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Blog Post Written by: Bob Lavoie, Vice President and Head of L.E.K. Consulting’s global MedTech Practice.
Unprecedented cost pressures on hospitals will play a pivotal role in driving GPO growth, according to L.E.K. Consulting’s Strategic Hospital Priorities Study. L.E.K.’s third annual study of nearly 200 senior hospital decision-makers tracks changes in hospital strategies and purchasing trends. More than 60% of U.S. hospital executives surveyed expect budget increases in 2012, a trend that is expected to continue during the next five years. But despite growing budgets, 80% of administrators asked are continuing their aggressive supplier negotiations in an effort to manage costs – and the use of GPOs will continue to play a central role in their procurement strategies.
GPO Usage Trends Nearly 60% of survey respondents are increasing their current GPO use this year – which is an increase since 2011. And this percentage is projected to continue to grow during the next five years, according to survey participants. How hospitals use GPOs will vary significantly based on their size. Small hospitals with less than 100 beds are planning the largest increase during the next five years – nearly 85% of those surveyed projected increases. Smaller hospitals anticipate using GPOs more than their larger counterparts because larger hospitals are more interested in partnering directly with manufacturers of medical devices, and can use their size to negotiate favorable contracts with many key suppliers. The breadth of products purchased via GPOs, particularly by smaller hospitals, is also expanding beyond low-cost, high-volume supplies and is increasingly used to purchase higher-priced medical equipment.
That said, many larger hospitals still plan to increase their GPO use, but at a lower frequency. These larger hospitals are finding GPOs valuable for price benchmarking as a starting point for direct negotiations with their suppliers. So even if larger hospitals aren’t using GPOs with the same frequency as smaller hospitals, there is an opportunity for GPOs to play a valuable role in their procurement process.
Because hospital needs can vary significantly based on bed size, successful GPOs will focus on providing tailored services to address the pronounced differences in the procurement strategies and requirements of their customers.