Medical practices face a high cost of doing business, which seems to increase each year. Group purchasing organizations (GPOs) offer a risk-free method for saving money that benefits practices of all sizes.
GPOs capitalize on the collective bargaining power of members and obtain discounted rates on medical supplies and services. Leveraging the power of many in the field of healthcare enables even the smallest practices to enjoy substantial savings on necessities like vaccines.
Bolstering the bottom line
“If your practice doesn't belong to a GPO, you're losing money,” says MBA Brandon Betancourt, a practice administrator for Salud Pediatrics in Algonquin, Illinois.
“Vaccines are the second most expensive line item on our income statement,” he says. “If a small practice spends $220,000 a year on vaccines and their GPO negotiates a 15 percent discount, that's a $33,000 savings. For larger practices, which can easily spend a million dollars in vaccines each year, the savings is even more significant.”
GPOs benefit all physician specialties, including pediatricians, family practitioners, internists, obstetricians and gynecologists, says Paresh Patel, national sales manager for CCPA Purchasing Partners (CCPAPP). The group provides GPO services to a wide variety of medical providers.
"Faced with decreasing reimbursements from managed-care companies and Medicare and Medicaid, it's more important than ever for medical practices to use GPOs to reduce expenditures,” says Patel. “In addition to helping offset the cost of vaccines, some GPOs provide additional savings by contracting with vendors. [Those include] companies that provide medical and office supplies, payroll services and medical-waste disposal."
In the shifting climate brought on by the current health care reform, the use of a GPO may mean a practice thrives rather than just survives.
“The current health care reform has resulted in hospitals purchasing large physician practices for patient volume,” says Patel. “The medical practices that don't get purchased must be especially financially stable to operate independently, and GPOs can help them achieve this.”
Most GPOs don't charge physicians to join, because they make their revenue from vendors eager to provide discounts in exchange for access to large groups of physicians. Obtaining ready-made clientele lets vendors to save on marketing and promotional costs.
If a GPO charges a fee, it should be nominal, says Patel. He notes that CCPAPP offers an associate membership, which is free. It also has a limited partnership membership that physicians join by paying $10 and then they are eligible to receive a financial distribution at year's end.
Most GPOs allow you to pick and choose which vendors in their roster you would like to use. CCPAPP, for instance, has a portfolio of 15 vendor contracts. Practices can opt in or out at any time.
Most GPOs do not have purchasing requirements, with the exception of vaccine compliance. Generally, practices must commit to purchasing vaccine products from one manufacturer, restricting competing products.
Joining a GPO is easy, says Betancourt. “All you have to do is pick up the phone and ask for an application.”
A freelancer since 1985, Julie Bawden-Davis has written for many publications, including Entrepreneur, Better Homes & Gardens and Family Circle. Julie blogs for Contently.
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