Date of Award

2016

Document Type

Thesis

Degree Name

Master of Science (MS)

Department

Systems Science and Industrial Engineering

First Advisor

Nagarur, Nagen

Abstract

Most of the hospitals in the USA carry out their purchasing of supplies, including pharmaceuticals, through Group Purchasing Organizations (GPO). GPO is an organization, which aggregates procuring volumes of their member hospitals and negotiates low prices from manufacturers or vendors. According to 2013 statistics, 98% of hospitals in U.S. are purchasing their bulk health care products through GPOs, and it saves U.S. health care industry approximately $36 billion annually. Through these hospitals enjoy advantages by purchasing through their GPOs, there are some disadvantages such as paying membership fees to their GPOs, restricting the purchasing power of the hospitals outside their GPOs, making it more complicated to buy better or advanced products from new vendors. As various political and economic factors are forcing hospitals merge into large hospital associations, the concept of self-contracting or managing supplies directly, comes into the picture.

In this research, the concepts of healthcare supply chains with GPOs are described in detail. Purchasing systems under self- contracting are then discussed. Three possible options for the hospitals are then examined, namely, continuing current purchasing through their GPOs, direct purchasing from manufacturers (self –contracting), and finally, forming an association with other hospitals and purchasing through this association. The preferable options are discussed under the concepts of Game Theory. This research also examines the changes needed in the supply chain if any of the above new options is selected.

A regular supply-chain consists of Hospital, GPO, and vendor or manufacturer. As healthcare delivery systems are merging into one group or forming hospital associations, they have an additional option of carrying out their purchasing through these associations. In this work, it is assumed that the individual hospitals take their decisions based on total costs of supplies, and they chose the supplier by comparing the various options available. In this research, these questions are answered by following a game-theoretic model, by making some assumptions. Concepts of game theory such as Nash equilibrium, Mixed Strategy Nash Equilibrium (MSNE), etc. are discussed.

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