Group purchasing organizations (GPOs) help healthcare providers realize savings by negotiating discounts with manufacturers and distributors on their behalf. GPOs represent many healthcare organizations, allowing them to aggregate purchasing power and obtain better prices. They establish contracts but do not purchase products directly. Instead, individual healthcare providers use the contracts when making their own purchases. In addition to lower prices, GPOs provide evaluation of new products and purchasing tools to streamline the supply chain process. GPOs are financed through fees paid by both member healthcare providers and preferred suppliers based on purchase amounts made through GPO contracts.

1. Q&A
Q: What is a Group Purchasing Organization (GPO)?
A: 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.
Q: How is group purchasing used in the EMS industry?
A: Healthcare providers use group purchasing to obtain the right products at the very best price.
Overall, about 72 percent of purchases that health systems make are done using GPO contracts.
Q: How do GPOs save money for health facilities?
A: Because GPOs represent many different healthcare organizations, GPOs offer economies of scale
to the healthcare supply chain. By aggregating the purchasing power of hospitals and their
affiliated networks GPOs help balance the negotiating equation between purchasers and vendors.
Q: How does group purchasing work?
A: GPOs work to negotiate contracts with healthcare manufacturers, distributors and other suppliers.
After a group purchasing contract is created, it is still up to the healthcare provider to decide
which product is most appropriate in each circumstance and make the most appropriate purchase.
GPOs do not purchase or buy any products. They negotiate contacts that hospitals can use when
making their own purchases.
Q: What types of services do GPOs provide beyond volume discounts?
A: GPOs provide a unique mechanism for a group of healthcare providers to coordinate not only
their purchasing power, but also their brain power. By drawing upon their broad-based
memberships, GPOs give owners, C-level executives, and other clinical experts a pathway for
evaluating new products and what their impact could be on the quality of care. GPO’s also
provide other purchasing and collaboration tools to streamline the supply chain process.
Q: How are GPOs financed?
A: GPOs rely, in part, on fees paid by members and from their Preferred Suppliers to finance the
services the GPOs offer healthcare providers. These administrative fees are generally based upon
the purchase price that the healthcare provider pays for a product purchased through a GPO
contract. The fee is paid when a GPO's provider-member utilizes a GPO contract.