Neoforma Offering Tightens Medical Supply Chain

The biggest cost for health-care companies is human labor. The second biggest is supplies. Health-care supply-chain software vendor Neoforma Inc. is offering a new Web-based system that helps hospitals and other health providers make their materials management more efficient and less costly by optimizing vendor contacts and discounts.

The new version of Neoforma Materials Management Solution integrates with health-care providers' existing patient registration, billing and general ledger, and surgery-scheduling systems. And because the Web-based system is fully hosted and offered via a monthly subscription fee, no infrastructure, maintenance, or upgrade work needs to be done by a health-care company's internal IT organization, says Steve Wiggington, Neoforma's senior VP of sales and marketing.

Using handheld bar-code devices, a hospital's supply staff can remotely enter information such as inventory transactions and purchase orders into Neoforma's offering. Hospital managers can go online to check whether their companies' purchases are complying with suppliers' contract terms, as well as track their status for volume tier discounts.

Because multiple departments and personnel within hospitals are involved with ordering and purchasing supplies, keeping track of contract terms and volume discounts is difficult and expensive, says Peter Smith, materials manager at Madonna Rehabilitation Hospital, a 269-bed facility in Lincoln, Neb. "We have 14 [patient] units in our hospital, and their supply needs are different," he says. Since using Materials Management Solution, beginning in January, it's been easier for Madonna Rehab to track dollars spent with each vendor, as well as to track compliance with contracts and rebates, he says. In addition, the biggest time-saver has been the automation of inventory and supply data entries that had been done manually before the bar-code scanners were deployed as part of the Neoforma system, Smith says.

Most health providers are under financial pressures related to cutbacks in reimbursement from government programs such as Medicare and Medicaid, as well as reduced payments from health insurers. So, "for every $30,000 our solution can help save, that's equal to about $1 million in revenue," for the average health-care company, Wiggington says. That savings can come from improved efficiencies in the supply chain, including the automation of manual processes and better compliance with vendor contracts.

Madonna Rehab's Smith says "it's too early to tell" the return on investment of his company's use of Materials Management Solution; however, the system is already saving a lot of time and reducing errors related to supply orders, he says.

Monthly pricing for Materials Management Solution subscriptions is $5,000 to $25,000, depending on which modules are selected, the number of concurrent users, and how the solution is deployed.