By Khatereh Calleja, J.D.
By Khatereh Calleja, J.D.
Hospitals and healthcare providers across the country are facing unparalleled financial pressures. Surging patient populations, rising hospital closures, shrinking budgets, and declining reimbursement rates mean healthcare providers must find ways to cut costs while enhancing the quality of the care they provide – a challenging task to accomplish in today’s volatile and unpredictable healthcare landscape.
As the sourcing and purchasing partners to virtually all of America’s 7,000+ hospitals, as well as the vast majority of the 68,000+ long-term care facilities, surgery centers, clinics, and other healthcare providers, healthcare group purchasing organizations (GPOs) play an important role in delivering cost-savings to the healthcare system.
GPOs leverage the purchasing power of healthcare providers to negotiate competitive prices for healthcare products and services, driving down costs and increasing innovation and competition in the healthcare system.
A new report underscores just how significant a role GPOs play in reducing healthcare costs for healthcare providers and taxpayers. Healthcare economists at Dobson DaVanzo & Associates analyzed the National Health Expenditure (NHE) data published by Centers for Medicare and Medicaid Services (CMS) along with data collected from a survey of healthcare providers that use GPO services, and reached the following conclusions about the value of GPOs to the U.S. healthcare system:
- GPOs save the entire healthcare system up to $34.1 billion annually and will save the healthcare industry $456.6 billion over the next ten years (2017-2026).
- GPOs reduce supply-related purchasing costs to hospitals and nursing homes by 13.1 percent compared to providers who do not use GPO services.
- GPOs generate $15.5 billion annually in Medicare and Medicaid cost-savings and will reduce Medicare and Medicaid spending by up to $206.4 billion over the next ten years.
These cost-savings help preserve physicians’ ability to effectively treat their patients and safeguard patient access to affordable healthcare.
Although delivering cost savings is a critical part of the GPO mission, it is not the only consideration. Rather, the goal of GPOs is to help providers source and purchase supplies that meet their unique needs and bring the best value to their operation. And according to the report, GPOs are successfully achieving that goal.
The report noted GPOs help improve quality of care by ensuring that hospitals and providers are delivered the appropriate supplies for each patient, making sure physicians have the products they need when they need them. GPOs also help with benchmarking, comparative analysis, electronic product tracking and emerging trends. These services help streamline the purchasing process, allowing providers to spend less time and money on logistics and more on their patients. The myriad benefits and services GPOs provide leads the report authors to conclude that “collectively, GPO services lead to increased efficiencies, better use of staff, and lower total costs.”
Cost containment is a systemwide challenge for healthcare stakeholders. And GPOs’ unique line of sight over the entire healthcare supply chain makes us distinctly situated to help our provider partners meet challenges head on. As the healthcare landscape continues to evolve, studies like the Dobson DaVanzo report and other industry surveys of provider purchasing executives suggest that hospitals, nursing homes and other healthcare providers will continue to turn to their GPO partners to deliver the best product at the best value.
Editor’s note: The Dobson DaVanzo report may be accessed at https://www.supplychainassociation.org/wp-content/uploads/2019/05/HSCA-Group-Purchasing-Organizations-Report-FINAL.pdf
Khatereh Calleja, J.D., is the president and CEO of Healthcare Supply Chain Association (HSCA).