Most hospitals outsource supply procurement to purchasing alliances, or group purchasing organizations (GPOs). Despite their early 20th century origin, we lack both national and trend data on alliance utilization, services, and performance. The topic is important as alliances help hospitals control costs, enjoy tailwinds from affiliated regional/local alliances, and face headwinds from hospital self-contracting and criticism of certain business practices.
We compare the utilization, services, and performance of alliances in 2004 and 2014.
We analyze alliances using two comparable surveys of hospitals. We use significance tests to assess changes in alliance utilization, services, and performance (e.g., cost savings). We also assess the use of regional/local alliances affiliated with national GPOs.
Purchasing through national alliances has somewhat diminished. Over 10 years, hospitals have diversified GPO memberships to include regional/local alliances (many affiliated with their national GPO) and engaged in self-contracting. At the same time, hospitals have increased purchases of many categories of supplies/services through national GPOs and endorsed their value-added functions and increasingly important role. Hospitals report greater satisfaction with several GPO functions; performance on most dimensions has not changed.
National alliances still play important roles that hospitals find valuable.
Purchasing alliances continue to play an important role in helping hospitals with both cost savings and new services. Their growing complexity, along with growing use of self-contracting, poses managerial challenges for hospital purchasing staff that may require greater hospital investment.
Lawton R. Burns, PhD, MBA, The James Joo-Jin Kim Professor, Department of Health Care Management, The Wharton School, Philadelphia, Pennsylvania. E-mail: burnsL@wharton.upenn.edu.
Allison D. Briggs, BA, BSPH, is Doctoral Student, Department of Health Care Management, The Wharton School, Philadelphia, Pennsylvania.
This research was supported by a grant from The American Hospital Association.
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The authors have disclosed that they have no significant relationship with, or financial interest in, any commercial companies pertaining to this article.