Senators investigate hospital group purchasing organizations

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