Breaking the chain: GPO changes and hospital supply cost efficiency

Abstract

The use of group purchasing organizations (GPOs) as a supply chain intermediary is a long-standing and strategic approach to enhancing supply cost efficiency in U.S. hospitals. As a consequence, a hospital's decision to reconfigure its GPO network can have critical ramifications for the hospital's supply cost performance. In this study, we conceptualize possible GPO changes as structural and relational and investigate the impact of GPO changes on supply cost efficiency. To this end, we employ archival, panel data from multiple sources that track the performance of 2,391 U.S. hospitals between 2009 and 2014. Our findings indicate that, whereas hospitals that make a structural GPO change experience a decrease in supply cost efficiency, hospitals that enact a relational change are shown to experience improvements in supply cost efficiency. Our findings have important theoretical and managerial implications for supply chain management and hospital administrators.