Group Purchasing Sector Studies Single Source Contracting, Treatment of New Technology Products

The 14th Annual Report found that HGPII members can meet these goals because they continue to implement policies that support the integrity of their respective business models. The independent assessment of 11 organizations, who are among the HGPII Charter signatories, studies business practices and ethical standards within the group purchasing sector, particularly hospitals and other health care providers. The year-long research project is the result of the ongoing engagement of each organization that entails questionnaires, direct examination, and review and leadership training.

Reflecting changes in the healthcare system and its supply chain, HGPII also supplemented its Annual Report with a detailed review of two issues that have been central to the Initiative’s standards from the beginning: the use of single-source contracting, and practices that affect the availability of new healthcare products that represent clinical improvements or technological advances.

The Annual Report uncovered the following advances that support the adoption of best business practices:

• GPOs Limit Single Source Contracting: HGPII signatories comply with rigorous competitive bidding processes aligned with non-exclusionary contracting standards. The vast majority of these represent products that are proprietary or lack more than one qualified supplier, including branded pharmaceuticals, innovative technologies, and diversity suppliers. Overall our research found that single source contracts represent only 4-10% of the contracts in GPO portfolios. 

• GPOs Propel Technology and Innovation: HGPII signatories are implementing programs to accommodate the entry of new healthcare products and technologies into the supply chain. This supports anecdotal evidence that key GPO networks are providing market access to many healthcare startups. These reviews involve standing committees that assess emerging technologies based on their contribution to the supply chain: incremental benefits to patient care, patient safety, and healthcare worker safety. Members have also developed successful ongoing programs to mentor and coach innovation suppliers.

• GPOs Support Environmentally Preferred Purchasing: HGPII anticipates that the use of environmentally-preferred purchasing will continue to grow in some areas as more GPOs determine that the overall value of such products is commensurate with the cost of these items. As hospitals drive this trend, experts believe more will adopt these sustainable practices to combat concerns related to safe waste disposal and chemical-free medical supplies.

• GPOs Encourage Supplier Diversity Programs: HGPII members emphasize promoting opportunities for underrepresented populations in the healthcare supply chain. This was done through member-led initiatives such as supplier diversity programs, education, scholarships, and awareness campaigns. Members also developed Historically Underutilized Business (HUB) projects that focus on creating contracting opportunities for minority-owned businesses and new jobs in surrounding communities.

 “Our annual research comprehensively reviews the business practices of HGPII’s members. This year’s report reaffirms that individual HGPII organizations are committed to meeting the highest ethical standards and best business practices to serve networks of health care providers best,” said Phil English, National Coordinator of HGPII. “Our report further indicates that HGPII members maintain clear policies, standards, and levels of compliance to meet the exceptional standards outlined in the HGPII charter.”

“GPOs continue to be uncompromising in their pursuit of cost savings, quality of health systems, and their shared commitment to promoting transparency and accountability within the healthcare supply chain,” said Senator Byron Dorgan, National Co-Coordinator. “We’re proud of the role HGPII members play in leading the industry to establish the best practices to achieve the highest ethical standards possible while challenging organizations to innovate and adapt.”

The Role of GPOs in Healthcare

Healthcare GPOs are business organizations that pool the purchasing volumes of member hospitals, health systems, and other providers like nursing homes, home healthcare agencies, and physicians. GPOs ensure the acquisition of the best and most cost-effective products and services and assist their members in improving the quality of care for patients and efficiencies throughout the supply chain.

Background: HGPII Annual Report and Members

The HGPII report is the product of an ongoing process that involves an individual commitment by each member organization to implement ethics standards, employ best practices in contracting, address vendor grievances and offer appropriate administrative fee structures. HGPII is managed as an independent institution by Arent Fox LLP, with oversight by key industry leaders.

Nine of the nation’s leading GPOs founded HGPII in 2005 to promote and monitor the best ethical and business practices in purchasing for hospitals and other healthcare providers.

The HGPII member GPOs are Capstone Health Alliance, Children’s Hospital Association (CHA), HealthTrust Purchasing Group, Health Procurement Solutions, LLC (HPS), Innovatix, LLC, Intalere, Premier, Inc., Texas Purchasing Coalition, Vizient, and Yankee Alliance.

English and Dorgan are former Members of Congress from the US House of Representatives and the US Senate, respectively, and they co-chair the government relations practice at Arent Fox. Visit the HGPII website for additional commentary from English and Dorgan on this year’s report.