Understanding Group Purchasing Organization (GPO) Pharmacy terms is an important step in driving cost savings, efficiency, and compliance.
Having a clear understanding of the language and how strategic contracting processes can benefit healthcare organizations of different sizes.
Watch this 3 minute intro to learn more:
The article below is a walkthrough of the essential language used by GPOs like HealthTrust to illustrate how to drive and attain value for members through effective contract management.
The Contracting Process – Definitions
The contracting process is the cornerstone of how GPOs drive value for their members. This process starts with a Request for Information (RFI). An RFI is employed to cast a wide net to all potential suppliers to learn about the industry landscape and perform essential market research. This step is crucial as it informs us about current market dynamics and innovations, allowing us to better serve our members.
Following the RFI, and after a comprehensive internal review, HealthTrust proceeds to the next stage – the Request for Proposal (RFP). During the RFP phase, vendors who have passed our initial review are invited to submit their proposals. These proposals must meet specific clinical and business requirements set by HealthTrust and are critical in ensuring that our contracts reflect the best interests of our members considering both quality and cost-effectiveness.
Another aspect of the contracting process is a Request for Enhancement (RFE). This allows vendors to enhance their current offerings under existing contracts, ensuring that our members always have access to improved and competitive products and services.
Contract Strategies
Understanding different contract awards is essential in comprehending how GPOs operate. There are four main types of contract awards:
- Sole Award: This occurs when we enter into an agreement with a single supplier. Sole awards typically drive the most value because our GPO commits significant volume to one vendor, receiving the best pricing and contract terms in return.
- Dual Award: This involves having two vendors on contract for a product, providing flexibility and ensuring supply chain security without compromising on the cost benefits.
- Multi Award: In this arrangement, more than two vendors are contracted for a single product. This strategy is used to promote competitiveness among vendors, driving down prices and improving product quality and service delivery.
- Optional Awards: These are optional to the GPO membership and do not affect the member’s compliance with HealthTrust contracts. They offer additional flexibility to members who may have specific needs or preferences. Examples of optional awards include pharmacy software and cleanroom services, among others.
Attaining Value from Contracts
At HealthTrust, our agreements are uniquely structured to provide maximum value. They may include several tiers based on market share or volume commitments. Additionally, we offer Letters of Commitment (LOC) agreements that members can complete to secure additional value based on their commitment levels.
In order for members to understand how to attain best value, any agreement with more than one price point will have a program summary available on the pharmacy member portal. This summary serves as a vital resource for members to comprehensively understand the agreement.
Conclusion
In conclusion, HealthTrust, as a GPO, drives substantial value through a meticulous contracting process that encompasses an RFI, strategy validation, RFP, implementation, and ongoing contract management. This structured approach ensures that our members consistently receive the best products and services at the most competitive prices, enhancing their operational efficiency and care delivery capabilities.
To learn more, connect with the HealthTrust Pharmacy team at healthtrustpg.com/ihp/resources or reach out to Kathleen Bourget, PharmD, Director of Clinical Pharmacy Member Support at Kathleen.Bourget@healthtrustpg.com.
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