Testing the GPO waters: as competition for your business continues to increase, it may be tempting to abandon your group purchasing organization for a competitor. However, it's important to consider whether the savings presented can actually be realized

Healthcare Financial Management, June, 2004 by Martha A. Dula

6. Roll date. Find out when the contract roll for the GPOs will take place, and make sure this timing is factored into the analysis. Any market basket analysis presented for a program that is anticipating a contract roll within six months should be considered suspect and should, at a minimum, be adjusted for the roll.

7. Conversion cost. When determining cost for the conversion, ask your distributor what the specific price increase will be. In some cases, it will cost at least $17,000 per program to change GPOs. This money will be reflected eventually in the overall cost to your facility.

8. Staffing cost. Find out what the cost of the conversion will be in terms of your staff hours. Conversions do require an investment of time, and this factor should not be overlooked.

9. Hidden dues. Beware of hidden dues or payments involved in the proposed new GPO. If any of these expenses apply, determine whether they have been factored into the analysis.

10. Distributor cost. Make sure the distributor's cost plus any agreed-upon fee or rate of profit was factored into the audit analysis, and make sure that achieving the desired price does not depend on changes in the distributor's payment terms or deliverables that you cannot live with.

11. Previous commitments. Be aware of current commitments to manufacturers that will detract from the proposed savings.

12. Implementation timing. Obtain guarantees on any implementation time frames that have been factored into the analysis.

13. Generic savings. Relative to pharmacy, if a sole-source product has recently gone off patent and the generic substitute is now available, verify that the savings of the generic substitute against the sole-source product is incorporated into the audit analysis for all bidders or GPOs.

14. Shortages make sure the savings forecast is not based on items that are back-ordered or unavailable in times et specific drug shortages. In times of shortages, the pharmacist will have no other choice but to order a more expensive substitute.

15. Missing products. Insist on line-by-line data comparisons. A bottom-line total or even subtotal on a group of products will not provide enough information to determine whether the GPO has eliminated products that it does not have contracts on or that would require therapeutic substitutions for comparison. Savings forecast on the GPO's presented group of products may be lost if volume usage is high on some of these "missing" products.

16. Product comparison. Do not allow contracts that you might hold directly with a manufacturer to be omitted from the analysis. You need to understand the bench depth and the GPO's ability to penetrate your particular mix of products. To do so, you will want to compare matches between products for which you hold direct contracts with the manufacturer and those available under the GPO. Also important are comparisons between like products or potential substitute products. It is important to see areas where the GPO lacks a contract or has obtained an alternate product at a lower price.