A vertical group purchasing organization aggregates demand within a single industry; a horizontal GPO aggregates demand across industries for the indirect categories they hold in common. The difference lies in which categories the contracts cover, and that one fact decides how a hospital, a hotel group, and a manufacturer each experience group purchasing.

Healthcare’s GPOs negotiate clinical supplies. Hospitality grew out of food distribution and negotiated food, beverage, and furnishings. Manufacturing has no equivalent, because the spend that defines it is engineering-specified and managed in-house. In all three industries, the vertical GPO covers the spend that defines the industry and leaves the spend that every industry shares: maintenance and repair supplies, safety and PPE, wireless telecom, software and IT, packaging, office supplies, janitorial services.

A group purchasing organization pools the purchasing volume of many member organizations and negotiates supplier contracts against that combined volume, which is what gives collective buying power its leverage. Members then buy at the contracted price without negotiating individually. Which kind of GPO a company joins is decided largely by its industry, and the two kinds do not cover the same spend. Everything that follows about hospitals, hotels, and factories comes back to that.

Two kinds of GPO (Vertical GPO VS Horizontal GPO)

A vertical GPO specializes by industry. Premier and Vizient contract for hospitals; Avendra and Foodbuy contract for hotels and restaurants. Their pre-negotiated contracts follow the categories their industry is built on. A horizontal GPO specializes by category instead. It contracts for the indirect goods and services that a hospital, a hotel, and a factory all buy in similar forms, and it draws its volume from members across unrelated industries.

The two are complements. A hospital, a hotel group, and a manufacturer can each belong to a vertical GPO and a horizontal GPO at the same time, because the two negotiate different categories.

For the buyer, membership in either kind is usually free and rarely exclusive. Revenue comes from administrative fees that suppliers pay on the volume routed through contracted agreements, calculated as a percentage of contract sales. That arrangement is standard across the industry, and it means the party paying the GPO is the same party the GPO negotiates against. The evidence section below returns to what that does and does not appear to cost members.

Indirect spend is the axis that makes three unrelated industries comparable: maintenance, repair, and operations supplies, safety equipment and PPE, wireless telecom, software and IT, packaging, office supplies, and janitorial and facility services. Every organization buys these categories, and no organization is defined by them, which is exactly why a vertical GPO leaves them alone and why they are the categories most likely to go unmanaged.

Healthcare: a clinical GPO market created by statute

What healthcare GPOs cover

Premier, Vizient, and HealthTrust are the three largest healthcare GPOs in the United States. Their contracts cover medical and surgical supplies, pharmaceuticals, laboratory products, and capital equipment, and extend into non-acute care settings such as nursing homes and physician practices. Adoption is close to universal: between 96 and 98 percent of US hospitals hold at least one GPO contract, according to a 2019 analysis by Dobson DaVanzo and Associates commissioned by the Healthcare Supply Chain Association, the industry’s trade body. That adoption rate is itself healthcare’s distinguishing feature. In no other industry is group purchasing the default rather than a decision.

Why the split exists

Healthcare’s GPO market has the shape it does because of a 1987 statute. The Medicare and Medicaid Patient and Program Protection Act created a statutory exemption permitting healthcare GPOs to collect administrative fees from vendors without triggering federal anti-kickback liability. HHS safe harbor regulations issued in 1991 added the condition that any fee above 3.0 percent of the purchase price be specified in the member’s written agreement. Healthcare is the only industry whose GPOs operate under a statutory carve-out of this kind, and no equivalent statute governs group purchasing in hospitality, in manufacturing, or anywhere else. A federal exemption made large-scale clinical group purchasing viable, and the market consolidated around it.

The spend that sits outside

A hospital’s clinical spend is contracted; much of its non-clinical spend is not. The same 2019 Dobson DaVanzo analysis estimated that GPO activity touches roughly 60 percent of hospital and nursing-home non-labor spending, which leaves close to 40 percent of it outside GPO-negotiated contracts. That remainder is where a hospital buys maintenance and repair supplies, safety equipment and PPE, wireless telecom, software and IT, packaging, office supplies, and janitorial services. Premier, Vizient, and HealthTrust were built to negotiate med-surg supplies and pharmaceuticals, and they do that well. Their contracts were never built for a hospital’s tail spend, the low-value, high-frequency purchases spread across hundreds of suppliers that no category manager owns.

What this means for a healthcare buyer

Healthcare’s supply failure mode is shortage. A gap in drugs or devices reaches patients directly, and price is rarely the binding constraint on those categories, because the clinical GPO already negotiated them. What remains open to management, and what still carries continuity risk, is the indirect spend nobody put under contract.

Hospitality: a GPO market that grew out of foodservice

What hospitality GPOs cover

Avendra, Foodbuy, Entegra, Source1 Purchasing, and Hilton Supply Management are the organizations that aggregate hotel and restaurant demand. Their contracts are built around food, beverage, and FF&E, the furniture, fixtures, and equipment that furnish a property. Purchasing-power figures published for several of them come from the organizations themselves and reach the trade press unaudited, so they read as claims rather than measurements. Search for a hospitality GPO and nearly every result describes a foodservice GPO. The conflation reflects how the market formed, but it misrepresents what a hotel buys.

Why hospitality’s gap is different

Hospitality’s GPO market took its shape from foodservice contracting rather than from statute. Food is the category where a hotel’s purchase volume is largest and its margins are thinnest, so food is where the aggregators formed, and the organizations that negotiate for hotels today grew out of food distribution and menu economics. Entegra’s own guide to GPO benefits for hotels and restaurants is almost entirely food content despite naming hotels in its title. The market never developed a comparable aggregator for anything else a hotel buys.

The spend that sits outside

Janitorial and facility services, safety equipment and PPE, wireless telecom, software and IT, packaging, and office supplies sit outside the contracts of the food-origin hospitality GPOs. A hotel group’s telecom agreement has nothing to do with its food GPO, and no food GPO negotiates its cleaning chemicals, its housekeeping equipment, or the tail spend accumulating across individual properties.

Hotel operators are not corporate travel buyers

A hotel operator buys supplies to run a property. A company with traveling employees buys hotel stays and rental cars. Both get called hospitality procurement, and they sit on opposite sides of the same transaction. Corporate travel programs negotiate rates with car rental and lodging suppliers on behalf of employees, which makes them a category a company buys rather than an industry served.

What this means for a hospitality buyer

Hospitality’s failure mode is guest experience. A stockout of amenities, cleaning supplies, or PPE reaches the guest within a single shift, and the food GPO does not cover the categories where that failure starts. The unmanaged spend and the guest-facing risk sit in the same place, and neither one shows up in a food contract review.

Manufacturing: indirect spend scattered across sites

What manufacturing’s GPO market covers

Manufacturing has no Premier and no Avendra. The GPOs serving manufacturers negotiate MRO, safety and PPE, packaging, and janitorial supplies, which are indirect categories rather than the industry’s defining spend. Direct materials, meaning steel, resin, castings, and electronic components, are almost never GPO-contracted, because they are engineering-specified, quality-qualified, and managed in-house as a strategic function. Manufacturing has no dominant industry-specific GPO because the spend that defines the industry is the spend a third party cannot aggregate.

Why manufacturing’s gap is different

Healthcare and hospitality face a coverage gap, a set of categories their vertical GPOs never contracted. Manufacturing faces a control problem instead, since its indirect categories are reachable through existing contracts while the buying is fragmented across facilities that each hold purchasing autonomy. The same bearing, the same glove, and the same pallet get bought at three prices at three plants. A single-site manufacturer meets the category version of the same problem: too little volume in any one indirect category to negotiate alone, and no second facility to standardize against. Both versions are organizational rather than a failure of negotiating skill.

Where the money leaks

Money leaves through three mechanisms. Facility-level buyers purchase off contract when a contracted part is not on the shelf and a line is waiting. Tail spend, the long list of low-value purchases spread across hundreds of suppliers, has no owner and no negotiated price. And specification differences between plants stop identical items from consolidating into one volume worth negotiating. Supplier consolidation closes all three at once, because it standardizes specifications, gives the tail spend an owner, and puts contracted parts on the shelf.

What this means for a manufacturing buyer

Manufacturing’s failure mode is downtime. An MRO stockout stops a line, and the cost of the missing part is trivial next to the cost of the stopped line. Consolidation buys continuity alongside price, because a single contracted supplier holding committed volume has more reason to carry stock than twelve transactional ones. Compliance and standardization across sites is what converts scattered purchasing into volume worth a contract.

Most companies belong to more than one GPO

Multi-GPO membership is the norm. Most healthcare facilities hold contracts with more than one GPO, and hospitals work with two to four on average, according to the 2019 Dobson DaVanzo analysis. Membership agreements are typically non-exclusive, which means joining a horizontal GPO does not require leaving a vertical one and does not require changing distributors. The useful question is which GPO to use for which categories, and that is the only frame under which a vertical GPO and a horizontal GPO stop looking like competitors.

The genuine alternatives each carry a trade-off. Negotiating directly with suppliers preserves full control over terms and forfeits aggregated volume. A purchasing cooperative gives members ownership and requires shared governance, often with a capital or commitment stake attached. An informal buying consortium among peer companies aggregates volume for as long as the group holds together. Fractional or outsourced procurement support adds negotiating capacity without adding contracts, and it adds a fee.

Before signing anything, read the exclusivity clause. An agreement that restricts purchasing outside its own contracts limits what any second program can do, and exclusivity is the one term that turns complementary memberships into competing ones.

What the evidence on GPO savings says

The evidence on GPO savings is contested, and the field’s strongest study is more careful than the marketing built on it.

Lin and Wang, writing in the Journal of Public Economics in 2025, studied US medical and surgical hospitals and reported two separate findings. A one-standard-deviation increase in GPO scale reduced an average hospital’s supply expenses per discharge by 2.7 percent. Switching from a bottom-quartile to a top-quartile GPO by market share reduced supply expenses per discharge by 4.8 percent, worth $85 per discharge and more than $1.2 million per hospital per year. They found no evidence that savings came at the cost of care quality or through selective patient admission, and savings reached consumers only in competitive markets.

The contrary evidence is older, and real. The General Accounting Office reported in 2002 that hospitals buying on GPO contracts did not always pay less, and often paid more, than hospitals negotiating directly. The US Senate Finance Committee’s 2010 minority staff report carries the title “Empirical Data Lacking to Support Claims of Savings with Group Purchasing Organizations.” Both are contested and both are old. In February 2024 the FTC and HHS jointly issued a Request for Information on whether GPO contracting practices contribute to generic drug shortages. No finding of causation followed.

Industry-funded and independent figures measure different things. The 13.1 percent supply-cost reduction and the $34.1 billion in annual savings come from the 2019 Dobson DaVanzo analysis commissioned by the GPO trade association; the 2.7 and 4.8 percent figures come from a peer-reviewed causal study.

GPO revenue comes from the suppliers whose contracts the GPO negotiates, and healthcare’s 3.0 percent disclosure threshold is a statutory safeguard found in no other industry. No vertical-specific savings evidence exists outside healthcare, so any figure presented as a hospitality or manufacturing GPO savings rate is a vendor claim.

How to find the spend your GPO does not cover?

Non-strategic categories are served better by a competent process than by a talented negotiator. Three steps establish what is already covered and what is not.

1. Audit indirect spend by category. Pull twelve months of accounts payable data and classify every line into MRO, safety and PPE, wireless telecom, software and IT, packaging, office supplies, and janitorial. Spend visibility at category level is the input everything else depends on, and accounts payable data is usually the only place it exists in full.
   
   
2. Map the categories against contract coverage. List the GPOs and negotiated agreements you already hold, and mark which categories each agreement genuinely contracts. Most buyers have never done this, because membership gets assumed to be coverage.
   
   
3. Size the remainder. The categories with no contract behind them, plus the tail spend no category manager owns, are the addressable gap. That number is what any second program would be working with, and it is the only figure worth taking into a conversation with a GPO.

Where a horizontal indirect-spend GPO helps

CenterPoint Group is a horizontal indirect-spend GPO. We negotiate MRO and industrial supplies, safety and PPE, office supplies, wireless telecom, software and IT, and packaging for members across healthcare, hospitality, manufacturing, and other industries, which are the categories a vertical GPO leaves uncontracted.

Membership does not require leaving an existing GPO and does not require changing distributors. Members keep the suppliers they already use and buy at pricing negotiated against more than $1 billion in collective indirect spend. Since 2006 we have delivered 15 to 35 percent savings by category, at a 96 percent savings success rate. One manufacturing member reduced office supply costs by 30 percent across more than 20 locations within 30 days of implementation. Another consolidated more than ten MRO and safety suppliers into a single contracted program and reduced those costs by 25 percent.

Request a free pricing analysis. We will benchmark your indirect categories against contracted pricing and show you what the uncontracted gap is worth in your own numbers.