Healthcare Spotlight: Group Purchasing Organizations
If you are in the healthcare industry and are involved in the purchasing process, odds are you have heard of a GPO. Group Purchasing Organizations are entities used to leverage the purchasing power of a group of businesses to provide the best prices to their clients.
The first healthcare GPO was created in the early 1900s to assist in a New York hospital system's buying needs. Since then, many GPO companies have formed to assist in promoting quality healthcare relief and help diverse providers in effectively managing expenses. How it works is that a GPO aggregates the volume of purchasing power and needs from the various members of its group and develops contracts with suppliers so that they may buy at a group price to receive a discount. Essentially, GPOs try to adapt the concept of a bargain club to the medical industry: fronting the capital to induce bulk purchasing and ordering for users.
These companies are able to make their money by charging their clients "administrative" fees, which may be an upfront payment for membership to the GPO, or may come as a percentage fee for sales volume from the vendors. GPOs brand their services as a company that allows for improved operating margins for healthcare providers, along with value added benefits like supply chain support, benchmarking data, and compiled portfolios of products and services needed to address a specific healthcare system's needs.
An article was just released in February detailing the 3 largest GPOs in the United States for 2017:
1) Vizient based out of Irving, Texas spends about $100B annually. The organization serves a membership consisting of roughly half of the entire nation's acute care providers. They also serve about 20% of the ambulatory market in the US.
2) Premier, locaed in Charlotte, N.C., spends more than $50B annually and has a membership of 3,750 hospitals (accounting for 76% of U.S. community hospitals) and more that 130,000 smaller provider organizations. They also offer integrated data/analytics and supply chain solutions to their members. Premier has also created performance improvement collaboratives, where hundreds of hospitals can join forces and attend workshops that are focused on improving patient care.
3) HealthTrust (Nashville, Tenn.) has a $30 billion annual spend volume and have members that include 1,600 hospitals and more than 26,000 non-acute care sites in the U.S. as well as the U.K. HealthTrust prides itself on offering the industry's only national committed model GPO, as well as their subsidiary, HealthTrust Workforce Solutions, which is the largest provider of vendor-neautral, healthcare labor manager services program solutions in all of North America.
