Surgical Products and GPOs

There's a Perpetual Myth That Hospitals Must Follow GPO Contracts for Product Purchases. This Is Both Untrue and Antitrust. 

All GPOs are part of the Healthcare Supply Chain Association (HCSA), located in Washington DC. In their FAQs they state the following:

Are hospitals and suppliers required to use GPOs? (link)

No. All GPO contracts are voluntary and the product of competitive market negotiations. Suppliers are not required to contract with GPOs and healthcare providers are not required to use the contracts negotiated by GPOs with suppliers, even if the providers were a part of the committee process that reviewed and approved the contracts. All hospitals, nursing homes, clinics, surgery centers, etc., can purchase “off contract” and often do. Virtually all of America’s 7,000+ hospitals as well the vast majority of the 68,000 non-acute care centers belong to at least one GPO. A 2010 GAO report found that, on average, hospitals belong to 2-4 GPOs, which compete with one another for hospital business.

This is an excerpt from a email we received from the HCSA's CEO Todd Ebert last year, after we had expressed some issues with a large GPO:

"Finally, GPO member providers can specifically ask for a new technology. Have you met with providers that are willing to bring this to the attention of their GPO? Use of GPO contracts by healthcare provider members is completely voluntary – providers can and do purchase off-contract – so if there is a product that a provider wants, it is in the interest of the GPO to help them find and acquire it."

If you go onto their website it states an average of $55 Billion in cost savings annually. Now, that may seem like a lot, but it really isn't, seeing how the cost of care continues to climb. We spend 17.8% of our GPD on healthcare. That is over $3.7 Trillion per year. Trillion with a "T". The average defense expenditure over the last few years was about $680-$770 Billion with a "B"! This is only about 4% of our GDP. That is equivalent from a comparative example to the earth's distance to the sun, vs the moon! It isn't slowing down either, as under current law, national health spending is projected to grow at an average rate of 5.5 percent per year for 2018-27 and to reach nearly $6.0 trillion by 2027 (CMS).

$55 billion is a drop in the bucket, but despite the rise of cost, the U.S. spends about twice what other high-income nations do on health care but has the lowest life expectancy and the highest infant mortality rates, a new study suggests. What is more alarming is that a large part of this was administrative costs, which accounted for 8 percent of GDP in the U.S., more than double the average of 3 percent of GDP.

You see, in a digital age, pricing shouldn't be held secret, or allowed to create a market of corporate middle agencies like PBMs and GPOs. In fact, we actually had to create Safe Harbor acts to allow them to operate, as in any other business it would have amounted to federal Racketeering charges. Manufactures pay fees in a pay to play scam that only gives the industry about $55 Billion is savings, as they make many more times than this by extorting those fees from each manufacturers under the guise of cost savings. Cost savings that could have been passed onto the consumer directly. No middle man needed. Problem solved.

PBMs got a saving pass earlier this summer after President Trump had issued some thoughts on removing safe harbors that restrict free markets, only to have his constituents back off the idea because of lobbyist. There are a few groups out there fighting to keep this fight going to reduce the amount of cost associated with them, as it relates to choice and the end consumer. In fact President Trump, and this is not a political endorsement one way or another, is still vying to fight for this according to recent news in Florida a few days ago.

Apolitically, we should all be looking at means and solutions to streamline care and services, by removing those layers of admistrative bureaucracies and middle entity stratifications that raise cost and restrict free markets. Any rational mind would have to agree that without improving the cost and business of care, throwing more tax dollars into a single payer system, without any improvements, would be devastating, and worse unsustainable. There is very little accountability in healthcare, and removing an imperfect corporate market that heavily subsidizes cost, for one bore by a majority of tax dollars would be a waste on a grand scale. Given the rise in trillions of debt, to take on another $6 Trillion annually in the next ten years would be a death nail to the US economy.

In fact, if we wanted to create a true free market where price for commodities were for all to see, we wouldn't need secret pricing bids or GPOs. According to this article: Group purchasing organizations' practice of requiring manufacturers "pay to play," or pay fees to have their products featured in supply catalogs, is among the factors driving up the cost of healthcare, a trio of Johns Hopkins University professors argue in a new paper.

Furthermore:

GPOs are exempt from a federal law that bans kickbacks or rebates in return for furnishing items or services. That means GPOs ask manufacturers to pay a fee to have their products featured in their catalogs, or even a premium fee to become a sole supplier. That could drive up the cost of supplies if manufacturers pass on those fees to hospitals, the professors said.

This is absolutely true. All manufacturers mark up the cost of goods to account for every amount of extortions and discounts expected. For example. I can say my product is $5000 dollars, but I'm gonna sell it to you for $500 dollars. You feel like you got a deal, checked off a box of nonexistent discounting, and I still made a margin. Was that really a cost savings, or a perceived cost savings everyone could report to get their bonus? One ting to remember, as long as a company can supply a good a fair market value, and maintain quality, pricing to grow R&D, jobs, and manufacturing, then that's all that is needed to compete and stay in business.

Now, if all pricing was transparent or at least had a transactional record through "block chain" for example, of any line item product or SKUs nationwide, especially for commodities of like products, then we wouldn't need GPOs or PBMs, and dynamic pricing would go away. You see, it's the lack of transparency and free markets all manufacturers need to compete in the healthcare space. This allows us to remove the barriers and stratifications that limit free market and cost improvements. THIS IS WHERE SUPPLY CHAIN NEEDS TO GO and you can bet I'll be part of it in some way! This would allow tiers of volume needed to balance the system out fairly from one healthcare facility to the next. Remember, everything is based on volume of goods contracted or sold. This would expose dynamic pricing especially for small facilities across the nation, giving the best price where it is needed by those institutions who lack the margins for expanded growth and services.

Under the current model, new innovations take years to reach customers under these commodity schemes, robbing end users and their patients optimized care delivery and services. GPOs can't adopt in real time, or react to quality issues, especially when they lead their customers to believe that all products have to be purchased from the LIST! In fact, the people making those decisions in office buildings many miles away are incentivized by one thing, price, regardless of its impact on end users and their patients. Their clinical staff are also mostly out of touch with conditions on the frontlines of care. They are incentivized to grow their business and their profits, not to actually improve care.

They also provide rebates that hospitals can trade in for expanded service, rebates that wipe away any of the savings hospitals thought they were getting for a discounted list of products they were believed to have benefited from.

Our company once had one of the biggest GPOs out there give us a call because we raised a stink about the current process online. They wanted to include us on a sourcing bid for positioning products. They spent the first part of the meeting talking about how clinical relevant they were and how we should be honored, as they listed the names on the current contract for positioning products they were considering. They funny thing was they listed manufacturers who were not even in the surgical positioning space, nor did they have any actual clinical understanding of what we were discussing in terms of processes and known liabilities readily published as it related to positioning and their liabilities, despite their credentials. These are people making decisions for providers from 1000 miles away, those who seek to limit your choice over someone's idea of cost value, not cost benefit!

So how does this affect us as a small business, especially a small Veteran Owned business, in many ways. We can't compete when hospitals deny us the right to even engage with their providers because we aren't on the LIST. One company out there is the worst offender, they also control credentialing to get into hospitals for engagement. Fortunately, we have records and email chains of clinicians and sourcing agents telling us they can't or won't talk to us if we don't have a contract with this company. That is anti-trust!

You have a choice! Exercise it!

Patient Positioning and GPOs

If you find a patient positioning product that meets your need, you should have a choice. GPOs only look at cost, not the functionality of products. They don't understand cost benefit, performance, or the processes required to perform routine surgical care. They don't have the metrics to compare and contrast.

Cost is the worst predictor of product choice! This assumes all products are equal. We can't evolve care if we buy into this, as this limits our clinical growth and duty to patients! 

Providers should worry about the care they give, not the cost. Our job is to make sure you get what you need when negotiating with your facility. 

Saving a few dollars of perceived upfront cost can wreck the efficiency & performance of a surgical suite, losing $100's-$1000's per procedure related to inefficiency, variance, and poor staff utilization. This is especially true under evolving BPCI's (Bundled Payments for Care Improvement).

All companies can pass on direct cost savings to the hospital, as we have to pay fees to GPOs to be on that pay to play contract. 

We offer the only positioning systems on the market that do what they do, and we refuse to be commoditized, as this commoditizes your choice, your processes, and your performance. 

We would gladly welcome the opportunity and privilege to compare our products to your existing Trendelenburg positioning systems. We offer greater efficacy through design, better patient patient handling and positioning processes over historic processes, those needed to improve the safety of BOTH surgical staff and their patients. We also improve utilization needed to maximize surgical efficiency and reimbursement ROI.  We can readily demonstrate this anytime, anywhere!

Please consider  infinitus Medical Technologies when evaluating patient positioning options. We can work with you on pricing, but more improtantly give you what you need! 

We are different for many reasons, simply because we know what it's like to provide surgical care as a clinically founded company!