GAO Report Casts Healthcare GPOs in Favorable Light

John Commins, September 28, 2010

The trade group representing the healthcare industry's group purchasing organizations says their efforts to improve transparency, accountability, and fair product discounting has been validated by a federal government report released this week.

The Government Accountability Office report interviewed GPOs, hospitals, and device vendors, and determined that hospitals increasingly rely on GPOs as the primary means to help keep the costs of medical products and services in check.

"With so many votes of confidence affirming the value of GPOs, and 98% of all hospitals reliant on GPO low-cost contract pricing, the market has spoken loudly and the facts are clear," said Curtis Rooney, president of the Health Industry Group Purchasing Association. "The GAO confirmed what the 8th Circuit Court of Appeals, U.S. Department of Justice, the Federal Trade Commission, and virtually all of the 5,000-plus American hospitals have already found—GPOs reduce costs for hospitals."

The GAO report was instigated at the request of Congress, which had raised concerns about GPOs engaging in anticompetitive practices such as collecting excessively high administrative fees. For the report, the GAO interviewed the six largest healthcare GPOs, which made a combined $108.7 billion in hospital purchasing in 2007. The GPOs were not identified by name in the report. 

According to the GPOs, the average contract administrative fees paid by vendors in 2008, weighted by purchasing volume, ranged from 1.22% to 2.25% of customer purchases. The GPOs in GAO's review reported that they have revised their codes of conduct and established the voluntary Healthcare Group Purchasing Industry Initiative association to promote best practices and public accountability.

John Commins

John Commins is a senior editor at HealthLeaders Media.

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