How does a GPO work?
A Group Purchasing Organization (GPO) gives businesses access to lower costs on products and services they use everyday. A GPO gives members access pricing discounts through combined purchasing power. This means when all of these businesses are combined into one group, their total purchasing power is much larger than if they were separate.
Google defines a GPO as so:
Based on that definition we understand a GPO’s role across industries such as healthcare and non-healthcare. Businesses that utilize a GPO will realize cost savings on products and services while also getting preferred contract terms. These contracts provide members with exclusive access to “bulk prices” for non-bulk quantities from suppliers or vendors. In turn, leading to lower costs for the same amount of products businesses already use everyday.
What industries does a GPO serve?
A GPO will usually serve either healthcare or non-healthcare businesses. Healthcare can range from hospitals all the way to smaller, private practices. Non-healthcare industries are referred to as Business and Industry. Non-healthcare companies include small business to religious organizations, all of which leverage a GPO to save on products and services.
- Urgent Care Centers
- Home Health Agencies
- Nursing Homes
- Clinical Labs
- Ambulatory Care Centers
- Private Physician Practices
- Religious Institutes
- Commercial Business
- Stadium and Arenas
- Property Management
There are many more businesses that utilize a GPO for cost savings. The main reason businesses fall into a healthcare or a non healthcare classification is so the combined spend power of all of these businesses is much greater than if they were in a smaller pool.
Where a GPO falls?
A GPO does a lot more than just bringing on new members. A GPO plays a big relationship management game by positioning itself, its members, and suppliers in an opportunistic way so all parties can benefit. This means maintaining strong relationships with vetted suppliers and ensuring members are connected to the right suppliers for their business.
All about positioning.
Membership is the key to better contracts, lower prices, and lower risks. GPOs must bring on new members to establish a solid base with steady spend. Once a strong flow is in place the GPO can better negotiate contracts for its members bringing about deeper discounts and/or better contract agreements. With solid contracts in place and good spend, a GPO can further and further separate itself from risks and constantly pass on product savings to its members.
Different types of GPOs.
- A vertical market GPO focuses on one main industry only taking on members from that space. These businesses all purchase large quantities of the same products so they attain contracts that benefit their operation the most. For example, large hospitals all purchase the same kind of products. So, when they all band together they have a larger purchasing power giving them access to the best contracts.
- Horizontal market GPOs span across several different industries. However, this only works because even though industries are different from member to member, their respective businesses are buying the same products and services.
- Some GPOs can be larger and they focus on a more specific industry similar to a vertical market GPO. However, in this case contracts are industry specific and are negotiated directly between vendors and the large companies purchasing these products.
Is a GPO right for your business?
Sometimes it may be difficult to know what a GPO can do for your business specifically. Good news, we are here to answer all your questions. CLICK HERE to schedule a call with our team and learn how a GPO can serve your business and bring you access to the best contracts and the best savings.
We are Purchasing Connections, an example of a horizontal market GPO, we serve healthcare organizations and businesses alike giving them access to purchasing channels that save them on products and services they need everyday. We are a GPO sponsor of Premier, and our partnership allows us to attain excellent pricing for all of our members no matter their industry.
Now that you know what a GPO is we here to serve your business and be your GPO solution.
Questions: Schedule a call with our team to learn about membership.