How Can GPOs and Healthcare Providers Save Money? (Part 1)

Spend Matters would like to welcome Bill King to Spend Matters this morning. Bill is Manager-Healthcare at BravoSolution. He has over thirteen years of experience in healthcare, most spent working for one of the largest GPOs. He has a great deal of hands-on experience that includes IT, contract management, contract development, contract administration, contract process and technology, contract negotiations and supply chain data management.

You've probably heard the expression We all have to work together many, many times this year, and it is truly the catch phrase for healthcare providers these days. Everyone has had to dig deep into their pockets to find additional cash and lower expenses, cut costs and uncover unconventional ways to save money. No one in the healthcare supply chain is exempt. The economy has played a major role in this belt tightening, but there are still ways that healthcare providers can overcome the seemingly dreadful forecasts that lie before them.

Change is inevitable, and we all know that. The key to surviving the healthcare economic crisis is how well you have positioned your organization. Some healthcare providers have approached the challenge by partnering with group purchasing organizations (GPOs), while others are adopting new strategies that may or may not include a GPO relationship. Some have had major successes working with GPOs, while others struggle to realize their value. Why do some healthcare providers benefit from the GPO relationship while others don't? The answer seems easy, but is actually surprisingly complex.

Each GPO is unique and has its own strengths. The key then, is to leverage your relationship with your GPO so you can realize actual, measurable savings. By partnering with the right GPO, you can use their strengths and resources to assist your organization and provide much needed savings. If, however, you are not partnered with the right GPO, you could be in for continuous struggles. If you do not have a relationship with a GPO, you might want to consider the possibilities of a successful GPO relationship before completely discounting that option for your organization.

What are some of the differentiating characteristics of an outstanding GPO relationship, and how can a GPO clearly identify savings for your organization? The answers to these questions may sound simple, but some aspects of the relationship are not easy to measure.

  • Sourcing and Procurement: At the top of the list are GPO sourcing and procurement processes. They offer the easiest tests to determine if they can offer you savings, and is relatively easy to measure. It's essential that a GPO offers sound procurement practices while delivering contracts that healthcare providers will utilize.
  • Service Line Standardization & Private Label Programs: While technically these two programs fall under sourcing and procurement, they are separated here because they offer the potential for huge savings. Any time you standardize your product line and buy from the GPO's private label programs, you are sure to find significant savings in the majority of categories they offer.
  • Technology: Technology is a critical factor in a successful GPO relationship. It can be a differentiating service that helps healthcare providers accomplish real savings. Technology includes tools such as an online catalog, tracking price eligibility, local and national contract visibility, education, revenue management and capital planning and budgeting, to name just a few.
  • Identification of Opportunities: One area that can't be overlooked is how well the GPO can identify savings opportunities for your organization. Whether it's tracking and comparing labor supply costs, assistance on service programs, analyzing supply cost expenses or identifying diverse suppliers to help public providers meet necessary spending, the differentiating GPO can provide these opportunities and much more.
  • Understanding of the Healthcare Industry: Healthcare is very different from other industries. It is unique because not all decisions can be made based on cost alone. The GPO will understand this, and put a great emphasis on selecting the right supplier to deliver positive patient outcomes. It should be clear that costs are absolutely important but cannot be sacrificed at the expense of an inferior product. Saving a few pennies today could cost you much more later if you have to replace deficient materials.
  • Spend Analytics: With spend data flowing at unheard of speeds just a few years ago, it is critical that the GPO delivers a superior analytics solution. These solutions can provide your organization with the means to instantly (and not insignificantly) cut healthcare costs. A good analytical tool offers item standards, clinical benchmarking, dashboards for easy use, savings analysis and product utilization reports.

In the next installment of this series, we'll continue the discussion on how GPOs and healthcare providers can help your company to save on their healthcare spend.

- Bill King

Spend Matters would like to thank Bill King and BravoSolution for his contribution. In the meantime, you can sign up for BravoSolution's new monthly healthcare newsletter here. "Healthcare Solutions Monthly" delivers articles, hot topics, best practices, and solution ideas to help companies save on healthcare spend.

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