Group Purchasing Reduces Healthcare Supply Chain Costs by 13%

Group purchasing organizations (GPOs) are delivering critical cost-savings to providers, as well as increasing competition, transparency, and even emergency preparedness for events like COVID-19, according to a new report from the Healthcare Supply Chain Association (HSCA).

The third annual report from HSCA found that GPO members are projected to save the healthcare system $34.1 billion annually, with $456.6 billion in savings estimated from 2017 to 2026.

Hospitals, nursing homes, and other providers will share in those savings, as GPOs reduce healthcare supply-related purchasing costs by 13.1 percent. Those savings are compared to the supply expenses of providers who do not engage GPO services, the report stated.

“As the United States continues to address the spread of COVID-19, supporting healthcare providers and the patients they serve is more important than ever,” Khatereh Calleja, president and CEO of HSCA, stated in a press release. “GPOs are on the front lines of patient care, working with provider partners to deliver a safe and reliable supply of the best products at the best value.”

“This year’s HSCA Annual Value Report confirms what hospitals, healthcare providers, suppliers and policymakers see every day: GPOs support emergency response, reduce costs, enhance quality, increase competition, and drive transparency throughout the healthcare system.”

HSCA represents 13 of the leading GPOs in healthcare. The organizations help healthcare providers across the care continuum to realize supply chain savings and efficiencies through aggregate purchasing volume. With greater buying power, GPOs negotiate more favorable discounts with manufacturers, distributors, and vendors on behalf of their providers.

In this year’s report, HSCA reported that GPOs delivered cost-savings to their providers through up-front pricing discounts, reduced administrative costs, and product standardization. The reductions in supply-related expenses is projected to total $456.6 billion over the ten-year period from 2017 to 2016.

Hospitals and other providers are also overwhelmingly satisfied with their GPOs, HSCA stated.

The association pointed to research from the Wharton School of the University of Pennsylvania that found, despite slight declines in national GPO participation, 90 percent of all hospital executive respondents reported being satisfied or very satisfied with their national GPO. A majority also believed GPOs helped them achieve “demonstrable cost savings” and margin improvement.

The research from 2018 used surveys of hospital supply chain executives by the American Hospital Association (AHA) and the Association for Healthcare Resources & Material Management (AHRMM) to gauge GPO satisfaction levels.

Recognizing lower levels of participation, national GPOs have begun to offer non-price services to improve healthcare supply chain efficiencies.

In this year’s report, HSCA reported that those non-price services included drug utilization management, drug shortage prevention and mitigation, cybersecurity, value-based purchasing, healthcare-associated infections, and emergency preparedness.

The latter service will likely play a key role in the recent outbreak of COVID-19.

The US currently has the greatest number of confirmed cases of the novel coronavirus, with over 189,700 cases according to data from Johns Hopkins University at the time of publication. The sudden surge in cases has led to severe shortages of key healthcare supplies, including personal protective equipment and drugs like bronchodilators, albuterol, and chloroquine and hydroxychloroquine, which are antimalarial drugs and potential COVID-19 treatments.

The pandemic is shining a light on emergency preparedness – an area GPOs say they can help.

HSCA’s report found that GPOs helped members “prepare, respond and rebuild after public health threats and man-made or natural disasters.” The report also stated that GPOs can help providers with stockpiling for emergencies.

National GPOs are already responding to the current crisis. Vizient and Premier Inc. have both launched advocacy efforts to increase supply for hospitals and other providers on the frontline of the pandemic. Many GPOs are also providing COVID-19 information to members, giving them guidelines and recommendations on managing and conserving products.

“While cost-savings and delivering the best products at the best value remain central to the GPO core mission, hospitals and healthcare providers are increasingly relying on GPOs for a broad range of services beyond cost-savings to improve healthcare in US,” Calleja stated. “GPOs are committed to helping meet the needs of providers amidst challenges like COVID-19 and continuing to provide high quality care for patients.”