Legislators will look into a complaint by a Lehi medical-supply firm that University Hospital is violating state law in its purchasing practices.
Rep. Byron Harward, R-Provo, says he's asked for a legislative audit of the hospital's buying practices. Several internal hospital audits have been conducted in recent years, says Harward, and each "strongly recommends" that a legal opinion be delivered on the hospital's purchasing agreements. Apparently, no such opinion has been delivered, says Harward, a member of the Legislature's Administrative Rules committee that's investigating the hospital.Ed Johnson, vice president of Johnson Medical Services, Lehi, says his firm and other local medical-supply companies have effectively been frozen out of the hospital's purchasing for more than 15 years.
Mary Shea Tucker, associate general counsel for the University of Utah, says the U.'s purchasing practices are completely legal and are saving taxpayers large sums of money. Johnson has not been frozen out, she says.
The hospital belongs to a consortium of 58 university medical centers around the country and purchases much of its material through that group buying, says Tucker. State law specifically allows "group cooperative external agreements," which is what the consortium is, she says.
Johnson said his firm, which specializes in operating-room tables, lights and accessories, has only been "invited to bid" on three or four University Hospital contracts over 15 years. "My guess is we could have bid on 60 to 100 contracts but were never even given the chance," says Johnson.
In those three or four cases where Johnson was allowed to bid, he didn't get the contracts, he says. "I believe we were the low bidders each time. But the U. has a policy of `standardization.' (They want to buy the same kind of equipment as much as possible and) take that into account in the bid. We had different equipment, we didn't get it," he complains.
Tuckers says that Johnson could bid on consortium contracts. If the low-bidder, he would get them. In fact, she says, the manufacturers whose equipment Johnson carries have indeed bid and won consortium contracts. Johnson could even bid on strictly U. contracts, although those are fewer. He has done so and won a few, claims Tucker.
Harward says he's sympathetic with the hospital's attempt to hold down health-care costs through group purchasing - as the consortium does. But there are state purchasing laws that must be followed, and it makes sense that more money would be saved by going with the low bid, he says.Johnson and Harward said they are also concerned that a hospital administrator in charge of purchasing sits on the board of directors of the consortium. "I can't think of a greater conflict of interest," says Johnson.
Harward says that hospital officials at first told him that the U.'s contract with the consortium was secret - "They said I couldn't read it." But when Harward ordered hospital officials to show where state law allowed such a secret contract, they couldn't. Harward read the agreement and was concerned to find that the consortium itself makes a 2 percent profit on each purchase that comes through the consortium. Having the hospital administrator oversee hospital purchases and sit on the board of a consortium that makes money on each such purchase "certainly troubles me," said Harward.
Tucker said a U. administrator does sit on consortium committees - but all consortium members have representatives on committees. The 2 percent is an administrative fee that allows the consortium to operate. "It doesn't end up in his (the U. administrator's) pocket," she said.
Harward is also concerned that the hospital has a five-year contract with a large medical-supply firm, Baxter Health Care, that has recently been in trouble with the federal government. He wants that relationship examined by the legislative auditor general as well.
Baxter, an international firm, is boycotting conducting business in Israel because some of its owners are Arabs, says Tucker, and so the U.S. government is taking some kind of action against Baxter. "Baxter has nothing to do with the consortium, it is just a very large distributor of health supplies whom we have a state contract with," says Tucker. The U. "is very satisfied with Baxter's performance on that contract."
If the Legislature won't let the U. belong to the consortium, "we will lose great savings in purchasing, and we'll loose the huge discount in medical malpractice insurance that we get through the consortium - there is no other alternative (group purchasing) arrangement out there for us to join," said Tucker.