Dig Deeper Into Your GPO Relationship | Eight Tips to Maximize Your Contract

Group Purchasing Organizations (GPOs) are on the front lines of key health trends across the entire healthcare continuum. With this broad perspective, they are uniquely able to help healthcare providers confront many challenges. For instance, GPOs have helped their members with emergency preparedness, energy management, drug utilization management and value-based purchasing.

Today hospitals face ever increasing costs and lost revenue and are turning to their GPOs for help once again. Nearly two-thirds of US health systems included in a 2018 study reported a 44% reduction in operating margins between 2015 and 2017. A key factor in these eroding margins is the increase in operating expenses which exceeded revenue growth by three percentage points during the same time period. As we move more toward value-based care, the pressure to reduce overall costs is more critical than ever.

In this environment, most hospitals rely on Group Purchasing Organizations for financial relief. In fact, hospitals that use GPOs save 13.1% on supply-related buying costs compared to those that don’t. As a result, it’s estimated that GPOs will reduce healthcare spending over the next 10 years by $456.6 billion.

OR supplies in particular are a significant cost category worthy of close attention. Depending on the specialty and procedure, some surgical supplies can represent 50% or more of the total cost per case, according to OR Manager (Vol. 28 No. 7 July 2013).

The bottom line is that GPOs are supply chain partners that can help reduce costs for entire health systems while allowing healthcare staff to focus on care.

Once you look beyond volume discounts earned through aggregated purchasing, you’ll find a wealth of value-added offerings from your GPO. Consider how could you benefit by utilizing these eight GPO services:

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  1. Actionable Solutions from Business Intelligence
    The HIMSS organization defines business intelligence as the aggregation, analysis, and use of clinical, financial, operational, and non-traditional data captured inside and out of the healthcare setting to directly inform decision-making. (6) BI has the power to positively impact patient care delivery, health outcomes, and business operations so as to provide actionable data feedback. (1) Many GPOs have developed business intelligence tools to assist providers.
  2. Supply Chain Optimization
    Most GPOs provide members with specialized spending analytics that help drive supply chain optimization as well as benchmarking. Many even provide item master and nomenclature standardization along with Enterprise Resource Planning (ERP) systems and tools to analyze and provide data members can use to optimize your supply chain.
  3. Physician and Clinical Preference Item Consolidation (PPI/CPI)
    Clinical leaders are first and foremost scientists, who need accurate, unbiased, evidence-based information to support quality and cost decisions that may impact patient outcomes. Many GPOs offer specific consulting services to assist hospitals in working with these stakeholders towards standardization of medical devices such as implants and other “preference card” items.
  4. Utilization and Standardization
    Ask what supply utilization and standardization programs your GPO and contracted suppliers offer to help reduce waste and inventory management costs, to help drive savings at the procedure level.
  5. Process Improvement
    GPOs continually seek measurable improvement solutions to maximize reimbursement and protect or improve the bottom line through consultative service offerings.
  6. Margin Improvement
    While many solutions address margin improvement, newer programs such as Bundled Payments review and streamlining service lines have a direct impact on margins. GPOs may aggregate provider data to pass on clinical and supply chain benchmarks to its members.
  7. Staff Education
    GPOs offer a wide variety of educational and in-service training programs from internal resources, contract suppliers and medical device manufacturers–including many that help satisfy continuing education requirements.
  8. Value-Based Purchasing (VBP)
    Some GPOS can provide assistance with VBP, which links provider payments to improved performance. This form of payment model holds healthcare providers accountable for both the quality and cost of the care they provide. It attempts to reduce inappropriate care and to identify and reward the best-performing providers.

Author’s Note: Some GPOs may offer additional benefits beyond the eight categories listed here and/or use different nomenclature for their programs. You can find detailed listings on individual GPO websites. To access or utilize these or other services, contact your GPO account representative. They will arrange communication with the appropriate personnel to discuss accessing the service requested.

GPOs continue to unite supply chain experts and providers to share best practices, create beneficial communities of knowledge and offer new models to help members reduce spending and increase margins by aligning cost, quality and outcomes.

About the author: Skip Carlson is an accomplished medical sales, marketing, leadership, training and education support expert with 43+ years progressive performance in the medical industry, including hospital management, medical device manufacturing, revenue cycle management, staff development and assessment, sales training and distance learning.


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