Driving savings through collaboration

GHX helps remove costs from the healthcare supply chain and improve the quality of care by enabling hospitals and suppliers to do business together electronically and with greater accuracy. GHX establishes and maintains connections between hospitals and suppliers, helping them overcome many of the challenges posed by differences in technology systems and capabilities among trading partners. GHX also helps hospitals and suppliers synchronise data to reduce errors in the purchasing process. Automation of purchasing processes and data synchronisation can also increase visibility into critical data that can help hospitals better manage the products used in patient care.  

More than 6100 healthcare delivery organisations and 10,000 suppliers in eight European countries, the USA and Canada currently transact business through the GHX Exchange. Transaction volume has steadily increased since GHX was founded in 2000.  In 2012, GHX processed more than US$54 billion (€42 billion) in purchase orders, in addition to a wide variety of other supply chain transactions, including confirmations, advanced ship notices, invoices and price catalogue updates, among others. As the result of greater automation and better data quality, hospitals and suppliers working with GHX are on target to drive more than US$5 billion (€3.8 billion) in efficiency savings over five years (2010–2015). 

GHX delivers value in three primary areas: technology, community and data.

The application of supply chain technology has the potential to transform healthcare fast. Unfortunately, healthcare has a limited amount of money to spend on new technology and needs to be able to leverage the investments it has already made. GHX brings expertise in integrating a broad range of technology systems that can help providers and suppliers extend the capabilities of their existing systems, while enabling them to share a cloud-based platform and hosted software. This approach is more flexible, faster to implement and less expensive than licensed, on-site solutions.  

There is a great deal of value in a large, global community sharing the same platform to change how business is done in healthcare. It is not unlike a community in the traditional sense that comes together to share infrastructure (for example, roads) and rules (for example, traffic signals), and pool resources for the common good (for example, education).

This presents an unprecedented opportunity in terms of visibility of common data and performance metrics, as well as the adoption of global standards. 

GHX helps members better manage highly dynamic data across their own disparate systems, while making it possible to share data with authorised trading partners. While certain aspects of healthcare will always remain highly competitive, GHX is a testament to the fact that a more collaborative approach to both technology and process is a more efficient and cost-effective means to achieve our common goal: better, more affordable healthcare.

Supply chain is the second largest and fastest growing area of spending after labour for most hospitals, accounting for 40–45% of operating expenses. Gartner Research estimates that many providers can reduce supply chain costs by 5–15% if they better analyse, plan and control the purchase and use of goods and services, which can translate into a profit increase of 2–7%.1  By handling processes electronically, healthcare delivery organisations can also more easily identify opportunities for volume purchasing. These data can also help suppliers better plan for product demand. 

Unfortunately, procurement is still viewed by many as an operational function as opposed to a strategic asset. Typically, 30–35% of a hospital’s spend goes through procurement, and that spend impacts the resources available to achieve the organisation’s primary objective: patient care. Unlike cuts in front-line care, a greater focus on supply chain also helps hospitals lower costs in a manner that does not negatively impact quality; in fact, it can potentially improve outcomes. Automating processes enables clinicians to spend more time with patients, and better visibility into product utilisation can help hospitals determine which products contribute to improved care. 

Other industries have recognised the role the supply chain plays in lowering costs and improving customer value.  Elevating the supply chain in healthcare can help providers improve operational, financial and clinical performance.  

What are some of healthcare’s biggest challenges?  

The challenge facing healthcare is the same in North America and Europe: the need to improve quality, while lowering costs. In light of the current financial crisis in Europe, providers are looking for new ways to save money and rationalise services, which increases the focus on the supply chain and the kind of broad industry solutions offered by GHX.

Healthcare delivery organisations and their suppliers recognise that they need to work collaboratively to lower the total delivered costs of products used in healthcare. One area of focus is cost to serve, which is reflected in a supplier’s selling, general and administrative (SG&A) costs, which are higher in healthcare than other industries. A National Health Service (NHS) procurement official recently noted that cost to serve could account for as much as 45% of the price paid for an implantable device.  

The relationship between the supply chain and patient safety will become more evident with new regulations designed to address issues around implantable devices. Recent news events, such as the PIP breast implant scandal, have heightened interest in tracking implantable devices. 

The European Commission, like many other regulatory bodies around the world, plans to require manufacturers to label their products with unique device identifiers (UDIs) that can be used to track products across the supply chain in an unambiguous manner. GHX can help providers capture, store and transact business using UDIs, which include GS1 Global Trade Item Numbers.

In North America, providers and suppliers are collaborating with GHX to develop an industry solution to recoup more than US$5 billion in waste in the implantable device supply chain. The implantable device solution will also address the need to document UDIs in electronic medical records, which will be key to linking product performance and clinical outcomes. In Europe, GHX is exploring solutions to recoup more than US$2 billion (€1.5 billion) in waste associated with poor inventory management practices.

1. Supply Chain Consultants and Outsourcing Providers for Healthcare Delivery Organizations. Gartner Research;5 July 2011.

• Transaction volume: >US$54 billion (>€42 billion)
• Percentage of medical surgical products represented by integrated GHX suppliers: 85%
• Savings achieved by GHX customers since 1 January 2010: US$2.4 billion (€1.8 billion)