The big fish of the supply chain -- manufacturers, distributors and group purchasing organizations -- have had their 15 minutes of fame for high drama announcements of partnerships and joint ventures into e-commerce. Now it's time to get on with the drudgery of purchasing.
Full-throttle Web-based supply procurement is a long way off and not something likely to be seen in 2001. Wiring hospitals to the Internet won't come as easy as wiring home desktops to Internet service providers such as America Online. AOL, for one, doesn't have to referee the struggle between physicians attached to certain brands of drugs and medical supplies and materials managers committed to purchasing other brands through their GPOs.
Materials managers have more pressing headaches awaiting in the new year that will distract them from e-commerce. Among them, a new federal law that requires the use of more expensive and less plentiful safety needles in an effort to reduce the number of needlestick injuries.
For much of the past year, many in purchasing were distracted by a proliferation of dot-coms with big aspirations of disenfranchising the powerful GPOs -- until the entire dot-com sector's house of cards came crashing down last spring.
In the healthcare industry, the survivors seem to be those that had the good sense to join rather than try to beat the GPOs, which bring their ready-made blocks of hospital customers to the deals. Most notable were Neoforma.com, which teamed up with the nation's largest GPO, Irving, Texas-based Novation, and Medibuy.com, which first partnered with San Diego-based Premier and then acquired empactHealth.com, the e-commerce provider created by HCA-The Healthcare Co., the nation's largest for-profit hospital chain.
All eyes will be on Neoforma.com, which has distinguished itself as the first e-commerce site partnered with a GPO to blaze an initial public offering trail. It soared with other dot-coms, reaching a per-share high of more than $70 last winter only to tank with the technology crash of last spring so that shares are now hovering just above the NASDAQ's threshold $1 mark.
Not to worry, say Neoforma.com executives. Despite the deflated share price, construction of the marketplace is ahead of schedule in signing up and plugging in hospitals.
Meanwhile, five big hospital suppliers teamed to launch their own e-commerce site, the Global Healthcare Exchange in April. This is not to be confused with the five big hospital distributors (since dwindled down to four) that teamed up to launch their own e-commerce site NewHealthExchange.com that same month.
Just how everybody proposes to get along together remains to be seen.
However, everyone seems to have finally heard the last of that oft-quoted magic number, $11 billion. The figure comes from a study -- now considerably dog-eared -- that assessed the amount of waste in supply chain processing costs. The standard argument for e-commerce has been that Web-based procurement will eliminate much of that waste.
The GPOs are already backing away from promising large cost savings through their electronic marketplaces. The buzzword for the year will be quality. GPOs will try to coax reluctant hospitals to their fledgling Web sites on the promise that Internet purchasing will give them a reckoning of supply chain costs never before obtainable. Crunched delicately, the data can help make the entire hospital better, they will insist.
Considering pharmaceuticals are the biggest cost in purchasing, they are likely to grab much of the attention in 2001. Lee Perlman, executive vice president and chief operating officer of the Greater New York Hospital Association, predicts a lot of work in formulary management and pricing tiers over the coming year within GPOs. He says the Field of Dreams days of group purchasing are gone: Simply negotiating a discounted price with a vendor won't be good enough to bring hospitals to the contract. "All GPOs are trying to prove value beyond pricing," Perlman says.
E-commerce will be the tool for getting there.
