September 27,2010

Grassley: Independent Assessment Needed to Verify Savings for Hospitals and Others Under Existing System for Group Purchasing

WASHINGTON – Senator Chuck Grassley said today that more needs to be done to determine if Group Purchasing Organizations are helping to achieve significant savings for hospitals and others buying medical products, much of which is ultimately taxpayer funded.

“Whether Group Purchasing Organizations are able to help save money on medical supply costs, or not, impacts federal health care 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.”

Grassley’s comments came along with the release of a new review by the Government Accountability Office (GAO) and a report of his own staff about Group Purchasing Organizations.  Grassley requested the GAO report in January 2009, to update its earlier study on the business practices of Group Purchasing Organizations.

Grassley said the report of his staff of the Senate Committee on Finance summarizes the information he received directly from Group Purchasing Organizations, about their activities and operations, in response to the requests he made in 2009.  He said there is not empirical data available to support claims of savings by Group Purchasing Organizations.

Group Purchasing Organizations act as purchasing intermediaries that negotiate contracts between health care providers and vendors of medical products.  The GAO said that a 2009 study found that Group Purchasing Organization contracts account for an average of 73 percent of non-labor purchases that hospitals make.  Others estimate that about 98 percent of hospitals use Group Purchasing Organizations to purchase products.