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Imagine walking into a supply warehouse with a blank check, a day to kill and an idling truck waiting outside. Whatever you'd want, you'd get without thinking for a second about prices. Sutures? Grab as many as you can. Latex-free gloves? Will a skid tide you over? Some skin prep kits? Sure, back up the truck.
If only. In the fixed-cost world of surgery, where supplies are your biggest expense next to staff, it's probably a better idea to shop for medical inventory with an eye on the bottom line.
A group purchasing organization can be your best personal shopper, yet all GPOs are not created equal, and it takes a shrewd administrator to find the one that works best for her center. Here are five questions to ask before joining a GPO.
1. Do I pay a monthly fee to participate in the GPO? Refuse double-dipping. GPOs make money from their contracted vendors based on the amount you spend on each vendor's contract. You should never pay a monthly fee for the GPO's contracts, because the vendor is paying the GPO a fee for every dollar you spend with it. If there's a fee in sight, move on with your shopping (see "A Sampling of Your GPO Choices" on page 60).
2. Are the vendors I use among the GPO's contracts? In your search for the best match, ask the GPO representative to give you a list of its current contracted vendors. Ask when each contract expires and what the GPO is doing to renegotiate that contract. Take the GPO's list and compare it to your current vendor list. If the GPO doesn't have 90 percent or more of the same vendors you have contracted, ask if it's negotiating or willing to negotiate to add that vendor to its contract portfolio. If the answer's no, continue shopping.
3. Are the GPO's contract prices with these vendors better than those you've negotiated on your own? This next compare-and-contrast step will tell you if you're saving or spending more with a GPO. First, identify the top 25 products to 50 products you purchase. Place them on an Excel spreadsheet and note the current price you pay per item. In the next column, insert the GPO's negotiated price for the same item. In the third column, note the difference between the two amounts. Share your findings with your prospective GPO to see if the products you're already buying at a lower cost can be renegotiated in their contract. If you've negotiated lower prices on your own, you should have the option to decline a contract within your GPO contractual agreement.
Why would you use a GPO if you were better than they are at negotiating the best price? The answer is simple: If you find the GPO saves you money on 95 percent of your center's high-volume items, then strongly consider signing on. If not, keep shopping.
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A Sampling of Your GPO Choices | |
The growing number of dedicated ambulatory surgery service divisions among the nation's best known purchasing organizations underscores outpatient surgery's value to group purchasing organizations. Here's a sampling of nine GPOs that focus on the outpatient setting.
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4. Are the GPO's contracts user-friendly? Consider ease of use in accessing the GPO's contracts. Can you simply sign the agreement and note what level of products you'll buy each year? Or do you have to sign the contract and enter all your required items with guarantees of monthly purchases? If you find the contract restrictive, continue shopping.
Before you sign on with a GPO, ask about its maintenance agreements and ongoing support services that will ease your administrative burden. Does the GPO provide education about new products on the market? Does it send you alerts on price increases and alternative products to try? Does it seek your opinion on contracts you need it to negotiate? What does the GPO service rep do for you on a weekly or monthly basis? Does he come to your office and compare your invoices to contract prices to assure you're billed correctly? Does the GPO provide online service and product information? Does it track the volume of goods you purchase on contract? Will it teach your staff how to use its network to obtain product information? If you answer "no" to most of those questions, keep shopping.
5. What other services and support does the GPO offer to keep costs down? You're looking for a business partner. Top GPOs can be key allies in helping surgery departments resolve some of your most critical issues, including contract versus non-contract utilization; high volume of purchase orders; cost control per procedure; commodity; pharmaceutical, implant and physician preference; lack of inventory management tools; lack of benchmarks for capital equipment cost and supply cost per case; lack of educated staff who understand supply-chain management and the purchasing process; added pressure on staffing shortages; and the essential need for standardization.
The best GPO provider for you is the one that delivers contract maintenance, cost management/price controls, assistance in developing wholesaler/distributor relationships and assistance in developing vendor/supplier relationships.
When a GPO provides these services, you've found a business partner that understands your supply needs, delivers cost management and has an IT system that keeps you updated on your supply contracts and pricing. Your GPO should also generate e-reports on contract utilization, product volume, audits and rebate tracking (if you have rebates coming).
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A Sampling of Your GPO Choices | |
The growing number of dedicated ambulatory surgery service divisions among the nation's best known purchasing organizations underscores outpatient surgery's value to group purchasing organizations. Here's a sampling of nine GPOs that focus on the outpatient setting.
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On the Web |
Click here to download a Sample Par Level Supply Sheet. |
Holding up your end
Choosing the right GPO is key to driving down supply costs, but so is the effort you make to service the contract on your end. There are four key components in decreasing your costs for medical supplies: Use the GPO that best serves your center's needs, educate your physicians and nurses about supply costs, purchase supplies by walking around, and develop par levels for every item purchased and stored in the center.
The best administrators manage by walking around, and the same is true for purchasing techs. Have them check par levels daily to assure you're not below the minimum inventory you keep on the shelf. Set up a standard day or days of the week to purchase most of your supplies. While there are always emergencies that require you to order off-schedule, insist on keeping the number of purchase orders to a minimum. Each purchase order costs you money in time, payment processing and recording of the payment once received.
Set a standard for having cases pulled 72 hours in advance. This practice helps decrease the volume of purchase orders and eliminates emergency shipping costs when something must be sent overnight. Teach your purchasing tech to run schedules for a minimum of seven days out and count the supplies (such as packs, tubing and implants) needed for each upcoming case. Then check the shelves for supplies on hand so that you only order the difference. Keep no more than 30 days of inventory in your surgery center at any time. This keeps your money in the bank and not gathering dust on your shelves.
One more detail is to develop par levels for every supply storage area. Teach your staff to stock by par level only. Audit their work to assure that they're not hoarding supplies. In the long run, hoarding actually costs the center money and can even generate waste.
Universal savings
In general, healthcare professionals primarily think of GPOs as valuable to hospitals and health systems. But the landscape has changed over the last two decades as outpatient facilities have gained enormous negotiating power. Whether you manage at a hospital's surgery center or at an ASC, your leverage is great and, through carefully focused shopping, your center can post valuable savings to its bottom line by signing with a GPO.
Once you select a GPO, continue to evaluate your contract by constantly asking for answers to the same questions you asked when choosing the company. If GPO vendor contracts change, or service to your center is diminishing, grab your basket and laundry list of questions and go shopping again.
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Advice From a GPO User |
In the year I've been involved with our GPO, I've saved anywhere from $1 to $40 per item on supplies. I've also tracked a 7 percent savings on IV catheters, 16 percent savings on IV tubing and a whopping 48 percent decrease on my cost of sutures. Like any service or piece of equipment you rely on at your facility, the GPO you choose must be user-friendly to be truly effective. That starts with the compatibility - both professionally and personally - that you have with the company's contact. Ask prospective GPO reps for a face-to-face interview because that's the only way to get a true feel for the chemistry you share. Conduct the interview at your facility; this will let you see who's willing to spend time with you, and that will provide an indication as to how committed the GPO is to servicing your facility. A rep who can't get to your facility for an interview probably won't be around much to answer any questions or concerns you might have during the life of the GPO contract. During these interviews, ask questions that will help you understand whom you'll be dealing with. I wanted to know the size and boundaries of a rep's territory. The closest rep of one company was two hours away and had to traverse the busiest interstate in Florida to get to our facility. How often would I see him? Not very often. I also wanted to know how flexible a company was with respect to getting me supplies in emergency situations. Par levels and pulling cases the night before surgery are all well and good, but we all know missing items are sometimes needed an hour before cut time. Could the GPO respond quickly enough to help me in that situation? I needed to know. The GPO's delivery schedule is also a key consideration. I found a GPO with a truck in my area five days a week, so I'm able to have supplies delivered whenever I need them. Along those same lines, find out where the company's warehouse is located and make sure it's local. Also, if the GPO doesn't have a product you constantly use on stock at a local warehouse, is it willing to change that setup to meet your needs? I found out which GPOs accept orders over the Internet and e-mail updates and changes to the product list. Staying current is essential, and you shouldn't have to work hard to get updates from companies. Finally, I asked how long the companies were in business and what other facilities they serve in my area. That gave me an idea as to which centers I could contact to get feedback from administrators about the company and its level of service. If a GPO isn't established in your vicinity, find out why. Treat the face-to-face meetings with GPO reps like job interviews, because that's essentially what they are. The reps make a commission on anything they sell to you, so make sure they earn their money. - Patrice Spera, RN, MS, CNOR, CRNFA Ms. Spera ([email protected]) is the administrator of the Tampa Bay Specialty Surgery Center in Pinellas Park, Fla. |
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