Subscribe to The Podcast by KevinMD. Watch on YouTube. Catch up on old episodes!

Health care data strategist Lee Ann McWhorter discusses her article “Why health care reform must start with ending monopolies.” Lee Ann explains how monopolistic control by entities like GPOs, PBMs, EHR vendors, and MMIS platforms drives up costs, suppresses innovation, and undermines patient safety. She highlights how opaque contracts and data silos leave hospitals flying blind, why favoritism often trumps performance, and how COVID-19 revealed the dangers of centralized sourcing models. Lee Ann emphasizes that hospitals have the power to break this cycle by rejecting monopolistic contracts and investing in transparent, independent, and sustainable solutions. Listeners will learn why cost is not the true crisis—control is—and how restoring competition can protect patients and rebuild trust in the system.

Our presenting sponsor is Microsoft Dragon Copilot.

Microsoft Dragon Copilot, your AI assistant for clinical workflow, is transforming how clinicians work. Now you can streamline and customize documentation, surface information right at the point of care, and automate tasks with just a click.

Part of Microsoft Cloud for Healthcare, Dragon Copilot offers an extensible AI workspace and a single, integrated platform to help unlock new levels of efficiency. Plus, it’s backed by a proven track record and decades of clinical expertise, and it’s built on a foundation of trust.

It’s time to ease your administrative burdens and stay focused on what matters most with Dragon Copilot, your AI assistant for clinical workflow.

VISIT SPONSOR → https://aka.ms/kevinmd

SUBSCRIBE TO THE PODCAST → https://www.kevinmd.com/podcast

RECOMMENDED BY KEVINMD → https://www.kevinmd.com/recommended

Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome Lee Ann McWhorter. She’s a health care data strategist. Today’s KevinMD article is “Why health care reform must start with ending monopolies.” Lee Ann, welcome to the show.

Lee Ann McWhorter: Thank you, sir. Thank you very much.

Kevin Pho: Let’s start by briefly sharing your story and then talk about the KevinMD article that you shared with us today.

Lee Ann McWhorter: Absolutely. I’ve been in health care supply chain for 25 years. I started out as a distributor rep and went on to technology. I spent several years installing servers in hospitals and connecting large IDNs to their distributors and their manufacturers so they could have real-time automation. I have represented EDI solutions and bill-only solutions, and have been trying to repair the data breakpoint in the health care supply chain for the last 25 years.

Kevin Pho: And your KevinMD article is “Why health care reform must start with ending monopolies.” Tell us why you decided to write the article and what’s it about for those who didn’t get a chance to read it yet.

Lee Ann McWhorter: I’ve been in the supply chain long enough to know that there’s a great number of monopolies that control data, pricing, and product. A trigger for me was the first quarter of this year; there were thirty-one class one recalls. Class one recalls, as you know, are pretty severe and usually cause harm or even death in patients. I was shocked to know that all of those suppliers were still on GPO contract. We live in a very pay-to-play system where suppliers can pay for placement.

Kevin Pho: What’s a GPO contract for those who aren’t familiar with the supply chain lingo?

Lee Ann McWhorter: That’s a group purchasing organization. There are three in this country: HPG, Premier, and Vizient. Those three GPOs control the products, the pricing, and the data for the entire U.S. health care system. That piece of it has bothered me for many, many years.

In 1987, I’ll take you back for a quick history lesson, Safe Harbor was passed. Safe Harbor allows for GPOs to take legal kickbacks from suppliers. It makes that process legal. Suppliers fund the GPOs, and the GPOs help hospitals make purchasing decisions. I think that in itself is a huge problem. There’s a lot of pay-to-play in health care. I come from an organization that does not pay to play. We’ve got no big tech money, no GPO money, and no supplier money coming in, and we do that so we can serve up unbiased data.

For instance, when COVID-19 hit, people wanted to understand functionally equivalent, similar, and alternative items because we were back-ordered on everything. To have a lens across the entire industry, you’ve got to go to an unbiased data source for that type of information. That became a real passion of mine at the beginning of COVID-19. Throughout the COVID-19 experience and over the last five years, we’ve seen a lot of shortages and a lot of recalls. I think you’re probably aware of the B. Braun plant in North Carolina that went down and caused a nationwide shortage across the U.S., canceling surgeries. That was due to single-sourcing and sole-sourcing through group purchasing organizations. The same is true in 2022 when Abbott had a recall on baby formula. We had a baby formula crisis in 2022, and again, the GPOs, and congressional testimony backs this up, were responsible for that event.

What’s interesting, and the thing that is probably most bothersome to me, is that hospitals across this country take cash distribution checks from group purchasing organizations, and it keeps them buying from GPOs. Basically, GPOs take money from suppliers and then pay hospitals to buy from them. We have a lot of middlemen in American health care, and they’re driving up the cost, they’re creating these shortages, and they’re certainly not penalizing suppliers with poor performance that have a history of recalls.

In the first quarter, I got serious. I had my own health event; we’re all patients at the end of the day. I decided I was going to take on this challenge of addressing and confronting this problem head-on.

Kevin Pho: How do we get to this point where you have so few suppliers that we’re dealing with almost a monopoly?

Lee Ann McWhorter: It’s been thirty to forty years in the making. I had a conversation with a supplier last week who has a great product and a manufacturing plant here in the U.S. He’s got a footprint at a few of the big organizations, but he can’t make it on a GPO contract because his product competes with Medline, and Medline’s one of the big funders of the GPOs. It’s disheartening because there are so many innovative suppliers with great, safe, and less expensive products, but they can’t get a seat at the table because the GPOs protect the suppliers that fund them.

I think that in itself is a huge problem. When we have hospital CEOs sitting on the boards of these GPOs, that’s another huge breakpoint. I was really surprised, and one of the reasons I came on your show and wanted to speak with you is because the physician audience and the clinician audience have really embraced this message. They’re the ones that deal with the shortages and the recalls. They’re also the revenue generators at these hospitals. I thought if I could rally this group to get behind this cause and challenge this model, we might actually do something about it because it’s just been going on so long. It’s not getting better. We’re seeing more shortages and price increases. I have data platforms, so I know the high, low, and average industry price for all these products. Because we don’t pay to play, we’re quite a target. We show people the high, low, and industry average price. We’re quite a target, and we embrace those non-GPO suppliers because in the event of another recall, we need our hospitals to understand every single product in the market for that particular glove or mask or gown.

Resilience is the buzzword of the last five years, but to build a resilient supply chain, you have to have critical items and functionally equivalent and similar products to stand behind all your critical items. It can’t all be on GPO contract because when the backorder hits, everyone starts using what’s on GPO contract, and that back-orders as well. We’ve got to get really diverse in sourcing and allow some of these suppliers that have never had a seat at the table a seat at the table. They have a tremendous ability to change this game.

Kevin Pho: You gave a couple of examples earlier, but for those listeners who want to know how this specifically affects them, tell us a couple of other examples of how these monopolistic tendencies in suppliers specifically affect doctors and patients.

Lee Ann McWhorter: Sure. My mother, just a few years ago, had to have a hernia mesh installed. We went to a local hospital here, and at the time I was launching a medical device platform for Hearst Health and had access to all recalls and recall histories because we want to know the performance of a supplier, the lineage of a product, and their performance over time. When I went to the doctor, I asked, “What products are you using? Can I get a couple of part numbers?” They had two products that we were to choose from. One of the suppliers had a long history of recalls for surgical mesh, five in ten years. The other supplier had zero.

Obviously, because I am an advocate for my mother, I want to make sure she gets something installed at 80 years old that doesn’t have to come out in the future. I chose the product with zero recalls, but when I asked, “Why would you have this other supplier on contract with five recalls in ten years? Why would they be available? Why would you be installing that in patients?” The answer was, “Well, they’re on GPO contract.”

That was three or four years ago, but I think it got me questioning why we are continuing to promote suppliers that have harmed people, that have actually hurt patients. Why do we keep them on contract? Why do we keep paying them and presenting them in value analysis committees? The biggest concerning breakpoint for me is that a lot of GPO representatives sit on these value analysis committees at the biggest hospitals in the country, and they’re all supplier-funded. It’s really a difficult thing to get your hand around.

When you are thinking about going into a hospital, if you or I or anybody goes to a hospital and we have to have a medical device installed, I want to know that you are purchasing a product from a manufacturer that has a good reputation and a good history of producing products that don’t end up on recall. I think it’s that basic for most of us, where we want to know that these purchasing decisions are being made based on clinical evidence and outcome, not cost, not rebates, not that cash distribution check that they get back, but on the outcome.

Kevin Pho: How difficult is it to break these supply-side monopolies? Have there been any stories where hospitals or medical institutions were successful in getting a more diverse supply chain?

Lee Ann McWhorter: Absolutely. We have quite a few. I think the reason people come to my company is because we aren’t supplier-funded, so we have quite a few hospitals that are doing their own sourcing these days. They have realized that the GPO price is a starting point for negotiation; there’s not a lot of savings there. They are sourcing on their own, and they’re doing it in a way that is very effective. There’s enough technology now that people can contract directly with manufacturers and suppliers. No hospital is going to shut its doors under the weight of contract negotiation without the GPO.

That was originally their value proposition: “We’re going to negotiate contracts on your behalf.” There are definitely plenty of hospitals today that are doing it. I think the problem is that the largest health systems in the country, the Mayo Clinics, the big university systems, are all tied to these GPOs. They’re all on the boards, and they’re all getting very large cash distribution checks back for millions of dollars every year in exchange for continuing to buy on the GPO contract. It’s a very small number compared to what the GPOs still control today.

With Baxter, I think the turning point was the canceled surgeries and the lost revenue outweighed the cash distribution check they got back from the GPO. We’re now seeing where shortages are really affecting revenue for these hospitals, and that cash distribution check doesn’t cover it. I think that could be a catalyst for change overall. I think there are more and more people that are upset by this. I’ve had many people say, “Well, you’re just a vendor rep.” I’m not. I’m a patient and I’m a taxpayer, and this is my health care system. It’s your health care system, and everyone has a say in it. I think it’s time for people to see how these middlemen drive up our costs, control our products, control patient safety, and they certainly have a closed-loop information system that they surround their hospitals with so that they’re just shopping right back from the GPO every time.

Kevin Pho: You mentioned earlier that physicians and other health care professionals can advocate for a more diverse supply chain. What are some ways that we can do that? Because sometimes physicians are divorced from these decisions, especially in large health care systems. What can physicians do?

Lee Ann McWhorter: Sunlight is the best disinfectant. Obviously, education is key, helping doctors understand, especially at the, I’d say there are maybe thirty hospital systems in this country that are propping up these group purchasing organizations. One of the things that I would like to do is to help the physicians at these hospitals, at these thirty IDNs, push executive C-suite people to source in a way that is more fair and more driven by clinical outcome.

Having a GPO representative sitting on your value analysis committee would have to be concerning as a physician if you have to perform an explant and take a product out due to a recall. At that point, I would be questioning the system. This actually affects your rating as a physician, so I would think at this point in the country, we’ve got plenty of doctors that are the backbone, the spine of these organizations. When I think of it, as a business development person, I’m always looking for who’s the influencer, who are the decision-makers. I truly feel like the physicians and the clinicians are the influencers and the decision-makers in these organizations. It just is a matter of taking control back and not being passive-aggressive about it. I think we’ve got to be honest and authentic about what this is actually doing to patient safety.

Why is American health care so expensive? Every time I turn around, I’ve got a small tech company that wants me to pay them $150,000 a year for a seat at the table. All three of the big materials management companies, to be a preferred partner, want $150,000. I’ve got twenty-one trade shows that want $15,000 apiece. I’ve got various health care organizations that want us to pay $8,000, $10,000, or $12,000 a seat, and what they’re selling is access to C-suite individuals. They’re not selling resilience. When it’s GPO-funded, what they’re selling is access to C-suite executives, and I think it just feels wrong in every way. We constantly refuse to pay to play.

I think we’ve got to see more people in the industry do that and stand up to it. We make it in this industry because our hospitals stand up for us and force the Oracles of the world to integrate with our technology. If you have a good product, you have to leverage the hospital and the people that use those products to stay alive in this industry if you’re not in a pay-to-play environment. I think that we’ve got to have more people stand up and say, “This is wrong.” If I pay everybody $150,000 a year for a seat at the table, I’ve got to triple my pricing to hospitals. I can no longer give unbiased data if the GPOs are funding me and the suppliers are funding me. I’m not going to be able to show them every single supplier in the industry.

That is the piece of the puzzle. I grew up at Carolinas Healthcare Systems in Charlotte, which is now Atrium, and I always wanted to help them solve their breakpoints, whether it might be back-orders, clinical evaluation, or cost, quality, and outcome. I think we’ve got to come into these organizations with a very fair and unbiased data set. Who am I to say what you should use? I’m going to serve this up to you, and I’m going to show you all the attributes side-by-side. As a clinician or a physician, I’m going to let you make that decision. I shouldn’t be influencing you in any way.

I was so impressed with the physician audience because coming from twenty years in supply chain, I felt like a lone wolf a bit with this topic. I can’t get over the number of physicians and clinicians, the Physicians Against Drug Shortages, Physicians Against Middlemen. There are quite a few organizations, and they all want me to get involved. I’m late to this dance by a few years; these people have been fighting this for two decades. I am very appreciative of the support that I’ve gotten from the physician and the clinician audience. I think they’re the most vocal, and I think they have the most influence.

Kevin Pho: We’re talking to Lee Ann McWhorter. She’s a health care data strategist. Today’s KevinMD article is “Why health care reform must start with ending monopolies.” Lee Ann, let’s end with some take-home messages that you want to leave with the KevinMD audience.

Lee Ann McWhorter: I think it’s simple. Stop feeding the monopolies that control price, product, and data in health care. There are some great manufacturers out there with good intentions, good products, and great clinical evidence, and we’ve got to give other people a seat at the table if we truly want to build a resilient supply chain to withstand the next COVID-19 or the next disaster.

Kevin Pho: Lee Ann, thank you so much for sharing your perspective and insight. Thanks again for coming on the show.

Lee Ann McWhorter: Thank you, sir. I appreciate you.