GAO report: GPOs keep costs of medical products and services down

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GAO report: GPOs keep costs of medical products and services down

by Heather Mayer, DOTmed News Reporter | September 28, 2010
There is good news for group purchasing organizations from a new Government Accountability Office report published recently, which found that hospitals increasingly rely on GPOs as the primary means to help keep the costs of medical products and services balanced. But not all are in agreement. Some argue there is not enough empirical evidence to support the claim that GPOs provide significant savings.

The GAO interviewed six of the largest GPOs as well as several hospitals and medical device vendors, after concerns were raised nearly 10 years ago about whether GPOs were engaging in potentially anti-competitive business practices, such as collecting excessively high contract administrative fees.

In 2005, the GPO industry created the Healthcare Group Purchasing Industry Initiative, a voluntary membership group aimed at ensuring ongoing adherence to ethical conduct and business practices. If a group does not abide by the HPGII principles, it is kicked out.

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The Health Industry Group Purchasing Association said the voluntary group has "successfully led to increased transparency in contracting, increased number of multi-source contracts and to the development of technology innovation provisions."

In fact, one finding of the report concluded that three out of five device vendors interviewed said they are now paying lower administrative fees and that fees are more consistent and predictable.

"The report affirms that our aggressive efforts have yielded increased transparency and low administrative fees in health care contracting, the second largest expense for hospitals after the cost of labor," said Curtis Rooney, HIGPA president, in prepared remarks.

Other key findings of the report include that 90 percent of hospitals voluntarily contract with GPOs, and these hospitals use an average of two to four GPOs per facility.

The report also said that GPOs make themselves stand out by offering additional services designed to meet the needs of hospitals. These services, many of which come at no additional cost to clients, include patient safety services and clinical resource guides.

And at the request of Congress, the GAO had previously reviewed existing peer- and non-peer-reviewed articles about the impact of GPOs on pricing for hospitals, finding that all GAO-reviewed literature confirmed that GPOs reduce health care costs for hospitals.

"As we move toward implementation of federal health care reform, the cost savings that GPOs provide to American hospitals are more critical than ever," said Rand Ballard, HIGPA chairman, in prepared remarks.