Not A Cure-All, But Online Exchanges Help Hospitals Cut CostsNot A Cure-All, But Online Exchanges Help Hospitals Cut Costs

Remember how industry-specific, business-to-business online exchanges were going to revolutionize the way companies bought and sold goods? They haven't provided the upheaval some expected, but exchanges are surviving in some niches, including some serving health-care companies trying to optimize supply-chain efficiencies and squeeze out costs wherever they can.

Evanston Northwestern Healthcare has saved about $400,000 this year by using the online health-care supply-chain exchange Marketplace@Novation, says Tom Konsoer, VP of purchasing and material services at the Chicago-area hospital.

Before using the online exchange, Evanston Northwestern had seven people assigned to place supply orders from the dozens of vendors from which it buys $90 million of supplies each year. The hospital was able to reassign four of those staffers "to improve other areas" of the organization, he says.

The biggest chunk of savings--nearly $200,000 this year--has come from more-efficient supply-chain processes. For example, being able to get electronic confirmation of orders the same day they're placed means the hospital can address problems sooner, Konsoer says.

Evanston Northwestern also has improved compliance with vendor contracts. In some cases in the past, the hospital had been "paying higher-tier [prices] than we should have," Konsoer says. Now the hospital makes better use of volume discounts and other contractual terms.

Marketplace@Novation says 55 of its member hospitals saved more than $82.6 million this year. That value includes avoiding or cutting costs, such as eliminating the need for individual EDI connections to suppliers, better compliance with vendor contracts, and more automation of tedious manual supply-related tasks, says Judy Rowe, VP of customer success services of Neoforma Inc., whose supply-chain-management software and services run and support the operation.

Marketplace@Novation is the online exchange of Novation, a group-purchasing organization launched in 1998 by VHA Inc. and the University HealthSystem Consortium. The company says Novation member hospitals purchased more than $22 billion in supplies in 2003.

This story was modified Dec. 16