Group Purchasing Organizations (GPOs) are entities that help healthcare providers realize cost savings and workflow efficiencies by utilizing aggregated membership purchasing volume in order to help negotiate discounts with manufacturers, distributors, and vendors. They help realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors.

GPOs are membership-based and excel within the healthcare industry because of the magnitude of the number of companies in the industry. What this means for you – your healthcare organization can become part of a group of healthcare companies that join forces. As a group, your combined spend increases collective buying power and creates leverage. Approximately 97% of hospitals belong to at least one GPO; while almost three quarters of all hospital purchases are made through a GPO contract.

GPOs do not purchase any products; instead, they help negotiate contracts with healthcare manufacturers, distributors, vendors, and other suppliers based on the products and services that members need. After a group purchasing contract is created, a member decides which product is most appropriate for your needs and make the purchase. As a GPO member, you then benefit from significant cost savings for your purchases.

One recent study by the Healthcare Supply Chain Association (HSCA) found that GPOs save the entire healthcare system approximately $55 billion annually and are expected to save the industry approximately $457 billion in the next decade. A recent analysis from former FTC Chair Jon Leibowitz found that GPOs save providers an average of 10%-18% on products and services across most expense categories on supply-related costs compared to those that don’t. Furthermore, GPOs save Medicare approximately $8.7 billion annually and save Medicaid ~$6.8 billion annually. They are expected to save Medicare approximately $116.3 billion and save Medicaid ~$90.1 billion in the next 10 years.