Health Care Slowly Adopting E-Procurement

Loads of electronic-procurement firms are targeting health care. But despite the promise of improved efficiency, few hospitals want to struggle with the integration burden, and others say they doubt there will be any savings in the new approach.

In a study released this week, Sandy Lutz, associate director of health care research at New York-based PricewaterhouseCoopers, estimated that there are 50 to 70 electronic-procurement companies targeting the health care industry.

But U.S. hospitals currently make less than 3% of their purchases online, according to Toronto-based Millennium Research Group.

For years, most hospitals have ordered supplies ranging from office items to medical equipment through group purchasing organizations (GPOs). Acting as middlemen between health care providers and manufacturers, GPOs help negotiate volume discounts.

Other health care organizations buy direct. Greg Walton, CIO at Carilion Health System in Roanoke, Va., said he prefers to order supplies from manufacturers and hasn't seen much value from electronic-procurement firms.

"The Web is overhyped," said Walton.

Hospitals are often locked into long-term purchasing contracts and can't simply change their ordering systems overnight, according to Mark Anderson, a vice president at Stamford, Conn.-based Meta Group Inc. and a former hospital CIO.

That's why doctors' offices have caught on to electronic procurement more quickly than hospitals, said Anderson.

But health care is warming up to placing orders online. Hospital purchasing managers say that more than one quarter of their transactions will be conducted online by next year, and about two-thirds by 2003, according to Millennium Research.

Consider the Savings

Diane Zak, a purchasing manager at Talbert Medical Group in Costa Mesa, Calif., said online ordering will save the group time and money over the current handwritten purchase orders and Excel spreadsheets.

Talbert this week signed a three-year contract with Irvine, Calif.-based Embion Inc., which will work with Talbert's suppliers to move all of Talbert's purchases online. Zak says she hopes the process will be completed by next April.

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