Observation Deck: Take the uncertainty out of provider/supplier relationships

We’ve written in past issues of JHC (and again in this month’s issue – see “Model of the Future” on Sentara Healthcare) of the close relationship between vendors and providers, and of the necessity of setting healthy boundaries between the two.

Theirs is a relationship born of necessity. Vendors keep clinicians and contracting professionals abreast of valuable new technology and provide much-needed supplies and equipment. Clinicians often work with vendors to develop innovative technologies. But these relationships can sour when the line between vendor and provider becomes too blurred. You’ve seen the news stories:

  • Medtronic and the U.S. Department of Justice reach an agreement whereby the manufacturer pays a $40 million civil settlement to put behind it charges of providing kickbacks in the form of sham consulting agreements, sham royalty agreements and lavish trips for doctors to induce them to buy the company’s spinal products.
  • A Chicago cardiologist extols the virtues of a blood filtering device in speaking engagements to colleagues around the country. Though the doctor discloses that she is a paid consultant with stock in the company, she fails to disclose that the vendor contributed $180,000 in 2004 to a nonprofit research foundation that had overseen a study of the device – and that the foundation was an arm of the medical group to which the cardiologist belongs.
  • A University of Cincinnati heart surgeon conducts studies that promote the use of a device that uses radio waves to burn heart tissue in an effort to block electrical impulses, to treat atrial fibrillation. Not only does the surgeon allegedly engage in some faulty research practices, but he fails to disclose the fact that he has a royalty agreement with the device’s maker, guaranteeing him at least $200,000 a year, stock options and monthly consulting payments.
  • A University of Washington Medical School obstetrician travels the country promoting the testing of all pregnant women for genital herpes, despite the fact that federal health agencies and the American College of Obstetricians and Gynecologists have gone on record opposing routine testing. Turns out the obstetrician is paid $1,000 to $2,500 per talk, with funding provided by a drug manufacturer that makes a herpes drug.
  • A Florida hospital’s purchases of St. Jude Medical’s pacemakers and implantable defibrillators jump 400 percent – about $2 million – in about a year. The jump coincides with the hiring by St. Jude of a new sales rep – the girlfriend of an influential cardiologist at the hospital. The cardiologist denies any connection between the two events.

And stories have surfaced of improprieties on the part of materials and contracting executives as well.

Yes, conflicts of interest seem rife in healthcare purchasing and contracting today. Yet, according to some, the situation is no worse now than it has been in the past. “I don’t think there’s more of this going on today,” says Eileen McGinnity, president and principal of Aspen Healthcare Metrics, a healthcare consulting and data benchmarking firm in Englewood, Colo. “I think there’s as much as there ever was. It’s just that it’s coming a little bit more to the surface.”

“You want physicians to have the opportunity to work with manufacturers to innovate,” she says. “But [these relationships] have to be transparent and known to everyone, and they can’t be a reason for the hospital to pay more to purchase products.”

What’s a contracting professional to do?
Fortunately, contracting professionals who wish to protect their facilities have many options at their disposal. The first is, simply, to keep their eyes open. “To identify a conflict of interest, a contracting professional can stay close enough to the clinical program to know when these things are going on,” advises McGinnity. “If you don’t spend a lot of time interacting with [clinicians], you won’t have a sense of what’s going on.” When a situation arises that smells bad, the contracting professional has a responsibility to bring it to the attention of the organization’s executive leadership. Of course, that’s not a position that any JHC reader wants to be in. Hopefully, your organization has a clear-cut policy in place to deal with the situation.

Some IDNs have instituted policies that require physicians to certify annually that they have disclosed all potential conflicts of interest. “Then it’s up to the IDN to manage its value analysis process accordingly, so that the person with the conflict of interest isn’t in a position to make decisions about products in which they have an interest,” says McGinnity.

Other tools
Regardless of whether the IDN has such a policy in place, the fact is, other organizations – representing all facets of the supply chain – have written policies on which contracting professionals can fall back. These policies not only provide guidelines for action should a “situation” arise, but they offer concrete ways to prevent such situations altogether. They’re worth studying.

For example, the Code of Ethics and Professional Conduct of the Association for Healthcare Resource & Materials Management (AHRMM) calls on professionals to “[s]trive to conduct all business with honesty, fairness, integrity and loyalty to the institution and the profession,” and to “[n]ever enter into any transactions that would result in personal benefit or a conflict of interest.” The code also calls on AHRMM members to “[c]onduct oneself in such a manner as to merit the trust, confidence and respect of the healthcare marketplace.” That’s a pretty good litmus test.

The American Medical Association drafted its first set of guidelines regarding gifts to physicians from vendors in 1990. The AMA has updated its guidelines several times since. For easy-to-read “Frequently Answered Questions,” go to www.ama-assn.org/ama/pub/category/13394.html. Your suppliers have codes of their own. For example, two years ago, the Health Industry Distributors Association published its “Best Practice Distributor Compliance Program,” which raises potential areas of concern (e.g., gifts from distributors to healthcare professionals, excessive hospitality, etc.) and offers some guidelines to distributors who want to draw up their own policies.

The Advanced Medical Technology Association, or AdvaMed – an association representing 1,200 medical products manufacturers and subsidiaries – last updated its “Code of Ethics for Interactions with Health Care Professionals” January 2004. You can view information about the code by going to www.advamed.org/publicdocs/coe.html. Manufacturers that have self-certified with AdvaMed that they adhere to the organization’s code may display distinctive “Code of Ethics Supporter” logos on their business cards, stationery, etc. To see what the logo looks like, go to www.advamed.org/publicdocs/6-19-06coe_logo.shtml.

In 2002, the Pharmaceutical Research and Manufacturers of America revised its own “Code on Interactions with Healthcare Professionals,” citing a need to help its members stay focused on the true intent of buyer-seller interactions, namely, to inform healthcare professionals about products, provide scientific and educational information, and support medical research and education. The code may be viewed at www.phrma.org/code_on_interactions_with_healthcare_professionals/.

About the Author

Mark Thill
Mark Thill is the Editor of The Journal of Healthcare Contracting and has been reporting on healthcare supply chain issues since 1985. He is a graduate of Dominican University in River Forest, Ill., and he received a master's degree in journalism from Northwestern University in Evanston, Ill.