Hospitals and patients nationwide benefit from Group Purchasing Organization collaboration

The COVID-19 pandemic has served as a wake-up call shining a spotlight on one of the most critical, yet frequently under-appreciated aspects of health care — a resilient supply chain.

No care is delivered if physicians and health care providers lack the medicines, supplies, devices, and equipment needed to treat patients. It is at this intersection of clinical care and supply chain management where Group Purchasing Organizations (GPO) reside.

GPOs are a leading contributor to savings and quality care across all types of provider organizations, from small, rural community hospitals to academic medical centers, integrated health care organizations, and pediatric facilities.

GPOs exist in a number of industries, from hospitality to industrial manufacturing, with the goal of realizing efficiencies in procurement that save time and money. In health care specifically, GPOs leverage the collective purchasing power of groups of hospitals and health systems to negotiate and obtain the best prices for quality medicines, supplies, devices, and equipment to produce more cost-effective patient care.

In pooling the buying power of their members, GPOs also reinforce predictive demand for suppliers, which promotes a stable supply chain for the goods providers need to deliver care. The GPO approach, which also includes sophisticated analytic and advisory services, is estimated to save hospitals 10% to 18% annually. It also saves clinicians’ time and resources that can be better directed toward patient care and improved outcomes.

Information sharing is a two-way street. GPOs integrate member input into overall contracting decisions and often provide a forum for members to exchange information on best practices.

While hospitals and health systems understand the importance of managing costs, assuring the availability of supplies and medications essential for treatment may be even more critical. This is another area where GPOs play an important role. Discussing pandemic-related supply challenges for essential medications, Christine Collins, chief pharmacy officer at Lifespan, shares, “the efforts of [our GPO] to make [midazolam and propofol] available to us really became essential during this period.”

Each year, managing drug shortages costs health care systems an estimated $359 million in labor — a figure that does not include the impact on patients from delayed and canceled procedures caused by shortages of drugs and essential supplies. To mitigate and avert shortages, GPOs work with their members and suppliers to overcome weaknesses in the supply chain and strengthen it for the future.

GPOs can build in protection against drug shortages by negotiating a mutual commitment; suppliers promise hospitals adequate supply while hospitals promise suppliers a consistent demand. Such alignment of interests creates a more predictable and resilient supply chain. Eric Tichy, vice chair of pharmacy supply solutions at the Mayo Clinic Health System, agrees, “It’s great to have the consistency of access to drugs […] This is especially important when we’re dealing with these drug shortages because [GPOs] are constantly looking at the market and reassessing, and it would require a lot of effort for us to be able to replicate that.”

Even with mutual commitment, drug shortages are still occurring. In 2021, nearly half of all drug shortages were related to unknown causes. This indicates a significant lack of transparency across the supply chain — from manufacturing to distribution and shipping. GPOs understand that to address shortages, there must be greater visibility into the causes for disruptions at all points in the supply chain, and they are spearheading work to enhance such transparency. As Lifespan’s Collins notes, “Just having insight into the drug supply pipeline would instill a sense of calm, a sense of confidence.”

To advance long-term supply chain resiliency, the recently launched End Drug Shortages Alliance brings together a cross-section of stakeholders throughout the industry to uncover the root causes of shortages and begin to solve the problem. “Providers and patients have had to suffer the consequences of drug shortages for too long. It’s a problem that is too critical and complex to tackle as individual organizations. It will take all stakeholders working collectively with a common goal to end drug shortages in order to see real and effective change,” says Dan Kistner, PharmD, group senior vice president, pharmacy solutions at Vizient.