Unsung Heroes of Health Care Reform?: $36 Billion in Annual Savings Linked to 'Group Purchasing Organizations' in Major Survey of Over 400... (Schneller with data collection by Mathem...)

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Unsung Heroes of Health Care Reform?: $36 Billion in Annual Savings Linked to 'Group Purchasing Organizations' in Major Survey of Over 400 Hospitals

Date:4/29/2009

Schneller with data collection by Mathematica Research, Inc. finds the following results from GPOs as part of the $36 billion in projected direct price savings:

$6.8 billion for hospital pharmaceuticals;
$8.5 billion for medical/surgical purchases;
$1.9 billion in attributed savings in the $10.4 billion cardiology implant marketplace (either directly or indirectly by providing members with GPO purchased goods or reference pricing from directly engaging the marketplace); and
$840 million in attributed savings in the $7 billion dollar orthopedic implant marketplace (either directly or indirectly by providing members with GPO reference pricing for directly engaging the market).

Other savings arising from the work of GPOs include over $1.8 billion in reduced hospital purchasing costs by eliminating the need for hospitals to comprehensively carry out strategic sourcing, contracting and other key GPO activities for inpatient pharmacy, general medical products, orthopedic products, other clinical products and housekeeping products.

The study by Dr. Schneller makes it clear that there are further potential savings that could be achieved through wider use of Group Purchasing Organizations. According to the new report, over half of U.S. hospitals and systems use GPO pricing as the benchmark for starting their own negotiations for physician preference items - the most expensive items that they purchase. Similarly, over half report the desire to improve GPO contract penetration.

The need for health care cost reductions at the hospital level is now urgent in the U.S. Over half (54 percent) of hospitals had negative total margins during the first quarter of fiscal year 2009, including 80 percent of hospitals with 500 or more beds, according to a nationally representative

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Unsung Heroes of Health Care Reform?: $36 Billion in Annual Savings Linked to 'Group Purchasing Organizations' in Major Survey of Over 400...(Schneller with data collection by Mathem...),Health