Babson Case Number: BAB117 | Length: 17 Pages

Abstract

Was Premier, Inc., a hospital GPO, guilty of ethical conflicts of interest? Premier was a group purchasing organization (GPO) for more than 200 affiliated not-for-profit hospitals and health care systems in the United States. A series of investigative articles in The New York Times, beginning in March 2002, charged Premier with multiple conflicts of interest. Among its allegations, the newspaper argued that seller-paid fees; investments by Premier and its executives in vendors; and investments by vendors in Premier-sponsored equity funds, research institutes, and conferences all biased the selection process for medical products and services. As a result, Premier did not always choose items of the best quality or value for its affiliated hospitals. Moreover, The Times charged, new products – particularly those developed by small firms – were effectively locked out, suppressing medical innovation and hurting patient care. Richard A. Norling, CEO, and other top executives of Premier faced the difficult task of formulating an effective response to the charges raised by The New York Times. The (B) case is an epilogue to the (A) case. It describes Premier’s decision to hire an independent ethics consultant, the process it established to direct his work, and the major recommendations made by the consultant.

This case received the Emerson Center Award for the Outstanding Case in Business Ethics for 2004. It is suitable for upper-division undergraduate, graduate, and executive education courses in business ethics, leadership, business and society, and healthcare administration.