A government watchdog agency wants to know if hospitals accurately report payments they receive from group purchasing organizations that could affect Medicare spending. Some say the reporting of these payments could have broader implications for the federal safe harbor that protects GPOs from anti-kickback rules.
The Government Accountability Office concluded in its Nov. 24 report, “Group Purchasing Organizations: Funding Structure Has Potential Implications for Medicare Costs,” that HHS' Office of the Inspector General does not routinely assess whether fees from GPOs to hospitals are accounted for on Medicare cost reports. Those reports are used to help set Medicare payment rates for hospitals.
“To the extent that administrative-fee revenue is not reflected on cost reports, Medicare could be overpaying hospitals,” according to the GAO.
Underlying the issue is a decades-long debate about the federal safe harbor established in 1986 that allows GPOs to take administrative fees of 1% to 3% from medical suppliers and vendors, based on the price of their products, without violating the federal anti-kickback law. The safe harbor was created because GPOs were thought to help hospitals reduce the cost of medical supplies and other products, and therefore indirectly reduce costs for Medicare. The GAO said, however, that there is little empirical data available to explain the impact of the GPO model on healthcare costs.
“Repealing the safe harbor—which allows administrative fees—could eliminate the potential effects of the GPO funding structure on Medicare payment rate,” according to the GAO. But the agency added that “experts and others stated that this could be disruptive to the healthcare supply chain, at least in the near term.”
It's the first time the GAO has raised questions about repealing the safe harbor. But the watchdog agency pointed to a lack of empirical data needed to make the case for a repeal.
GPOs had been apprehensive about the report leading up to its release. But the report's recommendations were limited to ensuring that hospitals accurately report fees on their cost reports. The issue now is if HHS starts auditing cost reports and finds that hospitals are underreporting GPO-fee revenue that could raise questions about the safe harbor.