In today’s highly competitive healthcare landscape, hospitals and health systems are understandably looking for any opportunity to lower costs.


Group Purchasing Organizations are one of many tools health systems can utilize to lower procurement costs and overall expenses.


The entities received a boost in 1986 with an endorsement from the U.S. Congress, recognizing GPOs as a powerful resource to create competition and lower costs in the medical supply market.


In the decades since, GPOs have become big business in the healthcare industry with more than 70 percent of medical supplies being procured through their contracts, creatinglarge savings opportunities for hospitals and health systems.


A 2018 cost savings analysis prepared for the Healthcare Supply Chain Association found GPOs save the healthcare industry an estimated $34.1 billion each year, a majority seen in hospitals and senior care facilities.


The study found a large portion of annual savings related to supplies with GPOs cutting costs for supply purchasing by as much as 13 percent or more.


Those savings can up add quickly when one considers supply costs make up about 15 percent of hospital expenses on average, according to a 2019 hospital supply study, while some surgery-intensive hospitals can spend as much 30 or 40 percent on supplies.


Utilizing a GPO can help reduce costs on many of the supplies and services imperative to running a hospital or healthcare facility. These can include food supplies such as meats, dairy, vegetables and fruits; janitorial supplies, paper goods and disposable items. Additionally, GPOs may offerdiscounted rates forvalue-added operating services such as travel, rental, equipment repair, temp labor, and a range of medical supplies for patient care through their own internal supplier partnerships.


That is why it is important to have a deep understanding of the relationship with your organization’s GPO and the savings you are either receiving or potentially missing out on.


As a healthcare consultant,I have worked with many hospitals and organizations throughout many yearsto find the best GPO partners and contracts to meet their needs. One of the first questions I ask my clients is “When was the last time you looked at your GPO and their pricing?”


It’s a good rule of thumb to review your GPO agreements every three to five years to re-evaluate what the company is doing for your organization. It is imperative that your GPO is offering a flexible program that is tailored to meets organization’s goals.


Consider the overall value you are receiving: Your organization might pay a fee to be a member of that GPO, but is the value appropriatein comparison to the costs you are paying? Couldyour hospital be missing out on valuable incentivesor rebates?


For those healthcare systems which serve as regional leaders, operating several facilities in different markets, there may be opportunities to act as your own GPO and leverage economies of scale to lower purchasing costs across the board.


At the KESTGO Group, our expert teams can visit with an organization, evaluate the existing GPO relationships in place and look for opportunities for cost-savings on supportive services. We can tailor a program to best suit your organization’s purchasing needs and financial goals.


It is our expertise which helps clients determine if they are getting what they were promised by their GPO partners. We recommend healthcare organizations take a deeper look at what they are getting from their GPOs and KESTGO is here to help ease that process.


Equally as important as procuring competitive pricing on supplies is maximizing operational efficiencies on those goods once they come through the door.


A GPO can help you find the best prices on chicken or produce, but it’s crucial to have the tested production guidance to make sure you are optimizing every dollar from those products in your hospital. It’s not only vital to get a great price on food, but it’s just as imperative to make sure you aren’t wasting it in the kitchen.


KESTGO’s consultants can help guide healthcare organizations by sharing expertise and resources to help maximize operational efficiencies and ensure the best value for procurement of goods and services throughout your facilities.


As the marketplace constantly evolves,there are always new opportunities for cost savings on the horizon.


In the last several years, we have seen new trends in the GPO landscape as organizations pull away from national entities,creating agreements among a smaller number of hospitals to commit a high percentage (as much as 85 percent) of purchases through regional GPOs, which are able to obtain lower prices than their national counterparts.


Additionally, arecent study by the Supply Chain Association found that overall hospitals saw as much as 17 percent savings through utilizing GPO contracts across three major supply categories: Medical-surgical, pharmaceuticals and laboratory.


While the percentage of hospitals with compliance levels of 60 percent or more was highest for commodity items (89.1%) and pharmaceuticals (84.9%), but much lower for PPIs (32.4%) and capital equipment (19.9%), representing an opportunity for potential future savings, according to the study.


By creating a GPO partnership that best suits a healthcare system’s needs, or even taking the path of creating a regional GPO or partnering with other organizations, there exist many pathways to reduce overall costs to the benefit of your bottom line.


From procurement to production and distribution, our expert team can help you navigate complicated contracts and partnerships to find the best GPO program,one tailor-made to maximize cost-saving opportunities for your organization.


We will help you decide which contractor is best for your supply needs and develop an individual program to maximize your operational efficiencies so you can focus on what matters most – providing high-quality care to the communities you serve.