4 Important Considerations When Choosing a GPO

Have you ever heard of GPOs? You first need to know that working with a GPO can help your business grow and reduce operating costs. The second thing you need to know is that a GPO will help you implement supply chain best and leading practices that help improve your operational and financial performance. The third thing is that group purchasing allows you to leverage aggregated purchasing volumes and access contracted equipment, products, and services at better pricing than you typically would be able to get on your own. Did I mention that GPOs already did the heavy lifting of vetting vendors and negotiating the contract?

A GPO has the power to enhance your business operations and performance through the many GPO products and services they offer. While at it, you must know that GPO stands for “Group Purchase Organization.” When you need good solid value-based contracts and vetted vendors, leave it to a GPO because they bring speed to value.

Here’s a post that unravels the four essential considerations when choosing a GPO. Also, we will cover a little something you need to know about a medical group purchasing organization.

The Different Types of Group Purchasing Organizations

While GPOs can come in many sizes and flavors, there are basically two different types of GPOs. As you move forward, allow us to explain each.

  1. Vertical Market GPO – A Vertical Market GPO focuses on one specific industry or a single vertical market. This includes medical & healthcare, food service, construction, hospitality, and automotive industries. It allows you to buy items requiredforyour enterprise at a discounted price.
  2. Horizontal Market GPO – Horizontal GPO members exist in different industries but purchase similar equipment, products, and services used in different industries. It frees up time for organizations to focus on more strategic spend areas. Examples include Office Equipment, Services, & Supplies, Environmental Equipment, Services, & Supplies, MRO & Facility Management Equipment, Services, & Supplies, and Information Technology Equipment, Services, & Supplies, & Safety Equipment, Services, & Supplies, & Staffing & Recruiting Services.

The 4 Considerations When Choosing a GPO

#1 Transparency

Look for a GPO that offers Transparency regarding its membership, fees, contracts, pricing methodologies, and how they provide value to their members. Check out their vendor partners, membership requirements, and purchasing expectations. You need to know how everything works up front before becoming a member. Surprises are not pleasant, so look for clarity.

#2 The Right Kind

Check to see if you have a GPO for your specific industry. If not, look at GPOs available in your area, as there may be regional GPOs that can provide value in many areas, even if they are not specific to your industry. Chances are there are a couple of GPOs that focus specifically on your industry and offer a full range of GPO products and services.

GPOs are not just about providing group discounts on supplies. GPOs offer many products and services, such as continuing education, staff training & professional development, capital planning, custom contracting, advisory services, special financing, and more. You want a GPO who will partner with you, and you can partner with, to help you with implementing supply chain best and leading practices and to be an advisor and advocate. There are a number of ways a GPO may help you reduce costs and improve operations and performance. Make sure they provide you with a comprehensive strategy, plan, and road map on how they plan to deliver value.

#3 Understand their contracting model

Check out your GPO’s contracting model and compare it with others. There are multiple GPOs in the market, and their contracting models can vary. Some GPOs may offer you only a single contract in a specific product category, while others provide a more extensive selection of vendors and manufacturers depending on the product category. Look at their contract portfolio to ensure that contracts cover the product and service areas you need. Ask about their sustainability and resiliency strategies related to their contacts. How do they select and vet the vendors they have on contact? Do they use vendor scorecards to track and trend vendor performance? What contracting KPIs do they use? Are there contract terms and conditions that may create issues for you, such as payment terms, authorized unilateral price adjustments, penalties, and fees? Are there mandatory contract participation or spend volume requirements? Their responses will also show how transparent the GPO is with its members.

#4 Run an In-depth Analysis

Run a deep analysis of the associated costs and organizational compatibility or fit. You need to know the value position the GPO provides and if its culture and philosophy are a good fit. Ask about Membership requirements, value-added services, and value-based programs. Ask if they do a comprehensive spend analysis which is essential to assess the GPO’s capability to help you manage costs and drive saving initiatives. Be prepared to share your spend data (Item Master, Purchase History, & A/P Spend Report). Remember, Transparency is a two-way street; both parties need to share sensitive data and information to assess if the GPO has the capabilities you need to be a good strategic business partner and to help quantify the potential ROI that shows the value of this strategic business decision. What advisory services are available, and do they offer customized services? Develop a GPO scoring matrix to identify meaningful, relevant criteria for comparing different GPO and their products and services. It is important to do your due diligence and choose a GPO that can provide value today and in the future. Partnering with a good GPO is a prudent, strategic business decision that will serve you well for many years and help your organization improve its operational and financial performance.

GPOs in the Medical Industry

The cost of healthcare has risen considerably over the years, and its projected year-over-year growth is unsustainable in the long term. GPOs help in sourcing and negotiating costs for medical devices, drugs, and various products and services on behalf of healthcare providers, nursing homes, hospitals, and so on. The central purpose of a GPO is to reduce costs and improve operational and financial performance. They can help you with industry cost containment efforts and help minimize their impact on your financial performance.

A GPO also works to build relationships between its members and its vendor partners. The objective is to ensure members and vendors benefit from the GPO relationship, agreements, and GPO products and services (Win-Win-Win).

Healthcare GPOs always keep pace with the latest market developments and shifts. That’s not all!

GPOs are here to help you succeed. GPOs have played a crucial role in helping their members fight against several disease outbreaks and natural disasters (Eboli, Flue, & COVID, Hurricanes, Earthquakes, Floods & Fires). They were mission-essential in assisting hospitals to source and secure ventilators, PPE, and other critical products in short supply. They helped set up field hospitals, established and managed supply chain functions, and assisted in developing COVID patient treatment and management protocols. They provide a unique perspective on healthcare and a number of related issues to their members, vendor partners, various professional organizations, and federal, state, and local governments (Key industry stakeholders). Contact us, and let us show you how we can help.

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