Thumbs Down To GPOs In Physicians' Offices

Edition: September 1999 - Vol 7 Number 09
Article#: 479
Author: Repertoire

Group purchasing organizations will rarely win any popularity contests with suppliers. So, perhaps it's not surprising that in a recent survey in Repertoire's Dail-E-News, most respondents pooh-poohed GPOs' efforts to crack the physician market. Now, were they giving us their honest opinions of what has occurred, or were they projecting their deepest wishes on the situation? You tell us.

Here's what we asked:

  1. GPOs have been trying to get into the physician market for years. In your opinion, how many stars would you give their efforts? (One star -- terrible; Two stars -- not bad; Three stars -- pretty good; Four stars -- outstanding.)

  2. If you were a confidante to GPOs, how would you characterize the opportunities in the physician market? (Terrible, not bad, pretty good, outstanding)

  3. Explain your answer.

  4. To the extent that GPOs have been SUCCESSFUL in penetrating docs' offices, how do you explain their success? What's the formula of the winners? (Explain in a sentence.)

  5. To the extent that GPOs have been UNSUCCESSFUL in penetrating docs' offices, how do you explain their failure? Where have they been striking out?

  6. Finally, how much does GPO participation in the physician market affect manufacturer/distributor relations? (Not at all, not too much, pretty much, a lot)

  7. Please explain your answer.

Reader Responses

One reader gave GPOs' efforts two stars and rated the opportunities in the physician market as ‘not bad.’ ‘Medicare reimbursements are a drag on physician practice earnings except for highly specialized practices,’ the reader says. Formula for GPO success in the physician market? ‘Cash in the MDs' pockets.’ And finally, GPO participation in the physician market affects the relationship between manufacturers and distributors ‘a lot,’ says the reader. ‘National account contracts conflict heavily with margin goals for both the manufacturer and distributor.’

One star, says another reader regarding GPOs' efforts in the physician market. Yet GPOs' opportunities are pretty good. ‘I know of only one [pure physician GPO] -- Lynx Purchasing Service. AmeriNet isn't just physicians. There are plenty of opportunities out there.’

‘I think that [physician office purchasing] is one of the fastest growing segments of health care because of the aging population and an increase in outpatient procedures and office surgeries,’ says one reader, who gave GPOs two stars for their efforts in this area. Successful GPOs focus on a specialty, such as oncology or dermatology, the reader says, while unsuccessful ones push a ‘one-size-fits-all’ program. Physician-office national accounts programs affect the manufacturer/distributor relationship ‘a lot,’ says the reader. ‘Unless your distributors have a way of handling small orders and the service requirements of a physician's office, it can be a real problem. Manufacturers are then left with customers who want the products, but can't get them. Distributors don't want labor-intensive customers. They are interested in volume and focus their sales and customer service efforts on larger customers.’

Two stars to GPOs for their efforts in the physician market, says another reader. Like several others, the reader believes the opportunities for GPOs are ‘not bad.’ ‘There is opportunity simply because of the sheer number of physicians and physician groups.’ The winning formula for GPOs is the same as that for manufacturers: ‘Our usual method of doctor office penetration is indirect, that is, through the docs' connection at the hospital or by way of trade show exposure.’ But GPO involvement in national accounts will have an effect on supply chain relationships. ‘Whatever a GPO does in the physician market insofar as pricing goes has a direct effect on prices offered to distributors -- usually a reduction in what the distributor currently pays.’

‘Terrible’ is how another reader characterizes GPOs' physician-office efforts. Yet the opportunities for GPOs aren't bad. ‘They have an opportunity, because many physicians' offices are part of hospital systems,’ says the reader. GPOs have been relatively unsuccessful in their efforts thus far because they have failed to ‘organize and communicate an effective message to a large audience,’ says the reader. GPO participation in the physician market shouldn't affect manufacturer/distributor relationships all that much. ‘Most hospitals that belong to a GPO will still purchase niche products directly.

GPOs' efforts among physicians haven't been bad thus far, says one reader, adding that there is a formula for success: ‘They must have a local presence via a GPO rep, who understands how [doctors] access supplies and can tailor a program that improves their current procurement method.’ Like another reader, this respondent says GPOs fail when they offer cookie-cutter solutions. ‘Docs' egos want to have a personalized solution which recognizes them as different,’ says the reader. As for the impact of GPOs on distributor/manufacturer relationships, the reader says it's been minimal, ‘because GPOs haven't penetrated enough to make much of a difference.’

One star, says another reader regarding GPOs' efforts in physicians' offices. As for opportunities, ‘There's not a lot of margin left to squeeze out of the [physician] market. Getting lots of small packages delivered all over the U.S. is a different business than a tractor-trailer to a hospital loading dock or stockless/JIT, for that matter.’ The formula for GPO success? ‘Marketing!’ says the reader. ‘Contract cost is only one aspect, but who in a doc's office is doing contract analysis? It's hard enough to get materials managers to comply. Market the programs in an easy-to-use format for non-professional purchasers.’ The ticket for successful GPOs is the same, namely marketing. ‘Again, you can't bring an acute-care-based program to the [physician] market and think it will be successful just because there are good contract costs,’ says the reader. And regarding the impact of GPOs' physician-office efforts on manufacturer/distributor relationships, the reader says, ‘Only a handful of contracts have gotten in the way of us providing competitive programs to our customers, and we have the largest physician-based buying program in the United States -- AMA PurchaseLink, with approximately $27 million in sales in 1998.’

Another ‘terrible’ rating for GPOs' efforts, according to one reader. It's a tough market, although ‘physicians may be more receptive in the future,’ the reader says. Successful GPOs make an effort to understand the physician culture, whereas unsuccessful ones fail to realize that ‘physicians don't act like hospitals.’ GPO participation in the physician market affects manufacturer/distributor relations ‘pretty much,’ says the reader. ‘Compliance is difficult for hospitals. It's worse for docs.’ Another one-star rating. But maybe that's to be expected by this reader, who calls the opportunities for GPOs ‘terrible.’ ‘It's a great opportunity if done correctly. But GPOs have no control over a doc's office and never will -- just as they can't control the local hospital. If it is a proprietary system, it may be different. But even then, it is difficult.’ GPOs' undoing is the fact that ‘they offer no value other than price. Nurses in docs' offices want assistance on a daily or weekly basis. GPOs can't offer anything but a price, and quite frankly, the price can be achieved elsewhere.’ As for the effect of GPOs on distributor/manufacturer relationships, ‘It can be dramatic, but it depends on the company. If it is Midmark, the GPO will cause huge issues.... If it is a small no-name physician item, it will be totally different.’

Wow! Four stars, says one reader, characterizing the efforts of GPOs in the physician market. Opportunities in the physician market are pretty good, says the reader. ‘Oncology practices are looking not only for ways to save on the acquisition of drugs and supplies, but for value-added services as well.’ The winners are those GPOs that can bundle great pricing through volume commitment and offer value-added services to the doctors' offices. Regarding the effect of GPOs on manufacturer/distributor relationships, the reader says, ‘GPOs are capable of bringing therapeutically equivalent drugs to the forefront by educating the physician practice on the financial ramifications of utilizing the therapeutically equivalent drug. GPOs are this secondary source of educating the consumer on behalf of the manufacturer/distributor, and for driving usage of the manufacturer/distributor drugs.’