HIGPA International Expo : HIGPA Expo attendees told 'The smartest will win' as BBA pressures, disintermediation change biz

Health Industry Today, Nov, 1999

Attendees at the Health Industry Group Purchasing Association (HIGPA) International Expo held in Palm Desert, Calif., in late October were told that e-commerce does not have to be divisive to corporate sales and marketing structures. Instead, said Sam Greco, president of International Healthcare Investment, the GPO view should be to look at the Internet as a partner. Hospitals will be forced to try e-commerce, he contends, and that means everybody else has to look at the process very seriously. The message of the medium is that e-commerce will impact the industry, and as a group, HIGPA members need to expand their focus. "Ask yourselves the right questions & say to yourselves, "Should I concentrate on being in your business or understanding mine?" said Greco. The message coming out of the HIGPA meeting was somber and cautionary but not without optimism. As Greco said, it is a message promoting an accelerated learning curve, applying lessons already learned, and commitment gaining reward Developing e-strategy Expo attendees should develop e-commerce strategies to:

* Visualize the supply chain;

* Model meaningful supply contracts;

* Monitor GPO performance;

* Measure the manufacturer and distributor;

* Create accountability. "Consumerism has become a buzzword," Greco said. "What it means is a steady flow from information to documentation to visualization to production. The smartest will win." So where does the industry have to concentrate its efforts? "We want top-line solutions & the consumer will not accept anything else," Greco said. "We want a do-it-yourself answer & it has to come from us, it can't be something forced on us. We need to leverage the Internet & that is the e-ffective transfer of knowledge to productivity. "We have an option with e-commerce: we can wait and see, we can say we don't see the solution, we can say "The Internet is OK, but only if we're buying commodities," or we can get excited." The state of the state The new millennium is bringing with it increased pressures from the spending reductions of the Balanced Budget Act (BBA) of 1997, and e-commerce is raising its own series of questions to which there are no answers written in stone. A record number of 675 attendees at the conference heard the message over and over again that change is in the wind, and the organizations that deal with it first and fastest will be the survivors. The industry is also facing accelerating demand from an aging population, the increasingly complex and expensive health care requirements of Baby Boomers and an attendant increase in chronic illness. Under extreme cost and reimbursement pressure, the battle for market share is also consuming advertising and revenue dollars at an unprecedented rate, says Allan Fine, a consultant. And those aren't the only pressures. "We're seeing a dramatic increase in the use of pharmaceuticals, up 15-17% from last year, that is using up a share of med-surg dollars," Fine said. "And most hospitals continue to lose money & simply put, their expenses are exceeding their revenue." The executives who lined up for a chance to pitch their wares to GPOs and IDNs were told that the market isn't going to be very hospitable in the immediate future. For the next five years, Fine said, employer costs for providing medical care to their companies will rise. Health plans will be brokered as commodities and incur more and higher costs to operate, but the market will not pay a premium for excellence. Consumers already demand excellence, Fine said, as a result of increased access to information and product knowledge through the Internet. Enrollment in Medicare will rise, forcing an even sharper pencil at hospitals and care providers. Still, says Fine, the industry will soldier on. "Customer access and input is increasingly expert," he said. "In the future, if you let your customers become your partners, they will help you determine the direction you need to take." A view from Wall Street Investment banker Joseph Boystak, managing director of Sutro & Company, Los Angeles, called his industry the "gatekeeper to the money markets" and said health care industry forces are forcing consolidation and reorganization on an unprecedented scale. "The rapid technological advances are data and capital expensive and are forcing companies to look for partners," he said. "Companies looking to claim market share need to measure outcomes and improve efficiency. "There are additional earnings pressures on companies, not just on a fiscal basis but quarter to quarter," Boystak reported. In a nutshell, he said, the stock market will increase its support of biotechnical companies. But the hospital supply sector is "way down," pharmaceuticals and medical devices are on an even keel and will probably stay that way, and investments in e-commerce platforms will continue and will begin to challenge the traditional distribution channels. In e-health platforms, the opportunities are in connectivity, commence and content. Biotechnology/genomics, pharmaceuticals/drug delivery, and reorganized delivery networks will fuel investor enthusiasm in the 21st century. "The Internet will be a major event in the new millennium," he said. "Billions will be funneled into that sector." And a good portion of it will come from HIGPA members. "This organization represents $20 billion in annual purchasing power," Boystak said. "You put billions back into the health care sector. You should look at yourselves with cautious optimism, but at the same time you have to be aware that the industry will not, in five years, look the way it does now. Recognizing the fundamentals Greco said the time had come to look to the very nature of the industry. The basic questions, he said, are always the hardest. Look to the future and ask yourselves, as an industry: