GPO to IRS: Thwart manufacturers that would shift med device tax hit to hospitals

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The second-largest group purchasing organization (GPO) in U.S. healthcare is urging the IRS to formally block medical device manufacturers from tucking the cost of the impending 2.3 percent excise tax into the prices they charge hospitals for their products.

Charlotte, N.C.-based Premier made its case for the measure in a May 7 letter that also asks for language in the final regulations that would codify, by way of an illustrative example, the tax-exempt status of surgical kits assembled by hospitals for their own use.

The two-pronged appeal comes a few weeks after a survey of manufacturing finance executives showed that nearly half the industry is considering price hikes to offset the hit when the tax kicks in next January as part of the Patient Protection and Affordable Care Act (PPACA).

“Each part of the healthcare industry has a shared commitment and responsibility to pay for healthcare reform,” the dispatch reads. “The intent of the device tax is to raise revenues from manufacturers to cover their share of financing healthcare reform. Hospitals are already contributing their fair share, through policies that reduce hospital payment updates … and that penalize hospitals based on rates of readmissions and hospital-acquired conditions.”

The letter then urges the IRS to require that manufacturers provide documentation in their tax filings certifying that they have not included the tax in the price of their products.

Premier explained its request for language on kitting by stating that, although it believes the exemption of custom procedure kits is clear under the proposed guidelines since the kits are not offered for commercial distribution, an example would “provide greater clarity with respect to the tax” and guard against the possibility of “double taxation” on kits assembled from already-taxed devices. 

With a purchase volume of around $43 billion in 2011, Premier is behind only Alpharetta, Ga.-based MedAssets in buying power, according to figures published by Healthcare Purchasing News.

Last week industry lobby AdvaMed filed comments with the IRS to suggest ways the 2.3 percent levy can be made less onerous on manufacturers.

All of this comes against the backdrop of numerous bills to repeal the tax wending their way through Congress as the Supreme Court deliberates the constitutionality of the PPACA itself.