business of pediatrics

How Independent Pediatricians Save with Group Purchasing

Independent pediatricians often get their start as independent physicians because they want to practice medicine the way they see fit. It’s what makes independent medicine great! Independent practices often pay high prices for basic supplies like gloves and exam paper, especially for vaccines, one of the highest costs for most practices. We spoke to Ken Fenchel of the Independent Practice Management Services Organization (IPMSO) and to Kathy Chebib and Andrew Johnson of PracticeWell/Physicians’ Buying Group to learn how independent practices can benefit from pulling together, and most importantly, save significant effort and money.

Group Purchasing in Healthcare

“If you pay X amount of money for a box of Gardasil [and receive the rebate through a GPO], that  adds up. The rebate can be substantial.” Kathy Chebib, Vaccine Program Manager of PracticeWell’s Physician’s Buying Group

In healthcare, the most common ways to participate in group purchasing is through a GPO or Group Purchasing Organization. Still, you can also elect to be a member of a Managed Services Organization. An MSO allows physicians to access the items and services that would ordinarily cost a single practitioner or group practice more than a larger organization, such as a hospital.

A traditional MSO offers management services and cost savings, but Ken Fenchel, the co-founder and CEO of IPMSO, notes that GPOs like IPMSO and PracticeWell’s Physicians’ Buying Group (PBG) are a little different than most MSOs. Ken explains. “Our goal was to grow out an organization like an MSO, membership wise, but aggregate sales and share those cost savings with everyone. Kind of like a co-op does.”

Ken knows from experience that independent practices want to run their business their way, and deserve the same cost-savings as larger organizations. He worked in pediatrics himself as an administrator and COO for 25 years, and served as a Physician’s Assistant in the U.S. Army for 21 years prior.

Kathy Chebib, PracticeWell’s Vaccine Program Manager for PBG, notes that the buying group’s beginnings in the 1980s led it to becoming a Benefit Corporation today, as the company’s goal has always been to harness the group purchasing power of physicians without an aim for gaining a profit: for example, the company has always given administration fees earned back to member practices as rebates. Kathy has worked as a practice manager at Golden Gate Pediatrics and remarks that the work PracticeWell does in practices day to day “allows us to respond to common problems easily. It’s just best for doctors and their patients.” 

Many practices are only too familiar with high costs for supplies and vaccines; in many cases, however, costs are dependent on a practice's size and the number of providers. For example, a supplier such as McKesson or Henry Schien has local representatives that depend on commissions. This makes it so that the representative’s aim is to get practices to pay the highest cost for the supplies they need, usually at variable costs based on provider numbers.

GPOs offer independent practices a chance to access lower costs by using the power of many practices to benefit all of them. Committed to a different supplier? Some group purchasing organizations like IPMSO don’t require purchases from a given supplier, but often their leverage with suppliers can offer practices great rates. 

PracticeWell’s Operations Manager Andrew Johnson says that while some GPOs have competing contracts with companies, it’s really more about what the physician values, and saving time on evaluating many costs and benefits “There’s different products out there with capital expenditure up front, then there’s subscription services, like GoCheckKids for vision screenings. Different vendors have value propositions like this. For vaccines, some people like color-coded pre-filled syringes – even at a higher cost. We’d like to honor the people who say ‘We value this over that.’”

“If you’re going strictly on value,” he continues, “You have to evaluate so much. If you’re not as worried about digging through the numbers, but if you want color codes on your vaccines, you pay more but get what you like. We want you to be as well-informed as possible.”

Purchasing Power Saves Costs on Vaccines

Vaccines are one of the most costly and important investments a practice makes annually. While the federal government sets a standard price for vaccines, it matters where you purchase them, since rebates on vaccines can either go back to independent practices… or into a GPO’s pocket.

Any pediatric practice can call a pharmaceutical company and get what Ken calls the “catalog price” and Kathy calls the “list price” for vaccines. However, Group Purchasing Organizations (GPOs) can access vaccines at a discount. Vaccine manufacturers are required to sell the vaccines to practices at the same price. Ken explains:

“The difference is the GPO or buying group by law can get management money from vaccine manufacturers and that money goes to GPOs to administer the plan, and to make sure fed regulations are met. Then, if you have money left over, you can 1) keep it as profit, 2) use it, or 3) rebate it to local practices.”

Some GPOs will keep the rebate for themselves. Ken notes that hospitals will sometimes take the rebate and use it to offer physicians free CME, but as he points out, a physician would need to be taking all of the hospital’s offered CME courses, or else their rebate is subsidizing someone else’s education!

Kathy’s work at Golden Gate Pediatrics has made her clearly see the benefits of a group purchasing organization: “Physician buying groups all offer the same contract pricing from the manufacturer. You save those significant contract discounts when joining a buying group. If your buying group also provides rebates based on purchases, that is icing on the cake, saved year after year.”

She continues, “You can view the rebate as extra savings, or in the “bottom line” scenario, it is the check you are not writing every year to access the same contract discounts. The rebate varies among buying groups- no rebate, or almost everything back to the practices. You spend $1 million on discounted vaccines with all buying groups. If you receive $30K in rebate every year, it adds up.”

Rebates can also have huge impacts for independent practices, Andrew notes. His work at SF Bay Pediatrics let him see direct benefits of rebates: “From my point of view, the rebate actually goes to my benefit as a practice employee – it could go to 401(k)s, health insurance, or equipment for the office instead of equity for a hospital.”

GPOs or MSOs can also offer practices savings on services such as credit card processing, revenue cycle management, and more. Ken notes that IPMSO works hard to find the best deals for pediatricians:

 “Every product we provide to members has been curated and discounted for best prices so they get quality at great pricing. Our whole goal is to put as much money back in the pockets of pediatricians.”

Like PCC, IPMSO’s goal is to empower pediatricians and not to take over control of the decisions they want to make. In an ideal situation, your practices in the end should have control over what to buy and access to great prices for the items and services you need.

“We feel it’s the best of both worlds,” says Ken. “You own your own practice, we provide you the savings in the background so you don’t have to go out and call all these vendors and compare prices.”

If your practice is struggling with comparing costs on supplies and vaccines, or tired of contacting supplier representatives when you suspect you could be saving money, a group purchasing option like IPMSO or PracticeWell’s Physicians’ Buying Group could be a good fit. Getting started is easy too. “There’s really not much that changes operationally,” says Andrew. “Just lower prices. You get the same products, you’re just accruing the rebate immediately.”

With a smile, Ken acknowledges that “Indie peds don’t want to be told what to do. We have no financial control over them. We give advice based on what we see in data, and show them what’s available. We consider everyone as part of our team.”

When you’re starting a practice, you want to have the right players on your team. Whether or not you choose a group purchasing option, there are plenty of avenues for independent pediatricians to explore as they start out. Learn how to start fresh and migrate your existing patients to a new practice with this webinar featuring PCC’s Chip Hart and The Verden Group’s Susanne Madden.

Watch the webinar!

Allie Squires

Allie Squires is PCC's Marketing Content Writer and editor of The Independent Pediatrician. She holds a master's in Professional Writing from NYU.