Group purchasing organizations (GPOs) have been both lauded and lamented in the last few weeks by various stakeholders, experts, and studies. Now, the Health Industry Group Purchasing Association (HIGPA) and Medical Device Manufacturers Association (MDMA) are weighing in to argue the value of the system.

Heather Thompson

October 27, 2010

2 Min Read
Do GPOs Help Or Hurt? Depends on Who You Ask

First, in late September, the Government Accountability Office (GAO) released a study that was heartily supported by HIGPA. Through interviews with six GPOs and several hospitals and device vendors, GAO concluded that group purchasing increased transparency and encouraged low administrative fees and discount pricing as a result of aggressive codes of conduct and other voluntary accountability initiatives. The report findings “confirm what the 8th Circuit Court of Appeals, U.S. Department of Justice, Government Accountability Office, the Federal Trade Commission, and American hospitals have already found—GPOs reduce costs for hospitals,” said Curtis Rooney in a statement. Rooney serves as president and CEO of HIGPA.
 

About a week later, MDMA released its own report, conducted by Robert E. Litan, a senior fellow in economic studies at the Brookings Institution, and Hal J. Singer, managing director and principal at Navigant Economics. This report states that GPOs often operate according to a compensation system that provides incentives to keep prices artificially high.
 

The study examined a database of 8100 hospital transactions from 2001 through 2010. Its findings indicate that when the hospital purchasing process was exposed to greater competition, hospitals were able to achieve savings up to 18% off the GPO price achieved on average for 2010.
 

The study authors noted that eliminating antikickback exemption for GPOs (which allows them to accept fees from device makers) would save hospitals as much as $37.5 billion per year and cut taxpayer costs by $11.5 billion. Critics contend that the antikickback exemption has created relationships with large firms and don’t help smaller companies out of the process. The result, conclude researchers, is an unfair limit to patients’ access to treatments.
 

“This study bolsters our argument that Congress must pass legislation that will restore the illegality of kickbacks between suppliers and GPOs,” Mark Leahey, president of MDMA, said in a statement. He added that the current GPO model adds billions of dollars in unnecessary costs to the to healthcare system.
 

Rooney, however, has implied that this research is colored by industry backing. “An MDMA-funded ‘study’ suggesting that device manufacturers would voluntarily reduce their prices and their profit margins under a new GPO model is a slap in the face of the more than 90% of America’s 5000-plus hospitals that use GPOs,” Rooney said. “The device industry attacks GPOs because we are working for hospitals.”

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