The power of group purchasing.

Abstract

There are four issues facing provincial GPO's, independent GPO's, health care organizations and vendors: co-operation; commitment; compliance; and competition. Co-operation: Hospitals have traditionally competed with each other for scarce resources and, as a result, have managed their operations in isolation. However, group purchasing provides hospitals willing to work together with an opportunity to significantly increase their purchasing power with vendors, thereby substantially reducing costs. Commitment: The success of GPO's depends on the commitment to contracts by the members. The American experience indicates that commitment of smaller, more focused organizations is easier to control and maintain. Some provincial GPO's have difficulties ensuring commitment from members; therefore, they have not achieved their full potential. Compliance: Hospital compliance with committed volumes negotiated in the corporate contract is essential to ensuring the continued strength of the group's purchasing power. GPO's require mechanisms for ensuring compliance. Smaller GPO's with a common vision and a mutual understanding of the benefits to be realized from compliance will be more successful. Competition: Independent, national GPO's, like Medbuy, may be perceived to pose a threat to provincial GPO's. However, this competition should be viewed positively because it encourages all GPO's to work harder to provide higher quality services that will ultimately benefit the hospital membership. The group purchasing concept is valuable to provide reduced costs to groups through higher volume purchases. Canadian GPO's are evolving and now offer Canadians provincial, interprovincial and independent GPO alternatives. Health care organizations must study these options and decide which alternative would be most beneficial for their particular situation.(ABSTRACT TRUNCATED AT 250 WORDS)