How Can GPOs and Healthcare Providers Save Money? (Part 2)

Spend Matters welcomes back Bill King, with the sequel to his previous post.

When it comes to GPO best practices to save money, what should you look for? One area in which a GPO can assist you the most is sourcing. There is trained staff to do contract category bids, negotiate good terms and conditions and communicate the details of new agreements to your organization. But what happens if you do not have a GPO relationship? You can still realize significant savings, provided you have the right expertise and tools to assist you. With proper planning, whether you have a GPO relationship or not, sourcing is one of the main areas you can realize significant savings.

Best Sourcing Practices

When you conduct a sourcing event, you should use proven practices for the bid process. A few are listed below:

  • Identify what you buy and how much of it you buy.
  • Select product categories where you can have an influence on purchasing decisions.
  • Set priorities to determine which categories are to bid first.
  • Identify which suppliers to invite to the bid.
  • Invite the suppliers to the sourcing event.
  • Build an RFP that will score the supplier responses fairly.
  • Distribute the RFP to the appropriate suppliers.
  • Conduct contract negotiations before the award.
  • Determine the low-best award by factoring non-financial and financial data.
  • Award the contract to the appropriate suppliers and notify all suppliers of your decision.
  • Communicate to all the purchasing staff the details and requirements of the new contract.
  • Start purchasing off the new contract using the necessary manufacturer or distributor product codes.

Contract Utilization & Compliance

A contract will not reach its full savings potential until you standardize your purchasing towards it. This could be committing volume to reach a higher tier or simply updating all the materials management systems to include the new codes. A recent Modern Healthcare article stated that "good" hospitals on average purchase only 20 percent of their products through contracts. That is a shockingly small number and can easily account for considerable lost savings for healthcare providers. Locally negotiated contracts may close this gap some, but not to the degree necessary in today's economic setting.

If you want to drive significant savings with your sourcing event, contract compliance is crucial. When manufacturers realize that you deliver results, future negotiations over price will definitely benefit your organization.


A number of healthcare providers are starting to see the enormous benefits of teaming with other, non-related healthcare providers to aggregate their volume. This appears to be a national trend, and for good reason. This "virtual network" can control their commitment and receive much better pricing than they would if they completely on their own.

Capital Group Buys

National Group Buys offer another way to realize substantial savings. GPOs typically have a lot of experience in this area, but you can also do this on your own. You will need to identify other healthcare facilities with similar needs. Once you combine the volume of the multiple facilities, significant savings on capital related products can be achieved.

Custom Contract Solutions

While GPOs offer custom solutions for their larger members, smaller providers and ones without a GPO relationship can also benefit from custom contract solutions. The key is finding the right resource that can negotiate either additional savings over and above the current contract or add new suppliers that offer additional savings to your organization.

Being partnered with the "right" GPO can offer significant benefits and savings to providers. They offer excellent contracts at competitive prices, programs geared toward saving its members money, understand your specific needs while offering you tools that have proven to provide savings.

Whether or not you have a GPO association, a good sourcing strategy is essential. The superior GPO will have plenty of expertise and save you a tremendous amount of time and resources. In addition, you can look for tools and solutions to use on your own that complement savings best practices from GPOs. If you're curious to learn more about the opportunity, 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.

Spend Matters would like to thank BravoSolution's Bill King for his contribution on this important topic.

- Bill King

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