Tag Archives: group purchasing organizations

Journal Sentinel details public health investigation into tainted alcohol wipes

Last week we shared the story of how MSNBC.com reporter JoNel Aleccia uncovered the FDA’s failure to take action on contaminated products manufactured by a Wisconsin company.

Shanoop and Sandra Kothari of Houston, claim the wipes led to the death of their son, Harrison Kothari, 2.
Shanoop and Sandra Kothari of Houston claim tainted alcohol prep wipes led to the death of their son, Harrison Kothari, 2. (Photo courtesy of MSNBC.com)

One couple believes alcohol prep pads used on their son were tainted with a bacterium, leading to his death. Aleccia shared with AHCJ members how she covered each step of the story, including what documents were useful and how she got them, to find that the FDA had known about problems in the manufacturer’s plant as early as 2009.

Now, Raquel Rutledge and Rick Barrett of the Milwaukee Journal Sentinel have written a detailed narrative about the FDA’s oversight of the Triad Group and H&P Industries, as well as the death of 2-year-old Harry Kothari and illnesses at the Children’s Hospital in Aurora, Colo.

Their narrative tells of the public health investigation, with FDA investigators visiting the factory day after day for weeks, children in Colorado getting sick and epidemiologists trying to find the source, the role of purchasing groups, Kothari’s death and the FDA’s heavily redacted inspection reports.

Trade group says conflicts negate GPOs’ leverage

A recent GAO report looked at group purchasing organizations and established that they were pervasive, and that they’d adopted some internal ethics rules. It did not, however, substantially evaluate charges that GPOs can increase cost and stifle innovation.

However, a medical device trade group picked up where the GAO left off. According to a study published last week by the Medical Device Manufacturers Association (53-page PDF), repealing the special GPO exemption to a general ban on kickbacks in situations where federal health spending is involved would result in as much as $25 billion in annual savings. The study’s a quick, forceful and engaging read, but it comes, of course, from an organization that clearly has a dog in the fight.

The Health Industry Group Purchasing Association, a trade association representing 16 GPOs, has – not surprisingly – a different view,  evidenced by its website, GPOsSaveMoney.org.

(Hat tip to the AP)

GAO examines competition in hospital purchasing

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.


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.

Higher health care costs, lack of safety innovations traced to group purchasing organizations

The Washington Monthly‘s Mariah Blake writes about the ins and outs of group purchasing organizations (GPOs)  and their effect on the development of newer, potentially safer, medical equipment. She reports the system has kept potentially lifesaving innovations off the market and may be contributing to the rising costs of health care.

Among the products she cites as having been created but largely kept out of the supply chain as a result of the GPO system are a syringe with a retractable needle, a syringe designed to reduce bloodstream infections and a surgical towel that can be spotted on X-rays to keep towels from being left in the body after surgery. Those products were developed by small suppliers who seem to be squeezed out of the market by the system.

Photo by kreg.steppe via Flickr

Blake’s combination of narrative about the small suppliers who have been stymied by the system and her investigation into how GPOs became such a game changer will be of great interest to anyone who writes about health care costs and innovations in patient safety.

Blake explains the evolution of GPOs, “a system built on a seemingly minor provision in Medicare law that few people even know about.”

It’s a system that has stifled innovation and kept lifesaving medical devices off the market. And while it’s supposed to curb prices, it may actually be driving up the cost of medical supplies, the second largest expenditure for our nation’s hospitals and clinics and a major contributor to the ballooning cost of health care, which consumes nearly a fifth of our gross domestic product.

Through a series of court cases, one of which granted GPOs protection from antitrust actions, and their subsequent consolidation, GPOs revenues became “tied to the profits of the suppliers they were supposed to be pressing for lower prices.”

A former GPO employee explains, “But GPOs make their money by charging vendors fees. And if you get a percentage of sales, going with a lower bid from a little company just loses you money and pisses off the big vendors with multiple contracts.”

Blake reports that most small suppliers are wary of speaking out about GPOs. “Several talked to me off the record. At least a half dozen more agreed to speak, only to back out at the last minute or retract their statements after we had spoken.”

Blake points out that this incentive system has an effect on health care costs. GPOs contend that they keep costs down by pooling hospitals’ buying power, but Blake reports one company has kept data on hospital purchases and found that “bids hospitals got through their GPO contracts were substantially higher” than what could be had by negotiating directly with vendors for the same equipment.

More about GPOs