GPO Initiative to Promote Best Business Practices

April 1, 2005

5 Min Read
GPO Initiative to Promote Best Business Practices

The value of healthcare group purchasing organizations (GPOs) continues to engender lively controversy among medical device manufacturers and healthcare policy makers. In recent years GPOs have been widely accused of employing a variety of anticompetitive business practices, and have consequently found themselves on the defense against the possibility of strict federal regulation and congressional oversight of their activities. But anyone who imagines that the GPO industry is on the ropes and about to go down for the count had better take another look.

At the beginning of April, the nation's leading healthcare GPOs announced a formal program to “promote and monitor best business practices in purchasing for hospitals and other healthcare providers.” Established as the Healthcare Group Purchasing Industry Initiative, the program has enrolled as participants all of the country's major GPOs, together accounting for more than 80% of the nation's healthcare purchasing volume handled by GPOs.

All of the member GPOs are said to be demonstrating commitment to the initiative at the highest level by having their respective CEOs serve on the steering committee. Nine leading GPOs have signed on to the initiative, including Amerinet (St. Louis), Broadlane Medical Systems (San Francisco), Child Health Corp. of America (Shawnee Mission, KS), Consorta Inc. (Schaumburg, IL), GNYHA Ventures Inc. (New York City), Healthtrust Purchasing Group (Brentwood, TN), MedAssets (Alpharetta, GA), Novation Corp. (Irvine, TX), and Premier Inc. (Charlotte, NC).

The voluntary program establishes six core principles of ethics and business conduct, and intends to monitor how participating GPOs implement those principles. The principles require participating GPOs to act on the following guidelines.

• Have and adhere to a written code of business conduct, which establishes the high ethical values expected for all within the signatory's organization.
• Train all within the organization as to their personal responsibilities under the code.
• Work toward the twin goals of high-quality healthcare and cost effectiveness.
• Work toward an open and competitive purchasing process free of conflicts of interest and any undue influences.
• Have the responsibility to each other to share their best practices in implementing the principles; each signatory shall participate in an annual best-practices forum.
• Be accountable to the public.

Interim coordinator for the new initiative is Kirk O. Hanson, a professor and executive director of the Markkula Center for Applied Ethics at Santa Clara University (Santa Clara, CA). “GPOs have a single mission—to help hospitals, and to do it with more transparency and public accountability,” says Hanson. “GPOs help hospitals with their greatest challenge—controlling costs while advancing quality patient care.”

Each company participating in the initiative will answer an annual questionnaire. Results of the survey will be summarized in a public accountability report, which will be available for review by government officials, hospitals, and other healthcare providers. The report is expected to provide comparative accountability data that can be used in selecting a GPO.

“This initiative puts a system in place that assures ongoing adherence to best practices,” says Hanson. “The high level of transparency required by the initiative will enhance public trust and understanding of the role of these organizations.”

Since 2002, alleged anticompetitive practices of some GPOs have been the subject of a number of hearings conducted by the Senate Judiciary Committee's subcommittee on antitrust, competition policy, and consumer rights. Commenting on the initiative, subcommittee chairman Mike DeWine (R–OH) and ranking member Herb Kohl (D–WI) said they were “gratified that the GPO industry took
seriously . . . the need to assure the permanency of the industry's reforms.”

The senators indicated that they would study the GPO initiative carefully to determine whether it addresses their objectives of “obtaining a transparent and enforceable mechanism to assure the permanency of GPO reforms to prevent anticompetitive and unethical practices.” The antitrust subcommittee is expected to meet again during the current session of Congress, and intends to solicit input from other hospital supply-chain participants, including medtech manufacturers.

The Healthcare Industry Group Purchasing Association (HIGPA; Arlington, VA) has endorsed the industry initiative and has encouraged its member companies to participate. Although the association has long been considered the voice of the GPO industry, however, it does not intend to submit its own response to the Senate antitrust subcommittee request for comments.

Meanwhile, the Medical Device Manufacturers Association (MDMA; Washington, DC) sounded a note of skepticism about the GPO industry's latest initiative. MDMA has consistently challenged GPO practices that it considers to be anticompetitive. While welcoming industry input about the initiative, MDMA executive director Mark Leahey says that it “falls short” of addressing some of the core problems of GPO business behaviors, including bundling, sole-sourcing, and long-term contracts.

“The initiative does not stipulate uniform and consistent industry standards, provides no real enforcement for noncompliance, and lacks independence,” says Leahey. Moreover, he says, the initiative is “overly optimistic” in assuming that the industry can police itself in the absence of any regulatory oversight.

For a copy of the charter of the Healthcare Group Purchasing Industry Initiative, and more information about the group's activities, visit www.healthcaregpoii.com.

© 2005 Canon Communications LLC

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