Cook County economy would be harmed by health system plan, commissioners say

  • By Alex Parker
  • Staff Writer
  • May 20, 2009 @ 10:50 AM

The Cook County Health and Hospital System's proposed procurement system would harm the county's economy, forcing many small businesses to cut their operations, county commissioners asserted yesterday.

Leaders of the health system explained the thinking behind a plan to use a consortium of vendors to purchase medical supplies to commissioners yesterday, as local business owners who oppose the plan did their best to poke holes in the health system's argument.

The plan to use a Group Purchasing Organization (GPO), which use a pre-approved set of vendors, is under fire by local business owners that currently supply the county.

They say an agreement would eliminate their ability to sell to the county. Health system officials say independent surveys prove the system would save at least $20 million this fiscal year, and as much as $40 million annually in the future.

Commissioner Peter Silvestri complained there has not been enough analysis about the impact on the local economy.

"Have we considered the economic burden on the county?" he asked. Health system officials say they have not.

System officials say a GPO used to purchase pharmaceuticals since 2006 has saved about $20 million over three years.

"What we hope to achieve out of this is we will use the whole purchasing power of this large system that we have, instead of operating at a highly fragmented, extraordinarily expensive manner," says system chairman Warren Batts. "It is one of the most significant moves we can make [to save taxpayers money]."

But Commissioner Roberto Maldonado disagreed with that assertion from the outset, saying in his opening statement, "A group purchasing organization would effectively eliminate [small businesses'] ability to do business with the county because [GPOs] shut out minority- and women-owned businesses, and only do business with majority companies."

Health system CEO William Foley, COO David Small and chief procurement officer Leslie Duffy also defended the plan, which they say would not violate the system's requirement to give at least 35 percent of aggregate business to minority- and women-owned businesses.

They said the system always gives preference to local businesses when making purchasing decisions.

However, the system's current pharmaceutical vendor, AmerisourceBergen, is based in Pennsylvania, and has few Cook County partners. The system's new procurement policy, adopted in March, states a local business is defined as a company in good standing with the state, meaning it does not necessarily have to be owned or operated by Cook County merchants.

Officials also stressed not every supply contract would necessarily go through a GPO, likening it to a Costco membership, where consumers have the option of shopping there or elsewhere.

Foley, who began as CEO three weeks ago, said using a GPO is standard industry practice.

"I feel strongly that group purchasing is not only a best practice, but an essential one," he says. It is used by other area hospitals, including hospitals operated by Loyola University, University of Illinois and the University of Chicago.

"There will be business for women and minority businesses out of Cook County," says Duffy, the procurement director.

But business owners say that's a false assumption. They complain it will be near impossible for the system to consider local options because local businesses generally do not belong to GPOs, and that GPOs have not been forthcoming requirements to belong to the consortia.

"If it were an open process...those things should be available to us," says business owner Pam McDonough.

Betty Hancock Perry, the county's contract compliance officer, said AmerisourceBergen, the current pharmaceutical vendor, has not fulfilled its requirement for giving business to minority- and women-owned businesses, giving fewer than 3 percent of business to them. AmerisourceBergen was given a reduced requirement of 3 percent, far less than the 35 percent expected from other contracts.

An AmerisourceBergen representative disputed that, saying it has exceeded the amount by hundreds of thousands of dollars.

But Perry, who nodded in agreement with the points business owners made, says, "It is true if [businesses] are not in the GPO, they will not be considered."

Hospital officials have said they have all but decided on a GPO, but the board has yet to approve a contract.

Elliot El Amin, whose business provides the supplies to the system, complained that the system is already using its pharmaceutical GPO to purchase supplies. He cited a measure passed by the board in early April, extending its contract with the GPO in order to purchase supplies.

Daily News Staff Writer Alex Parker covers public health. He can be reached at 773.362.5002, ext. 17, or alex [at] chitowndailynews [dot] org.