One of the staples of the healthcare and hospital supply chain is the GPO, or group purchasing organization.
These organizations have been around for over 100 years. Why do they have such incredible staying power? It’s because they help hospitals, doctor’s offices, and other healthcare facilities significantly reduce supply-related costs.
Just how effective is GPO cost cutting when it comes to helping hospitals save money?
GPO Cost Cutting: How GPOs Help Hospitals Reduce Costs
GPO purchasing networks are an important component of the healthcare system. Like doctors and nurses, they are on the front lines when it comes to patient care. GPOs support healthcare providers, as well as their patients, by providing safe, reliable products at more affordable prices. This benefits the hospitals by reducing overhead, which allows healthcare workers the opportunity to provide their patients with optimal care.
According to the Healthcare Supply Chain Association’s most recent report, GPO cost cutting results in overall savings of more than $34.1 billion annually. Over the next decade, they’re also projected to reduce healthcare spending costs of hospitals and nursing homes by over $450 billion. Additionally, the report found that GPOs can help hospitals:
- Increase transparency: GPOs can help hospitals with supply decisions that will improve their efficiency, because of their expansive knowledge of all the products and services on the market.
- Improve emergency preparedness: GPOs are true partners to their healthcare members. They help them prepare for natural or man-made disasters. They also help hospitals respond to public health threats after disasters occur.
- Increase their cybersecurity: AI, digital medical devices, and online services are helpful and necessary in our digital age. Unfortunately, they’re also vulnerable to cybersecurity threats that can jeopardize the health and safety of patients. It can also open hospitals up to the threat of lawsuits if a patient’s privacy is violated, or if they are physically injured as a result of the breach. GPO purchasing networks can provide hospitals with innovative products and/or services that also protect providers against cybersecurity threats.
- Prevent drug shortages: GPOs collaborate with government agencies (like the Food and Drug Administration) to ensure that there is an adequate supply of drugs, products, and supplies for patients’ needs. They also look for ways to address potential drug shortages.
Source: Healthcare Supply Chain Association
GPOs can help hospitals improve their efficiency and productivity. By finding the best prices for hospital purchasing, GPOs help ensure that hospitals are fully stocked with life-saving inventory, while also reducing work for the admin department. Price discounts and purchasing efficiency in the healthcare supply chain increases the predictability in supply chain management and ensures healthcare supply chain best practices.
How GPO Cost Contracting Can Benefit Suppliers
We know how GPOs help hospitals – they aggregate purchasing volumes, and then use that as leverage to negotiate discounts. How does that benefit Suppliers?
GPOs need to make sure they’re working to benefit their partners – you, the supplier – to ensure Suppliers get the value from the contract they need. Developing a good, trusting relationship with a supplier will help both parties in the long run.
The GPO-Supplier Relationship
Your GPO representative will inform you of what their members (the hospitals) want in terms of volume of supplies, as well as the amount they can invest. That transparency fosters trust and can help you build a long-term relationship with your GPO.
For manufacturers and suppliers, working with a GPO can help:
- Identify opportunities
- Ensure consistent revenue
- Net you many clients in a short amount of time
- Shorten the selling period and streamline sales
- Increase exposure for your company
- Increase sales opportunities (particularly those that were once only open to larger suppliers)
- Enhance your company’s sales efficiency
GPO Purchasing Networks Also Improve the Lives of Patients
Healthcare group purchasing organizations can see every aspect of the healthcare supply chain. They work hand-in-hand with doctors and hospital administrators every single day. Because of that, they play an integral role in the healthcare system, improving the health and lives of millions of patients around the country.
Source: Healthcare Supply Chain Association
While the idea of developing hospital slippers for kids or special diapers for premature infants might not seem like a big deal to some people – it is a huge deal for the medical team, parents, and children.
GPOs Meeting the Needs of Their Healthcare Partners
More hospitals than ever are facing financial pressures like never before. While budgets shrink and hospitals close, the patient population rises. Hospitals have to find ways to cut costs without impacting the quality of care they deliver to their patients.
Such a challenging task often requires outside assistance. That is where GPOs come in to help hospitals save money and ensure optimal patient care. They do this by leveraging the hospital’s purchasing power as well as peer collaboration. As the healthcare field and the healthcare supply chain continues to evolve, the partnerships between healthcare suppliers, GPOs, and hospitals will be more important than ever.
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