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FOR IMMEDIATE RELEASE
Contact: Carolyn Hickey
Phone: 703-243-9262

Orlando, FL (October 17, 2002) - A new study released today by the Health Industry Group Purchasing Association (HIGPA) revealed that health care providers report they save between 10 and 15 percent by channeling their purchases through group purchasing organizations (GPOs), totaling between $19.0 billion and $33.7 billion in savings for CY 2002. A one percentage point decline in the rate of these GPO-generated savings-which would occur if restrictions were imposed on the GPO contracting process-would result in an increase in total public and private expenditures for health services and supplies of between $1.9 billion and $2.24 billion in CY 2002, according to the study.

The study, entitled The Role of Group Purchasing in the Health Care System and the Impact on Public Health Care Expenditures if Additional Restrictions are Imposed on GPO Contracting Processes, was conducted by Muse & Associates, a health care research firm based in Washington, D.C. The study was financially supported by HIGPA.

Impact on Medicare, Medicaid and other public health care programs

The study found that implementing additional restrictions on the GPO business model would result in an increase in expenditures in CY 2002 for several public health care programs. For every one percentage point decline in the rate of GPO-generated savings:

• Medicare - Expenditures would increase by an additional $540 million to $641 million;

• Medicaid - Expenditures would increase by an additional $395 million to $468 million;

• Department of Veterans Affairs - Health care expenditures would increase by an additional $61 million and $73 million;

• Department of Defense - Health care expenditures would increase by an additional $36 to $73 million; and,

• Workers’ Compensation - Health care expenditures would increase by an additional $32 million to $39 million.

Combined Medicare and Medicaid expenditures, the nation’s health care programs servicing America’s most vulnerable populations-the elderly and disabled, and the poor, respectively-could increase by an additional $1 billion if the cost savings GPOs provide were reduced, the study confirms.

Providers, payers and ultimately, consumers will pay more for products and services purchased through GPOs if their ability to negotiate on behalf of their providers is curtailed by additional restrictions on the GPO contracting processes, the study reports. Imposing such restrictions as taking away the essential contracting tools available to GPOs to get the best deals on products for their members would tilt the marketplace in favor of manufacturers and have a negative impact on pricing, discounts, and savings that GPOs attain.

"This study validates the cost savings that GPOs provide to the health care system," said HIGPA President and CEO Robert Betz, Ph.D. "U.S. hospitals face a very difficult challenge every day in trying to provide affordable, quality health care for their patients. They have two main costs:supplies and labor. This study confirms that GPOs are essential to helping providers hold down the cost of supplies."

The recent changes that the GPO industry committed to as set forth in the HIGPA GPO Code of Conduct are significant and will ultimately contribute to enhancing patient care. However, providing high quality health care at affordable prices is a constant balancing act, and if taken too far, further changes to the GPO business model could, as the Muse study highlights, negatively effect the U.S. health care system."

To estimate the savings attributable to GPOs, analysts based their study on CY 2002 projected data, regarding national health expenditures accounts and projections produced annually by the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS).

The study also found that hospital providers report that 44.6% out of $476.1 billion of their expenditures are non-labor related for CY 2002. Nursing homes’ non-labor related expenses for CY 2002 account for 25% out of $103.8 billion of total health care expenditures. From these figures the study estimates that the GPO marketplace for CY 2002 is $238.3 billion.

To obtain a copy of this study contact HIGPA’s Director of Communications, Carolyn Hickey, at (703) 243-9262.

HIGPA is a chartered trade association of approximately 165 health care purchasing and supply chain organizations. HIGPA's Industry Members include purchasing groups, associations, and health care provider alliances. HIGPA's Trading Partner members include many of the world's leading health care product manufacturers, distributors, wholesalers and rela ted suppliers. According to a recent study conducted by a former principal analyst at the Congressional Budget Office, hospitals save patients over $30 billion each year by purchasing products through group contracts.

To learn more about HIGPA or the group purchasing industry, visit www.higpa.org or call 703-243-9262.

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