufacturer chains. The same principle can be applied in order to reduce other environmental impacts, as raw materials, water or energy consumption. This broad conception, which accompanies products and processes from “cradle to the grave” is the base of “Life Cycle

Assessment” systems and the “Green Purchasing” or “Environmentally Preferable Purchasing”. Besides material resources, health organizations, especially the largest and most complex ones as hospitals, keep several kinds of relationship, from long lasting to occasional, with service suppliers that execute support functions or render specialized services.

In the support areas, there are frequent outsourcings of hygiene services, safety, accounting, security control and maintenance. Currently, in the big cities companies specialized in laundry and hospital nutrition were also created. The outsourced laundry offer services that can include not just the washing, but the clothes supply itself, operate in its own facilities, with high efficiency equipments, investing in modernization and solving problems that originally would have to be managed by hospitals, as water high consumption, effluent liquids treatment and noise levels. Meal supply companies can also operate in their own facilities, opening spaces and releasing hospitals from administrative and legal responsibilities and still operate snack bar or refectory services.

Among the medical specialized services, partnerships with specialized companies in clinical analyses, pathological anatomy, blood bank, radiology and image diagnosis among others are very common. These companies operate generally inside the health care facilities and can have a variable degree of independence regarding the hospital. In this situation, the waste and the effluents generated by these services remain managed by the hospital, as well as water and energy supply.

4. Analysis of results: environment management and its application in the health care industry

During the last decades, the environmental matters were being incorporated by several sectors. Since the basic principles started to be developed and applied in the productive processes, they generated different tools and models for environmental analysis and administration. Barbieri and Dias (2001) highlight the following production and consumption models that seek sustainability: Cleaner Production, Total Quality Environmental Management

(TQEM), Echo-efficiency and Design for Environment. Lamming (1996) emphasizes the importance in using environmental criteria in the product and supplier evaluation through the group of procedures called Green Purchasing and the suppliers’ responsibility on the environmental impacts of their products along its lifetime, even in the moment they are discarded, what is called Product Stewardship. Another model that has been established as a referential in measuring products and services environmental performance, is the Life Cycle

Analysis – LCA, which implies an environmental evaluation of all impacts of a product, from the raw material extraction process and production, through distribution, utilization and final destination after its lifetime.

The models above can be employed exclusively or jointly. They can also be part of more comprehensive tools like environmental management systems or environmental certification systems.

We can observe that some of the models and tools created to manage the business environmental performance involve changes that can only be indeed implemented by means of implication and collaboration among value chain elements. As we have already mentioned in the first part of this work, health care assistance constitutes a set of extremely complex chains that converge to the health services providers. Among these, hospitals are characterized by their activities’ diversity and volume and for being big consumers of products and services. According to these facts, developing integrated environmental solutions among chain players, constitutes a huge challenge.

In Brazil, nowadays, there are already pioneer experiences in some hospitals with environmental management systems and environmental certification (ISO 14.000). Also remarkable are the initiatives in the quality area, as the accreditation system developed by ONA –

National Accreditation Organization (Organização Nacional de Acreditação) and the quality certification systems as ISO 9.000 and the labeling system of CQH – Hospital Quality Control

Program (Programa de Controle da Qualidade do Atendimento Médico-Hospitalar). This last program was created by São Paulo Medical Association and by the São Paulo Medical Regional

Council. CQH extended its quality management project creating, in 2003, a national award for quality management in health care, the PNGS – National Award in Health Care Quality

Management (Prêmio Nacional de Gestão da Qualidade em Saúde), which as the Brazilian

National Quality Management Award (PNQ) and other important quality awards includes environmental responsibility items. These initiatives have incorporated, even more values tied to ethics, social responsibility and environment protection in the Brazilian mentality.

In a study about the chemical waste situation in twenty hospitals in São Paulo city,

(Ribeiro, 2003), we observed that the few solutions implemented concentrate on the treatment and final destination subjects, exactly the ones of higher cost and in which results are limited, once they act minimizing the effects of dangerous wastes in the environment, but have no effect in the prevention, like reducing the residues generation. The same study identified several opportunities for processes or product change, involving residues return to the suppliers (reverse logistics), recycling, reduction or even elimination by the substitution for less dangerous products. These changes could bring benefits such as cost and risk reductions and more rationality in the use of resources, although, they would depend on the integrated participation of material, equipment and service dealers and the development of new technologies, products and processes. Apparently, neither the suppliers, nor health service providers or the system operators and backers still noticed the improvement possibilities for all the industry performance that could be obtained through integrated environmental projects. The lack of an integrated approach is also associated to the lack of information flow. According to the same research, just a quarter of the twenty hospitals demonstrated that were able to identify the generated chemical residues, and just two adopted specific methods, as inventories or monitoring systems for residues and rules for notification of hazardous waste.

The information flow is a fundamental aspect for environmental improvement in the value chain. The information flow is a factor of integration, confidence and transparency, and it is as important as the product flow and the capital flow. Senge (2001) points the increase pressures for accountability of the natural, social and financial capitals like a motivator of the social innovation that carries to commitment and collaboration.

In many parts of the world, public and private initiatives that aim environmental impacts reductions in health industry, have been seeking overcome the restricted conception of the pollution control, limited to the wastes and effluents treatment. Facing higher costs and the increasing complexity of the environmental implications, health organizations have become more responsive to sustainability principles. This new way of dealing with the environmental problems improves the performance possibilities, without endangering the investment capacity and the productivity of organizations. As examples of this tendency we can mention the Hospitals for a

Healthy Environment program, known as “H2E” and the Health Care Without Harm - HCWH project. These two examples include a considerable number of members in many countries.

The Health Care Without Harm – HCWH (2005) project was created in 1996 by an international coalition of 28 organizations, motivated by the divulgement of an USEPA report, alerting to the fact that the health care waste incinerators were the main source pollution air for dioxins in United States. Nowadays the project relies on the participation of 491 organizations in

52 countries in America, Europe and Africa. The campaign name bases on Hypocrites' oath “first, do no harm” and its declared mission is: transform health care industry worldwide, without compromising patient safety or care, so that it is ecologically sustainable and no longer a source of harm to public health and environment.

The members of HCWH are: hospitals and health care systems, medical professionals, community groups, health-affected constituencies, labor unions, environmental health organizations and religious groups. The program demands the commitment of all members to its objectives and it doesn't accept manufacturers’ financial contributions and doesn't endorse products.

HCWH's main goals are;

1. Working with a wide range of constituencies for an ecologically sustainable health care

system;

2. Promoting policies, practices and laws that eliminate incineration of medical waste,

minimize the amount and toxicity of all waste generated, and promote the use of safer

materials and treatment practices;

3. Phasing out the use of PVC (polyvinyl chloride) plastics and persistent toxic chemicals in

health care and building momentum for a broader PVC phase out campaign;

4. Phasing out the use of mercury in all aspects of the health care industry;

5. Developing health-based standards for medical waste management and to recognize and

implement the public’s right to know about chemical use in health care industry;

6. Developing just sitting and transportation guidelines that conform to the principles of

environmental justice: No communities should be poisoned by medical waste treatment

and disposal;

7. Developing an effective collaboration and communication structure among campaign

allies. The Hospitals for Health Environment Program – H2E (2005) started in 1998 with an agreement between American Hospitals Association (AHA) and Environmental Protection

Agency (USEPA), establishing the intention of advancing in the efforts for pollution prevention in American hospitals. The initial goals were: reducing the residues containing Mercury, reducing the residues total quantity and identifying pollution prevention opportunities. In its first stage, the program relied on representatives' participation of concerned parts that created work groups to elaborate the main reference and administration tools. In 2001 H2E reorganized having formally a partnership program, including other institutions, it was also created an information system about pollution prevention and an annual award.

The program is constituted by representatives of professionals, as the American Nurses

Association, the Health Care Without Harm Organization and technicians of medical areas, nursing, material and environment administration, state government and local agency representatives, health service associations, collection and destination of industry residues, materials, equipments and manufacturers. H2E's efforts are based on collaboration work and net members' commitment to common goals.

H2E's main projects are:

1. Eliminating mercury-containing waste from health care facilities' waste streams by 2005;

2. Reducing the overall volume of waste (both regulated and non-regulated waste) by 33

percent by 2005 and by 50 percent by 2010;

3. Identifying hazardous substances for pollution prevention and waste reduction

opportunities, including hazardous chemicals and persistent, bioaccumulative, and toxic

pollutants;

4. Ecological constructions and facilities (Green Buildings); 5. Environmental purchase system criteria (EPP – Environmental Preferable Purchasing or

Green Purchasing);

6. Administration findings, planning, training and education.

Among the plans adopted by both programs, we wish to highlight the EPP

Environmentally Preferable Purchasing or Green Purchasing that are applied to the purchase processes. Its main objective is the selection of manufacturers and suppliers that respect the environmental legislation and, the selection of products that, from their production stage, along their lifetime and after this, produce reduced impacts to the environment. The environmental purchase system is based on the principle that it is possible to reduce the environmental impacts, without product quality decrease.

EPP's underpinning is the recognition that the purchase process is a critical stage in the organization environmental management. It considers the extended enterprise concept, expanding the organization responsibility to all the chain considering not just the suppliers, but also the suppliers of these ones.

EPP bases mostly on the use of supplier evaluation instruments and of products that guide the purchase processes such as proclamations, biddings, specifications and contracts. The manuals inform about the products composition and its substitution for not toxic or less toxic ones, minimum packing, recycling, reprocessing and reutilization, minimum impacts in the final disposition, energetic efficiency, durability, waste and loss reduction, stock control, safety for patient, employees and environment. Both programs offer software for products evaluation, lists of alternative products and processes, nets for information exchange about suppliers and products and lists that meet environmental requisites.

5. Conclusions The construction of solutions for environmental impacts in the health care industry in

Brazil faces several difficulties. One of the most important aspects of the problem regards to the value chain structure and the organization of the health assistance.

Health service providers, to where materials and services of several suppliers converge in the final product consolidation, the health assistance or procedure, perform the central role in the chain. This convergence results in concentration of pollution factors, such as residues, effluents and emissions around the health service provider, which remains responsible for all the environmental problems.

This environmental problem concentration demands financial and technological resources, that are limited by aspects that depend on the financing of the sector and, are therefore controlled, largely, by the chain downstream links, composed by the operators and payers. The providers have difficulties in recover the costs to pollution prevention once the health care, while business, is a controlled market.

Regarding to the technological and to the information resources, we verify that, also in this case, the provider is in disadvantage concerning the elements upstream in the chain. The products and service manufacturers and suppliers hold the knowledge of composition and of the risks involved in the utilization and residues of these materials. That information becomes strategic because it influences the purchase and productive process decisions. The discussions about products or process environmental impacts can, and should, carry the technological standards alteration practiced by the health sector, like, for example, certain substances and materials substitution as Mercury, PVC or glutaraldeyd. In addition to these factors, manufacturers’ resistance in assimilating the extended responsibility of the producer and the transparency principles, which tend to penalize the products that involve larger environmental impact, in the production processes, in its utilization or in its residues. In Brazil, the manufacturers of products with these characteristics don't still have the intention of sharing costs associated with the necessary measures, neither does the development of the most adequate technologies to mitigate environmental impacts, that are still understood as externalities.

As we could observe in the cases presented before, the solution for the countless environmental problems, as well as health and safety risks of professionals and patients, involve integrated efforts of all value chain elements. The information issue is important in the development of this cooperative environment, as a decisive element that catalyzes the engagement and the confidence between involved actors. In the era of the information economy, this is, undoubtedly, a decisive factor for business competitiveness, however, it contributes for the chain competitiveness, as long as, among other benefits, it improves the environmental performance and sustainability. Transparency and knowledge aggregate value and link the productive system to the real market’s needs.

Today, sustainability principles are a market and a society requirement. Ignoring this requirement worsens the environmental degradation process and increases the industry competitive phase displacement. The means to implement the environmental conscience and sustainability practice in Brazilian health care industry aren't still clearly defined, either in the legislation and in the public policy for the sector, or in the integration of actions and cooperation between players and its relations in the health market. As well as other mentioned subjects in this study, we hope that these matters will be discussed in a deeper way in the future.

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