Group purchasing in US healthcare saves up to 18% - Supply Management

Group purchasing in US healthcare saves up to 18%

21 July 2017

Group purchasing organisations (GPOs) in the US health sector produce savings of up to 18% for customers, according to a report.

The report by the Healthcare Supply Chain Association, Group Purchasing Organizations: How GPOs Reduce Healthcare Costs and Why Changing Their Funding Mechanism Would Raise Costs, said savings were due to lower transaction costs brought about by eliminating individual negotiations. GPOs’ ability to buy in bulk and negotiate lower prices than healthcare providers could individually obtain also contributed to savings.

The report said GPOs create a more competitive marketplace while negotiating prices for drugs and other medical products and services on behalf of healthcare providers.

Healthcare providers typically realise savings of between 10% and 18% on the cost of supplies purchased through GPOs, said the report.

Smaller hospitals, which have less purchasing weight than larger facilities, are particularly likely to benefit from GPOs and can pass on savings to patients, the report said.

Healthcare providers can source from multiple GPOs and still retain the right to procure supplies directly from suppliers, ensuring the market remains highly competitive.

“The current GPO funding model helps support competition and lower costs for providers, patients and taxpayers,” said the report.

“A healthcare provider would have no incentive to become a GPO member or choose to make purchases through a GPO if [its] strategies increased its costs or inefficiently reduced its supply choices.

“This incentive structure provides a strong basis to expect that GPOs reduce, rather than increase, providers’ costs.”

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