Checkup on Implementation Success

Neoforma, Novation document $12 million in savings among 31 hospitals using supply chain management solutions

Neoforma, Novation document $12 million in savings among 31 hospitals using supply chain management solutions

San Jose, CA — March 15, 2004 — Neoforma Inc., a provider of supply chain management solutions to the healthcare industry, said it has identified more than $12 million in savings at 31 hospitals across the country that use Neoforma's supply chain management solutions through Marketplace@Novation.

All of the hospitals are members of VHA Inc. and the University HealthSystem Consortium (UHC) and have documented more than $100,000 in savings, with nine documenting more than $500,000. Neoforma, which is doing the research in conjunction with Novation, the supply company of VHA and UHC, estimated that approximately 70 percent of the total savings identified are recurring.

Willis-Knighton Health System, a four-hospital System in Shreveport, La., said it has achieved greater visibility into its contracts and increased its levels of automation through Marketplace@Novation. As a result, the health system has saved $2.6 million by streamlining, automating and simplifying labor-intensive processes, such as contract and order management and product selection. In addition to these savings, Willis-Knighton has been able to redeploy materials management staff to work on higher value projects within the hospital.

"Before using Marketplace@Novation, we were drowning in the manual process of placing orders and managing contracts," said Greg Weeks, director of materials management at Willis-Knighton Medical Center. "Now, we are able to manage supplies and contracts with greater versatility which has resulted in tremendous savings."

Today, nearly 75 percent of the hospital's orders are processed electronically. In addition, Willis-Knighton said it has been able to re-deploy four full-time employees to more strategic projects, such as internal distribution management, invoice reconciliation, order follow up and a project to pilot barcode scanners at the point of supply usage.

"Supply chain problems cannot be solved with technology alone. An introspective and strategic look into the business practices that may be creating inefficiencies and driving up costs is also necessary," said Judy Rowe, vice president of customer success services at Neoforma. "Hospitals have the opportunity to realize even greater value by using an integrated approach to supply chain management, utilizing a combination of technology, information and services while also implementing a way to measure results."

In late 2003, Neoforma and Novation started a retrospective value documentation program with an initial group of 31 VHA and UHC hospitals. As part of this program, Neoforma helped its hospital customers to establish benchmarks against which hospitals can measure ongoing progress in supply chain management efficiency.

"The value documentation program has produced overwhelming results for members, demonstrating that hospitals can achieve significant savings when they take full advantage of a tool like Marketplace@Novation," said Mark McKenna, president and chief executive officer of Novation.

Neoforma builds and supports solutions for Marketplace@Novation, the online healthcare exchange offered by Novation for members of VHA and UHC.

Neoforma said it has packaged its value documentation methodology into a new tool, called Neoforma Success Tracker, which enables customers, including VHA and UHC hospitals, to identify, measure and track the performance of implemented supply chain management solutions across the organization.