HIGPA: Green light for GPO savings tools

U.S. Court of Appeals decision puts to rest – for now – claims of conspiracy, price inflation and other horrors

In the highest-level legal case to consider the group purchasing industry in years, the United States 8th Circuit Court of Appeals in August affirmed GPO cost-containment strategies, including sole-source provisions, tiered pricing, and bundled discounts.

In a few short pages, the Court of Appeals decision in Southeast Missouri Hospital v. Bard Inc. settled antitrust and competition questions raised in the public policy arena by a small but obsessive group of suppliers over the last decade. In summary, the court agreed with the decision of the lower district court to dismiss the plaintiff’s claims. The court also disagreed with the plaintiff’s claims that the supplier, C.R. Bard, “abuse[d] its dominant position in the catheter market in contracting with GPOs, inflating prices for hospitals.” The court stated that these claims were unsupported by fact and that there were no questions of law to be decided.

The issues raised in this case are the same allegations consistently raised by a handful of discontented suppliers and their supporters, who have waged a legal, lobbying and public relations campaign against GPOs. This highly orchestrated campaign has suggested a conspiracy between large suppliers and GPOs to, among other things, inflate prices for hospitals and the government. Fortunately, in their exhaustive review of these allegations, the U.S. Department of Justice, Government Accountability Office, Federal Trade Commission and others have all found that GPOs do, in fact, save hospitals – and therefore the government and taxpayers – money.

The Appeals Court’s findings of fact are also significant, and include:

  • GPO membership is voluntary for hospitals. Hospitals can (and do) switch from one GPO to another, and they may belong to multiple GPOs.
  • Ninety-six to 98 percent of all hospitals in the United States voluntarily belong to one or more GPOs.
  • On average, hospitals pay 16 percent less by buying under GPO contracts.
  • GPOs do not purchase supplies; member hospitals do so under the terms of their GPO-negotiated contracts.
  • Hospital contracts with GPOs can be terminated at any time with notice to the supplier.

Like the zombie in a horror movie who will not go quietly into the night, it is probably too much to hope that these zombie claims propped up by a few suppliers are actually dead this time. What is clear, however, is that these bogus claims, like zombies, are not based in reality.

As hospitals across the country continue to face down budget crises, they must increasingly rely on proven methods to contain costs. Hospitals and other healthcare providers must also now implement many additional requirements mandated by the new healthcare reform law. They will need to double down on their partnerships with GPOs to reduce operating costs and to bring the best technology to clinicians at the best value while improving quality. Now that these legal issues have been settled (again), it is time to move on and work together to tackle the important cost containment challenges facing the healthcare delivery system.

The full decision of the 8th Circuit Court of Appeals can be found at http://caselaw.findlaw.com/us-8th-circuit/1535190.html

About the Author

Curtis Rooney
Curtis Rooney is president of the Healthcare Supply Chain Association, www.supplychainassociation.org