Industry Structure of Group Purchasing Organizations

Abstract

A large majority of U.S. hospitals procure their supplies through Group Purchasing Organizations (GPOs). These organizations negotiate vendor contracts that are intended to save money for the hospitals and other healthcare providers, for example, nursing homes. The genesis of GPOs can be found in the common and quite essential activity where a number of small organizations combine their purchasing power to gain buying leverage on their suppliers to negotiate for lower prices and other discounts for related services. Buying cooperatives, or collective buying initiatives, of this type can be found in a number of industries especially when they are in the early stages of their growth.