On Friday, as leaders of the Cook County Health and Hospitals System approved a three-year $6.4 million contract for laundry and linen services, small businesses renewed claims that they're being pushed away. And this time county commissioners are joining them in complaining about the health system's use of a group purchasing organization.
The contract, with Cincinnati-based Standard Textile Co., Inc., is expected to save the health system 38 percent of its current contract with Lorain, Ohio-based Angelica Corporation. And health system leaders say a rebate program will net an additional $2 million.
But a growing clamor from county commissioners and small business owners illustrates that not everyone is comfortable with the health system’s use of a centralized group purchasing program, which health system leaders expect to save up to $20 million a year. So far, however, the health system has been unable to prove those savings.
“There are three issues I see,” says Todd Maddock, market vice president for Angelica, which has a Chicago location based about a mile away from Stroger Hospital. “It’s not a fair and competitive bidding process. Two, it goes to sole-source bidding, and three, it has the potential to eliminate 110 Cook County residents’ jobs.”
Angelica has had a linen and laundry contract with the county for 25 years, and is one of a number of businesses that have lost contracts with the county since it began purchasing supplies from UHC/Novation, the group purchasing organization, in September.
Maddock, whose company was awarded a $14 million contract last year, says Angelica wasn’t asked to bid on a new contract. Chuck Rossmiller, CEO of Wheeling-based Healthcare Laundry Services says his company was invited to bid on the contract only after badgering the health system’s procurement director, Leslie Duffy.
Health system CEO William Foley maintained Friday a thorough review of the contract showed the county will benefit.
“This is a big contract. We’ve been doing a lot of comparisons and analysis of the bids that come in, the pricing of those bids, to really compare apples to apples,” he said. “From management’s perspective, we feel an obligation to put this in front of the board. If it wasn’t that much of a savings, we might feel different. But $2 million over three years isn’t insignificant.”
Health system spokesman Lucio Guerrero says any contract signed with a group purchasing organization is aimed at saving money to provide better health care services to county residents.
“I'd argue the taxpayers of Cook County get the spoils. The money we save doesn't go into a private companies pocket - it goes to serve taxpayers,” he says.
Board member David Carvalho acknowledged that some local businesses that had previously done business with the county are upset, but said that was the nature of business.
“You will either be disrupting a relationship with an existing vendor…or changing relationships if the current vendor whose contract has expired is not the vendor under the GPO,” he said.
Standard Textile, which has offices in Cincinnati and Belgium, has sub-contracted with Superior Health Linen, a Madison, Wisc.-based company with a location in Batavia, in Kane County.
Commissioner Robert Steele says contracts like this need further scrutiny.
“We’re hiring a company that’s not Illinois-based company, not a Cook County-based company, which means our tax dollars are not going to be spent in our county,” he says, promising to ask more questions about the contract.
Also joining the call for more scrutiny are Commissioners Edwin Reyes, Deborah Sims and Peter Silvestri, who earlier this month called for public hearings on the issue.
Silvestri says the health system will provide an audit of its purchasing in July to determine how beneficial group purchasing has been.
“My initial concerns about the group purchasing plan have not wavered,” he says. “It discourages local business, it discourages minority- and women-owned businesses, it discourages things we should be encouraging.
“Yes, it saves money. Then we have to weigh the amount we’re saving against the loss of local business enterprises in our hometowns.”
Maddock says he hopes to do business with the county again, but he was surprised the quarter-century relationship was never taken into consideration.
“You would think it would constitute at least open and honest communication, which we never had,” he says.