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GPO & Healthcare Industry: Key issues and rise of Ecommerce

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by Satish Tiwari
29 June 2015

The Healthcare providers-GPO -Medical vendor's business model is an established model wherein GPOs are entrusted with taking cost saving decisions on behalf of their healthcare clients. This model of business has its share of appreciations and criticisms where new studies are carried out regularly to assess the impact of this model in healthcare spending's. Recent developments in ecommerce front and indications of a large ecommerce player entering this market are signaling arrival of pending disruptive innovation in this sector which has been operating more or less same model since early 1900's. The aim of this article is to discuss key issues faced in this business model and understand the potential disruption that ecommerce can cause in this sector. �Introduction Group purchasing organizations are vital wheel in the functioning of medtech industry where they have disrupted the models of sales reps maintaining close relations with physicians to maintain sales drive.� GPOs wield enormous bargaining powers with medtech companies for their client hospitals with aim of gaining bulk buy discounts for purchases on behalf of the hospitals. The GPOs act as trusted partner for hospitals wherein they are expected to take unbiased, cost conscious, fair value based decision on behalf of hospitals. According to a report[1] hospitals and nursing homes employing GPOs on an average have reductions of 10-18 percent in costs when compared to peers who do not avail GPO services. The role of GPO in medical technology can be assessed by a fact that there are over 600 GPOs with 96-98% of hospitals, private or community based availing their services and according to research1 GPO will generate savings of $167.9 billion to $370.0 billion during five year period (2013 to 2017) and $392.2 billion to $864.4 billion over ten-year period (2013 to 2022).   Author: Satish Tiwari

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