Observation Deck: Doors Opening

At press time, it appeared that the Antitrust Subcommittee of the Senate Judiciary Committee was preparing to reconvene hearings on group purchasing. It also appeared likely that the senators who run the Subcommittee, Herb Kohl (D-Wis.) and Mike DeWine (R-Ohio), would reintroduce legislation to provide continuing federal oversight of group purchasing organizations. And it’s pretty much a lock that GPOs will fight it.

To be sure, the GPOs have tried to head off federal intervention. Just look at the codes of conduct, the new approaches to contracting (e.g., elimination of bundling), the embracing of new technologies and, most recently, the creation of the Healthcare Group Purchasing Industry Initiative, an effort by some of the country’s biggest groups to identify best practices for ethics and business. All these activities are reminiscent of what occurred in the years leading up to prospective payment in 1983, as hospitals and their trade association tried (in vain) to avoid federal intervention by implementing their own voluntary cost-cutting initiatives.

That’s not to say that efforts to stop legislation are fruitless. Remember the huge backlash to Clinton healthcare reform? That said, we could expect a tough battle ahead. But even if legislation is eventually passed, what effect will it have on you and your IDN? Maybe less than you think. That’s because other developments are unfolding that could help you in your cost-containment efforts, especially those having to do with physician-preference items.

Recent months have seen a flurry of activity in the area of gainsharing. (See the article in this month’s issue for more information.) Simply put, gainsharing rewards physicians (with money) who help reduce their spending on expensive items, such as implantable defibrillators or orthopedic implants. The concept has been around for a while, but a series of recent decisions by the Department of Health and Human Services could accelerate its implementation.

What does that mean to you? There’s the possibility that your facility will actually implement a formal gainsharing program. (It appears such programs have to be quite formal indeed, because paying doctors to cut costs without the blessing of the Department of Health and Human Services could get your IDN in a lot of trouble.)

But what about all those IDNs and hospitals in which formal gainsharing may never be instituted? There’s good news here, too. “If you want to get into physician-preference items, now is the time,” says Karen Barrow, VP of Amerinet’s Clinical Advantage program, which helps hospitals work with clinicians to reduce the cost of physician-preference items. Why? Because all the attention on gainsharing has made hospital administrators more aware than ever of the high cost of physician-preference items. Chances are that they will gain a better understanding of the problem, as well as ways to solve it.

And those solutions don’t necessarily mean cash paid to surgeons. “Ninety-nine percent of the time, it’s not money [physicians] want,” says Barrow in this month’s article. “It’s ÔI’m tired of covering the ER,’ or ÔTurn my rooms over faster in surgery,’ or ÔGive me more qualified, trained personnel.'” Younger physicians may seek assistance from the hospital in marketing their practices beyond their traditional service areas. Administrators should work on demonstrating to their surgeons that when they work together to reduce costs, they free up money for these kinds of improvements.

Yes, group purchasing may be facing tough times. But at the same time, other doors are opening, through which contracting professionals can gain the upper hand in their battles against rising costs.

Mark Thill About Mark Thill

Mark Thill is the Editor of The Journal of Healthcare Contracting and has been reporting on healthcare supply chain issues since 1985. He is a graduate of Dominican University in River Forest, Ill., and he received a master's degree in journalism from Northwestern University in Evanston, Ill.

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