February 15

3 Steps To A More Effective GPO Strategy


Everyone in supply chain circles has bought into the value of GPOs in reducing their healthcare organization’s supply chain expense savings. Yet, our studies have shown that you can have an even more effective GPO strategy by following these three steps:

A More Effective GPO Strategy

1. Don’t Sign On To A New Or Renewal GPO Contract Until You Have Conducted A Value Analysis And Utilization Study. It’s been our clients’ experience to save up to 26% on a commodity group by performing a value analysis and utilization study prior to signing on to a new or renewal GPO contract. For example, instead of one of our clients automatically signing up for their GPO’s new wound care dressing contract, they decided to conduct a comprehensive value analysis and utilization study of this commodity group. The result of this VA & UM study was a cost optimization savings of $262,000 on this client’s wound care dressings. If this client just accepted their GPO contract as-is, they would have only saved 10% on this commodity group.

2. Include Your GPO’s Vendors (But Don’t Limit Other Bidders) In Your Bid/Negotiations For Your New Or Renewal Purchased Services Contracts. The best way we have found to obtain the lowest cost on purchased services contracts (PSC) is to include but not be limited to only your GPO’s vendors in your bid/negotiation of your (PSC) contracts. This is because your off-the-shelf GPO contracts are not customized to your customers’ exact requirements, nor are they the lowest cost option if you structure your PSC bids properly.

3. Perform A Functional Analysis On Your GPO Purchases To Lower Your Cost Of Goods Purchased. The theory behind the concept of functional analysis is that your customers don’t need everything they are specifying for their commodities you are purchasing for them. Once you have your customers justify the functions (primary, secondary, and aesthetic) they absolutely, positively require, you can re-specify their products, services, and technologies and save in the range of 29% to 76% annually.

Savings Beyond Price

GPOs can be quite effective in lowering your price at the pump by about one or two percent annually, but by employing the strategies we suggested above, you too, can save significantly more beyond price on your purchases without decreasing quality.

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GPO, GPO contract, healthcare organization, healthcare supply chain, Healthcare Value Analysis, hospital supply chain, Hospital Value Analysis, purchased service contracts, supply chain expense, supply chain expense savings, supply expenses, supply utilization, value analysis

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