lmost
every healthcare organization belongs to a group purchasing organization
(GPO). In fact, 96 percent of all acute-care hospitals and 98 percent of all
community hospitals hold at least one GPO membership, according to the
Healthcare Supply Chain Association (HSCA), a trade association that
represents 16 GPOs. Further, more than 600 organizations in the United
States participate in some form of group purchasing, HSCA reported.
The GPO landscape has changed significantly over
the years. This started with formation of three large groups (including VHA,
Premier, AmeriNet) in the late 1970s-early 1980s, continued as the market
added alternative models (such as Tenet-driven Broadlane, HCA-driven
HealthTrust, and MedAssets) at the end of the 1990s, and again in the last
decade with the reemergence of smaller, more regional groups. Some
organizations have even become their own GPOs. Most recently, we have seen
three more major changes: Amerinet was acquired by its largest owner
(Intermountain Healthcare), VHA and UHC merged (now called Vizient), and
MedAssets has decided to leave the field by selling its GPO business to
Vizient. If there is one constant evident it is that change will continue.
Where do these moves leave today’s healthcare
organizations? In one sense, little has changed. An organization’s GPO
should continue to be a resource, which is why it needs to maximize the
effectiveness of the GPO relationship.
Belonging to a GPO is not the same as using that
resource effectively and getting everything you can from it. There are four
things to look for in the relationship and how to maximize it.
Most GPOs receive an administrative fee from suppliers
based on the amount of purchasing volume flowing through the contract. The
percentage varies from contract to contract, and the overall percentage
varies from GPO to GPO. Most GPOs return a portion of this to its members.
This is called the "share back." The amount of share back that members get
is different between GPOs and is often different between members in the
same GPO. Those GPOs that offer lower share back percentages contend that
members get additional value through lower contract prices or other
benefits. At minimum a healthcare provider organization should be
receiving a share back that is consistent with other similar members.
The
contracts and how you use them.
The raison d’etre for the existence of
GPOs is to provide its members pricing for goods and services that is
better than pricing those members can get on their own. This is based
largely on aggregation of purchasing volume. But many members find that
they are able to beat the GPO price. This is often due to their ability to
standardize and commit. Some organizations have addressed this shortfall
by creating "mini-GPOs" that are still part of the national GPO but
generate better pricing based on commitment. Other organizations
individually renegotiate numerous GPO contracts to secure better pricing
for their individual organization. If you are in a situation where you
feel the need to renegotiate all the contracts you might question whether
the GPO is the right one for you. Further, you should evaluate the benefit
you are gaining vs. the resources you are using.
The
resources that the GPO should be providing to help you.
Every GPO
should support you, as its member, in maximizing the value of their
portfolio and assisting you with any issues you have in accessing the
contracts. For larger organizations this can include regular, even
full-time, on-site resources. Are you getting the support you need?
Ancillary resources beyond the contracting.
The major GPOs have all
expanded their portfolio of offerings to include many useful technology
products. These include everything from price benchmarking to
cost-per-case determination to quality indicators. Some of these are
automatically included with membership but many others are provided to
some, but not all members without cost.
Organizations that have maximized their
relationship with their GPO are comfortable that their financial return is
market competitive, use their GPO contracts as much as possible and/or
belong to a subgroup that adds additional value through commitment, get all
the support they need to maximize the contract portfolio, and get the
technology offered by the GPO at little or no cost.
Organizations that are not currently maximizing
the relationship should consider their options. Certainly one option, and
the most obvious, is to meet with the leadership from your current GPO to
discuss your participation and relationship. Let them know your concerns and
see how they will address them. Another option is to test the market to see
if there is a different GPO that would better allow you to maximize the
relationship. For larger organizations, perhaps it is time to consider
establishing yourself as a GPO. This is a significant undertaking with many
risks. But others have weighed the risks and embarked on this course.
Remember that you are the
GPO’s customer and you should be treated as a customer. If you are not
getting everything you should from your GPO, take steps to see that you do.
It is a valuable and important resource that should not be squandered.