The group purchasing organization industry delivered a first draft of a sweeping code of conduct that weighs in on conflict-of-interest issues and takes broad swipes at standardizing the industry's everyday business practices.
The document was delivered this afternoon to the office of Sen. Herbert Kohl (D-Wis.) in response to an order from the Senate Judiciary antitrust subcommittee, which Kohl chairs. Modern Healthcare's Daily Dose obtained a copy of the code. It aims to establish conduct guidelines for GPOs as they go about the business of brokering a substantial but untold portion of the estimated $173 billion the nation's hospitals spend yearly on supplies.
The draft code of conduct is a first step only, GPO industry officials said, and in coming weeks, it will be shared with a variety of trade associations, including the group representing medical device manufacturers.
As drafted, the code is unlikely to appease small equipment manufacturers, whose complaints of being locked out of the market by GPOs in part prompted the subcommittee hearing. Device manufacturers, which planned to submit to the subcommittee their own ideas for a code of conduct, want to see an end to sole-source contracting and to "the abusive nature of administrative fees," said Larry Holden, president of the Medical Device Manufacturers Association, Washington.
The draft document would eliminate neither. Instead it offers the assurance that the groups would fully disclose their fees and practices to members.
Developed under the umbrella of the Health Industry Group Purchasing Association, Washington, the draft code reflects industry "best practices," officials said, and was wholeheartedly adopted by the 26 GPOs represented on a working group of 22 individuals. "The document outlines the principles we think should ultimately be in the GPO code of conduct," HIGPA spokesman David McDonough said.
It addresses in broad strokes six areas of concern raised at an April 30 subcommittee hearing. The subcommittee gave the GPO industry a 90-day deadline for returning with potential solutions.
The draft document does not set limits on the administrative fees GPOs receive from suppliers nor does it categorically prohibit GPOs from holding equity stakes in companies under contract.
The code would allow an investment in the small number of cases in which an investment "demonstrably benefits the GPOs' members by creating a source of a clinical preference item or service where there is otherwise no other source, or very limited sources." But the GPO must immediately disclose to members in writing its equity interest in the company and continue to do so at least yearly. In addition, hospitals should not be under any obligation to buy from companies in which their GPOs had invested, according to the draft code.
Conflict of interest policies, which represent the largest section of the code, apply both corporately and individually. The code would prohibit GPO employees with influence over contracting decisions from accepting gifts, favors, honoraria and entertainment from vendors above a nominal value of $50 per instance or $100 per year. Nonemployees, such as hospital workers participating in the decisionmaking process, must disclose all gifts and excuse themselves from decisions affecting the particular vendor.
The GPOs said their hospital members should be able to communicate directly with vendors, regardless of whether the vendor has a contract, and purchase items from outside vendors without fear of financial retribution. At the subcommittee hearing, suppliers charged that some hospitals had been punished for dealing with outside vendors. The two groups that testified at the hearings--Novation and Premier--denied that was the case.
The working document also includes policy statements that would commit the industry to finding the newest and most innovative products, supporting programs and processes with the potential to boost patient safety, and promoting diversity among vendors.
Although Novation and Premier have borne the brunt of scrutiny, GPOs say the industry itself has been challenged. Many contend the conduct guidelines would merely codify practices already in place. "I feel like the industry is really stepping up and intending to do the right thing," said John Bardis, president, chairman and CEO of MedAssets HSCA.