A Research Agenda for Emerging Roles of Healthcare GPOs and Their Evolution from Group Purchasing to Information Sharing to Strategic Consulting

Abstract

The Group Purchasing Organizations (GPOs) facilitate group buying on a large scale by aggregating the demands of several buyers. The GPO negotiates a lower purchase price with the seller by using the collective purchasing power of the buyers and lowers the buyers' procurement cost further by reducing the unit search costs and the unit transaction costs through scale. The role of healthcare GPOs has evolved noticeably in the last few years. The technology has enabled them to add substantial value to the supply chain by using information. In addition to group purchasing, today's healthcare GPOs act as informational powerhouse and empower the buyers with strategic information, technology, and consulting services to identify opportunities of cost savings and prevent possible revenue leakages. The early literature on GPOs has mainly focused on the different aspects of group purchasing, e.g. power of group buying, allocation of cost savings among members, group formation and member commitment, pricing of GPOs' intermediary services, and the issues regarding competition and anti-trust. However, not much research has been done analyzing the economic consequences of GPOs' new roles as information powerhouses and strategic consultants. In this paper, we present an overview of the existing literature, describe the emerging roles of GPOs beyond group purchasing, and then identify the overlooked research areas that invite further studies by the research community.