MDMA: Suspect GPO-hospital deals cost taxpayers $38B annually

Lack of competition in the medical device purchasing game adds roughly $38 billion to our healthcare bills annually, according to a new study commissioned by the Medical Device Manufacturer's Association. The medical device lobbying group calls out group purchasing organizations (GPOs) for allegedly creating a false market for such devices that not only inflates costs, but provides kickbacks to participating hospitals. 

In turn, Health Industry Group Purchasing Association (HIGPA) president Curtis Rooney refers to the study as "reckless MDMA propaganda," accusing the medical device industry and its manufacturers of trying to increase profits that already amount to $200 billion. 

Essentially, GPOs exist to secure the best prices on medical devices for hospitals. However, rather than searching for the best devices or prices, the MDMA study says, GPOs instead opt to sell devices based on which companies pay them a fee. The GPOs then sell the devices to hospitals via "sole source" contracts--often at higher-than-necessary prices--knowing the hospitals get insurance companies to cover the costs. Ultimately, those costs are passed down to consumers, while hospitals receive a percentage of their contract back from the GPO. 

Such a setup is made possible, the MDMA says, because of safe harbor statutes passed by Congress in 1986 that exempt GPOs from Medicare anti-kickback rules. 

Economists and report authors Drs. Hal Singer and Robert Litan, profess that hospitals that chose to purchase devices in the aftermarket--not through GPOs--saved 10 percent on costs. The study looked at 8,100 hospital transactions from 2001 to 2010. 

"It is painfully clear that while hospitals and providers are trying to improve care and reduce costs for patients, the supplier-funded GPO model is costing the healthcare system billions," MDMA president Mark Leahey said in a statement. "[C]ongress must pass legislation that will restore illegality of kickbacks between suppliers and GPOs." 

Rooney disagrees. 

"Hospital purchasing executives are smart shoppers in an aggressive and competitive market, and they voluntarily turn to GPOs to help them find the best products for the best deal," he said in a statement. "All independent, empirical, and non-industry studies of GPOs--including examinations by the GAO, FTC, DOJ, academia, and the 8th Circuit Court of Appeals--have found that GPOs save hospitals money. 

"Because medical device manufacturers did not like what the U.S. Government Accountability Office found in its most recent analysis of the group purchasing industry, MDMA has chosen to disregard or manipulate the GAO report for its own purposes." 

For more information:
- here's the MDMA funded report
- here's the MDMA's statement
- read HIGPA president Curtis Rooney's response
- check out this Huffington Post article
- check out's efforts to get the "Safe Harbor" statutes repealed