HHS OIG Issues Report Regarding Revenue From Vendors at Three Group Purchasing Organizations
On Wednesday, January 19, 2005, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) issued a report regarding an audit of three group purchasing organizations (GPOs).
During the audit period GPOs collected $1.8 billion in fees of which $1.3 billion exceeded operating expenses. GPOs retained $415 million for VC investment and other business ventures. OIG also audited 21 hospitals and found that many were not correctly filing their cost reports. Some hospitals accounted for only 54% of the fees in their costs reports. The report also stated that most of rebates directly from manufacturers were accurately reflected in the cost reports.
As the report states, congressional concern appears to be longstanding beginning in 1986 with a House conference report which expressed concerns about the level of vendor fees and directed the Secretary of HHS to monitor vendor payment arrangements for possible abuses. The Senate Judiciary Committee, Subcommittee on Antitrust, Competition Policy and Consumer Rights has also conducted three hearings on the GPO industry under the leadership of Chairman Mike DeWine (R-OH) and ranking member Herb Kohl (D-WI). The result of these hearings was the introduction of bipartisan legislation, The Medical Device Competition Act, which would have capped fees at three percent as well as provided additional oversight of the GPO industry.
In light of today’s report, MDMA believes that the need for additional reforms has never been greater. Action must be taken to address not only the clinical and competitive concerns raised as result of certain GPO practices, but the financial waste some of these middleman add to the healthcare system.