The future of any facility requires that – “your facility must own their Supply Chain and that begins with how you design your facility.” For numerous decades most, if not all facilities, have been told – “I have your back and what we offer will save you money when you purchase your materials using GPOs.” This has made most facilities very lazy with untrained staff.
The following potential drawbacks should be considered and why such contracts can soon become very challenging. Such conversations are not discussed but all too soon your soon realize there really is not a cost savings and you are limited to the choices to purchase. These are just a few:
- Limited Product Choices – in a complex ecosystem of procurement, organizations are constantly faced with critical decisions for acquiring medical supplies and services in a cost-effective manner. Choice is primarily limited within the GPO system and therefore, price controlling to only purchase certain manufacturer goods are in play. Independent purchasing of goods has always led to competitive pricing, but it is easier – according to the GPOs to allow them to develop and maintain that negotiation point.
- Pricing Disparities – most knows about the concept of
“wholesale” vs “retail” purchasing. The GPO needs to negotiate pricing from
suppliers in a manner to allow their profit margin to be maintained. Simply,
purchase low and sell higher to the facility is common. A band-aid costing
$0.05 now cost $1.00/per unit, thus driving up the cost to the next level – the
patient who requires such products.
- Conflict of Interest – in addition to pricing
disparities, we must talk about conflict of interest. Typically, the GPO
negotiates product that only serves to better their bottom line and not what is
good for the facility they are selling to. This profit margin and potential mark-up,
again increases per cost and decreases the quality chosen. GPOs often receive
fees or rebates or suppliers but not pass those saving to the end-user. This
financial only relationship builds loyalty between GPO and suppliers and not
those who they are in business to support – the end user.
- Compliance and Transparency Issues – compliance normally reflects “those
who write the rules and truth has slowly become questionable in many areas.”
Therefore, transparency reflects “what they want to tell.” Their made
purpose is making money, even at the expense of those developed partnership that
suggests a better outcome for the end-user. Because of this condition: limited
customization is available, membership fees become a moving target, and quality
of goods purchased become the downfall through built in short-cuts experienced.
This complexity can make it difficult for hospitals to navigate compliance
requirements at the same time - ensure they are adhering to contractual
obligations, which lessens quality at the same time increased cost.
What not discussed – It soon was realized, during COVID -- the reality of Supply Chain limitations soon appeared, and many today have not learned anything from such shortages. The only way to minimize and increase your operation is “own your own inventory levels and take back control over your future” and that begins at both the CEO and staff level through better communications in designing. Warehousing of inventory is a must, and you need a professional to help you and your staff "man-up" to meet the demands now yet discovered to see true savings; not to mention better efficiency.
There is hope that will allow your facility to regain ownership of products used and the first step is designing your system better and, that begins during project-phasE-DESIGNING.
Tomorrow is but a promise! It will take a partnership you can trust that will lead you forward - to fix both todays and tomorrows problems.
Contact us to discuss and allow us to partner with you!
