Cook County Health System Withstands Challenge to Purchasing Decision

May 10, 2010

The ordinance that established the Cook County Health and Hospitals System (Health System) in 2008 specifically granted its independent Board of Directors the authority to participate in purchasing consortia. At a meeting on April 30, 2010, the Board reaffirmed its right to award a contract through such a purchasing group, despite objections from two Commissioners of the Cook County Board.

The contract before the Health System’s Board involved the provision of laundry and linen services at Stroger, Provident and Oak Forest Hospitals and at Cermak Health Services. According to Health System officials, the best price for the services came from the County’s Group Purchasing Organization (GPO). A GPO is a purchasing intermediary that is used to control the cost of medical products. By pooling purchases, GPOs say they can negotiate lower prices from manufacturers, distributors and other suppliers. Roughly 96% to 98% of U.S. hospitals use GPOs for at least some of their purchasing functions, according to an industry trade group.

The Cook County Health System entered into an agreement to participate in the Oak Brook-based University HealthSystem Consortium/Novation GPO program in September of 2009. Health System officials have said that the arrangement is expected to save $20 million a year.

In the case of the Health System’s laundry services contract, officials said the vendor obtained through the GPO offered a maximum price of $6.54 million over three years—at least $2 million below the price previously proposed by the Health System’s vendor of 25 years. Officials said they were able to compare the prices because the Health System had issued two Requests for Proposals before turning to the GPO.

The Health System’s longtime vendor, Angelica Healthcare Services Group, argued at the April 30, 2010 meeting that the numbers were not comparable because the terms of the contract had been changed. Angelica and two Cook County Commissioners, Robert Steele and Edwin Reyes, also told the Health System’s Board that replacing Angelica could cause the County residents to lose their jobs. Angelica is based in Lorain, Ohio, but has a Chicago location near Stroger Hospital. The GPO-obtained vendor, Standard Textile of Cincinnati, has subcontracted with a Madison, Wisconsin-based linen company that has a location in Batavia. Both commissioners said they would introduce an ordinance to prevent similar contract awards in the future, although they did not provide details about this proposal.

The Health System’s use of a GPO has long been controversial. Local small business owners have objected on the grounds that they would not be able to compete with major suppliers. In May of 2009, Cook County Board President Todd Stroger asked the Health System to proceed more slowly with the GPO plan because it might hurt minority and women vendors.

At the meeting on April 30, all except one of the Health System’s directors voted to approve the contract with the new vendor. The dissenter, Jorge Ramirez, vice chairman of the Board and secretary/treasurer of the Chicago Federation of Labor, said he did not want the GPO to result in a loss of jobs in Cook County. However, other Health System directors, including Cook County Commissioner Jerry Butler, said it was their responsibility to obtain the best price for services.

The Civic Federation strongly supported the creation of an independent Health System Board to improve the Health System’s efficiency and limit the role of politics in its day-to-day operations. The Federation continues to recommend that the Health System should manage its own basic activities, including hiring, firing, contracts, purchasing and finances. The Federation continues to oppose any role for the Cook County Board of Commissioners in the Health System’s affairs beyond appropriating funds and exercising broad financial oversight.