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Uncloaking the Mystery of the 3 National GPOs

by John Strong

National GPOs are for-profit. Each one is organized as a for-profit entity.

Healthcare Group Purchasing Industry Initiative (HIGPII)

The three national GPOs (Vizient, Premier, HealthTrust Purchasing Group) operate somewhat under the radar, but the practices and organization of each can be found on the organization's website. Why HIGPII? In 2003, the U.S. Senate investigated what was then the six or eight largest national GPOs in the country concerning their businesses and ethical practices. The result was an “industry initiative” (Washington speak), formed to lend transparency to healthcare GPOs.

Safe harbor and conflict of interest

Taking fees from suppliers doing business with federally reimbursed healthcare providers is a conflict of interest. As a result, a “Medicare Safe Harbor” was created requiring GPOs to inform every member, at least annually, about the amount of their purchases and fees earned from those purchases. The federal government allows this despite concerns because it believes that this saves hospitals, and thereby Medicare, money.

Beyond purchasing power, how does the money make it back to the hospital?

  • GPOs pay annual dividends

  • Many GPO contracts contain rebates for participation

  • Outsourcing their supply chain personnel to GPO

  • GPO board member compensation to senior leadership

Want to look up the partner GPO dividends of your own hospital?

Not public. Ask the hospital CFO or the director of supply chain.

John Strong is co-founder and chief consulting officer of Access Strategy Partners Inc., working with new and innovative medical technology manufacturers to prepare and help them scale commercialization.

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