Cost Savings Problems Aren’t Solved By Changing your GPO

Cost Saving Problems Strategies

All healthcare leaders are looking for solutions to their organization’s cost savings problems.

Changing your GPO is a popular strategy. However, doing this alone won’t solve your cost challenges. 

These two key strategies will help your hospital to resolve your cost savings issues:

1. Negotiate a direct contract with your vendor.

Every hospital has specializations, buying power, negotiating ability and pricing insights.

All of these are areas health systems can focus on to liaise directly with your vendors.

Healthcare leaders can work with vendors to meet their individual cost management needs.

We recommend five starting points for negotiations:

  • Your hospital must analyze and discuss every single line item detail during vendor negotiations. This will identify the best cost savings.
  • Vendor list prices change every year. This makes discounts irrelevant.
  • We recommend all hospitals avoid monthly minimums in contract renewals.
  • Don’t allow prices to auto-renew.
  • You can negotiate agreements at any time. They do not have to be in or out of term.

2. Physician cost awareness.

The OR accounts for up to 70% of hospital revenue and approximately 50% of its costs.

Involve physicians in the supply chain and cost process to optimize cost savings.

Encourage physicians to understand the cost and profitability of Physician Preference Items (PPIs) to significantly reduce costs.

Price transparency is an important element in vendor negotiation for PPIs.

Costs decreased by 6.54% in one study when cost data was presented to physicians.

Personal experience of manufacturers, clinical outcomes and their relationships with vendors can all influence physicians.

Physician cost awareness is critical if your hospital wants to develop a sustainable cost reduction strategy. It will also ensure high-quality patient care.

Partnering with an experienced healthcare consulting provider, with a proven track record in cost reduction, helps your hospital to find these key cost savings.

Reach out at to discuss your cost savings goals and how we can support and accelerate cost savings opportunities in your organization.

Lisa Miller

Lisa Miller

Lisa Miller is a consultant, speaker, and podcast host. Her consulting firm, VIE Healthcare, has provided services to over 1,000 hospitals and organizations since 1999.

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