Group purchasing plan helping independents

Vendors offer discount to physician organization

A Fayetteville, NC, physician organization has been able to save its members big money by negotiating group purchasing arrangements with vendors.

Sandhills Physicians Inc., a multispecialty organization of about 250 physicians, has negotiated group purchasing arrangements for its members for almost everything needed for a medical practice from printed materials to medical malpractice insurance to laboratory services.

"Group purchasing has been very valuable in terms of financial savings," says Rita Graves, an administrator who initiated the group purchasing plan when she began managing the organization in the summer of 98.

Members, all of whom are physicians in independent practice, say they are thrilled with the results. For instance, one large physician group reported saving $800 on laboratory services the first month; a solo practitioner saved 50% on his first order of medical-surgical supplies under the new system.

"Vendors are very open to group purchasing because it brings them volume, and in the business world, everything, including price, is driven by volume," Graves says.

Before Graves began negotiating for the group purchasing discounts, she sent out a survey to each of Sandhills Physicians’ practices, asking what they were purchasing, how much they were purchasing in each category, and who their vendors were.

From the results of the survey, Graves was able to design a group purchasing plan. She found that 80% of the physicians used the same local office supply vendor and that the practices were spending a lot of money on office supplies. "That was a directive for us to talk to them and negotiate a discount."

For her first contacts, she chose the vendors that already were doing the most business with the physicians and those with whom the physicians were most satisfied.

Here’s how the program works:

Sandhills Physicians Inc. contacts each vendor, gives it information about the organization, and negotiates the discounts. Graves makes sure the vendors understand upfront that the organization does not mandate full compliance. "We tell them we’ll put the word out to the physicians, but we cannot force them to order from these vendors. These are independent practices, and if they don’t want to use the medical surgical supply company we negotiate with, that’s their privilege," Graves says.

Most participants buy from program vendors

However, she notes, almost 100% of the practices in the organization do choose to purchase from the vendors.

"If it didn’t happen immediately, they started hearing from the other doctors about the savings and made the decision to move their business. Our physicians understand dollars and cents and that it is more important and more difficult to keep costs down in a market when reimbursement is not going up," she adds.

The physician practices order individually and identify themselves as a member of the group in order to get the discount. The vendor ships directly to each practice and invoices each individually.

The discounts vary with each vendor, and the savings vary for each medical group since the large groups already had big discounts.

Sandhills Physicians Inc. has negotiated with 11 companies that supply medical and surgical supplies, office supplies, laboratory services, medical records storage, printing, medical malpractice insurance, office equipment, medical waste, pharmaceuticals, patient charting, and medical furniture.

"We were lucky in our community because we don’t have as much competition as some communities. It might not work as well in another community," Graves says.