Hospitals and other health care providers have one principal objective: providing high quality
care at an affordable price. Achieving this objective is always difficult, but it is particularly
challenging now given a steady rise in the costs of health care items and services, and a sharp
decline in payor reimbursement levels.
Group purchasing organizations (GPOs) — which enter into contracts with suppliers on behalf of
their provider-members — help providers achieve their objectives of providing quality,
affordable health care. GPOs do this in several ways. Most importantly, GPOs leverage
purchasing power. That is, GPOs represent large numbers of providers and, as such, are able to
negotiate lower prices with suppliers for a particular item than most individual providers, acting
on their own, generally could.
GPOs also help their members avoid certain costs. For example, the process of procuring items
and services — defining institutional needs, identifying quality products, preparing requests for
proposal, analyzing responsive bids, and negotiating contract terms — requires specialized
personnel, and is both time consuming and costly. GPOs, which are funded in large part by the
fees that they receive from suppliers, are able to furnish those procurement services to their
members at a minimal, or no, cost.
The services GPOs provide are of critical importance, especially during an era when providers
are faced with a wide-range of challenges that put added constraints on the financial well-being
of providers. The challenges include:
n More than 40 million Americans without health coverage;
n Severe hospital and health facility workforce shortages;
n Increasing administrative and regulatory burdens;
n Serious challenges in health care liability insurance;
n Skyrocketing costs for many critical new health care products and services;
n The increasing need for standardization of care and product use to improve patient
safety, eliminate adverse events and reduce supply costs;
n Reimbursement systems that erect barriers to full deployment of new drugs and
n Rising costs and declining reimbursement; and
n A new emphasis on readiness in the wake of September 11.
In rising to these challenges, health care providers have pursued strategies to assure the highest
level of uninterrupted care for their patients. At the same time, health systems have an obligation
— imposed by public and private payers of care — to deliver such services in the most efficient
cost-effective manner possible. In recognition and appreciation of this obligation, now more
than ever before, health systems need access to the cost-saving tools and resources of group
purchasing to manage growth in health care costs.
The Health Industry Group Purchasing Association (HIGPA) — in consultation with its member
organizations — has prepared these Code of Conduct Principles to help ensure that providers
have access to group purchasing organizations that offer necessary services at the lowest possible
The principles cover several areas, including legal compliance, disclosure of vendor
payments, conflicts of interest, product innovation, and a diverse manufacturer base with access
to the GPO contracting process.
The organizations within HIGPA recognize that cooperation among health care providers is
critical to ensure that patients’ best interests are always served. Therefore, we collectively affirm
our commitment to the following initiatives aimed at assuring patients’ receipt of the highest
HIGPA’s GPO Members are committed to observing these Principles, and to implementing
company-specific compliance policies and procedures based upon each GPOs unique business
structure and relationships. The Principles set forth below underscore the group purchasing
industry’s commitment to improving health care and advancing technological innovation at the
most manageable cost to providers of care and their patients. These initiatives are designed to
assure the operation of a thriving, innovative and competitive health care marketplace. Each
GPO shall, at a minimum, incorporate these principles into its own Code of Conduct. Further,
each GPO shall be committed to the full implementation of these Principles and shall not take
any action that would be contrary to the intent and purpose of these Principles.
A. Compliance with Applicable Laws
Each GPO shall comply with applicable laws. Each GPO shall stay abreast of changes
and new developments in the law and provide compliance training, guidance and
education regarding applicable laws for directors, officers and employees.
B. Conflict of Interest Policies
1. GPO Employees
a. Each GPO shall implement internal policies to require that employees who
are in a position to influence the GPO contracting decisions do not accept
any gifts, entertainment, favors, honoraria or personal services payments
(other than those of Nominal Value) from any Participating Vendor.
b. Each GPO shall implement internal policies to require that none of its
employees who are in a position to influence the GPO contracting
decisions for Participating Vendors have an Individual Equity Interest in
such Participating Vendors.
2. GPO Non-Employee Officers, Directors, or Advisors
a. Each GPO shall implement internal policies to require that any nonemployee
officer, director, or member of an advisory board of a GPO, in a
position to influence the GPO contracting decisions, who accepts any
gifts, entertainment, favors, honoraria or personal services payments
(other than those of Nominal Value) from any Participating Vendor
discloses such transactions to the appropriate governance body and is
recused from any negotiations or decisions relating to such Participating
b. Each GPO shall implement internal policies that require that any nonemployee
officer, director or member of an advisory board or body of a
GPO discloses Individual Equity Interests in any Participating Vendor to
the appropriate governance body and is recused from any negotiations or
decisions relating to such Participating Vendor.
3. GPO Corporate Equity Interests
a. Each GPO shall implement internal policies ensuring that the GPO does
not have any Corporate Equity Interest in any Participating Vendor of
Clinical Products or Services, unless the acquisition of such Corporate
Equity Interest demonstrably benefits the GPO’s Members by creating a
source of a Clinical Product or Service where there is otherwise no other
source, or very limited sources.
b. Each GPO that has a Corporate Equity Interest in a Participating Vendor
shall disclose such equity interests to Members in writing. Each GPO in
which a Participating Vendor has a Corporate Equity Interest shall
disclose such equity interest to Members in writing. Such disclosure
should be made (a) at the time the Corporate Equity Interest is obtained if
the GPO already has a contract with the Vendor or (b) at the time the GPO
enters into a contract with the Vendor if the GPO does not already have a
contract with the Vendor, and in each case, at least annually thereafter.
GPOs shall also publicly disclose such Corporate Equity Interests.
c. Each GPO that has a Corporate Equity Interest in a Participating Vendor
will impose no obligation, commitment or other requirements or
restrictions that in any way obligates any Member to purchase goods or
services from such Participating Vendor.
C. Member Relations, Product Evaluation & Vendor Grievances
GPOs shall be committed to identifying and making available to Members innovative
products and technologies in order to promote high quality and cost-effective health care,
and to the free exchange of information relating to clinical, safety and technological and
other innovations within the industry. Toward that end, each GPO shall incorporate the
following principles in its contractual and business relationships with Vendors and
1. Member Communications & Relationships with Vendors
a. Each GPO shall implement its policies and contracts in a manner that
permits its Members to (a) communicate directly with Vendors, including
Vendors that do not have current contracts with a Member’s GPO, (b)
assess Products or Services provided by a Vendor that does not have a
contract with the GPO, and (c) purchase Clinical Preference Products or
Services directly from Vendors that do not contract with the GPO.
b. Each GPO shall implement a contracting process that (a) informs potential
Vendors of the process for seeking and obtaining contracts with the GPO
and (b) provides any and all interested Vendors with the opportunity to
solicit contracts, including but not limited to posting such information on a
GPO’s website and promptly responding to Vendor inquiries regarding
contract opportunities.Innovative Product Evaluations
Each GPO shall individually engage in or otherwise participate in processes and
programs that routinely evaluate and provide opportunities to contract for
innovative Clinical Products or Services.
3. Vendor Grievances
Each GPO shall adopt policies and procedures that endeavor to address Vendor
grievances related to access for innovative Clinical Products or Services.
D. Use of Contracting Tools
The goals of the GPO contracting process include promoting quality of patient care and
achieving price savings and cost reduction for Members. In order to better achieve those
ends, GPOs seek to foster competition among Vendors. To that end, GPOs have
contracting tools that include sole source contracting, commitment level requirements,
contract length and multi-product line discount arrangements. GPOs should use these
tools either alone or in combination only in contracting arrangements that achieve the
foregoing goals. These goals are most important in relation to Clinical Preference
Products or Services. To the extent that multiple contracting tools are used in the
contracting process, each GPO shall consider the following factors in each contractual
arrangement to achieve the aforementioned goals: market share of the Participating
Vendors, the size of the GPO, the number of Vendors available to provide the relevant
product or service, ability of the Participating Vendor to meet the needs of the GPO’s
Members, and the occurrence of innovation in the relevant product or service category.
E. Compliance, Certification & Implementation
1. Compliance Officer
Each GPO shall designate a compliance officer who will be responsible for
overseeing compliance with the Code of Conduct adopted by the GPO and the
fulfillment of the GPO’s reporting requirements.
The management of each GPO member of HIGPA shall certify annually to
HIGPA that they are in compliance with the principles. HIGPA will publish an
annual report identifying those HIGPA members that have certified their
compliance. This certification shall constitute a requirement for membership in
3. Implementation, Transition & Updating
a. Each GPO shall adopt a transition plan supervised by its compliance
officer in keeping with these principles in the event (a) an entity becomes a Participating Vendor to a particular GPO, (b) an employee (i) is in a
position to influence the contracting decision for Participating Vendors
and currently has an Individual Equity Interest in such Participating
Vendors or (ii) is hired or transferred to a position in which the employee
would influence the contracting decision for Participating Vendors and has
an Individual Equity Interest in such Participating Vendors, or (c) other
situations arise to which these principles apply. Each GPO shall seek
regular, periodic and timely disclosure of information covered by these
conflict of interest principles by directors, officers, employees and
b. HIGPA shall assess and update the principles consistent with newly
identified best practices and as business practices change to ensure that the
goals of avoiding conflicts of interest and promoting competition continue
to be achieved.
F. Reporting & Education
1. Industry-Wide Survey
To promote competition and to evaluate on an ongoing basis the benefits of group
purchasing, HIGPA will evaluate and implement, consistent with the antitrust
laws, periodic surveys and aggregate reporting of industry-wide information
relating to value through cost savings and administrative efficiencies of GPO
2. Web-Based Vendor Directory
In order to foster innovation, HIGPA, with the support of its GPO members, shall
make available a web-based directory where Vendors can post product
information, including information about products that the Vendors consider to be
new and innovative.
3. Educational Programs
HIGPA shall coordinate the development and implementation of industry-wide
educational programs focusing on new developments related to clinical
innovations, contracting processes and programs, patient safety, public policy,
statutory and regulatory requirements and best practices regarding compliance
and Code of Conduct principles. As part of this process, the industry will draw
upon representatives of GPOs and any Vendors to promote processes and
programs to assure availability of new and innovative products to Members
through the GPO contracting process.Disclosure of Vendor Payments
1. Written Agreement
Each GPO shall have a written agreement with each Member or Member’s agent
that authorizes the GPO to act as a purchasing agent to negotiate contracts with
Vendors to furnish goods or services to each Member.
2. Disclosure of Acceptance of Payments
Each GPO shall disclose in writing to each Member or Member’s agent that it
receives Payments from Participating Vendors with respect to purchases made by
or on behalf of such Member.
3. Disclosure of Payments Related to Purchases
Each GPO shall annually report, or cause to be reported, to each Member or
Member’s agent the amount of all Vendor Payments received with respect to
purchases made by or on behalf of the Member.
4. Disclosure of Payments Not Allocable to Actual Purchases
Each GPO shall annually report, or cause to be reported, to each Member or
Member’s agent the amount of Payments received pursuant to a Vendor contract
that was utilized by that Member, but is not allocable or otherwise reported with
respect to the actual purchases of that or any other Member.
H. Safety, Cost-Reduction & Clinical Comparability
GPOs shall support programs and processes, such as displaying Universal Product
Number (“UPN”) or machine-readable bar codes at the unit-of-use level, or other
programs and processes, that provide for clinical comparability and improve and promote
patient safety and supply-chain cost reduction.
GPOs shall offer or participate in programs that promote diversity among Vendors to
include women and minority-owned Vendors. “Clinical Preference Products or Services” shall mean those Clinical Products or
Services which require substantial training to learn to use and which have a demonstrable
effect on patient care outcomes. Accordingly, they are products or services for which a
provider has a particular preference based on factors such as the provider’s training and experience, the performance or functionality of such products in a clinical setting and
patient clinical outcomes.
B. “Clinical Products or Services” shall mean products or services used by providers
directly in the provision of health care services to patients.
C. “Corporate Equity Interest” shall mean securities, options, warrants, debt instruments
(including loans), or rights to acquire any of the foregoing.
D. “GPO” shall mean any entity that as all or part of its business activities is authorized to
act as the agent of a provider of health care services to enter into contracts with Vendors
(“Vendor Contracts”), pursuant to which Vendors agree to sell or furnish goods or
services consistent with the terms set forth in the Vendor Contracts. GPOs do not
typically take title to products.
E. “Individual Equity Interest” shall mean securities, options, warrants, debt instruments
(including loans), or rights to acquire any of foregoing, provided, however that the term
shall not include: (a) interests in mutual funds or (b) interests held in a blind trust in
which all investment decisions are independently managed by a third party and the
existence and trust terms are fully disclosed to the appropriate governing body to ensure
that the neutrality of the GPO contracting decisions are protected.
F. “Members” shall mean any provider of health care services to patients that has an
agreement (directly or through an authorized agent) which authorizes the GPO to act as
the provider’s purchasing agent to negotiate contracts with Vendors to furnish goods or
services to the provider.
G. “Nominal Value” shall mean any item, service or other thing of value (not including
cash or cash equivalents) that does not exceed $50 per instance or $100 in any given
calendar year. Any item, service or other thing of value that costs $10 or less shall not be
counted toward the $100 annual limit.
H. “Participating Vendor” shall mean, with respect to a particular GPO, a Vendor that has
a contract or submits a formal bid or offer to contract with such GPO to provide goods or
services to the GPO’s members.
I. “Payments” shall mean all payments by a Vendor of goods or services to a GPO as part
of any agreement to furnish goods or services to Members.
J. “Vendors” shall mean manufacturers, distributors, suppliers or other entities that sell
goods or services to Members.
Hospitals and other health care providers have one principal objective: providing high quality