Reports on the GPO Industry Spur Discussion
October 10, 2010
Posted by chcablogadmin in : Group Purchasing
As you know, HIGPA and HGPII have been working closely with others in the GPO industry to provide transparency and information to those in Washington, D.C. Last week, the U.S. Government Accountability Office released its official report on GPOs titled “Group Purchasing Organizations: Services Provided to Customers and Initiatives Regarding Their Business Practices.”
The report detailed the comprehensive, industry-leading steps taken by GPOs to ensure transparency, fair contracting and discount product pricing for American hospitals. HIGPA applauded the report and President Curtis Rooney stated in HIPGA’s response, “The GAO… confirmed what the 8th Circuit Court of Appeals, U.S. Department of Justice, Government Accountability Office, the Federal Trade Commission, and virtually all of the 5,000+ American hospitals have already found – GPOs reduce costs for hospitals.” The report contained no surprises and HIGPA immediately provided an overview and talking points as well as speaking to National Journal and Modern Healthcare to correct some misinterpretations.
Ranking member of the Senate Finance Committee Sen. Chuck Grassley (R-Iowa) released his own minority staff report, “Empirical Data Lacking to Support Claims of Savings with Group Purchasing Organizations,” based on the GAO’s findings. Grassley’s report contains expected talking points: that it is difficult to determine the amount of savings brought about by GPOs, and that administrative fees far exceed operating costs and are used for more than negotiation of contracts. The report may serve as a basis for Grassley to attack Safe Harbor at some point in the future. Many expect he will push for more hearings.
This week, Navigant Economics (a subsidiary of Navigant Consulting; see description below) released their own study entitled “Do Group Purchasing Organizations Achieve the Best Prices for Member Hospitals? An Empirical Analysis of Aftermarket Transactions.” This study, funded by the Medical Device Manufacturers Association (MDMA), examined a database of medical device transactions conducted between 2001 and 2010 in which hospitals sought to improve GPO prices through competitive bidding processes. Findings indicate that when the hospital purchasing process is exposed to greater competition, hospitals were able to achieve savings of up to 18 percent off the GPO price achieved on average for 2010. This study suggested the need to reform the way GPOs are compensated to help ensure they deliver value to the health care system. Premier responded to Navigant’s report by stating that the $200 billion medical device industry and its largest manufacturers are the only parties that stand to benefit from changing a working, competitive GPO market. They added “the relationship between GPOs and manufacturers should be adversarial in this context, and the attacks tell us that we are effective in driving manufacturer prices down and providing significant cost savings to hospitals, patients and payers alike.”
As a result of these published studies, health care and political blogs as well as national magazines including Modern Healthcare are engaged in dialogue about the benefits, concerns, reach and oversight of GPOs. On the Action for Better Healthcare blog, Kester Freeman, former CEO, Palmetto Health, discusses the GAO study and states “GPOs are a major asset to health care. They are helping lead the way with important aspects of health care reform. They improve the way care is delivered, setting standards in safety and quality. The work they do helps make non-profit hospitals and health care systems stronger. In the end this is a win for patients and the health care system in this country.”
HIGPA and HGPII will continue to proactively follow and respond to developments and I will keep you informed as well. As HIGPA Board Chairman Rand Ballard concluded, “As we move toward implementation of federal health care reform, the cost savings that GPOs provide to American hospitals are more critical than ever. HIGPA is committed to further increasing price transparency in the health care sector and to promoting access, competition and choice so hospitals are able to identify and purchase the best products at the highest value.”
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Navigant Economics, a subsidiary of Navigant Consulting, provides economic and financial analysis of legal and business issues to law firms, corporations and government agencies. Their clients are engaged in litigation, regulatory proceedings, policy debates and strategic planning.
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