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In the August issue of the Journal of Healthcare Contracting, HIGPA President Curtis Rooney discusses the recent findings of the U.S. 8th Circuit Court of Appeals (Southeast Missouri Hospital v. Bard Inc.), which reaffirmed the fierce competition in the GPO industry and the cost savings provided to hospitals and healthcare facilities.
Mr. Rooney’s article gives an overview of the case, in which the class action lawsuit alleged that a supplier working with a GPO inflated prices in violation of the Sherman Act. The district court determined that the arrangement was “perfectly legal” and competitive because the hospital was “free to walk away” from the contract. In addition to accentuating the competition in the GPO market and the healthcare supply chain, the court affirmed other relevant facts (for a second time), including:
• On average, hospitals pay 10 to 15 percent less by buying under GPO contracts.
• GPOs do not purchase supplies. Member hospitals do under the terms of their GPO-negotiated contracts.
• Hospital contracts with GPOs can be terminated at any time with notice to the supplier.
• Hospitals are not required to purchase through their GPO contracts, but can instead purchase supplies “off-contract,” negotiating their own prices directly with suppliers.
• GPO membership is voluntary for hospitals. Hospitals can (and do) switch from one GPO to another, and may belong to multiple GPOs.
• Ninety-six to 98 percent of all hospitals in the United States voluntarily belong to one or more GPOs.
Rooney summarizes: “Financial pressures on hospitals continue to mount, and U.S. public policy will continue to focus on deficit reduction. In addition to the important legal findings involved in this case, it is clear that GPOs will play an increasingly important role in saving money for hospitals, Medicare and taxpayers. Now hospitals can move forward with their mission of caring for patients without fear of legal challenge to the contracting tools needed to purchase critical supplies.”