Evolution of Commercial GPO Beyond Indirect Spend

In our last article, Scott Miller discussed several key factors that have contributed to the solid foundation we have built here at CoreTrust.  The key factors included starting with commercially relevant spend from within our hospital GPO, building relationships across the Private Equity space and forming advisory boards to ensure our members guide our development activities.  The resulting foundation has enabled us to build contracts that primarily address indirect spend, and our ever-growing membership runs over $4 billion through the program.

A focus on indirect spend is common in the commercial GPO space. As such spend is similar across vertical markets, GPOs employ negotiators with indirect spend expertise and most companies view indirect spend as non-mission critical to their organization.  However, if aggregation delivers value on indirect spend categories, why not apply the same principles and factors to more complex mission critical spend?  I would contend the answer lies within the principles and factors that have led to success in indirect spend.

First, aggregation works when enough critical mass has been gathered to impact pricing on a category.  Pricing is often commensurate with spend, so the greater the spend the GPO can aggregate, the greater the savings that can be achieved through the GPO. Second, companies must align on a plan and sourcing strategy and ultimately move market share.  Critical mass alone will not deliver results; the GPO must lead a coordinated approach with a defined plan.  Commitment to shifting market share will ensure suppliers respond aggressively in the sourcing process. Third, the GPO must bring relevant subject matter expertise to engage with the members and run the sourcing process.  Given the complexities of developing vertical solutions, subject matter expertise is critically important from supplier conditioning, to writing and evaluating RFPs, to negotiating final outcomes.

CoreTrust is uniquely positioned to navigate the complexities of vertical solutions and extend the GPO concept beyond indirect spend.  With over 2,000 members, we have a density of companies in many verticals.  Our member-led, board-driven engagement model is combined with a rigorous sourcing process to deliver unmatched results.  And we have a team of subject matter experts in areas of complex, mission critical spend to lead our sourcing events and take vertical solutions to market.  From Food to Manufacturing to Logistics, we are excited for our subject matter experts to share their insights with you in articles over the coming months.

James Hallock

James Hallock

CoreTrust VP Development