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Over the past couple of weeks, medical device manufacturer Medtronic has cancelled GPO contracts with two of the largest healthcare GPOs. So much for the well-worn medical device industry argument that suppliers are forced to go through GPOs to sell products and services to hospitals.
The Medtronic decision supports what HIGPA has been saying all along – suppliers can sell either through a GPO or directly to a hospital. GPOs do not create obstacles to doing business. But Medtronic’s decision also raises another important question: Why wouldn’t a supplier want to do business with a GPO, particularly when GPOs provide cost efficiencies for doing business to both the supplier and the hospital? Medtronic claims this move will reduce healthcare costs, but at the same time says the move will increase profits. So how does the country save money on healthcare costs through a move designed to help Medtronic make more money?
Of course, being able to determine whether this move results in price savings to hospitals will also depend on Medtronic’s willingness to be transparent about its pricing. GPO contracts provide that transparency. It is unclear whether hospitals will be able to enter into local agreements without signing contracts with confidentiality or “gag clauses.” Only time will tell just how transparent Medtronic intends to be.
Medtronic’s move may be great for increasing profits and that is good news for Medtronic shareholders. But if it increases healthcare costs as well, that is bad news for all of us.
Sixteen Novation member hospitals sent a letter in response to Medtronic’s decision, expressing disappointment and concern.