What If Your Group Purchasing Savings Suddenly Dried Up?

What If Your Group Purchasing Savings Suddenly Dried Up?

Robert T. Yokl, President/CEO, SVAH Solutions

I often asked the attendees at seminars I have conducted what they would they do if their group purchasing savings suddenly dried up. Some of the attendees’ answers were that they would look for another job in another industry, take early retirement, or squeeze their distributors even harder.

This is no longer a hypothetical question. We are now hearing from members of our supply chain community that many hospitals, systems, and IDNs have squeezed their last dollars out of their national GPOs and are only saving pennies with their regional GPOs. The time has come to accept this reality: The law of diminishing returns has reached a tipping point with your GPOs. No longer can you expect robust supply chain savings from them. This doesn’t mean your savings job is over!

That Doesn’t Mean Your Savings Job Is Over

Your healthcare organization needs to save even more every year to offset reductions in reimbursement, keep pace with inflation, and balance their budget. This means that supply chain/value analysis professionals need to identify new sources of savings, beyond price and standardization, just to keep running in place. Here are three areas to consider when searching for these new and  better savings opportunities:

  1. Unbundle Your Contracts: We often observe that GPO contracts covering a supply category, such as office supplies, can be enhanced even further by unbundling high-volume/high-cost commodities (e.g., toner, copy paper, office furniture) inside the contract and bidding or negotiating them separately.
  2. Supply Utilization Management: If you aren’t attacking your wasteful and inefficient consumption, misuse, misapplication, and value mismatches in your supply streams, you are missing 7% to 15% more savings.
  3. Purchased Services Contracts: Purchase price is just the tip of the iceberg on the savings on your purchased service contracts. For example, here’s a list of 9 Things to Negotiate With Your Purchased Service Contracts Other Than Price.

These are just three “savings beyond price” ideas that are available to your healthcare organization. All it takes is a curious, experimental, and determined mindset to uncover them.

There Are Always More Savings Between the Lines

We have relied on our GPO savings (price and rebates) for almost a century to fill our supply chain budget gaps. However, the new normal, as I see it, will be less GPO savings for our healthcare organizations and more savings beyond price (i.e., advanced value analysis techniques, clinical utilization management, purchased services vested outsourcing, etc.). That’s why I believe there are always more savings between the lines.

About Robert T. Yokl, Founder & Chief Value Strategist for SVAH Solutions
Robert T. Yokl is President and Chief Value Strategist at SVAH Solutions. He has four decades of experience as a healthcare supply chain manager and consultant, and also is the co-creator of the Clinitrack Value Analysis Software and Utilizer Clinical Utilization Management Dashboard that moves beyond price for even deeper and broader clinical supply utilization savings. Yokl is a member of Bellwether League’s Bellwether Class of 2018.


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