- Definition: Group Purchasing Organization (GPO)
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A group purchasing organization (GPO) is an entity that leverages the purchasing power of a group of businesses such as hospitals to obtain discounts from vendors based on the collective buying power of the GPO members. GPOs come in various sizes and derive their revenue through a variety of mechanisms. One of the most common methods is through administrative fees that are actually paid by the vendors. In some cases, the GPO is funded by fees paid by the buying members. These fees can be set as a percentage of the purchase or set as an annual flat rate. Rules set by the GPO can vary in the level of restriction. For example, some GPOs set mandatory participation levels for their members, while others are completely voluntary. Also, within a group of buyers it is sometimes required for all members of that group to belong to the same GPO. Members may be allowed to select items purchased through the GPO or may be bound by contract that allows less “cafeteria-style” choices.
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