INSIDE THE CURRENT ISSUE

October 2009

Fast Foreword

Here we go again

Memo to the Congressional troika of Sens. Herb Kohl (D-WI), Bill Nelson (D-FL) and Charles E. Grassley (R-IA): The year 2002 called and wants its artificially inflated controversial issue about group purchasing organizations back.

Yes, the Senate Finance Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights is returning to the trough from which it apparently wasted taxpayer dollars seven years ago to educate itself on how the GPO industry operates. This senatorial troika, apparently hoping to cash in on the healthcare reform publicity circuit with their respective electorates, could have taken discussions about GPOs to the next level.

For example, they could have explored how GPO operations, for better or worse, contribute to financial framework of the healthcare system, as well as how their services may impact – directly and indirectly, the clinical outcomes of tax-paying citizens as patients funding the overall system. They could have more directly tied GPO operations to President Barack Obama’s administrative-defining singular issue of healthcare, er, healthcare insurance reform, which their colleagues on Capitol Hill have been debating and "windsocking" in the media for months.

Instead, they retread. Apparently hoping for that deer-in-the-headlights reaction, the troika dispatched mildly aggressive letters to seven of the nation’s leading GPOs (one of which is part of another) that asked virtually the same questions that should have been answered (and, by and large, were) seven years earlier. Those questions involved describing in detail all of what GPOs do for clients, what kind of payments they receive for what services and from whom, what kind of criteria they use for product selection, how sole-source contracting works and the nuances of "bundled" discounts.

Guess they threw out all that paperwork when the Bush Administration left town.

Still, they should be able to unearth much of this basic information in the annals of Congressional testimony and via numerous corporate and media websites. But unless they’re establishing a case for alleged illegal activities (which this fishing expedition can’t even fake), requests for specific contractual details from privately held companies – even ones trumpeting transparency – oversteps some clear boundaries separating business and politics, er, government. Only one of the 10 largest GPOs is a publicly traded corporation. Yet the federal Departments of Defense and Veterans Affairs are part of that elite group. They adopted and implemented a number of private-sector practices back in the 1990s. Neither was served with such silly inquisition papers.

What a shame. These politicians could have constructively contributed to the wheel-spinning healthcare reform discussion and at least encouraged a brief accelerator-driven skid mark.

Let’s be honest. Group purchasing as a concept isn’t the issue and shouldn’t be. Most everyone recognizes that it works because many successful businesses outside of healthcare – like Walmart, for example – can attribute part of their growth to it.

Instead, the issue involves funding mechanisms. How GPOs make money.

Let’s be realistic. Both the Bush and Obama Administrations demonstrated a complete disregard for America’s capitalistic free enterprise economic system by usurping control of the domestic publicly owned banking/financial and automotive industries. Essentially forcing banks and finance companies through publicly borrowed bailout funding to change their practices, which technically were legal, and firing the CEO of the nation’s largest auto manufacturer, extended the government’s reach well beyond the Reagan Administration deregulating the airlines back in the 1980s.

Yet, we don’t see the government waving bailout bucks or boardroom bounce-outs as leverage against GPOs, hospitals and insurance companies. Nor should it.

Of course, when the Justice Department green-lights two independent hospital systems in Georgia to collaborate on group purchasing services as it did a few weeks ago, tiny cracks and fissures developing in the Congressional strategy start to become evident.

To their credit, however, the senatorial troika wisely is zeroing in on one area of GPO operations that should be the crux of their motivation – something I wrote about seven years ago. Unfortunately, GPOs have little to no control over that area, so the senatorial crosshairs are out of focus. More next month.