1. “Driving Down Construction and Operational Costs: How a GPO Does It”

2. Agenda Introduction / Who are the GPO’s GPO Structures
GPO Contract Characteristics
GPO Contracted Suppliers
Doing More With Less
Operations Support
Capital Impact
Capital Construction Project Opportunities
Next Steps

3. Group Purchasing Organizations in the Marketplace
A group purchasing organization (GPO) is an entity that helps healthcare providers-such as hospitals, nursing homes and home health agencies realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors.
These are the four leading GPO’s in the healthcare world. US Communities is out there in state and local government support. Many states have their own GPO’s to support state needs. The GSA is by far the largest GPO in America.

4. GPO Structures Can be privately held or a public company.
Members of GPO’s typically have some ownership relationship with the GPO.
There are “committed GPO’s”, where members must use the agreements.
There are “Free Choice GPO”, where members have a choice on whether or not to use the GPO portfolios.
Contract use compliance is the key.
GPO contracts are available for use by the members and their affiliate members, which may not be owned by member.
GPO’s support Healthcare (acute / non-acute), Colleges & Universities, K-12 and Business & Industry
In the Healthcare Industry, every hospital has on average 2.3 GPO’s to pick from
Three key words: Commitment, Compliance and Audit

5. Committee role – the voice of the member
Provide aggregate/ contract level data
Participate in value analysis discussions
Develop and approve award criteria
Act on committee awards within own organization
Support award decision with all Members
Member requirements
Supplier long list
Supplier short list
Award decision
Action
Committees make KEY contracting decisions and are involved in every step
Make group purchasing agreement award(s) that provide the best overall value and drive strategic initiatives on behalf of the alliance or, in rare cases, make no award
Review, add to and approve the long list of qualified suppliers
Review and approve the short list of qualified suppliers

6. GPO Contract Characteristics
Commodities
Capital
Purchased Services
Pricing structure will include tiered pricing, the more you buy, the deeper the discounts.
Contracts also allow for local negotiation or competitive bidding.
Allow for aggregation across multiple entities within a system.
Contracted suppliers pay a % fee to GPO based upon sale to GPO members.
Fee payment is meant to be for general, selling & administrative expenses (GS&A). The opportunity for the supplier is to save GS&A expenses when being a part of a GPO.
Contracts are multiyear, typically three to five years.
GPO’s share fee with member

7. GPO Contracted Suppliers
Suppliers may sell direct to the members.
Suppliers may sell to the members through authorized distributors or dealers.
Third parties can buy off the contract on member’s behalf, so the member gets the benefit of sale recognition.

8. Doing More With Less

9. Healthcare Facilities Management
Facilities related expenses makes up 5% of the total healthcare enterprise budget
Every $ saved goes straight to the bottom line.
$1 saved in facilities operations equates to the margin derived from $25-$40 in patient revenue.
GPO’s can help with cost reductions in operations and capital construction projects

10. Water Treatment
Uniforms, Mats, Microfiber
Bulk Oxygen
Floor Care
Infection Control
Housekeeping Products
Paper & Janitorial Supply Distribution
Paper Towels & Tissues
Energy Services
MSDS Management
Can Liners
Mobile Storage Services
Emergency Response Services
Laundry Products
Waste Management
Parking Management
Lawn Care / Snow Removal
Pest Elimination
Moving Services

11. Capital Impact

12. Healthcare Construction Project Opportunities
Medical Equipment
IT & Telecom
Furniture,
Fixtures &
Equipment
(non-clinical)
Consultant Fees
& Contingency
Project budget
60%
Project budget
13%
Project budget
10%
Project budget 7%
Project budget
10%
Contract categories 17
Contract categories
118
Contract categories 9
Contract categories 9
Contract categories
National contracts 49
National contracts
379
National contracts 23
National contracts 38
National contracts 2

13. We bring contracts with over 400 suppliers of materials and equipment that goes into our members’ construction projects
Now, Let’s look at the entire portfolio and see how you currently use Premier suppliers

14. Contract implementation – Industry relationships
The construction industry is driven by relationships
Incorporating GPO contracts involves creating awareness and building the process to implement contracts during a project
This involves working with all parties during a project
Understanding the relationships and industry model is imperative to the success of implementing agreements during your project

15. Construction contracts
Healthcare Provider
GPO PORTFOLIO
Construction contracts
architect/engineers
& equipment planners
Contracted national supplier
General Contractor or
Construction Manager
Local distributor
Local
subcontractors
Connecting the dots…

16. What is Your Goal?
group purchasing organization (GPO) is an entity that helps healthcare providers-such as hospitals, nursing homes and home health agencies-realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors.

17. How to Begin?
Audit your present utilization of multiple categories in facilities, construction and EVS support services.
Determine where you have standards based upon quality, service and price
Determine where you do not have standards and establish your parameters for quality, service and price.
Match your standards to the GPO portfolio offering and determine the best quality and the best service for the best price point through aggregation.
It requires a commitment to change, diligence and discipline on the part of management, staff, consultants and the contractors

18. Jim Venker, AIA Senior Director, Facilities, Construction and Environmental Services