A former Novation employee has filed a whistleblower suit alleging that the hospital group purchasing organization defrauded government health plans.
Group purchasing organizations negotiate contracts that groups of hospitals use to buy a wide array of medical products. According to a Dallas Morning News article of September 22, 2007, the suit alleges that Novation received kickbacks from suppliers it was negotiating with. The cost of these kickbacks is passed on to the hospitals in the form of higher prices. These higher prices are then passed on to the government when the hospitals seek reimbursement from Medicare and Medicaid.
The suit, brought by Cynthia Fitzgerald under the qui tam provisions of the False Claims Act, was recently unsealed when the United States and the state of Texas declined to intervene.
Novation is the nation’s largest group purchasing organization for hospitals, serving 2,200 community-owned hospitals and 100 teaching hospitals. It purchases more than $25 billion in supplies and services annually.