The U.S. centralized purchasing organizations (Group purchasing organizations, or GPOs for short) centralize the needs of hospitals through competition in the marketplace through purchasing intermediaries like GPOs. The emergence of GPOs has played a role in cost savings for healthcare organizations and in reducing the upward pressure on U.S. healthcare costs.
From the late 1950s to the early 1990s, the number of GPOs in the U.S. continued to grow; purchasing commodities also gradually added cosmetics, medical devices, surgical supplies, office supplies, meals, etc. from the initial purchase of a large number of disposable supplies (e.g., syringes, catheters, and drugs). The service targets also expanded to cover medical institutions, clinics, individual clinics, nursing homes, etc. After the 1990s, the number of GPOs in the U.S. continued to decrease while their size expanded, and large-scale contracts fell into the hands of a few GPO organizations due to mergers between GPOs.
Major Impacts of GPOs
1. For hospitals: by freeing hospitals from the complexities of material purchasing matters, GPOs save individual hospitals 10%-18%.
2. For suppliers: Suppliers only need to negotiate with GPO, saving energy and material resources. In addition, suppliers avoid the risk of backlogging inventory or running out of stock and reduce operating costs by obtaining an estimate of hospital demand in advance.
3. To the regulator: Under the GPO model, the government only needs to supervise the GPO's behavior, prevent market monopoly, and maintain fair competition in the market, without getting involved in specific product prices, purchasing, and other detailed matters.