Future of IDNs and GPOs

on May 2, 2019 at 5:00 am

Future of IDNs and GPOs

Integrated Delivery Networks and Group Purchasing Organizations (IDNs and GPOs) are currently a fundamental part of the US healthcare system. In the move to value-based care, IDNs are already well-positioned to make the change, while GPOs may struggle to adapt.Today, 97 percent of US hospitals purchase through GPO contracts, according to the GAO. There are roughly 1,000 IDNs in the US, and they control about 40 percent of the market.GPOs, which are used in other markets besides that of healthcare, have proven effective in reducing healthcare costs, according to a recent study. Healthcare GPOs are business organizations that pool the purchasing volumes of member hospitals, health systems and other providers like nursing homes, home healthcare agencies, and physicians.

Although GPOs do not purchase or take ownership of products; they instead negotiate competitive contract pricing. GPOs organize providers into purchasing groups to consolidate market share. This leads to increased negotiation power, volume discounts, and outsourcing to experts that can assess the needs of providers, and appropriately supply them with the most appropriate products at the most competitive prices. GPO members and customers receive financial benefits through up-front pricing discounts, patronage dividends and distributions, and reduced administrative costs.

And they do this effectively: GPOs ensure acquisition of the best and most cost-effective products and services and assist their members in improving quality of care for patients and efficiencies throughout the supply chain, the study says.
IDNs are health systems in which providers are affiliated with a parent company. They consist of medical groups, facilities, labs, and one or more acute care hospitals and associated outpatient facilities, and provides a continuum of care.

GPOs reduce costs for hospitals

There is clear evidence that GPOs reduce costs for hospitals.
A report for the Healthcare Supply Chain Association estimated that GPOs generated savings to the entire U.S. healthcare system of:

  • $29.3 billion to $64.5 billion in 2008;
  • $164.2 billion to $361.4 billion over the subsequent five-year period (2008 to 2012);
  • $380.8 billion to $838.3 billion over the subsequent ten-year period (2008 to 2017);


Like accountable care organizations (ACOs), IDNs exist to coordinate patient care, improve the quality of care, and control costs.
“Unlike ACOs, IDNs have negotiating power,” one expert explains. Their negotiating power comes in two forms.

First, the majority of IDNs are associated with one or more GPOs. Some IDNs purchase supplies and other medical technologies for their organization independently, negotiating directly with MedTech device companies or other manufacturers or distributors.

Second, IDNs often compete with traditional healthcare insurers by contracting directly with employer groups for the delivery of healthcare to their employees. With the costs of providing healthcare coverage to employees growing out of reach for some employers, they may be drawn to IDNs offering their own health plans because IDNs may be able to offer lower prices to deliver care.

Transition to Value-based Care

According to the Academy of Managed Care Pharmacy, (AMCP) there is good reason to believe that IDNs will be leaders in the transition to models based on rewarding value over volume, and their role in improving patient care and control rising costs.

“But there are significant challenges in implementing such reimbursement agreements,” the AMCP warns. “Nowhere is the potential and challenge of value-based care more evident than in integrated delivery networks (IDNs). By their very design, IDNs can capture data necessary to evaluate whether a patient, or group of patients, have obtained a desired therapeutic outcome. This data is the foundation for determining value of specific products or interventions.”

But first, the AMCP continues, IDNs must overcome significant operational hurdles. “Successful adoption of value-based agreements will require IDNs to carry out a range of complex processes, including advanced data analytics, end-to-end population health management solutions, comprehensive care management, and successful patient engagement. The tasks before us include:

  • Validating how value-based care is currently delivered in integrated delivery systems;
  • Understanding opportunities and barriers to implementing pharmaceutical value-based arrangements;
  • Developing key recommendations and action plans that allow IDNs to reach the full potential of value-based agreements;
  • Gaining a better understanding of opportunities for managed care organizations, accountable care organizations and IDN to collaborate to drive improvements in health care outcomes.

What about GPOs? “The dominance of GPOs driving prices downwards seems to be waning,” writes ZS Associates in a recent note. The shift towards value-based healthcare continues to accelerate, creating increasing pressure on GPOs to demonstrate that their services can add the right value in this new environment.

“Provider consolidation continues, creating centralized decision-making units that focus increasingly on quality, outcomes and total costs over physician and clinical preferences.” This tends to leave GPOs out of the picture.

Furthermore, ‘patient empowerment’ continues to increase, with consumers of healthcare services having greater choices about where they elect to receive treatment.

PointData: Your Partner for Data Analytics

While the number of publicly announced value-based contracts between life sciences companies and payers has increased over the past few years – it now accounts for 34 percent of contracts, according to the GAO -- there are still a number of barriers preventing increased adoption.

The biggest hurdle? Challenges with collecting, linking and analyzing data, according to Deloitte’s 2018 real-world evidence (RWE) benchmarking survey.

Accurate data is critical to pharmaceuticals companies if they are to get the full benefit of working with GPOs and IDNs. PointData can provide consulting services to help pharmaceuticals firms adapt their networks to data management. PointData will also provide outsourcing services so that data management can be handled by their experts.

Membership roster data provides a good example. Currently, each pharmaceuticals company tries to maintain its own roster, with revisions and updating only made when errors in the roster are discovered. The burden of adding new locations or expanding the customer list is too imposing for pharmaceuticals firms to support -- they lack the tools for these operations.
PointData fills this gap for these companies. Using our services, GPO and IDN rosters are updated almost in real time -- this reduces error rates and provides accurate data that saves time and money.

No other company offers Data-as-a-Service format to manage these rosters. PointData was founded by a team of seasoned IT professionals, all with years of experience in the healthcare industry. We believe the roster management processes and rebate processes for pharmaceuticals/biotech firms is in dire need of an update. As a result, our focus is on helping organizations to make their entire contracting process more efficient and to drive down the cost of services, freeing up resources to focus on activities that add greater value. Today, PointData is improving efficiency at pharmaceuticals firms, offering them our Data-as-a-Service platform and providing consulting services to integrate cutting-edge solutions.

Servicing Rebates

The rebate validation process and the associated support activities are proving too labor-intensive and costly for pharmaceuticals firms. Yet managing these rebating processes efficiently is critical to pharmaceuticals firms’ success. Rebates are, of course, necessary to obtain formulary and tier placement. But rebates have to be negotiated with all the stakeholders in the pharmaceutical value chain every year, and then tracking how they are to be paid has become an overburdened complex process for pharmaceutical companies.

Using our data-as-a-service platform, and our proprietary software solutions to manage rebates, we can cut down on the time-intensive and error-producing process used by most pharmaceuticals firms. And firms can easily track every aspect of the rebate support process in real time. And we can track them. PointData can cut rebate processing costs and increase value obtained from rebates.