Healthcare Group Purchasing Industry Initiative

Introduction: The Healthcare Group Purchasing Industry Initiative ("Initiative") is an independent and voluntary organization created to establish and assure implementation of the highest ethical standards and business conduct practices in the healthcare group purchasing industry. Each Signatory of the Initiative pledges to follow a set of six core ethical and business principles, to report annually on adherence to these principles using an Annual Public Accountability Questionnaire, and to participate in an Annual Best Practices Forum to discuss best ethical and business conduct practices with other GPO representatives and interested parties. The six core principles underscore the healthcare group purchasing industry's commitment to use ethical business practices to help healthcare providers provide quality patient care at the most manageable cost.

The Initiative's six core principles are:

1. Each Signatory shall have and adhere to a written code of business conduct. The code establishes high ethical values and sound business practices for the Signatory's group purchasing organization.
2. Each Signatory shall train all within the organization as to their personal responsibilities under the code.
3. Each Signatory commits itself to work toward the twin goals of high quality healthcare and cost effectiveness.
4. Each Signatory commits itself to work toward an open and competitive purchasing process free of conflicts of interest and any undue influences.
5. Each Signatory shall have the responsibility to each other to share their best practices in implementing the Principles; each Signatory shall participate in an annual Best Practices Forum.
6. Each Signatory, through its participation in this Initiative, shall be accountable to the public.

Each Signatory is committed to the full implementation of the six core principles and shall not take any action that would be contrary to its intent and purpose. Each Signatory agrees to fully comply with the mandatory Healthcare Group Purchasing Code of Conduct Principles set forth below.

The Initiative also tracks how participating Signatories implement the Healthcare Group Purchasing Code of Conduct Principles through the Initiative's annual accountability process. Each Signatory submits an Annual Public Accountability Questionnaire to provide further transparency to the public regarding how each Signatory has implemented the Healthcare Group Purchasing Code of Conduct Principles. This disclosure allows government officials and the public to assess the adequacy of each organization's ethical and business practices.

The Healthcare Group Purchasing Industry Initiative Code of Conduct Principles

1. Each GPO shall have and adhere to a written code of business conduct. The code establishes high ethical values expected for all within the Signatory's organization.

1. Each GPO's distribution of code of business conduct ("Code") shall include:

1. distributing the Code to all new employees during their employee orientation; and
2. making available the Code to all clinical advisory committee members, contractors, directors, agents and vendors.

2. Each GPO's oversight of its Code shall include:
   
1. a compliance officer to be responsible for overseeing compliance with the Code;
2. a compliance committee or similar committee to advise the compliance officer and assist in the implementation of the Code;
3. a mechanism whereby employees can report possible violations of the Code without fear of retribution;
4. a mechanism to evaluate, investigate and resolve suspected violations of the Code;
5. a process to monitor on a continuing basis, adherence to the Code;
6. a process whereby adherence to the Code is measured in job performance;
7. a process to inform its Board of Director's committee or other appropriate committee regarding its adherence to its Code and its commitment to The Healthcare Group Purchasing Code of Conduct Principles; and
8. a process to continually measure and improve upon the value of the GPO's Code by evaluating best practices within the healthcare group purchasing industry.

2. Each GPO shall train all within the organization as to their personal responsibilities under the code.

1. Each GPO's Code training shall include:

1. providing all new employees training on the Code and any applicable law; and
2. providing periodic compliance training, guidance and education on the Code and any applicable law to employees, committee members, directors, officers, and any applicable contracting agents.

3. Each GPO commits itself to work toward the twin goals of high quality healthcare and cost effectiveness.

1. Each GPO's policies supporting high quality healthcare and cost effectiveness shall include:

1. a policy that encourages a competitive marketplace for healthcare procurement;
2. a policy that encourages members to purchase future medical technology and products determined to be innovative.
3. a policy that promotes the evaluation of innovative medical technology and products; and
4. a policy that promotes purchase of safe medical products.

4. Each GPO commits itself to work toward an open and competitive purchasing process free of conflicts of interest and any undue influences.

1. Each GPO's conflict of interest policies related to individuals shall include:

1. a requirement that employees in a position to influence the GPO contracting process not accept any gifts, entertainment, favors, honoraria, or personal service payments other than those of a Nominal Value from any participating vendor¹;
2. a policy prohibiting its employees who are in a position to influence the GPO contracting decisions from having an Individual Equity Interest in any participating vendor² in the contract areas they influence;
3. a policy that requires that any employee not covered under Section 4(a)(ii), and any officer, director, or a member of an advisory board of a GPO who accepts any gifts, favors, honoraria or personal services payments other than those of Nominal Value from any participating vendor to disclose such transactions to the appropriate governing body and for that individual to be recused from any negotiations or decisions related to such participating vendor;
4. a policy that requires that any employee not covered under Section 4(a)(ii), officer, director, or a member of an advisory board of a GPO to disclose Individual Equity Interests in any participating vendor to the appropriate governing body and for that individual to be recused from any negotiations or decisions relating to such participating vendor; and
5. a policy that requires all employees, directors, officers, and members of advisory boards to disclose information regarding any conflict of interest described in its Code on at least an annual basis.

2. Each GPO's conflict of interest policies shall include a policy to ensure that it does not have any Corporate Equity Interest³ in any participating vendor unless the acquisition of such Corporate Equity Interest demonstrably benefits the GPO's members, the GPO discloses such equity interest to its members in writing, and the GPO imposes no obligation, commitment or other requirements or restrictions that in any way obligates a member to purchase goods or services from such participating vendor.

3. Each GPO's conflict of interest and disclosure policies related to administrative fees shall include:

1. a policy that ensures the receipt of administrative fees from vendors do not encroach upon the best interests of the GPO's members;
2. a policy that requires it to have a written agreement with each member authorizing it to act as their purchasing agent to negotiate contracts with vendors to furnish goods or services to each member;
3. a policy to 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;
4. a policy that requires it annually to disclose all administrative fees received from vendors for contracting activities with respect to purchases made by the respective member; and
5. a policy that requires it annually to disclose all payments received from any vendor in the course of the GPO's group purchasing activities, but not allocable or otherwise reported with respect to the actual purchases of that or any other member.
   
4. Each GPO's policies to ensure an open and competitive purchasing process shall include:
   
1. a requirement to publicly post on its website or through other appropriate means information about its contracting process and contract opportunities;
2. a policy to ensure a fair and unbiased system for evaluating healthcare products and services being considered for procurement;
3. a policy that allows its members to communicate directly with all vendors and evaluate their products, regardless of whether the vendor has a contract with the GPO;
4. a policy that allows its members to purchase medical products from vendors that do not contract with the GPO;
5. a policy that establishes a vendor grievance procedure;
6. a policy to ensure the appropriate use of bundling, length of contracts, and sole or dual source contracts; and
7. a policy that promotes diversity among vendors to small, women and minority-owned vendors.

5. Each GPO shall have the responsibility to each other to share their best practices in implementing the Principles; each Signatory shall participate in an annual Best Practices Forum.

1. Each GPO's Best Practices Forum participation shall include sending an appropriate number of participants including senior executives to actively participate in the annual Best Practices Forum.

6. Each GPO shall be accountable to the public.

1. Each GPO's responsibilities shall include:
   
1. ensuring its CEO and Compliance Officer annual certify to the Initiative that it is in compliance with The Healthcare Group Purchasing Code of Conduct Principles;
2. submitting its response to the Initiative's Annual Public Accountability Questionnaire on a timely basis; and
3. ensuring its CEO and Compliance Officer annually certify to the Initiative that these individuals have reviewed and approved the GPO's Public Accountability response.

APPROVED AND ADOPTED BY THE INITIATIVE STEERING COMMITTEE:

September 21, 2007

¹ 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.

² Individual Equity Interest is defined as securities, options, warrants, debt instruments (including loans), or rights to acquire any of the foregoing, provided, however that the term shall not include: (a) interests in publicly held 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 neutrality of the GPO contracting decisions are protected.

³ Corporate Equity Interest shall mean securities, options, warrants, debt instruments (including loans), or rights to acquire the foregoing.