Our Group Purchasing Organization (GPO) is a purchasing agent authorized to act for our members, thus allowing us to enter into agreements with suppliers or manufacturers through which items and supplies can be purchased by members at competitive prices. Because of our large member base, our GPO is able to negotiate much more favorable prices with suppliers for a particular item or service than our individual providers could on their own. This GPO will be supported by acquisition of related expense side suppliers. This approach will leverage a single physician member purchasing power by the combined volumes of all participating members.

This Member Benefit as a cost reduction strategy will focus on reducing the internal costs and maintain tighter control over supplies and related spending. This will provide substantial savings on medical supplies and the corresponding costs associated with ordering, inventory control and shrinkage. We anticipate splitting the savings dollar for dollar with our members.

Purchased Supplies

• Medical Supplies

As reported by the National Society of Healthcare Consultants, Medical Supplies used in the everyday practice of medicine accounts for about six percent to ten percent of total practice revenue, depending on the specialty. Medical-surgical disposable supplies includes a range of medical supplies, including paper goods, needles and syringes, gauze and wound dressings, surgical instruments, sutures, examination gloves, orthopedic soft goods, tongue blades and applicators, sterilization and intravenous solutions, specimen containers, diagnostic equipment reagents, and diagnostic rapid test kits.

According to Dun & Bradstreet, there are over 312,536 establishments, utilizing 2.7 million employees in this industry. The number of employees per establishment is estimated to be around 9. This industry’s total sales amounted to over $240 billion.

PRMA Holdings physician practice revenue is approximately 2 million per year. Expenditures for medical supplies are therefore approximately $75,000 to $200,000 per year taking into account for multiple physician practices which is the norm in the PRMA Holdings population of physician members.

The supply chain for medical products is manufacturer, distributor, and dealer, each with their own respective mark-up. Physician’s offices generally buy through local dealers. These local medical supply dealers generally mark up their products from 30-40% above their costs from their distributor.

Manufacturers or Distributors generally do not sell directly to private practice physicians. This creates the opportunity to aggregate the private practice physician purchases into our Group Purchasing Organization.

• Professional Employer Organization

In the relationship among a Professional Employer Organization (PEO), a worksite employee, and a client company, there exists a co-employment relationship in which both the PEO and client company have an employment relationship with the worker.

The PEO and client company contractually allocate and share traditional employer responsabilities and liabilities and substantially reduce the employer risk.

• Office Supplies

Office supplies purchases generally consume about 3-4% of the gross practice revenue. These supplies generally consist of file supplies, patient charts, toner, labels and paper, etc. Office supplies expense of 2%-3% of $2,000,000 or $40,000 per year. There are markups of 30-45% to the physician practices. The GPO with larger combined sales volumes and efficiencies should generate additional expense category savings.

ProMed Alliance in addition will offer technologically advanced filing solutions such as bar coded file charts, RFID filing systems and cabinets.