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What is a GPO?

A group purchasing organization (GPO) is an entity that helps organizations in various markets realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors. The Veterinary Club (TVC) is a national GPO focused exclusively on the veterinary market.

How does group purchasing work?

TVC works with veterinary organizations to determine which vendors are most appropriate from a clinical and service standpoint. Once a decision is made, GPOs work to negotiate contracts with manufacturers, distributors and other suppliers.

After a group purchasing contract is created, it is still up to the veterinary organization to decide which product is most appropriate in each circumstance and make the most appropriate purchase. GPOs do not purchase or buy any products. They negotiate contracts that veterinarians can use when making their own purchases.

How is group purchasing used in the veterinary market?

The veterinary market is highly fragmented with over 70% of the practices operating as either a sole practitioner or a small practice with less than 3 veterinarians on staff. This fragmentation has benefited the manufacturers and distributors by allowing them to continue to reap higher margins as a result of unleveraged purchasing from independent practitioners, small practices, hospitals and teaching centers.
Other healthcare providers, like hospitals and physicians, use group purchasing to obtain the right products at the very best price. Overall, about 72 percent of purchases that hospitals make are done using GPO contracts.

What types of services do GPOs provide?

Organizations from all industries are increasingly relying on GPOs to help manage the complexities of contracting. Many GPOs offer various solutions to help manage their purchasing.

GPOs provide a unique mechanism for organizations to coordinate not only their purchasing power, but also their brain power. By drawing upon their broad-based memberships, GPOs give individuals from similar organizations a pathway for evaluating new products and services.

What are the benefits of group purchasing?

Because GPOs represent many facilities, they are able to offer economies of scale to the customers that they serve. By aggregating the purchasing power of many organizations, GPOs help balance the negotiating equation between purchasers and vendors.
GPOs produce substantial savings by removing costs across the entire supply chain and not by simply contracting for the cheapest products. GPO customers receive financial benefits through up-front pricing discounts and reduced administrative costs.

In addition, GPOs provide valuable cost-avoidance savings to organizations by helping them standardize and streamline their purchasing.

Do the suppliers charge me more by going through TVC instead of direct from them?

Absolutely not - you will actually pay less than going direct to a supplier. Since TVC is able to leverage the purchasing power of all of our customers, suppliers see value in partnering with us to offer our customers a lower price.

What types of entities utilize group purchasing services?

All types of organizations use group purchasing. Individual practitioners, small practices, hospitals and teaching facilities.

How are GPOs financed?

GPOs rely, in part, on fees paid by vendors to finance the services the GPOs offer to the veterinary organizations. These administrative fees are generally based upon the purchase price that the organization pays for a product purchased through a GPO contract. The fee is paid when a GPO's provider-member utilizes a GPO contract.

What is the value in allowing GPOs to earn administrative fees from vendors?

The value in GPOs earning administrative fees is that it allows veterinary organizations to dedicate more financial resources to the direct provision of patient care.
 

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