David Burda: Tell us a little more about how the excise tax was proposed.
Curtis Rooney: I think back in July there was this discussion on healthcare reform, about how to pay for healthcare reform. And so, GPOs, as I think I mentioned to you earlier, are already paying or already responsible for $36 billion annually in savings to hospitals. And so, when the healthcare industry went down to the White House, we didn't go with them, there was discussion of an excise tax to help pay for healthcare reform which the device manufacturers have decided to fight. And, in that discussion they suggested to staff that the GPOs have an excise tax. And, when we entered that conversation, people were scratching their heads because they didn't understand how one industry could suggest to lawmakers that another industry pay for taxes for them. So, we went to them. We suggested that there's a better way to do it and that they understood GPOs are savers. The device guys, if they're going to pay for excise taxes, should pay for it themselves. And the current proposal is $40 billion over 10 years for device manufacturers.
David Burda: Curtis, we understand that those provisions are now off the table. Can you tell us about the grass-roots movement that helped you get that accomplished?
Curtis Rooney: A couple things. Just to take one step back. Most people don't know that GPOs are actually owned by hospitals—mostly. And so they went—the GPOs went to their customers, the hospitals, and said, ‘Please contact your member of Congress and also please contact the suppliers that you work with.' So that was our grassroots effort, and the response was overwhelming. Over 400 hospitals wrote in to their member of Congress and senators saying, “Please don't change the way GPOs do business. They provide all kinds of savings and services to the hospitals. You're asking for $155 billion in cuts and reductions. This is not the time to change this business model.”
David Burda: If devicemakers are assessed those fees or even a smaller amount, how would that affect GPOs?
Curtis Rooney: Sure. Two things: One is they suggest that they will pass on those costs, and so, ultimately, will be paid for by the customers, which, of course, is the hospitals. Interestingly we had a study done by Eugene Schneller at Arizona State University, who looked at GPOs and asked hospital resource managers and materials-resource managers: Where did GPOs save you the most? And in the area of what are known as physician-preference items—implants, cardiac implants, knees, hips—GPOs and those manufacturers really don't do a lot of work together. And so when they do do it, it's mostly like you and I would use Kelley Blue Book as a comparison. But we don't expect it to affect GPOs. But we do expect it to affect hospitals.
David Burda: Your members were sent a letter by key Senate lawmakers asking for more information about GPO operations, how do you intend to respond to their requests?
Curtis Rooney: Sure. So, going back to the discussion we had back in May with the Baucus and Grassley staff, we said to them, “Look, most of these questions you're asking are on this Web site. Here it is.” And that information was provided. They asked approximately nine questions. Six of those questions are actually on that Web site covering the issues that I just mentioned earlier. And, some of the other questions—the three other questions—are very specific questions that only really a specific GPO could answer, such as, “Show us an example of your contract. What are your fees specifically?” So those individual GPOs will be following up, and actually the deadline for that submission is the 25th of September, so that should be coming up. And we probably expect other follow-up questions, and we'll be happy to provide all the information. And each GPO will be doing so.
David Burda: Curtis, do you expect Congress to hold any more hearings on GPO operations?
Curtis Rooney: I think it's hard to say. We haven't had a hearing since '06. I think the industry certainly has moved on and certainly has done its best to make sure that all of the business practices that were in question are provided to the public. And so we feel like we've done a good job of that, but if there are hearings, we'd be happy to participate because we think we have a great story to tell. We think GPOs are the unsung heroes of healthcare reform because they do all the things that healthcare is talking about, reducing costs, improving patient safety and improving efficiency as well.