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December 7, 2022
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David Burda
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Economics Outcomes Policy
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4-Minute 4sight

Taking Another Swing at Healthcare GPOs

I’m sure nothing will come of it, but it is worth noting that some people (other than me) think healthcare group purchasing organizations make patient care more expensive, not less expensive, as GPOs profess.

Again, if the success of your business model depends on being exempt from the anti-kickback provisions of the federal fraud and abuse statutes, it doesn’t say much about the societal benefits of what you do.

The latest swing and probable miss at healthcare GPOs comes from a coalition of nine patient, physician, and consumer advocacy groups. The group called on the Federal Trade Commission to investigate GPOs’  “under-appreciated role in diminishing medical supply market resilience, weakening patient care, and threatening national security.” Ouch.

The coalition includes Free2Care, Physicians Against Drug Shortages, Practicing Physicians of America and Public Citizen. Members of the healthcare industrial complex are noticeably absent from the roster.

In a 13-page letter dated Nov. 22, the coalition called GPOs “monopolistic middlemen” whose market power lets them “obstruct the competition of a functioning market” and “generate exorbitant profits for owners at the expense of the public interest.” It gets worse from there. You should read the full letter.

The coalition asked the FTC to investigate GPOs with the probe focused on eight things, listed verbatim from the group’s letter:

  1. The effects of concentration in the GPO industry.
  2. GPOs’ effects on competition in medical supply markets.
  3. The effects of GPOs on medical supply prices and reliability of medical supplies.
  4. The effects of GPO purchasing and contracting practices on medical supply shortages.
  5. The frequency and effects of GPOs’ use of sole-sourced or exclusive contracts.
  6. The connection between GPO concentration and the offshoring of medical supply
  7. Whether elimination of the anti-kickback statute safe harbor would alleviate any of these
  8. Whether the “antitrust safety zones” for joint purchasing arrangements should be

Now that’s what I call an investigation!

Quoted in the Ohio Capital Journal and requoted in Becker’s Hospital Review, which is where I got the idea for this post, Todd Ebert, president and CEO of the Healthcare Supply Chain Association, the GPO trade group, said, “Group purchasing organizations (GPOs) play a critical role in the healthcare supply chain, identifying and sourcing high-quality products at the best value for healthcare providers so that they can deliver safe and effective care for patients.” Further, “The organizations who signed the letter are focused on exhuming decades-old literature and criticisms rather than highlighting the wealth of studies and reports available on GPO cost-savings and competitive practices.”

I’m sure Ebert isn’t talking about wealth of studies and reports that the HSCA or GPOs themselves paid for, funded or underwrote. Nah.

Still, the chances that the FTC will investigate GPOs are slim. And even if the agency does look into GPOs, the chances anyone will do something about GPOs are less than slim. On-the-other-hand, the agency is investigating pharmacy benefit managers, which, in my opinion, also add rather than subtract costs to the healthcare system. Maybe the PBM probe will whet the FTC’s appetite for monopolistic middlemen.

One can only hope.

Thanks for reading.

About the Author

David Burda

Dave Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers—patients—are king. If you do what’s right for patients, good business results will follow.

Dave’s personal experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 35 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 35 years and his three children, none of whom want to be journalists or lobster fishermen.

 

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