New OIG Advisory Opinion Addresses GPO That Includes Labs

By Kelly A. Briganti, Editorial Director, G2 Intelligence

Group purchasing organizations (GPOs) are entities that act as a purchaser of supplies and equipment for a number of other entities—usually health care providers like hospitals. Laboratories can play a role in such arrangements. For example, just last year, molecular laboratory NeoGenomics announced it was entering into a three-year agreement with a GPO named Premier. Earlier this month, the U.S. Department of Health and Human Services Office of Inspector General released Advisory Opinion 16-06, addressing whether a proposed GPO arrangement involving laboratory participants would run afoul of the Anti-Kickback Statute. The GPO negotiated “with vendors regarding products and pricing to be offered to the GPO[‘s]” members and vendors paid the GPO administrative fees (set forth in written agreements) according to a “percentage of the value of sales to members.”

That GPO’s membership included more than 84,000 health care entities including hospitals, nursing facilities, clinics, physician practices, home care and laboratories. The GPO originally had two owners: a health system and a Co-owner owned by 120 health care providers and suppliers. A proposed restructuring would result in the health system owning the co-owner of the GPO. 800 of the 84,000 GPO members were also owned or operated by the Health System that now would fully own the GPO.

Even though the OIG said the proposed arrangement would mean the GPO wouldn’t meet the definition of the Anti-Kickback Statute’s GPO safe harbor, the members owned by the same entity that also owned the GPO were only one percent of the total GPO members. And all the members were subject to the same terms in their GPO agreements whether they were affiliated with the Health System owning the GPO or not—so, the members related to the Health System didn’t get better terms than any other members. Therefore, because the GPO would still operate as a purchasing agent for a group of entities a majority of whom were unrelated to the GPO, the arrangement presented “an acceptably low risk of fraud and abuse in connection with the anti-kickback statute.”

For further discussion of this Advisory Opinion, see the May 12, 2016 issue of National Intelligence Report.