CHALLENGE 07
Misunderstanding Procurement, GPOs, and Contracting
Health IT companies sometimes treat procurement, GPO agreements, and contracting as the final administrative steps in an otherwise completed sale.
They are not.
A provider may believe the technology creates value and still need to determine whether it can be purchased through the organization’s established processes, whether the commercial terms are acceptable, whether additional approvals are required, and whether the vendor is prepared to support an enterprise relationship.
At the same time, the reverse mistake is just as common.
A vendor may obtain a GPO contract or other purchasing vehicle and assume that access will create demand.
It will not.
A contracting path can remove friction from a buying decision. It does not replace the need to create that decision in the first place.
A contract can make you easier to buy from. It cannot make you worth buying.
Seller’s Lens vs. Buyer’s Lens
Health IT companies often look at procurement and contracting as mechanisms for getting the deal completed. Providers view them as part of the process for making sure the organization is buying the right solution, from the right vendor, under acceptable terms and risk.
Seller’s Lens
“We have a contract path.”
The seller sees:
- access through a GPO or purchasing agreement;
- preferred or pre-negotiated terms;
- an easier contracting path;
- fewer administrative barriers;
- access to member organizations;
- a shorter route to procurement;
- improved market credibility;
- and an opportunity to accelerate closing.
From the seller’s perspective, contracting access should make sales easier.
Buyer’s Lens
“We still need a reason to buy.”
The provider is asking:
- Does this solve an important enough problem?
- Have the right stakeholders approved the solution?
- Has value analysis been completed?
- Does the business case justify the investment?
- Are the commercial terms acceptable?
- What obligations and risks are created by the agreement?
- Can the vendor support implementation and scale?
- Does the purchasing vehicle actually fit how we buy?
Contract access reduces purchasing friction. It does not create organizational demand.
Why This Becomes a GTM Problem
When vendors confuse contracting access with commercial readiness, they can invest significant time in agreements that make the solution purchasable without creating the internal demand required to actually purchase it.
The GPO Contract Becomes the GTM Strategy
The vendor assumes access to member organizations will generate demand without a corresponding sales motion.
“We’re on Contract” Is Mistaken for Pipeline
Potential access is mistaken for active demand, qualified opportunities, and real pipeline progression.
Procurement Appears Too Late
The sales team reaches agreement with business stakeholders before understanding how the organization must actually purchase.
Value Analysis Becomes a Surprise
Evidence, financial justification, or operational documentation is requested after the seller thought the deal was nearly complete.
Contract Terms Slow the Deal
Legal, liability, pricing, implementation, data, or service requirements surface late and extend the timeline.
The Vendor Is Easy to Buy but Hard to Scale
The purchasing mechanism exists, but the company has not demonstrated the operational readiness required for broader adoption.
A purchasing vehicle is not a buying signal.
Provider Perspective
James Ludwig
Former Premier Executive
Marisa Farabaugh
Chief Supply Chain Officer, AdventHealth
Robin Damschroder
Chief Financial Officer, Henry Ford Health
James Ludwig
Former Premier Executive
A GPO Agreement Is a License to Hunt
A GPO can provide an important bridge between vendors and healthcare organizations.
It can simplify access to contracting mechanisms, establish commercial terms, and make it easier for a member organization to purchase a solution once the buying decision has been made.
But the agreement itself does not create demand.
The vendor still needs to identify the problem, build internal support, demonstrate value, navigate evaluation, and win the provider’s decision.
The GTM implication
Treat GPO access as an enabler of the sales process—not as a substitute for the sales process.
Marisa Farabaugh
Chief Supply Chain Officer, AdventHealth
Purchasing Decisions Extend Beyond Product Interest
In a large health system, supply chain and procurement help determine whether a solution can move from local interest to an organizationally supported purchase.
That may involve value analysis, commercial terms, operational requirements, standardization considerations, pricing benchmarks and market comparisons, and confidence that the vendor can support the broader organization.
The purchasing process therefore needs to be understood early enough that the vendor is not discovering critical requirements after the commercial team believes the deal is already won.
The GTM implication
Understand how the provider evaluates and purchases technology before the opportunity reaches contracting.
Robin Damschroder
Chief Financial Officer, Henry Ford Health
Contracting Does Not Replace the Investment Decision
An available purchasing mechanism does not answer whether the investment should be made.
Finance still needs confidence in the economics, timing of value, assumptions, and competing uses of organizational resources.
A favorable contract can simplify the transaction after that decision.
It cannot make an unattractive investment attractive.
The GTM implication
Make the business case strong enough to earn the purchase before relying on the contract path to complete it.
How to Diagnose Procurement & Contracting Readiness
Separate Access From Demand
A contract can provide access.
It cannot guarantee opportunity.
The commercial team should distinguish between:
Contract Access
- available purchasing vehicle;
- negotiated commercial terms;
- membership access;
- simplified procurement;
- established vendor status.
Buyer Demand
- important problem;
- active internal sponsor;
- committed stakeholders;
- validated business case;
- defined Decision Process;
- organizational priority.
Both can matter.
But only one tells you whether somebody actually wants to buy.
Being available to purchase is not the same as being selected for purchase.
Understand the Provider’s Purchasing Path Early
The Paper Process in MEDDPICC® should not begin when the contract arrives.
The sales team should understand:
- whether a GPO or preferred contract is required;
- whether procurement must be engaged;
- whether value analysis is involved;
- what documentation is needed;
- when legal review begins;
- how pricing is evaluated;
- what insurance or liability requirements apply;
- and what approvals are needed before signature.
The objective is not to turn the salesperson into a contracting expert.
It is to understand enough of the process that predictable requirements do not become unexpected delays.
Paper Process should be discovered—not discovered late.
Prepare for Value Analysis
In many provider organizations, purchasing decisions involve more than confirming that the product functions.
The organization may need evidence around:
- clinical or operational value;
- financial impact;
- workflow implications;
- implementation requirements;
- comparative alternatives;
- standardization;
- risk;
- utilization;
- and expected outcomes.
The stronger the vendor’s evidence before that evaluation begins, the easier it becomes for internal stakeholders to support the purchase.
Value analysis asks a different question from the product demo: not “Does it work?” but “Does adopting it make sense for our organization?”
Understand That Your Pricing May Be Benchmarked
Some healthcare organizations have access to anonymized supply-chain price-checking and benchmarking tools that allow them to compare pricing and commercial terms against what similar organizations are seeing in the market.
Not every hospital or health system uses these resources, but vendors should not assume that the price presented to one provider exists in isolation. Supply chain and procurement teams may have outside reference points when evaluating whether pricing is competitive and defensible.
That makes pricing discipline increasingly important—particularly for vendors selling across multiple hospitals or health systems.
Do not assume the provider is evaluating your price only against the number on your proposal. They may also be evaluating it against anonymized market benchmarks.
Make Sure the Company Can Support the Contract It Wins
Winning an enterprise contract can expose weaknesses that were invisible during a smaller sales process.
The provider may expect:
- implementation capacity;
- service levels;
- training;
- support;
- reporting;
- security commitments;
- integration resources;
- geographic coverage;
- and the ability to support broader deployment.
That means scale readiness should be considered before the company aggressively pursues enterprise contracting.
The goal is not simply to win access to a large customer base. It is to be ready to serve it.
Diagnostic Content — Bottom Line
Procurement readiness means understanding how the provider will purchase, what evidence and approvals are required, and whether the vendor can support the relationship after the contract is signed.
Better Discovery Questions — Don’t Ask / Ask Instead
Good procurement discovery goes beyond asking when the contract will be sent. It helps the sales team understand the purchasing process early enough to anticipate the evidence, stakeholders, and approvals required to complete the decision.
DON’T ASK
“Are you a member of our GPO?”
ASK INSTEAD
“Once your organization decides to move forward, what purchasing path would typically be used for a solution like ours?”
DON’T ASK
“When will procurement be involved with the contract?”
ASK INSTEAD
“What procurement, value-analysis, legal, or contracting steps need to occur before an agreement can be finalized?”
DON’T ASK
“If we’re already on contract, can we move straight to purchase?”
ASK INSTEAD
“What internal approvals still need to occur even when an existing purchasing agreement is available?”
The objective is not simply to find the shortest contracting path. It is to understand the complete path from provider decision to executable purchase.
From Contract Access to Commercial Readiness
Before treating an available contract or GPO relationship as evidence of commercial readiness, the sales team should understand whether real buyer demand exists, what purchasing process will be used, what evidence remains necessary, and whether the company can support the resulting relationship. The Buyer’s-Lens Test helps distinguish purchasing access from an actual buying decision.
1. Questions Health IT Companies Should Be Able to Answer
☐ Is there genuine provider demand for the solution?
☐ What purchasing vehicle will likely be used?
☐ Is a GPO or preferred agreement required?
☐ When does procurement become involved?
☐ Is value analysis required?
☐ What evidence will value analysis evaluate?
☐ What legal or contracting reviews remain?
☐ Who owns the Paper Process internally?
☐ What could delay signature?
☐ Are commercial terms already established?
☐ What obligations begin after contracting?
☐ Can the vendor operationally support the scale of the agreement?
If the sales team knows how the provider can purchase but cannot explain why the provider will purchase, the opportunity is not commercially ready.
The Buyer’s-Lens Test
A procurement-ready opportunity should allow the sales team to answer “yes” to each of the following:
✓ Yes, real buyer demand exists.
The contract path is supporting an active buying decision, not substituting for one.
✓ Yes, the purchasing process is understood.
Procurement, value analysis, legal, contracting, and required approvals are visible.
✓ Yes, the required evidence is available.
The vendor is prepared to support the provider’s evaluation beyond the product demo.
✓ Yes, the Paper Process is mapped.
The team understands what must happen between business approval and signature.
✓ Yes, we can support what we are selling.
The company has the operational capacity to meet the obligations created by the agreement.
When those five answers are present, procurement and contracting become part of a predictable buying process rather than a late-stage surprise.
David's GTM Takeaway
Health IT companies sometimes invest enormous energy in getting onto a GPO contract, preferred-vendor agreement, or other purchasing vehicle.
Those relationships can be valuable.
They can remove friction.
They can create access.
They can make the company easier to purchase from.
But they do not create the underlying buying decision.
The vendor still needs to solve an important problem, build internal support, demonstrate value, navigate the buying committee, and earn the investment.
And when pricing enters the discussion, remember:
- The seller may think it is negotiating a price. The provider may be benchmarking a market.
That is why procurement and supply chain need to be understood as part of the buying process—not simply as the administrative path to signature.
- A contract can make you easier to buy from. It cannot make you worth buying.