Federal authorities launch medical supply investigation

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The U.S. Department of Justice is investigating how medical supply companies market to long-term care facilities and other healthcare providers that serve Medicare and Medicaid patients.

The federal government served more than a dozen medical supply companies with subpoenas to determine if Medicare and Medicaid are paying more than facilities are spending, according to a New York Times report.

The government appears to be concerned with how the industry's use of rebates, discounts, barter arrangements and refunds affect how much Medicare and Medicaid pay facilities compared with how much facilities actually spend. The investigation appears to focus on how Novation, the nation's largest group purchasing organization, and others contract between thousands of nursing homes, clinics and hospitals to purchase medical supplies.

Senate hearings were held earlier on the topic, after which major group purchasing organizations vowed to clarify and make more apparent their practices.