GPO industry: We’re on track

The healthcare group purchasing industry says the newest government report on the business is evidence that self-policing and federal oversight across several agencies is working. The Government Accountability Office report looks at the federal oversight and self-regulation of GPOS in the years following a congressional hearing of the same topic in 2004 and the formation of the Healthcare Group Purchasing Industry Initiative in 2005. It’s the fourth GAO report since 2003 since to address GPOS.

The GAO found few examples of HHS’ inspector general’s office, the Federal Trade Commission and the Justice Department taking legal action against GPOS in the past eight years.

Curtis Rooney, president of the Healthcare Supply Chain Association, said in a written statement that the report “found that the federal government has sufficient ability to monitor and investigate GPOS, and that the government has exercised its oversight capacity and found no evidence of anti-competitive GPO behavior.”

However, the report, addressed to Sens. Herb Kohl (D-wis.), Chuck Grassley (R-iowa) and Tom Coburn (R-okla.), said the current system of oversight does not address all questions about GPO business practices, notably whether contract administrative fees “create a financial incentive that is inconsistent with GPOS obtaining the lowest prices for their customers.”

The 2005 industry initiative, referred to as HGPII, requires member companies to follow ethics and business conduct requirements and can revoke membership if a GPO violates the group’s standards. A HGPII official told the GAO it has never occurred. HGPII established a vendor-grievance process in 2010 to address the concerns of suppliers. Complaints are reviewed by a third party provided by the American Arbitration Association.

A representative of small device manufacturers told the GAO that they were unaware of the new process nearly two years after it was formed. A Medical Device Manufacturers Association spokesman declined to comment.

The GAO assessment of the Justice Department’s oversight found additional friction between the devicemakers and GPOS. In 2010, some devicemakers filed a complaint “questioning the general structure of the industry and how the industry operates.” An investigation was not conducted because there was not enough information about anti-competitive behavior, the GAO reported.

The Justice Department has filed one lawsuit against a GPO since 2004. In 2007, the Arizona Hospital and Healthcare Association settled with the Justice Department and Arizona’s attorney general over antitrust allegations involving ratesetting by its subsidiary GPO’S traveling nurse registry for member hospitals. The FTC told the GAO that it usually receives about one complaint a year alleging anti-competitive behavior, and has investigated some, but has not taken any enforcement action since 2004.

HHS’ inspector general’s office said it has collected information about GPOS’ contract administrative fees in the course of auditing hospitals’ cost reports, but has not “routinely exercised its authority” to request and review information about the fees from GPOS or imposed penalties on any GPO during the past eight years. Officials noted that such information would not necessarily be enough to determine whether a GPO violated the anti-kickback statute.

Grassley said in an e-mailed statement that GPOS would be subject to “public accountability” next year under a provision of the Patient Protection and Affordable Care Act that requires GPOS to report ownership or investment interests held by physicians and their families. “In light of this GAO report and prior reports, I look forward to the implementation of the Physicians Payments Sunshine Act, which Sen. Kohl and I authored,” he said.