Tit for tat, at least one group purchasing organization under antitrust scrutiny is now turning up the heat on its suppliers.
Consorta, a Rolling Meadows, Ill.-based GPO whose shareholders are faith-based or not-for-profit health systems, is distributing a new policy that outlines acceptable and unacceptable business practices for its vendors. If they chronically fail to meet expectations, they risk losing Consorta's business, or possibly worse, being reported to federal antitrust authorities.
"Suppliers Expectations," as the document is titled, arrives as a host of national GPOs are putting the finishing touches on their own codes of conduct. The codes are being written at the urging of the Senate Judiciary Committee's antitrust subcommittee, which for a year has been monitoring GPO business practices and their role in hampering the introduction of new technologies into the healthcare marketplace.
Like Consorta's code of conduct, which its board approved in January, the five-page document stipulates guidelines for behavior and performance, only this time for vendors.
"It was just sort of the next step," said Sheila Reed, a Consorta spokeswoman. "When we put together the code of conduct, it had a lot to do with business relationships, but we are not in those relationships by ourselves. We are only one half of the equation."
Reed added that the document merely codifies criteria for suppliers that always have been in place. "These are probably more comprehensive, but it's not a huge change in position for us. It just reinforces the behaviors and expectations we've always had," Reed said.
The document applies to the nearly 500 vendors who furnish supplies to more than 2,100 Consorta providers, including more than 400 hospitals. Among other things, suppliers are expected to honor agreements Consorta has with rival suppliers without undermining them. They are similarly expected to promote competition, provide competitive pricing and support the adoption of innovative new technology. Consorta also expects its vendors to support the industry's efforts to use a universal product number and bar coding on all products down to the unit of use.
If a supplier consistently fails to live up to the expectations, it could risk losing Consorta's business. Consorta also warns it would consider reporting incorrigible suppliers to the antitrust subcommittee and the Federal Trade Commission. The document has been posted on Consorta's Web site, consorta.com, and suppliers are just now receiving copies of the agreement at their regular quarterly review meetings with Consorta officials, Reed said.
"I don't think we're interested in being the monitoring GPO for the supplier community, but we realize that just like GPOs, there is a continuum of behavior in suppliers and there are supplier organizations that sometimes push things very far. We feel we need to be mindful of that," Reed said.
Although other GPOs haven't gone so far as to formulate a blanket policy, they too have certain expectations of their suppliers.
"We applaud any effort to raise the bar on ethical standards for all players in the supply chain," said Jody Hatcher, senior vice president for Novation. "We take perhaps an even more rigorous approach by incorporating these and other elements into each individual agreement with our suppliers."
Considering that small vendors have been the most vocal about their supposed victimization by allegedly anticompetitive GPOs, some might question the propriety of GPOs dictating their behavior. But suppliers are just now digesting the implications of the document. Promoting competition in the marketplace "is something we can get behind ... but we're cautious of GPOs mandating certain behavior," said Mark Leahey, executive director of the Medical Device Manufacturers Association, a Washington-based trade group that has spearheaded the criticism of GPO business practices. Leahey also noted that the MDMA has an "open line of communication with (Consorta) and we will continue to talk to them."