GPOs evolve to meet new provider demands

It’s not just about purchasing anymore

In 2011, group purchasing organizations were called upon to do more than ever before to assist healthcare providers in cutting costs, and, most GPOs have expanded their range of services to meet this new demand.

“With everyone focusing on cuts in Medicare and Medicaid payments and reimbursement issues with healthcare reforms, GPOs are being called upon to help with these transitions,” said Curtis Rooney, president of the Healthcare Supply Chain Association (formerly the Health Industry Group Purchasing Association).

“There is more of an interest in using the GPO in ways that go beyond group purchasing. They have branched out to include value analysis, patient safety, IT systems and more,” he added.
“A lot of GPOs are adding revenue cycle management to their offerings to make sure billables are paid on time. They are also coordinating the supply chain with the clinical practice. They are doing more with less,” noted Rooney.

Todd Ebert, president of Amerinet, a St. Louis-based healthcare GPO, says that in his 20 years in the industry, GPOs have gone from being simply a portfolio of prices to a service-oriented partner in the effort to drive expense out of the supply chain and other healthcare cost centers.

“Providers are much more open to changing (how they use their GPO) now than prior to healthcare reform,” said Ebert. “They know they need to be effective and efficient with the supply chain.”

“Now we have customers who will literally say to us, ‘I want to know where the best opportunities for me to save money are,’” said Ebert. “It’s an ongoing process to bring customers the best value.”
Ebert agrees with Rooney that GPOs are now offering more products and services than ever.

“With healthcare reform, the biggest trend is that reimbursements are going down. Providers are asking, ‘how are we going to maintain our viability?’ They are looking to Amerinet and other GPOs to help them achieve that goal,” said Ebert.

According to Jim Webb, senior vice president of operations at Irving, Texas-based GPO Provista, the current economic conditions compounded by cuts to reimbursements “are forcing people to take a closer look at the supply chain.”

“Providers are going to look to their GPOs and say, ‘I appreciate what you’ve done for me, but I need you to do more,” added Webb. “The days of GPOs just providing a pricing portfolio are gone – that isn’t going to cut it anymore.”

The year also saw some drama for GPOs when a controversial decision sparked fireworks last spring.
In March, Minneapolis-based medical device vendor Medtronic canceled five contracts with Novation, an Irving, Texas-based healthcare supply contracting company serving VHA and the University HealthSystem Consortium – two national healthcare alliances serving more than 25,000 members – and Provista, representing some 28,000 sites.

Novation develops and manages competitive contracts with more than 600 suppliers, officials say, representing nearly $40 billion in spending in 2010.

At the time, Rooney called the cancelations an “attack on American hospitals.”

“Medtronic’s recent decision to cancel its GPO contracts puts greed ahead of patients. GPOs work on behalf of hospitals and other healthcare providers, and GPO contracts are based on strong competitive forces,” said Rooney. “Manufacturers compete with one another to win business by offering the best products and services at the best value. Medtronic has simply abdicated this competitive space in an effort to prevent hospitals from banding together to get the best deals. The result is purely predatory.”

Medtronic defended its decision with a statement from spokesperson Chris Garland, who said, “Medtronic, like other healthcare organizations, realizes the challenges that all participants in the market are facing in light of healthcare reform and economic uncertainty. With an eye on removing costs from the healthcare system, Medtronic believes that we will be best able to address the varied needs of our customers by managing our business interactions and relationships locally instead of through Novation.”