Group purchasing organizations cut hospital costs up to 18 percent

Group purchasing organizations save hospitals as much as 18 percent on their costs, according to a new survey by the Healthcare Supply Chain Association (HCSA).

Altogether, GPOs will likely save up to $864 billion for the entire U.S. healthcare system between 2013 and 2022, DOTmed reported. "At a time when hospital reimbursement is declining, healthcare CEOs and purchasing executives are turning to their GPOs to help reduce non-labor spending and to ensure that patient needs are met," HCSA President Curtis Rooney told DOTmed.

The firm Dobson DaVanzo & Associates conducted the survey, using national health expenditure data compiled by the Centers for Medicare & Medicaid Services. Altogether, hospitals spent about $268.2 billion on supply and equipment purchases in 2012. Dobson DaVanzo estimated that the percentage of non-labor purchases for hospitals undertaken by GPOs are between 72 percent and 80 percent. The savings generated on behalf of the hospitals range from between 10 percent and 18 percent. That means a total cost savings for hospitals of up to $55.2 billion per year.

Medicare non-labor expenditures for hospitals totaled $72.9 billion. The survey concluded that savings through GPOs ranged from $5.8 billion to $11.5 billion.

Not all participants in healthcare delivery believe that GPOs are automatic money savers. Charges of financial conflicts led to an investigation of the nation's largest GPOs in 2009. The next year, a study by the Medical Device Manufacturers Association accused GPOs of inflating the costs of devices by creating "false markets" for their demand and potentially paying kickbacks to hospitals in order to include the in their purchases. Also in 2010, the U.S. Government Accountability Office issued a report saying that GPOs were not completely transparent and had only taken small and initial steps toward opening their books on financial transactions and avoiding potential conflicts of interest.

To learn more:
- read the DOTmed article
- here's the study (.pdf)