s03a.jpg (13176 bytes)The advent of the World Wide Web has changed forever the way in which business is transacted. The market for new and pre-owned medical imaging equipment is no exception from the possibilities of enhanced sales via the Web.

Jeff Kleck, founder of Neoforma.com Inc. (www.neoforma.com of Santa Clara, Calif.), one of several companies that holds Internet auctions of used medical equipment, asserts that medical imaging equipment is “the lion’s share of the auction market.”

A handful of dot-com sites have entered the used and refurbished medical imaging equipment marketplace in recent months. While the sites are limited primarily to used and refurbished equipment, buyers may use some sites to research and facilitate the purchase of new equipment. Most sites also offer auxiliary services, such as hospital room planning, equipment inventories and used equipment certification.

The dot-com companies also aim to plug a gap in the lifecycle of medical equipment.

Chip Halverson, president of MedAssets Exchange Inc. (www.medassets.com of Wood Dale, Ill.), explains that hospitals and group purchasing organizations (GPOs) spend a significant amount of time and effort procuring new medical imaging equipment. They continue to invest resources during the life of the equipment to maintain the technology. “At the end of the process, there is little effort or time spent on disposal,” Halverson says.

The dot-com medical equipment market adheres to a simple premise. One hospital may warehouse a piece of equipment after a several-year lifespan. Although the equipment has little value in a warehouse, if the equipment is refurbished or remains in good working order, it may be quite valuable to a given buyer.

“In the third world, U.S. technologies are cutting edge, even when that technology is five or eight years old,” says David Hickson, president and CEO of Auctionmart ( www.auctionmart.com? of Bryan, Texas.). “Some of our buyers are in developing countries. We expect that market to increase to greater than 50 percent of our sales.”

First-hand evaluation
Dot-com companies, like other sellers of used medical equipment, face one substantial hurdle. How can they demonstrate that a piece of medical equipment works properly and is worth buying over the Internet?

“One of the problems in the pre-owned market is that much of the equipment has been de-installed. It’s in the warehouse,” Hickson elaborates. “This makes it very hard for potential buyers to see how patient-ready it is. If equipment is already out of the hospital, it’s very difficult to know if it’s working correctly. Once equipment is out of the hospital, it loses as much as 80 percent of its value.”

Auctionmart developed a solution to the de-installation dilemma by contracting with hospitals ahead of time.

“We find out months in advance what equipment will be de-installed and try to put it on our site 30 to 60 days in advance of de-installation,” Hickson says.

Auctionmart takes photos of the equipment, obtains technical data on the warranty and provides one year’s worth of service history on high-end medical imaging equipment, such as MRI and CT scanners and linear accelerators. The Auctionmart arrangement gives buyers the ability to assess the equipment prior to making a bid. The company also offers an upcoming auction area where buyers can preview the equipment and email questions. Auctions begin every Monday and last for two weeks.

Auctionmart does not offer warranties on equipment sold on its site, since much of the equipment is under service agreements. The company can help buyers purchase a service agreement.

While Auctionmart does not plan to enter the new medical imaging market, it does offer a classified section for refurbished and remanufactured equipment. Sellers in this section are restricted to refurbishing companies and original equipment manufacturers providing refurbished or remanufactured equipment.

All equipment sold on the classified site comes with a minimum 90-day warranty. Some of the equipment in this section may be new; such as cath labs, ultrasound systems or monitors used for demonstration at trade shows. Most of these items carry a one-year warranty. Auctionmart contracts with a number of companies to sell demo and refurbished equipment, as well. The companies include Steris Corp. (Mentor, Ohio), Hitachi Medical Systems America Inc. (Twinsburg, Ohio), Ampronix Inc. (Irvine Calif.), Sonora Medical Systems Inc. (Longmont, Colo.) and MedEquip (Ann Arbor, Mich.).

‘As is/where is’ sales
MedAssets, another seller of used and refurbished medical imaging equipment on the Web, also realized that selling used products can pose a dilemma.

“Our thought was people wouldn’t buy on an ‘as is/where is’ basis,” Halverson says. “The e-bay model doesn’t work for business-to-business.”

MedAssets’ site has been up-and-running since last November. In recent months, the site has averaged between 1,800 and 2,000 “hits” per month. Approximately 50 percent of the visits are by individuals at hospitals, with clinics and medical imaging centers accounting for much of the remainder.

MedAssets purchased Comdisco Healthcare Group’s refurbished equipment business from Comdisco Inc. (Rosemont, Ill.) in August 1999 to give MedAssets “bricks and mortar” assets and a 67,000 square foot warehouse. The company employs 30 technicians to refurbish equipment. It also enables the company to certify and warrant equipment for sale on its site.

Although MedAssets allows sellers to post ‘as is/where is’ equipment for sale on its site, Halverson says, “the product may not sell, or it may sell for a very low price.”

Quality certification
Another option for the seller is to engage MedAssets to inspect and certify the device. MedAssets would complete a report with a detailed inventory of features, upgrades, future upgrade capabilities, service history and information about how the device was maintained. The product is assigned a score ranging from 1 to 5, with 1 being like new and 5 ready to scrap.

The fee for the service is based on the modality and the critical nature of the device. Certification can cost from $1,000 to $3,500 per item.

A hybaric chamber in fairly good condition might read MedAssets certified condition 2. For equipment that falls onto the lower end of the company’s scale, MedAssets offers recommendations about how to upgrade categories and possibly achieve a better selling price.

“At this point,” says Halverson, “the product becomes sellable. Buyers are willing to pay more for a certification and warranty. Evidence for this exists in other businesses.”

For equipment certified category 1 or 2, MedAssets will offer sellers or buyers the opportunity to buy a warranty. When MedAssets warranties a product, it automatically de-installs and re-installs the equipment. Even without a warranty, a customer can employ MedAssets to do both.

Archiving on the Web? and when the sum equals parts

Dot-coms that provide services to the medical imaging community are not limited to the equipment arena. InsiteOne (www.insiteone.com of Wallingford, Conn.), for example, provides digital archiving services. Richard Friswell, chairman and CEO, says, “This is a way of acquiring archiving capabilities without the cost or headache of maintaining equipment.”

As hospital and radiology departments make the conversion to digital technology, Friswell points to the need for infrastructure to manipulate, manage and store medical images and other patient information. An adequate archiving solution often proves quite expensive. The result? A high technology, digitally formatted image is transformed into a low-tech film print.

InsiteOne provides a proxy server at the hospital site, where digital studies are stored for 30 to 45 days. After that time, the study is shipped to two separate warehouses and burned into DVD. The study can be returned to the hospital in its original format at any time.

“A fully enabled PACS is 30 to 40 percent more efficient than an old-fashioned, film-based radiology department,” estimates Friswell.

How do the costs compare? Friswell offers this model:
? $8-$12 per study per year to maintain a film-based radiology department
? $7 per study for a fully-loaded digital archive run by a hospital
? an average of 72? year for the InsiteOne time share, space share model

Medibix (www.medibix.com of Longmont, Colo.) specializes in another niche – components and spare parts priced less than $2,000. Steve Gelman, president of Medibix, outlines two separate markets for the company. OEM design engineers use the site to purchase parts for prototype machines, while medical equipment repair personnel use the site to purchase spare and replacement parts.

Medibix has developed search engines that reduce the amount of time looking through catalogs.

“Our buyers are not necessarily looking for a lower price,” Gelman concludes. “They’re looking for an easier way to order.”

MedAssets does not plan to sell new medical imaging equipment, but it does market new upgrades and add-ons.

Neoforma.com offers both live and Internet auctions of medical imaging equipment. Neoforma.com determines whether or not to sell a piece of equipment in a live auction or online. The goal is to market the equipment for sale in the arena where it will garner the optimum price.

Kleck says that the equipment runs the gamut from still installed ‘as is/where is’ equipment to de-installed, fully refurbished, warranted, ISO 9000-certified equipment.

“Equipment has a much greater value, if it’s sold when it’s still in operation,” he adds. “The Internet allows you to [make the connection to] see equipment while it’s still in operation.”

In addition to offering auction services, such as inventorying hospitals, appraising equipment and moving equipment for sale, Neoforma.com provides an equipment planning service, which includes five functions. “Tours” offers online panoramic views of healthcare facilities, allowing clinical staff, administrators, architects and vendors to see how other sites have designed spaces and gather ideas about how to design and equip a space.

“Departments” presents an online reference to definitions and the typical complement of rooms used in each space. Site visitors can read a functional description of 96 departments and 1,800 rooms, review a typical equipment list and link to tours of similar rooms in actual facilities.

“Procedures” is an online reference to definitions, typical rooms where procedures are performed, and types of products used during procedures. “Resources” offers a booklist and other publications and resources for planning and designing a healthcare facility. The final offering is a “CD-ROM” planning tool called EQPlan 3.0c, which allows the user to create a project specific equipment list for each room.

Kleck points out that planning costs can be prohibitive for hospitals, and many manufacturers do not offer a planning service that includes products from other manufacturers, and many hospital rooms need products from multiple manufacturers.

“Instead of hospitals re-inventing the wheel every time they plan a new room,” Kleck says, “we provide an archive of best practices for building that room.”

Part of Neoforma.com’s integrated equipment planning process is the provision of a marketplace for buyers and sellers of new medical imaging equipment. While Neoforma.com does not sell the new equipment, it facilitates the sale by providing a utility that

connects buyers and sellers. Neoforma.com has contracts with a number of OEMs – including GE Medical Systems (GEMS of Waukesha, Wis.), Philips Medical Systems North America (Shelton, Conn.) and Varian Medical Systems Inc. (Palo Alto, Calif.) – to sell new equipment on its site.

Kleck says Neoforma.com’s approach stimulates the new equipment market in two ways. It allows hospitals to reduce the time it takes to determine how to dispose of the old equipment and it facilitates the planning process that accompanies the purchase of new equipment.

Auction acquisitions
Another dot-com company that features pre-owned medical imaging equipment is Medibuy (www.medibuy.com of San Diego). Launched in November 1998, the virtual marketplace includes an auction format with two main products. The eCertified section features equipment from pre-approved vendors that meet three parameters – a minimum 90-day warranty, a return policy and education or training manuals.

Medibuy includes an ‘as is/where-is’ auction section on its site. Jim Pearson, senior vice president, notes that medical imaging equipment is found in both sections. Medical imaging equipment in the auction section tends to be outbound from hospitals, while medical imaging equipment in the eCertified section comes from refurbishers who can offer warranties, return policies and training manuals.

All types of healthcare facilities – including hospitals, physician’s offices, surgery centers and emergency care facilities – use the Medibuy site, Pearson adds.

Medibuy customers can access auxiliary services through the company, too. Because setting an appropriate price can be a potential glitch in the market for pre-owned medical equipment, Medibuy is developing an industry blue book to help hospitals determine appropriate market value for used and refurbished medical equipment. Pearson could not say when the new feature would be available.

Medibuy also plans to facilitate the sale of new medical imaging equipment through its eCatalog, a technology that allows buyers and sellers to communicate. Currently, eCatalog is limited to medical and surgical supplies, but Pearson says some medical imaging equipment companies “have signed on as vendors and we are working to put equipment in the catalog.”

When the equipment part of the catalog is in operation, Pearson asserts that buyers no longer will need to initiate separate contacts with multiple vendors when making a purchasing decision. Instead, they can collect information and compare equipment from different vendors at the Medibuy site.

Another possibility for new equipment purchases on Medibuy is an eRFP that allows buyers to submit a request for purchase of non-contracted items.

New equipment sales
GEMS launched its product Web site (www.gemedicalsystems.com) last November, initially marketing accessories and small-ticket medical products. By December, the company added its new GE Signa OpenSpeed open MRI system – which carries a list price of $1.5 million – to the list of available online offerings.

Peter J. Arduini, GEMS’ general manager for global ecommerce, says www.gemedicalsystems.com uses what he described as a “sales-assisted model” for its Web sales, whereby GEMS representatives collaborate with customers and distributors.

The Web site acts as a conduit between the sales representative and the potential buyer. The customer designates what he or she wants in a piece of medical imaging equipment – the features, configuration, etc. – and the sales rep will reply with the appropriate pricing information. Financing options and possible payment schedules also can be outlined at the Website.

Arduini estimates that the site averages 35,000 customer “hits” per week, with traffic increasing 10 to 15 percent month-to-month. GEMS also tracks “page views” – the number of different pages a single customer will review during his or her visit. GEMS figures it averages more than 200,000 page views per week, with customers spending 12 to 14 minutes on each visit.

“The mix is pretty much across the board,” Arduini says. “A big chunk of the business has been on the director and department side – directors for radiology, cardiology and patient monitoring. The other half is a mix of clinical people, from radiologists and technologists to biomedical technicians and service people.”

Judging by the dollars, GEMS has done well since its online buying program went live. Arduini estimates sales in the range of $500 million over a six-month span.

“About 12 percent of that is unassisted [sales], which means a customer goes online without interacting with a [sales] rep,” he adds.

The unassisted sales, he says, are dominated by repeat customers – who are already familiar with GEMS’ big-ticket medical imaging equipment, such as GEMS’ AMX-4 mobile X-ray unit – and customers who purchase “less complex” products.

GPO factor
The relationship between group purchasing organizations (GPOs) and dot-com sites that sell medical equipment can be complicated.

“Initially, from a GPO perspective, we all knew that the Internet would be a powerful tool,” says Todd Ebert, executive vice president of AmeriNet Inc. (St. Louis). “Dot-coms help speed up processes, thinking and planning.”

On the other hand, he notes that GPOs did question whether dot-coms are potential competitors. For the most part, hospitals are not viewing the dot-com sites as a buying portal, at least in the view of one GPO executive.

“Our customers want a vehicle through AmeriNet to put used equipment for sale on the Web,” says John Sutton, AmeriNet’s senior contract manager for laboratory and diagnostic imaging. “The market is not going where everyone expected it to a few years ago.”

According to Sutton, the best market for dot-coms selling pre-owned and refurbished medical equipment could be healthcare facilities in foreign countries. Many American hospitals, on the other hand, are somewhat reluctant to purchase refurbished imaging equipment that relies on older technology.

In the U.S., Sutton sees dot-com success coming from very high-end, refurbished, high-tech equipment, such as cardiac cath labs and CT scanners. He does not believe standard X-ray equipment will sell to hospitals, but he acknowledges that non-acute, non-hospital markets might be interested in bread-and-butter equipment, such as radiographic, fluoroscopic or radiographic tomographic equipment.

One of the services that dot-com sites can offer to hospital systems and GPOs is an equipment inventory.

Other dot-coms companies offer equipment inventories to GPOs. Neoforma.com and Novation and Medibuy and Premier have equipment inventory arrangements.

The equipment inventory services, integrated planning capabilities (when available), and selling features of the dot-coms appear to have the most utility for hospitals.

As the Internet becomes more engrained in the global culture, vendors and healthcare providers will find ways to use it to their respective benefits.end.gif (810 bytes)