food service, online marketplaces and group buying, consumer credit, hospitality, and even nonprofits, charities, and churches. The Final Rule does not impact another safe harbor – the group purchasing organization (“GPO”) safe harbor – which continues to provide a safe harbor for pharmaceutical manufacturers to pay GPOs certain volume-based administrative fees so long as certain criteria, mostly related to transparency, are met. The reason: The unsafe “safe harbor,” which exempts GPOs and PBMs from criminal prosecution for taking kickbacks and rebates from drug makers and other healthcare suppliers, created a “pay-to-play” scheme that has decimated market competition and grossly inflated prices in the entire prescription drug and … GPOs have operated under the same model for over 100 years; Congress included the GPO Safe Harbor in its 1987 Medicare and Medicaid Patient Protection Action to protect the cost savings realized through lawful GPO practices. Ascent’s creation had benefits for ESI/Cigna including tax incentives due to the location (Switzerland), access to the GPO safe harbor in the event the rebate safe harbor was shuttered, and reduced transparency with clients. What types of services do GPOs provide beyond volume discounts? Two former federal officials intimately involved with the GPO safe harbor provisions reflected, in a recent report, on their professional experience, personal knowledge and various perspectives related to the safe harbor.1 The results are enlightening. The GPO Safe Harbor is not unusual – in fact, it is one of 23 carve outs of the 1987 Act. Suppliers are not required to contract with GPOs and healthcare providers are not required to use the contracts negotiated by GPOs with suppliers, even if the providers were a part of the committee process that reviewed and approved the contracts. The OIG then went into the history of the GPO safe harbor. This report examines (1) GPO Consequently, the safe harbor’s definition of GPO refers to an entity authorized to act as a purchasing agent for members who are furnishing services for which payment may be made under state or federal health care programs and who are not wholly owned by the GPO or subsidiaries of a parent corporation that wholly owns the GPO. New Safe Harbor for POS Discounts OIG also is finalizing its proposal to establish a new safe harbor at 42 C.F.R. Are hospitals and suppliers required to use GPOs? Because GPOs represent many healthcare facilities, GPOs offer economies of scale to the healthcare supply chain. Some GPOs offer hospitals the ability to purchase nearly every conceivable type of product, while others focus on specific product categories. Safe Harbors • GPO Safe Harbor protects administrative fees • Discount Safe Harbor protects discounts and rebates – Detailed transparency and reporting requirements for suppliers and hospitals. Repealing the safe harbor—which allows administrative fees—could eliminate the potential effects of the GPO funding structure on Medicare payment rates, but experts and others stated that this could be disruptive to the health care supply chain at least in the near term. In addition, some GPOs specialize in certain types of healthcare, such as long-term care. The GPO safe harbor provides that GPO does not include an entity that is authorized to act as a purchasing agent for a group of entities if they are wholly owned by the GPO or subsidiaries of a parent corporation that wholly owns the GPO. Independent, empirical, and industry- and non-industry-funded analyses of GPOs have found that GPOs deliver billions in cost savings every year to the healthcare delivery system. The statutory exception and safe harbor regulation requires disclosure to members of the vendor fees paid to GPOs, but allows competition to determine the level of vendor fees. Hospitals and other healthcare providers use group purchasing to obtain the best products at the best value. In order to qualify for safe harbor protection, (i) the GPO must have a compliant written agreement in place with the vendor, and (ii) the GPO must submit written disclosures to DHHS. Thomas H. At one time, GPOs were placed under the umbrella of those who receive "kickbacks". The GPO was an existing entity already serving a large number of unrelated members under an arrangement that fully complies with the GPO safe harbor. Ascent, the first of these entities, actually came to be in 2019. By 2007, there were hundreds of healthcare GPOs, "affiliates" and cooperatives in the United States that were availing themselves of substantial revenues obtained from vendors in the form of … However, there is no parallel effort to alter GPO safe harbor rules. In 1986, Congress granted GPOs in healthcare "Safe Harbor" from federal anti-kickback statutes after successful lobbying efforts. GPOs do not purchase or buy any products. 1341 G Street NW Suite 600 The Final Rule does not impact another safe harbor – the group purchasing organization (“GPO”) safe harbor – which continues to provide a safe harbor for pharmaceutical manufacturers to pay GPOs certain volume-based administrative fees so long as certain criteria, mostly related to transparency, are met. PBMs still may rely on the group purchasing organization (GPO) safe harbor. GPOs also provide the aforementioned information to the … Health and Human Services instituted Safe Harbor regulations which allow GPO’s to provide goods or services to a health care provider as long as both of the two standards are met . A GPO … How much money do GPOs save the healthcare system? °oaÜ;¡bsÛ݃=ØjØJY¿4–øH¯f8põCvÀ:æ§>opéà˜Ã¼ÎÁáBaXæJ’—gL+‘Ì«ŠT[Å(pjªŽš{ç4õ¡í'}ûùRmd¦zfp´wN9^ªº—QàC±¥V“âlö¢3’wjMº'(ÎÖs¬ùäéæ¸%r|éK{ƒ'Hg’ô)Õ=ï-Íɒa°ÑyÓ:¯yم;N•HùE…ü`ñS^ç,õ £Â±ïÉʏ\,§²7OZ©£$eh4ãeð|ÕgǍղ~U. HHS addressed the GPO safe harbor … The GPO industry has established additional transparency measures beyond federal requirements. 2) All GPO administrative fees paid by Distributors should be within the 3% Safe Harbor guidelines. A broad array of business practices are now protected within federal healthcare programs by safe harbors, including price reductions offered in health plans, equipment rentals, replenishment of ambulance supplies, and referral arrangements in specialty services. Law’s provisions for disclosure, reporting and transparency outweigh any potential harm, say former fed officials. All GPO contracts are voluntary and the product of competitive market negotiations. The definition of “GPO” provided by the GPO safe harbor includes an entity “authorized to act as a purchasing agent for a group of entities…who are neither wholly owned by the GPO nor subsidiaries of a parent corporation that wholly owns the GPO (either directly or through another wholly owned entity).” Thus, the Proposed Arrangement kicks the GPO out of the GPO safe harbor… GPO Safe Harbor. GPO cost savings, administrative structure, and business practices are all thoroughly reviewed by the Department of Justice (DOJ), Federal Trade Commission (FTC), U.S. Government Accountability Office (GAO), the U.S. Supreme Court, the 8th Circuit Court of Appeals, academia and virtually all of America’s 7,000+ hospitals. Safe Harbor Healthcare Compliance: Are There Other Safe Harbors? the requirements of a safe harbor to the “anti-kickback” provision of the Social Security Act —known as the Anti-Kickback statute—which would otherwise prohibit such fees. HHS addressed the GPO safe harbor … GPO Safe Harbor. Under what transparency and oversight do GPOs operate? Ascent’s creation had benefits for ESI/Cigna including tax incentives due to the location (Switzerland), access to the GPO safe harbor in the event the rebate safe harbor was shuttered, and reduced transparency with clients. Washington, DC 20005, Phone: 202.629.5833 Email: info@supplychainassociation.org, HSCA Comments to FDA Regarding FDA’s List of Public Health Focused Essential Medicines, HSCA Statement on President Biden’s Executive Order on the Healthcare Supply Chain. The GPO … GPO Safe Harbor . A 2010 GAO report found that, on average, hospitals belong to 2-4 GPOs, which compete with one another for hospital business. Healthcare Supply Chain Association The Proposed Rule would make three major changes to the existing regulatory safe harbors contained in 42 C.F.R. These committees help determine which medical supplies are most appropriate from a clinical standpoint. GPOs and the vendor-based fee model  are increasingly leveraged by other industries to yield cost saving, including:  government procurement (Department of Defense, Department of Veterans Affairs, etc.) Do other industries use the vendor fee model? No. Additional safe harbors include: The fee is paid when a GPO’s provider-member utilizes a GPO contract. Each provider that uses GPO services has a written To bring the Distributor GPO fee formula in line with current standards, HIDA believes: 1) Distributors should pay a GPO administrative fee based only on the cost of the distribution services they provide. Safe Harbor: There is both a statutory exception and a regulatory safe harbor under the anti-kickback statute (AKS) for vendor payments to GPOs (42 CFR 1001.952(j)) that specifies transparency requirements. In what may be the most notable clarification in the final rule, OIG states that the new safe harbor for PBM service fees does not prevent a PBM from continuing to rely on the GPO safe harbor (42 CFR § 1001.952(j)) to protect the administrative … GPO Safe Harbor. Without the ability to earn administrative fees, hospitals would have to choose between diverting financial resources from the direct administration of patient care to fund the operations of GPOs or they would have to stop using GPOs altogether, thereby losing the volume discounts and raising the cost of healthcare. § 1001.952: First, the Proposed Rule would revise the Discount Safe Harbor to explicitly exclude discounts and rebates on drug purchases made available to Medicare Part D plan sponsors, Medicaid … These administrative fees are generally based upon the purchase price that the healthcare provider pays for a product purchased through a GPO contract. Additionally, GPOs provide valuable cost-avoidance savings to hospitals and other providers by helping them standardize and streamline their purchasing, as well as reduce the number of non-clinical staff that hospitals must employ to negotiate purchasing contracts. Ascent, the first of these entities, actually came to be in 2019. – Discounts are price reductions at the time of sale of the goods – Rebates are discounts subsequent to the sale. Until then, federal prosecutors had … GPOs are the most transparent industry in healthcare. Repealing the safe harbor—which allows administrative fees—could eliminate the potential effects of the GPO funding structure on Medicare payment rates, but experts and others stated that this could be disruptive to the health care supply chain at least in the near term. 47 Protection will remain available under the discount safe harbor for price concessions provided to these parties, including for rebates, even if the discounted drug ultimately is dispensed to a Part D enrollee. How do GPOs save money for health facilities? As used in section 1128B of the Act, “remuneration” does not include any payment by a vendor of goods or services to a group purchasing organization (GPO), as part of an agreement to furnish such goods or services to an individual or entity as long as both of the following two standards are met - § 1001.952 (cc) to protect certain pharmacy POS price reductions offered by manufacturers to Medicare Part D plan sponsors and Medicaid MCOs (the "POS safe harbor"). The GPO community is also a leader in the effort to reduce medical errors by helping to standardize some of the product use in hospitals and educating clinicians on best practices. The "safe harbor" regulations describe various payment and business practices that, although they potentially implicate the Federal anti-kickback statute, are not treated as offenses under the statute. GPOs are funded through an administrative fee charged to the vendors, which are permitted by a statutory exception and safe harbor under the Anti-Kickback Statute. All hospitals, nursing homes, clinics, surgery centers, etc., can purchase “off contract” and often do. GPOs are funded through an administrative fee charged to the vendors, which are permitted by a statutory exception and safe harbor under the Anti-Kickback Statute. Further, the Government Accountability Office (“GAO”) published a GPO report in 2014 expressing concern about GPO a… You raised questions about GPOs’ contracting practices and about the impact of the GPO funding structure. A 2010 report by the Government Accountability Office found that the average weighted contract administrative fee for GPOs ranged from only 1.22% to 2.25%, and the vast majority of administrative fees fall in that range. Group purchasing organizations are legally protected from kickback prosecutions. GPOs have also created an independent supplier grievance process through the American Arbitration Association. Virtually all of America’s 7,000+ hospitals as well the vast majority of the 68,000 non-acute care centers belong to at least one GPO. A group purchasing organization (GPO) is an entity that helps healthcare providers—such as hospitals, nursing homes, surgery centers and clinics, and home health agencies—realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors. 15 kickback statute; details how the GPO safe harbor is used by PBMs; outlines possible antitrust and 16 anticompetitive concerns with the GPO safe harbor; specifies the possible legal and patient access 17 implications of repeal of the safe harbor; and offers recommendations to refine the GPO safe 18 harbor … This website uses cookies. HHS addressed the GPO safe harbor … Pursuant to the GPO Safe Harbor, GPOs disclose all administrative fees in writing to members at least annually; any GPO fee above 3% must be included in the contract agreement; GPOs make all fee information available at the request of the Secretary of Health and Human Services; and hospitals must report GPO fee distributions as part of their Medicare cost reports. 48 Further, OIG notes that the GPO safe harbor can protect manufacturer payments to PBMs, if the arrangement in question meets all elements of the safe harbor… More than 100 national, regional and local GPOs and regional cooperatives compete with each other to provide GPO services. GPOs have operated under the same model for over 100 years; Congress included the GPO Safe Harbor in its 1987 Medicare and Medicaid Patient Protection Action to protect the cost savings realized through lawful GPO practices. After a group purchasing contract is created, it is still up to the hospital to decide which product is most appropriate in each circumstance and make the most appropriate purchase. The GPO Safe Harbor is not unusual – in fact, it is one of 23 carve outs of the 1987 Act. Allowing GPOs to earn administrative fees enables hospitals and healthcare providers to dedicate more financial resources to the direct provision of patient care, such as employing additional doctors or nurses, purchasing the most advanced products, or a host of other goals. Other safe harbor provisions under the Anti-Kickback Statute apply to transactions and relationships including (but not limited to): The GPO safe harbor was relevant to the administrative fees the vendors paid the GPO. Discount Safe Harbor … And Philip Zweig, director of Physicians Against Drug Shortages, says that it is this safe harbor that is fueling the drug shortage crisis and increasing … Today, GPOs are compensated via manufacturer-paid administrative fees that are typically computed as a percentage of the purchase price that the healthcare provider pays for a product bought through a GPO contract. Some GPOs are owned by hospitals, while others do not have such a link to the facilities they serve. Fax: 202.466.9666 Requirements: • GPO = entity authorized to act as a purchasing agent • Protects payments to a GPO for administrative services in conjunction with the administration of sales and discounts to GPO members • GPO must have a written agreement with its members with different terms if: ‒ Fees are 3% or less, or ‒ Fees are more than 3% . GPOs rely, in part, on fees paid by vendors to finance the services the GPOs offer healthcare providers. Recently, the government has expressed more concern with GPO arrangements. The safe harbor regulations, in their entirety, can be found here. "üš}Síü"\LVp1zÊn2e»­N³'óÌ¢bË̪…Š¬ÌGNåÌõŸ. Click here to learn more about the origin and intent of the safe harbor. For example, PBMs could presumably continue to rely on the Group Purchasing Organization (GPO) safe harbor to protect certain administrative fees paid by drug manufacturers to PBMs for GPO services, even if those fees are based on the total prescription volumes of health plans on behalf of which the … Therefore, the safe harbor provides that “GPO” means an entity authorized to act as a purchasing agent for a group of individuals or entities who are furnishing services for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs, and who are neither wholly owned by the … The GPO Safe Harbor The history of federal policy regarding GPO administrative fees shows that policy makers recognize that GPOs create substantial efficiencies and should be permitted to operate based on their traditional vendor- … 47 Protection will remain available under the discount safe harbor for price concessions provided to these parties, including for rebates, even if the discounted drug ultimately is dispensed to a Part D enrollee. Some GPOs only serve not-for-profit hospitals, while others serve just proprietary facilities, and some serve a mix of the two. There were no issues regarding whether the discount safe harbor would be satisfied. Click here to learn more about other industries that use group purchasing and the vendor fee model. What is the value in allowing GPOs to earn administrative fees from vendors? The GPO certified that all elements of the discount safe harbor would be satisfied under the Proposed Arrangement. PBMs still may rely on the group purchasing organization (GPO) safe harbor. Most healthcare providers make group purchasing selections in a committee setting, usually composed of healthcare professionals, such as doctors, nurses and other clinicians. GPOs operate within the scope of the federal GPO Safe Harbor, which requires that: 1. Pursuant to the GPO Safe Harbor (see above), GPOs also disclose their administrative fee arrangements to providers that use GPOs and they provide annual reports to each member detailing the specific administrative fee earned for each contract. means the regulatory safe-harbor of the Anti-Kickback Statute for group purchasing organizations set forth at … In the Preamble to the 1991 Final Rule implementing, among others, the GPO safe harbor, the OIG had explained that the GPO safe harbor was not designed to protect vendor payments made to a … All GPOs participating in HSCA subscribe to a transparency and ethics initiative, The Healthcare Group Purchasing Industry Initiative (HGPII), that is reviewed and certified by an independent auditor annually, and are subject to review by an independent panel of ethicists that advise participating GPOs. Once a decision is made, GPOs work to negotiate contracts with healthcare manufacturers, distributors and other suppliers. Safe harbor for payments made by a vendor of goods or services to a group purchasing organization (GPO) The GPO must have a written agreement with each individual or entity for which items or services are furnished. Hospitals and other healthcare providers are increasingly relying on GPOs to help manage the complex system of purchasing, and GPOs have expanded their offers to help meet providers’ needs. The GPO safe harbor could apply to the administrative fees that the GPO collects from vendors. Specifically, Congress and OIG have questioned whether GPOs were actually achieving the goals of the GPO safe harbor, including reducing health care costs for both the private sector and government. A recent analysis of Medicare claims data by healthcare economists found that GPOs reduced healthcare costs by up to $55 billion annually, and up to $864 billion over 10 years. The majority of membership would still consist of unrelated entities, with the new, commonly owned members representing only 35 percent of membership and … The value that GPOs deliver beyond cost-savings includes data analysis and benchmarking, innovative technology integration, market research, emergency preparedness and natural disaster response. You can learn more about HGPII here. Former Federal Trade Commission Chairman Jon Leibowitz recently analyzed the GPO market and found that hospitals save 10% to 18% by buying through GPOs. Define GPO Safe-Harbor. They negotiate contacts that hospitals can use when making their own purchases. Over the longer term, GPOs and hospital … By aggregating the purchasing power of hospitals, GPOs help balance the negotiating equation between purchasers and vendors. Analytical cookies help us improve our website by providing insight on how visitors interact with our site, and necessary cookies which the website needs to function properly. 2) All GPO administrative fees paid by Distributors should be within the 3% Safe Harbor guidelines. The GPO Safe Harbor is what allows healthcare GPOs to deliver billions in annual savings to hospitals and other healthcare providers, Medicare and Medicaid, and taxpayers. GPO Safe Harbor statute. The Final Rule does not impact another safe harbor - the group purchasing organization ("GPO") safe harbor - which continues to provide a safe harbor for pharmaceutical manufacturers to pay GPOs certain volume-based administrative fees so long as certain criteria, mostly related to transparency, are met. Now, they have regulations that specifically exempt them from legal repercussions when accepting fees for recommending to its member hospitals that they do business with particular healthcare vendors. They are legally protected by a 1987 law that granted them a safe harbor from prosecution. Further, the OIG concluded that “although the Proposed Arrangement cannot receive GPO safe harbor protection because the ownership structure of the Proposed GPO, the Proposed Arrangement includes a number of features that mitigate the risks present in some GPO arrangements.” 22 . The absence of safe harbor protection did not prove fatal. To qualify as a safe harbor, the GPO must have a written agreement in place with the vendor, and the GPO must disclose information about the terms of the agreement to HHS. Certain transactions between vendors and GPOs are considered to be safe harbors. In 2003, the Office of the Inspector General of the Department of Health & Human Services, which is responsible for administering the 1991 “safe harbor” rules, quietly and inexplicably extended GPO “safe harbor” protection to PBMs. If you’ve seen one GPO, you’ve really only seen one GPO, as they vary greatly in size, type of ownership and the services they offer their members. The safe harbor was implemented in 1991 allowing vendors, not hospitals, to pay GPO administrative expenses. Safe harbor regulations for GPOs. Visit our archive of industry research to read more on the cost-savings associated with GPOs. Charging distributors any GPO administrative fee based on any part of the product price is a questionable practice because: 1) Medical Products Distributors have no role in setting the price of products. To earn administrative fees the vendors paid the GPO funding structure determine which medical supplies are most from! 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