New Independent Study Finds Healthcare Group Purchasing Organizations to be Procompetitive

A new independent academic analysis of healthcare group purchasing organizations (GPOs) found that the purchasing partners to virtually all 5,000+ American hospitals are procompetitive and reduce hospital costs through high volume purchasing power. The analysis was conducted by economists from the University of North Carolina and the University of Florida, and published in a 2013 issue of Managerial and Decision Economics.

The authors also considered GPO funding mechanisms and the so-called GPO Safe Harbor, which Congress enacted in 1987 to protect the healthcare cost savings and efficiencies that GPOs deliver to hospitals, and to codify the model under which GPOs had been operating for nearly a hundred years. The authors found that any potential conflicts created by the GPO funding mechanism “may well be more apparent than real.”

“GPO cost savings, administrative structure and business practices have been thoroughly reviewed by the U.S. Government Accountability Office (GAO), Department of Justice (DOJ), Federal Trade Commission (FTC), the U.S. Supreme Court, the 8th Circuit Court of Appeals, academia and virtually all of America’s 5,000 hospitals. This study on the competitive effects of GPOs joins that growing body of analysis,” said HSCA President Curtis Rooney. “All independent, empirical, and non-industry analyses of GPOs have found that GPOs deliver billions in cost savings every year to the healthcare delivery system and deliver the best products at the best value to their hospital, long-term care and healthcare provider partners.”

To read the full analysis, click here.

HSCA Applauds Slowdown in U.S. Healthcare Spending; Cites Critical Role of GPOs in Helping to Contain Costs for Hospitals and Long-Term Care Facilities

The Healthcare Supply Chain Association (HSCA) today applauded the annual report from independent economists at the U.S. Centers for Medicare and Medicaid Services (CMS) demonstrating that growth in U.S. healthcare spending remained low in 2012 for the fourth straight year. HSCA also highlighted the critical role of group purchasing organizations (GPOs) in delivering billions in savings to hospitals, Medicare and Medicaid, and the American taxpayer.

“Healthcare group purchasing organizations are critical cost savings engines for American hospitals, nursing homes, and other healthcare providers. GPOs work with their hospital partners every day to deliver the best, most innovative products at the best value, and GPOs save billions every year for hospitals, taxpayers and the Medicare and Medicaid programs,” said HSCA President Curtis Rooney. “HSCA is pleased with the slowdown in healthcare spending growth, but we know there is more work to be done. As hospitals and healthcare providers continue to face mounting financial pressure, they will rely even more on their GPO partners even more to provide critical cost savings, to identify and bring innovative medical products to market, and to help hospitals preserve patient access to affordable and effective care.”

GPOs achieve billions in savings annually by using high-volume purchasing methods to secure discounts for hospital partners. Recent studies indicate GPO savings to Medicare of $104 to $230 billion from 2008 to 2017, and Medicaid savings of between $74.1 and 162.5 billion during the same period. In 2008 alone, GPOs generated overall savings of $29 to $64 billion for the healthcare system, according to one study. Of that, Medicare realized savings up to $17 billion and Medicaid saved up to $12 billion.

CMS actuaries released an annual report Monday demonstrating that, for the fourth consecutive year, growth in healthcare spending remained low, increasing by 3.7 percent in 2012 to $2.8 trillion.

For the full HSCA press release on the CMS report, click here.