I’ve met many GPO equipment planners, purchasing directors and various other employees connected to Group Purchasing Organizations. All are looking to accomplish the same thing: to provide quality products for their constituents and earn a living for themselves and their companies. To these ends they’ve been effective over the years. The GPO strategy makes sense for many different products that medical facilities acquire and consume on a daily basis. The challenge presented is with regard to high-dollar, infrequently purchased items like imaging equipment such as CT scanners, MRI, and Digital X-ray.
Over the past 5 years there has been a visible shift in the medical imaging industry toward the acquisition of refurbished imaging equipment. Whether purchased through OEM Refurbishment houses or third party imaging companies, the increased level of interest presents a tremendous challenge to the basic GPO structure.
The Breakdown of the Breakdown
Relative to selling refurbished imaging systems, the GPO business model is inversely correlated between limited supply and financial savings. Of course the core of a GPO is to bring about discounted pricing due to increased volume. Let’s zoom in for a closer look:
On the new equipment market increased sales translate into increased production, which, in turn, translates into a lower cost per unit. This is why a GPO relationship with an OEM makes sense.
Conversely, on the secondary market, where product supply is diminished and fixed at any given time, increased sales translate into greater product scarcity, which, in turn, translates into a higher cost per unit.
Based on concepts of supply and demand, there’s often a rub between the fundamental principles of how GPOs and secondary equipment sellers can bring great value to you.
If your facility network’s budget allows for all its imaging departments to upgrade with all new equipment at the same time, let us first applaud you on your success. Let us also say that, in such circumstances, working with a GPO could be a good way to get a better price on each of those units from the OEMs.
On the other hand, if your budget is a reflection of the times and you're looking to carefully balance clinical and economic needs, consider these two things:
- Even the most well-negotiated new equipment price is EXTREMELY unlikely to approach the savings that can be had on the refurbished market.
- As GPOs do not commonly offer refurbished equipment (remember the volume concept?), your GPO agreement will likely allow for taking a look at refurbished equipment and service solutions. Why not shop around?
The imaging industry is in the midst of a sea change. The economic and political forces that have led us here demand that established business formulae be altered, sometimes radically, in order to face new strictures head-on with innovative solutions.
If you have questions about equipment, service, parts, market valuations, please let us know. We’re here to help.
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