An August 11, 2009, letter sent jointly by Sens. Charles Grassley (R-Iowa), Herb Kohl (D-Wis.) and Bill Nelson (D-Fla.) on behalf of the Senate Judiciary Committee's Antitrust, Competition Policy and Consumer Rights Subcommittee to MedAssets, Novation, Amerinet, Broadlane, Consorta, Premier and the HealthTrust Purchasing Group (collectively, GPOs), suggests that the Subcommittee is beginning to scrutinize some of the healthcare industry’s structural costs as part of healthcare reform in an effort to increase the transparency of the provider purchasing process.

Limited Information Available

The senators were concerned that there was limited information about the services and activities performed by GPOs and how the GPOs were paid for their services. The senators stated "there is little information about other fees or payments that GPOs may secure from manufacturers, other vendors and suppliers, in connection with and outside of group purchasing activities, such as product marketing." GPOs historically have argued that they would not be able to offer programs beyond basic contracting services without the fees, which traditionally have been paid by product manufacturers. The argument, however, appears to have intrigued the senators, as they have asked the GPOs to document and explain their non-contracting services and to see detailed information on how the GPOs interacted with providers, manufacturers, vendors and suppliers, including data regarding the fees charged and the impact on the GPO and its members when a member hospital purchases items outside of the GPO agreement.

False Claims Action

At least one whistleblower lawsuit under the federal False Claims Act bears watching. United States ex rel. Fitzgerald v. Novation LLC, S.D. Tex., No. 3:03-CV-01589. In this case, a former Novation employee alleged that from 1993 to 2003, Novation and others used their market power to secure kickbacks and other illegal remuneration from vendors in exchange for awarding them GPO contracts. The whistleblower claimed that the fees were well hidden through "slush funds," secret accounts and unrelated business ventures. In addition, the whistleblower alleged that her compensation rewarded her for closing deals that maximized the payments to the GPO rather than finding the lowest bid for the GPO’s members.

Physician Payments Sunshine Act

The GPO inquiries follow the reintroduction of the Physician Payments Sunshine Act (PPSA) earlier this year by Sens. Grassley and Kohl. The PPSA requires GPOs to disclose all payments or transfers of value to physicians worth $100 or more. The PPSA would require payments and other transfers of value for consulting fees, compensation for other services, honoraria, gifts, entertainment, food, travel, education, research, charitable contributions, royalty or license fees, current or prospective ownership or investment interests, CME speaker fees and grants and other payments to be reported to CMS in a searchable manner. Manufacturers or group purchasing organizations that fail to report such payments would be subject to fines between $1,000 and $10,000 per infraction, up to a total fine of $150,000 per company per year, where the failure to report is deemed to be an oversight. However, if the failure is a "knowing failure to report," the aggregate annual fine limit is up to $1 million per company.