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September 15, 2021
David Burda
Economics System Dynamics

Shock! Not Every Health System Loves Their GPO

A caveat before you keep reading. As a journalist, I see things as half empty. I leave the half full to the marketing, communications and public relations people. 

With that bias out in the open, it turns out that not every hospital or health system loves their group purchasing organization. That’s my takeaway from FTI Consulting’s second annual GPO survey. You can download the survey results here

Let’s start with the fact that it’s noteworthy that FTI can even conduct a GPO survey. Hospitals, health systems and GPOs are a fairly closed and tight-lipped ecosystem. They don’t like to talk about what they do or how they do it, particularly their contracting practices, lest they be the subjects of congressional hearings again like they were about a decade ago.   

Yet, FTI found 40 hospital and health system supply chain executives to take its survey. That alone tells you it’s not all rosy in GPO-land. 

Twenty-seven of the 40 supply chain executives, or 68 percent, said they were “satisfied” or “extremely satisfied” with their hospital’s or health system’s GPO. That means 32 percent, or about a third, said that they were “unsatisfied,” “extremely unsatisfied” or had no feelings one way or another about their GPO. 

That half-empty part also is revealing in that a third of the respondents passed on the opportunity to say that they loved their GPO. 

Where’s the love? Well, it’s certainly not in physician preference items, purchased services or advisory services.  Those three offerings by GPOs to their hospital and health system members topped the list of offerings in which the survey respondents said they were dissatisfied at 43 percent, 40 percent and 33 percent, respectively. 

Sixty-three percent of the respondents said consolidation among healthcare GPOs over the past 10 to 15 years has had a positive effect on the supply chain marketplace. But 18 percent said no, it hasn’t. Fewer and larger GPOs have had a negative effect on the healthcare supply chain, they said.

“Decreased competition leads to unfavorable financial outcomes,” even in the GPO world, FTI noted.

That could help explain why 15 of the 40 respondents, or more than a third, said their hospital or health system put its GPO contract out for bid in the past one to three years. That’s more than double who said the same thing in last year’s FTI GPO survey.

A few others said they’re thinking about forming their own GPO or simply negotiating supply contracts directly without a GPO. Those options could be a result of hospital and health system consolidation that gives larger provider organizations leverage with suppliers themselves. They’re getting so big that they don’t need a GPO. 

Healthcare markets are deliberately complex because incumbent healthcare organizations make them so to enrich themselves, not to serve customers. GPOs and other middlemen such as pharmacy benefit managers are a deeply rooted part of the Healthcare Industrial Complex®. What this rare glimpse into the GPO world courtesy of FTI shows is, some of those roots may be starting to rot.   

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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