Hospital group purchasing organizations may open a few doors for vendors, but their supply contracts do not guarantee that a huge base of customers will cross the threshold, according to a new survey of suppliers.
At the same time, GPOs appear to be clueless that many big hospital systems seem to be just biding their time with GPOs until an opportunity comes along to negotiate supply contracts on their own.
That pretty much sums up what suppliers think about their love-hate relationship with GPOs, according to the results of a survey conducted by NCI, a Palm Harbor, Fla., consulting company specializing in the healthcare purchasing business. NCI released the results exclusively to Modern Healthcare last week.
The survey was conducted in preparation for an educational conference called "Building a Successful IDN Program" that NCI will be holding in Chicago July 21-22. But the results are especially timely as the Senate Judiciary Committee's subcommittee on antitrust prepares to hold its second hearing on GPO business practices this week, on July 16.
The less-than-enthusiastic attitude that suppliers have toward GPOs wouldn't come as a surprise to anyone. Disgruntled medical device manufacturers, who have charged that GPOs hamper the introduction of their innovative products to the marketplace, have in large part spurred the yearlong investigation by the Senate panel. Premier and Novation, the two largest GPOs, are expected to appear to report on their progress in shaping up to the subcommittee's concerns.
For all the talk about how GPOs dictate which medical products are purchased by hospitals, hospitals are not complying with their GPO contracts in awesome numbers, judging by the survey results. Suppliers that responded to the online survey reported that GPO contracts generally brought only a fraction of their promised potential volume of sales (See chart). HCA-owned HealthTrust led the pack of seven national GPOs, with 28.3% of the suppliers reporting that they sold better than 50% of what HealthTrust contracts promised to deliver. Novation, the joint supply company of VHA and University HealthSystem Consortium, came in a close second, with 28% of the suppliers reporting 50% or better conformity with the GPO's choice of vendors. St. Louis-based AmeriNet trailed the pack; only 6.4% of the suppliers responding reported better than 50% performance.
On average, 18.5% of the suppliers said they realized better than 50% of the volume that GPOs had suggested they could ultimately achieve with their contracts. Perhaps more significantly, a little less than half of the suppliers that responded to the survey-43.8%-said they were realizing less than 20% of the GPOs' potential volume.
The compliance numbers were not nearly "as high as you would expect," said Greg Firestone, NCI's chief executive officer. He surmised that physicians and other clinicians were driving the high volume of purchases off contract, choosing supplies based on what they preferred rather than on what GPO contracts encouraged.
More than half of the suppliers surveyed-58.3%-said a hospital's affiliation with a GPO could open doors but did little more to guarantee business. Nearly 10% said they could not get a meeting with a decisionmaker unless they had a GPO contract. Nearly one-fourth-23.6%-said GPO affiliation plays only a small role in a hospital's decision to purchase a particular product.
The suppliers that responded to the NCI survey were asked to rank GPO priorities. Reinforcing the complaints of the small device manufacturers, they said they thought the GPOs are most concerned with bringing low prices to members and, secondly, with recruiting and retaining hospital members. The suppliers said the GPOs were least concerned with seeking out new products that provide better care or clinical effectiveness.
Asked to assess the relationship between GPOs and their members, 43.7% of the suppliers thought the members were just "using GPOs until the opportunity comes along to do it themselves." Meanwhile, revealing somewhat of a disconnect between GPOs and their hospital customers, only 5.6% of the suppliers said they thought GPOs actually perceived large hospital systems as a threat to GPOs' existence. Another 39.4% of the respondents said they thought GPOs and their members were well-intentioned but challenged as to how best to work together.
"I do not think (GPOs) understand the needs of their customers," Firestone said. "But to be fair to the GPOs, any place you go in the U.S., every customer has a different need. It's hard to meet all their needs."
The online survey was sent to 2,343 people representing more than 1,000 different vendors. There were 138 responses, a 5.9% response rate. The average response rate for such surveys is 5% to 10%, according to PeopleView, the company that conducted the survey for NCI.