Judge determines GPOs do not violate antitrust laws
For some time now, we have discussed the importance of group purchasing organizations (GPOs) on our blog. Critics out there often question the business model of GPOs. Some wonder if contracting with suppliers, to offer cost savings to healthcare systems, really works. They wonder if the GPO contracts are somehow unfair to hospitals. Well, a recent high court ruling finds the answer to these questions is NO.
The plaintiff in a recent case questioned contracts that a company called Bard had, with a GPO, for catheter products. The arguement was that Bard’s GPO contracts and discounted prices were so attractive that hospitals could not afford to forgo them, which the plaintiff argued was in violation of antitrust laws. But on August 17, 2010, in the case of Southeast Missouri Hospital v. Bard, the 8th Circuit Court of Appeals ruled that sole-source provisions, tiered pricing and bundled discounts in a supplier’s GPO contracts do not violate antitrust laws.
In making its ruling, the court made the following statements of fact:
- GPO membership is voluntary and the marketplace is highly competitive, which benefits hospitals, payers and patients alike.
- GPOs do not purchase supplies; member hospitals do under the terms of GPO-negotiated contracts.
- GPO-member hospitals are not required to purchase through their GPO contracts. GPO-member hospitals can purchase supplies “off-contract,” negotiating their own prices with suppliers. However, purchasing off-contract may increase prices, as they forgo the discounts in their GPO contracts.
- On average, hospitals pay 16 percent less by buying through GPO contracts.
This is a critical ruling that validates the GPO business model and helps illustrate that hospitals, GPOs and suppliers share the primary goals of improving patient care and safely reducing healthcare costs when establishing supply contracts.
I really hope others are able to gain a better understanding of GPOs given this ruling. The decision affirms that the GPO business model is in fact ethical and fair – something many of us have understood for a long, long time.
Mike Daly blogs regularly at Action for Better Healthcare.
