New and renewal healthcare group purchasing contracts are signed every day by our nation’s hospitals, systems, and IDNs on every level of the supply chain from simple products to service contracts to major capital equipment and everything in-between. But, are we really vetting them or just going through the motions because of time constraints? It’s our contention that more vigorous GPO new and renewal contract vetting can save healthcare organizations hundreds of thousands or even millions in additional savings annually. You just need to change your hospital, system, or IDN’s new and renewal GPO contracts’ protocols to do so.
Revolutionize Your New and Renewal GPO Contract Vetting with These Straight-Forward Tips
Traditionally, new and renewal GPO contracts are reviewed by a healthcare organization’s value analysis teams for their cost effectiveness, appropriateness, and standardization opportunities. To enable your healthcare organization to yield additional savings in the range of an additional 9% to 17% (yes-additional!) on your new and renewal GPO contracts you need to:
- Perform a Value Analysis Study: This requires that your VA teams first understand the functional requirements for the product, service, or technology GPO contract being offered, then seek out a lower cost alternative that is superior to the contract offering. This could mean eliminating some of a product’s features to lower its cost, eliminating it altogether, or changing manufacturers. In short, don’t let a new or renewal GPO contract offering hold you back from looking for lower cost options vs. signing on the dotted line just because your GPO asked you to.
- Benchmarking with Your Peers: It is important to benchmark every new or renewal GPO contract that comes across your desk searching for lower cost alternatives. What better way than to see what your peers are doing with the same or similar product, service, or technology. We do this automatically for our clients which provides them with evidence (pro or con) to properly vet their new and renewal GPO contracts. The results will surprise you!
- Establish Evidenced-Based Clinical Evaluations: A clinical evaluation is performed on a new product, service, or technology to ensure that it is safe, effective, and confirms its advertised benefits. More importantly, you must have a control group that uses another product, service, or technology that you can compare the results to ensure that the clinical evaluation is scientifically relevant. Is this how you conduct your clinical trials? If not, you should write a new protocol to do so!
- Conduct a Utilization Study: The acquisition cost of a product, service, or technology is only about 10% to 15% of its lifecycle cost. 75% to 90% of the lifecycle cost is how it is employed or utilized at your hospital, system, or IDN, and 10% is the cost disposition of the commodity at the end of its lifecycle. Therefore, you need to focus your new and renewal contract vetting on what product, service, or technology provides the best utilization cost over its lifecycle.
Use Your New and Renewal GPO Contracts as a Catalyst for Change
We teach our value analysis practitioner students that when they receive a new or renewal GPO contract, it should be a catalyst for change vs. approving or renewing a GPO contract (i.e., maintaining the status quo) without first going through the four-step vetting process we just discussed. This can almost guarantee you double-digit savings on all your new or renewal GPO contracts going forward, because you won’t be following the pack and just signing on the dotted line.