As practices face a financial squeeze, interest is growing in buying groups, which can offer double-digit reductions in expenses. Here, Chris Locke – head of the LMC Buying Groups Federation – explains the advantages
What is a buying group?
For many years, small groups of practices have successfully negotiated discounts on products such as flu vaccines. LMC buying groups have more recently become established, seeking to employ additional scale, resources and expertise to obtain best value from a wide variety of companies.
The first ‘associated’ buying group was established in Kent in 2008 and the number has grown exponentially since. Using procurement consultants, they have obtained excellent savings on medical consumables, stationery and insurance. The LMC Buying Groups Federation was established early last year, and there are now about 3,300 practice members.
What savings can they offer?
An analysis by our procurement advisers suggests we can offer savings of up to 30% for medical consumables and office supplies and up to 28% on locum insurance.
On flu vaccines, the buying group federation has discounts on some products of 55%, although rival suppliers sometimes offer last-minute deals that match our national benchmark. But savings are variable. Travel vaccine discounts are extremely modest, because there are only really two suppliers, GSK and Sanofi Pasteur MSD. Practices get discounts from them anyway based on volume, but those in the buying group get an additional 1.25% or 1.75% respectively.
Do buying groups offer any other advantages to practices?
LMC buying groups use proper supplier agreements, vetted and approved by lawyers, and undertake appropriate checks (something local practice groups may not have the time or resources for). Unlike some commercial buying groups, membership is free to practices paying the LMC levy. LMC buying groups’ advisers can demonstrate potential savings by analysing practice invoices and producing a breakdown of comparative costs on a spreadsheet.
Can groups of GP practices gain similar savings themselves?
In areas where the LMC is not part of a buying group, a practice consortium may wish to fill that gap. But bulk purchasing requires a lot of organisation and carries risks – if it involves central storage and redistribution arrangements, for instance. This will almost certainly necessitate additional insurance cover and requires careful planning.
There are lots of other ways that practices working together, as federations or provider consortiums, can reduce expenditure – by sharing back-office functions, or increasing opportunities for income generation by jointly bidding to provide services under PCT contracts. Centralising business development, data management or governance functions can bring economies of scale. A jointly financed business manager can often repay their salary by instituting economies and scoping opportunities for income generation. Business managers may also be in a position to encourage consortium practices to use a buying group’s approved suppliers, so practice federations and LMC buying groups can be mutually supportive.
Are there areas where use of a buying group is less appropriate?
For some commodities, local practice groups may want to negotiate local discounts – for instance, for telephone systems used by practices sharing new accommodation, or software LMC buying groups deem to be of limited interest.
For many other goods and services, the size of the client base is important. With travel vaccines the discounts increase with volume, so by centralising ordering, practices can earn extra discounts.
What are the legal implications of joining a federation?
The federation is not a legal entity. It is a voluntary trade association, but our work is done by the Trent LMCs Buying Group, which is a trading name for Practice Support Services (Nottinghamshire) Ltd or PSS, a wholly owned subsidiary of Nottinghamshire LMC Ltd. Each LMC buying group has a legal agreement with PSS to obtain membership for its practices. Practices have free membership but there is no compulsion to join or use the suppliers we recommend, so no need for a written agreement, as contracts are between them and the relevant supplier. PSS has legal agreements with the suppliers that are annual and renewable, and these agreements have been vetted by lawyers.
Chris Locke is chief executive of Nottinghamshire LMC and head of the LMC Buying Groups Federation
Practice buying groups: a quick guide