GCU Yang et al Discussion
respond to the following as a peer. According to Brock (2003), a group purchasing organization (GPO) is a business purchases supplies in volume from manufacturers to pass along cost savings to member hospitals that each pay an up-front membership fee. The GPO achieves volume purchasing from each seller/manufacturer to achieve a quantity discount per unit along with a single administrative purchasing fee, allowing member hospitals to achieve savings they could not achieve alone (Brock, 2003). Some GPOs were able to gain proprietary information that individual purchasers could not obtain and perform product testing and comparison that individual healthcare facilities could not achieve, thus contracting with a “best” manufacturer for their members. This and other behaviors brought GPOs under the scrutiny of the Federal Trade Commission (FTC) (Brock, 2003).
Despite violation of Section 1 of the Sherman Act, which makes it unlawful for buyers and sellers of goods and services from entering into contracts or collusions to jointly set prices at which they will jointly buy or sell goods, the Supreme Court has recognized that GPOs provide value to its member healthcare organizations that outweigh the anticompetitive effects of its purchasing model (Brock, 2003). In 1996, the U.S. Department of Justice and the FTC issued the Statement of Antitrust Enforcement Policy in Health Care, noting that most GPOs did not raise antitrust concerns, but addressed specific issues to develop policies or safety zones with goals to prevent market disruption through monopoly purchasing or price fixing (Brock, 2003). Brock notes that the Statement requires that 1) GPO membership services must total 35% or less of total sales of a product or service, and 2) the total costs of the products purchased by the hospital must be less than 20% of its total revenues.
Brock’s article was written in 2003. A Bing search using the terms “group purchasing organization and FTC” yielded an article referenced below by O-Brien et al., (n.d.); though undated the reference section lists publications as recent as 2016. The article delineates multiple additional requirements applicable to GPO’s and members for legal compliance. A search at FTC.gov using terms “group purchasing organization and healthcare” resulted in several articles recovered discussing group purchasing of pharmaceutics but nothing regarding purchase of general medical supplies.
Certainly, with the coming changes in healthcare focused on creating high value healthcare through emphasis on reduced costs and high quality through MACRA legislation, group purchasing organizations make sense in helping hospitals to reduce costs. These groups must be monitored to ensure their market footprint does not result in market dominance, cost control, limitations on research and development, and supplier harm.
Brock, T. H. (2003). Hospitals, group purchasing organizations, and the antitrust laws. Healthcare Financial Management, 57(3). Retrieved from https://search-ebscohost-com.lopes.idm.oclc.org/login.aspx?direct=true&db=edsbig&AN=edsbig.A98953926&site=eds-live&scope=site
O’Brien, D., Liebowitz, J., and Anello, R. (n.d.). Group purchasing organizations: How GPOs reduce healthcare costs and why changing their funding mechanism would raise costs. Retrieved from https://www.bing.com/search?q=ftc+group+purchasing…