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Do you believe it?
The Healthcare Supply Chain Association (HSCA) (formerly HIGPA) recently announced the results of a survey of the value that group purchasing organizations (GPOs) add to the U.S. healthcare system. The analysis, “A 2014 Update of Cost Savings and Marketplace Analysis of the Health Care Group Purchasing Industry,” conducted by Dobson DaVanzo & Associates, assessed updated CMS data, Medicare Cost Report (MCR) data, and estimates of the GPO market and market penetration.
The analysis found that that GPOs’ ability to command market share and negotiate volume discounts, allows for savings of between 10 and 20 percent on average for their respective members and customers.
- According to the report, in 2012, GPOs generated $55.2 billion in annual savings for hospitals, Medicare and Medicaid, and taxpayers.
- The report predicted GPOs will generate savings of between 2013 and 2022 up to
- $864 billion for the entire U.S. health system
- $229 billion in Medicare savings
- $169 billion in Medicaid savings
Dobson DaVanzo concluded that “the success GPOs have had in penetrating the healthcare marketplace has resulted in the GPO price structures becoming the de facto market price. Even for items not purchased through a GPO, the power of lower prices negotiated by GPOs is present. This savings is not evident in the penetration rate or the savings rate.”
The report also stated the authors’ belief that the savings attributed to GPOs is a conservative estimate and that there are “many market segments for which GPOs could continue to provide savings in the future.”
Wow, those are some huge savings! Do you buy it?
While I am delighted on the value proposition, I would caution that cost savings have to be viewed in light of spend, including supply, service, capital, etc. Curbing, limiting, right-sizing… use any approach you want to typify spending versus saving and broader based metrics should show whether savings have a realistic impact on an organizations overall performance.
So given the savings that GPOs have helped organizations achieve in the 2014 update, what is our cost per adjusted patient discharge? and has it dropped over the 2014 period?