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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. § 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 … 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. Some GPOs offer hospitals the ability to purchase nearly every conceivable type of product, while others focus on specific product categories. 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. GPO Safe Harbor statute. Former Federal Trade Commission Chairman Jon Leibowitz recently analyzed the GPO market and found that hospitals save 10% to 18% by buying through GPOs. The GPO safe harbor could apply to the administrative fees that the GPO collects from vendors. 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"). 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 … GPOs are the most transparent industry in healthcare. A 2010 GAO report found that, on average, hospitals belong to 2-4 GPOs, which compete with one another for hospital business. "üš}Síü"\LVp1zÊn2e»­N³'óÌ¢bË̪…Š¬ÌGNåÌõŸ. 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. They are legally protected by a 1987 law that granted them a safe harbor from prosecution. Further, the Government Accountability Office (“GAO”) published a GPO report in 2014 expressing concern about GPO a… 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. 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. 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. What is the value in allowing GPOs to earn administrative fees from vendors? The OIG then went into the history of 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. The GPO industry has established additional transparency measures beyond federal requirements. Most healthcare providers make group purchasing selections in a committee setting, usually composed of healthcare professionals, such as doctors, nurses and other clinicians. 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. 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. 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. food service, online marketplaces and group buying, consumer credit, hospitality, and even nonprofits, charities, and churches. These committees help determine which medical supplies are most appropriate from a clinical standpoint. GPO Safe Harbor. These administrative fees are generally based upon the purchase price that the healthcare provider pays for a product purchased through a GPO contract. Thomas H. At one time, GPOs were placed under the umbrella of those who receive "kickbacks". 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. 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 GPO Safe Harbor is not unusual – in fact, it is one of 23 carve outs of the 1987 Act. 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. 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. 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. – Discounts are price reductions at the time of sale of the goods – Rebates are discounts subsequent to the sale. The fee is paid when a GPO’s provider-member utilizes a GPO contract. 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. Visit our archive of industry research to read more on the cost-savings associated with GPOs. 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. All GPO contracts are voluntary and the product of competitive market negotiations. Group purchasing organizations are legally protected from kickback prosecutions. 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. HHS addressed the GPO safe harbor … 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. In addition, some GPOs specialize in certain types of healthcare, such as long-term care. means the regulatory safe-harbor of the Anti-Kickback Statute for group purchasing organizations set forth at … The GPO … There were no issues regarding whether the discount safe harbor would be satisfied. 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. Safe Harbor Healthcare Compliance: Are There Other Safe Harbors? The absence of safe harbor protection did not prove fatal. Under what transparency and oversight do GPOs operate? 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 … 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. 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. The Proposed Rule would make three major changes to the existing regulatory safe harbors contained in 42 C.F.R. 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… You can learn more about HGPII here. How much money do GPOs save the healthcare system? 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. Until then, federal prosecutors had … What types of services do GPOs provide beyond volume discounts? 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. By aggregating the purchasing power of hospitals, GPOs help balance the negotiating equation between purchasers and vendors. New Safe Harbor for POS Discounts OIG also is finalizing its proposal to establish a new safe harbor at 42 C.F.R. 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. PBMs still may rely on the group purchasing organization (GPO) safe harbor. Healthcare Supply Chain Association Each provider that uses GPO services has a written 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. Some GPOs only serve not-for-profit hospitals, while others serve just proprietary facilities, and some serve a mix of the two. 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. GPOs also provide the aforementioned information to the … Recently, the government has expressed more concern with GPO arrangements. Ascent, the first of these entities, actually came to be in 2019. 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. HHS addressed the GPO safe harbor … 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.) Safe Harbors • GPO Safe Harbor protects administrative fees • Discount Safe Harbor protects discounts and rebates – Detailed transparency and reporting requirements for suppliers and hospitals. 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.” The safe harbor was implemented in 1991 allowing vendors, not hospitals, to pay GPO administrative expenses. 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 $864 billion over 10 years. Law’s provisions for disclosure, reporting and transparency outweigh any potential harm, say former fed officials. GPOs have operated under the same model for over 100 years; Congress included the GPO Safe Harbor in its 1987 Medicare and Medicaid Patient Protection Action to protect the cost savings realized through lawful GPO practices. More than 100 national, regional and local GPOs and regional cooperatives compete with each other to provide GPO services. 2) All GPO administrative fees paid by Distributors should be within the 3% Safe Harbor guidelines. Charging distributors any GPO administrative fee based on any part of the product price is a questionable practice because: 1) Medical Products Distributors have no role in setting the price of products. Ascent, the first of these entities, actually came to be in 2019. If you’ve seen one GPO, you’ve really only seen one GPO, as they vary greatly in size, type of ownership and the services they offer their members. Other safe harbor provisions under the Anti-Kickback Statute apply to transactions and relationships including (but not limited to): GPO Safe Harbor. °oaÜ;¡bsÛ݃=ØjØJY¿4–øH¯f8põCvÀ:æ§>opéà˜Ã¼ÎÁáBaXæJ’—gL+‘Ì«ŠT[Å(pjªŽš{ç4õ¡í'}ûùRmd¦zfp´wN9^ªº—QàC±¥V“âlö¢3’wjMº'(ÎÖs¬ùäéæ¸%r|éK{ƒ'Hg’ô)Õ=ï-Íɒa°ÑyÓ:¯yم;N•HùE…ü`ñS^ç,õ £Â±ïÉʏ\,§²7OZ©£$eh4ãeð|ÕgǍղ~U. This website uses cookies. Click here to learn more about other industries that use group purchasing and the vendor fee model. Some GPOs are owned by hospitals, while others do not have such a link to the facilities they serve. Hospitals and other healthcare providers use group purchasing to obtain the best products at the best value. The GPO safe harbor was relevant to the administrative fees the vendors paid the GPO. PBMs still may rely on the group purchasing organization (GPO) 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 … 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. GPO Safe Harbor . You raised questions about GPOs’ contracting practices and about the impact of the GPO funding structure. 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 . Define GPO Safe-Harbor. HHS addressed the GPO safe harbor … They negotiate contacts that hospitals can use when making their own purchases. There were no issues regarding whether the discount safe harbor to finance the the... 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