Major changes in the healthcare industry brought about by Washington have put an increased emphasis on cost cutting. In order to cut costs, healthcare organizations are looking at their supply chains to determine if any changes can be made to reduce spending without sacrificing quality.

Group Purchasing Organizations, or "GPO's", have been around since the early 1900's to provide the healthcare industry with cost savings on those purchases made by hospitals, nursing homes, and other healthcare organizations. They work with healthcare professionals to select the suppliers and materials required for their facilities and then use purchasing volumes to negotiate pricing and discounts. With these established rates and discounts the GPO's create contracts with the suppliers for use by the hospitals working with them. They do not specifically make the purchases for hospitals; they simply establish the contracts that are then utilized by healthcare providers to meet their own purchasing needs.

While GPO's have been popular in the healthcare purchasing market, there are certain objections to this type of service. One of the biggest criticisms of GPO's is their emphasis on cost reduction through volume-based purchases, rather than looking at overall value. Another objection says that GPO's don't assist hospitals in controlling supplier's invoices by establishing reporting guidelines, which opens the door for overcharging on invoices.

Consultants can provide purchasing services for healthcare providers and help to alleviate the concerns GPO's raise. Consultants work with individual healthcare organizations and their procurement departments to develop a solution, manage budgets, and deliver value. Following procedures similar to GPO's, consultants work with healthcare providers to determine the materials required for the organization and then contract with the suppliers that are able to deliver the best valued products for that organization.

Unlike GPO's, consulting firms frequently have best practices in invoicing requirements, which can be implemented with healthcare organizations for better visibility into spending. Consulting firms are focused on achieving cost savings and value for their specific client. This means that their focus is not on achieving discounts through large-volume purchases, but on finding the best market price for the products required by their client.

Consultants are able to leverage best practices, cross-industry expertise, and previous work experience to develop recommendations and solutions that best fit the client's needs. As an added bonus, consultants also have the ability to work with GPO's and assist in navigating the contracts and tools they have to offer. Therefore, organizations are able to continue working with GPO's, but with the added benefits from consulting services.

Source One has worked with a number of healthcare organizations to optimize purchasing budgets, as well as other GPO's on clients' behalf. To learn more about our healthcare procurement services check out our website!

Image courtesy of: TransactRx
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Megan Connell

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