1. Global Healthcare Exchange Canada Trade Exchange Adoption Supply Chain System Innovation Team 8: Brigitte Allaire, Tamara Burnham, Yilan Zhang, Jackie Derhak

2. 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?

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. Organizational Problem Operations

11. Organizational Problem Operations 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

12. 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

13. EDI architecture  One-to-one communication between computers Exchange architecture  Multiple computers within an organization connecting to many different suppliers

14. 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

15. Information Aspect of Problem Establish connections Understand the marketplace  Health-care industry in Canada Understand the supply chain process Identify clients  Purchasers  Suppliers  Distributors

16. 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%

17. 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

18. Identify Clients GHXC 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

19. 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

20. 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

21. 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

22. Information Aspect of Problem Summary Management of change Altering culture that has existed for years Removing authority from those involved in purchasing Purchasing staff’s perceptions No control over marketplace

23. 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

24. 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

25. 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

26. 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

27. Organizational Problem Operations Marketing Financial Market place Client needs Supply chain Web Browser EDI ERP

28. 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?

29. 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

30. Messages for Modern Leader Moving Forward is about people Understanding users  “Technology camel”

31. Messages for Modern Leader The importance of Change Management should not be underestimated Increasing executives’ understanding of IT => Champion

32. 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

33. 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

34. Sources:  www.carenet.cawww.carenet.ca  www.ghx.comwww.ghx.com  McNurlin, Sprague, & Bui (2009) QUESTIONS ?

35. 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