Medical Buying Groups – The way forward for surgeries and clinics

Many surgeries and clinics may not have heard of or considered the benefits of forming a purchasing or buying group. 

A buying group, which can be run by a cost reduction or purchasing consultancy will negotiate substantial savings in key areas of expenditure, such as telephony (fixed line and mobile), insurance, utilities and office supplies. This is achieved by utilising the ‘purchasing power’ of a collection of small organisations, which individually have little or no power in price negotiations, to group together in order to command significant discounts. 

In this article, David Davis, Managing Director of Total Purchasing Solutions (www.totalpurchasingsolutions.com) and Barney Phillips, director of Barnstormers Group, affinity partners of a major telecoms company, outline some of the benefits of forming a purchasing or buying group. 

Cost Reduction – The easiest way to increase both cash flow and profitability

By David K Davis

The world is getting more and more competitive and for an enterprise to succeed they must focus 100% focus on their core business – which in the case of medical surgeries is customer service and satisfaction. As a result, expenses on non-core products and services, or overheads, can easily run out of control.

However, a solution to this is at hand and it is very easy to implement. Cost reduction consultancies, such as Total Purchasing Solutions, exist to ensure that businesses and organisations are receiving the best quality products and services at the lowest price. In addition, these consultancies are usually self-financing with the fee being a percentage of the saving generated. The whole process creates a partnership relationship.

The basis behind cost reduction consultancies is openness to outsourcing, where a specialist in a chosen field will take full process and delivery responsibility for a non-core activity. This can be summarised by - ‘if you love it, let it go’ – if you love what your organisation does then do what you do best and leave the management of overheads in the hands of the experts – remove this distraction from your daily routine.

How do cost reduction consultancies work?

Total Purchasing Solutions state that they save time and money for clients. Lowering costs saves money and time is saved by avoiding lengthy internal cost analysis projects with the commensurate demand on management supervision just to make some small savings in non-key areas.

A cost reduction consultancy will conduct an initial meeting with an organisation to review procurement processes and the expenditure incurred. From this a list of priorities will arise generating the initial focus for the cost reduction project, this can be as simple as analysing a selection of supplier invoices. The result is a professional report providing a:

Summary of current prices paid and service levels received ( a useful snap-shot of the current status quo)
Synopsis of the services / rates offered by a selection of alternative suppliers.
Conclusion explaining the course of action needed and the cost savings that will be derived.

At Total Purchasing Solutions this process is regularly undertaken for over 12 different areas of expense including telecoms, office supplies, mobile telephones, utilities and insurance, leading to savings in excess of 30%. All this for a brief introductory meeting and the provision of some current expenditure details.

The benefit of cost reduction consultancies is not just in reducing your costs. In effect you receive a free of charge review of business procurement and associated processes. This is an excellent opportunity to utilise the services of a specialist to gain a full understanding of where business resources should be better channelled.

Telecoms savings for buying groups

By Barney Phillips


Telecommunications, especially fixed-line (or land-line) telephony is a major expense for most businesses and organisations. Organisations rely on telephones for their business needs so money spend on telephone call charges is usually not begrudged. 

It is mostly taken for granted that large suppliers such as BT and NTL offer ‘business tariffs’ – and they undoubtedly do – but how many organisations spending £50,000 per annum on telecoms use BT or NTL? Very few. The reason for this is that because they have a relatively high expenditure on telecoms, they can pick and choose between Least Cost Routing (LCR) companies, such as Worldcom, Redstone, Colt and the like, and play them off against each other vying for the most competitive rates.

What does BT offer small to medium organisations? Small to medium business tariffs that are better than standard call charges but leave a lot to be desired. At Barnstormers, we work with purchasing and cost reduction consultants, buying groups and consortiums to ensure that their customers and members benefit from competitively priced telecommunications. 

A prime example of this work is a project we recently embarked upon with a purchasing consultant for their client, a group of pubs and bars across the UK. This group consists of close to 50 pubs and bars, and each of them has a relatively low expenditure on telecoms and other utilities. The purchasing consultant in question worked with Barnstormers on reducing the group’s telephone call expenditure by almost £4,000 per annum, from £24,800 to just over £20,000. This brought major benefits to each of the pubs and bars in the chain, as instead of paying 4p for local and 6p for national calls, we were able to negotiate a deal that cost them just 1.95p per minute for local and national calls. This example highlights just the telecoms savings, which is the area that we work in, and in this case the purchasing consultant also brought substantial savings in other areas such as utilities and procurement costs as well. 

David Davis and Barney Phillips are interested in setting up a buying group amongst the readership of this journal, to assist in saving them money in key areas of expenditure.

For further details and to join up, please contact David through Feedback on this site or 
Total Purchasing Solutions on 0870 224 2015 info@totalpurchasingsolutions.com 
or Barney at Barnstormers Group on 0800 16 13 611 barney@barnstormerspublicity.co.uk 

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Discussion Paner on Dispensed Items Buying Group

This paper has been drawn up to propose the development of a buying group of dispensing GPs. It is based on the experienced gained from organising a PCG group. The most significant points, which come out of this experience, are:

(ii) very advantageous discounting deals can be agreed for practices within the group, this is demonstrated by the successful arrangements made by the former Broadland PCG group

(iii) It is quite important to ask practices to predict their take up process when setting up a new arrangement. It is crucial for company representatives to be given a true picture of consumption and the speed of their market growth. In doing this therefore it is important to be ‘real’ and not to say what the company ‘wants to hear.

(iv) Company offers to help practices manage change should be adopted with great caution. Unless really independent it does give the company a great deal of sensitive and otherwise unobtainable information about the practices prescribing patterns. However it can be an effective way of introducing difficult change.

(v) The buying group can influence the ways in which companies provide bonus. An early benefit in Broadland was to reduce the irritating transfer order system.

It must be clear that such a group would be independent of the prescribing groups for the PCGITs concerned but would always work within the formulary and other decisions made by such groups. The group would also seek the advice of the prescribing adviser over contentious issues.

At present the group would probably incorporate practices who wish to join from one PCG1T. It is hoped that there will be opportunities to make joint arrangements with other buying groups in the future. The number of practices involved whilst initially 10 to 13 could rise to between 20 and 30 for shared arrangements. Such a potentially substantial group has raised the interest of several of the drug companies with which the concept has been discussed

Aims to be achieved in setting up the groups:

To bring together those practices that wish to participate in a joint purchasing group. This exercise is intended to achieve the following objects:

1. It is proposed that the buying group should meet monthly) called together by an elected chair.

2. Each practice involved will send one representative to the group; this can be the prescribing lead, Practice Manager or Senior Dispenser.

3. The purchasing negotiations on different areas or classes of drugs will be led by those within the group who take an interest in these issues and who have a level of expertise in negotiation. They will report on developments in their areas to the meeting and make appropriate recommendations.

4. Practices will then take away these recommendations to discuss with partners and will feed back their views to the next meeting. In parallel with this the individual leading negotiations for this area (or the chair of the buying group) will consult the Pharmaceutical advisers and/or leads for the PCOs concerned. If necessary they may have to discuss the proposed purchasing agreement with the prescribing group to ensure that any items included in a buying agreement are clinically acceptable.

5. An important component of any buying agreement is to be able to predict with reasonable accuracy the actual usage of the drugs involved. Therefore at the meeting of the buying group when the final decision on an arrangement is to be made, practices will be asked advise whether they wish to ‘sign up’ for the proposal concerned. If they do they will also be asked to clarify the level and speed of take up anticipated (e.g. will they expect to reach a maximum of 70% usage of dispensed items of this drug after 3 months from start date?). This figure may vary greatly between practices depending on the views of the partners, the level of commitment to the product and the approach the practice takes to converting its prescribing to this product ( e.g. a gradual change or ‘all change’ on a particular date)

6. A bring forward date for this agreement to be reviewed by the buying group will then be agreed (usually 12 months?)

1. The Pharmaceutical adviser must support clinically any drug for which a buying agreement is to be made.

2. All practices will be requested to stay with the same wholesaler for the majority of their purchasing or to decide to transfer to a new wholesaler as a group. This allows the best possible arrangements to be made with the wholesaler and ensures a single point of delivery for drug companies.

3. Practices will try to adhere to the buying agreements that they have signed up for as far as this is clinically acceptable. Should there be a clinical reason for changing they will report this to the next group meeting. Practices will be asked not to change during an agreement period on commercial grounds for one item, this can be used as a deliberate tactic to break up buying group arrangements.

4. It must be noted that the nature of the agreements are that these are between the individual practice and the Drug Company. This is to ensure that EU law on contracting is not broken by these arrangements.