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MRO-016 Ver 1.2 (Dec 23)

Confidential & Proprietary | 2023 CBRE Inc.

Healthcare group purchasing organizations (GPOs) are the sourcing and purchasing partners to virtually all of America’s 7,000+ hospitals — 98% of all U.S. Hospitals utilize a GPO.   GPOs boast the delivery of $34.1 billion annually in costs savings to healthcare systems and forecasts an increase to $456 billion over the next ten years. 

Benefits Of  Healthcare GPOs

Lower costs - Healthcare GPOs can negotiate lower prices for medical supplies and equipment than individual providers can, by pooling their purchasing power and leveraging economies of scale.  Healthcare GPOs can also help lower the administrative fees paid by healthcare facilities, by reducing the transaction costs associated with negotiation.  A study by the Healthcare Supply Chain Association (HSCA) found that healthcare providers can save between 10 and 18% by purchasing through a GPO.  Another study by the University of Tennessee found that hospitals that switched GPOs or added a new GPO reduced their supply costs by 7.5% on average

Improved efficiency - Healthcare GPOs can help streamline the sourcing process and reduce errors, by providing digital solutions such as e-procurement, e-catalogs, e-invoicing and e-auctions.  Healthcare GPOs can also help improve inventory management and reduce waste, by implementing vendor managed inventory (VMI) programmes and standardizing products.  For example, Vizient, a leading GPO, offers an e-commerce platform called Marketplace that allows members to compare prices, access contracts and order products online.  Intalere, another GPO, offers a cloud-based solution called OptiMIM Advantage, that automates the contract management process and provides real-time data and analytics

Enhanced quality - Healthcare GPOs can help improve the quality of care and patient outcomes, by sourcing high-quality products and services that meet the clinical needs and preferences of providers.  Healthcare GPOs can also help monitor and improve supplier performance, by identifying and tracking key performance indicators (KPIs) and providing feedback mechanisms

Increased innovation - Healthcare GPOs can help foster innovation and competition in the healthcare market, by introducing new products and services that address unmet needs or offer better value.  Healthcare GPOs can also help support research and development, by providing data analysis and market intelligence to suppliers

How Does A GPO Work?

MRO

MRO Categories In CBRE

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Other Costs To Consider

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How To Price Waste & Circular Services

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Page 2 of 4

Healthcare GPOs and facilities management company partnerships are arrangements where healthcare providers and facilities management companies join forces to leverage their collective purchasing power and achieve savings and efficiencies on products and services related to the operation and maintenance of healthcare facilities. 

Potential Benefits Of Healthcare GPO & FM Partnerships

Further cost savings - By leveraging the collective purchasing power, GPOs and FM's can negotiate lower prices and better terms with suppliers, resulting in significant cost savings and efficiency gains for healthcare providers.  These arrangements can also help healthcare providers streamline their procurement processes and reduce administrative burdens 

Further improvements to quality and patient care -  By partnering with facilities management companies, GPOs can help healthcare providers access high-quality products and services that enhance the safety, comfort and satisfaction of patients and staff.  Facilities management companies can also help healthcare providers comply with regulatory standards and best practices, as well as implement innovative solutions that improve clinical outcomes and operational performance

Risk mitigation & sustainability  - By outsourcing their facilities management functions to specialized companies, GPOs can help healthcare providers reduce their exposure to operational, financial, and reputational risks.  Facilities management companies can also help healthcare providers achieve their corporate sustainability goals by implementing environmentally friendly practices and technologies that reduce energy consumption, waste generation and greenhouse gas emissions 

Healthcare GPO & CBRE Opportunities

Current Hospital Client GPO Alignment

Current Crossover Spend

Opportunity?

• Clients are accessing GPO contracts for cost savings in facility management in hospital systems where CBRE are not engaged today
• Potential to engage with GPO's and share  data to assist clients while utilizing CBRE’s expertise in FM
• CBRE’s expertise in FM is an alignment opportunity for GPOs
  

MRO-016 Ver 1.2 (Dec 23)

Confidential & Proprietary | 2023 CBRE Inc.

MRO

MRO Categories In CBRE

Suppliers / Pricing

Waste Services & Circular Economy

Other Costs To Consider

Suppliers / Pricing

Waste Services & Circular Economy

How To Price Waste & Circular Services

Suppliers / Pricing

Waste Services & Circular Economy

How To Price Waste & Circular Services

Suppliers / Pricing

Page 3 of 4

Before considering potential partnership with GPO's, CBRE must consider the strategic challenges of such an arrangement and its impact on the client account.

Considered Challenges If Partnering With A GPO...

Transparency & Accountability - GPOs have faced criticism and scrutiny for their business practices, such as charging administrative fees to suppliers, receiving rebates and incentives from manufacturers and creating exclusive or sole-source contracts that may limit competition and innovation.  GPOs need to demonstrate their value proposition and ethical standards to their stakeholders and regulators 

Effect on current CBRE Supplier Partner Relationships - S&P relationships (who also have relationships with the GPO) could be strained because they will be required to pay admin costs to the GPO that they aren’t reporting today.  S&P partners could feel they are paying administrative fees twice and could hesitate to partner as well as provide competitive pricing 

Contracting:

• GPO’s service contracts are restricted to duo sourced in most cases and offer a narrow list of supplier options to members
• GPOs lack service contracts with suppliers in the FM space HVAC, Plumbing, Electrical, General Maintenance
  
• GPOs don’t offer a robust value prop for facility management

MRO-016 Ver 1.2 (Dec 23)

Confidential & Proprietary | 2023 CBRE Inc.

MRO

MRO Categories In CBRE

Suppliers / Pricing

Waste Services & Circular Economy

Other Costs To Consider

Suppliers / Pricing

Waste Services & Circular Economy

How To Price Waste & Circular Services

Suppliers / Pricing

Waste Services & Circular Economy

How To Price Waste & Circular Services

Suppliers / Pricing

Page 4 of 4

CBRE needs to conduct further analysis and dialogue prior to any GPO partnership program.  Revisit this area in 2024 for an update! 

GPO Strategy Next Steps

MRO-016 Ver 1.2 (Dec 23)

Confidential & Proprietary | 2023 CBRE Inc.