Health Care Dilemmas

I just returned from a wonderful vacation in Puerto Rico. Puerto Rico is considered an unincorporated territory of the United States. The United States Congress legislates over many fundamental aspects of Puerto Rican life, including citizenship, currency, postal service, foreign affairs, military defense, communications, labor relations, the environment, commerce, finance, health and welfare, and many others.

In San Juan you would never know you were outside the U.S. However, just a few miles outside of San Juan it takes on the view of a third world country. Puerto Rico has a population of approximately 4 million and has the highest population density of any state or territory. They have a median income of approximately 34% of residents in the US.

Managed Care in Puerto Rico

In 1993 in an effort to improve health care for its residents, they moved to a managed care system. It has resulted in a more evident gap in the financing of health care in which 90% are dependent on Medicaid funding. This was very interesting to me as I am very much involved in sustaining a business in the industry.

Group Purchasing Organizations (GPO’s) in the U.S.

Many of these same issues are becoming evident in the U.S. throughout our poor, indigent, and rural populations. My personal observations in the last year involve the purchasing systems of our hospitals. Many have made drastic changes. This has occurred by negotiating the “best” deals through companies called Group Purchasing Organizations (GPO’s) which contract with large medical suppliers.

This is fine and dandy, however, small businesses are being squeezed out. We have a very niche (small) market and have based our business on innovative products, some of which we have filed and/or received patents on. That leaves us no competition in many areas which would ordinarily be great, however, if you are a small business and have a few products (not thousands) the GPO’s will not even look at you.

Just recently they have said we can apply to bid for spots on the contracts but, I still haven’t figured out how to do this and none of them are very helpful. Most large organizations hire someone to specifically do only GPO contracts. We are a small business and do not have the resources to hire someone whose sole purpose is to simply figure all of this out.

Our other dilemma is we wanted to be fairly priced when we started this business not giving ourselves huge mark-ups. If we have to go through GPO’s, they retain a certain % and we have to discount the products on top of that. This leaves me wondering…. we developed very cost effective products and pass that cost savings on to the health providers without a middle group (the GPO’s who get a percent of the cost savings they get the hospital). If the medical companies and insurance companies took out the middle person and went to the proposed managed health care program with this reduction (which would be the same as going through a GPO) it would save billions.

So I ask you, would this not improve our health care costs? Bring the innovation of small businesses to the forefront? I really don’t know, but it sure seems like a place to start……

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