Device maker study: Hospital middlemen arrangement wastes billions

"The study said hospitals and health care providers save money when they buy medical devices on their own instead of getting them through group purchasing organizations even though GPOs exist to save money for those buyers," The Associated Press reports. "Group purchasing organizations conduct auctions with medical device makers, allowing the winning bidders to sell their devices to hundreds of hospitals. Because group purchasing organizations are paid by medical device makers and not hospitals, they are encouraged to maintain current deals rather than negotiating new ones even if it means the hospitals pay more for equipment. Hospitals funded the GPOs until 1986, when a change in Medicare rules allowed medical device companies to pay the organizations directly" (Seaman, 10/6).

The Hill: "The issue hasn't been overlooked by Sen. Chuck Grassley (R-Iowa). Citing a new report from the Government Accountability Office (GAO), Grassley, the senior Republican on the Finance Committee, said there's no evidence GPOs are saving taxpayers anything. 'Whether Group Purchasing Organizations are able to help save money on medical supply costs, or not, impacts federal healthcare spending,' Grassley said. 'There's no data with which to independently verify the effect, one way or another, and that's a shortcoming in the current system'" (Lillis, 10/6).

In a second story, The Hill reports that "[t]he Group Purchasing Organization (GPO) lobby is pushing back — and hard —" against the study. "'All independent, empirical and non-industry studies of GPOs — including examinations by the GAO, FTC, DOJ, academia and the 8th Circuit Court of Appeals — have found that GPOs save hospitals money,' Curtis Rooney, head of the Health Industry Group Purchasing Association (HIGPA), said in a statement." The study, Rooney continued, "is a slap in the face of the more than 90 percent of America's 5,000-plus hospitals that use GPOs… The device industry attacks GPOs because we are working for hospitals" (Lillis, 10/6).