Supplying Your Practice: Should You Join A GPO

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March 18, 2022

When you run a private practice, you become acutely aware of what supplies you need, think about where to procure them, and worry about prices. 

To start with, make a list of supplies that you everything you need:  drugs, syringes, gloves, paper for your exam table, cleaning supplies and more. Include how often you are using these supplies because we’ll need this info to figure out the quantities you need to order. 

You’ll want to develop an inventory system will help you track how often you use each item and when you need to reorder. 

Before I talk about where to buy supplies—buying  for your practice is no different than buying anything else. You need to comparison shop. There is tremendous variability in pricing. 

You can buy from individual vendors. Create an excel spreadsheet –put the item name in each row and the vendor in the column so that you can compare prices of vendors. You will also want to consider buying from a General Purchasing Organization (GPO).

GPOs were endorsed by Congress as a means of lowering prices in the medical supply market with the expectation of lowering healthcare costs. But not all GPOs are equal.  You will want to shop GPOs. . 

How do GPOs source and negotiate prices for products and services?

 GPOs help source and negotiate prices for drugs, medical devices, and other products and services for healthcare providers.  GPOs don’t take own or take possession of the product. They are the middlemen. GPOs have increasingly been trying to differentiate themselves from one another by offering additional value-add services to further reduce costs or improve efficiencies.

If GPOs are middlemen, how do they save healthcare providers money?

It is simply an economy of scale issue. It takes time and effort fr a supplier to negotiate a price for every item it sells with every healthcare provider that wants to purchase that item. GPOs can decrease costs by lowering transaction costs and prices through joint negotiation. 

How much can I save with a GPO?
GPOs can save providers 10% to 18%.

How else can a GPO benefit me?
As a small private practice, you may discover that it is difficult to obtain certain products at the scale you need them. Joining a GPO can help you procure the product because they have a steady inventory and a lower per unit cost on each order. 

GPOs pre-screen vendors to reduce the risk of working with a problematic supplier. GPOs also has access to more member reviews. You can save time and manpower because your staff doesn’t have to screen each vendor for every purchase. 

How to choose a GPO?
You will need to vet any GPO that you want to join. Start by asking other medical practices that you know. There are many large national, regional and local GPOs. Combine that with the ability to join multiple GPOs, easily switch from one to another and the result is competition for members and greater incentives for providers. 

Can I belong to more than one GPO?
In case I haven’t been clear enough, you can belong to more than one GPO. You can belong to multiple GPOs and still buy from individual vendors.

How much does it cost to join a GPO?
Some GPOs are free, some charge a membership fee. The membership costs usually pay for themselves after the first order so the fees should not be your defining consideration. 

If you'd like to hear more tips on how to start, run and grow your practice and related medical businesses, sign up for my newsletter at https://www.thepracticebuildingmd.com. and join my FB group, The Private Medical Practice Academy.

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00:00:00 Hi, it's Dr. Weitz. Thanks so much for joining me for this episode of the private medical practice academy. When you're an employed physician and you need a pair of gloves, you walk over to the box, take a pair. And off you go. If the box is empty, you ask your medical assistant to replace the box. I'll make you a bet that you've never stopped to think.


00:00:21 Where did they get that box from? And no, the closet is not the answer. Or did you wonder how many boxes do I need to order? Is there a shipping cost? And do I need to comparison shop chances? Are you never thought about any of this? On the other hand, when you run a private practice, you become acutely aware of what supplies you need.


00:00:46 You think about where to procure them, and you worry about how much it's going to cost you today. I'm going to tell you about buying supplies and why you'll want to consider using one or more group purchasing organizations, otherwise known as GPS to start with make a list of supplies that you need. This includes everything from drugs, syringes, gloves, paper for your exam table,


00:01:10 cleaning supplies, and more. If you're still employed and are preparing to start your practice, make a list of everything you use, make a list of everything you see, book in the cabinets, pay attention to what supplies the medical assistant uses. For example, what are they using to wipe down the exam table? Make sure to include how often you're using these supplies,


00:01:32 because we'll need this information to figure out the quantities you need to order. If your practice is already up and running, you already have some supplies. How often are you looking for something only to find out you don't have it? Is it something you really need or is it a nice to have? How often do you need it? If it's a regularly needed item added to your supply list,


00:01:54 regardless of who you buy your supplies from, there are several things you'll want to consider first, how much storage space do you have? If you buy 10 cases of something to get the lowest price, but you have no place to store it. How did that actually help you? And what if you only use that item once a month? So those 10 cases will last five years,


00:02:14 you spent more money upfront, and there's a good chance that that item may even expire before you get around to ever using all of it. There's a balancing act to ordering because you will pay more to order one of something regularly than if you buy several of them less frequently in inventory system, we'll help you track how often you use each item. And when you need to reorder use the inventory system to track expiration dates so that when you get new supplies,


00:02:47 you actually use the oldest ones. First tracking inventory also helps prevent you from running out of things and being caught by surprise. It takes only one time of having no gloves left and needing to have someone make an emergency run to CVS, to get you through clinic. And as you can imagine, you're going to pay extra for rush shipping things, regardless of who you order them from.


00:03:10 Now, let's talk about where to buy supplies. Before I address the specifics. Buying supplies for your practice is no different than buying anything else you need to comparison shop. There is tremendous variability in pricing, and you may discover that you want to purchase from a variety of vendors rather than doing one stop shopping. The one-stop shopping approach is likely to cost you more money.


00:03:39 You can buy from individual vendors like Henry Schein or McKesson, and you should certainly get prices from them for everything you want to purchase on that note, create an Excel spreadsheet, put the item name in each row and the vendor in the column so that you can compare prices. Then when you go to consider signing up with one or more GPS, we can compare the prices of the GPS per item,


00:04:04 as well as the individual vendor prices in the 1980s, GPS were endorsed by Congress as a means of lowering prices in the medical supply market, with the expectation that they were going to help lower healthcare costs. Now there's been some debate as to whether GPS really obtained the lowest prices for their members and whether GPO contracting practices actually shut out some suppliers because of this.


00:04:32 You want to shop GPS, not all GPS are created equally. GPO has helped source and negotiate prices for drugs, medical devices, and other products and services. Many of the GPS are owned by provider members, meaning you have to actually buy into the GPO. One thing I want you to understand is that GPS don't actually take possession of the product. There are nothing more than the middleman between the actual supplier and you be end-user GPS have increasingly been trying to differentiate themselves from one another by offering additional value added services,


00:05:10 to further reduce costs or improve efficiencies. So if GPS are middlemen, how do they actually save you money? It's simply an economy of scale issue. It takes time and effort for a supplier to negotiate a price for every item itself to every healthcare provider that wants to purchase that item. GPS can decrease costs by lowering transaction costs and prices through joint negotiation,


00:05:37 as it should be apparent. There's bargaining strength, volume discounts, and supplier competition. That results from these negotiations. If you think about it, it's similar to why joining an IPA or CIN for insurance contracting can be beneficial. Overall. GPO is typically say providers about 10, 18% as a small private practice. You may also discover that it's difficult to obtain certain products at the scale.


00:06:05 You need them. Remember when I was talking to you about the 10 cases, you may not need 10 cases of something, but if you're trying to purchase them directly from the vendor, they may determine that you're a small order. Isn't really worth filling. Joining a GPO can help you procure the product because they have a steady inventory and a lower per unit cost on each order.


00:06:28 One limitation to consider is that you have to use the product from the vendor that the GPO has a contract with. As an example, if you absolutely have to have a certain brand of glove and the GPO doesn't have a contract with that vendor, you'll either need to purchase the gloves through a different GPO or independently directly from that vendor aside from negotiating power GPS have some other advantages.


00:06:52 One of the value added services that GPS offer is compliance. They have a legal staff that helps to ensure that purchases comply with relevant regulatory laws. The GPO has pre-screened vendors to reduce the risk of working with a problematic supplier and GPS have access to more member reviews. You can save time and manpower because your staff doesn't have to screen each vendor for every purchase.


00:07:21 Now that I've explained why you want to join the GPO, let's talk about how to choose the GPO in case I haven't been clear enough. You can belong to more than one GPO. You can actually belong to multiple GPS and still buy from individual vendors. You'll need to vet any GPO that you may be interested in. Joining start by asking other medical practices that,


00:07:46 you know, there are several large national GPS, as well as multiple regional and local GPS. There are an increasing number of GPS combine that with the ability to join multiple GPS and easily switch from one to another. And the result is competition for members and greater incentives for you. I'm sure you're wondering how much it costs to join the GPO. So some of them are free.


00:08:14 Some charge, a membership fee, the membership costs, however, usually pay for themselves after the first order. So how much are the fees should not be your defining consideration? Joining a GPO is not static. It's not that you join. And that's it. GPS are constantly negotiating their prices and constantly changing their contracted vendors. You'll want to review your GPO pricing at least annually,


00:08:40 to make sure that you're getting the greatest savings on the products that you want. And more importantly, that you're also getting them from the vendors that you want. This is a task that can easily be assigned to Your practice manager or to the man who's in charge of supplies and the inventory tracker. The reason this is so important is that it is not uncommon for you to think that you're paying the best price for,


00:09:07 let's say a drug only to discover that the cost of the drug has actually gone up because the GPO no longer has that contracted rate buying supplies and how much you pay for supplies is obviously an important component of understanding what your expenses are. But it's only really a small part of the story. Okay? Whether you pay an extra 2 cents per glove in and of itself may or may not be a big deal to your practice.


00:09:36 The real issue is that you need to be able to understand this information and how much you're paying for each item so that you can ultimately drill down to what is your cost for seeing each patient? What is your cost for doing a procedure? And then ultimately to be able to compare that to the revenue that you're generating per patient or per procedure so that you can identify what your profit margin is.


00:10:04 If you don't have a granular understanding of your expenses, it will be very difficult for you to really figure out where you should spend your time and effort in terms of growing your practice, potentially in terms of your marketing efforts and more so, yes, you should comparison shop. Yes, you should consider using both vendors like a Henry Schein or McKesson as well as GPS.


00:10:30 Think of them like Sam's club or Costco, but ultimately understand that that is only one small part of why you actually really need to micromanage buying supplies. Thanks for joining me. Please be sure to sign up for my newsletter below, I'll be sending you tips on how to start a practice, grow a practice, and then add multiple services so that you can maximize your revenue.

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