group purchase is recent trend in healthcare

1. By:
• Dr.Megha
Nahar(lecturer,SJMC
H)
• Sr.Alphonsa

2. CONTENTS
Group purchase definition
History of GP
Objectives of group purchasing
Types of groups
Advantages
Group benefits
Role of GPO
Cost management
Case study on benefits
Tips for buying

3. GROUP PURCHASE
Definition: A shared service which
combines the purchasing power of
individual organizations or facilities in
order to obtain lower prices for
equipment and supplies.

4. HISTORY OF GP
Group purchase started with formation of GPO(A group purchasing organization (GPO) is an entity that helps
healthcare providers realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with
manufacturers, distributors and other vendors)
• The first healthcare GPO was established in 1910 by the Hospital Bureau of New York.
• For many decades, healthcare GPOs grew slowly in number, to only 10 in 1962.
• Medicare and Medicaid stimulated growth in the number of GPOs to 40 in 1974.
• That number tripled between 1974 and 1977.
• The institution of the Medicare Prospective Payment System (PPS) in 1983 focused greater scrutiny on costs and fostered further rapid GPO
expansion.
• In 1986,US Congress granted GPOs in healthcare "Safe Harbor" from federal anti-kickback statutes after successful lobbying efforts.
• By 2007, there were hundreds of healthcare GPOs, "affiliates" and cooperatives in the United States that were availing themselves of
substantial revenues obtained from vendors in the form of administrative fees, or "remuneration." 96 percent of all acute-care hospitals
and 98 percent of all community hospitals held at least one GPO membership. Importantly, 97 percent of all not-for-profit, non-
governmental hospitals participated in some form of group purchasing

5. Objectives of group purchasing
Securing financial surplus through purchasing large
amounts of supplies for a smaller price.
Certifying companies that follow good
manufacturing practices and that are registered
according to the rules and regulations set by the
Executive Board, thus ensuring a high quality of
purchased items.
 Ensuring use of the same drugs manufactured
by the same company by all the states.

6. Contd….
Rapid processing and awarding of presented tenders.
 Ensuring a continuously supply of drugs, hospital supplies
and equipment all year round through regular successive
deliveries.
Encouraging other health sectors, e.g. specialized hospitals,
to secure their needs through group purchasing.
Encouraging the policy of purchasing from generic-
registered companies to obtain a greater financial surplus.
Supporting the drug industry to achieve security of drug
supplies in the country.

7. TYPES OF PURCHASING
GROUPS
Independent
group
Alliance or
association
based
groups
System
based
groups

8. Advantages of group
purchasing
1.Cost savings
By pooling your orders with others, the costs to shops or
suppliers can be lower and we benefit from significant
discounts.
2.Transparency
Group purchasing leads to transparency in
the examination of tender awards

9. 3. Standardization
Agreeing on the items for the group purchasing
programme leads to standardization of the drugs.
4. Labour reduction
Reductions in labour are attained through
minimizing administrative and regulatory
burdens on the organization.
5. Enhancement of purchasing operations
the group purchasing results in the reduction in the
length of the procurement process, the increased
predictably of timing and the simplification of
procedures

10. 6. Information sharing
Exchange and sharing of information among
institutions, hospitals and countries is very valuable
7. Uniform types of drugs
If there is uniformity in the drugs allowed
for use in all the states, it is easier for people
to get the same drug in the country

11. 8. Ensure continuous supply of drugs
it minimizes routine administrative and financial
procedures
9. other services
training on Quality Assurance, Certificates, a common
formulary manual for drug, hospital sundries,
Uniforms & Linen, medical Laboratory supplies .

12. • Increased Vendor Support
member hospitals will have access to
additional sales and marketing tools from
their manufacturers.
• learning new skills
Volunteering in a buying group can be a way of
getting new skills and experience, and
developing confidence

13. AN ESTIMATE OF BENEFITS IN US

14. CASE STUDY
• A study conducted by Dr. Eugene Schneller, Professor of
Supply Chain Management at Arizona State University:
‘The Value of Group Purchasing 2009: Meeting the Needs
for Strategic Savings’, reports that group purchasing saves
the healthcare industry $36 billion annually.

15. CASE STUDY
• Group purchasing organizations save hospitals as much as 18
percent on their costs, according to a new survey by the Healthcare
Supply Chain Association (HCSA).
• The firm Dobson DaVanzo & Associates conducted the survey, using
national health expenditure data compiled by the Centers for
Medicare & Medicaid Services. Altogether, hospitals spent about
$268.2 billion on supply and equipment purchases in 2012. The
savings generated on behalf of the hospitals range from between
10 percent and 18 percent. That means a total cost savings for
hospitals of up to $55.2 billion per year.
• In a recent Healthcare Supply Chain Association (HCSA) report,
healthcare economists at Dobson DaVanzo & Associates found
GPOs could help reduce overall healthcare spending by up to
$864.4 billion by 2022, approximately $55 billion every year

16. 8 Largest Group Purchasing Organizations
for Hospitals
• 1. Novation, Dallas, Texas – 2,911 hospitals
• 2. Amerinet, St. Louis — 2,570 hospitals
• 3. Premier, Charlotte, N.C. — 2,500 hospitals
• 4. MedAssets, Atlanta - 1,700 hospitals
• 5. The Broadlane Group, Dallas — 1,100 hospitals
• 6. HealthTrust Purchasing Group,Brentwood, —
1,400 hospitals
• 7. Consorta, Schaumburg, Ill. — 530 hospitals
• 8. Child Health Corporation of America, Shawnee
Mission, Kan. — about 54 children's healthcare
systems.

17. GPO Challenges

18. Strategies for group success
To be successful, purchasing groups must follow the following points
 Conduct strategic planning
 Enhance vendor relationship
 Service constituents with common missions
 Stick to the same group for a substantial period
 Achieve adequate volume
 Exchange information
 Obtain input from all members
 Provide liaison with members pharmacy and therapeutic
committees
 Establish a common formulary
 Formulate review programmes
 Deal ethically
 Enforce exclusively

19. Tips for buying :
 Don't build expectations too high, for example, about how
much savings will be.
 Keep trying different things. If it doesn't work, it isn't a
failure, try something else.
 Be open to other people joining in
 If the group is led by residents rather than public services,
it is more likely to meet the community's needs and to be
sustainable. Services need to facilitate people to do things
by themselves.
 To maintain your bargaining power and make the most of
fluctuating oil prices don’t tie your group in with one
supplier.
 Know your area , Know the people , Know the product

20. Cost Savings Management and
Substitution Recommendations
• Group purchasing membership brings with it access to a
competitive and extensive portfolio of products, services, and
solutions because many GPOs represent thousands
healthcare professionals and facilities to offer members the
benefit of economies of scale. By aggregating this purchasing
power of a GPO, healthcare providers can gain:
• Balance the negotiating equation.
• Provide leverage for purchasers.
• Remove certain costs across sales and supply chains.
• Contract for the least expensive products.
• GP members receive financial benefits through upfront
pricing discounts, distributed discounts and lower
administrative costs and achieve substantial savings.

21. contd....
● Ensure rapid processing of presenting tenders at various
stages.
● Reduce wastages due to over stocks and non-essential
items.
● Information exchange among the members through the
executive Board about what had been experienced, in any
of the member states, of adverse reactions or side effects
to any of the items:
i. Increase purchasing volume through the group purchase
ii. Post marketing surveillance system for the drug action.

22. MYTHS
1. Group purchasing will bankrupt local
suppliers
2. Group purchasing deals with marginal
suppliers.
3. Hospitals experience late deliveries
4. Hospitals have no recourse for vendor
errors

23. limitations
• Charges of financial conflicts led to an investigation of
the nation's largest GPOs in 2009. The next year, a
study by the Medical Device Manufacturers Association
accused GPOs of inflating the costs of devices by
creating "false markets" for their demand and
potentially paying kickbacks to hospitals in order to
include the in their purchases. Also in 2010, the U.S.
Government Accountability Office issued a report
saying that GPOs were not completely transparent and
had only taken small and initial steps toward opening
their books on financial transactions and avoiding
potential conflicts of interest.Goods and purchased
services annually in the public and private hospital
setting in OECD countries are in excess of 450 billion
Euros(US$620 billion).

24. THANK YOU