No one in the healthcare supply chain is exempt. Even organizations that have taken the obvious cost cutting steps – delaying capital improvements, freezing hiring and travel and so on – need to continually find new areas to save more money. The economy has played a major role in this tightening of the belt, but there are still ways that healthcare providers can overcome the seemingly dreadful forecasts that lie before them.

Change is inevitable, and we all know that. The key to surviving the healthcare economic crisis is how well you have positioned your organization. Some healthcare providers have approached the challenge by partnering with group purchasing organizations (GPOs), while others are adopting new strategies that may or may not include a GPO relationship. Some have had major successes working with GPOs, while others struggle to realize their value. Why would some healthcare providers benefit from the GPO relationship while others don’t? The answer is easy, yet complex at the same time.

Each GPO is unique and has its own strengths. The key then, is to leverage your relationship with your GPO so you can realize actual, measurable savings. By partnering with the right GPO, you will use its strengths and resources to assist your organization and provide much needed savings. If, however, you are not partnered with the right GPO, you could be in for lengthy struggles. If you do not have a relationship with a GPO, you might want to consider the potential value of a successful GPO relationship before completely discounting that option for your organization.

What are some of the differentiating characteristics of an outstanding GPO relationship, and how can your GPO clearly identify savings for your organization? The answers to these questions may sound simple, but some aspects of the relationship are not easy to measure.

At the top of the list are the GPO’s sourcing and procurement processes. They offer the easiest test to determine if they can improve your savings. It is also relatively easy to measure. It is essential that GPOs offer sound procurement practices while delivering contracts healthcare providers will utilize.

While technically these two programs fall under sourcing and procurement, they are separated here because they offer the potential for huge savings. By standardizing your product line and buying from the GPO’s private label programs, you are sure to find significant savings in the majority of categories they offer.

• Technology

Technology is a critical factor in a successful GPO relationship. It can be a differentiating service that helps the healthcare providers achieve real savings. Technology includes tools such as an online catalog, tracking price eligibility, local and national contract visibility, education, revenue management and capital planning and budget, to name just a few.

One area that cannot be overlooked is how well the GPO can identify savings opportunities for your organization. Whether it is tracking and comparing labor supply costs, assistance on service programs, analyzing supply cost expenses or identifying diversity suppliers to help public providers meet necessary spending, the differentiating GPO can provide these opportunities and much more.

Healthcare is very different from other industries. It is unique because not all decisions can be made based on cost alone. The GPO will understand this and put a great emphasis on selecting the right supplier to deliver positive patient outcomes. It should be clear that costs are absolutely important but cannot be sacrificed at the expense of an inferior product. Saving a few pennies today could cost you much more later if you have to replace deficient materials.

With spend data flowing at speeds unheard of just a few years ago; it is critical that the GPO deliver a superior analytics solution. These solutions can provide your organization with the means to instantly (and not insignificantly) cut healthcare costs. A good analytical tool offers item standards, clinical benchmarking, dashboards for easy use, savings analysis and product utilization reports.

One area in which a GPO can certainly assist you the most is sourcing. They have trained staff to do contract category bids, negotiate good terms and conditions for you and communicate the details of new agreements to your organization. But what happens if you do not have a GPO relationship? You can still realize significant savings, provided you have the right expertise and tools to assist you. With proper planning, whether you have a GPO relationship or not, sourcing is one of the main areas you can realize significant savings.

When you conduct a sourcing event, you should use proven practices for the bid process. A few of them are listed below:

A contract will not reach its full savings potential until you standardize your purchasing towards it. This could be committing volume to reach a higher tier or simply updating all the materials management systems to include the new codes. Recent data suggests that most hospitals purchase less than a quarter of their goods on contract. That is a shockingly small number and can easily account for considerable lost savings for healthcare providers. Locally-negotiated contracts may close this gap some, but not to the degree necessary in today’s economic setting.

If you want to drive significant savings with your sourcing event, contract compliance is crucial. When manufacturers realize that you deliver results, future negotiations over price will definitely benefit your organization.

A number of healthcare providers are starting to see the enormous benefits of teaming with other, non-related healthcare providers to aggregate their volume. This appears to be a national trend, and for good reason. This "virtual network" can control their commitment and receive much better pricing than they would were they completely on their own.

National Group Buys offer another way to realize substantial savings. The GPOs typically have a lot of experience in this area, but you can also do this on your own. You will need to identify other healthcare facilities with similar needs. Once you combine the volume of the multiple facilities, significant savings on capital related products can be achieved.

While GPOs offer custom solutions for their larger members, smaller providers and ones without a GPO relationship can also benefit from custom contract solutions. The key is finding the right resource that can negotiate either additional savings over and above the current contract or add new suppliers that offer additional savings to your organization.

Being partnered with the "right" GPO can have significant benefits and savings to providers. They offer excellent contracts at competitive prices, programs geared toward saving its members money, understand your specific needs while offering you tools that have proven to provide savings.