GPO MYTHS DEBUNKED

Do you have some concerns or presumptions about medical group purchasing organizations (GPOs)? We’re here to help you dispel those myths one by one.

A GPO is an organization that uses leverage to supplement existing procurement efforts in all aspects of the procurement process, from sourcing to supplier management and supplier collaboration. Let’s review some of the most common myths about GPO.

Myth #1: If GPOs are so great, why aren’t they more widely used? Why aren’t more healthcare facilities on board?

Actually, GPO participation may be higher than you realize, particularly in developed countries like the United States. It is currently estimated that up to 98 percent of hospitals in the United States use GPO contracts for purchasing1, and they benefit from savings that are greater than what they could achieve on their own.

The Middle East region has only recently begun to see the light of the GPO concept, with the launch of a couple GPOs, one of which is a leading GPO in the United Arab Emirates – Bridge Medical Group Purchasing Organization (BMGP), which launched in January 2022.

Myth #2: A GPO cannot meet my specific requirements

GPOs, in fact, operate within a flexible Framework that allows participants to reap the benefits of leverage while retaining the ability to negotiate adjustments and incorporate options that address specific needs. GPOs recognize the importance of adaptability. As a result, GPO members are fully involved in the design of supplier agreements.

Myth #3: A GPO will tie me down

Participants are not required to use a GPO in its entirety. Members take advantage of category offerings and other services based on their specific needs and where the greatest value can be generated.

Myth #4: We can save more money on our own in some categories

This point actually highlights a significant benefit of GPOs. When you work with the GPO, you choose which of the pre-negotiated agreements to participate in based on the available savings. There is no requirement that you participate in all or even the majority of the categories available. Assume you identify five categories out of 30 that are clear choices and five more where the savings are good but not as high. Moving all ten categories to the GPO will still make sense. This is due to the fact that, in addition to the hard savings, you are avoiding the time-consuming RFP and Sourcing processes and gaining the flexibility to influence other areas of spend and focus your efforts on strategic priorities.

Myth #5: GPOs are compensated through supplier rebates, but the amount is hidden from the customer

This is not correct. Most GPOs operate on administrative fees applied to gross sales, which are incorporated into member pricing. Participants can see the compensation.

Myth #6: GPOs might compete or replace suppliers & vendors

This is not correct. GPOs partner with suppliers & vendors to provide them with necessary tools & data that supports further distribution of their products. These debunked myths demonstrate that a GPO is a viable option for both short and long-term savings, and the benefits and flexibility it offers. As your healthcare facility transitions to lean purchasing, you should be ready to consider all options for sourcing, a GPO could potentially be your best option.
References:

  1. https://www.supplychainassociation.org/wp-content/uploads/2019/05/HSCA-Group-Purchasing-Organizations-Report-FINAL.pdf
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