The GAO has issued a report, “Group Purchasing Organizations: Funding Structure has Potential Implications for Medicare Costs,” that examines the effects of group purchasing organization (GPO) contracting practices and their funding structure. The five GPOs in GAO’s review reported being predominately funded by administrative fees collected from vendors (totaling $2.3 billion in 2012), which were almost always based on a percentage of the purchase price of products obtained through GPO contracts. The five GPOs reported that nearly 70% of these fees were passed on to GPO customers or owners. The GAO points out that literature and expert views on the effects of this funding structure vary. To the extent that the vendor fee-based funding structure affects prices for medical products and services, Medicare payment rates could be affected since hospital cost reports impact annual payment updates. The GAO notes that repealing the safe harbor that allows administrative fees could eliminate the potential effects of the GPO funding structure on Medicare payment rates, but the agency cited concerns that this could be disruptive to the health care supply chain at least in the short term. The GAO recommends that the HHS Secretary determine whether hospitals are appropriately reporting administrative fee revenues on their Medicare cost reports and take steps to address any under-reporting that may be found.