Group purchasing amongst nonprofits is still relatively new, but is quickly becoming common place as these also aim to find ways to reduce overhead expenses.
In the healthcare field, GPOs have most commonly been accessed by acute care organizations, but non-profit Community Clinics and Health Centers throughout the U.S. have also been engaging in group purchasing.
The institution of the Medicare Prospective Payment System (PPS) in 1983 focused greater scrutiny on costs and fostered further rapid GPO expansion.
In 1986, Congress granted GPOs in healthcare "Safe Harbor" from federal anti-kickback statutes after successful lobbying efforts.
By 2007, there were hundreds of healthcare GPOs, "affiliates" and cooperatives in the United States that were availing themselves of substantial revenues obtained from vendors in the form of administrative fees, or "remuneration".
With healthcare costs rising sharply in the early 1980s, the federal government revised Medicare from a system of fee-for-service (FFS) payments to PPS, under which hospitals receive a fixed amount for each patient with a given diagnosis.
GPOs may collect an "Administrative" fee up to 3.0% of all sales volumes from the vendors that they negotiate a contract from, upon selling products to their member hospitals.
[6] A hospitality GPO focuses on solving procurement and sourcing concerns for hotels or vacation rentals by aggregating the demand for products and services used to furnish and stock guest units and operate hospitality businesses, delivering deep savings on furnishings, appliances, electronics, software, home goods, kitchen, and bed and bath products for its members.
[7] GPOs in the hospitality sector provide not only cost savings but also essential services like menu innovation and operational support, which are critical for enhancing guest satisfaction and efficiency.
Horizontal market GPO members exist in many different industries, but they purchase a lot of the same goods and services to build their products and run their companies.
A horizontal indirect spend GPO succeeds in reducing procurement costs by aggregating the demand for non-strategic, or indirect cost supplies and services used by a broad horizontal market spectrum of member client organizations by consolidating purchasing power and establishing contracts to achieve preferred pricing, terms, and service standards.
The resulting combined buying power helps the usually mid-size and larger member client organizations save money on their purchases of categories such as temporary labor services, office products, safety supplies, office equipment, packaging supplies, uniform and laundry services, pest control, and expedited parcel delivery.
The consolidation of purchasing effort with the GPO also allows member clients savings from reduced staffing overhead costs.
[10] The suppliers to this type of GPO offer preferred pricing, terms, and service standards because they experience lower overall selling expenses and the increased volume usually associated with the addition of a single very large customer.