Jun 03

Group Purchasing Organizations in Health Care Industry

Across the healthcare industry over the last several decades, Group Purchasing Organizations have grown as a representative unit at hospitals, medical facilities and health care centers. What these organizations are able to do is create stronger buying power for their member providers.

Health care providers like nursing homes, hospitals, and health care agencies get into group purchasing organizations to help them save money by aggregating their buying volume, while gaining efficiencies to leverage negotiating power with manufacturers, distributors and other vendors. Over time, these groups can save enormous amounts of money on supplies and services they need to deliver the best patient care.

In the pharmacy industry, being part of a GPO can be a vital element to ensuring an independent pharmacy’s survival. By joining a GPO, a pharmacy can get better prices through group volume discounts in exchange membership fees. If your pharmacy handles 5,000-10,000 prescriptions a month, serving up a combination of generic and brand name medicines, then joining a GPO makes sound business sense.

Because of the growth of these groups, national associations now represent their interests of members and vendors. A few examples include the Physicians Alliance of America, Cardinal Health, Premier and others. In some cases, member hospitals actually are the owners of the Group Purchasing Organization. The members have incentives for delivering savings that are directly in line with helping hospitals afford what they need for delivering care.

Member hospitals range in bed sizes from 50‑bed hospitals to 1,000‑bed hospitals, and with that difference, buying power for the hospital would vary if they were to remain independent. A 50‑bed hospital would pay a lot more for supplies, services and goods. Group Purchasing Organizations give smaller members and hospital groups the same buying power as 1,000‑bed hospitals.

Smaller hospitals consolidate under a GPO. Today, the margin of hospitals in America that are just an independent entity is under two percent. They’re generally affiliated with one or more facilities, which can run from 2, 3, or up to 20 or 30 groups together. But hospitals do not buy everything they need through GPOs. Some hospitals buy up to a third of their supplies and goods from a manufacturers that’s outside of a GPO contract. That’s allowed under the conditions of the GPO organization’s agreement.

Overall, group purchasing organizations still offer hospitals the ability to lower their costs without diminishing patient care, primarily because of the economic value they bring to the healthcare marketplace.

Companies like ec2 Software Solutions work with pharmacies and hospitals in GPOs and use them to promote ongoing two-way communication between providers and individuals.It helps to delivers advanced technology products to more than 150 radiopharmacies and over 4,000 hospitals and clinics worldwide.