HGPII Details GPOs’ Efforts to Reduce Prices and Increase Transparency Amid Marketplace Challenges

HGPII Details GPOs’ Efforts to Reduce Prices and Increase Transparency Amid Marketplace Challenges

The latest edition of a widely circulated annual survey of the national healthcare supply chain has found that healthcare group purchasing organizations (GPOs) are adhering to best business practices, and exploring innovative methods to address supply disruptions while promoting cost savings and quality.

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The Healthcare Group Purchasing Industry Initiative (HGPII) today released its 17th Annual Report. This landmark assessment of the healthcare supply chain demonstrates how the GPO sector is contributing to a more resilient healthcare supply chain while adhering to traditional commitments to product quality and cost savings for health systems.

As concerns about inflation, offshoring, and marketplace disruption come to the fore, many group purchasing organizations (GPOs) are drawing from lessons learned during the pandemic to address the mounting financial pressures health providers now face. The HGPII Annual Report underscores the major role that the nation’s GPOs play in ensuring that the healthcare supply chain stays resilient and healthcare providers’ expenses remain affordable.

By conducting interviews and reviewing member questionnaires, HGPII’s annual assessment of the healthcare supply chain underscored a number of promising developments.

Improved Prediction of Supply Chain Bottlenecks

  • GPOs accommodated breakthrough, predictive technologies using strategic purchasing and contracting regimes.
  • By leveraging data from their extensive network of providers and customized analyses, GPOs were able to better forecast demand for vital products, including prescription drugs.
  • As a result, GPOs were well-positioned to suggest alternative therapeutics and identify additional supply sources, playing a significant role in anticipating and mitigating medical supply chain slowdowns.

Increased Transparency

  • GPOs delivered additional transparency about their operations, pricing structure, and other previously private information. These industry-wide transparency efforts—complemented by reciprocal commitments for preferential pricing, supply delivery deadlines, and contract innovations—allowed organizations to better assess risk across the supply chain.
  • GPOs continued to develop innovative online applications and software platforms that provided better transparency and information sharing—benefitting physicians, healthcare payers, and patients alike.
  • Increased information sharing from GPOs fostered better decision-making when it came to inventory procurement, as well as preparation for looming supply shortages and potential demand shifts across the marketplace.
  • Multisource contracting remained the industry standard, and GPOs maintained purchasing policies that promoted competitive bidding, a transparent awards process, and product choice for healthcare providers.

A More Resilient Supply Chain

  • Many GPOs relied on greater supplier redundancy, more domestic production, and adequately stocked inventories to mitigate further disruption and bring down costs.
  • Some organizations worked with suppliers to procure additional months of inventory for members. Others scaled up their own production through investments in manufacturing capabilities, offering products like gowns and glove that could be customized to provider specifications.
  • GPOs were also able to provide a price hedge for providers concerned about obtaining supplies at a reasonable price.

GPOs have also made significant headway in promoting sustainability and diversity. They reported identifying and promoting environmentally preferred products (EPP), which assist providers seeking to reduce health hazards and implement green standards for acute and long-term care settings. GPOs participating in HGPII also demonstrated a continuing commitment to promoting diverse ownership in the healthcare supply chain, with programmatic commitments and contracting policies that encourage health systems to patronize qualified minority owned suppliers.

As a result of these measures, GPOs were able to promote innovation in the healthcare system, secure lower prices for health care providers, and provide critical support for the promotion of new services and technologies. And despite stated concerns about inflationary pressures, critical product shortages and challenges related to offshoring, competition in the industry remained fierce in 2022, paving the way for novel approaches to service, delivery, value creation and product offerings.

“HGPII has exhaustively studied the healthcare supply chain over the last two decades, and our latest Annual Report highlights some of the challenges facing the healthcare marketplace but also identifies encouraging trends. Healthcare GPOs participating in our project are clearly adapting to the changes in the healthcare system following the pandemic, and many are contributing real expertise to the priority to make the supply chain more resilient. This has been balanced with their preexisting mission to generate cost savings for healthcare providers while preserving the quality and reliability of goods and services purchased. HGPII members have demonstrated a continued commitment to compliance with industry standards for ethics and best practices, while adhering to necessary transparency practices. While our healthcare system is facing deep challenges related to cost and access, the group purchasing sector is clearly contributing to the resources available to healthcare institutions and policy makers.”– Philip S. English, HGPII National Co-Coordinator

“GPOs, and the healthcare industry as a whole, are building on the foundation they laid during the pandemic to better bridge the gap between volatile marketplace demand and fulfillment. We are thrilled to see that GPOs have been largely successful in empowering healthcare providers with lower prices and better transparency, stopping at nothing short of transforming the very nature of the medical supply chain itself.”– Senator Byron Dorgan, HGPII National Co-Coordinator

In 2005, HGPII was established by nine major healthcare group purchasing organizations (GPOs) that pledged to adopt and implement a set of principles for business ethics and conduct centered on the healthcare supply chain industry. These best practices are shared at the HGPII Annual Forum and independently evaluated annually with the HGPII Annual Report.