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Senators investigate hospital group purchasing organizations

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Safe Harbor
Medicare
Kickbacks
investigations
hospitals
group purchasing organizations (GPOs)
Business Practices

Right now, about $60 billion worth of hospital supplies are bought by hospital group purchasing organizations. These organizations, known as GPOs, get their expenses from vendors who sell to them, which leaves them open to charges that the vendors are essentially buying their business. Now, a group of senators are wondering whether the Medicare safe harbor allowing this to happen is a good idea.

Ordinarily, such payments to purchasers would be considered kickbacks under Medicare law. However, several years ago Congress created a safe harbor for such contracts, assuming that they'd save money by allowing hospitals to buy in bulk.

Now, though, a group of senators are investigating these relationships, sending letters to the seven biggest GPOs demanding detailed information about their business practices. These include how they are paid, what services they perform besides picking vendors and negotiating prices, and how their revenues are affected if a hospital goes off the reservation and buys supplies on its own.

To learn more about the investigation:
- read this piece in The New York Times

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Comments

GSA, GPO is so ancient a concept and it is sad that the government and the healthcare industry has bought into this ponzi scheme. With pervasive internent technology, the government and hospitals need to smarten up like Walmart. In my own practice I use extreme competetive bidding, NO signed contracts with any vendors, open bidding, aggressive searching for the best items at best price from multiple countries. It involves a little homework..but it is money saved. It is also important that while budgeting to not insist that departments spend the money allocated in the same year. there should be incentives to carry forwrd the amount for future use. If Department heads are asked touse commonsense and caution in purchasing, things will fall in place.

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