Making a case
Shoppers pitch sellers at annual expo
Healthcare group purchasing executives used the 2010 HIGPA International Expo last week to push their argument that GPO contracting practices provide fair ground for vendor competition while simultaneously taking costs out of the healthcare system.
The annual conference, put on by the Health Industry Group Purchasing Association, was held Oct. 25-27 in Orlando, Fla., and provided vendors with an opportunity to meet with GPO executives. More than 450 people attended this year’s expo.
The event took place roughly a month after the release of a Government Accountability Office report on GPOs’ financial and contracting practices. The report was accompanied by a minority report from Sen. Chuck Grassley (R-Iowa), who, along with some suppliers, is critical of an anti-kickback law exemption that allows group purchasers to collect administrative fees from vendors that sell their goods and services through GPO-negotiated contracts. Grassley has argued that the safe harbor provision reduces competitive pricing because GPOs earn more with higher prices, and he has indicated that he may push for greater financial oversight of GPOs.
But during the conference, GPO executives pressed their case to vendors, saying that their business practices not only provide a level playing field for vendors to bid for hospital purchasing contracts, but also help small and minority suppliers to get on hospitals’ radars and compete for business.
“Healthcare reform is not a zero-sum game,” Peter Allen, senior vice president of sourcing operations for Novation, said during a panel on GPO-vendor relations. “This is real money that will come out of the hospitals, and as we look forward, we anticipate hospitals having fewer resources and people to negotiate contracts. So, the GPO contract will become even more crucial,” he added.
At least one GPO executive, however, prodded his peers to ramp up supplier diversity efforts as one means of helping small businesses become viable competitors for hospital purchasing contracts. During a session on supplier diversity and innovation, Lamont Robinson, senior director of supplier diversity for Novation, urged GPOs to adopt multiple measures aimed at expanding opportunities for minority and women suppliers. Such measures, he said, should include creating mentoring programs and incubators for strengthening the businesses of diverse suppliers and helping those suppliers create partnerships with large businesses so they can better compete for contracts.
“You may have a gap with a large supplier where they may not provide a particular product, and they can partner with a smaller supplier who is producing a customized solution,” said Robinson, who noted small suppliers lack the resources to mass produce and distribute their goods. “A lot of the solutions that are coming are not coming from large companies, but the smaller companies,” he added.
The effects of healthcare reform on the supply chain also took center stage during the conference, with supply chain experts predicting how legislative changes will influence what products hospitals buy. Charles Root, founder and president of medical coding company CodeMap, said during a session that hospitals and suppliers will need to keep a close watch on the nuances of reform legislation to remain compliant with payer reimbursement requirements and to maximize their business opportunities.
Root noted, for example, that changes in reimbursement for laboratory and imaging services will affect hospitals’ purchasing habits and, as a result, suppliers’ businesses. But he also said increased coverage of preventative services will present new business opportunities for suppliers who provided disease-screening and preventive-care products. Root pointed to drug screening as one area of anticipated growth as providers work to prevent abuse of highly addictive pain medications in patients who are prescribed such drugs.
“This is what you call an unintended consequence” in that it generates opportunities to create usable products for doctors, Root said. “Everybody is going to take a haircut during the next few years, but you’ve got time to adjust, and there’s no question that if you can innovate as a manufacturer or hospital, then those will be the winners.”
Robinson said smaller suppliers can offer solutions too.