An online buying service for doctors is about to step into the hospital marketplace.
Medicalbuyer.com, part of Cimtek Commerce, Johnson City, Tenn., is readying a broad portfolio of contracts with national and regional distributors, an electronic bidding system and a big-time advertising campaign to appeal to doctors, its core customers, and hospitals, a new frontier.
The site (www.medicalbuyer.com) went live almost a year ago. By design, though, the company relied on visits by the curious and word of mouth to get started. The "soft launch" let Medicalbuyer.com work out kinks and develop requested features, said Edward Rollins, M.D., a radiologist who has since given up medicine to become the company's chairman and chief executive officer.
Frustration with the old-fashioned supply approach spawned the venture. Almost two years ago, Rollins turned to the Internet to help his wife, a pathologist, supply her private practice. They figured there must be an online shop geared to doctors. But Rollins soon learned otherwise. To him, the vacuum signaled a wonderful business opportunity.
Rollins hooked up with Michael Bradley in 1997 to form the company called Cimtek Commerce. Bradley, president and chief operating officer, had experience developing online catalogs for other businesses, including a joint venture called Cimtek_Thomas, with Thomas Publishing, which prints company directories.
Flush with $11 million in venture capital, Medicalbuyer.com is stepping up its campaign to put the Internet to use in purchasing medical-surgical supplies and equipment.
The main customers so far are doctors, operating independently and in group practices. Unlike hospitals, most doctors haven't paid as much attention to supply expenses as hospitals have. Even the few of the 500,000 practicing physicians who have tried to cut costs haven't been able to amass much purchasing power to drive price breaks.
But the Internet may give doctors a shortcut to buying convenience and discounts. Bradley estimates the average physician could save $3,000 per year by ordering supplies through Medicalbuyer.com rather than through conventional catalogs or local distributors.
Though Rollins declined to provide detailed figures on sales through the service to date, he said that sales are growing by 50% per month.
As of last month, more than 400 shoppers per day were visiting the site, which the company has done little to publicize until now. On average, visitors spend six or seven minutes browsing. About 20% of those who buy are repeat customers. First sales are small, about $30, but return purchasers quickly beef up orders, surpassing $240 an order, the average bought by conventional means.
Most of the 2,000 or so products available are commodities commonly found in doctors' offices, such as tape, gauze, splints and stethoscopes. Medicalbuyer.com lists the products and their prices by distributor. The company said that customers can expect to save from 10% to 50% over expenditures through conventional methods.
Though varied, most of the merchandise is small and uncomplicated.
"If you can pick it up and carry it, it fits," Rollins quipped.
In the next several months, Medicalbuyer.com expects to announce arrangements with at least four distributors, which will boost the products available to 20,000 and make the service more appealing to sophisticated buyers.
Starting in the fourth quarter, hospitals and doctors also can hold reverse auctions, putting out for bid either spot orders or long-term agreements for specific products. Long-term agreements could be hammered out as quickly as in 30 days.
This strategy, if successful in achieving big discounts for hospitals, would threaten the bread and butter of purchasing groups.
Although Medicalbuyer.com has talked about cooperating with several buying groups, which executives declined to name, resistance to the idea seems more likely.
Inertia in the healthcare supply chain is legendary, but Medicalbuyer.com expects old-fashioned capitalism to eventually prevail in the fight for efficiency.
"We have another partner on our side, and that's Adam Smith," Bradley said.
Medicalbuyer.com has already won some converts.
"To my surprise, I plugged in supplies that we routinely order, and I found that their prices were a lot better than a lot of traditional mail-order catalogs," said Oscar DeAsis, business manager for his wife's solo practice in internal medicine in Vernon, Texas.
DeAsis made his first purchase, worth about $162, in August and since then has made three other purchases worth more than $600.
"I was very impressed," he said.
But convincing hospital customers may be more difficult.
Internet buying services are "a very positive market force," said Michael Millard, director of pharmacy and materials at Sacred Heart Medical Center in Eugene, Ore. "But I think the question is, Are we interested now?" He answered: "No. Because we think sole-source, committed group purchasing is still the way to get the lowest price today."