Supplier-backed Global Healthcare Exchange is emerging as the force to be reckoned with in the fast-consolidating healthcare e-commerce marketplace.
Hospitals and their group purchasing organizations eyed the supplier-backed effort suspiciously when it formed a little more than two years ago, but now it seems everyone wants to do business with it.
GHX's newest agreement is with Broadlane, San Francisco, a full-service supply management company that has worked hard to shed any misconceptions that it is a run-of-the-mill GPO. Backed by investor-owned hospital chain Tenet Healthcare Corp., Broadlane customers also include Kaiser Permanente, Universal Health Services, Kindred Healthcare and Continuum Health Partners-more than 450 hospitals in total.
Simply put, the three-year contract with GHX later this year will hook up the 292 hospitals now participating in Broadlane's BroadLink exchange with suppliers doing business on GHX-and vice versa.
Potential hospital customers are nothing new to GHX in recent months. Last year, the Denver-based exchange signed a three-year agreement with San Jose, Calif.-based Neoforma, the e-commerce partner of group purchasing giant Novation. Several months later, GHX sealed a three-year working agreement with AmeriNet, St. Louis, the nation's largest membership-based group purchasing organization.
Ironically, AmeriNet had been on a search for an e-commerce provider since it ditched plans to merge with Broadlane in late 2000-proving there really is nothing new under the sun in healthcare e-commerce, just new relationships. Then, barely two weeks after the AmeriNet announcement, GHX merged distributor-backed HealthNexis into its fold (Dec. 3, 2001, p. 20).
Broadlane officials said connecting to GHX was pretty much a no-brainer after identifying 15 major suppliers on the exchange that their hospital customers use heavily. As a result Broadlane will be able to process through the exchange approximately 60% of their annual supply purchases. The integration with these GHX supplier customers is expected to increase BroadLink's transaction volume by about 20%, adding $300 million in purchases that go through the exchange yearly.
Broadlane customers apparently are doing a lot of business through the BroadLink electronic marketplace already. Officials said of the $3.6 billion in supplies expected to be purchased by Broadlane customers this year, a little more than $1 billion will flow through the exchange. BroadLink went live just a little more than a year ago.
Signing up with GHX has been in Broadlane's game plan for nine months, said Lee Marston, Broadlane's managing director of e-commerce and technology. "Our customers are ecstatic that we can bring GHX suppliers to them electronically," Marston said.
Meanwhile, the Broadlane addition adds quite a bit of "critical mass" to GHX's already snowballing list of customers. GHX Chief Executive Officer Mike Mahoney said business is growing 40% monthly and he anticipates GHX will have close to 1,000 hospitals signed on by year-end. Approximately $1.2 billion in supplies will be going through GHX by the end of 2003, he said.
Mahoney said the key to GHX's success is its ownership by some of the largest suppliers in the healthcare business, including Johnson & Johnson, GE Medical Systems, Baxter International, Tyco International and Boston Scientific Corp.
"I think the key thing is if you look at our founding principles, we want to be open and neutral and we want to work with the customers' preferred procurement platform," Mahoney said.
One happy GHX hospital customer is 445-bed Robert Wood Johnson University Hospital, New Brunswick, N.J. Although it purchases supplies through Novation, the hospital opted to conduct its e-commerce through GHX instead, said Jeffrey Welch, director of materials management. He estimated that excluding pharmacy, the hospital is purchasing about $50 million of its $130 million total through GHX.
"I think it's a great opportunity for (GHX) to hook up with Broadlane," Welch said. "Broadlane is very aggressive and they have a very aggressive (e-commerce) product-no doubt about it. Hooking up with GHX can only be good for the industry."
As the industry source for product information, GHX has grown to become the "it" exchange, said Eric Brown, research director at Forrester Research, Cambridge, Mass. With a key relationship with Neoforma and now Broadlane, the only GPO-supported exchange that is missing from the mix is Premier-backed Medibuy, he added.
"It really puts the pressure on Medibuy," he said. "(GHX is) the center of the universe here."
Financial details of the agreement between GHX and Broadlane were not disclosed, but there was no exchange of equity.