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Devicemakers passing excise tax on to providers, GPOs say


By Beth Kutscher
Posted: January 25, 2013 - 11:00 am ET
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Group purchasing organizations are expressing "alarm" that the medical device industry is passing along the costs of a controversial excise tax to healthcare providers.

The Healthcare Supply Chain Association, which represents GPOs, said in a statement that it is concerned about evidence that some medical-device makers are billing hospitals directly for the 2.3% tax.

A separate statement from Novation, a GPO that serves community-based, pediatric and academic hospitals, said that at least one unnamed medical device manufacturer had billed "many" of its members to cover the costs of the tax.

Novation said the hospital industry has voluntarily contributed $155 billion over 10 years to help cover the costs associated with healthcare reform -- while the medical device tax, which amounts to $20 billion over 10 years, was put in place because manufacturers "refused to voluntarily contribute."

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"While most device manufacturers are taking responsibility for this tax, there are some manufacturers attempting to pass their obligation on to hospitals," Jody Hatcher, Novation's president and CEO, said in the statement. "This tax should be the responsibility of the manufacturers, and Novation is dedicated to ensuring that member hospitals are impacted by it as little as possible."

A spokeswoman at AdvaMed, the trade association for the medical device industry, said in an e-mail that the group has no position on how its member companies approach the tax.

"We have consistently said the device tax is bad policy, and that's why AdvaMed and its member companies continue to fight for its repeal," she said. "Members of Congress from both sides of the aisle remain strongly supportive of eliminating the tax because it is already substantially increasing costs to the device industry and harming its competitiveness. We have already seen a number of harmful effects, including layoffs, reduced investments in R&D and delays in significant capital improvements."

The GPO industry had already feared that the tax would mean higher charges for hospitals.

The HSCA is among the groups that have been urging the Internal Revenue Service to block the medical device industry from shifting costs to providers. The American Hospital Association, the Federation of American Hospitals and the Catholic Health Association co-signed a letter along with the supply-chain association supporting that stand.


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