GAO examines competition in hospital purchasing

Andrew Van Dam

About Andrew Van Dam

Andrew Van Dam of The Wall Street Journal previously worked at the AHCJ offices while earning his master’s degree at the Missouri School of Journalism.

Group purchasing organizations are intermediaries which theoretically group hospitals together to give them more leverage in purchasing negotiations. In 2009, they accounted for an average of 73 percent of hospitals’ non-labor purchases and were used by 98 percent of American hospitals. There are more than 600 of them in the United States, but the six largest account for 90 percent of the business.

In 2002, they came under fire for anti-competitive practices such as product bundling, excessive administrative fees and sole-source contracting. These practices also may limit access to innovative devices, a problem Washington Monthly‘s Mariah Blake investigated earlier this year.

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Photo by House of Sims via Flickr

At the time, the GPOs promised to institute codes of conduct to prevent such practices. A new GAO report (24-page PDF) aimed to see how much of a difference such codes had made, among other things (pages 18-22, all page numbers are based on the PDF). It also sought to answer questions like “what exactly do GPOs do, anyway?” (page 12), and “how do they make money?” (page 13).

The report relies heavily on interviews and self-reporting, all of which seem to indicate that the industry has voluntarily made progress toward curbing exclusive contracts and conflicts of interest, though a deeper independent investigation would be needed to produce any truly conclusive answers.

The industry’s primary trade group, the Health Industry Group Purchasing Association (HIGPA), heralded the GAO’s findings.

“The GAO report clearly demonstrates the group purchasing industry’s firm commitment to remaining the most transparent industry in health care. 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,” HIGPA President Curtis Rooney said in a press release.

HIGPA, which cooperated with the GAO investigation and says it has helped review codes of conduct across the industry, has a membership list that might come in handy for reporters looking to localize this story.

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  1. Pingback: Trade group says conflicts negate GPOs’ leverage : Covering Health

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