Prognosis: Positive

Medical supply chain gets help stat

Denver and San Jose, CA  August 29, 2001  Global Healthcare Exchange and Neoforma have signed a definitive agreement to create the first comprehensive, integrated supply chain solution for the healthcare industry. According to a statement by the companies, the goals of the collaboration are to deliver a more robust end-to-end solution to help their respective supplier and hospital customers more quickly realize the benefits of e-commerce and minimize the costs of connectivity and information exchange. The two Internet-based healthcare supply chain solutions companies will also expedite efforts to establish critical industry standards.

Under the terms of the three-year agreement, Neoforma's current and future marketplaces will interface with GHX's supplier connectivity portal and AllSource catalog. GHX will license portions of Neoforma's innovative NeoConnect solution suite, which supports the integration of trading partners for supply chain collaboration.

Neoforma and GHX will market this solution to existing and prospective customers. The two organizations also intend to jointly develop, market and sell technology and supply chain solutions. No equity was issued by either company in connection with the agreement. Other terms of the agreement were not disclosed.

The agreement enables Neoforma's hospital customers, including the 514 hospitals currently contracted to use the Neoforma-powered Marketplace@Novation, to transact business with GHX's network of healthcare supplier members through the integrated solution, without implementing and maintaining separate Internet connections. GHX's connected suppliers will be able to sell their products to Neoforma's current and future hospital customers through one Internet-based exchange, reducing implementation costs and simplifying the e-commerce strategy for these suppliers. GHX has signed more than 100 leading supplier members. To participate in the integrated solution, hospitals and suppliers will have agreements with both GHX and Neoforma.

"We are proud to partner with GHX. This strategic alliance is good news for the healthcare industry," said Bob Zollars, chairman and CEO of Neoforma. "As a result of the integrated solution created by this agreement, hospitals and suppliers can easily connect through one powerful and secure solution."

"From the beginning, GHX believed that the participation of all stakeholders, including hospitals, manufacturers, distributors and group purchasing organizations, is the best way to achieve real supply chain efficiencies," added GHX President Mike Mahoney. "For our customers, this means the integrated solution from GHX and Neoforma will enable them to more quickly realize the benefits of a fully connected supply chain.

Recent studies confirm the strategic purpose behind this collaborative effort. "The Value of eCommerce in the Healthcare Supply Chain," published in June 2001, found that supply costs represent a major portion of healthcare expenditures, which constitute a significant percentage of the U.S. economy. For hospitals, the study found that reducing supply chain costs can improve profitability and, ultimately, allow them to devote more resources to patient care.

According to the study, suppliers can realize operational and sales efficiencies through effective use of e-commerce. It also concluded that e-commerce "value will be fully realized when supply chain participants reach the critical mass of acceptance, have the technology to integrate information system infrastructures, and design a common language for communication."