Recent news that Medtronic is cancelling several contracts with group purchasing organizations is troubling to say the least. It is a move that hurts hospitals, and in my opinion, it shows that Medtronic wants to avoid a competitive process that has been proven to drive down prices and create transparency.
Since the public may not fully understand the scope of what group purchasing organizations offer, let me set the record straight. These organizations allow hospitals and healthcare systems to work together to pool their collective buying power, conduct an open and thorough competitive bidding process, establish uniform contracts, and ensure they get the best prices from medical suppliers. Manufacturers must compete with one another to win the GPO business by offering the best products, services, terms, conditions and pricing. Manufacturers get a uniform contracting process and reduced need for sales staff. This helps protect hospitals’ best interests on many levels.
The move by Medtronic to cancel many of its GPO contracts demonstrates that they want to prevent hospitals from banding together to get the best deals. My concern is that hospitals will be left in isolation to negotiate with a device maker that will now be able to charge whatever the local markets will bear. It will be up to hospitals now to negotiate one-on-one with this billion dollar company in hopes of getting a fair price. The result of this is higher prices, reduced efficiency and more work for hospitals. All of this ends up in higher costs for patients and communities.
This move by Medtronic is not about saving the healthcare industry money. It is about lining shareholder pockets. It is the latest symptom in what has become a troubling pattern within the device industry. The industry has avoided transparency and competition in the interest of their bottom line.
This is about keeping more profits in their coffers at the expense of hospitals and patients across the country.
Ed Howe blogs regularly at Action for Better Healthcare.