DOTmed Home MRI Oncology Ultrasound Molecular Imaging X-Ray Cardiology Health IT Business Affairs
News Home Parts & Service Operating Room CT Women's Health Proton Therapy Endoscopy HTMs Mobile Imaging
SEARCH
Current Location:
>
> This Story


Log in or Register to rate this News Story
Forward Printable StoryPrint Comment

 

 

More Industry Headlines

Virtual care and the real world impact Dr. Nick van Terheyden on what it means for hospitals, physicians and patients

Mobile apps can improve radiologist workflow, minimize potential for report errors How Novarad's AlertView helps reduce workflow impediments

New ultrasound imaging technique better detects prostate cancer SHI may yield a better value than MR for evaluating prostate

New cardiac MR imaging technique eliminates breath holds and shortens exam time May have applications for imaging cancer patients too

Retail holds key to understanding digital expectations for healthcare Bringing simple and reliable digital interactions to the patient experience

Brigham and Women's Hospital pioneers intraoperative imaging with AMIGO Suite Insights from one of the pioneering teams in intraoperative MR

Aether to launch AI-powered software for its 3-D organ printing technology Company to work with Harvard on printing human organs

MR reveals immune cell role in traumatic brain injury repair Repair damaged blood vessels of the meninges

We all bleed the same color – the legacy of Dr. Charles Richard Drew Get to know the 'Father of the Blood Bank'

CIVCO Radiotherapy and Adaptiiv ink distribution deal Partnership will increase access to software that personalizes radiotherapy

Leroy B. Schwarz
(Credit: Purdue University)

Game theory study says GPO fees don't hurt hospitals

by Brendon Nafziger , DOTmed News Associate Editor
Group purchasing organizations receive flak from skeptics who wonder if the administrative fees they charge medical device and drug manufacturers drive up hospitals' supply chain costs.

But a new study by Purdue University researchers using the complicated mathematics of game theory suggests the fees cut into manufacturers' profits -- without raising the prices hospitals pay.

Story Continues Below Advertisement

OR Tables, Treatment/GYN/Uro Chairs, Transport Stretchers, Hospital/ICU Bed

iMS combines the superior service of Oakworks Medical and advanced manufacturing technology of FAMED Medical Solutions. The goal of iMS, "Connecting Art and Medical Science" goes way beyond product with exceptional CareLink service. Contact us today!



"The manufacturer's assertion [is] that they have to raise prices for everyone in order to cover the [contract administration fee]," Leroy B. Schwarz, a study co-author and professor of management at Purdue, told reporters in a call Tuesday. "However commonsensical that might seem, the math just doesn't show it to be the case."

In the study, researchers argue GPOs lower purchasing costs, particularly for smaller hospitals, and that administrative fees collected by GPOs don't distort their incentives to save.

The results come after medical device giant Medtronic Inc.'s February walkout on contracts with the GPO Novation, in a move some analysts called a "watershed moment" for the industry.

When asked on a call if the timing had been planned, Curtis Rooney, president of the Health Industry Group Purchasing Association (HIGPA), a GPO lobby, joked, "No, that would have been very clever though."

GPOs are middlemen who say they help member hospitals save money by negotiating contracts for them from suppliers. Because the hospitals couldn't drive much of a bargain alone, the argument goes, they could push for lower prices together because of the higher volumes.

More than 20 years ago, Congress passed a "safe harbor" provision that lets GPOs pocket administrative fees from vendors, typically to the tune of 3 percent of the volume contracted. It's estimated that GPOs net at least half their revenue through these payments.

GPO critics argue that these fees pose a conflict-of-interest problem, as they give the GPOs an incentive not to lower prices. Some critics estimate that repealing the "safe harbor" provisions would save the health care system billions of dollars a year.

Studies on GPOs' health care impact have been mixed. A 2006 report based on case studies from Novation suggested a contract price of $3,116 for providers buying directly from the manufacturer but only $1,749 going through a GPO.

But last fall, in a study commissioned by the Medical Device Manufacturers Association, economists compared GPO contracts with winning bids on an after-market auction service called MEMdata. They found the auction prices were 10 to 14 percent cheaper than the original GPO price over the 10 years of data they had available.
  Pages: 1 - 2 - 3 >>

Related:


You Must Be Logged In To Post A Comment

Advertise
Increase Your
Brand Awareness
Auctions + Private Sales
Get The
Best Price
Buy Equipment/Parts
Find The
Lowest Price
Daily News
Read The
Latest News
Directory
Browse All
DOTmed Users
Ethics on DOTmed
View Our
Ethics Program
Gold Parts Vendor Program
Receive PH
Requests
Gold Service Dealer Program
Receive RFP/PS
Requests
Healthcare Providers
See all
HCP Tools
Jobs/Training
Find/Fill
A Job
Parts Hunter +EasyPay
Get Parts
Quotes
Recently Certified
View Recently
Certified Users
Recently Rated
View Recently
Certified Users
Rental Central
Rent Equipment
For Less
Sell Equipment/Parts
Get The
Most Money
Service Technicians Forum
Find Help
And Advice
Simple RFP
Get Equipment
Quotes
Virtual Trade Show
Find Service
For Equipment
Access and use of this site is subject to the terms and conditions of our LEGAL NOTICE & PRIVACY NOTICE
Property of and Proprietary to DOTmed.com, Inc. Copyright ©2001-2018 DOTmed.com, Inc.
ALL RIGHTS RESERVED