What is a Group Purchasing Organization (GPO)?

Introduction

A Group Purchasing Organization (GPO) serves as a conduit for businesses to achieve cost savings by leveraging collective purchasing power. In the dental industry, GPOs play a pivotal role in helping dental practices reduce their operational expenses. However, joining a GPO is not always a simple process, and may present challenges like limited options, contractual obligations, quality concerns, a lack of customizable services, upfront costs, delayed benefits, and even compliance issues. At Wood & Morgan, we want to demystify the process so that you can feel more confident in your decision to join a GPO. 

Let’s take a closer look at what is a GPO and why it is a worthwhile option for dental professionals to consider. 

What is a GPO? What Does It Accomplish?

A GPO is an entity that leverages the collective buying power of its members to negotiate with suppliers for lower prices on goods and services. In essence, a GPO accomplishes significant cost savings for its members. Acting as a mediator, it uses the principle of collective purchasing: the greater the number of businesses purchasing through the GPO, the stronger the leverage to negotiate decreased rates. A program administrator within the GPO manages these supplier agreements, ensuring they align with the needs and expectations of its members. As GPOs grow and adapt over time, they continually refine their strategies to provide increasingly beneficial outcomes for their members.

Types of GPOs

GPOs typically fall into one of three categories. 

• Horizontal GPOs: These organizations serve a wide range of industries by negotiating lower prices on goods and services that are commonly required across different sectors. For example, office supplies, cleaning services, or IT support. This type of GPO can be beneficial for smaller businesses that lack the purchasing power to obtain such discounts on their own.

• Vertical GPOs: Vertical GPOs specialize in a single industry, like healthcare, education, or dentistry. They leverage the combined purchasing power of members within that industry to negotiate discounts on industry-specific products or services. This can lead to significant savings on specialized equipment or supplies that may otherwise be expensive.

• Master Buyer GPOs: In this arrangement, one primary organization (the master buyer) enters into sizeable contracts with suppliers and allows other smaller organizations to buy from it at the negotiated prices. This structure is common in industries like automotive or manufacturing, where smaller companies can benefit from the purchasing power of larger entities.

Benefits of Joining a GPO

Joining a GPO can provide numerous benefits, including:

• More Favorable Pricing: Membership in a GPO often translates into savings at the item level due to combined leverage. From a legal perspective, the negotiated prices must comply with state and federal laws, rules, and regulations pertaining to price-fixing and anti-trust, making it essential for dental practices to ensure the GPO is a legitimate organization that complies with these rules and regulations. Be aware of fly-by-night organizations! 
• Time Savings: GPOs often handle negotiations and supplier relationships, freeing up valuable time for dental practices to focus on patient care. However, it’s crucial to have legal oversight of any agreements or changes to ensure they are in the best interest of the practice.

Exceptional Customer Service: GPOs can often provide better customer service due to their established relationships with suppliers. Legally, it’s important to ensure that the terms of service, as well as any guarantees or warranties, are appropriately documented and upheld.

• Additional Support: GPOs can offer extra assistance, such as resolving issues with suppliers. Having a legal team or advisor ensures that a practice’s interests are protected during these interactions, particularly if disputes or conflicts arise.

• Access to a Range of Suppliers: Membership in a GPO can give dental practices access to a wide range of suppliers they might not have had otherwise. From a legal standpoint, it’s important to vet the suppliers to quality has not been compromised.  

• Administrative Efficiency: GPOs can streamline purchasing and administration, reducing the workload for dental practices. Practices should ensure that their compensation arrangements with GPOs do not conflict with laws regulating the corporate practice of dentistry. 

In essence, while GPO membership can offer significant benefits, it’s crucial to also understand the potential legal implications. Dental attorneys can provide valuable guidance in navigating these complexities.

Why Dental Practices Should Seek Legal Guidance When Joining a GPO

Legal guidance is crucial for dental practices considering joining a GPO. Dental attorneys can assist with negotiating supplier contracts, understanding the obligations and rights associated with GPO membership, ensuring compliance with relevant laws and regulations, and navigating any potential disputes or conflicts that may arise.

Conclusion

GPOs can offer significant benefits to dental practices, from cost savings to streamlined operations. However, these advantages come with legal considerations. Dental attorneys play a vital role in helping dental practices navigate these issues, ensuring that their GPO membership aligns with their business goals and legal responsibilities.

Are you considering joining a GPO? Let our experienced dental attorneys guide you through the process. Contact us today to learn more about our services and how we can help ensure your GPO membership benefits your dental practice while maintaining legal compliance.