For many healthcare facilities, GPO benefits are cost savings on supplies. In January, Caresfield teamed up with Managed Health Associates (MHA) to host a CaresTalk webinar, How to Overcome Breaks in Your Supply Chain: How to Diversify Vendors while Leveraging Your GPO Contract.
According to 4 challenges Impacting the Healthcare Supply Chain, between 59-83% of organizations have reported delays or increased lead times in acquiring supplies since the start of the pandemic. In response, 81 percent of these organizations adjusted their inventories, most by increasing inventory levels, to weather the demand fluctuations and disruptions.
Researchers estimated that between the years 2013 and 2022, GPOs will have saved the healthcare industry between $392 and $864 billion. Almost all of America’s 7,000 hospitals belong to some form of GPO, not because it is required, but because it saves so much money.
– “Four Daunting Myths about GPOs” – Caresfield Blog
In the presentation, Kacie Bemmels, Caresfield director of strategic partnerships; and Barry Marquardt, Managed Health Care Associates director, medical products and services sales; look at how the environment for non-acute facilities has changed since the onset of COVID. They also provided tips for how nursing homes, skilled nursing facilities and other long-term care providers can leverage GPOs and suppliers to ensure they have critical supplies and are getting the best price.
Caresfield has worked with MHA since 2017, providing the GPO’s members with labels, tourniquets, cohesive bandages, specimen bags and other specimen collection products. At the peak of the COVID-19 pandemic, Caresfield provided many MHA members with critically needed PPE. Today, their partnership continues to grow with adult incontinence products and other supplies requested by MHA members.
Long-Term Trends
Bemmels and Marquardt highlighted three primary areas where COVID-19 made a long-term impact on the supply chain:
- Redundancy
- Near-shoring
- Resilience
The pandemic highlighted supply chain issues for many healthcare organizations. To address this issue, it’s important for purchasing managers at all types of facilities to have a strong relationship with vendors. These relationships ensure clinicians have a reliable supply of products.
“Facilities have been streamlining operations for years, adopting just-in-time inventory practices,” Marquardt said. “The pandemic didn’t just stretch that supply chain, it broke it in many respects.”
Impacts on Different Types of Facilities
According to HIDA’s 2021 Post-Acute Market Report, skilled nursing facilities are projected to lose $94 billion between 2020-2021. The main factors driving losses are:
- Occupancy declines
- Additional PPE costs
- Revenue losses
- Death of residents
While it’s been a difficult couple of years for these facilities, data suggests that nearly half the organizations believe things will improve in the near term, with occupancy rates returning to pre-COVID- levels.
Provider/Supplier Bridges and Barriers
There are many opportunities to improve relationships between suppliers and health care providers. It is undeniably important for suppliers to share transparent information. Marquardt used N95 masks as an example. The masks weren’t widely used before the pandemic and then suddenly everyone needed them. It created chaos for providers.
Many suppliers cashed in during the pandemic with opportunistic price increases. When paired with uncertainties in the operating environment, it became difficult to manage costs.
Another barrier in the relationship is the influence clinicians have on procurement. While everyone wants their supply chain to be smooth and efficient, there can be different thought processes between the clinical and purchasing teams on what efficiency looks like. Ideally, the supply chain supports the best outcome for patients or residents with the fewest resources spent. This can be difficult in non-acute settings, where it’s typically a single person reviewing costs and product alternatives.
Healthcare facilities weren’t the only ones hit hard by the pandemic. Throughout the pandemic, Marquardt fielded calls from MHA members asking who their account rep was for different contracts. Many distributors and manufacturers decreased their customer service and field sales teams. Suppliers also dealt with raw material cost increases.
Important Questions to Ask Your Suppliers
Asking the right questions when evaluating suppliers can ensure you have a productive relationship.
Forward-thinking manufacturers are looking at the pandemic as an opportunity to bring manufacturing to the U.S. For example, Caresfield is moving manufacturing for our disposable tourniquets to our Minnesota headquarters. Ordering items made or stored in the U.S. poses a lower risk. They arrive more quickly and usually have a guaranteed delivery date.
It’s also important to know whether a supplier has a strategy to mitigate risks by optimizing costs and working with backup suppliers. Suppliers should be investing in research and development to optimize costs and produce quality products. Distributors without backup suppliers or raw material sources run into back orders and disruption. Price won’t matter if you can’t get your products.
The quality of products matters, too. Suppliers with a quality management system hold products to a certain standard. There is little to no material waste which helps control the cost of raw materials. If a supplier uses a quality management system you know they make products you can depend on.
Finally, you’ll want to know if a supplier works with any GPOs. If they do, you can potentially save thousands of dollars annually. Typically, GPO contracts come with discounts on purchases, rebates for compliance and other value-adds like free freight. By leveraging the bulk purchasing power of GPOs, you often ensure access to critical products.
GPOs are Diversifying Vendor Sources
MHA, like many other GPOs, is always working to provide better value to members. During the pandemic they expanded product categories. They worked with suppliers to find personal protective equipment and other commodities. MHA found strong manufacturers with a high market share and healthy supply chains to make these products available to members.
Additionally, GPOs work to understand supplier’s forecasting challenges and drive price transparency. No one could see the impact COVID would have the supply chain for PPE, disposable paper products, POC testing kits and other products, but by working together suppliers and GPOs can prepare for the future as well as possible. By communicating what’s available and what sourcing needs to change, GPOs and vendors can help you keep crucial supplies stocked.
How to get the most out of your GPO contract
In our blog post Four Daunting Myths about GPOs, we shared how researchers estimated from 2013 to 2022, GPOs saved the healthcare industry between $392 and $864 billion. Almost all of America’s 7,000 hospitals belong to some form of GPO, not because it is required, but because it saves so much money.
GPOs come in many shapes and sizes, depending on the organizations they serve. They can be regional or national and vary by service areas: acute/non-acute/segment of non-acute. GPOs bring information and resources together to save you money and time. MHA is a high touch/high-service GPO. They boast strong field representation and internal member support.
One of the biggest benefits of working with a GPO is how it combines your organization with peers to negotiate better prices with suppliers. GPOs also vet suppliers through a thorough evaluation process – both clinical and operational – so you and your value analysis committee don’t have to wade through every option. GPOs also manage contract negotiations, so you don’t have to negotiate individual agreements with suppliers.
Beyond the cost savings on the supplies, GPOs save members significant money by negotiating value-adds like free freight, on-site support and rebates. Some GPOs even offer different revenue and value-based programs to enhance your membership.
How Suppliers Support GPOs and their Members
There are many ways suppliers and GPOs can work together to help clinicians deliver outstanding care. First, the organizations can collaborate openly on new product opportunities. For example, Caresfield and MHA recently started working together on adult incontinence items. For Caresfield it was an opportunity to expand the relationship with MHA and build trust and rapport with their members.
Next, suppliers can share transparent information on current inventory of the most-needed products. This includes relaying market conditions back to GPOs with quarterly and annual budgeting. This can include shipping fees, raw material costs and other information.
In addition to sharing information and collaborating, suppliers can support GPOs by offering customization options. For wristbands, Caresfield offers unlimited customization. We know that not every organization uses the same process. We can accommodate wristband color and text needs and still provide ID bands in a short time.
Finally, suppliers can provide guidance on conversions. By doing the heavy lifting for facilities, suppliers can build a strong relationship, helping you provide outstanding care while managing your budget.
“The bottom line it comes down to communication,” Marquardt said. “As a supplier, proactively engaging with your customer base drives comfort and confidence in your operation.”
Make the Right Choice for Your Facility
Partnering with GPOs can provide a wealth of benefits aside from access to contracted pricing.GPOs are often happy to do the legwork in areas where you are not taking advantage of a contract. It can help you find products for conversion and identify situations where you may be in a less-than-ideal position. For example, some MHA clients were unaware that they locked themselves into a primary vendor agreement with limited opt-outs or a captive service agreement for five years or more.
As a supplier or as a GPO, our goal is to give you the tools to make your operation successful with a focus on positive clinical outcomes. We’d love to get your feedback on how to improve that strategy. If your current distribution partner, supplier or GPO doesn’t do that for you, maybe there is room for improvement or another partner out there!
