The Group Purchasing Organization Agreement Should Clarify the Responsibilities and Engagement Rules Between the GPO and Its Members
When it comes to the Group Purchasing Organization Agreement always utilize experienced GPO law firms and lawyers to mitigate risks for the GPO via a properly drafted Group Purchasing Organization Agreement, there is simply too much at risk that can be avoided
For a brief understanding of a typical Group Purchasing Organization Agreement, we have outlined below some of the common provisions included in general Group Purchasing Organization Agreements, provisions that are useful in most Group Purchasing Organization Agreements and for most types of GPOs. Remember, when it comes to typical business agreements between two parties, seeking legal advice is prudent, when you take into consideration the fact that Group Purchasing Organization Agreements are executed among the GPO parent and many parties, having a law firm or lawyer that specializes in representing GPO’s and crafting GPO friendly Group Purchasing Organization Agreements is critical for risk mitigation. It’s also extremely useful for the GPO members as the Group Purchasing Organization Agreement also provides information on the rules of engagement to the signing members and having a clear, well-defined path to engage leads to more productive and headache free GPO and member interactions. Clarity is good for everyone involved and the Group Purchasing Organization Agreement provides just that!
Group Purchasing Organization Agreements
Group purchasing organizations (GPOs) come in all shapes and sizes and serve a wide variety of industries. One thing they have in common is that the relationship they have those to who use their services to achieve more favorable purchasing terms needs to be carefully documented through an agreement with each one of them. Such agreements themselves may go by various names, but here they will be referred to as Group Purchasing Organization Agreements. Simply put, the Group Purchasing Organization Agreement should describe the services provided by the GPO to its members or participants, specify how it will be compensated for its services and set forth what is expected of the members who enjoy the GPO’s services.
Group Purchasing Organization Agreements – A Representative Sampling of Provisions Found in Group Purchasing Organization Agreements
The points below describe a representative sampling of provisions that are often found in Group Purchasing Organization Agreements, whether they be focused upon health care provider members or whether they serve other types of constituencies. Once again, the information provided below is not intended to be all inclusive, but rather is provided only for purposes of illustration. They are also not listed in any certain order of importance as it pertains to the Group Purchasing Organization Agreement.
Group Purchasing Organization Agreements Often Contain the Following Provisions
- The Group Purchasing Organization Agreement provides the description and scope of purchasing program services to be provided by the GPO to it’s partnership.
- The Group Purchasing Organization Agreement contains provisions relative to the use and handling of data provided to and/or derived from the involvement of Suppliers and Members with the GPO’s purchasing programs.
- The Group Purchasing Organization Agreement specifies the dues or fees to be paid by the GPO Members.
- The Group Purchasing Organization Agreement provides the disclaimer of warranties of products and services provided through GPO to the member and limitation of liability provision
- The Group Purchasing Organization Agreement requires the GPO member to maintain public liability insurance of at least a certain amount and to name the GPO as an additional insured.
- The Group Purchasing Organization Agreement requires the GPO Member to indemnify and hold the GPO harmless from damages arising out of the GPO Member’s participation in the GPO and other specified causes.
- The Group Purchasing Organization Agreement provides the statement of criteria to be maintained on an ongoing basis to remain a Member of the GPO. Examples could require that the Member be creditworthy, be prompt in the payment of all debts owed to the GPO or its suppliers, that it be in the business upon which the GPO is focused, to list a few.
- Group Purchasing Organization Agreements set the expectations or duties to be performed by Member for the benefit of GPO. Examples could include a specified degree of support of the GPO’s purchasing programs, attendance at meetings, and participation on committees. (the latter two examples would be more typically found in a buying group or GPO owned its members.)
- Group Purchasing Organization Agreements define whether Member is permitted to join other GPOs. A GPO would not typically permit participation in other groups which closely compete with it.
- Group Purchasing Organization Agreements define whether the Member may have a separate purchasing arrangement with a supplier for products already covered by a purchasing program of the GPO. Click here for more details.
- Group Purchasing Organization Agreements set forth the grounds for terminating a Member’s participation in the GPO.
- Group Purchasing Organization Agreements set forth the remedies of the GPO against a Member or members for violating terms of Group Purchasing Organization Agreement, or other defaults.
- The Group Purchasing Organization Agreement includes a provision for how long the Group Purchasing Organization Agreement will be in effect, if not indefinitely, any automatic renewal provisions or providing for type of notice required to voluntarily terminate the Agreement.
- The Group Purchasing Organization Agreement stipulates what the rights of the GPO and the Member are upon termination of Agreement. For example, the GPO should be entitled to receive a release of liability from the Member upon termination.
- Group Purchasing Organization Agreements typically include a confidentiality provision to protect the proprietary information of the GPO with which the Member is entrusted.
- Any Group Purchasing Organization Agreement should include a provision that the Partnership Agreement is non-assignable.
- Group Purchasing Organization Agreements also contain the usual contractual provisions at the end, such as those pertaining to notices, governing law, dispute resolution, the remedy specific performance being available, etc.
The Group Purchasing Organization Agreement – It’s Critical to Obtain Proficient Legal Advice When Creating Such a Foundational Agreement Such as the Group Purchasing Organization Agreement, Including any Revision to a Standing Group Purchasing Organization Agreement
The Group Purchasing Organization Agreement is critical documentation of the GPO’s relationship with its members. Every group has its own unique objectives and requirements. The Group Purchasing Organization Agreement should clearly delineate the objectives, rights, duties, and expectations of the parties, so that there can be no misunderstanding. We at Ray Law Firm, PLLC are well qualified, having done so for many GPO’s of all sizes and locations, to assist GPOs in this important task, whether it be in existence for years, in the process of formation, or are simply a gleam in their founder’s eye. When it comes to drafting and executing a Group Purchasing Organization Agreement, count on the Ray Law Firm, PLLC to deliver reasonable, protective GPO Agreements with Clarity for all parties involved.
Group Purchasing Organization Agreements – Key Components of the GPO Agreement With Respect to Healthcare GPO’s
When it comes to GPO agreements and healthcare, there are some nuances that make them different than GPO Agreements for other types of GPO’s. The Group Purchasing Organization Agreements for healthcare GPOs must comply with the Safe Harbor Regulations to avoid possible exposure under the Anti-kickback Statute (AKS) (See 42 U.S. Code § 1320a–7b). The Safe Harbor Regulations may be found at https://www.ecfr.gov/current/title-42/chapter-V/subchapter-B/part-1001/subpart-C/section-1001.952 and are cited as 42 C.F.R. § 1001.952(j). The AKS only applies to GPOs that serve healthcare providers who receive federally funded healthcare payments such as Medicaid or Medicare. For more information regarding the nature of healthcare GPOs and compliance with the Safe Harbor Regulations, please go to GPO Antitrust Update for 2023 and GPO Safe Harbor . Accordingly, their Group Purchasing Organization Agreements must check a number of boxes to comply with the Safe Harbor Regulations. Partnership Agreements for GPOs that are not healthcare related are relieved of that burden. Let’s focus upon the types of provisions that should be included in healthcare-related GPO Agreements
Group Purchasing Organization Agreements - Partnership Agreements Provisions Specific to Healthcare Related GPOs
Under the Safe Harbor Regulations, the Group Purchasing Organization Agreement must be entered into in writing with all of its members. In addition, it must provide for either or of the following: (i) That participating vendors who sell to the GPO’s members will pay a fee to the GPO not to exceed 3% of the purchase price of the goods provided to the members of the GPO; or (ii) If the fee paid by the vendor to the GPO is not 3% or less, then the amount to be paid by the vendor must be disclosed, or if not known, the maximum amount to be received by the vendor must be disclosed in the GPO Agreement. Such amount can either be stated as a fixed amount or as a percentage of the purchases made from the vendor by the members of the group under the agreement between the vendor and the GPO. In addition, the GPO must disclose to each healthcare provider member in writing at least once a year, and to the Department of Health and Human Services, when requested to do so, the amount received from each vendor with respect to purchases made by on behalf of such member. The definition of a group purchasing organization under the Safe Harbor Regulations is worth noting here as it in and of itself can be seen as a requirement. The definition is given as follows:
“the term group purchasing organization (GPO) means an entity authorized to act as a purchasing agent for a group of individuals or entities who are furnishing services for which payment may be made in whole or in part under Medicare or a State health care program, and who are neither wholly-owned by the GPO nor subsidiaries of a parent corporation that wholly owns the GPO (either directly or through another wholly-owned entity).”Therefore, another requirement is that the GPO must serve as a negotiating agent for a collection of unrelated healthcare providers. If they were all affiliates of each other, then they would not fit within the Safe Harbor Regulations.
Group Purchasing Organization Agreements for Healthcare GPO’s - Let’s Consider Some of the Specific Provisions in a Group Purchasing Organization Agreement for Healthcare GPO’s
With that general background in mind, now let’s consider some of the specific provisions that are wise to include in a healthcare-related Group Purchasing Organization Agreement. This list below is not intended to be all inclusive, but rather to demonstrate several provisions that are unique to healthcare GPOs. They are also not listed in any particular order of importance with regard to healthcare related Group Purchasing Organization Agreements.
- Group Purchasing Organization Agreements include a provision disclosing the percentage of purchase volume or the amount of fees the GPO will receive from the suppliers who participate in the GPO programs.
- Group Purchasing Organization Agreements include a provision requiring the GPO to report on an annual basis the amount it received from each Supplier with respect to purchases made by or on behalf of Member to the member and to the Secretary of the United States Department of Health and Human Services upon his or her request.
- Both the GPO and the member will make its books and records open to each other for audit insofar as they pertain to such party’s participation in the purchasing programs offered by the GPO.
- Group Purchasing Organization Agreements include an agreement by Member to comply with the Safe Harbor Provisions.
- Group Purchasing Organization Agreements stipulates an obligation of Member to remain licensed under state law to provide its healthcare services and certified to participate in the Medicare and Medicaid programs.
- Group Purchasing Organization Agreements include a provision for disclosing the GPO’s affiliates who may either be suppliers or members of the GPO
- That neither party is excluded or disbarred from participating in any Federal Healthcare Program (as defined under 42 U.S.C. § 1320a 7b(f), has not been convicted of a criminal offense related to healthcare services, or is under investigation for such.
- Agreement by Member that every purchase of a product subject to the requirements of § 340B of the Public Health Services Act made by Member through any contract with a supplier contract provided by the GPO shall be for Member’s ultimate consumption or “Own Use,” and not for resale.
- Similarly, Members should be required to agree not to sell any such 340B type product purchased through the GPO to any wholesaler, distributor, or other entity.
