Group purchasing organizations, or GPOs, have become the champions of healthcare providers when it comes to purchasing supplies and optimizing cash flow.
GPOs are formed by groups of individual hospitals, sometimes under the same ownership or located in the same geographic area, working together to obtain the products and services they need. There are over 600 GPOs in the United States, representing almost all of the hospitals, clinics, and healthcare providers in the nation.
These GPOs serve as negotiators – a contracting agent between suppliers and healthcare providers – working to find the best deals for their members. In this way, GPOs save time and optimize cash flow for for hospitals.
4 Ways GPOs Can Save Hospital Cash Flow
According to studies, GPOs reduce the cost of supplies for hospitals by 10-18%. These tremendous savings are achieved by the collective power of the hospitals and other healthcare providers coming together to negotiate contracts with suppliers.
Group purchasing organizations save individual hospitals from having to go through numerous conversations and negotiations to get what they want. Instead, they source out the best deals on behalf of their members (hospitals and healthcare providers).
Independently, a hospital’s supply chain leader will spend a lot of time and money sourcing out and purchasing the equipment needed to keep the hospital running and the patients properly cared for. The variety of supplies required would result in numerous small purchases and deliveries from a variety of vendors and manufacturers. These costs add up quite quickly and hinder the hospital from investing money into other areas of their operation.
Here are four ways that joining a GPO would optimize that same hospital’s cash flow:
1. Bargaining Power
By handling cases in bulk, GPOs give hospitals more bargaining power because they can negotiate deals for larger purchases. Operating on behalf of an entire group of hospitals and healthcare providers, GPOs offer suppliers much larger contracts than any individual organization could. The industry competition created by these big contracts also gives the GPOs a better chance of getting a good deal from suppliers looking to undercut the opposition. This is a particular benefit for small hospitals that can join forces with the “giants” of the industry, like national GPOs or larger hospitals.
2. Flexible Options
Almost all of the hospitals across the United States are members of at least one GPO and use those services to secure supply contracts. However, many still purchase more than ¼ of their supplies outside of GPOs. While group purchasing organizations can generally get hospitals better prices for supplies than they can find on their own, that is not always the case. Hospitals are not required to stick solely to the suppliers that were sourced out by their GPO, allowing them to find the best options to meet their individual needs.
3. Better Access
Thanks to the bargaining power of GPOs, hospitals have better access to innovative and specialized equipment. Some group purchasing organizations have policies in place to identify new technologies and products, and to get them into the hands of healthcare providers as soon as possible. Being member owned, GPOs also have a strong incentive to get their people the best tools and technologies available.
4. Improved Service
GPOs help hospitals get access to the unique supplies that they need to be able to operate effectively and efficiently. By saving hospitals money, ensuring that they have the supplies they need, and securing them access to innovative products and technologies, GPOs allow their members to provide better service and potentially lower costs. This in turn improves the patient/customer experience, and making sure that patients are satisfied with their care is what matters most.
GPOs: The Helpers to Hospitals Everywhere
Using the power of synergy, GPOs have become trusted partners, helping to save hospitals by optimizing cash flow. Thanks to group purchasing organizations, hospitals are no longer left to fend for themselves, devoting extensive resources to acquiring the products and services that they need to keep operating. GPOs give hospitals greater bargaining power, offer them more options and better access to get the equipment that they need, and allow them to provide the best possible care.
GPOs do not deserve all of the glory, though. The distributors and manufacturers also play a part in saving hospitals money and getting them the life-saving equipment that they need by teaming up with the GPO to find a deal that works for everyone.
A Manufacturer’s Part in the GPO Cash Flow Rescue Mission
Healthcare manufacturers are in the unique position of contending for the chance to work with GPOs to most effectively meet the needs of their members.
The competition is not small. Getting the chance to play a role in a GPO cash flow rescue mission requires more than a willingness to negotiate. It calls for a deep understanding of these GPOs – who they are, what they stand for, and what they need. It demands a trustworthy brand.
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