DEPARTMENT: Materials Management / POLICY DESCRIPTION: Vendor Relations
PAGE:1 of 8 / REPLACES POLICY DATED: May 1, 2000, December 18, 2000
APPROVED: June 19, 2001 / RETIRED:
EFFECTIVE DATE: August 15, 2001 / REFERENCE NUMBER: MM.002
SCOPE: All Company-affiliated facilities, including but not limited to, hospitals, ambulatory surgery centers, home health agencies, physician practices, service centers, and all Corporate Departments, Groups and Divisions and HealthTrust Purchasing Group, and particularly the following Departments and individuals:
Materials ManagementReimbursement
Education and TrainingControllers
Pharmacy
PURPOSE:
1.To articulate the Company’s expectations of vendors in their interactions with the Company and its colleagues.
2.To establish parameters for seeking and accepting funds from vendors for conferences, educational programs and other events.
3.To make clear that, other than as permitted herein, the Company does not wish to place extra-contractual demands on vendors.
POLICY:
  1. The Company expects vendors to respect the Company’s Code of Conduct and policies and procedures. It also encourages vendors to commit in contracts with the Company and any of its affiliates to adhere to the provisions of the Company’s Code of Conduct and policies and procedures which address vendor interaction with Company colleagues and facilities.
  2. The Company will accept vendor funding for certain events (e.g., educational events, charitable events, trade shows and conferences) only as outlined below, provided that the vendor’s funding and/or participation is not inappropriately offered by the vendor or solicited by the Company.
  3. In no event is any request for, or acceptance of, a vendor contribution to be connected in any manner, implied or express, with the conduct of business with the vendor (i.e., receiving funds from a particular vendor does not equate to an incentive or implied obligation to purchase goods or services from that entity, except as is allowed by the Discount Safe Harbor Regulations; likewise, refusal by a particular vendor to provide funds will not result in a refusal to purchase goods or services from the particular entity). Except for rebates and administrative fees received in accordance with Company policy, no payments, in whatever form, are to be received from a vendor that are contingent or based upon the Company purchasing services, supplies or equipment from such vendor.
  4. Any exceptions to this policy must be approved in writing by the facility’s Division President and the Senior Vice President for Ethics, Compliance and Corporate Responsibility.
DEFINITION:
For purposes of this policy, “vendor” is defined as an entity doing or seeking to do business with HealthTrust Purchasing Group (HPG), the Company, or any of its affiliated facilities.
For purposes of this policy, “colleague” is defined as any employee of the Company or any of its affiliates.
PROCEDURE:

A.Expectations of Vendors

  1. The Company expects its vendors to be familiar with our Code of Conduct and policies and procedures which relate to our colleagues’ interaction with vendors and other business associates, including but not limited to our Business Courtesies Policy, EC.005, Entertainment Policy, EC.006, and Vendor-Promotional Training Policy, EC.007, and to abide by those standards and policies.
  1. The Company provides vendors with a brochure which sets forth HPG’s and the Company’s commitment to high ethical standards. The document also includes reference to the relevant policies and their website addresses.
  2. The HPG’s website, located at contains additional information for vendors regarding the Company’s commitment to ethical business practices and its expectations of vendors with respect to their business practices.
  1. The Company encourages its vendors to have an ethics and compliance program, a code of conduct, or other evidence of their commitment to ethical business practices.

B.Permissible Arrangements for Vendor Funding of Events

Unless approved in writing by the Division President and the Senior Vice President for Ethics, Compliance and Corporate Responsibility, the following are the only permissible arrangements for vendor funding of events provided such events comply with Company policies, including the following: Non-Employed Physician Education Expenses, LL.010, and Providing Free and/or Discounted Training and Equipment to Referral Sources, LL.011. The fair market determination made pursuant to LL.010 and LL.011 should take into consideration the value of like training or equipment offered by other entities. The fair market value determination should not be reduced by vendor funding.

  1. Company-Sponsored Educational Programs.
  1. A Company-affiliated facility, including a Corporate Department, may accept funds from vendors for educational events pursuant to an educational grant (“restricted” or “unrestricted”) which has been contracted for and included in a national or local agreement with the vendor regarding the products or services that the vendor is to provide. The facility may not accept an educational grant unless the dollar value of the related supply purchases it makes from the vendor exceed the amount of the grant. The educational event must be in accordance with accrediting body standards (whether or not the particular program is accredited for continuing education (CE) credit) and must be related to the product or service provided by the vendor. Accrediting body standards can be foundfor the Accreditation Council for Continuing Medical Education (AACME) at the American Nurses Credentialing Center (ANCC) at for the American Council on Pharmaceutical Education (ACPE) at Other accrediting bodies may have similar guidelines which must be followed if accreditation is sought from such organizations.
  1. When HPG negotiates a contract that includes an educational grant, the contract language must specify that the program be related to the vendor’s products or services.
  2. To obtain funding for an event through an educational grant, a facility must first check with the local representative of the vendor to see if funds are available and if the vendor is interested in using the funds for the identified purpose.
  3. Before using funds pursuant to an educational grant in a national agreement, a vendor must determine that the funds are available.
  4. During regular program reviews, vendors will provide HPG staff with a summary of account activity relating to funding of educational programs.
  1. However, if:
  1. All funds under any educational grant by any particular vendor have been expended;
  2. The national agreement with such vendor does not include an educational grant; or
  3. There is no national agreement with such vendor,
a facility may accept funding from such vendor provided that:
  1. the educational event is in accordance with accrediting body standards (whether or not the particular program is accredited for CE credits);
  2. the program is related to the services or products the vendor provides;
  3. the vendor is given promotional credit for having contributed to the cost of such event; and
  4. the funds do not exceed the cost of supplies purchased from that vendor.
Accrediting standards can be found for the Accreditation Council for Continuing Medical Education (AACME) at for the American Nurses Credentialing Center (ANCC) at and for the American Council on Pharmaceutical Education (ACPE) at Other accrediting bodies may have similar guidelines which must be followed if accreditation is sought from such organizations.
  1. Examples of appropriate use of educational grant funds for an educational event include:
  • A hospital plans to present an educational program on management of diabetes for the medical staff. An insulin pump vendor offers to fund the program in part. The Company has a contract with the vendor that includes an educational grant and funds are still available under the grant. The hospital plans the educational program in accordance with accrediting body standards, and the funding is received from the vendor pursuant to the provisions in the grant contract. The hospital uses and maintains the appropriate documentation and the vendor is given promotional credit for having contributed to the cost of such event.
  • A hospital plans to develop a video tape on advances in cardiovascular medicine for physicians. A stent vendor offers to fund the program in part. The Company has a contract with the vendor but it does not include an educational grant. The videotape is developed in accordance with accrediting body standards and the hospital uses and maintains the appropriate documentation and the vendor is given promotional credit for having contributed to the cost of such video tape.
  1. Joint Educational Program with or without contract funding. A facility may co-sponsor an event outside the provisions of an existing purchasing agreement (if any), such as a conference, seminar or educational program, with a vendor subject to the relevant accrediting body standards where both the facility and the vendor:
  1. Benefit from the event;
  2. Are jointly contributing financially or in kind (e.g., contribute space, food or other services) to the sponsorship of the event;
  3. Have input into the invitation list;
  4. Are listed as co-sponsors of the event; and
  5. Arrange that payments by the vendor for certain aspects of the program (e.g., speaker fees or food) are made directly to the individual/entity to be paid.
An example of such an educational program includes a lunchtime program on a particular medical topic with CE credit for attendees where the vendor pays the speaker’s fee and the facility provides the space and food. The program brochure includes both the facility and the vendor as sponsors, and both have an opportunity to invite guests to the program.
  1. Trade Shows, Conferences and Company Meetings. A facility or Corporate Department may permit vendors to participate in events the facility or Corporate Department sponsors, such as trade shows, conferences for Company colleagues or Company meetings provided that the vendors receive something of commensurate value in exchange for their contributions.
  1. Except as provided herein, vendors may not be required or permitted to subsidize facility or Corporate Department meeting or conference activities. Vendors may purchase exhibit opportunities at an event the facility or Corporate Department is sponsoring provided that the facility charges all vendors a like amount for like opportunities. The facility or Corporate Department may use the money from the sale of exhibit opportunities to offset costs of any portion of the meeting.
  2. A vendor may provide materials or samples to be distributed at the facility-sponsored event provided it is clear that the materials or samples were supplied by the vendor and provided that if given to a Company colleague the value does not exceed the $50 gift limit.
An example of an appropriate way to permit vendors to participate in a Company meeting, conference or a trade show is: The Company is arranging a meeting of colleagues from several Company-affiliated facilities. The colleague organizing the event for the Company sends a letter to vendors offering booth space at the meeting. The rate that the Company quotes the vendors is the same for all vendors for like space. The Company may use any amounts that exceed the costs of the exhibit space to offset costs of the meeting.
  1. Charitable Functions. From time to time, Company-affiliated facilities are asked by charitable organizations to contribute to their organization or participate in a fundraising event of their organization, including asking or encouraging others outside the Company to participate in the charitable function.
An individual who has chief executive authority for a component of the Company (e.g., the CEO of a hospital, a Group President, the Corporate CEO) must approve the use of Company resources to support a charitable organization. Such support includes encouraging company colleagues as well as others outside the Company to participate in a charitable organization’s fundraising efforts. If the chief executive of the relevant component approves supporting a charitable organization including encouraging others outside the facility to become involved, the individual(s) designated by the chief executive of the relevant component to seek others’ support must send written invitations to participate to a diverse audience, comprised of vendors and non-vendors (e.g., community businesses). The written invitation must include a statement that any failure or refusal to contribute will not affect the recipient’s business relationship with the Company. Any funds a vendor or other non-Company entity chooses to provide the charitable organization must be provided directly from the vendor to the charitable organization (i.e., not through a Company-affiliated facility or Company colleague).
Examples of the proper way to address fundraising by charitable organizations includes:
  • The local chapter of the American Heart Association is having its annual fundraising dinner. A Company hospital is invited to purchase 10 tickets (i.e., a table) at the dinner and is encouraged to invite other companies in the community to do the same. The hospital purchases the 10 tickets and distributes them to hospital colleagues. An individual authorized by the CEO sends a letter to vendors and other businesses in the community encouraging them to support the American Heart Association dinner and provides the recipients with a contact number at the Association if they are interested in being involved.
  • A department director at a Company hospital is a member of the Board of Directors of the local council of the Girl Scouts of America and wants to solicit contributions in its annual fundraising drive. The department director would like to use Company letterhead and a limited amount of administrative support to send a letter to community businesses seeking support for the Girls Scouts’ fundraiser. The department director is granted approval by the hospital CEO to use the facility’s letterhead and a limited amount of facility administrative support to do so.

C.Documentation Requirements

A Company-affiliated facility accepting funds from a vendor for an educational event must utilize the Request for Educational Grant from a Vendor form (see Attachment) to request the funding from the vendor. The completed form must have the proper approvals and must be maintained with the other supporting documentation for the event kept at the facility.
D. Business Courtesies from Vendors
  1. Vendor-Sponsored Entertainment. Consistent with the limits in the Company’s Entertainment Policy, EC.006, a vendor may provide to Company colleagues entertainment that does not exceed $100 in value per event at an infrequent rate (generally meaning it does not exceed 4 times per year).
  1. Gifts. Consistent with the Company Code of Conduct and Business Courtesies Policy, EC.005, a vendor may provide to Company colleagues gifts that do not exceed a total of $50 in any one year.
  1. Vendor Promotional Training. Consistent with the Company’s Vendor Promotional Training Policy, EC.007, vendors may provide training regarding new products or services it wishes to promote and associated travel, meal and entertainment costs provided the recipient’s supervisor and the facility Ethics and Compliance Officer determine that the substantive portions of such event outweigh any entertainment portions.

E. Accounting Requirements for Vendor-Sponsored Events

The Medicare rules do not provide adequate guidance regarding the specific treatment of funds provided by a vendor for educational programs for national contracts. Accordingly, the Company has adopted the most conservative approach and treats such funds as discounts. For individual facilities receiving vendor funds for educational programs, the amount received must be offset against the cost of supplies purchased from the applicable vendor by the particular facility. Since the funds are provided by the vendors only to the extent the facilities conduct educational programs related to the vendor’s products, those facilities that take advantage of these funds will, in effect, receive a higher percentage discount on the products they purchased from the vendor.
If the educational program is sponsored by the corporate office (or similar corporate subsidiary providing management or support services) and is regional or national in scope, the amount received by the corporate office (or similar corporate subsidiary) will be allocated to all facilities with other rebates received from that vendor and will be similarly offset against the cost of supplies purchased from the applicable vendor. As stated previously, the subject matter addressed in the educational program funded in whole or part by a vendor must relate to the product it provides to the facility.
The facility must keep the funds obtained for specific purposes segregated in separate general ledger accounts to maintain adequate control of the receipt and use of the funds. All transactions should be supported by adequate documentation. Supporting documentation for withdrawals and expenditures should document the proper approvals and should also clearly document that the funds were used for the purpose intended.
Those activities that are not related to patient care, as defined by Medicare, should be segregated in separate accounts to facilitate proper exclusion for Medicare cost reporting purposes. The following are some examples of activities which are not allowable for Medicare reporting purposes: charitable events and fund raising activities, health fairs, community education, educational events for non-employees, alcoholic beverages, gifts and entertainment. The facility should consult the appropriate Reimbursement Department representative regarding specific items. Expenses that are not allowable for Medicare reporting purposes will be excluded from cost reported to Medicare even if funds were received from vendors under this policy relating to these activities. For Medicare reporting purposes, the funds received will be used to reduce the cost of supplies purchased from the vendor, the same as discounts and rebates.
All assets, liabilities, revenues (i.e., grant money) and expenses must be properly segregated and reflected in the accounting records of the facility. Revenues received for activities covered by this policy should not be used as a reduction of expense, but reflected in “other revenue – rebates/educational grants.”
REFERENCES:

Company Code of Conduct, November 1, 2000

Business Courtesies Policy, EC.005

Entertainment Policy, EC.006

Vendor Promotional Training Policy, EC.007

Physician Access to the Internet within Company Facilities Policy, EC.013

Non-Employed Physician Education Expenses Policy, LL.010

Providing Free and/or Discounted Training and Equipment to Referral Sources Policy, LL.011

7/2001