GAO urges review of group purchasing

The Government Accountability Office (GAO) urged the U.S. Health and Human Services Administration in a new report to assess hospitals' reporting of revenue that they can receive from group purchasing organizations (GPOs) to ensure it does not affect Medicare payments.

Under the GPO model, organizations negotiate contracts for services and products in return for fees from vendors. GPOs can use these fees for operational costs or distribute them to contracted hospital systems. GPOs must meet specific conditions to be exempt from the Social Security Act's anti-kickback provision, and must also report all fees they receive as a cost reduction to the government, meaning GPOs that underreport risk affecting Medicare rates, according to the report.

The GAO has no way of knowing how severe the problem of underreporting is, as the Department of Health and Human Services has not reviewed that information since 2005 and the Centers for Medicare & Medicaid Services has not specified that the agency routinely aduit it, according to the report.

"Repealing the safe harbor--which allows administrative fees--could eliminate the potential effects of the GPO funding structure on Medicare payment rates, but experts and others stated that this could be disruptive to the healthcare supply chain at least in the near term," the report states. "Over the longer term, GPOs and hospital systems are likely to adapt to the new market environment."

HHS agreed with the GAO's recommendation that it review the information, according to the report.

The Healthcare Supply Chain Association, which represents multiple GPOs, said in a statement to reporters that it "fully support[s] hospital compliance with administrative fee reporting and we applaud the evidence cited in the report which demonstrates that the vast majority of hospitals have been reporting appropriately and transparently."

GPOs are growing in popularity as hospitals seek to improve cost efficiency and respond to anxieties about the Affordable Care Act, FierceHealthcare previously reported.  Moreover, a July survey found they can save hospitals up to 18 percent.  

To learn more:
- read the report

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