Fundamentals of GPOs and Healthcare Contracting

A group purchasing organization (GPO) is an entity that helps its healthcare provider members — such as hospitals, physician practices, and nursing homes— save money by combining their purchasing volume and using that buying power to negotiate discounts with manufacturers, distributors, and other vendors.

GPOs date back to 1909 in the United States. They formed to negotiate the best deal on goods and services for their members. Today, hundreds of organizations in the United States participate in some form of group purchasing. These include a small number of national GPOs, along with more than a hundred regional or specialized groups.

Virtually every U.S. hospital is represented by one or more GPOs. Also represented by GPOs, in fast-growing numbers, are nursing homes, physician practices, and other types of providers.

And, while their founding purpose— to reduce costs—is clear-cut, the actual GPO contracting process can be very complex. In this course, we’ll explore the fundamentals and some of the complexities of group purchasing and contracting.

After completing this course, you will understand:

• What drives providers to “aggregate” their purchasing power
• How complex contracting processes lead to even more complex systems to administer them
• What features you need to understand about GPOs and healthcare pricing contracts
• How GPOs get paid
• How distributors support contracts and help providers get the right price
• What can go wrong with contracting processes
• Why vendors choose to participate in the GPO contracting process