Following adoption of new codes on ethics early in the decade, group purchasing organizations have undertaken many changes, according to a new report by the Government Accounting Office.
Here are 10 points the GAO made in a study of the six largest GPOs, which it did not identify by name, and their trade group, the Healthcare Group Purchasing Industry Initiative.
1. GPO contracts account for about 73 percent of non-labor purchases hospitals made in 2009.
2. About 98 percent of hospitals use GPOs to purchase products, and each hospital uses an average of two to four GPOs.
3. Of more than 600 US. GPOs, the six largest account for almost 90 percent of all hospital purchases through GPO contracts. These six companies' had a combined volume of more than $108 billion in 2008, with the two largest GPOs accounting for almost 60 percent of that volume.
4. A GPO's decision to fund a service through direct customer charges or contract administrative fees often depends on the percentage of customers planning to use that service. If all of its customers plan to use a certain service, contract administrative fees typically pay for the service, but if only a portion of customers plan to use the service, users would typically be charged a separate fee.
5. The average contract administrative fees paid by vendors in 2008, weighted by purchasing volume, ranged from 1.22 percent of to 2.25 percent of customer purchases. Individual contract administrative fees to GPOs ranged from 0.09 percent to 10 percent of a product’s purchase price.
6. The six largest GPOs reported distributing $1.1 billion to customers and owners in 2008.
7. GPOs have revised their codes of conduct and established a voluntary membership association focused on promoting best practices and public accountability among member GPOs.
8. The Healthcare Group Purchasing Industry Initiative adopted a set of principles of ethics and business conduct, including a written code of business conduct, sharing best practices, annually reporting policies and business practices and working toward high quality health care, cost effectiveness and an open and competitive purchasing process.
9. All six GPOs' codes of conduct and other initiatives have impacted contracting practices, innovative product selection, contract administrative fees, potential conflicts of interest and the transparency and accountability of GPO business practices. For example, three GPOs reported convening forums for members to learn about new and innovative products.
10. As a result of the codes of conduct, four GPOs reported they do not receive contract administrative fees greater than 3 percent, and one GPO reported an overall decrease of administrative fees in relation to sales volume since 2002.
Read the GAO report on GPOs (pdf).
Read other coverage on GPOs:
- 8 Largest Group Purchasing Organizations for Hospitals
Here are 10 points the GAO made in a study of the six largest GPOs, which it did not identify by name, and their trade group, the Healthcare Group Purchasing Industry Initiative.
1. GPO contracts account for about 73 percent of non-labor purchases hospitals made in 2009.
2. About 98 percent of hospitals use GPOs to purchase products, and each hospital uses an average of two to four GPOs.
3. Of more than 600 US. GPOs, the six largest account for almost 90 percent of all hospital purchases through GPO contracts. These six companies' had a combined volume of more than $108 billion in 2008, with the two largest GPOs accounting for almost 60 percent of that volume.
4. A GPO's decision to fund a service through direct customer charges or contract administrative fees often depends on the percentage of customers planning to use that service. If all of its customers plan to use a certain service, contract administrative fees typically pay for the service, but if only a portion of customers plan to use the service, users would typically be charged a separate fee.
5. The average contract administrative fees paid by vendors in 2008, weighted by purchasing volume, ranged from 1.22 percent of to 2.25 percent of customer purchases. Individual contract administrative fees to GPOs ranged from 0.09 percent to 10 percent of a product’s purchase price.
6. The six largest GPOs reported distributing $1.1 billion to customers and owners in 2008.
7. GPOs have revised their codes of conduct and established a voluntary membership association focused on promoting best practices and public accountability among member GPOs.
8. The Healthcare Group Purchasing Industry Initiative adopted a set of principles of ethics and business conduct, including a written code of business conduct, sharing best practices, annually reporting policies and business practices and working toward high quality health care, cost effectiveness and an open and competitive purchasing process.
9. All six GPOs' codes of conduct and other initiatives have impacted contracting practices, innovative product selection, contract administrative fees, potential conflicts of interest and the transparency and accountability of GPO business practices. For example, three GPOs reported convening forums for members to learn about new and innovative products.
10. As a result of the codes of conduct, four GPOs reported they do not receive contract administrative fees greater than 3 percent, and one GPO reported an overall decrease of administrative fees in relation to sales volume since 2002.
Read the GAO report on GPOs (pdf).
Read other coverage on GPOs:
- 8 Largest Group Purchasing Organizations for Hospitals