An article from the San Francisco Chronicle noted how the new Chancellor of the University of California - Davis (UC-Davis), Linda Katehi, is already contending with controversy. One brief section about her goals for the campus caught my eye. The article noted that Dr Katehi (who has a doctorate in engineering) holds 16 patents, then:

Now Katehi wants to transfer that entrepreneurship to the campus she'll lead.

'The campus is in a wonderful position to become a major force in improving and strengthening the economy of the state,' Katehi told The Chronicle, adding that she'll help UC Davis to become more aggressive in taking new biotechnology and agriculture products to market.

Through a distinctive tradition of core-discipline excellence, interdisciplinary collaborations and productive partnerships, UC Davis teaches students to think critically, objectively and creatively and to be lifelong learners, engaged leaders and productive citizens; pursues research to advance knowledge and to address state, national and global challenges; and serves the public through the generation, broad dissemination and application of knowledge.

Almost four years ago, we posted about the strange world of hospital group purchasing organizations (GPOs). These organization purchase large volumes of medical products for member hospitals, but a "safe harbor provision" in federal law allows them to charge the vendors, not the hospitals for their services. In fact, it is legal for hospitals to share in fees the vendors give these organizations, and to award contracts to vendors who pay the largest fees.

Our 2005 post focused on allegations about the operations of a single GPO, Novation. We noted "several cases in which Novation's actions seemed to have denied hospitals access to the best products, or have increased, rather than ratcheted down the cost s of supplies and equipment."

Now, the US Senate is investigating a group of the largest GPOs. According to the New York Times,

Lawmakers eager to broaden health care coverage while holding down costs are examining the institutional market for medical supplies, a largely unseen $60 billion-a-year realm where things like bedpans and heart implants change hands.

Senators from committees like finance, judiciary and aging are investigating the practices of companies that represent big networks of hospitals, nursing homes and other institutions. These group purchasing organizations select 'preferred' manufacturers and negotiate the prices of medical products, which are a closely held secret. They then use a variety of carrots and sticks to make sure their hospitals buy those brands at the contracted price.

The senators are concerned that these groups’ practices may be inflating health costs at taxpayer expense. Much of the cost is borne by the government, as it reimburses hospital expenses through the Medicare program.

On Wednesday, the senators sent letters to the seven biggest group purchasing organizations, known as G.P.O.’s, demanding detailed information about their business practices, including how they are paid, what services they perform besides picking brands and negotiating prices, and how their revenues are affected when an affiliated hospital buys supplies on its own instead of using the group contract.

The senators also asked for copies of contracts, something not normally made public.

For years, there have been complaints that the buying process is opaque and unfair. The purchasing companies’ operating expenses are usually paid by the manufacturers sitting across the bargaining table, leaving them open to accusations of steering huge blocks of institutional business to the vendors willing to pay the most.

The group purchasing organizations deny this, saying they award contracts on the merits and help hospitals get good deals, saving the government money.

The savings are hard to verify, because the market’s opacity makes price comparisons nearly impossible.

Normally, Medicare’s law against kickbacks would bar vendors from paying the companies that award them contracts, but Congress granted the industry a special 'safe harbor' many years ago, in the belief that volume purchasing saved money. The senators seem to want to test that belief and perhaps change or abolish the safe harbor, something that would turn the industry on its head.

Some of the group purchasing organizations have been in the spotlight before. Premier and Novation were the subject of articles in The New York Times in 2002, which prompted Congressional hearings and the issuance of an industry code of conduct. But Senate aides said they were still hearing reports of possible abuse....

In summary, although GPOs were ostensibly set up simply to save hospitals money when purchasing supplies and equipment, these organizations have turned into huge, complicated and opaque entities whose actions are hidden, but which seem to be conveying large amounts of money back and forth among suppliers, hospitals, and the GPOs themselves. It is not at all clear that the GPOs save the hospitals money, nor get them the best possible supplies for the money they spend.

The leaders of the hospitals, including some of the countries most prestigious teaching hospitals, that own Novation and other GPOs ought to explain what these organizations really are doing, and particularly how they are supporting the hospitals' missions.

Again, this is another example of how opaque and unaccountable hospital leadership may be. But, the less transparent and accountable are health care leaders, the more the health care mission is at risk.

A year and a half ago, we posted quite a bit about the case of the deadly contaminated heparin. In retrospect, what is most amazing is how quickly this case fell off the radar screen.

Summary of the Case of the Deadly Contaminated Heparin

Here is a summary:

- We have posted several times, recently here and here, about the tragic case of suddenly allergenic heparin.