Corporate news

The Group Purchasing Organization (GPO) lobby is pushing back — and hard — against a new study indicating that GPOs don't save hospitals money on medical devices.

“All independent, empirical and non-industry studies of GPOs — including examinations by the GAO, FTC, DOJ, academia and the 8th Circuit Court of Appeals — have found that GPOs save hospitals money," Curtis Rooney, head of the Health Industry Group Purchasing Association (HIGPA), said in a statement.

The new report, released Wednesday by the Medical Device Manufacturers Association (MDMA), found that eliminating a decades-old anti-kickback exemption for GPOs — which allows them to accept fees from device makers — would save hospitals as much as $37.5 billion per year, while cutting taxpayer costs by $11.5 billion.

“It is painfully clear that while hospitals and providers are trying to improve care and reduce costs for patients, the supplier-funded GPO model is costing the healthcare system billions,” MDMA CEO Mark Leahey said in a statement. 

Not so, says HIGPA's Rooney, implying that the findings were colored by the device industry's backing of the research.

"An MDMA-funded ‘study’ suggesting that device manufacturers would voluntarily reduce their prices and their profit margins under a new GPO model is a slap in the face of the more than 90 percent of America’s 5,000-plus hospitals that use GPOs," Rooney said. "The device industry attacks GPOs because we are working for hospitals." 

The medical device lobby on Wednesday went after the intermediary companies that purchase their products on behalf of hospitals.

In a new report, the Medical Device Manufacturers Association (MDMA) is charging that Group Purchasing Organizations (GPOs) "fail to deliver" in their primary role: bringing down costs for hospitals.

“It is painfully clear that while hospitals and providers are trying to improve care and reduce costs for patients, the supplier-funded GPO model is costing the healthcare system billions,” MDMA CEO Mark Leahey said in a statement. “This study proves that GPOs not only fail to bend the cost curve for healthcare down, they are preventing hospitals and patients from getting the best products at the best prices."

The new MDMA study — conducted by researchers at the Brookings Institution and Georgetown University — found that repealing a 24-year-old anti-kickback exemption allowing GPOs to accept fees from device makers would cut federal health spending by $11.5 billion each year.

“This study bolsters our argument that Congress must pass legislation that will restore the illegality of kickbacks between suppliers and GPOs,” Leahey said.

GPOs are designed to cut costs by negotiating bulk prices with device companies on behalf of large groups of hospitals, nursing homes and other providers. But critics contend the anti-kickback exemption has created cozy relations — both between GPOs and hospitals and GPOs and device makers — that cut smaller companies out of the process at the expense of patients' access to treatments.

The issue hasn't been overlooked by Sen. Chuck Grassley (R-Iowa). Citing a new report from the Government Accountability Office (GAO), Grassley, the senior Republican on the Finance Committee, said there's no evidence GPOs are saving taxpayers anything.

"Whether Group Purchasing Organizations are able to help save money on medical supply costs, or not, impacts federal healthcare spending," Grassley said. "There’s no data with which to independently verify the effect, one way or another, and that’s a shortcoming in the current system."

The GPO lobby was quick to fight back. Curtis Rooney, president and CEO of the Health Industry Group Purchasing Association, said the GAO report "clearly demonstrates" that GPO efforts have created "increased transparency and low administrative fees in healthcare contracting."

“GAO and academic research have documented the significant cost savings and the wide range of valuable services that GPOs provide to hospitals, which is why virtually all American hospitals voluntarily contract with GPOs,” he said.

Career colleges specializing in healthcare training rely much more heavily on federal student aid than most other for-profit schools, the Government Accountability Office (GAO) reported Monday.

Roughly 75 percent of total revenues for the average for-profit health school come from federal loans and grants, GAO found. That's well below the 90 percent limit on such federal revenues, but much higher than the average (63 percent) for other career college specialties. 

"A higher education association official we spoke with suggested that some for-profit schools specializing in healthcare tend to attract lower-income students that rely more heavily on federal student aid, leading these schools to have higher 90/10 rates," GAO writes in a summary of the findings.

Those schools specializing in healthcare represent about a third of all for-profits, according to GAO.

Under a 1998 law, for-profit schools are prohibited from receiving more than 90 percent of their revenue from federal student loans. (In other words, at least 10 percent of funding must come from private student loans, state educational grants, the students themselves or some other source.) 

Schools are required to report their 90/10 rate each year, and those that don't comply could lose their eligibility for federal aid. That's a big deal for an industry that tapped roughly $24 billion in federal loans and grants in the 2008/2009 school year — up from $8 billion in 2002/2003. 

In its new report, GAO found that the average 90/10 rate for all for-profit schools rose from 62 percent in 2003 to 66 percent in 2008. 

Aside from health specialty schools, GAO found that schools run by publicly traded companies also depend more heavily on federal aid than the average for-profit. 

The report arrives as the Education Department is drafting new rules designed to reduce the number of loan defaults among for-profit students.

The lobby says the superstore's Humana venture will penalize seniors who want to buy their drugs from local pharmacies.

The group charged with certifying new health technologies under the administration's "meaningful use" guidelines announced its approval of 33 new products Friday.

The move by the Certification Commission for Health Information Technology (CCHIT) means that doctors and hospitals purchasing those products will be eligible for financial incentives designed to encourage their adoption of more efficient medical technologies. 

In a statement, CCHIT Chairwoman Karen M. Bell said the certifications come "in time for the 2011-2012 incentives."

The HIT incentive program, included in the Health Information Technology for Economic and Clinical Health Act, was enacted in 2009 as part of the Democrats’ economic stimulus bill. 

To govern adoption of those technologies, the Health and Human Services Department in July finalized its meaningful use rules, which are designed to ensure that healthcare providers don't just purchase new health technologies, but actually use them to benefit patients. 

A list of the 33 products is available here.

The Obama administration on Tuesday named the last of a long list of regional contractors charged with helping doctors and hospitals transition from paper-based medical records to electronic systems. 

CalOptima Foundation was awarded a two-year, $4.7 million contract to cover Orange County, Calif., while Massachusetts eHealth Collaborative will receive roughly $5.1 million to cover the state of New Hampshire, the Health and Human Services Department (HHS) announced.

The contractors are the final pieces of the national network of Regional Extension Centers (RECs) created to facilitate providers' adoption of health information technologies. That network was launched by last year's economic stimulus bill, with provided $677 million for RECs over two years. 

"The selection of these final awardees means that Regional Extension Centers are now in place in every region of our country to help health providers make the switch from paper-based medical practice to electronic health records," David Blumenthal, HHS' national coordinator for health information technology, said in a statement. 

"For primary care physicians and smaller hospitals in particular, the RECs will be an important resource to help meet the challenges of adopting [electronic health records] and using them to deliver better care."

U.S. health insurers, facing uncertain times in the wake of healthcare reform, are expanding overseas in a bid to increase profit, reports The Wall Street Journal. Cigna Corp., for example, is launching new products in Spain, Belgium and China.

While China has a growing market — the government there hopes to extend basic healthcare to the country's billion-plus population by 2020 — European markets offer opportunities for complementary private coverage as residents grow dissatisfied with public offerings.

Meanwhile, United Health Group has been hired by Britain's National Health Service to run disease-management programs, and Aetna in 2007 bought GoodHealth Worldwide to offer individual policies to expatriates.

Almost half of surgeons who received $1 million or more in fees from orthopedic device companies failed to report those payments when publishing scientific articles, according to a new study.

The study, published online Monday by the Archives of Internal Medicine, for the first time cross-referenced a public database of companies' consultant payments with the disclosure information in medical journals and found significant shortcomings. That means doctors who rely on these studies are not being informed of potential conflicts of interest.

"The findings raise troubling questions about undisclosed payments or royalties and other fees from medical device companies that could lead to biased scientific conclusions," senior author David Rothman said in a statement.

Researchers with the New York-based think tank Institute of Medicine as a Profession looked at 2007 physician payment information from five orthopedic device companies (Biomet, DePuy Orthopedics, Smith & Nephew, Stryker and Zimmer). They then narrowed their focus to 41 surgeon researchers who were paid $1 million or more for consulting, honoraria and other services and found more than half of 95 articles they published after being paid did not disclose the financial relationship.

Even those that did report a relationship, the authors write, did not reveal how substantial the payments were — up to $8.8 million in one case. Almost all the studies were directly related to devices made by the companies making the payments. The authors point out that scientific journals often rely on the honor system and do not check multiple databases that are now available.

The new study comes at a time of increased transparency in the health sector. The healthcare reform law mandates that drug and medical device manufacturers report payments to physicians in a searchable public database by 2013. And the public has also become increasingly skeptical: Half of patients said they suspected that the choice of drugs their doctors recommended was influenced by corporate gifts, according to a recent study by Consumer Reports.

In June, the medical journal Anesthesia & Analgesia thoroughly revised its publication guidelines after one of its contributors pleaded guilty to healthcare fraud. Scott Reuben, former chief of the acute pain clinic at Bay State Hospital in Springfield, Mass., was sentenced to six months of imprisonment on charges of falsifying research funded by Pfizer and other drug makers and publishing results of studies he never conducted.

"Patients have a real stake in transparency," Rothman said. "You want to make sure that the surgeon is choosing the device that is best for you and that your doctor is not getting biased information."

The American Health Care Association announced Monday that Kansas Gov. Mark Parkinson (D) will take over as president of the long-term care industry group and its National Center for Assisted Living in January following his term in office.

Parkinson has owned and operated long-term care facilities for more than 15 years, AHCA said in a press statement, making him an ideal choice to head the group.

"In this new era of health reform, Parkinson’s deep background in this sector coupled with his policy expertise, will serve our members well as we look to future challenges," the statement said. "As a policymaker who knows how Washington works, and as the owner and operator of several skilled nursing and assisted living facilities, he will be a measured voice to speak on the elderly’s behalf."

The pharmaceutical, biotech and medical device industries stand to benefit from President Obama's proposal to expand the research and development tax credit, according to Wall Street analysts.

Obama is pressing Congress to expand the tax credit by about 20 percent and make it permanent. First introduced in 1981, the credit has been extended 13 times and expired eight times — most recently on Dec. 31, 2009.

"AdvaMed has long supported making the R&D tax credit permanent," said Brett Loper, senior executive vice president for government affairs for the Advanced Medical Technology Association. "We look forward to seeing the details of this new proposal and the other tax changes being discussed today to determine how they will affect America’s medical technology companies."

In a statement Tuesday, Pharmaceutical Research and Manufacturers of America also expressed support for the tax credit. But PhRMA also made it clear that it has not taken a position on Obama's specific proposal.

"For America to keep its global leadership in medical innovation, it is critical that public policies and programs support continued research and development (R&D) of new medicines. Investments made in R&D help support the economy and U.S. jobs, including jobs in the U.S.-based biopharmaceutical sector," PhRMA said in a statement. "America's biopharmaceutical research companies — who lead the world in the discovery of new medicines for patients suffering from disease — look forward to working with the Administration and Congress on finding long-term policy solutions that can help ensure that America keeps its innovative edge."

CLARIFICATION: This post was updated on Sept. 9 to clarify that PhRMA has not taken a position on Obama's specific proposal.