Are You Clear on Your GPO Strategy?

GPO stands for “group purchasing organization” and can be an important part of your supply chain strategy, however it shouldn’t be the only element to it.

It is critical for a hospital (or health system) to have their own independent spend strategy for all areas of their hospitals spend and that may include disrupting current marketplace norms.

A GPO strategy is only a part of (and in some cases not a part of at all, for example, if a hospital sources completely on their own) what a hospital’s overall spend strategy should include. Hospitals have an over-reliance on GPOs for their spend strategy.

When it comes to your GPO strategy, you also shouldn’t simply copy and paste somebody else’s. You need to create your own.

Let me give you an example.

If you look at the Fortune 500 and how they utilize group purchasing organizations, they utilize it as needed, but they still create their own supply chain strategy, which is very different in every organization. A GPO must provide line item savings to your organization, that’s fundamental. However, over the course of some years, they have evolved to offer new services, new subscription services, and new products that go beyond providing line item savings for different products or services that your hospital utilizes.

Interestingly enough, recently I had a CFO say to me, “You know, I don’t even know what we’re paying for within our GPO agreement. What are all the products and services that are bundled into our GPO? We get those products and services or subscription services deducted from our admin fees, and we get those admin fees back from our group purchasing organization.”

She brought up a great point.

Here are just some of the questions that stemmed from this:

• Are we using all these subscription services?
• Do others in our organization even know about them and could they be using them?
• Are they underutilized?
• Do we need them at all?
• Are we paying the right price for them?
• Are there products and services that we get from GPOs that we can simply find in the marketplace that are more innovative and provide better value?
• Is there a better fit for us elsewhere?

They could be questions that you need to ask yourself.

It was a fascinating conversation because it led me to think about all the other GPO conversations that I’ve had in the past.

If you don’t have one, it’s time to create one. Not next month or next year. My recommendation is that you create one today. First, a spend strategy, and then a GPO strategy.

If you do have one, the above may lead you to take a deep dive look, and ensure you possess clarity around it.
Let me know in the comments below – does everyone in your organization know about the additional subscription services and products offered by your GPO?