Senate Hearing Update


The New York Times series on GPOs

The Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights held three hearings regarding the practices of Group Purchasing Organizations (GPOs) and Dominant Medical suppliers. As a result of these hearings, most of the major GPOs, including Premier and Novation, created Codes of Conduct to attempt to reduce anticompetitive conduct relating to clinical preference products. As part of these investigations, the General Accounting Office published two reports. The first report found that GPOs do not always offer hospitals lower prices. The second GAO report addressed certain anticompetitive contracting practices used by GPOs including sole source contracts and bundling arrangements and discussed the various Codes of Conduct implemented by the GPOs to correct these practices. Furthermore, the Department of Health and Human Services Office of the Inspector General recently published a report that showed of the $1.8 Billion in fees that 3 GPOs collected over a four-year period, $1.3 Billion exceeded their operating expenses. Of this $1.3 Billion in excessive fees, the GPO kept over $400 Million for venture capital endeavors as well as reserves. The remaining $898 Million dollars were returned to hospitals. Of this, $255 Million was returned to just 21 hospitals. None of the hospitals correctly reported the fees on their cost reports to Medicare. In addition, in 2004, Senator Kohl and Senator Dewine introduced The 2004 Medical Device Competition Act to promote competition and innovation in the healthcare marketplace. The Senate hearing testimonies, government reports, and the proposed bill are posted below. We offer this information to further Masimo’s goals of improving patient safety, improving patient care and reducing the cost of care.