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How Group Purchasing Organizations (GPO) Cut Healthcare Industry Costs

Michael Wilson | Aug 13, 2014

Category: Healthcare

In these sluggish economic times, medical organizations must do everything they can to save money on the equipment and supplies that they need to purchase. Group purchasing ...

GPO-Saves-Healthcare-Facility-Money
In these sluggish economic times, medical organizations must do everything they can to save money on the equipment and supplies that they need to purchase. Group purchasing organizations, or GPOs, are an integral part of this endeavor. Cutting healthcare industry costs with group purchasing organizations is an extremely effective tactic for healthcare facilities that want to maximize their revenue by keeping their spending under control.

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The Facts On Cutting Healthcare Industry Costs With Group Purchasing Organizations

Several statistics have shown that group purchasing organizations have been and will continue to save money for the entire healthcare industry. In a report released by the Healthcare Supply Chain Association, medical analysis firm Dobson & DaVanzo projected that GPOs will reduce healthcare spending by as much as $864.4 billion in the next ten years. GPOs do this by negotiating contracts on behalf of their participating members and using the collective purchasing power of all members to reduce prices for equipment and supplies. The report goes on to say that for hospitals alone, GPOs can save up to $55.2 billion per year.

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How GPOs Save Money For The Healthcare Industry

Medical procurement professionals are cutting healthcare industry costs with group purchasing organizations in several ways:

  • Negotiating best-value contracts: most GPOs are able to provide the deepest discounts that vendors have available. Vendors are happy to provide these price cuts in return for preferential consideration during medical procurements
  • Offering consultative services: today’s GPOs are multifaceted and do much more than just lower prices. The best GPOs will help their members by offering them revenue management services as well as education on how the products and equipment under their contract should be best utilized. This means that GPOs save their members directly on procurement costs and indirectly on operational costs
  • Advocating on behalf of their membership: GPOs act as a liaison between their individual members and healthcare suppliers and regulatory bodies. GPOs will keep their members up to date about the latest regulatory issues and provide training and evaluative tools that can be used to ensure their members are in compliance with the latest healthcare standards

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Cutting healthcare industry costs with group purchasing organizations is essential, not just for individual facilities and offices but for the success of the industry as a whole. At a time when legal issues and changes to revenue capture procedures are adding complexity to the economic elements of the healthcare world, GPOs are helping doctors and their staff members maintain revenues so that they can be properly compensated for the important work that they do.

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Image Source: Hospital Aristides Maltez

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