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FOR IMMEDIATE RELEASE
Contact: David McDonough
Phone: 703-243-9262

GPOs SAVED HOSPITALS UP TO $19 BILLION IN NON-LABOR COSTS IN 1999, STUDY FINDS

WASHINGTON, D.C. (March 15, 2000) -- Group purchasing organizations (GPOs) saved hospitals between 10 and 15 percent ($12.8 billion to $19.2 billion) of the $128 billion in non-labor health care costs that were channeled through GPOs in 1999, according to a new study released today by the Health Industry Group Purchasing Association (HIGPA).

Non-labor purchases-such as pharmaceuticals, supplies, medical equipment and food-accounted for about 44.6 percent ($179 billion) of hospitals' total expenditures in 1999, the survey found. Of this amount, approximately 72 percent ($128 billion) was purchased using group contracts, the study found.

The study was conducted by Muse & Associates, a research firm based in Washington, D.C. and with funding from HIGPA. It is the first time a sample of hospital purchasing executives has been queried about how they utilize group purchasing for non-labor expenditures.

"This study shows that GPOs save hospitals billions of dollars each year by reducing the cost of non-labor expenditures," said HIGPA Executive Director Robert Betz. "It also is evident from the study that GPOs have room to grow in helping hospitals and other providers realize even more savings in their non-labor costs."

In the survey, purchasing managers reported that GPOs help hospital staff with product standardization, comparison shopping, as well as streamlining their health care products and services. GPOs also assist hospitals with procurement, storage and transfer of non-labor items such as pharmaceuticals, supplies, medical equipment and food.

The study's other findings include:

• Approximately one-third of the hospitals surveyed currently conduct purchasing over the Internet.
• Of the Internet users, about 5 percent of their purchases are made online.
• Hospital purchasing managers said they know they receive a fair price for purchases through their group contracts because they conduct internal audits and detailed cost comparisons.
• Hospitals spent an average of 12.5 percent ($21.9 billion) of all non-labor expenditures on pharmaceuticals in 1999.
• Hospital spending for medical/surgical equipment and supplies averaged just over 19 percent of total non-labor expenditures in 1999, or $34.1 billion.

The telephone survey of 221 purchasing managers at community hospitals was conducted in the fall of 1999. The survey is not a statistical sample and respondents were not selected in a nationally representative manner. The survey was designed to supplement the limited data that exist about the non-labor side of health care and to verify the accuracy of the data about GPOs, which must be extrapolated from a combination of government and private-sector data sources, including the Health Care Financing Administration, the Congressional Budget Office (CBO) and the American Hospital Association. The researchers were led by Don Muse, Ph.D., formerly Principal Analyst, Medicare/Medicaid, at CBO.

For more information on the 64-page study or for copies contact HIGPA at 703-243-9262.

HIGPA is a national chartered trade association of approximately 150 health care purchasing and supply chain organizations that serve approximately three out of every four U.S. acute care hospitals, as well as most of the long term care, home care and medical group practice markets. To learn more about HIGPA, visit our web site: www.higpa.org.

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