Healthcare facilities are usually shocked when we tell them expenses for supplies could be as much as 28 percent lower just by taking better advantage of GPO (Group Purchasing Organization) contracts. They thought they were getting full advantage of their GPO just by signing up. But in fact, it’s like signing up for a gym. Look at these two guys pictured below. Both of them have a gym membership, but only one of them is taking advantage of it.
Looking like the guy on the right takes dedication and persistence. The same could be said about your need to work all the angles at your GPO. Many of our new healthcare facilities are like the guy on the left: they failed to access key GPO benefits and ended up with a scrawny bottom line. To make sure this does not happen to you, here are 10 action steps to help boost your GPO savings.
1. Get to know your GPO rep.
It’s surprising how many of our new healthcare facilities don’t even know their GPO representative. The reps’ ability to help you is worth their weight in gold. But they may not actually do it because they tend to be spread very thin. So you need to reach out to them. Just spending a small amount of time with your GPO rep will give you a great return on investment, something in the order of tens of thousands of dollars of ROI per hour. Schedule a review of your organization’s account with your rep at least twice a year.
2. Make sure your GPO and distributor work together.
You’ll save a lot of money if you can persuade the reps from your GPO and from your distributor to work together on your behalf. Before contracted GPO prices can take effect, the distributor rep has to load them into your account. If the distributor rep fails to do this, your facility will realize no savings. They are very busy people and may forget. You need to directly contact each distributor about each contracted price.
3. Closely follow vendor contract expirations.
Vendor contracts with GPOs typically last only three years. So even if you get your distributor rep to link your organization to a wonderful suture contract, it may turn out that the contract expires next week, and those great savings will evaporate. GPOs rarely alert you when contracts are about to expire, so unless someone in your organization is proactively monitoring expirations, that great suture price you obtained may suddenly double. Following up after the fact is not a good alternative, because it can take weeks to renew the contract and get your great price back again. Facilities that are too busy to keep track of contract expirations often designate outside consultants to do the work.
4. Be aware of unusual GPO contracts.
In addition to getting discounts on medical/surgical supplies and pharmaceuticals, GPOs also offer money-saving contracts on a variety of other products and services that you might not even be aware of. These categories include food distribution, janitorial supplies, shipping, capital equipment, office furniture, medical gases, bio-medical waste, wireless phone service, transcription, office supplies, lab services, builders, car rental and computers. Explore these extra ways to save money, because they could substantially boost your bottom line.
5. Make sure your GPO matches your specialty.
Work backward when choosing a GPO, starting with the items on which you spend the most money. Find out which GPO offers the biggest discounts for those items. Each GPO tens to have a “sweet spot” of very low prices for certain specific purchases. Aggressive GPO pricing may cover whole areas, such as surgery, pharmaceuticals or GI, or it can be more specific, such as an unusually good contract price for propofol. Choose the company that offers the best value for the products you use the most.
6. Link to as many contracts as possible.
This sounds like a no-brainer, but most facilities fail to link to all the contracts available through their GPOs. In fact, we often encounter new healthcare facilities that have accessed only a few contracts or, in some cases, no contracts at all. GPOs may not bring this problem to your attention. They do not have the manpower to proactively analyze every line item of expense for available contracts. Our company, however, does this routinely.
7. Set your sights as high as possible.
The higher your purchase volume, the more aggressive your pricing tier can be, but it is up to you to ask for that tier. You may be accessing several vendor contracts at base-tier pricing when you could be accessing a more aggressive tier. If you are waiting for your GPO to suggest a higher tier, you could be waiting a very long time.
8. Focus on high-volume products
Even a small facility may purchase thousands of line items. You could spend every waking hour reviewing prices for each of these products. To conserve your energy, focus on the highest-volume products. Remember the 80/20 rule: 20 percent of your supplies account for something like 80 percent of spending. Focus on these items with your GPO and medical distributor. Once you are done examining the top 20 percent, then, by all means, start scrutinizing items with lower annual spends.
9. Review purchases of non-GPO products.
You should be regularly reviewing your purchases of products outside your GPO contracts to determine whether any of them could be substituted with a similar product on your GPO contract.
10. Use the training offered by GPOs.
As GPO policies can be complex and confusing, take advantage of the educational programs that GPOs offer. These can include live events, online material and webinars. Make sure one or more people on staff follow these offerings. In addition to online offerings, some GPO live events roll out the red carpet in one-to-two day training at their headquarters. Some even offer free, weeklong educational conferences (travel and lodging not included).
The lesson is that GPO membership will require you to do some heavy lifting on a regular basis. You can’t just sign up and expect those well-toned muscles to develop. But if you put your mind to it, you’ll be able to realize some great ROI.
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