When leaders of the Cook County Health and Hospitals System signed a controversial medical supply contract in September, they promised savings of about $20 million annually.
Small business owners vociferously protested the health board’s decision, saying they would be cut out of the bidding process.
Now, six months after the county signed the three-year, $500 million medical supply deal with UHC/Novation, local businesses say their dire predictions have come true, and point to dramatically reduced county contracts.
As for the expected savings, health system spokesman Lucio Guerrero says it’s too early to tell how the group purchasing program has affected the bottom line. But health system leaders are keenly aware that they promised hefty savings.
“That number ($20 million) is pretty much in stone, so we’d have to make it up elsewhere” in the budget, Guerrero says.
Health system officials say a similar contract to purchase pharmaceuticals several years earlier yielded big savings.
They anticipated that allocating most of the medical supply business to a conglomerate of pre-approved vendors would simplify the procurement process.
Local medical suppliers are grumbling that they can’t join the group purchasing organization because it requires hefty up-front fees, and are hesitant to speak out against the plan for fear of losing even more business.
One small business owner says county contracts, which accounted for 60 percent of her business, have all but disappeared. Another says he’s lost half of his business and doesn’t know if it will survive.
“They all tell me they’re hurting,” says Ross Litton, whose Howard Medical Supply provided the county with underpads and other supplies until January. “County was really the last place local businessmen could go.”
Sheila Hill, executive director of the Chicago Minority Development Supply Council, says she’s worried about the way smaller businesses’ opportunities are drying up.
“My concern is when you go to a GPO, typically it squeezes out the smaller local vendors,” says Hill. “Prior to the GPO, the minority- or women-owned businesses could sell directly to the hospital (system). Some of them had been extremely competitive and had a great opportunity.”
Those opportunities have trickled to a standstill, according to local medical suppliers.
In November, one major medical supplier, Owens & Minor, invited local vendors to learn how they could be brought into the fold.
But local suppliers were told Virginia-based Owens & Minor was interested only in subcontracting with manufacturers that could add unique products to its catalog.
Owens & Minor spokeswoman Trudi Allcott says the company has reached out to local businesses, and currently works with two women-owned manufacturers in the area.
“Our efforts (with the health system) to date have been working with Novation to align Cook County with the products and supplies that are inside the Novation portfolio,” she says.
Owens & Minor, one of nation’s largest medical suppliers, is the county’s preferred vendor, Allcott says.
Elliot El-Amin, whose business, CE Services, has supplied the health system for about four years, says he’s lost about 80 percent of his business with the health system. He, like other merchants, is relying on the remainder of his business to stay afloat.
“A couple of years ago, it was the fastest growing segment of our business. But now, it’s just barely existing,” he says.
While El-Amin says he has been awarded contracts, the county hasn’t followed through. He calls it “frustrating.”
“Typically, once you’re awarded a contract, usually it’s a matter of days or at the worst, a couple of weeks before someone from the (purchasing) department is calling you and placing an order,” he says. But that’s not happened, leading El-Amin to wonder who is filling the county’s need.
“They’ve got to be buying from somebody,” he says.
Though one-third of the health system’s supply contracts still go out for bid, suppliers in Cook County say they’re not seeing the business.
Jackie Dyess, president of Intercity Supply says the county hasn’t placed an order with her company since the spring.
She says she has lost about 5 percent of her business since group purchasing went into effect.
“At the end of the day, local businesses are hurting as a result of the county’s decision, and we still have to support the local tax base,” she says. “It creates an unpleasant business atmosphere.”
Guerrero, the health system spokesman, says group purchasing is a good thing for the county, which he says was taken advantage of by a “cottage industry” of middlemen.
“The thing is, we have to balance taxpayer resources with making sure we get the best savings available,” he says. “Because of the way things were going for so long in the county, that wasn’t being taken into account.”