Printer Friendly Page
VA COULD SAVE BILLIONS USING e-COMMERCE
TECHNIQUE,
OFFICIALS SAY -- The VA could slice $500
million to $700
million a year from its budget by using a
sophisticated form of
electronic purchasing to buy supplies, drugs
and services.
Story here...
http://www.govexec.
com/dailyfed/0707/072507bb1.htm
Story below:
-------------------------
VA could save billions using e-commerce
technique, officials say
By Bob Brewin
bbrewin@govexec.com
The Veterans Health Administration could slice $500 million to $700
million a year from its budget by using a sophisticated form of
electronic purchasing to buy supplies, drugs and services, the former
leader of the agency told senators Wednesday.
Dr. Kenneth Kizer, VA's undersecretary of health in the late 1990s, told
members of the Senate Veterans Affairs Committee at a hearing that
private hospitals using a technique known as "expressive commerce"
typically see savings in the range of 12 percent to 18 percent on
purchases.
In his testimony, Kizer said that based on the Veterans Affairs
Department's budget for medical and surgical supplies, pharmaceuticals
and facilities maintenance, "and factoring their already preferred
government pricing, I would anticipate VA could achieve savings in the
range of several hundred million dollars in the first year after
starting to utilize expressive bidding (i.e., $500 million to $700
million), with probably much larger savings as experience was gained
with the technology."
In expressive commerce, suppliers use a secure Web site to submit sealed
proposals that include conditions such as volume discounts and rebates,
differing payment terms and package offers. The idea is to allow
suppliers to make their case in much more detail than existing
e-commerce methods.
The University of Pittsburgh Medical Center started using expressive
commerce two years ago. Philip Green, head of the strategic business
initiatives unit at the center, said the technology can generate savings
of between 8 percent and 14 percent or even higher on purchases of a
wide range of supplies used by hospitals.
Green said his medical center has formed a joint venture called
CombineMed with the key player in the expressive commerce field,
Pittsburgh-based CombineNet Inc. The center, he said, was seeking to
shave costs in its supply chain when it found that CombineNet's software
was being used by "incredibly sophisticated organizations" such as
Procter & Gamble to cut their purchasing costs.
Kizer said expressive commerce, also known as "sourcing optimization,"
is an established practice not only at Procter & Gamble, but other
private companies such as 3M and Johnson & Johnson. It also has been
adopted by the U.S. Postal Service and the United Kingdom's National
Health Service.
Tom Finn, president of CombineMed, said its software allows for the
nuances found in a face-to-face discussions between a buyer and seller
about a range of needs and requirements.
Other types of e-commerce software tend to be price-driven, Finn said.
But the lowest price for a medical instrument may not be the lowest
cost, if, for example, it is a new model that requires retraining of
medical personnel.
CombineMed can handle millions of bids with hundreds of thousands of
constraints or permutations, Finn said.
Green said the University of Pittsburgh Medical Center recently awarded
a contract based on a proposal covering 600 different line items that
saved $600,000 over more traditional purchases.
Kizer said the VA should "vigorously pursue" the use of expressive
commerce to help realize savings on a health care system budget that is
expected to hit almost $38 billion in 2008, up from just under $33
billion in fiscal 2007.
-------------------------
Larry Scott --
