Group Purchasing Organizations : An Undisclosed Scandal in the U.S. Healthcare Industry

Group Purchasing Organizations (GPOs) are a massive subset of the healthcare industry that negotiate lower costs for healthcare supplies by buying for several hospitals at once. Group Purchasing Organizations provides an analysis and critique of this industry. Cover......Page 1 Contents......Page 8 List of Exhibits and Tables......Page 12 Preface......Page 14 Acknowledgments......Page 16 Prologue: Hearing of the U.S. Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights......Page 18 1 Healthcare Industry in the United States......Page 26 Characteristics of a Good Healthcare System......Page 27 Comparative Analysis of Healthcare Expenditures......Page 28 Health Indicators by Country......Page 29 The Rising Cost of Insurance......Page 30 Preventive Healthcare......Page 31 The Plight of the Uninsured......Page 32 2 Industry Structure of Group Purchasing Organizations......Page 34 Ownership Structure of GPOs......Page 35 Emergence and Growth of GPOs......Page 36 Sources of Revenue......Page 37 Brief Descriptions of Major GPOs......Page 38 GPOs: Industry Size, Concentration, and Market Power......Page 42 Oligopolistic Structure and Diminution of Intra-Industry Competition......Page 43 GPO Defense of Market Domination and Large Size......Page 45 Bargaining Power of Suppliers and Buyers......Page 46 Principal Agency Dilemma, Moral Hazard, and Unintended Consequences......Page 48 Perfect Paradise......Page 49 The Safe Harbor and Safety Zone Exemptions......Page 52 Safe Harbor in the GPO Industry......Page 53 Disclosure of Fees to Members and the Government......Page 54 Antitrust Concerns......Page 55 Financial Burden of GPO Activities on the Healthcare Industry......Page 56 Administrative Fees......Page 57 Deductibility of Operating Costs......Page 58 Return on Shareholder Equity......Page 59 5 GPO Activities, Conflict of Interest, and Their Adverse Consequences for the Healthcare Providers......Page 62 Anticompetitive Behavior, Discouraging Innovation, and Incurring Higher Cost for the Member Hospitals......Page 63 Conflicts of Interest, Nepotism, and Beneficial Business Practices......Page 71 Incurring Higher Costs for Member Hospitals: Failure to Deliver Best Available Products......Page 72 GPOs Push and Pull......Page 76 Acceleration of Government Initiated Investigations......Page 79 First Hearing: Hospital Group Purchasing: Lowering Costs at the Expense of Patient Health and Medical Innovations?......Page 82 Second Hearing: Hospital Group Purchasing: Has the Market Become More Open to Competition?......Page 87 Third Hearing: Hospital Group Purchasing: How to Maintain Innovation and Cost Savings?......Page 91 Fourth Hearing: Hospital Group Purchasing: Are the Industry's Reforms Sufficient to Ensure Competition?......Page 93 S. 2880: Medical Device Competition Act of 2004......Page 94 Hospital Group Purchasing Organization Reform Act......Page 96 Ensuring Competition in Hospital Purchasing Act......Page 97 Conclusion......Page 99 Appendix 7.1......Page 100 Appendix 7.2......Page 103 Appendix 7.3......Page 107 8 The GPO Industry's Efforts in Creating a Voluntary Code of Conduct: The Hanson Report......Page 110 Premier's Report "Best Ethical Practices for the Group Purchasing Industry"......Page 111 Professor Kirk Hanson's Investigation and Recommendations Leading to the Creation of HGPII......Page 112 Appendix 8.1: Recommendations for Best Ethical Practices......Page 118 General Structure, Governance, and Intended Outcome of the Healthcare Group Purchasing Industry Initiative ("Initiative")......Page 124 A Generalized Theoretical Framework for Analyzing Industry-Based Codes of Conduct......Page 126 Overcoming the Problems of Adverse Selection, Free Rider, and Diminution of Best Business Practices......Page 128 Private Law Character of CSR-Related Voluntary Codes of Conduct......Page 129 Creating Internal Cohesiveness and a Commonly Shared Vision......Page 130 Positive Aspects of Industry-wide Voluntary Codes of Conduct Dealing with Societal Issues......Page 131 Preconditions for Creating an Effective Industry-wide CSR-related Voluntary Code of Conduct......Page 132 10 Healthcare Group Purchasing Industry Initiative (HGPII)......Page 134 Principles 1, 3, and 4: Core Values of the Initiative......Page 136 Industry Structure and Its Relevance in Creating an Effective Voluntary Industry-wide Code of Conduct......Page 137 Structural Flaws in the HGPII......Page 138 Principle 2: Employee Training Principle......Page 140 Principle 6: Accountability to the Public......Page 141 Implementation Process......Page 142 Governance Structure......Page 144 The Money Trail......Page 145 Principal–Agency Conflict......Page 146 When All Is Said and Done, It's Mostly Said Than Done......Page 147 Concluding Remarks......Page 148 Appendix 10.1: The Healthcare Group Purchasing Industry Initiative Code of Conduct Principles......Page 150 Epilogue: A Whistleblower Files a Law Suit against Novation......Page 154 Notes......Page 166 Bibliography......Page 186 C......Page 196 H......Page 197 K......Page 198 S......Page 199 Z......Page 200 Healthcare Industry In The United States -- Industry Structure Of Group Purchasing Organizations -- Market Dominance And Anticompetitive Conduct Of Gpos -- Government Created Protections Of The Gpo Industry : Financial Burden Of Gpo Activities On The U.s. Healthcare Industry -- Gpo Activities, Conflict Of Interest, And Their Adverse Consequences For The Healthcare Providers -- Congressional Deliberations Of Gpo Operations -- Congressional Drive Towards Regulatory Reform -- The Gpo Industry's Efforts In Creating A Voluntary Code Of Conduct : The Hanson Report -- Theoretical Underpinnings For Creating Effective Industry-wide Voluntary Codes Of Conduct -- Healthcare Group Purchasing Industry Initiative (hgpii). S. Prakash Sethi. Includes Bibliographical References (p. [169]-177) And Index.