Posted by Imagine someone had designed a device that would essentially eliminate bloodstream infections (sepsis) caused by contamination of needleless injection ports. Great news right? Well, guess what happens next:
Unlike some of the solutions floated by big medical device makers, such as coating the ports with silver, Shaw’s innovation added only a few pennies to the cost of production. And it seemed to be remarkably effective: a 2007 clinical study funded by Shaw’s company and conducted by the independent SGS Laboratories found the device prevented germs from being transferred to catheters nearly 100 percent of the time.
Given these facts, you might expect that hospitals would be lining up to buy Shaw’s product. But that is not the case, even though his company is offering to match whatever price medical facilities are paying for their current, infection-prone IV catheter syringes.
Why not? Because of middlemen known as group purchasing organizations (GPOs; italics mine):
Originally, these purchasing groups were nonprofit collectives and were managed and funded by the hospitals themselves. But in the mid-1970s, the model began to shift. Some large hospital chains started to spin off for-profit GPO subsidiaries, which other hospitals could join by paying membership dues, much the way members of buying clubs like Costco pay dues to get bulk-buying discounts. By decade’s end, virtually every hospital in America belonged to a GPO.
Then, in 1986 Congress passed a bill exempting GPOs from the anti-kickback provisions embedded in Medicare law. This meant that instead of collecting membership dues, GPOs could collect “fees”–in other industries they might be called kickbacks or bribes–from suppliers in the form of a share of sales revenue.
What would possibly go wrong? Well:
As for independent assessment of GPOs’ effect on costs, they are hard to come by. But the little information that is available suggests that they may actually drive up the price of supplies. A 2002 pilot study by the Government Accountability Office found, for instance, that hospitals that went through GPOs paid more for safety needles and most models of pacemakers than those that negotiated prices on their own–for some pacemakers the median gap was as wide as 39 percent.
Even more unsettling are the findings of MEMdata, a Texas-based company that helps hospitals process their bids for new equipment and captures the quotes in a database, so that administrators can compare the prices they are offered to what others have paid. Shortly after the company opened for business, founder Bob Yancy says he discovered that bids hospitals got through their GPO contracts were substantially higher than the ones he or medical centers that weren’t locked into GPO pricing could get by negotiating directly with vendors for the same equipment. Yancy later had his staff add a field to their database to track just how GPO bids stacked up. Over the last seven years, his company, which serves more than 500 medical facilities, has collected tens of thousands of bids. On average, Yancy says, the GPOs’ prices are 22 percent higher than the ones that hospitals can get on their own. “The bottom line is that hospitals are being systematically overcharged,” he told me, when I met him at a Washington, D.C., restaurant. “GPOs are inflating the pricing.”
Thanks to GPOs, we are getting worse healthcare at higher costs. And Obama/Romneycare does nothing to stop the kickbacks–the topic wasn’t even addressed. This is rent extraction at its finest.
But single-payer healthcare was TEH SOCIALISMZ!!
July 23, 2010
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