Connecticut investigates research group

The relationships between corporate health care executives and the vendors who supply their businesses with goods and services have come under scrutiny with an investigation focusing on some of the most influential leaders in the field.

Connecticut Attorney General Richard Blumenthal has issued more than 100 subpoenas in the last six months seeking information about individuals and companies affiliated with the Healthcare Research & Development Institute, which is owned by some of the nation's top hospital leaders. It counts as members major manufacturers and suppliers of a wide range of health care goods and services.

Blumenthal has not filed any lawsuit or issued criminal charges against HRDI. But in past congressional testimony, he's made clear he considers the organization little more than a vehicle to allow hospital equipment and supply vendors to buy access to the nation's top hospital leaders.

In an interview with AMNews, Blumenthal declined to say how long the investigation would continue or which companies and individuals had received subpoenas, saying only that they were affiliated with HRDI and included at least one party in Connecticut. He was unaware of any similar investigations by other law enforcement agencies.

The leaders of Pensacola, Fla.-based HRDI dispute Blumenthal's description of their organization.

They describe the organization as a think tank that provides a forum for hospital leaders and suppliers and manufacturers to share ideas about industry needs with the goal of improving products and services. The organization arranges meetings twice a year, the most recent in May in Colorado Springs, Colo. At the meetings, corporate and individual members gather to discuss strategy, product development and industry concerns.

The individual members -- who are shareholders of the organization and include leaders of some of the nation's top hospitals and health systems, such as Chicago's Northwestern Memorial Healthcare and Texas' Baylor Health Care Systems -- are paid a fee for participating in the forums. Diane Appleyard, HRDI's president and chief executive, compared it to a consulting fee and said it typically amounts to about $20,000 per year.

The organization, established 54 years ago, is underwritten by about 45 corporate members, including big-name companies like Abbott Laboratories, Kimberly Clark, 3M, Morgan Stanley and Solucient, who pay an undisclosed amount in annual dues.

But Blumenthal has described the organization as a "secretive for-profit company" whose business raises anticompetitive concerns. "At the very least, it suggests insider dealings -- an insidious, incestuous, insider system -- symptomatic of the [group purchasing organization] industry," he said in testimony in March before a subcommittee of the Senate Judiciary Committee. Blumenthal said the business model essentially enables companies to make payments in exchange for access to hospital leaders who could influence important purchasing decisions.

"Simply put, HRDI provides its corporate members with the opportunity to purchase special access to hospital and health care CEOs. These CEOs are in a position to directly or indirectly exert considerable influence on purchasing decisions relating to the products that the corporate members sell to the hospitals and health systems these CEOs represent," he said in his testimony, which was given during a hearing about hospital group purchasing.

But Appleyard said the organization had safeguards in place to prevent against any such conflicts of interest. She said there are strict rules of participation for individual and corporate members prohibiting sales at HRDI events.

"The member is not going to be influencing what company the hospital buys from based on anything heard at HRDI," she said. "We are not a group purchasing organization. There's no buying and selling in our organization. ... We are a very small company that does basically consulting and market research."

Still, Appleyard acknowledged that the organization does not prohibit its members from doing business together outside of HRDI, in part because some of the companies involved are so dominant in the marketplace that such a ban would be impractical.

"If I prohibited members from ever doing any business with these companies, it would be impossible to do that. In the natural course of business, they do business with some of these companies," she said.

Matthew Katz, executive director of the Connecticut State Medical Society, said his organization has not taken a position on the case, although it is "concerned about the allegations" and awaiting the outcome of Blumenthal's investigation.

Physicians have cause to be particularly alarmed by the allegations since their work can be adversely impacted by hospital purchasing decisions, said Mark Leahey, executive director of the Washington, D.C.-based Medical Device Manufacturers Assn., which represents small to midsize manufacturers and has been critical of the group purchasing industry.

"The fact that these folks also sit on the boards of the multi-billion dollar GPOs, which really determine which products get into the hospitals, it creates a severe conflict of interest," he said.