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The Realpolitik of the Device Industry

Executive Summary

After years of criticizing medical technology advances as a cause of rising healthcare costs, many health policy experts and economists are coming around to the view that technology can reduce costs. But such a positive view of technology is worthless if hospitals won't pay a reasonable price for products. A recent New York Times article blasted hospital group purchasing for blocking access to new technology. But it was wrong--the real danger is that group purchasing is destroying hospitals' access to products that already exist.

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GPOs Cry Foul Following Senate Hearings

Facing intense scrutiny from both Senate hearings and a series of articles in the New York Times, GPO executives scramble to defend their practices even as they promise to pay more attention to the issues their critics raise.

Hospital, Heal Thyself

Some time in the next several months, the hospital group purchasing organization will undergo a level of public scrutiny that it has never experienced before. Two US senators are gearing up to hold hearings on the industry, specifically to explore the negative impact that group purchasing has had on competition among medical device and hospital supply companies. Ironically, one could argue that rather than pitting hospitals against suppliers, group purchasing could eventually prove about as bad for hospitals as it has been for some suppliers. By reducing the number of competitors in product categories, by creating the very oligopolies that small suppliers rail against, GPOs, and by extension the hospitals they serve--have boxed themselves into a corner.

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