Group purchasing options create significant savings

Guest post by Kevin L. Shrake,  35 year veteran of healthcare, a Board Certified Fellow in the American College of Healthcare Executives and a former hospital CEO. He currently serves as the executive vice president/chief operating officer of MDR, based in Fresno, California.

Why don't we shop for everything that we need in our personal lives in one store?

The answers are obvious. No one store has everything that we need, nor can it develop the business relationships with every supplier that results in the best financial deal for all goods or services. Options create cost savings in our personal lives and we should apply that principle to our purchasing procedures in the organizations we manage.

I have had the opportunity to work directly with every major group purchasing organization (GPO) in healthcare during the course of my career. They all provide valuable services, but each one also comes with their individual strengths and weaknesses. Taking advantage of the basic principle of using the power of bulk purchasing to lower costs is the essence of GPOs. Structuring your GPO relationships in a manner that best covers all of your needs is what separates top performers from their competitors.

Be hard on things and good to people. Far too often we simply look to how many positions we need to eliminate in order to balance our budgets. Although having an effective labor management program is essential, if we aggressively go after savings that do not affect jobs, it allows us to staff our organizations better. If we don't maximize our cost savings on acquiring goods or services, we will need to find those dollars in other ways that will likely be more painful.