Health Care Manufacturers to Launch Net Exchange

FRAMINGHAM (03/30/2000) - Five major health care suppliers have teamed up to form an Internet exchange that would link health care purchasers with suppliers.

The partners - which include Johnson & Johnson in New Brunswick, N.J., GE Medical Systems in Milwaukee, Baxter International Inc. in Deerfield, Ill., Abbott Laboratories in Abbott Park, Ill., and Medtronic Inc. in Minneapolis - hope to launch the Web service as a separate, privately held company to be up and running by the third quarter of this year. Each partner will hold stake in the company, which will be based in Chicago.

In a conference call, executives from the companies said that health care providers could use the exchange to order medical supplies online, change their contract terms and check the status of their orders from a single online source. The companies involved in the Internet venture hope to open the exchange to additional health care manufacturers and suppliers.

"This exchange is open to all manufacturers, with no cost to health care providers," said Arthur Collins, president of Medtronic. Collins added that he hoped the exchange would serve as a universal standard for the health care industry.

Though initially the exchange will serve U.S. customers, it will eventually go after the international market.

While company executives said the initiative should lower procurement costs for health care providers, they couldn't provide any dollar estimates.

Health care providers spend an average of $60 on a purchase order, according to Mark Anderson, an analyst at Stamford, Conn.-based Meta Group Inc., and a former hospital CIO. Conducting the purchasing transaction online could shave the costs by at least $24 by reducing paperwork and automating processes, Anderson estimated.

But time may be the biggest potential savings for health care providers that switch to an Internet-based purchasing system, said Anderson. While some health care providers can now send supply orders via electronic data interchange transactions, they have to follow up by phoning or faxing individual suppliers, he said. By eliminating a lot of manual steps when conducting transactions on the Internet, providers may be able to save 40% of the time it takes to complete a purchase order, he said.

GE Global Exchange Services in Gaithersburg, Md., i2 Technologies Inc. in Dallas, Ariba Inc. in Mountain View, Calif., and IBM will provide technology support to the exchange. Several weeks ago, i2, Ariba and IBM announced an e-commerce alliance aimed at helping businesses launch electronic marketplaces.

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