Hospital Group Purchasing alliance and financial performance

Abstract

Given the potential benefits of Group Purchasing Organizations (GPOs) in cost-containment efforts for hospitals on supplies and purchased services. An important question that remains unanswered is are there financial performance differences between users and non-users of GPOs. Therefore, this study explores if there is any financial performance between users and non-users of GPOs by hospitals. Data on hospital GPO utilization and financial performance were combined with secondary hospital market characteristics. Panel ordinal logistic regression with facility and year fixed effects analysis was used to examine the relationship between operating margin and use of GPO controlling for organizational and market characteristics. Data from 4,484 hospitals were available for analyses. Overall, the number of hospitals utilizing the services of GPOs increased significantly from 3,027 (72.9%) in 2004 to 3,128 (75.2%) in 2013. The major findings suggest that there is an association between the hospitals financial performance and their utilization of GPO services. Specifically, hospitals that utilized the services of GPOs had higher operating margins compared to hospitals that did not. This paper contributes to the literature of strategic management and provides policymakers and researchers an avenue that identifies whether the utilization of GPOs by hospitals has any financial bearing.