When looking to boost the bottom line of an ambulatory surgery center, many administrators look at the supply chain. One of the easiest and most effective ways to save money on supplies is by joining a group purchasing organization. GPOs leverage collective buying power to negotiate lower prices with vendors.
"The major benefit of joining a GPO is achieving savings in your supply chain without having to negotiate with every supplier that you use," says Richard Peters, senior director of ASC services at Provista, a supply chain improvement company. "The major GPOs offer access to hundreds of contracts for the supplies, services and capital equipment that you need to run your center," he says. "Discounts can run from small incremental price adjustments to significant discounts on capital purchasing."
Just like no two surgery centers are the same, neither are GPOs, says Mr. Peters. Choosing the best GPO for a particular ASC depends on that center's needs. He discusses six factors ambulatory surgery centers should look at when evaluating potential group purchasing organizations.
1. Contracting model. Mr. Peters says contract models vary from organization to organization. Some GPOs only offer one contract in a particular product area. That can restrict provider choice on those products, he says. For example, if a GPO has a contract with a certain provider for surgical sponges, but a center's surgeons prefer another brand, the center might be stuck.
"While this model might deliver slightly better prices on those products, it can put the center administrator in awkward positions with attending surgeons who often have strong preferences for other products in the category," he says.
2. Supply chain savings. This one might seem simple, but centers should do an analysis on the actual savings a particular GPO will produce. A 2009 survey by Health Care Sector Advances found respondents anticipated a savings of 18.7 percent when using a GPO. It's important that a center take into account all of the factors that go into pricing such as shipping costs, distribution costs and other terms and conditions like extended warranties or maintenance periods for example when calculating savings.
3. Distribution options. Centers should evaluate the different distribution options offered by GPOs and determine which model works best for them. This includes what distributors the GPO works with, what the coverage area is and which products each distributor handles. Centers should evaluate their needs related to service levels such as number of deliveries, assistance managing inventory or par levels and how much time they'll need to see the distributor representative.
4. Product selection. ASCs should look at the products a GPO offers and determine which of them the center would purchase. This includes looking at the brand preferred by a center's surgeons, as well as supplies unique to a specialty, such as supplies needed for a colonoscopy. Centers should also check which products a GPO offers under generic labels because these are often much less expensive than brand name products.
5. Spend coverage. This is an important factor to look at because it determines how much of a center's overall supply needs can be purchased through a particular GPO, Mr. Peters says. Look for a GPO that will give a higher spend coverage. This will mean less time looking for other contracts and negotiating with other vendors. A GPO might cover as much as 80 percent of a center's supply and services needs, Mr. Peters says.
6. Advisory services. GPOs offer more than just group discounts on supplies, Mr. Peters says. GPOs offer additional contracted services such as continuing education, equipment service, special financing, custom contracts and benchmarking data and supply spend analysis.
"A GPO focusing on the ASC market will act as an advisor or consultant to help the ASC improve their overall operational and financial performance," he says. "These advisory services include support regarding suppliers and distributors as well as strategic planning related to an ASC's supply chain management, new construction or equipment planning."
More expertise from Richard Peters:
11 Tips for Effective Negotiations With Suppliers
6 Mistakes ASCs Make When Purchasing Supplies and How to Fix Them
5 Strategies to Make Successful Capital Acquisitions
"The major benefit of joining a GPO is achieving savings in your supply chain without having to negotiate with every supplier that you use," says Richard Peters, senior director of ASC services at Provista, a supply chain improvement company. "The major GPOs offer access to hundreds of contracts for the supplies, services and capital equipment that you need to run your center," he says. "Discounts can run from small incremental price adjustments to significant discounts on capital purchasing."
Just like no two surgery centers are the same, neither are GPOs, says Mr. Peters. Choosing the best GPO for a particular ASC depends on that center's needs. He discusses six factors ambulatory surgery centers should look at when evaluating potential group purchasing organizations.
1. Contracting model. Mr. Peters says contract models vary from organization to organization. Some GPOs only offer one contract in a particular product area. That can restrict provider choice on those products, he says. For example, if a GPO has a contract with a certain provider for surgical sponges, but a center's surgeons prefer another brand, the center might be stuck.
"While this model might deliver slightly better prices on those products, it can put the center administrator in awkward positions with attending surgeons who often have strong preferences for other products in the category," he says.
2. Supply chain savings. This one might seem simple, but centers should do an analysis on the actual savings a particular GPO will produce. A 2009 survey by Health Care Sector Advances found respondents anticipated a savings of 18.7 percent when using a GPO. It's important that a center take into account all of the factors that go into pricing such as shipping costs, distribution costs and other terms and conditions like extended warranties or maintenance periods for example when calculating savings.
3. Distribution options. Centers should evaluate the different distribution options offered by GPOs and determine which model works best for them. This includes what distributors the GPO works with, what the coverage area is and which products each distributor handles. Centers should evaluate their needs related to service levels such as number of deliveries, assistance managing inventory or par levels and how much time they'll need to see the distributor representative.
4. Product selection. ASCs should look at the products a GPO offers and determine which of them the center would purchase. This includes looking at the brand preferred by a center's surgeons, as well as supplies unique to a specialty, such as supplies needed for a colonoscopy. Centers should also check which products a GPO offers under generic labels because these are often much less expensive than brand name products.
5. Spend coverage. This is an important factor to look at because it determines how much of a center's overall supply needs can be purchased through a particular GPO, Mr. Peters says. Look for a GPO that will give a higher spend coverage. This will mean less time looking for other contracts and negotiating with other vendors. A GPO might cover as much as 80 percent of a center's supply and services needs, Mr. Peters says.
6. Advisory services. GPOs offer more than just group discounts on supplies, Mr. Peters says. GPOs offer additional contracted services such as continuing education, equipment service, special financing, custom contracts and benchmarking data and supply spend analysis.
"A GPO focusing on the ASC market will act as an advisor or consultant to help the ASC improve their overall operational and financial performance," he says. "These advisory services include support regarding suppliers and distributors as well as strategic planning related to an ASC's supply chain management, new construction or equipment planning."
More expertise from Richard Peters:
11 Tips for Effective Negotiations With Suppliers
6 Mistakes ASCs Make When Purchasing Supplies and How to Fix Them
5 Strategies to Make Successful Capital Acquisitions