GPO Healthcare or Healthcare Group Purchasing Organizations are a group of people, companies, or institutions that purchase a bulk order of a good or multiple goods. The aim is to minimize the total investment cost by placing a bulk order of medical supplies. The GPO regulates the demand and supply in the market while working as a single unit to achieve efficient results.
History of Healthcare GPOs
The Hospital Bureau of New York established the first-ever Healthcare GPO in the year 1910, but they did not achieve popularity until the 1970s. The first half of the twentieth century saw next to no growth in GPOs, and there were only ten healthcare GPOs active in the year 1962. The next decade was a little better and resulted in forty of such GPOs in the year 1974. However, this number had tripled by the end of the decade.
The US Congress finally granted GPOs in healthcare a Safe Harbor against federal anti-kickback statutes in 1986. Henceforth, the growth of healthcare GPOs in the USA began. By the year 2007, there existed hundreds of them, and almost every hospital was found to have at least one GPO membership.
What Does a Healthcare GPO Do?
A GPO that consists of healthcare professionals, institutions, or medical suppliers, etc., fundamentally serves the purpose of negotiating prices with suppliers, manufacturers, and distributors. A GPO works to build a relationship between its member hospitals or individuals and their suppliers. The main aim is to make sure that both ends benefit from the dealings and help keep the emphasis on patient care at the same time.
Not only helpful in securing a monetary profit, but Group Purchasing Organizations also help hospitals and care centers by empowering them and enabling them to be more proactive. They can alter their approach towards risk-based payments, population health, diversification, and other such initiatives for the better. The global pandemic is a fine example of the same.
GPOs have played an integral role in helping countries fight back widespread diseases. They helped healthcare providers to manage the supplies of essential commodities. Furthermore, they have also worked with the government and its organizations to help provide the required resources throughout several countries.
Healthcare GPOs keep pace with the shifts and developments in the market and optimize the supply of the required commodities. In this way, they also reduce the possibility of facing a shortage of essential healthcare supplies since they work as a regulatory body.
Another contribution of healthcare Group Purchasing Organizations is that they act as data banks. Different members of the GPO, be it individuals or institutions, have their own set of data related to healthcare and its challenges. Through a GPO, data can be collected in one place from various sources and, in turn, analyzed. The analysis could prove to be helpful in treatments and early recognition of contagious ailments.
For the near future, the healthcare industry and GPO leaders predict a digital expansion for healthcare Group Purchasing Organizations. The digital market is not restricted to any geographical constraints, and anyone can access them from anywhere at any time. Furthermore, it is a faster and more efficient system of tracking demand and supply. The system proved to be especially useful when dealing with the pandemic, which has boosted its growth.
The pandemic has brought the vulnerabilities of the healthcare system and healthcare GPOs to light. Knowing about these vulnerabilities will enable them to learn and rectify past mistakes. The result will be a more efficient system.
Although there is a lot more to healthcare GPOs than negotiating and getting lower prices, it is their most popular and appreciated function. The Healthcare Supply Chain Association has conducted studies that reveal instances where people have saved millions of dollars because of the ability of GPOs to regulate price disparities. GPOs can recognize the differences in products that have an equivalent function and help the buyers choose the most cost-efficient alternative.
In the USA, the HSCA represents the nation’s leading healthcare GPOs. The HSCA has reported that these Group Purchasing Organizations help the healthcare industry save up to USD 34.1 billion annually. The report also mentions that GPOs can predictably reduce healthcare spending by up to USD 456.6 billion in the coming decade.
An Overview of the Healthcare GPO Marketing Industry
The Office of the Inspector General (OIG) and the General Accounting Office (GAO) are regulating agencies whose guidelines Group Purchasing Organizations have to adhere to. The agencies keep watch on the Healthcare GPO Market Sector and hold GPOs accountable.
There also exist other such agencies since the USA has over 600 functional GPOs, and maintaining an insight on their operations is important for the government. GPOs are healthcare reform and growth organizations.
These organizations support acquisition or product sourcing to assist hospitals, healthcare centers, and other medical service providers in diminishing expenses and enhance the patient experience. In addition to this, new market dynamics have emerged recently, and cloud-based e-commerce marketplaces have earned prominent recognition for easy goods and commodity purchases.
In addition, GPOs are self-disrupting and innovative enterprises and mostly present advanced and convenient online marketplaces to their clients. The value that GPOs present to their clients past a figure in a list is what enables them to distinguish themselves in an extremely aggressive marketplace.
GPOs embrace and promote a competing environment as it enhances effectiveness and intensifies usefulness to the patients and healthcare providers they assist. GPOs have been in existence for more than 100 years. They flourished by continually proposing and innovating unique models, competing healthily with other competing businesses, and emerging to satisfy client requirements.
The Essential Points to Understand About the Role of GPOs in the Healthcare Supply Chain
The discussion over how to cut down the skyrocketing expenses of healthcare has been a prominent topic in the public policy debate. Since healthcare GPOs play an indispensable part in the medical supply chain, questions have started to emerge about whether they work competitively and how they can reduce the costs of healthcare.
In the year 1980, the US Congress approved GPOs as a great force that presents competition and reduced rates in the medical supply business. It was further asserted that GPOs hold the potential to reduce the expenses in healthcare for both the private and government sector in a similar manner.
However, in recent times, the cost-savings advantages associated with GPOs have again been the subject of certain discussion. This discussion was primarily focused on whether GPOs can actually get the most economical rates for their members and whether the contracting methods of GPO shut out some vendors. Mentioned below are some of the key points that will make you understand the role of GPOs in the Healthcare Supply Chain.
- GPOs procure and bargain on the rates for products and services
GPOs assist in procuring and bargaining on the rates of medical pieces of equipment, therapeutic drugs, along other healthcare products and services on behalf of medical service providers.
These services further comprise nursing homes, hospitals, ambulance care facilities, doctor practices, and residence health companies. Usually, GPOs are controlled by their provider members, and these members never take the rights or ownership of the products and services. Instead, the primary goal of GPOs is to enhance the effectiveness and productivity of the healthcare industry.
GPOs have further endeavored to distinguish themselves by extending a variety of supplementary assistance to healthcare providers. An example of this can be data analytics that is used to decrease costs and enhance operations.
- GPOs assist in saving funds for patients and healthcare providers
GPOs decrease the expenses essentially with the help of two mechanisms. These mechanisms comprise more inexpensive transaction charges and lower expenses with the help of collective negotiation.
The healthcare supply procurement or purchase process is complicated and further involves hundreds of thousands of vendors marketing millions of pharmaceutical products, medicinal instruments, and services to medical service providers.
In addition, economics research that was conducted recently has identified numerous ways by which collective purchasing or procuring can generate more economical rates than customers can get on their own.
This research has further indicated that healthcare providers accomplish cost savings of around 10 percent to 18 percent by employing GPOs, pertinent to the costs providers would have received if they bargained the rates on their own. All of this can result in healthcare providers levying lesser rates to their patients.
- GPOs work in an extremely competitive acquisition market
The GPO market is functioning as an extremely unconcentrated and competitive market. Healthcare providers can now pick from various GPOs and can concurrently handle various GPOs at the same time. In addition, healthcare providers usually maintain and regulate their GPOs and present them with robust incentives to obtain lower prices.
The demand for acquisition and purchase services administered by GPOs is fragmented, with around five national GPOs and numerous smaller players that work at the local or regional level along with some providers who self-supply products and services with additional GPO assistance.
The contemporary emergence of local GPOs has additionally intensified the competition, and this is why GPOs are constantly competing in this industry by offering reduced rates that are eventually relished by healthcare providers.
The Pros and Cons for Healthcare Organizations of Using GPO Healthcare
While there are many advantages to hospitals using GPO healthcare, there are some drawbacks as well. Mentioned below are some of the pros and cons for hospitals using GPO Healthcare.
- A GPO can assist you in driving your products and services cost down. The main reason for this reduced cost is the bargaining that these organizations perform with suppliers to obtain the most favorable prices.
- Joining a GPO can present the healthcare industry access to new medical products or innovative services which may not be feasible to obtain on your own.
- Purchasing your healthcare facilities through a GPO saves you a lot of time. It demands a lot of time for hospitals to examine distinct suppliers and obtain the most commendatory prices. Rather, a GPO operates for you so that you spend less time hunting for the most suitable deals.
- Adopting a GPO further assists in the effective sourcing of healthcare products and services. This is particularly beneficial in the event of a healthcare supply scare or other crisis.
- Some GPOs might hold rigid shipping schedules for healthcare product supplies. As a result, healthcare service providers might have to ask for bulk orders to save their time which might not be required at the moment.
Transformations Within the GPO Industry
The GPO industry is encountering vital transformations. Consolidation in the industry is subduing wide-based competition amongst them. Specialized or regionalized GPOs have been developed, concentrating on particular divisions of healthcare along with the products and services needed under them.
Pharmaceutical vendors, distributors, and wholesalers outfitted with highly advanced contract and inventory administration software or Information Technology systems have identified these niche possibilities as well and are engaging in them either directly or with the assistance of GPO contract settlements.
In the next few decades, cloud-based financial portals or e-commerce enterprise models will present themselves willingly to healthcare goods and service purchasing, honest pricing, re-ordering, and other characteristics which can either promote or rival the traditional GPO enterprise model.are