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

Arlington, VA (June 9, 2005) – The Department of Health and Human Services Inspector General’s (HHS IG) recently released audit tells a story of success for the hospitals served by health care group purchasing organizations (GPOs). It was found that without adding to the hospital’s operation costs these GPOs were able to generate significant revenue through administrative fees, the vast majority of which were immediately returned to providers. The revenue the GPOs did retain from administrative fees that are not returned to members directly, are in fact indirect benefits to hospitals belonging to a GPO. The indirect benefits in most cases are returned in enhanced services and/or to support the development of new ventures to serve those same providers.

“The IG audit confirms the value GPOs bring to health care providers. GPOs help providers achieve cost savings and efficiencies by aggregating purchasing volume and contracting functions, including the use of administrative fees and rebates, to negotiate discounts with medical supply companies,” said Robert Betz, Ph.D., HIGPA President and CEO. “HIGPA and its members have long held the position of advocating that providers thoroughly account for such rebates and revenue disbursements on their Medicare cost reports. We believe the vast majority of health care providers are adequately engaged in such accounting practices.”

The IG audit reviewed three GPOs to determine how much revenue GPOs received from vendors and the disposition of that revenue. The IG’s audit covered a period from 2001 – 2003. In 2002, GPOs through the Health Industry Group Purchasing Association (HIGPA) adopted a Code of Conduct enhancing their business model. Consequently, interpreting data from this IG audit may not be as relevant today.

HIGPA is a chartered trade association of over 140 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 related 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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