Health Execs’ Group Disbands Under Antitrust Settlement with Conn.

January 30, 2007

A national organization of health care executives has agreed to disband amid an investigation by Connecticut authorities into whether it illegally gave preferential treatment to vendors who joined the group.

State Attorney General Richard Blumenthal announced an antitrust settlement last week with Healthcare Research and Development Institute LLC, based in Pensacola, Fla. Under the deal reached with the offices of Blumenthal and Florida Attorney General Bill McCollum, HRDI also agreed to pay Connecticut $150,000.

Blumenthal alleged that HRDI members showed favoritism to certain vendors, who paid $40,000 for membership privileges in the group and received direct access to chief executives of hospitals and other health care institutions.

Some executives were paid $20,000 to $25,000 a year to attend conferences with luxury accommodations and provide consulting services to companies that supply pharmaceuticals, medical devices and other goods and services to hospitals and other facilities, Blumenthal said.

Some HRDI members referred vendors to purchasing personnel at their hospitals or introduced vendors to other chief executives, he said. The investigation also found evidence that some vendors’ sales to certain hospitals increased significantly after they attended “confidential” panel sessions with chief executives of those hospitals during HRDI’s semiannual meetings, Blumenthal said.

“These practices threatened to inflate health care costs to patients and taxpayers — stifling competition in almost every health care supply and services market,” he said.

Blumenthal declined to name any of the HRDI members or vendors involved in the alleged activities, saying his investigation is continuing and may result in future legal action. He said his office investigated because several HRDI members and vendors have ties to Connecticut.

Under the settlement, HRDI will dissolve but will be allowed to reorganize with only health care executives, and not vendors, as members.

Diane P. Appleyard, HRDI’s president and chief executive officer, said the nearly two-year investigation has found no wrongdoing and no charges have been filed. She said the organization fully cooperated with investigators.

“HRDI never has and does not now buy, sell or encourage the purchase or sale of products or services,” Appleyard said in a statement. “From its inception, HRDI has strictly prohibited our corporate members from using HRDI meetings or relationships for selling or marketing to hospital members.”

According to HRDI’s mission statement, the health care executives get together to share new ideas and strategies, seek ways to improve their hospitals and services and educate companies that serve the industry so their products and services better meet patient and provider needs.

“Nevertheless, HRDI … has voted to cease operations early in 2007,” Appleyard said. “The toll of this investigation has been high in many respects for our members, their institutions, our corporate members and our staff.”

She said the group’s focus has always been to improve health care. She said its members hope to find new ways to accomplish that goal.

According to HRDI’s Web site, its more than 30 members have included: Joel Allison, president and chief executive of Baylor Health Care System in Dallas; Dr. Benjamin Chu, president of Kaiser Foundation Health Plan’s Southern California region; Martha H. Marsh, president and chief executive of Stanford Hospital & Clinics in Stanford, Calif; Thomas Priselac, president and chief executive of Cedars-Sinai Health System in Los Angeles; and Elaine S. Ullian, president and chief executive of Boston Medical Center.

HRDI’s client list includes health care products maker Abbott Laboratories of North Chicago, drug maker Eli Lilly & Co. of Indianapolis, the nation’s largest bank, Citigroup, of New York, Johnson & Johnson Healthcare Systems of Piscataway, N.J., personal care products maker Kimberly-Clark Corp. of Dallas and Morgan Stanley Inc., one of the big five U.S. Wall Street investment banks.

Allison’s office said he resigned from the group in November and would have no comment. A spokesman for Eli Lilly declined to comment. Messages were left with several other HRDI members and clients.

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