Hiltzik Examines Confidential Contracts Between Group Purchasing Organizations, Hospitals
In a follow-up to his column from last Thursday, Los Angeles Times columnist Michael Hiltzik examined the confidentiality clauses that govern contracts between hospitals such as those in the University of California system and medical supply purchasers such as Cardinal Health and Novation (Hiltzik, Los Angeles Times, 2/21).
Last week, Hiltzik profiled the experience of John Glaspy, professor of medicine at the University of California-Los Angeles Medical Center and medical director of UCLA's Bowyer Oncology Center, who attempted to reduce his university's $13 million annual bill for chemotherapy drugs (California Healthline, 2/18).
According to Hiltzik, Glaspy's experience highlights the problems with confidentiality in contracts that guarantee one side will benefit "more than the other." Hiltzik writes that "[o]ne disturbing thing" about the contract is that it suggests the UC system "may have been systematically overpaying for drugs," but "no one can tell for sure." Because the price and fee schedules are withheld administrators at UC's campuses as well as the public, the administrators are unable to determine whether alternative suppliers might be "able to undercut Cardinal/Novation," Hiltzik writes, adding that the "arrangement undermines any incentive at the campus level to look for more savings."
He adds that while "Glaspy's questions" about the contract "provoked the office of the university auditor to undertake an investigation," the inquiry "appears to have focused largely on whether there was something untoward about the contract award to Cardinal/Novation ..., not whether it yielded the best prices."
Hiltzik writes that there is "evidence that group purchasing contracts," such as those between UC and Cardinal and Novation, "bear a lot of watching." He writes that a 2002 study by the Government Accountability Office found that procurement of supplies through group purchasing organizations "did not guarantee that a hospital saved money" because the firms' prices frequently were higher than those available to hospitals that negotiated directly with medical suppliers. In addition, Hiltzik writes, the GAO and others say that mergers among GPOs have created conglomerates that "may be stifling price competition, rather than facilitating it" (Los Angeles Times, 2/21).