Healthcare Group Purchasing Organizations Continue to Adapt and Innovate in a Changing Healthcare Marketplace

The healthcare GPO industry is facing new challenges adjusting to developments in the healthcare supply chain, but the supply chain itself remains resilient, according to the Healthcare Group Purchasing Industry Initiative (HGPII) in its latest annual report released today. Hospitals, nursing homes, and other providers continue to access supplies and technology through negotiated contracts developed by GPOs, and the healthcare system utilizes these firms to share expertise and leverage savings according to HGPII analysts at ArentFox Schiff LLP. 

A link to the report can be found here.

“Our survey suggested that the healthcare supply chain is facing challenges created by periodic shortages, natural disasters, international supply disruptions and cost pressures,” said HGPII National Coordinator Phil English. “We conclude that the supply chain remains resilient, in part because of best practices and data analytics deployed by healthcare GPO innovators. However, policy makers should be concerned that key suppliers of essential healthcare products remain offshore with risk of disruption.”

The report hailed GPO industry leaders for providing transparency in their business practices and adhering to sound ethical practices in working with suppliers and health systems alike. The report noted that GPO firms remain highly competitive and offer access to the latest medical technology. 

“Our report highlights how healthcare GPOs are offering transparency and embracing high standards in their role in the medical marketplace,” said former Senator Byron Dorgan (D-ND), HGPII National Co-Coordinator. “The healthcare supply chain is currently under the microscope, and as the industry confronts changes in the supply chain, our survey offers insights on the questions facing both the industry and policymakers.”

The report, compiled by ArentFox Schiff, finds that the group purchasing industry remains highly competitive, particularly as GPOs run by pharmacy benefit managers further complicate the landscape. In this crowded environment, GPOs are offering a range of services touching upon education for members and suppliers, such as online academies and virtual training classrooms, to better understand market dynamics. As GPOs continue to adapt to dramatic shifts in healthcare marketplace, the survey also finds that the Safe Harbor statute capping administrative fees remains a critical tool for driving down costs for consumers and healthcare institutions.

By conducting interviews and reviewing member questionnaires, HGPII’s annual assessment of the healthcare supply chain also revealed several promising trends:

Improving Supply Chain Resilience

• Key GPOs have refined their capacity to anticipate supply shortages for critical products and use data analytics and logistics avoid the brunt of temporary disruptions.
• However, stockpiles and expanded inventories are limited by cost constraints.
• Long-term purchasing agreements for certain supplies and drugs, along with dynamic sourcing, has improved partnerships with suppliers and boosted the availability of products for entities across the healthcare industry.
• GPOs’ push for data has been accompanied by a nascent effort to boost domestic manufacturing in certain product categories, with automation as a potential solution to addressing increased labor costs.
• Single or sole source contracts that are at a higher risk for shortages represent an extremely small percentage of GPO contracting agreements.

Promoting Innovative Products

• HGPII members continue to facilitate the identification and adoption of breakthrough technologies in healthcare supplies, medical devices, and services for their members.
• Most GPOs have an internal process to review emerging technologies and healthcare products that benefit their membership, expand available supply, lower costs for consumers, and improve healthcare outcomes.
• GPOs’ ability to quickly review and approve new products is bolstered by their ability to sign contracts for innovative technologies at any time during the bid, award, and contracting cycle.

HGPII was established in 2005 by nine major healthcare group purchasing organizations (GPOs) that pledged to adopt and implement a set of principles for business ethics and conduct centered on the healthcare supply chain industry. These best practices are shared at the HGPII Annual Forum and independently evaluated annually with the HGPII Annual Report.