Healthcare Providers Need Procurement Checkup

Integrated and efficient procurement systems in demand for U.S. hospitals, IDC finds

Framingham, MA  December 13, 2002  While the majority of U.S. healthcare provider organizations are satisfied with their material management systems, fewer than half of those organizations have systems that integrate key functions, putting those providers at a competitive disadvantage, according to a new study by technology research firm IDC.

Based on its survey of more than 60 U.S. healthcare providers, IDC concluded that if hospitals fail to make the necessary changes to their procurement systems, the quality of their service will suffer, widening the gap between themselves and hospitals that are fiscally stronger, better managed and more willing to make technology investments for efficiency gains.

IDC's 2002 Healthcare Procurement Survey revealed showed that despite the current controversy over the business practices of leading group purchasing organizations (GPOs), 83 percent of healthcare providers said they are happy with their supplier relationships, especially the contracts negotiated on their behalf by GPOs.

Overall, 57 percent of respondents said their current materials management systems are working to their liking, while 43 percent said they are not satisfied.

However, 63 percent of the respondents said that under the current materials management systems, the key functions  data management, contract management and electronic transactions  are not integrated.

Demand for highly integrated healthcare procurement systems is high, spurring the adoption of a new generation of supplier relationship management (SRM) applications, IDC concludes.

"The healthcare supplier procurement business is on the cusp of a sea of change as hospitals around the country are trying to become more efficient," said Albert Pang, research manager of supplier relationship management and e-commerce applications at IDC. "The need to work within a system that is notoriously risk-averse poses a serious challenge to procurement and materials management professionals."

For the survey, IDC examined the latest developments in the market and current challenges confronting healthcare providers through the eyes of more than 60 materials management and procurement professionals representing 517 hospitals and nearly $15-billion worth of supply expenditures annually.