Healthcare Matters

The congressional hearings of 2004 served as a wake up call –if not a warning— to the entire GPO industry. Its business model was on the line. “Fire in the paint locker” is the expression that comes to mind. With no appetite for the increased levels of federal oversight being debated, the GPOs collectively took matters into their own hands. The industry’s biggest players formed the Health Group Purchasing Industry Initiative (HGPII) and immediately established a code of conduct for its members  –to get the heat off.

And it has worked.

Although members of HGPII (HGPII changed its name and is now known as the Healthcare Supply Chain Association –HSCA) remain fiercely competitive, the association has managed to police itself and hold each other to the higher standards they self-imposed. The results seem to validate the power of “doing the right thing.”

I do get a kick, however, when comparing what’s said in the GAO reports and/or listening to the comments of the Health and Human Services (HHS) Inspector General’s office, to those of Curtis Rooney, the president of HSCA. Not quite as entertaining as watching Bill O’Reilly (of Fox News) and Chris Matthews ( of MSNBC) concocting completely differing interpretations of the same story, but somewhere in the same orbit.

For example, here’s HSCA’s take on the most recent report filed by the GAO:

• “We applaud the GAO for its analysis of federal authority and oversight of the healthcare group purchasing industry, which today found that the federal government has sufficient ability to monitor and investigate GPOs, and that the government has exercised its oversight capacity and found no evidence of anti-competitive GPO behavior,” Curtis Rooney, president of the Healthcare Supply Chain Association, said in an e-mailed statement.

Here’s the GAO’s take on the same report:

• “Inasmuch as the collection of contract administrative fees is permitted under the safe harbor provision to the anti-kickback statute and safe harbor regulation, our oversight cannot address whether or to what extent these fees create a financial incentive that is inconsistent with GPOs obtaining the lowest prices for their customers,” the GAO said.  The HHS inspector general’s office told the GAO that it has collected information about GPOs’ “contract administrative fees” in the course of auditing hospitals’ cost reports, but has not “routinely exercised its authority to request and review disclosures related to GPOs’ contract administrative fees” or imposed administrative penalties on any GPO during the past eight years. Officials with the inspector general’s office noted that collecting information about contract administrative fees would not be enough to determine whether a GPO violated the anti-kickback statute.

In other words, Curtis Rooney is proudly pointing out that the GAO report provides no evidence of anti-competitive behavior and the HHS inspectors are saying that based on the extent of their oversight, they couldn’t tell anyway; that they haven’t been very aggressive in exercising what little authority they do have because, as said, it wouldn’t provide them enough insight to determine whether any particular GPO is breaking the law.

Perhaps a more balanced way of interpreting all of this might go something like this: Because no one is complaining about the GPOs anymore, the HHS hasn’t felt a need to do all that much. I mean, since when do any of us scratch a bite that isn’t itching? There’s only been one complaint that’s gone anywhere in the last 8 years, so if the HSCA is feeling pretty good about itself these days, it certainly seems well justified.

By the way, on the heels of the GAO report, the HSCA made a well-timed announcement of the development of a “small portal” designed to help smaller and newer entrants to the healthcare supply chain figure out how to break-in.  The site doesn’t appear to be much more than a series of links to its GPO member supplier enrollment applications, but it’s better than a stick in the eye if you happen to be a supplier without inside connections. I would love to see the HSCA keep some statistics on the number of new suppliers who use the portal and actually end up getting on some member’s contract schedule.

—Tom Finn