What is a Group Purchasing Organization

A group purchasing organization, or GPO, is an entity that is created to leverage the purchasing or buying power of a group of members to obtain discounts from vendors based on the collective buying power of the GPO members.

Many GPO's are funded by either a membership fee or an administrative service fee that is paid by the vendors.  Many GPO's provide free membership in an effort to attract businesses or organizations into their GPO which in turn gives them greater buying power.  Member participation may either be contractual (members agree to purchase solely through GPO contracts) or voluntary (members only participate based on their specific purchasing need).

The History of Group Purchasing Organizations

In 1910, the first healthcare GPO was established by the Hospital Bureau of New York.  Surprisingly, during the next 50 years, only nine more GPO's came onto the scene bringing the total number of group purchasing organizations in the US to 10 in 1962.  By 2007, there were hundreds of healthcare GPO's in the US.  Statistics show that 96% of all acute-care hospitals and 98% of all community hospitals hold at least one GPO membership.  Furthermore, Wikipedia states that 97% of all not-for-profit, non-governmental hospitals participated in some form of group purchasing.

GPO Advantages

Becoming a member of a group purchasing organization will help you save money on the equipment and services needed every day.  For medical practices, the cost associated with running a practice seems as if it is increasing every day, and joining a healthcare GPO makes financial sense.  The benefits for medical practices of becoming a member of a group purchasing organization include:

• Seamless Purchasing Efforts –Purchasing medical equipment and services is much more efficient once you become a member of a GPO.  The relationships formed by the GPO make the purchasing process much easier for the medical practice.

• Buying Power – The more members in a group purchasing organization, the more buying power, or leverage, you will have when making purchases for your practice.  The GPO can negotiate better deals on your behalf by leveraging the buying power of their members.  Medical practices are able achieve substantial savings on the equipment and services needed daily to operate their practice.

Types of Vendor Partners of Medical Practices

Medical practices purchase equipment and utilize a wide range of services every day when operating their practice.  Group purchasing organizations build relationships with vendors so that no matter what type of equipment or service your practice may need, the GPO has a relationship built with that specific provider.  A group purchasing organization comprised of thousands of members know how important it is to have a wide range of vendor partners.  These vendors may include:

• Payroll Services
• Insurance (Disability, General, Supplemental, etc.)
• Postage Meters
• Marketing Services
• IT Services
• Collection Agencies
• Answering Services
• Shredding Services
• Vaccines

These are just examples of the type of vendors you can expect from a medical GPO.  When searching for a GPO, find out how many members there are, what type of vendor agreements are in place, is there a contract, who runs the organization and more importantly, ask what type of savings are typical for a practice of your size and needs.