The Impact of Group Purchasing Organizations on Healthcare-Product Supply Chains

Hu, Qiaoyan; Schwarz, Leroy B.; Uhan, Nelson A.

doi:10.1287/msom.1110.0355

Cited by 70 publications

(44 citation statements)

References 12 publications

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“…In the first stage of the game, the GPO vendor declares the GPO price ,

P_{g} false[normal$ false/ u n i t false]

, a uniform unit price that the vendor offers exclusively to all GPO members, irrespective of their individual demand for the product (Hu et al. ). The GPO vendor decides on this exclusive price based on the likely distribution of the demands of the GPO's member hospitals.…”

Section: The Gpo Purchasing and The Contracting Modelmentioning

confidence: 99%

The Impact of Custom Contracting and the Infomediary Role of Healthcare GPOs

Saha

Tilson

2019

Production and Operations Management

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Manufacturers and distributors of expensive implants and other medical supplies often require buyers to sign non‐disclosure agreements treating all information concerning negotiated prices as trade secrets. Such agreements make it difficult for hospitals to obtain accurate pricing benchmarks. To save on procurement costs and to obtain pricing information, most hospitals in the United States join group purchasing organizations (GPOs). GPOs are believed to lower procurement costs by aggregating hospitals’ demand. Whether GPOs indeed add value to the healthcare supply chain and produce actual savings for hospitals are debated policy issues, as evidenced by the ongoing discussions on the topic in the US Congress. Some hospitals procure using GPO contracts, and some try to improve on prices available via GPO contracts, negotiating custom contracts directly with the GPO vendors. Using a game‐theoretic model, we prove that GPOs that operate independently and allow for custom contracting limit the benefit of demand aggregation to smaller hospitals only. The larger hospitals gain primarily from using the GPO as an infomediary to obtain critical pricing information benchmarks. Our results further explain why the introduction of custom contracting lowers the value of access to this pricing information for the hospitals, and how the savings through custom contracting can be misleading. We reveal how GPO vendors can exploit information asymmetry about their prices and earn even higher profits, and why, contrary to the industry's belief, the resulting savings are never higher for any hospital, not even for the larger ones when the GPOs allow custom contracting.

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“…In the first stage of the game, the GPO vendor declares the GPO price ,

P_{g} false[normal$ false/ u n i t false]

Section: The Gpo Purchasing and The Contracting Modelmentioning

confidence: 99%

The Impact of Custom Contracting and the Infomediary Role of Healthcare GPOs

Saha

Tilson

2019

Production and Operations Management

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“…Schaarsberg et al (2013) introduce and analyze the class of maximum collaborative purchasing situations and their associated games where the purchase price of a group of players is determined by the largest order quantity of the players in the group. In the context of health-care supply chains, the effect of group purchasing organizations on distribution of profit and providers' total purchasing cost have been investigated in Hu et al (2012).…”

Section: Literature Reviewmentioning

confidence: 99%

Collaborative replenishment in the presence of intermediaries

Hezarkhani

Slikker

Woensel

2018

European Journal of Operational Research

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In complex supply chains, individual downstream buyers would often rather replenish from intermediaries than directly from manufacturers. Direct replenishment from manufacturers can be a less costly alternative when carried out by the buyers collaboratively. This paper constructs a general model to study collaborative replenishment in multi-product supply chains in the presence of intermediaries. We introduce a class of associated cooperative games, outline a sufficient condition for their stability, and formulate a lower bound for individual allocations in the core. Drawing upon a class of associated two-stage games, we investigate the choice of allocation rule and its effect on the individuals' strategic decisions about participation in the collaborative organization. We prove that the Shapley value coordinates the supply chain as it makes complete participation the best individual choice for all buyers under complete or incomplete information. We show if the collaborative organization disregards the replenishment options from the intermediaries, so that they would be handled individually, no allocation rule could always coordinate the supply chain.

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“…We conceptualizes the third DART parameter -analysis of risk and benefit as the extent to which network actors are able to adequately assess the consequences of their de cisions to interact (Hu et al 2012;Tummala, Schoenherr 2011;Prahalad, Ramaswamy 2004;Chen, Paulraj 2004). This interaction decision might also include their decision to participate in any group purchasing alliance and most importantly the type of relationship practices to involve the upstream supply partners and downstream customers (Hu et al 2012).…”

Section: Supply Chain Risk-benefit Analysis and Value Co-creationmentioning

confidence: 99%

“…This interaction decision might also include their decision to participate in any group purchasing alliance and most importantly the type of relationship practices to involve the upstream supply partners and downstream customers (Hu et al 2012). Also hospitals often engage in outsourcing practices.…”

Section: Supply Chain Risk-benefit Analysis and Value Co-creationmentioning

confidence: 99%