Order supplies online? You bet!

Web vendors offer discounts, price comparisons, inventory management, and online reporting. What's not to like?

By Ken Terry
Managed Care Editor

Ordering medical supplies probably isn't something you think about much. You leave it to your nurse or medical assistant, and hope that you don't run out of anything. But buying supplies on the Internet will probably save you 10 percent or more. If you're like the average doctor, who spends about $20,000 a year on supplies, that's at least $2,000 in your pocket—not counting what you'd save in staff time.

The Alamo City Medical Group in San Antonio has been buying medical supplies online since February of last year. The group, which includes 16 family physicians in eight locations, purchases three-quarters of its supplies that way.

Shane Henricksen, Alamo City's director of nursing, says it used to take him a full day each month to fill out lengthy purchase orders and fax them to multiple vendors. Nurses in the practice sites would spend hours going through their supply cabinets to find out what they needed. They also had to receive vendor sales reps whenever the salespeople happened by, taking up time needed for patient care.

Now that Henricksen orders supplies online, the task takes him less than two hours a month. Alamo's online purchasing vendor has customized forms listing everything each practice site usually orders; Henricksen prints them and sends them to the clinic nurses.

After they check off what they need, they fax the forms back to him and he enters the orders on the vendor's Web site. He gets an instant confirmation of the purchase order and is immediately notified if anything is out of stock. The goods usually arrive within two days, and there's no shipping charge.

Since the group started buying supplies online, says Henricksen, "we've trimmed about $8,000 a month off our medical supply budget." That translates into a savings of 35 to 40 percent, he adds. Only some of that comes from discount prices; the rest comes from Henricksen's oversight of supply purchasing, which is greatly facilitated by the online price comparisons and reporting functions that the group's vendor, Esurg, offers. (Formerly, a clerk simply toted up and submitted orders from each site.)

FP Bruce C. Begia, president of the Alamo City Medical Group, says he's delighted with the electronic ordering system. "It's easy and convenient. We're able to go online any time and update or add an order. You're not on hold, or shuffling a bunch of paper. Prices are reasonable. This is a no-brainer."

Physician offices are slow to catch on

How many practices order supplies online? No reliable figures exist, but the percentage appears to be very small. Ron Fasano, who operates a Pittsburgh-based billing firm, recalls that in 2000, when a large IPA he was managing offered its doctors online purchasing, fewer than 2 percent tried it. An additional 25 percent of the offices took advantage of the vendor's low prices but faxed their orders in.

One roadblock to online ordering is that it involves the least automated area of the physician office. Rosemarie Nelson, a consultant for the Medical Group Management Association, says nurses and other clinicians who order supplies usually have no Internet access. Office staffers have access in 20 to 30 percent of practices, but most of those who do handle only billing and scheduling.

Many physicians have avoided online supply vendors because they weren't confident these firms would survive. Indeed, a big shakeout has occurred among online vendors, and most of the remaining ones focus on hospitals and other institutions.

But several vendors, including Esurg, Everything4MDs, Physician Sales & Service, and Henry Schein Inc., are physician-oriented. (See below for contact information.) Neoforma sells to practices as well as hospitals, although it's trying to divest its physician division.

Doctors also worried that online vendors wouldn't keep prices stable or deliver supplies quickly enough. But purchasing managers who've tried Web-based ordering say prices don't fluctuate much and online vendors turn around orders at least as fast as conventional wholesalers. And, although the Web specialists don't always have the product breadth of long-established distributors, they're willing to add new items that doctors need. Esurg, for instance, now offers injectables that the Alamo City group used to buy from another supplier.

Within the past year, as more physician offices have become comfortable doing business over the Internet, a steady trickle of groups and IPAs has begun ordering online. The Genesis Physicians Group, a Dallas IPA, is one of them. Genesis began offering online supply ordering to its 1,250 doctors last July. In the first five months, nearly 40 practices encompassing about 150 doctors signed up. The service is popular because the doctors get a 15 percent discount on 70 to 80 percent of what they need, says Ron Lutz, president of the MSO that manages the IPA.

Online vendors: It's not just the price breaks

Rosemarie Nelson notes that physicians can obtain discounts of 10 percent or more from a traditional wholesaler, too, simply by agreeing to give it all of their business. As part of an IPA or medical group, they could negotiate even better deals, she says. But online supply vendors give extra discounts or rebates to physician organizations without demanding exclusivity. This is a big plus for IPAs, which need to offer value-added services to justify their existence.

Doctors can also get discounts by joining group purchasing organizations. That's easier to do if they're part of hospital systems that buy through GPOs, but some buying groups will admit private practices, too. GPO discounts on medical supplies, however, don't usually exceed those offered by online vendors, say group and IPA executives and doctors.

Moreover, as Alamo City Medical Group and other practices have discovered, Web-based purchasing offers a number of advantages that go beyond price. For instance, although Physician Sales & Service doesn't give Milwaukee pediatrician William Westley Jr. a larger discount when he buys online than it did when he ordered from its sales reps, the convenience, time saved, and reporting benefits of buying online make a big difference to his nurse practitioner, Laura Weaver.

"I can pull up my account and see when I last ordered something, what I ordered, and how many I ordered," Weaver says. "With some of the specialty items I don't order often, I can see my pattern—how many I need to keep on hand, and how fast I go through them. Before, I had to have a sales rep come in every two or three weeks to help me and make sure supplies were replenished," she adds. "And he'd come when it was convenient for him, not for me."

Weaver is also among those who find that supplies purchased online arrive faster. "Now we look at what we need every couple of days. We don't order as much in bulk; because we can get it shipped within 24 hours, we don't have to keep as much on hand as we used to." That means less cash is tied up in inventory and less space is devoted to storing supplies.

An operations director for a hospital group in the Midwest, who asks not to be identified, shares Shane Henricksen's view that online ordering allows a group practice to manage inventories across multiple sites much better than it could on paper. In fact, she says her online vendor's reporting ability is a main reason her group is buying from that company instead of through the hospital's GPO, which offers a comparable discount.

Henricksen, too, appreciates the ability to generate reports on what each of Alamo City Medical Group's sites is ordering. "You can pull one product out and see how much of it you've used in the past year, or find out what your most expensive or most-used product is."

For individual practices, customized inventory management is the biggest nonprice benefit. "They don't have to do an inventory every time they order supplies," notes Charlette Heyer, director of the Independent Physicians Network, a 1,000-doctor IPA in Milwaukee. That, plus not having to see sales reps, cuts down the amount of time nurses spend on ordering. "That's important to doctors," she says. "They can afford to spend only so much on staff, and you want people taking care of patients instead of ordering supplies."

Online supply vendors

 

Ken Terry. Order supplies online? You bet!. Medical Economics 2002;5:55.