There's nothing we journalist types like better than a good-old-fashioned he said, she said story. The tension. The name-calling. The finger pointing. It all makes for good drama, which in turn makes for great headlines. And if the story involves two former business partners, associates or colleagues, well, that's all the better. Why else would the Charlie Sheen-CBS saga command 24-hour news coverage? And is there any other rational explanation for the fact that Sheen now has 2.4 million followers on Twitter?
While it may not rival the Sheen-CBS hysteria, we have our own share of headline-grabbing stories in health care these days, most of them full of bravado and hyperbole surrounding health reform. There's another drama playing out that hasn't received quite the same level of coverage, but could have a huge impact on that cost curve everyone keeps talking about. Back in late February, medical device manufacturer Medtronic Inc. cancelled its contracts (subscription required) with several GPOs. I know, I know. Whoopee, a supply chain story. But we both know that aside from labor, the supply chain represents a hospital's largest line item and one where there's still considerable opportunity to generate savings.
Medtronic made the move as part of restructuring. In announcing its third quarter earnings, the company also said it plans to cut 1,500-2,000 jobs, between 4-5 percent of its workforce. As you can imagine, GPOs aren't very happy about the move. The Health Industry Group Purchasing Association, in a sternly worded statement, said that Medtronic was "putting greed ahead of patients" and that this was "nothing short of an attack on America's hospitals."
There's been a fair amount of discussion on the blogosphere about whether we'll now see a rash of manufacturers cutting ties with GPOs and doing more direct sales with hospitals. Only time will tell if this is a harbinger of things to come or an isolated situation, but the finger wagging and name calling has blunted a more significant issue that lies just beneath the surface: transparency.
There is a dearth of information available to the public, let alone hospitals, on the cost of medical devices. For years, hospital materials managers have been signing supply contracts that prevent them from releasing any pricing information. GPOs presumably bring some balance to the equation by negotiating bulk discounts with vendors, but typically the GPOs also keep quiet on the details. Every few years, the situation garners attention from lawmakers, as our now-defunct sister publication Materials Management reported in 2009. Last fall, the Government Accountability Office got into the action, issuing a report that closely examined GPO practices and transparency.
Overall, the lack of transparency prevents hospitals from doing their full due diligence and comparison-shopping, let alone ensure that they are leveraging fair prices. The result is tremendous cost variation, as the ECRI Institute revealed in another article in Materials Management.
As we see in the current debate coming from D.C., the larger cost problem vexing health care is not going away any time soon. As the financing system evolves, particularly to global or bundled payments, the supply chain is certain to be drawn into the debate. That's been the experience of hospitals in early demonstrations on bundled payments. The first place they looked for savings was the supply chain. So the question is: Whether it is a vendor or GPO knocking on the door, how much longer can the system support the status quo? E-mail your thoughts to email@example.com.