Why your MSO's purchasing program probably is not a GPO

Why your MSO's purchasing program probably is not a GPO

There is one sentence that ends more conversations about group purchasing than any other. We already have purchasing through our MSO.

It is usually said with confidence, and it is usually said by someone who has never seen the contracts. Not because anyone is being careless. Because purchasing is item fourteen on a list of services, it has been quietly working for years, and nobody has had a reason to look at it closely.

This article is about how to look at it closely.

MSOs do offer purchasing, and that is the confusing part

Let us be fair about the facts before drawing any conclusions.

Management services organizations provide a genuinely broad set of functions. The Milbank Memorial Fund's survey of the field lists billing and collection, coding, claims submission, financial management, analytics, human resources, payroll, scheduling, practice management, quality metric tracking, credentialing, clinician recruitment, advertising, payer contracting, care coordination, data sharing, technology, and yes, purchasing and bulk purchasing (Milbank Memorial Fund).

So when an MSO says purchasing is covered, that is a true statement. Purchasing is in scope.

The question is not whether it is in scope. The question is what is behind it.

Coverage and specialization are different things

Look at that list again. Eighteen functions, and purchasing sits in the middle of it.

An organization delivering eighteen functions allocates attention roughly the way you would expect. Billing gets serious investment, because billing failures are visible within thirty days and threaten the relationship. Credentialing gets attention because it blocks revenue. Purchasing does not fail loudly. A practice paying nine percent more than it needs to on supplies experiences that as a slightly thin month, not as a problem with a name.

There is also a structural reason, and I would flag this as reasoning rather than documented fact. An MSO earns its money on management fees, and increasingly on the equity value of the practices it aggregates or acquires. Supply negotiation is not where its economics live. It is a retention feature. Retention features tend to get the level of investment that retention features get.

None of which makes an MSO's purchasing program bad. It makes it likely to be inherited rather than negotiated, which is a specific and checkable thing.

Four questions that settle it

Ask these of whoever manages your MSO relationship. The answers take about ten minutes to obtain and they resolve the question completely.

Whose contracts are these? Most MSO purchasing programs sit on a contract portfolio the MSO did not negotiate. It joined an existing group purchasing organization and passes the pricing through. That is a perfectly respectable arrangement, and it means your pricing is determined by that GPO's scale and priorities, not by your MSO's advocacy. Worth knowing which GPO, and worth knowing whether your categories are ones it cares about.

Which entities get the pricing? This is the important one. If your MSO negotiated based on the practices it manages or owns, the independent practices in your network are outside that count. They buy at their own small-practice pricing while sitting inside a network that looks large on paper. If you are accountable for the cost performance of the practices it does not own, that gap is directly expensive.

When was this last negotiated? Not renewed. Negotiated. Supply contracts roll forward on autopilot very easily, and a portfolio that was competitive in 2022 is simply a portfolio now.

What does it cover in my actual categories? General medical and surgical supply is the easy part and every program has it. Vaccines, biologics, point of care testing, and anything with cold chain or buy and bill economics are where the money actually is, and coverage there is far more uneven. Ask category by category.

If the answers come back clear and current, you are in good shape and you have learned something useful. If the answers require three emails and end in "let me find out," you have your answer.

Scale is the thing being measured

Here is why the second question matters more than the others.

A 2025 study in the Journal of Public Economics found that the scale of the purchasing group itself drives the savings. A one standard deviation increase in a hospital's GPO scale reduced supply expenses per discharge by 2.7 percent, and moving from the 25th to the 75th percentile of scale reduced them by 4.8 percent, roughly 85 dollars per discharge and more than 1.2 million dollars a year for an average hospital in the data (Journal of Public Economics).

Scale is the variable. Every practice excluded from the count is scale you had and did not use.

The broader savings picture is consistent. An analysis by former Federal Trade Commission chairman Jon Leibowitz found providers realize savings in the range of 10 to 18 percent buying through GPOs compared with negotiating alone (HSCA).

You do not have to choose

This is the part that surprises people, and it is the reason the question is not adversarial.

Group purchasing is not exclusive and never has been. A 2010 Government Accountability Office report found hospitals belong to two to four GPOs on average, and virtually all of the roughly 7,000 hospitals in the United States belong to at least one (HSCA). Contracts are voluntary, no provider is obligated to use a negotiated contract, and buying off contract is always permitted (HSCA).

So the decision in front of you is not whether to replace your MSO's program. It is whether to have a second reference point. Where your existing pricing wins, keep it. Where it does not, you have somewhere else to buy. The only thing you lose by having a comparison is the comfort of not knowing.

Hospitals worked this out decades ago, which is why belonging to several is unremarkable at that end of the market. Independent practices and the networks built around them inherited a single-program habit largely because nobody offered them an alternative.

What to do with this

Send the four questions to whoever owns your MSO relationship. Do it in writing, because the value is in the specificity of the reply.

Then price your two or three largest categories against contract pricing from a group that negotiates for organizations shaped like yours. If your current program is competitive, you will know within a week and you can stop thinking about it. If it is not, you have found money that requires no clinical change, no workflow change, and no new vendor relationship.

If you want the underlying mechanism first, start with what a group purchasing organization does.

One Harbor Alliance contracts on behalf of ACOs, MSOs, CINs, FQHCs, and independent physician practices. Participation is voluntary at every level, and it works alongside arrangements you already have rather than replacing them. Start with a question.