Stop the Madness with Your GPO Contracts
I have been told by value analysis managers throughout the country that they spend 96% of their time evaluating new or renewal GPO contracts, which isn’t value analysis at all. When I tell them that there is only 1%, 2% or 3% savings to be achieved with their GPO contracts and, on average, 26% to be saved on any value analysis project they conduct, they soon understand that they are spending their time on the wrong side of the supply chain equation – price!
The next question I’m always asked by value analysis managers is, “How do I STOP THE MADNESS with my GPO contracts, so that I can spend the required time on my value analysis projects?” Here’s three strategies that I tell them to employ to get organized, prioritize and optimize their time to save even more:
- Start a campaign with your peers to insist that their GPOs write contracts with 3, 5 and 10 year lifecycles – not one year terms. Not only will this tactic reduce the number of GPO contract renewals, but will enable GPOs to lock in their prices over the long-term, since inflation is the real threat to price stability in the healthcare marketplace. For example, Southwest Airlines has not been affected by the current energy crisis since they locked in their fuel prices over the long-term. Your GPO can provide this same price protection for you!
- Don’t change your manufacturers just because there is a new GPO contract being offered by your GPO, because the cost of change will usually cost your more than the contract savings being offered. You can do this by searching out comparable contracts with other GPOs (yes, you might need to join more GPOs to do so), so that you can continue to purchase from your preferred manufacturer at competitive prices. Your justification: Contract churn isn’t and will never be a cost effective way to do business.
- If you are a large enough healthcare organization to do so, write long-term custom contracts with your GPOs assistance, so that you can lock in your prices for the foreseeable future.
I’m sure you can think of a few more and even better strategies to organize, prioritize and optimize the time you are now expending evaluating your GPO contracts now that I have opened Pandora’s Box. It’s my opinion, that if we don’t STOP THIS MADNESS it will have a stifling effect on your supply chain effectiveness in the sort and long-term.
If you agree or don’t agree with my take on this topic, I would love to hear your comments on this pressing problem.
Your Partner in Innovative savings,
Bob Yokl
President & Chief Value Strategist
Strategic Value Analysis® In Healthcare
800-220-4274
P.S. If you would like more powerful savings and quality ideas like this one I would recommend that you sign-up for our “no cost” weekly Savings Beyond Price™ e-Newsletter at www.Strategicva.com. You will also get a copy of my e-book “Your Target Blueprint for Supply Chain Management Success”, as a bonus.
Comments
Leave a Reply
