Strength in Numbers: GPOs for EMS

Who doesn’t like saving money?

The answer, presumably, is nobody. For EMS agencies, all too familiar with the new mantra of our times—“Do more, with less.”—saving money while maintaining a level of service Americans have become accustomed to is critical, not just for continued success, but also survival.

And because the costs of equipment and supplies, not to mention fuel, only continues to rise, and revenue seems to be in constant decline, EMS agencies are increasingly turning to group purchasing organizations (GPOs) and cooperatives to save money on capital purchases and more.

Bill Mears, vice president of A-TEC Ambulance, Inc., based in Elgin, IL, used to think his organization got great pricing negotiating purchases on everything from vehicles to medical supplies on its own. That was up until a year ago, when through A-TEC’s relationship with Catalyst Insurance Mears met with representatives from EMS Redline, a GPO serving more than 60 EMS and patient transport providers nationally. Mears says A-TEC had just gotten what he thought were good prices on three new ambulances; after joining with EMS Redline, A-TEC was able to get an additional $10,000 discount per vehicle.

“Our second purchase was oxygen—we changed oxygen vendors,” Mears says. “We took our oxygen bills from the previous year, which were just over $50,000, and gave it to a company called Airgas through EMS Redline. With the EMS Redline pricing, and the exact same amount of oxygen and way of doing things, we saved an estimated $25,000 on the first year based upon what we paid previously.”

What, and Who, Are the GPOs?

The idea for healthcare group purchasing organizations and group buying cooperatives in the U.S. is more than a century old, but the number of healthcare GPOS didn’t experience a dramatic increase until 1986, when Congress granted healthcare GPOs “safe harbor” from federal statutes prohibiting kickbacks.

The cost structure among GPOs varies. Many GPOs charge members an annual membership fee. Members may see their savings up front on purchases or through rebates after purchase. And GPOs often receive ongoing funding through a return, ranging from 1%–3%, on the purchase of equipment and supplies from the vendors they negotiate contracts with.

While the number of GPOs and group buying co-ops exclusively serving the EMS market nationwide is growing, there are still relatively few “big” players.

The North Central EMS Cooperative (NCEMSC) based in St. Cloud, MN, is one familiar name. Started in 1997 with just three member ambulance services, it has grown to represent 4,285 members in 49 U.S. states, as well as Canada, Mexico and Colombia.

Other large GPOs include National Purchasing Partners, First Choice Cooperative and FireRescue GPO.

According to EMS Redline President Tim Onderlinde, who’s been involved in EMS for more than 35 years, the Michigan company began just three years ago, but it already boasts members across the country.

In talking with a counterpart in California a few years ago, Onderlinde says, he realized other agencies were paying more for ambulances and other large capital equipment purchases than he was, but paying less for medical supplies.

“We thought we really ought to sit down and see if there’s a way we could form a group, that could share information and go to the vendors and say, ‘We want to even the pricing structure out coast to coast,’” Onderlinde says. “Regardless of where you’re located in the country, we’re all buying the same type of products—everyday needs and capital needs—so let’s form a group to speak on our behalf and negotiate pricing.”

Now EMS Redline members have access to not only its network of over 100 vendors, but also to the more than 2,500 member health systems that are part of top national GPO, Premier.

For a $500 annual fee, EMS Redline members can leverage the best prices on equipment and supplies, Onderlinde says. Members see savings of anywhere from 30%–40% on the medical supply side, as well as significant savings elsewhere. And, Onderlinde says, members have access to “everything from band-aids to ambulances,” making EMS Redline’s online ordering portal essentially a one stop place to order everything an agency needs need to operate its business.

State EMS associations have also increasingly entered into the conversation, with the Wisconsin EMS Association’s (WEMSA) Group Buying Program largely serving as a model for others.

WEMSA Executive Director Mindy Allen said the Group Buying Program has been running for about 15 years and is open to services and corporate members, as well as individual members. It’s membership isn’t just limited to Wisconsin agencies, either. Members come from 20 states and consist of 394 service and corporate members, representing about 6,500 people, as well as individual members. Allen says a yacht club even joined, to receive discounts on defibrillators.

Like EMS Redline and others, the savings offered through WEMSA’s Group Buying Program can be significant. Allen says agencies often see rebates on ambulances ranging from $2,000—$3,500, along with sizeable discounts on radios and pagers, ZOLL AEDs and defibrillators, and disposable supplies. And every couple years WEMSA asks for RFPs from its vendors and seeks re-bids to ensure its members are always getting the lowest prices.

Discounts also aren’t limited to equipment and supplies, Allen explains.

“Other individual benefits our members can receive are discounts on insurance, Sprint, Dell computers, Kaplan Education and ambulance billing services,” she says.

Member costs vary—for service members the cost of membership is $22 per person, per year for everyone on the agency’s roster; for individuals the cost is $25 per year; and for corporate members there is a flat $425 annual fee.

Finding the Right Fit

While there are some clear benefits to belonging to a GPO or cooperative, they may not be for everybody, says Bob Holdsworth, founder of The Holdsworth Group, LLC, an international consulting firm providing marketing, management, strategic planning and funding services to clients in the EMS, fire service and healthcare industries.

A veteran paramedic and entrepreneur, Holdsworth says, from his perspective, the challenge lies in getting people to give up their way of doing things.

“What are you going to lose,” Holdsworth asks. “Are you willing to make compromises if your preferred vendor isn’t on the list? I think there’s value in group purchasing, but when I look at it I have to consider the ROI—return on investment.

“If you have to compromise, why join,” Holdsworth asks rhetorically. “I think you have to go into it with a sense of open-mindedness. Look at the costs and see which vendors you can access at better prices.”

Where he often sees examples of successful group purchasing is on the municipal level, through inter-local agreements between municipalities to purchase things like chlorine for the sewer treatment plant and even pens and pencils.

“It’s when we get into EMS that one person likes Stryker and another likes Ferno, and we meet at the line and fight over it instead of looking at the bottom line, which is how do we make our organization leaner and work within the budget,” says Holdsworth. “Realistically, a 4x4 is a 4x4; a stretcher is a stretcher, as long as it carries the weight load. A lot of agencies don’t always look at the most economical way of doing things, they look at the way they’ve always done it. If it doesn’t match then it’s not useful. I really think as an industry we need to stop doing that—quickly.”

Holdsworth recommends an EMS agency looking at joining a GPO consider the following:

• Who are the participating vendors?
• Is there a wide enough range of vendors to allow the agency to operate efficiently?
• What is the actual cost? Look at the annual fees, if any, as well as the potential savings.
• Where will you need to make compromises, and are those compromises significant?

“If you’re satisfied with enough of the answers,” he says, “then go for it.”

For Bill Mears and A-TEC, joining made all the sense in the world. “In today’s economy, any opportunity to save money is very important. If you don’t figure out a way to save money, you just won’t survive.”