Healthcare reform is the talk of the town these days. Key to reforming our healthcare system is to reduce waste and eliminate excess cost. Group purchasing organizations (GPOs) are one solution currently in place that accomplishes this. Yet again, the value of GPOs has been proven through an independent study by Dr. Eugene S. Schneller, professor at Arizona State University and principal at Health Care Sector Advances Inc.
Dr. Schneller’s recently released report of 429 hospitals quantifies the savings realized in U.S healthcare expenditures through GPOs at an estimated “$36 billion annually in price savings and over $2 billion in savings associated with human resources uncommitted to the purchasing process.”
In a teleconference launching the report, Dr. Schneller said, "Though largely invisible to the healthcare consuming public, GPOs are key players in healthcare reform. They literally save the country tens of billions of dollars annually through the power of aggregated purchasing volume and negotiated discounts with manufacturers, distributors and vendors.”
At Aurora, I witnessed vendors that were not selected for a GPO contract return to offer us a better price. Had they followed the KISS principle and supplied the best price right off the bat, they wouldn’t be at risk of losing significant amounts of business across the members of the GPO. The purchasing power of the alliance is what gave us leverage to achieve much-needed savings.
More importantly, however, is that in addition to reduced costs, a GPO also drives suppliers to ethical behavior. I’ve found that those who despise GPOs are typically those who are taking the medical specialist out to a fancy dinner, a round of golf at Augusta National, or perhaps simply lining his pockets with cash. In return, the doctor is to buy products that are not demonstrably better than those which might be available at a lower price. GPOs strip vendors of this unethical relationship selling. Rather, now the supplier has a much bigger challenge: sell on true value and quality performance.