Shop for CT scanner?
E-commerce is helping the business world go ‘round, and opportunities for conducting transactions online are increasing at every turn. While some of the better-known online retailers are reporting escalating sales of consumer goods and services, the healthcare industry also is seeing its share of e-commerce rise, with more and more hospitals and healthcare providers obtaining their everyday, products — largely consumables, such as gloves, film, syringes, pharmaceuticals, you name it — via the World Wide Web.
But can a successful e-commerce strategy for products and supplies make the leap to capital equipment? Is it as simple as ordering chemicals today and MRI scanners tomorrow?
“You don’t expect your customers who are going to be making million or multimillion-dollar capital equipment purchases that are very complex both to understand and to configure, that come with a whole slew of ancillary services that have to be worked over a couple of months — perhaps years in some cases — to flock to your site and participate in it,” begins Brian Duhinsky, global manager of GE Medical Systems’ (GEMS of Waukesha, Wis.) gemedicalsystems.com. “When it comes to an MR unit, it is not as simple as, ‘Here is the price. Do you have credit approval? We will check your credit card, please wait and thank you very much, we are done.’”
“In capital equipment, it is about using e-business, rather than e-commerce, to enhance the relationship,” offers Mark Dalen, vice president and CIO at Marconi Medical Systems Inc. (Highland Heights, Ohio). “You have a large, quite expensive piece of equipment. It is complex in that there are a lot of options, a lot of selections you make in purchasing the equipment. There are clinical applications provided as part of the equipment. There are a lot of implications to the purchase — power requirements, space requirements — so you have to figure out what your facility has. What we need is to look from a relationship model rather than a transaction model.”
GEMS and Marconi know all about transaction models. Each company maintains its own e-commerce operation for medical products and supplies.
However, Duhinsky and Dalen discount the Web as the place where capital equipment purchases — a maximum $50,000 list price in Duhinsky’s opinion and a $100,000 cutoff for Dalen — will commence, carry on and conclude with the click of a mouse. At the same time, both men believe that opportunities lie in using the Web to augment sales of capital equipment by providing customers with information that can pave the way for a capital purchase or tend the sales relationship after the paperwork has been signed.
“Where we see the high impact and high value is what the ownership experience will be once you have committed to the Marconi medical equipment,” adds Dalen. “What can we do for you better than we are doing for you today, and more effectively?”
Where to begin
For starters, Marconi and GEMS are putting more product content online and using the Web to respond to customers’ inquiries quickly, efficiently and at the customer’s convenience. They also have improved their respective Web infrastructures, enabling customers to access what historically had been internal information, such as order tracking, order status, equipment maintenance schedules and service appointments.
Personalizing or tailoring Web access so that each customer receives only the news and product information he or she needs without having to wade through a hierarchy of topics when they click on www.marconimedical.com is another way to forge the company-customer relationship, Dalen says.
Duhinsky notes that customers navigating www.gemedicalsystems.com can click on links that help expedite the “what if” games that get played out when any business makes a sizeable purchase: What if our patient volume went up? What if it went down? What if we did this? What if we did that? What are the various financing mechanisms available?
GEMS also is taking its FlexTrial service to the Web.
If new or upgraded software is available on the network for a customer’s particular piece of equipment, the customer downloads the new version, it installs itself, and the customer samples it on a trial basis until it expires, Duhinsky explains.
“We have had cases where somebody literally said, ‘I have a patient who is coming in this afternoon and there is a type of procedure I would like to do on my MR system. I do not have the software that will do that now, but I know from talking to my sales rep that this offer is available.’ It happened to be one instance of allowing [the customer] to, within minutes, be able to download it into the machine. This doctor was scanning this patient with that software later in the afternoon.”
“There are people who do parts of the capital equipment process on the Web. It’s not all or nothing,” Dalen says. “I cannot envision us going 100 percent e-commerce, but maybe 30 percent or 40 percent of what we do there could be done through the Web.
“There are other pieces in between,” he adds. “Something may cost $100,000, but it may be fairly straightforward to configure. Some of those items maybe we do 80 percent across the Web.”
Key ingredients
Straightforward configuration. No options. Little need for service. Low cost.
Those characteristics describe the philosophy behind Siemens Medical Systems Inc.’s (Iselin, N.J.) approach to selling specialty capital equipment online.
At this month’s annual meeting of the Radiological Society of North America (RSNA) in Chicago, Siemens will demonstrate its new, low-cost Somatom Smile, a CT scanner designed for online sales only. (No salesperson will call.)
Priced at less than $250,000, the Smile performs routine scans, such as sinus, orthopedic, chest, abdomen and lung cancer screening. Because it does not offer the image quality necessary to handle the more complex exams typically performed in large hospital environments, the Smile’s initial target audiences are ear, nose and throat practices, intensive care units in main hospitals and emergency rooms in smaller hospitals.
“The approach that we are taking relative to capital purchases [on the Web] is that it is not the thing to do,” asserts John Sandstrom, vice president of Siemens CT division. “If you want to take advantage of e-commerce, you have got to do something different.”
In addition to application limits and its low price, the Somatom Smile is a self-service scanner with 11 color-coded parts. It will diagnose itself and order the part the only way parts are available — online. A CD-ROM and online tutorials train customers to replace parts on their own.
Sandstrom compares the tube to a toner cartridge in its simplicity. You look at the part that needs replacing, you turn it this way and that, you plug it in and you push the button. For customers who feel uncomfortable about servicing their CT, Siemens will build in a labor component.
“The whole idea is to make it simple and to remove the fear,” he remarks. “Those things you want to do, you can; those things you do not want to do, you do not have to.”
Sandstrom insists that the Smile offers an “extremely compelling financial model” which should appeal to healthcare providers that consider themselves shut out of the CT market.
“You have a financial model, which is less than a patient a day, to have a CT scanner,” he adds. “If a million-dollar scanner has to return eight to 12 patients a day to break even, change that by a factor of 10. If there is a situation out there where somebody would need a CT service and has a patient a day, or maybe two or three, suddenly — at a patient a day — you are in the same situation you are with 12 patients on a high-end scanner. If you have five patients a day, you would have a financial model that has never before been seen in CT. At a return [with the Smile] of five patients a day, the equivalent return in a high-end scanner would be 60 patients a day.”
Sandstrom says the concept was crafted with a geographic market in mind: less-developed countries, in general; China, in particular. Demand is strongest in those areas, he says. The Smile will begin its rollout in China with its debut in the U.S. scheduled for the spring of 2001. As a general rule of thumb, customers can expect their CT in 30 days from time of order.
“We’re now at the point where technologies have matured, the marketplace is changing, and how do you provide more value and time,” muses Sandstrom. “In this whole issue of productivity, time is the free variable.”
The Exchange cometh
In the interest of saving time for all parties in a purchasing relationship, Global Healthcare Exchange (Westminster, Colo.) is entering the e-commerce, e-business environment.
A Web-based, business-to-business marketplace that serves as a single purchasing source for hospitals and other large healthcare institutions, Global Healthcare Exchange is a private company planning its full launch for January 2001, after having gone live in a pilot project in October. Member-manufacturers pay a yearly subscription fee based on a percentage of the company’s total sales. Transaction fees are non-existent. As a result, the Exchange makes the claim that it “adds no cost to the supply chain.”
According to vice president Bruce Johnson, the Exchange has approximately 40 members which deal in any number of products and pieces of equipment across modalities and disciplines. It does not compete with general purchasing organizations (GPOs), but views them as customers.
The Exchange, at www.ghcx.com, offers customers the convenience of one-stop shopping, the luxury of choice and the accuracy of up-to-the-minute pricing, says Johnson.
“Some of the issues hospitals face are they have to spend time fixing or modifying prices, because they do not match what are in their system, as well as trying to track down status and availability,” he adds. “Customers will have templates or acquisition forms that are online … they can go out for an update when the customer designates, and the Exchange can tell them, ‘Yes, that quantity can be fulfilled and that price matches the price on contract with your GPO.’ Because of the integration we have with the suppliers, those pieces of information are able to come near-real time to their facility.”
Johnson says the Exchange signs up companies, such as GEMS and Marconi, because industry giants see the Exchange as complementary, not competitive. It is a straightforward business proposition for them that gets the company name in front of another potential customer every time that customer orders through the Exchange.
“There is a class of customers that are very interested in exchanges, and it would be crazy for us not to be out there, too,” GEMS’ Duhinsky states.
“It is additional exposure,” comments Marconi’s Dalen, “but it also tends to make life easier for our customers. If they are ordering from us, whether it is capital equipment information or healthcare products, and they are ordering from six other people, their ability to do a single order that flows through to multiple vendors is beneficial to the customer.”
But while conducting business online offers several practical advantages, it also has its limitations and frustrations.
Some are technical in nature, such as bandwidth. Others include access — do all healthcare professionals have access? And, if they do, what kind of access do they have? Are they connecting with a 28.8 modem or a local area network (LAN)? Then there are people who steer clear of ordering online, because they prize the interaction with a sales representative or because, for some reason, they continue to be uncomfortable about pressing the “Buy” button. Finally, there are those whose workplaces and work processes either discourage or outright prohibit purchasing via the Web. Most participants agree that the possibilities outweigh the problems.
Getting customers to visit
Jack Spears, president and CEO of MedNeti (Needham, Mass.), a builder of independent Net marketplaces and provider of Web content management, acknowledges that e-commerce makes sense for packaged goods, items that can be boxed in quantity, marked with a bar code, assigned an inventory control number and sold at an established price. Medical supplies fit the bill. While he is of the opinion that the medical imaging industry is not ready to sell X-ray rooms via the Web just yet, he predicts that with investments in content and information technology (IT) infrastructure, purchasing capital equipment online could be a reality in five years.
“E-commerce is good for packaged goods, but once you get outside of that, it is really an onion of a thousand layers,” he opines.
“High technology [goods] are not mass-produced, high-quantity goods with similar features and functions. Also, the buying process is very complex; it is not a single person making a buy.”
First impressions are as important in e-business as they are in other kinds of transactions, and manufacturers first have to make sure that their Web sites entice visitors to stay once they get there. And keep them coming back frequently. Spears suggests that companies build some “stickiness” into their sites with news, articles, spreadsheets, economics modeling, population demographics, product evaluations, buyers guides and other objective information that will engage potential customers and provide them with tools that can help them through the online buying process.
“Even if you can amass all those value-added tools run peripheral of the transaction,” he continues, “then you also have to have the capabilities to integrate into the vendors’ actual information systems, because you need to flow that transaction into their order entry system, their invoicing system, their shipping system and other systems. All that has to be taken into consideration.”
“Through the development of our replacement parts Web site — we have found that real e-commerce is still sometime in the future. In order to have the ability to click and receive a replacement part the next day, all the steps of a transaction must be fully integrated. Not only from the buyers perspective, but also from the vendors perspective. There are many processes in the vendors’ information systems yet to be integrated to offer a seamless transaction. We are working with several vendors right now just trying to get their inventory in shape to meet the demands of a Net marketplace.”
“As companies become more aggressive about investing in their Web site and in the development of independent Net marketplaces, people will become more comfortable about purchasing on the Web,” Spears says. “Especially since the Web is the one marketplace that is open for business 24 hours a day, seven days a week, 365 days a year.”
Everywhere, anytime
As Siemens’ Sandstrom sees it, e-business has no where to go but up.
“There are a number of productivity changes to gain out of the e-business environment; it is only a matter of time,” he declares. “There is no question that a significant portion — I can’t say 40 percent or 75 percent, but it is going to be numbers much larger than 10 percent — of our business processes will move over into the electronic environment, and there is a big leverage on cost savings there.”
“The Internet is an enabler; it gives us flexibility” observes Dalen. “We sell a lot of our capital equipment outside of North America. I think we can do a better job for the other marketplaces in conveying information and offering services in other languages and in ways more suitable for other cultures than we have been able to.”
But it was Duhinsky who came up with the capper. “We can help our customers even when they are asleep.”
