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  • 13 - Group Purchasing Organizations, Monopsony, and Antitrust Policy

  • from Part III - Monopsony
  • Roger D. Blair, University of Florida, Christine Piette Durrance, Tirza J. Angerhofer, Duke University, North Carolina
  • Book:
    Antitrust Policy in Health Care Markets
    Published online:
    24 November 2022
    Print publication:
    08 December 2022, pp 300-322

  • Summary

    Hospitals use group purchasing organizations (GPOs) to purchase medical supplies, devices, and other inputs rather than purchasing directly from a manufacturer. GPOs consolidate the purchasing power of their members and negotiate contracts with input suppliers on their behalf. But this has raised several public policy concerns. First, in order to be successful in reducing input prices, a GPO must represent a sufficient volume of purchases and therefore has some measure of monopsony power, which tends to reduce social welfare. Second, GPOs employ a variety of contractual provisions that may limit the sources of supply to their members, which raises antitrust concerns about the exclusion of equally efficient competitors. Third, the GPO’s funding mechanism may provide a perverse incentive such that GPOs may not secure the best price for hospitals when it is profitable to do so. This chapter provides an economic analysis of the competitive consequences of GPOs and addresses the economic effects of the GPO funding mechanism.