GPOs are a Service Provider, but are they a Working Partner?
A group purchasing organization (GPO) model is built on economies of scale, grouping purchasers with similar needs to buy in bulk and reduce costs for member organizations. This works well when it comes to cost-of-doing-business items that companies use for their core offerings. In healthcare, this may be things like PPE, surgical equipment, medical supplies, and more.
But unfortunately, one size does not fit all. What about non-clinical goods and services, including spend in complex categories such as information technology, professional services, and facilities? These expenses are often unique to an individual market or organization, and a selection of national contracts does not always offer the best solution, or the best pricing.
Non-clinical spending for health systems typically ranges from 20% to 25% of net patient revenue. With razor-thin margins and limited staff resources, health systems must have a partner that can focus on non-clinical expenditures with the same rigor that is given to clinical and labor cost initiatives.
Below are five ways a strategic partnership focused on non-clinical goods and services can reduce overall costs for health systems capable of improving clinical spending.
- Leverage benchmarks from outside of healthcare. Having a partner who can look at spend and benchmarks across industries for the same non-clinical categories can ensure that a health system receives the best pricing. Think of facilities maintenance, information technology, and marketing print expenses. These are costs that most organizations bear, and any could serve as a beneficial use case for a GPO. But, when we look at organizations outside of healthcare, such as retail, manufacturing, and consumer packaged goods, the rates paid by health systems are often considerably higher than rates paid by peers in other industries.
- Engage subject matter experts (SMEs) to negotiate local contracts with the organization in mind. A strategic partnership should include a deep bench of category experts with cross-industry expertise. As advisors on sourcing and procurement agreements, SMEs can ensure contracts serve organizational needs. This level of added partnership ensures rates and terms are not only the best within healthcare but the best for that service.
- Gain complete transparency into non-clinical spending. A health system needs an enabling technology that can give visibility into where every dollar is spent. How can healthcare leaders make strategic decisions based on incomplete assumptions, without an accurate view of how, when, and with whom they spend? A true partner can provide technology that offers real-time insights into spend data, benchmarks against cross-industry data, and access to a diverse and proven supplier network.
- Execute and ensure maximum value realization. A partner should secure the best possible pricing and ensure that agreed-upon rates and contract standards are met. Where consultants offer advice devoid of execution, a true strategic partner can execute on initiatives and ensure that a non-clinical approach is sustainable long-term, delivering on the proposed value today and into the future.
- Ensure ongoing engagement with the marketplace. Opportunities to drive efficiency in an organization move every day, so having a partner who is in the market every day is essential. Effective non-clinical spend management requires more than one-time projects or set-and-forget pricing. A true partner will work continually on behalf of its health system to make sure pricing and service are optimal and that the partnership is delivering to the fullest.
A strong strategic partnership shines in times of stress. The current financial troubles faced by health systems require that every health system have a partner working on their behalf to drive savings on non-clinical spend, improve supply chain resilience, and execute on behalf of the health system to ensure savings goals are met. With this operational plan in place, resources can be prioritized for high-impact initiatives such as those focused on delivering care.
At LogicSource, the first step in every strategic partnership is through an in-depth non-clinical spend analysis and solution recommendation called a Mutual Value Assessment (MVA). The MVA is the culmination of hundreds of hours of work from LogicSource’s non-clinical category experts to analyze spend, suppliers, systems and processes, and benchmark current rates against other sectors purchasing the same products and services.
At the conclusion of an assessment, a detailed roadmap is delivered on how to achieve the value improvements, with an outline of cost savings and the steps required to implement and execute, segmented by difficulty. This is provided at no cost and is foundational to starting a good partnership.
The innovative leader in procurement services and technology, LogicSource is purpose-built to drive profit improvement, mitigate risk, and ensure supply chain continuity through better buying. LogicSource focuses exclusively on the sourcing and procurement of indirect goods and services, which typically represent 20% of an organization’s revenue and the area of greatest spending inefficiency. These include complex categories like marketing, packaging, corporate services, facilities, information technology, distribution and logistics and more, for which organizations often lack the capacity, focus and scale to achieve best-in-class buying. Unlike traditional advice-based consultants, LogicSource is a purpose-built buying utility with assets that are configurable to their clients’ needs and ready to deploy. By combining decades of sourcing and procurement expertise, superior market intelligence, cross-portfolio spending leverage, and their OneMarket® Source-to-Pay technology, LogicSource executes customized solutions that deliver immediate savings and sustainable value. For more information visit www.logicsource.com.