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How Group Purchasing Can Boost Practice Revenue

Greg Freeman, January 17, 2013

"Reducing your overhead to the supply chain creates a dollar-for-dollar impact on the bottom line," Heath says. "When a practice is not profitable enough, the first solution that comes to mind is increasing revenue. But when you include the variable costs of increased business, the bottom-line impact is smaller than if you cut your costs. Every dollar you take out of your supply chain is a dollar of profit."

Joining a GPO is not the only step in minimizing purchase costs, however. Standardizing purchases also will go a long way toward saving money, Kitchens says. If the practice has multiple physicians or locations, each one should agree on the supplies to be used to minimize buying separate supplies for one physician or location.

"Standardizing the supplies for any category is going to yield significant savings because you will be able to leverage the volume to get a better price point," Kitchens explains. "Buying a smaller amount of five different suture kits won't give you that leverage, whereas buying a much larger amount of the same suture kit will make you a power buyer."

To get involved with a GPO, a physician practice can send a request for proposal to several GPOs. An alternative is to invite the organizations to visit your practice and evaluate how they might save you money, Kitchens suggests.

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