A little-known subsidiary of the insurer Highmark is playing a growing role in cutting costs for hospitals, according to the Pittsburgh Post-Gazette.
Highmark company Provider PPI LLC made a relatively small $1 billion worth of purchases for its 61 member hospitals, which are mostly community facilities, but still managed to turn a $42 million profit while cutting costs for its client base.
The company focuses on some of the most expensive items that a hospital can purchase, such as cardiac stents, and knee and hip joints--pieces that often cost thousands of dollars apiece. Provider PPI uses panels of physicians to gather their input and make decisions as to which parts it negotiates to purchase for its members.
PPI has enjoyed some significant success adding to its members' bottom lines and outcomes: It has been able to increase the average margin per case by 16 percent while reducing the average length of hospital stay by 1.5 days, according to the newspaper. Most group purchasing organizations (GPO) release financial data, but few make direct clinical claims.
"When we first got started, it was hard to find our identity," PPI Vice President Paul Gallagher told the Post-Gazette. But "our core capacity is really being physician advocates."
There is little doubt that GPOs are beneficial to hospitals. A 2014 study credited them with cutting hospital costs by as much as 18 percent. They are projected to save $864 billion for the entire healthcare system between 2013 and 2022.
However, GPOs have come under scrutiny from the federal government. A 2014 Government Accountability Office report concluded that there may be an underreporting of payments between hospitals and GPOs, which could impact Medicare rates if they were properly reported.
To learn more:
- read the Post-Gazette article