Hospitals Could Save Nearly $5 Billion Through GPO Reform, Study Shows

According to a new report released during MDMA’s recent 12th Annual Meeting, the nation’s hospitals collectively could save nearly five billion dollars if hospital Group Purchasing Organizations (GPOs) lost their safe harbor protection under the Medicare anti-kickback statute. Hal Singer, Ph.D., president of the economic consulting firm Criterion Economics, developed the study. He told MDMA that if GPOs – which purport to save the health care system money through volume purchasing on behalf of groups of hospitals – no longer were permitted to collect fees from dominant suppliers in exchange for market exclusivity, Medicare could save $2.5 billion annually.

The safe harbor, which was enacted by Congress in the 1980s, exempts GPOs from criminal penalties for accepting kickbacks from health care suppliers. The Senate Judiciary Antitrust Subcommittee has been investigating allegations of anticompetitive conduct and conflicts of interest by GPOs and is contemplating legislation, including repeal of the safe harbor. MDMA Executive Director Mark Leahey commented: “The study demonstrates that GPOs cannot serve two masters. If the GPOs are to save money for hospitals and the health care system, and help assure delivery of high quality medical technologies to patients, they cannot be compensated by their suppliers.”