Value Added Up

‘GPOs save money,’ say hospital survey participants

GPOs save the U.S. healthcare industry $36 billion annually in price savings and more than $2 billion in savings associated with human resources uncommitted to the purchasing process, such as contracting staff and contract administrators, according to the author of a study funded by the Health Industry Group Purchasing Association.

Eugene Schneller, Ph.D., a professor at Arizona State University and principal, Health Care Sector Advances, Scottsdale, Ariz., surveyed 28 hospital systems representing 429 hospitals. The $36 billion in annual GPO direct price savings is distributed as follows:

  • $6.8 billion in price savings for hospital pharmaceuticals.
  • $8.5 billion for savings on med/surg (non-physician-preference) purchases.
  • $1.9 billion in savings on cardiology implant purchases, either directly or indirectly by providing members with GPO purchased goods or reference pricing. (More than half of U.S. hospitals and systems use GPO pricing as the benchmark for starting their own negotiations for physician preference items, according to the report.)
  • $840 million in savings on orthopedic implant purchases (either directly or indirectly by providing members with GPO reference pricing).
  • $17.96 billion in savings to other clinical products, such as computers, food, janitorial products and office products.

In addition, U.S. hospitals and hospital systems are estimated to have saved $1.8 billion in “human resource savings,” that is, savings attributed to the avoidance of salaries for contracting staff.

The study also reports that the average hospital purchases:

  • Almost 73 percent of goods through GPO contracts.
  • Eighty-eight percent of its pharmaceuticals through GPOs.
  • Eighty-two percent of general medical items through GPOs.

In the survey, 28 hospital systems, representing 429 hospitals, were queried as to their commitment to using GPO contracts for commodities, pharmaceuticals, physician preference items such as orthopedic implants and capital equipment.

To view the entire report, “The Value of Group Purchasing – 2009: Meeting the Needs for Strategic Savings,” go to and click on “New Report” in the upper left part of the home page.