HHS' inspector general's office recommended that the CMS clarify its instructions to hospitals on accounting for distributions from group purchasing organizations and vendor rebates. The recommendation followed an audit of three of the nation's largest GPOs and seven of their healthcare system members. The three GPOs collected $513 million in administrative fees from vendors between 2001 and 2003, earning $275 million in excess of operating costs, according to the audit. The GPOs retained $58 million of the excess for reserves and venture capital for new business lines and distributed $217 million to their members.
A subsequent review of seven systems, representing several hundred hospitals, found that one system did not fully account for about $5 million received from its GPO on Medicare cost reports and did not dispense the money to all of its hospital members. The inspector general's office did not disclose the names of the GPOs or systems. The systems also received a total of $115 million in rebates directly from vendors. All correctly offset the rebates on cost reports; however, one GPO did not distribute about $1.6 million in rebates to its members, the review found. The discrepancies were less than the amounts detailed in a January report by the inspector general's office on three other GPOs. -- by Cinda Becker