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The following article appears in the March issue of Healthcare Purchasing News.

with J. Edward Pearson, President and CEO, Medibuy, Nashville, TN

HPN: How satisfied are you with the progress made by medical supply e-commerce in general and Medibuy specifically over the past two years?

Pearson: Regarding medical e-commerce in general, this question can be answered by tracking expectations over the past two years. At first, hospitals were promised many e-commerce tools and product features as well as early benefits, everything from e-auctions to online catalogs with robust features. In addition, both healthcare providers and suppliers thought these products and services would be free, as “the other party” would foot the bill. Many people also thought enabling e-commerce would be fast and easy. Suppliers, in general, were skeptical of the seemingly endless entry of medical e-commerce companies in 2000, and subsequently resisted committing to any of the e-commerce firms. As suppliers were also very protective of the data availability and visibility offered by e-commerce, some of them formed their own firm.

There was too much focus on the wrong metrics. Whether it was the number and frequency of press releases, the number of hospitals or suppliers signed by any given e-commerce provider or number of strategic alliances. Some companies focused on glamorous-sounding solutions like e-auctions, large and robust catalogs, etc., that really didn’t impact significant purchasing processes.

Given this context, we have all learned that enabling true e-commerce and realizing significant benefits took longer than expected. And it was, and continues to be, hard work. There has been progress made by all parties over the past two years, but I suspect there is some level of disappointment felt by everyone.

Medibuy has not been immune to these dynamics. We launched some products that were later discontinued for a variety of reasons. We have had some strategy changes as well. However, we are very pleased with the commitment level from our strategic partners, Premier and HealthTrust Purchasing Group (HPG), and look forward to strengthening these relationships even further with increased user input from their hospital members as we go forward. We are definitely leveraging our learning over these past two years to solidify our strategy and direction to offer significant value to both healthcare providers and suppliers.

HPN: How would you describe the phase that medical supply chain e-commerce finds itself in today?

Pearson: Now that the field has been reduced to only the serious, viable, long-term e-commerce players, the posturing is over and realistic expectations are being put in place for all participants. We are entering a phase of execution — deploying real products and services and demonstrating real value to both healthcare providers and their trading partners that deeply impact supply chain efficiency. For example, the number of signed hospitals and suppliers is no longer relevant, but the number of integrated trading partners is relevant. It’s more than how many integrated suppliers you have; it’s how many invoicing suppliers and distributors relevant to a majority of a hospital’s purchases that count. The depth of integration is what really matters, as only comprehensive integrations enable core supply chain process improvement.

Medibuy is also in the execution phase. We continue refining our fast and repeatable integration processes, based on standards, and remotely support and monitor them after installation, thereby minimizing impact on IT departments. We have successfully integrated to MMIS from ESI Nova, Pathways, Lawson, Meditech, GEAC, SAP, PeopleSoft and many more.

We are focused on deploying proven products such as Access, Marketplace, and Reqs and proven services, such as Integration and Data Professional Services, that impact core supply chain processes. For example, our Access product quickly exposes order process discrepancies, such as price or quantity, that cause problems and errors between trading partners using intelligent integration and order processing tools. Our systems electronically “open up” these documents, interpret their contents, and notify hospitals with information that makes the supply chain process more efficient.

HPN: What do Medibuy and medical supply e-commerce firms still have to do to persuade hospitals to use Web-based procurement services?

Pearson: Medibuy is motivated to provide hospitals with expanded order processing capabilities, such as advanced ship notices, evaluated receipt notices, etc., and quality data so we can improve their reporting and analysis, which in turn gives hospitals visibility and advantages they never had before; such as improved sourcing abilities. Not all medical supply e-commerce firms are as motivated to provide such powerful capabilities to hospital users. We also need to better articulate immediate and future value of our solutions to clients. In the end, we all need to demonstrate that our products and services truly improve supply chain processes and reduce supply chain errors, thereby decreasing operating costs. This will only happen if we offer products and services that solve demanding supply chain problems that impact core processes.

HPN: What is Medibuy’s biggest strength?

Pearson: We improve core supply chain processes in a meaningful way that will eventually touch all aspects of the materials management process. By leveraging our supply chain and materials management expertise, we adapt commercially proven and scalable technology to develop core products and services. Therefore, our offering focuses on three things: order processing intelligence, “requisition to PO” workflow automation and data services and tools that facilitate increased contract compliance, simplified clinician purchase decisions and reduced errors with accurate, clean and standardized data. This offering enables us to be very relevant to our hospital clients. A director of materials management from one of our client hospitals told us his buyers don’t have to closely examine supplier acknowledgements looking for discrepancies from their purchase orders anymore, thanks to automatic discrepancy reports from our Access product — his buyers can now focus on other things.

HPN: What is Medibuy’s biggest weakness?

Pearson: Medibuy’s 2001 merger with three companies and their subsequent assimilation delayed our progress. Instead of focusing solely on hospital supply chain efficiency solutions, we had to focus some of our energy on internal issues relating to the mergers. However, our consolidation to Nashville and streamlined product portfolio onto a single technology platform have enabled us to get back on track with a rapidly growing list of 400+ deeply integrated hospitals and approximately 30 integrated suppliers that impact a large percentage of our clients purchases.

HPN: How can Medibuy save hospitals money and at the same time make itself profitable without adding cost to the supply chain?

Pearson: By eliminating supply chain errors and improving data quality we address the heart of procurement and materials management inefficiencies. By focusing our solutions in these two highly related areas while leveraging direct hospital user input to complement our supply chain expertise, we are enabling hospitals to save money – and the savings can be shared. For example, later this year GPO contracts will be more tightly integrated with our Marketplace as well as clean item and vendor masters, enabling hospitals to make more informed purchasing decisions, short and long term. Not just improved contract compliance, but contract optimization — which saves real dollars. In another example, a director of supply strategy from one of our client hospitals told us his single connection to our Marketplace and one standard electronic format for all purchase orders, for any supplier, makes it easier and faster for him to conduct business with his suppliers. Anecdotal stories like this one will eventually translate into bottom line cost savings.

HPN: What is your vision for medical supply e-commerce going forward five years from now?

Pearson: Efficient, electronic transactions will be a commodity. But the depth of procurement order processing capabilities will differentiate e-commerce providers. All trading partners will have greatly enhanced visibility into many portions of the supply chain with useful, timely information. In less than five years, “data” will have transformed into “information” for most users. However, the “holy grail” will be transforming “information” into “intelligence,” which leads to better sourcing and decision-making by all trading partners in the supply chain. In addition, Internet-enabled tools targeted at specialty areas of procurement and the supply chain will be available. We have all learned our lessons over the past two years — hospital and supplier end user needs will drive future product development, not the other way around.

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Copyright © 2002 Medibuy, Inc. All rights reserved.

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