global healthcare exchange canada trade exchange adoption supply chain system innovation team 8:...
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Global Healthcare Exchange Canada
Trade Exchange Adoption
Supply Chain System Innovation
Team 8: Brigitte Allaire, Tamara Burnham, Yilan Zhang, Jackie Derhak
Outline
Organization Organization Strategy and Business Model Organizational Problem Information Aspect of Problem IT/IS impacts GHXC’s approach Recommendations Messages for Modern Leader Where is the GHXC today?
Organization Founded in 2000, GHXC operates as a subsidiary of Global
Healthcare Exchange, LLC
GHX Founded and owned by health-care manufacturers
Internet-based trading exchange - hospitals can purchase medical and non-medical products
Provides single-source ordering and tracking for medical and non-medical products
Provides B2B procurement solutions for the healthcare industry
Offers supply chain solutions, market intelligence, and pharma solutions
Organization (cont’d)
Connected hospitals, suppliers, distributors, GPOs in order to improve accuracy, speed and effectiveness of the purchasing process.
“Open” exchange, GHXC encouraged participation from any buyer/seller in the health industry and as “neutral” exchange it contrasted other companies that facilitated competitive bidding environment.
As of June 2002, GHXC had secured a solid foundation of participants
The GHXC’s Strategy
“Automating and improving supply chain operations”
“An E-commerce facilitator”
“A technology company” providing a customized solution for improved management information
The GHXC’s Strategy (cont’d)
Customized solution Provided range of connectivity options to integrate
into back-end systems: Browser-based solutions Existing EDI channels Software to facilitate direct connectivity to exchange system
Standard catalogue Reliable, secure and scalable platform Reporting tools Professional services
GHXC’s Business Model
Establish widespread adoption of its solution by hospital and suppliers
Charge subscription fee to each trading partner in an exchange. Suppliers paid 0.125% of their annual revenues in the hospital
supplies sector
Attract hospital to e-commerce -> free trial period as incentive to join
Survey showed that hospital were willing to pay fees if there was value in the solution
GHXC’s Business Model (cont’d)
Improving relationship between health-care providers and suppliers, resulting in reduced costs and better patient care
Goal of hospital supplies purchase market at 50% by 2004, 80% by 2006
Intended to break even in 2004
Once membership target reached, sales and marketing costs could be reduced
GHXC’s Business Model (cont’d)
Hospital with ERP and MMIS, with EDO and connectivity software to be internet-enabled would not incur cash cost to connect
Older IT system needing upgrades ranged from $1,000 to $20,000
Other costs were time and resource management
Organizational Problem
Operations
Organizational ProblemOperations
Adoption & Communication Value Convincing stakeholders that GHXC would bring value to the
supply chain operations
Persuading industry decision-makers to change their behaviours and adopt GHXC’s solution
Overcoming cultural barriers within the hospital purchasing functions
Need Quicker Cost Recovery
Organizational problem (cont’d) Operations
Adoption Existing strong purchasing relationship
Long term contracts Price protection Afraid of commoditization of products
Achieving critical mass of buyers/suppliers -> fine balancing act
Existing EDI vs New Exchange Solution Point-to-point with hundreds of dedicated lines vs Hub-like
connectivity platform
EDI architectureOne-to-one communication between computers
Exchange architectureMultiple computers within an organization connecting to many different suppliers
Organizational problem (cont’d) Operations
Cost Recovery Unlike most companies, GHXC focussed on cost
recovery instead of profit maximization
Sustainability: Considerable R&D costs Important sales & marketing efforts Bills had to be paid
Free buyer participation to build critical mass Couldn’t indefinitely rely on supplier’s membership fees
Information Aspect of Problem Establish connections
Understand the marketplace Health-care industry in Canada
Understand the supply chain process
Identify clients Purchasers Suppliers Distributors
The Marketplace Health-care industry in Canada
Of the total $90 billion health-care expenditure in 2001, $28.6 billion was attributable to hospital spending, of which 15% was for supplies that could go through the GHXC system.
Canadian health-care was coping with rising costs, struggling to modernize hospital organization and administration
Industry had underinvested in information technology
Poorly integrated ERP and MMIS legacy systems -> “siloed” information pockets and poor data management practices
Supplier reach through existing EDI capabilities limited to ~15%
The Marketplace (Cont’d)Health-care industry in Canada
Legacy culture (Faxes, telephone calls)
Lack of managerial operating information among participants
Variability in price and service
High purchasing search, transaction, and workflow costs
Multi-levels and jurisdictions of Canadian health-care system obstacle
Canada fragmented, geographically dispersed market
Identify ClientsGHXC Targeted Buyers
Primary focus: hospitals due to concentrated supplies spending
Hospitals also tiered and fragmented
75% of medical supply-spending came from ~150 hospitals (out of 1,000)
Hospital operations departmentally driven, poor cross-department co-ordination
Largely manual purchasing process with limited standard
80% government funded -> behaviour towards budget preservation
Identify Clients The buyers - what’s in it for them?
Connectivity -> major driver in purchasing process efficiency
GHXC allowed multiple transactions with more than 100 suppliers through one connection
Customized technology solution and industry catalogue could provide standards
Automatic feedback on price, availability and shipping status
Continuous real-time updates
Identify Clients GHXC Targeted Suppliers
Manufacturers and distributors
Operating efficiencies a key priority
Just-in-time delivery and supply chain management services
Also tiered and fragmented with few supply chains among them
Range from multibillion-dollar corporation to small privately owned operations -> different levels of system sophistication
Identify Clients The suppliers - what’s in it for them?
Better access to purchasing behaviour and improved customer service
Easy to provide product updates
Moved to a demand-based model
For the Distributors:
Benefited from updated pricing and payment information
Reduced delays in payments; reduced errors
Better inventory management
IT/IS Impact
Technology obstacles inhibiting adoption
3 different IT options available Browser based solution Utilization of existing EDI to connect to ERP systems Direct connectivity software between exchange and ERP
system
Browser Based Solution Software application for retrieving, presenting and
traversing information on the web Pros:
Used to access information and display resources Easily accessible Inexpensive for users Control remains with consumer
Cons: Security of information
Existing EDI
Transfer of data, automatic order process Pros:
Efficient for maintaining inventory Reduction of order error Customers able to acknowledge, modify, track orders
Cons: Expense Customers require necessary technology Perceived loss of control in ordering process
ERP Aims to integrate corporate systems by providing a single set of
applications within a single database Pros:
Manages and coordinates all functions and data If successful, improves internal operations
Cons: Complete system/process change Expensive Change in culture Complicated / risky
Organizational Problem
Operations
Marketing
Financial
Market place
Client needs
Supply chain
Web Browser
EDI
ERP
GHXC on the right track Some understanding of clients, processes and marketplace
Marketing individual sales representatives Message had to be strong & clear
Improve care-giving capabilities Reduce operating costs Sales included technology & organizational processes
Flexibility in IT/IS implementation
Additional thoughts?
Our Recommendations Adoption strategy: Capturing connections
Communication is personal, not mass market Customer contact is interactive, not broadcast The customer service time frame is theirs, not yours The culture is bottom-up, not top-down
Faster cost recovery directly linked to clients realizing Value of GHXC services
Messages for Modern Leader Moving Forward is about people Understanding users
“Technology camel”
Messages for Modern Leader
The importance of Change Management should not be underestimated
Increasing executives’ understanding of IT => Champion
Where is GHXC today?
As a subsidiary of GHX, limited information available In 2006, GHXC:
296 Providers 57 suppliers
Compared to a strong Canadian competitor
In 2009, CareNET: ~ 500 providers ~ 100 suppliers
Where is GHX today? More oriented towards to US and Europe markets:
Over the past five years, GHX saved the healthcare industry over $1.3 billion in labor costs alone
Over 3,800 hospitals are connected to the GHX exchange in North America
In Europe, over 1,000 healthcare providers and 200 suppliers are trading electronically through GHX
Enables over 7,200 healthcare providers and 2,400 suppliers in North
America to conduct business electronically
Transaction volume on the GHX exchange has increased 1,500% since 2001, approaching $24 billion in 2008
Now has 20 equity owners
Sources:
www.carenet.ca
www.ghx.com
McNurlin, Sprague, & Bui (2009)
QUESTIONS ?
GHX grew from 15 to 20 owners since 2002
Equity owners of GHX include:
Abbott Exchange, Inc. AmerisourceBergen Corp. Baxter Healthcare Corp. B. Braun Medical Inc. Becton, Dickinson & Company. Boston Scientific Corp. Cardinal Health, Inc. Covidien C.R. Bard, Inc. Fisher Scientific,.
Inc.GE Healthcare HCA Inc. Johnson & Johnson Health Care Systems Inc. McKesson Corp. Medtronic USA, Inc. Owens & Minor, Inc. Premier, Inc. Siemens Medical Solutions, USA, Inc. University HealthSystem Consortium VHA Inc