The New GPO Landscape and its Impacts on Healthcare

A Q&A with Armin Cline, Vice President of Commercial Contracting with the Minimally Invasive Therapies Group of Medtronic

A: The MedAssets merger, combined with the VHA-UHC Alliance known as “Vizient,” is one of many signs that a shakeup of the established model of big purchasing is under way. It could even signal that disruptive business models are the new norm in the GPO space. And while there will undoubtedly be bugs to work out like integrating models, processes, and rebranding, providers could enjoy real benefits from the new GPO world.

A: When I started in this space 27 years ago, there were about two dozen GPOs that we recognized as national GPOs. Today there are five.

Now, I don't think we'll see completely new models emerge in the future — foundation contracting will continue to be important for providers. And GPOs will continue to contract on behalf of their members, who expect to receive fair pricing for quality products and services. I suspect:

• Contracting models will change and increase
• Organizations and individuals that weren't part of the mix three decades ago — including provider administration and clinicians — will command a more prominent seat at the decision making table
• Geographic coalitions will continue to form or merge, and their size will increase
• Data will be utilized to make informed contracting decisions

My hope is much of that will weed out inefficiencies. And device manufacturers will deal with fewer levels of bureaucracy to achieve the same results or better, as standardization is best promoted in the GPO environment.

A: I think the best thing GPOs do is help promote value and transparency for the customer. Value, like beauty, is in the eye of the beholder. But GPOs that define, find, and reward value will be best positioned to succeed going forward.

Big data is critical to defining value. Each of the national GPOs are developing or continuing to build their databases and analytic capabilities. These rich databases gleaned from their diverse membership base can be powerful tools to assess and learn from real-world experiences — and understand value in new ways. This did not exist just a few years ago.

The data GPOs aggregate will be used to help their members identify best practices, make value-based decisions, understand and improve outcomes, and help achieve the goal of supply chain excellence. It's a lofty goal. But I believe GPOs can help their members deliver better, more cost effective healthcare if they partner with their members and suppliers on data analytics. I think it's understood that providing value beyond price is where relationships truly grow and results improve.

A: The GPO of the future will have a product contracting entity, but that will be a fraction of their business.

Again, the transformation we've seen thus far has been due, in large part, to the rise of the big data provider. Those in the product space mine big data sets from our end-users — to add value to our “storefront” that is the mega-mall of the GPO. It helps tie outcomes directly to product experiences, which increases our value to customers.

Pretty soon, a price reduction won't cut it. Value discipline will.

And I believe those in the C-suite are correct in their thinking about the evolution of the GPO model in this new environment: When we collaborate with other like-minded organizations to share data, best practices, and solutions to common problems, we can reduce costs and improve outcomes.

That will make our noble industry better. And all of us, as healthcare consumers (i.e., patients), will be the beneficiaries. I'm sure the successful GPO of the future will continue to play a significant role in this evolution.

Armin Cline is Vice President of Commercial Contracting with the Minimally Invasive Therapies Group of Medtronic.