Amid healthcare uncertainty, hospitals will lean even more on their GPOs

The debate over the future of the Affordable Care Act (ACA) and the ongoing transition from fee-for-service to value-based care suggest a healthcare system full of uncertainty for American hospitals. Hospital executives who were already operating under severe budget constraints will be asked to do even more with less. This moment of great change for healthcare portends an expanded role for an often-unheralded supply chain player: the group purchasing organization.

The core mission of the GPO remains cost-savings – GPOs aggregate the purchasing power of providers to secure discounts and help procure the best products and services at the best value. A 2014 American Hospital Association (AHA) survey of hospital executives found that 90 percent of respondents were satisfied with the ability of their GPO to deliver cost savings, and an economic analysis of GPO operations prepared for the Healthcare Supply Chain Association (HSCA) estimated that GPOs save the healthcare system up to $55 billion annually.

Many providers, including some small and rural hospitals, lack the purchasing volume to obtain discounts on their own for specialized equipment and critical medical devices such as implants and diagnostic equipment. For these providers, the savings delivered by GPOs are particularly critical and will be even more so in the face of ongoing reimbursement challenges.

As hospitals face near total uncertainty over what will happen to the Affordable Care Act, and with Medicaid expansion, Medicare reimbursement, and a range of other challenging issues, hospital executives are assessing their vulnerabilities and trying to figure out how to best prepare for all contingencies. One of the first calls should be to their GPO.

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