by
Brendon Nafziger, DOTmed News Associate Editor | March 01, 2011
From the March 2011 issue of HealthCare Business News magazine
Singer says MEMData makes money generally as a percentage of the savings realized, not a percentage of the transaction. “Here you have a ‘GPO’ whose incentives are not potentially distorted,” he argues.
In the report, the researchers said that on average, through the 8,100 auctions studied, the winning bid was 10 to 14 percent less than the original GPO price over the decade’s worth of data they had available. The average GPO price was $81,436, but the average winning bid was $73,990, according to the authors. In 2010, the most recent data available, savings reached 18 percent, MEMdata said.
"Indeed, in [more than] half of all auctions in the transactions database, incumbent device makers on the GPO contract were induced to lower their own prices for the same product to the same hospital, and did so by approximately 7 percent on average," the report said.
Relying in part on figures like this, GPO critics estimate repealing the anti-kickback statute would reduce federal health care spending by $11.5 billion and save hospitals and providers up to $37.5 billion, based on 2010 data. Total private health care savings could exceed $25 billion.
Of course, these findings are far from final. HIGPA says the methodology used in the study is suspect. And further, GPO proponents say it’s not clear that MEMdata’s figures can be extrapolated to the whole of health care. MEMdata traffics in capital equipment, which, with so-called physician preference items, like pacemakers and orthopedic implants, GPOs have less of a stake in. In Schneller’s survey, only about one-third of hospitals, and half of health systems, said they completely relied on GPOs to contract prices for capital equipment. It’s important to note, majorities of both said they wanted to “improve” GPO contract penetration in this area.
A more troubling point is made by some critics -- that hospitals might not realize, or care, about the extent of the problem. This point was brought up in a class-action lawsuit, potentially the biggest in history, against the GPO Novation and a network of hospitals. In the qui tam suit, an ex-employee of Novation claims she was fired by the Irving, Texas-based GPO after she allegedly complained that a vendor was not fairly bidding on contracts, but instead hoped to snag them by offering various deals to the GPO.
In a 2007 New York Times article about the case, the paper notes the complicated rebate savings method employed by many GPOs, in which hospitals are given a small percentage, say around 2 percent, of the savings back at the end of the year provided they meet volume purchasing quotas. This, critics say, could allow millions of dollars to get lost in the system, with some hospitals “overstating” their supply costs, thereby “getting larger Medicare reimbursements than they were entitled to," even if it weren't done deliberately.
