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Group Purchasing Organizations

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Group Purchasing Organizations

A group purchasing organization (GPO) is an entity that helps its participants realize savings and efficiencies by aggregating purchasing volume and using that leverage to negotiate discounts with manufacturers, distributors and other vendors. GPO’s are commonly found among healthcare providers – such as hospitals, nursing homes and home health agencies. So, what is the difference between a GPO and a buying group or a purchasing group? These terms overlap with each other heavily and are almost used interchangeably. One characteristic that might separate GPO’s from buying groups is that their members might be more likely to be in different industries, but who have commonality in their purchasing patterns. Also, GPO members might be more prone to be the end user of the products it purchases, rather than the reseller of it. The members of health care GPO’s, being a good example.Whatever name the purchasing organization goes by, it must be carefully guided by legal counsel through the various pitfalls that lay across its path. They range from antitrust concerns, to legal issues arising in connection with its membership or with its suppliers. A well=advised purchasing organization will have strong indemnification provisions in its membership and supplier agreements.

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