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Hospital Group Purchasing Organizations (GPOs) Explained

Hospital Group Purchasing Organizations (GPOs) Are Collective Buyers for a Hospital's Supplies. Those Supplies Include Medications, Hospital Beds, Linens, Operating Room Supplies... Even Cleaning Supplies. Hospital Supplies Make Up About 33% of a Hospital's Budget and They Are the Second Largest Budgetary Item After Payroll. US Hospitals Spend About $240B Per Year on Supplies. Examples of the Largest GPOs are Premier, which has $1.3B Per Year in Revenue and Vizient, which has $714M Per Year in Revenue. GPOs Make Money By Charging the Manufactures an 'Administrative Fee' of 1.5% to 3% of Total Sales to a Hospital. Even Though the GPO is Negotiating Discounts for the Hospital, They Are Still Being Paid a Commission by the Manufacturer. GPOs Have a 'Safe Harbor' Exemption from the Federal Anti-Kickback Statute. In the 1980s when Medicare Moved to Prospective Payment with Set Prices, GPOs Were No Longer Seen as a Possible Source of Escalating Medicare Costs and So Were Granted Their 'Safe Harbor' Status. Some Complaints Against GPOs Include: 1) That They Are Anti-Competitive Against Smaller and Newer Supply Manufacturers in Favor of Large Manufacturers That Give Them Larger Unit Discounts. 2) They Have a Conflict-of-Interest Against Lowering Costs for Their Hospital Clients Since They are Paid a Commission by the Supply Manufacturers. Hospitals That Run Health Insurance Plans Such at UPMC and Intermountain Healthcare Might Be Particularly Focused on Their Supply Costs Since They Collect Premium and Are At Risk for the Cost of a Patient's Medical Care... and in fact, these two hospital systems do work with their GPO in a unique fashion. Sources: https://www.supplychainassociation.or... http://www.singerpubs.com/ethikos/htm... https://intermountainhealthcare.org/n... https://www.modernhealthcare.com/arti... https://www.owler.com/company/vizient... https://www.statnews.com/2019/11/19/h... https://www.businesswire.com/news/hom... AHealthcareZ is 200+ Healthcare Finance Educational Videos. 💥 BOOK: Check out Dr. Bricker’s Book 16 Lessons in the Business of Healing here: https://www.ahealthcarez.com/healthca... AHealthcareZ Viewers Include: Employee Benefits Professionals, HR, CFOs, Insurance Brokers, Benefits Consultants, Doctors and Nurses in Leadership Roles, Hospital and Health System Administrators, Health Insurance Carrier and PBM Professionals, Pharma and Med Device Professionals, Academic Professors and Students in Healthcare Administration and Public Health. 90,000+ Views Per Month Across All Platforms. Visit AHealthcareZ.com to Subscribe to the Healthcare Finance Video Newsletter. #HealthcareCosts #GroupPurchasingOrganization #GPO