How Medical GPOs Help Small Practices Save Money
Medical practices face high operational costs that continue to rise each year. Group purchasing organizations (GPOs) offer a risk-free way to save money, benefiting practices of all sizes.
How GPOs Work
GPOs leverage the collective bargaining power of their members to secure discounted rates on medical supplies and services. This collaboration enables even the smallest medical practices to access significant savings on essential items, such as vaccines.
Bolstering the Bottom Line
Brandon Betancourt, an MBA and practice administrator for Salud Pediatrics in Algonquin, Illinois, explains:
“If your practice doesn’t belong to a GPO, you’re losing money. Vaccines are the second most expensive line item on our income statement. If a small practice spends $220,000 a year on vaccines and their GPO negotiates a 15 percent discount, that’s a $33,000 savings. For larger practices, which can easily spend a million dollars on vaccines annually, the savings are even more significant.”
GPOs Benefit All Physician Specialties
GPOs offer savings across various specialties, including pediatrics, family practice, internal medicine, obstetrics, and gynecology. According to Paresh Patel, national sales manager for CCPA Purchasing Partners (CCPAPP), GPOs are especially important for medical practices facing:
- Decreasing reimbursements from managed-care companies, Medicare, and Medicaid
- The need to reduce operational expenditures
In addition to vaccines, some GPOs offer additional savings by contracting with vendors for:
- Medical and office supplies
- Payroll services
- Medical-waste disposal
The Role of GPOs in the Changing Healthcare Landscape
In light of current healthcare reforms, Patel highlights that many hospitals are purchasing large physician practices to increase patient volume. However, independent medical practices that are not acquired must remain financially stable, and GPOs can help them achieve this goal.
Minimal Outlay for Joining GPOs
Most GPOs do not charge physicians to join, as they generate revenue from vendors who seek access to large groups of physicians. This arrangement saves vendors money on marketing and promotional costs.
If a GPO does charge a fee, it is typically nominal. For example, CCPAPP offers an associate membership that is free, as well as a limited partnership membership for a small fee of $10, which qualifies physicians for a year-end financial distribution.
Minor Restrictions
Most GPOs allow practices to choose which vendors to work with. For instance, CCPAPP has a roster of 15 vendors, and practices can opt in or out of these contracts at any time.
While GPOs generally do not have strict purchasing requirements, some, like CCPAPP, require vaccine compliance, which involves committing to purchase vaccine products from a single manufacturer. Practices may not be able to purchase competing vaccine brands.
Easy to Join
Joining a GPO is simple. Betancourt advises, “All you have to do is pick up the phone and ask for an application.”
A freelancer since 1985, Julie Bawden-Davis has written for many publications, including Entrepreneur, Better Homes & Gardens, and Family Circle. Julie blogs for Contently
Photo credit: Thinkstock
