Definition of a Group Purchasing Organization or Buying Group

In the United States, a group purchasing organization(GPO), also known as a Buying Group, is an entity that is created to leverage the purchasing power of a group of businesses to obtain discounts from vendors based on the collective buying power of the GPO members. GPOs do not stock or directly supply products, they simply negotiate the price for their members for purchases through normal distribution channels.

Many GPOs are funded by administrative fees that are paid by the vendors that GPOs oversee. Other GPOs are funded by fees paid by the buying members and some are funded by a combination of both of these methods. These fees can be set as a percentage of their purchases or as an annual flat rate. Some GPOs set mandatory participation levels, commonly referred to as compliance, for their members, while others are completely voluntary. Members participate based on their purchasing needs and their level of confidence in what should be competitive pricing negotiated by their GPOs.

Group purchasing is used in many industries to purchase raw materials and supplies, but it is a very common practice in the health care industry. In the healthcare field, GPOs have traditionally contracted for a specific class of trade, such as acute care or long term care, however PDM Healthcare has brought group purchasing to the full spectrum of the healthcare market with a special focus on emerging markets.

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