A Strong Voice

Group Purchasing Organizations, or GPOs, touch us daily in many different ways. If you have purchased anything, from copy machines to snow skis from an independent retail establishment, you have purchased through a group purchasing organization (GPO). GPOs are not a new phenomenon; the first hospital buying group was established in 1910. Almost 100 years of evolutionary changes have molded the GPO model into what we have today.

The DME/HME industry has a number of different GPOs available, each with their own focus and philosophy as well as features, products and services they provide to their membership base. While belonging to a GPO is not for everyone, more than 3,000 independent home health care providers have benefited in one way or another from this partnership. The Health Industry Group Purchasing Association (HIGPA) is a great resource (www.higpa.org) on the effectiveness of GPOs in the health care industry. Make sure the GPO which you are considering belongs to HIGPA or a similar association.

The Health Industry Group Purchasing Association (HIGPA) is a great resource on the effectiveness of GPOs in the health care industry.

The main focus of GPOs is for independent-minded owners to have the luxury of maintaining a pricing level consistent with national chains. This happens even though the independent's purchasing may not meet the minimum requirements set forth by the manufacturers for volume purchasing. By combining the organization's purchasing in the aggregate, the GPO can negotiate for the best pricing category and the small independent establishment can compete with the large national entity. The GPO also can streamline your purchasing process, making purchasing from unfamiliar vendors an efficient exchange instead of a frustrating experience.

In the case of the DME/HME industry, the small provider can benefit financially from utilizing those contracts provided to them by their GPO by obtaining lower cost goods--effectively increasing their margins. While this is the attraction that stimulates the desire to belong to a GPO, it shouldn't be the only criteria considered when looking for one. GPOs have a wealth of other benefits available to their members and should be investigated before making a decision to join. Since the small provider is required to wear many different hats, you should be investigating GPOs that can aid you in growing your business beyond negotiating for better pricing.

Does the GPO you are looking at have educational initiatives? Any employee new to your staff, or one that is moving to an unfamiliar position, is usually trained in the least amount of time by another staff member juggling even more responsibilities. This practice of see one, do one, teach one doesn't make sense in the complicated world of HMEs. With regulatory, reimbursement and compliance issues being so complex, a full understanding is needed or mistakes, followed by possible financial losses, may occur. A GPO that understands your business can offer education to your staff, giving them courses and programs to take, while allowing you to concentrate on fulfilling your own initiatives. Education is an investment into your company and your employee's future.

Networking support is also key in determining your choice of GPO. Even though you desire to be independent, support through your fellow GPO members can assist you in a variety of different ways. Situations that an independent may consider isolated may have been already identified and solved by other members. By networking with larger independents, you can be aware of the pitfalls concerning accelerated growth rates, cash flow problems or even reimbursement issues allowing you to grow your business carefully. Being able to use this wealth of information will allow you to consider a plan of action that you may not have carefully examined previously. Make sure your GPO has an open networking system in place from which to pull information.

An ever-changing world exists through managed care and reimbursement issues. Does the GPO offer guidance and support on these issues? One method is to have all of the HCPC information available to you making reimbursement analysis convenient to your staff. Another is to have a template for managed care contracts to pull from, taking some of the guesswork out of the process. Still another is to have all of the detailed Medicare and Medicaid information, including newly released Program Memorandum and alerts issued by the four DMERCs, easily available for you. Is there a best practices manual accessible for you to use? A GPO will make the wealth of past experience available for you to raise your standards. Also, a professional within the staff should be accessible to handle any questions you may have about these difficult issues.

Are marketing tools and support available to you as a member of that GPO? Getting the most out of quality print material to promote your business to case managers and health care professionals isn't easy for an independent provider. Does the GPO have resources to accommodate your advertising and print material request? Having contracts with Yellow Page advertisers, design firms and maintaining current image libraries are some of the ways a GPO can help you. By utilizing these resources, your GPO can help in getting your message across to your target audience while saving you money.

Finding a source for financial and insurance services is highly important in today's world of expansion, cash-flow and high DSO. Does your GPO have proper relationships with those services? If they do, you can spend less time on the phone looking for those specialized services and more time working on your business. Opportunities abound in the leasing world, make sure they are right for your situation before you sign on the bottom line. A savvy business owner needs to be aware of all financial and insurance options available before committing to any plan and your GPO can help.

How do you handle the management of your company? This is another way a GPO can help. Not only should your GPO have a wide range of consultants to choose from, but they also should have quality management tools to aid you in assessing your business, then creating a viable plan for improvement. It is all too easy to fall into a routine that doesn't stimulate correct business procedures. Your GPO should be able to assist with outcomes measurements, regulatory and reimbursement updates as well as a host of other services that provide for proper management procedure.

Who are some of the other members of the GPO? We are told from childhood that you are judged by the company you keep. Are your fellow members active in industry and trade associations? If they are, you will be the first to know of any regulatory issues that may be coming down the pike. Does the organization encourage you to be active in the industry, and is the GPO taking an active stance on industry objectives? A GPO should be involved in national issues concerning their member's welfare as well as providing a forum for response. As an independent, you have a small vote, but by joining forces with other members, your voice has a chance to grow exponentially.

Finally, how is all of this information accessible to you and your staff? The Web has allowed us to transfer data instantaneously, and your GPO should have a ready conduit to get the information into your hands 24 hours a day, seven days a week. When dealing with vendors, it is imperative to have your contract information current and accessible to make sure there are no surprises after the sale. Other resources through the GPO should be obtained in the same manner, current information is the independent providers best friend.

Remember these components as you consider joining a group purchasing organization. If you were shopping for a new car, you would investigate the performance data, check under the hood, look into the appearance and comfort features, maybe even kick the tires. All of the new cars on the market today will get you from point A to point B, it is the side features that make a specific model attractive to you. The same holds true for GPOs, all of them concentrate on purchasing, but once you check under the hood, you will find many differences.

The GPO can negotiate for the best pricing category and the small independent establishment can compete with the large national entity.

I hope this gives a future member insight on the advantages and differences in GPOs. While on the surface you may be looking for lower pricing, take the time to explore the resources beyond contract pricing so you will know how a GPO can help your business grow. All of the GPOs offer a broad range of services to their members, making sure there is a good philosophical and cultural match before you commit is essential to a long-term partnership. In the mean time, happy tire kicking.

This article originally appeared in the November 2002 issue of HME Business.

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