Top 7 reasons to choose aggregate medical purchasing

 

 

Introduction

 

The Healthcare Supply Chain Association (HSCA),  a regulatory body representing Group purchasing organizations (GPOs) which are responsible for aggregate medical purchasing published a report stating that the latter has saved up to $55 billion per annum in costs. There is roughly 600 group buying entities, out of which 30 GPOs hold a great reputation in the eyes of HSCA. These GPOs enter into a contract with health care providers like hospitals and clinics and in return negotiate on prices and other terms with supply chain management companies and manufacturers of medical supplies, devices & drugs. However, selecting that one perfect GPO from a list of  600 odd partners may prove to be a task and hence health care providers can opt for membership from a couple of GPOs allowing a greater degree of flexibility.  

 

As per the study conducted by Definitive healthcare researchers, the healthcare system is moving towards consolidation to leverage from better market penetration and higher market share. GPOs too are following in their footsteps to attract higher purchasing power, gain attractive discounts, and reduce administrative costs. And healthcare providers will seek GPOs who enjoy higher purchasing power which will attract competitive prices and bigger discounts. Many health care providers tend to opt for local GPOs because they offer hassle-free services without any bureaucratic complexities.

 

The list of benefits of aggregate medical purchasing

 

1. Saves cost without compromising the quality of medical supplies 

HSCA estimates that aggregate medical purchasing that GPOs make will reduce the burden on hospitals by $456.6 billion between 2020-2030. The GPOs enabling the bulk purchase, encourage both parties, suppliers, and hospitals to engage in value-based purchasing ensuring quality products and services at a reduced price. Aggregate medical purchasing led to a 13% reduction in overall supply chain costs compared to those hospitals that did not follow the GPO channel. As per the research conducted by Wharton School of the University of Pennsylvania this year, 90% of the healthcare staff have voted in favor of GPOs stating that aggregate buying led to reduced costs and higher profits without putting a strain on the patient’s pockets. 

 

2. Healthy competition 

Working or not-working with a GPO is at the sole discretion of the health-care players, however, each health-care player employs two or more GPOs and this encourages health competitions between the GPOs as well as hospitals. During the negotiation process, this competition leads to reduced cost, enhanced quality, and breakthroughs, ultimately benefiting the healthcare sector.

 

3. Establishes trust

Friction-less deliveries as per the set conditions of the deal, help to develop transparent business transactions building long-term rapport and trust. HSCA has highlighted that GPOs will soon roll out non-cash incentives to encourage the distribution channels of the hospitals by offering value-added services, improved emergency response, standard delivery of drugs, controlling hospital-related infections and mitigation services, etc. 

 

4. Emergency response 

Bulk purchasing helps with stockpiling the medical supplies to respond to medical emergencies like a pandemic or other disasters. As per the HSCA report, this can be witnessed in the ongoing pandemic which was unnoticed by mainstream channels for a long time, that GPOs aiding aggregate medical purchase have brought tremendous relief by providing emergency service, through reduced costs, quality products and yet maintaining transparency in the tough times. Due to the pandemic, the healthcare system has experienced a sudden surge in medicines and equipment needed to combat the Pandemic. And according to HSCA, GPOs have played a crucial role in responding to the pandemic with the same quality service. 

 

5. Regulating the prices and availability 

Many incidences have come to light where there is a huge demand for certain drugs and yet they are not evenly distributed across the market. For instance, there have been reports that many life-saving generic drugs are not available in certain markets. Ensuring the continuous flow of drugs and medical devices is handled by GPO which manages it through bulk purchasing. Secondly, aggregate purchasing helps GPOs establish strong connections with multiple stakeholders of health care systems like the Food and Drug Administration (FDA), manufacturers, supply chain players, etc which helps in keeping a check on drug shortages.  

 

6. Higher purchasing power 

With the supporting bodies like HSCA, GPOs have an upper hand on the negotiation which gives them the purchasing power more than the individual hospitals and clinics, attracting higher discounts. Apart from discounts, aggregate purchasing also brings in other benefits like lesser administrative costs and standard product delivery which makes GPOs a popular supply chain channel in the healthcare system. 

 

7. Technology and Cybersecurity 

The association with GPOs allows keeping cyber crimes in check by providing authenticated medical devices that may otherwise be hacked to steal the patient’s confidential records. Many GPOs also provide a broad spectrum of services like market research, statistics, and analysis, high-tech solutions, maintenance of data, keeping infections in the hospitals under control, easy communication across the medical fraternity. 

 

8. Overall improvement

HSCA pointed out that more than 7000 health care providers have benefitted from the GPOs because it allows them to focus on their primary job to provide health care while GPOs act as intermediaries to take care of procurement requirements.

 

While GPOs continue aiding the aggregate medical purchasing which leads to win-win situations for all three parties- the manufacturing vendors, the health care provider, and the GPO, it is imperative to keep timely checks on supply chain contracts to evaluate the GPOs from time to time. It is also advisable to monitor the list of manufactures and suppliers that the GPOs are tied-up with, the bigger the list of the clientele of the GPOs, the better. Aggregate medical purchasing from GPOs not only delivers reduced costs but also opens a myriad of opportunities in the form of reduced supply chain cost, lower administrative cost, availability of technological innovations, sharing of updated knowledge, standard deliveries, and more which ultimately has positive effects on revenues and overall functioning of the healthcare system.