Although group purchasing organizations (GPOs) have been around for over a century and are common in the medical industry (98% of hospitals in the US are belong to a GPO), they have only begun to gain traction with dentists over the last few years. With many private dental practices looking for ways to reduce overhead costs and stay competitive in an increasingly DSO/corporate dental market, GPO’s can provide significant savings opportunities and practice support.
Below are answers to common questions about GPO’s and information on how they can help dental practices lower costs and increase profitability:
What is a Group Purchasing Organization (GPO)?
A GPO is an organization that brings multiple businesses within a particular industry together to negotiate contracts with shared/commonly used vendors on behalf of the group. During negotiations, the GPO leverages the collective buying power of the group so its members can receive volume discounts (think Costco or Sam’s Club) and other benefits they could not have achieved alone. As the group grows, the GPO continues to negotiate new vendor agreements based on the groups higher purchasing volume, which means increased savings for the group.
Members of a GPO have the added benefit of enjoying lower, locked-in pricing for the duration of the contract, rather than trying to manage price fluctuations throughout the year or relying on limited-time promotions to reduce expenses.
How can GPO’s support independent dental practices?
To run an independent dental practice, private practitioners must not only provide high-quality care, they must also oversee the business needs of the practice. At times, finding a balance between the two can feel overwhelming.
GPO’s offer private practitioners much needed support for the business side of their practice, so they can focus on clinical excellence. Rather than spending their valuable time price shopping or trying to navigate vendor contracting on their own, GPO’s do the leg work for dentists, staying up to date on innovations and trends within the industry, reassessing marketing pricing and managing all vendor contracts to ensuring members are receiving the best pricing available for supplies, equipment, lab, and many other services such as IT support, employee benefits and billing.
Outside of supplies and equipment, what other services
are offered through a GPO?
In addition to reducing costs of general office supplies and equipment, GPO’s offer lower, contracted pricing for purchased services which can include:
- Banking and financial services
- Billing support (including credit card processing, insurance credentialing and collections services)
- HR and Employee Benefits
- Consulting Services
- Legal/Liability Coverage
- Continuing Education & Training Programs
- Patient Programs (such as dental savings plans)
- IT/Technical Support
- Website Development
Does joining a GPO impact individual practice autonomy?
A GPO’s primary goal is to obtain the best contracted pricing for its members and continue to grow, so pricing continues to improve over time.
Dentists are still able to order directly with each vendor and are free to choose the products, equipment and services they want utilize at their practice.
GPO contracts with preferred vendors offer practices lower pricing and other exclusive benefits, however, members are not required to only utilize products or services from contracted vendors. Members can take advantage of as much or as little of the group benefits as they want, however, to achieve the highest level of savings possible, utilizing the group contracts is recommended.
How does a GPO make money?
GPO members continue to purchase from each vendor directly but are now able to access their GPO contracted price, while the GPO acts as the contract administrator.
To do this and to enable a GPO to continue to grow their offerings, they are primarily funded by administrative fees (typically, a percentage of the revenue generated by members over a specified period of time) from each contracted vendor, membership fees, or a combination of both. For example, Independent Dental Solutions (IDS) is a no-fee buying group whose merchandise and equipment program saves members between 20-30% on average each year and is funded by administrative fees from vendors, rather than membership fees.
Are there disadvantages to joining a GPO?
No two GPO’s are exactly the same – some require membership fees to join, some do not, each maintains contracts with its own group of vendors and depending on the size of the group, contracts and the associated savings may vary. Researching the available options will help you select the GPO that best supports the needs of your practice.
Once you’ve identified which GPO to join, there are very few disadvantages to participating in a GPO. They offer significant savings opportunities on a wide range of supplies and services for your practice while allowing you to maintain control of your practice.
To learn more about Independent Dental Solutions and how GPO’s can support your practice, contact [email protected].