Examining the financial and quality performance effects of group purchasing organizations.

BACKGROUND: Hospitals frequently enter into group purchasing organizations (GPOs) to manage supply costs, yet there is mixed evidence regarding the benefit for hospitals to participate in a GPO. However, the role of GPOs on hospital operations has expanded into dimensions of quality that have not been previously examined. PURPOSE: The aim of this study was to examine the effect of hospital participation in a GPO, as well as GPO network characteristics, on both financial and quality performance outcomes. APPROACH: Data from multiple secondary sources regarding hospital and GPO characteristics were used to create an unbalanced panel of hospitals from 2012 to 2015. This data set was then aggregated to the GPO network level to address questions related to network characteristics, including concentration, bed size, geographic scope, and focus. We evaluated three hospital-level outcomes: supply expense, clinical processes of care score, and patient experience score. The mean of each outcome among all hospitals in a GPO in a given year was used for analyses at the network level. We used fixed and random effect models to assess the effect of hospital characteristics and network characteristics on three measures of financial and quality performance. RESULTS: We found no difference between GPO and non-GPO hospitals for any of the outcomes. However, analyses at the network level revealed network characteristics, including concentration, size, and scope, that affected both supply expense and patient experience scores, but not clinical processes of care. CONCLUSIONS: These results indicate that GPO participation may be motivated for reasons beyond cost and quality performance impacts. PRACTICE IMPLICATIONS: Hospitals and GPOs should consider network characteristics, such as the concentration and geographical dispersion of the GPO network. Alternatively, GPOs may seek to develop homogeneously sized networks dispersed locally in order to best deliver both financial and quality benefits to their members.