Group purchasing organizations (GPOs) say they save hospitals significant dollars and help them spread healthcare resources. The critics of GPOs say they skim off too much profit for themselves and keep the small players with new technologies out of the hospital supply game.

The Health Industry Distributors Association (HIDA; Alexandria, Virginia), in a just released position paper, sides with the critics.

GPOs have been overpaid by almost $700 million in fees across the last 10 years, according to the HIDA paper, “Group Purchasing Organizations’ (GPO) Distributor Fee Formula Requires Scrutiny,” which examines the fee structures charged by GPOs and paid by acute care medical products distributors.

“HIDA is calling for discussion on the fee structure topic with the goal of bringing the fee structure for medical products distributors in line with recently elevated standards in GPO contracting,” said Matthew Rowan, HIDA’s president/CEO, in a statement issued with the paper.

“More than two years of federal government scrutiny and new commitments by GPOs to increase transparency and promote integrity initiatives, demand a close reexamination of fee structures and practices,” the organization said.

Acute care medical products distributors are currently charged GPO fees on a basis greater than the value of the distribution service they provide, according to the paper. Rather than being charged solely on the basis of the service they perform, distributors are also assessed fees based on the manufacturer’s product price, according to HIDA. It says that this occurs even though distributors have no control over product prices, which are negotiated between GPOs and manufacturers. Moreover, GPOs also charge manufacturers fees based on these same product prices, the group said.

According to HIDA, distributors should only pay fees based on the distribution services they provide. “Distributors are being affected by an outdated fee structure that is out of sync with current industry integrity and transparency expectations — now is the time to update this system,” Rowan said.

One reason HIDA says charging distributors any GPO administrative fee based on any part of the product price is a questionable practice is because GPOs already collect a fee up to 3% on the product cost.

“By charging distributors a second fee based on the product cost, GPOs appear to ‘double dip’ – collecting two product-based fees on the sale of a single product,” the paper notes.

HIDA is an international trade association representing medical products distributors.

CMS changes ‘most sweeping’ since ‘83

The Centers for Medicare & Medicaid Services has issued the most sweeping rule changes for hospital reimbursement since 1983, according to the American Hospital Directory (AHD).

The new regulations, which affect acute care hospitals nationwide, go into effect Oct. 1 and will have significant impact on how hospitals are reimbursed for in-patient services (IPPS), according to recently completed studies by AHD.

There will be redistributions of reimbursement among some medical services and among certain types of hospitals. These changes are caused primarily by a new severity-adjusted DRG system and transition to a new weighting methodology used by CMS to set relative weights for payment, American Hospital Directory said.

“We just completed a series of studies that calculate the impact of the CMS regulations on hospital reimbursement based on detailed, claim level data,” said Paul Shoemaker, president/CEO of AHD. “Our studies indicate that small and rural hospitals and hospitals specializing in cardiac care will be negatively impacted by the new rules. We also noted that teaching hospitals will realize an increase in base payments but will see reduced outlier payments under the new MS-DRGs.”

AHD has posted the studies on its web site.

AHRQ reviews HIE plans in 34 states

The Agency for Healthcare Research and Quality (AHRQ; Washington) has released a set of reports titled “Privacy and Security Solutions for Interoperable Health Information Exchange.” The reports review 34 state Health Information Exchange plans and identify the challenges and feasible solutions for ensuring the safety and security of electronic health information exchange.

All states followed a standard core methodology, but each was provided an opportunity to tailor the process to meet their needs. As a result, states varied on several dimensions, including degree of adoption of electronic health information exchange, healthcare market forces in the state, legal and regulatory conditions related to health information, demographic composition of the state, and financial status.

“These reports address one of the greatest concerns that Americans have about health information technology: Will their personal data be safe?” said AHRQ Director Carolyn Clancy, MD. “This work presents information on how to develop privacy and security solutions that allow for the exchange of information safely and securely.”

“The number of stakeholders involved in this initiative demonstrates the magnitude of this work,” said Robert Kolodner, MD, National Coordinator for Health Information Technology. “The report findings and recommendations will provide ongoing guidance for local, state and federal governments as we move toward greater interoperability.”

This work was funded under a contract with AHRQ, the Office of the National Coordinator for Health Information Technology and RTI International.

AARP pushes for reform in California

With only days remaining in the 2007 legislative session, the healthcare reform proposals developed by Governor Arnold Schwarzenegger, as well as state legislative leaders, are awaiting action. Both proposals would increase access to healthcare coverage and the quality of care, according to the AARP (Washington), the major U.S. association advocating for those over 50.

AARP said it conducted the poll to help inform policymakers about how their members feel about the need for healthcare reform.

The poll of 802 members in California shows that healthcare reform is a top legislative priority for them and indicates strong support for broad healthcare reform, two-thirds of respondents strongly agreeing that all Californians should have access to quality, affordable healthcare.

Two-thirds of poll respondents said they believe it is important that the governor and state legislature pass a healthcare reform bill this year, and many will be closely monitoring the vote on healthcare reform, the organization said. Six in 10 respondents said they are unlikely to re-elect legislators who do not pass a healthcare reform bill this year. In addition, a significant number of members said they are unlikely to vote for an extension of term limits for legislators if a healthcare reform bill is not enacted.

AARP said that the majority of its members in California have difficulty affording healthcare and many are concerned about being able to get access to quality, affordable healthcare for themselves and their family.

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