I’m sure you have often heard the saying, “If you only have a hammer, you tend to see every problem as a nail.” I think this quote is analogous to group purchasing. If you only focus on group purchasing, you tend to forget there are other even better sources of supply expense savings. This is especially important now that group purchasing organizations are losing their ability to generate new price savings on the current products, services, and technologies you are buying through them. In essence, GPOs are pretty much treading water! That’s why many healthcare organizations are changing their GPOs with the hope they can keep their price savings flowing.
Changing Your GPO Isn’t the Answer
As mentioned, we are seeing more and more healthcare organizations changing their GPOs to obtain a one-time savings in the range of one percent. However, to obtain this savings these same healthcare organizations need to endure the horrific process of evaluating and then implementing hundreds of new contracts to obtain the promised one percent savings. This conversion process can take eight to 12 months to be complete before a hospital, system, or IDN see even one dollar in savings. Not to mention the disruption these changes cause their nursing and administrative staff. That’s why changing your GPO isn’t the answer!
Thinking Beyond Group Purchasing
Don’t get us wrong. We here at SVAH are champions of group purchasing! Yet, we don’t see GPOs as the only answer to reducing and then controlling your supply expenses, especially now that they are running out of price savings. We see a better answer to this challenge of reducing non-salary expenses is to attack your Savings Beyond Price™ (supply utilization management, standardization optimization, lifecycle cost analysis, etc.) that can yield a healthcare organization seven to 15% annually in supply chain expense savings, almost overnight. I guarantee you that your return-on-investment will be much better than any change you might be considering with any and all new group purchasing organizations.
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