Healthcare group purchasing organizations (GPOs) aggregate the purchasing requirements of their customers, thus lowering costs in both the purchasing function itself and in the prices at which products and services are purchased. GPOs are an essential link in the supply chain of the nation’s healthcare providers, such as hospitals, clinics, and other healthcare delivery entities. Additionally, GPOs enable customers to coordinate the collection of data and systems improvements essential to the quality of care and the reduction of costs.1
Premier, Inc., one of the leading healthcare GPOs, with more than 2,300 U.S. hospitals and 64,000-plus other healthcare sites, was created by not-for-profit hospitals, in part, to protect scarce resources for patient care by helping these not-for-profit hospitals purchase their supplies collaboratively and facilitating their ability to conduct group purchasing.
In 2002, in response to on-going interest in the GPO industry, Premier’s Board of Directors adopted a comprehensive set of ethics principles, policies and practices which serves as the basis for the development of Premier’s Group Purchasing Code of Conduct and sets a new high bar in ethical conduct for the GPO industry. As an organization, Premier has “put a stake in the ground” relative to how it plans to guide and conduct its business through the use of its Code of Conduct. The Code of Conduct sets out Premier’s policies and procedures to promote contracting and supply chain arrangements that achieve both a high quality of medical care and competitive pricing.
Premier’s Code is designed to protect patients first by assuring a fair, open purchasing process and protecting the ability of not-for-profit hospitals to safely reduce the cost of care through collaborative product evaluation and purchasing. Through its Code of Conduct, Premier is focused on its commitment to help its customer hospitals and health systems improve the quality of medical care while at the same time lowering its cost. In all that it does, Premier acts ethically, accountably and fairly with respect to all participants in the healthcare marketplace. In practice, the ethical conduct of an organization is a reflection of the collective conduct of all its employees, officers, and customers of its board of directors.
Premier’s Code includes detailed provisions in the areas that are on-going compliance issues for all organizations including conflicts of interest; contracting policies; supplier diversity; breakthrough technology; and communication and reporting.
Conflicts of interest, real or perceived, are a concern for any industry. The GPO industry pays special attention to conflict of interest as a way to ensure that contracting processes are fair and unbiased. GPOs should have a comprehensive annual conflict of interest process for all employees, officers, committee members and advisors.
How a GPO contracts with its suppliers goes a long way toward ensuring that suppliers trust the process and believe that contracts are awarded fairly. A GPO’s contracting process should promote healthy competition while encouraging new and innovative suppliers and products to enter the market. Contracts in a GPOs portfolio should be evaluated by customer peers including directors, clinicians, and physicians. For example, at Premier there are 20 different standing committees as well as several product or service-specific task forces. Each group uses an established methodology to objectively review potential contracted supplier offerings. In support of these committees, Premier has developed a unique product evaluation program that establishes consistent standards for contracted suppliers and emphasizes: quality, regulatory compliance, safety and environmental policies, delivery capacity and performance, electronic data interchange (EDI) and e-commerce capability, research and development, customer service, as well as technology and software development. In addition, the contracting process is strengthened by key initiatives that are designed to enhance customers’ access to high quality, effective products.
GPOs should establish diversity programs to encourage customers to support minority-, women-, and veteran-owned suppliers and small businesses. Supplier diversity is an integral part of the sourcing process and an important part of every contracting decision. Premier has tried to provide industry leadership in this area by helping minority, women, veteran and small businesses compete in the healthcare market while supporting customers’ efforts to encourage supplier diversity in all its forms. Diverse suppliers create jobs and enhance economic opportunities in local communities. For healthcare providers, access to diversity suppliers expands choice and offers innovative service options while strengthening the availability of quality products. Supporting minority, women and veteran-owned businesses is often cited as a tangible customer goal that demonstrates their support of the local community. .
Since its inception in 1999, the Premier Technology Breakthroughs Program has been committed to creating a fair, timely, confidential and unbiased sourcing process. Over the years, the program has helped facilitate the introduction of dozens of innovative products. Each Premier group purchasing agreement contains a technology breakthroughs clause, allowing the timely review of truly innovative products. Products that meet the program’s stringent requirements may be considered for a new agreement outside the standard contracting cycle.
Ethics and compliance programs for GPOs should mirror certain now well established processes for healthcare efforts generally. For example, GPO chief ethics and compliance officers should have ready access to the Board and its audit committee and should give periodic reports regarding the implementation of the ethics and compliance program. In addition, Premier also audits its adherence to its Code of Conduct on an ongoing basis through third-party reports to the Board Audit Committee. Included in the reports are recommendations for improving adherence to the code. Additionally, the Legal department monitors compliance with applicable federal laws.
Like any industry, GPOs must continue to adhere to strict standards and codes of conduct. Having a comprehensive ethical and compliance approach creates the necessary trust and transparency that ensures the best outcomes for patients.
1 Taken from the annual HGPII annual report at www.healthcaregpoii.com
