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FOR IMMEDIATE RELEASE
Contact: David McDonough
Phone: 703-243-9262

The Value of Group Purchasing Organizations - The Facts
Statement by Robert Betz, Ph.D.
President & CEO, HIGPA

WASHINGTON, D.C. (March 5, 2002) - Group purchasing organizations provide a critically important function for hospitals in the procurement of health care products and supplies. The savings of 10 to 15 percent that GPOs enable hospitals to realize are more important today than ever before because of falling reimbursements from both public and private payers, and a general trend of rising health care costs overall. Industry wide, GPO-negotiated discounts translate into savings of approximately $15 billion to $20 billion each year for hospitals and other providers.

The overwhelming level of GPO utilization by hospitals across the U.S.-including every organization on U.S. News & World Report's 2001 Honor Roll of America's Best Hospitals-is powerful evidence that GPOs provide a crucial function for health care providers. GPOs continue to be utilized to such a high degree because they offer hospitals a critical cost savings mechanism.

Nationwide, approximately 72 percent of all products hospitals purchase are obtained through GPO contracts. This both further proves the value GPOs offer to thousands of hospitals and other providers across the country, while also illustrating the ability of providers to purchase outside of a GPO when appropriate.

HIGPA counts among its members over 130 manufacturers, distributors and other vendors that recognize the importance of group purchasing and the value in working in a cooperative environment with GPOs to improve the health care delivery system. Unfortunately, a small but vocal minority of suppliers do not share this view. Their motive is clear: they would like to see hospitals and their group purchasing agents powerless to aggressively negotiate contracts. This would only raise the cost of health care with no corresponding increase in quality.

I believe that group purchasing organizations are of vital importance in helping health care providers across the country realize the ability to aggressively negotiate contracts that offer value to those providers. The benefits GPOs provide-from volume discounts of 10 to 15 percent, to an increased ability to pool the best advice of clinicians when making purchasing decisions, to helping providers most effectively manage their supply chain through a variety of services such as benchmarking and e-commerce solutions-is proven each and every day by the near 100 percent use of GPOs by hospitals and other providers.

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