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Aurora Health Care moves supply purchasing to the web

Thursday, May 02, 2002

Milwaukee, Wis., Aurora Health Care is employing new web-based technologies to streamline the health care industry's often costly and cumbersome purchasing process.

Aurora, in concert with two business partners, Medibuy and Allegiance Healthcare, is making great strides toward integrating a full web-based supply chain.

Through Medibuy, a pioneer in Internet-based commerce between health care providers and suppliers, Aurora is sending web-based purchase orders to one of its key suppliers.

"This new system holds great promise" said Ken Peterson, Aurora's vice president of system logistics management. "Working with our partners at Medibuy, we expect to soon extend our successes with one supplier to many other vendors."

The web-based system is improving accuracy, reducing costs and enhancing the efficiency of the entire purchasing process. Aurora already has gained productivity savings in processing transactions while also improving the accuracy of purchase order transmissions. Even small improvements in the supply chain can have a significant impact for Aurora, which purchases more than $375 million worth of supplies each year for its 14 hospitals, 100 clinics and other health care facilities.

The XML web purchasing system represents a significant improvement over systems that rely on electronic data interchange, or EDI, which requires the use of multiple proprietary networks to communicate with vendors. XML is a web language that facilitates direct database-to-database connections.

The system Aurora and Medibuy are using operates over the Internet and allows Aurora to pass transactions through a single channel instead of multiple networks. And since Medibuy's systems are flexible enough to handle both XML and EDI, Aurora can take advantage of newer technologies, such as XML, while continuing to work with trading partners that still use EDI.

In addition, Aurora and Allegiance Healthcare, a Cardinal Health company, have achieved an industry first by initiating XML for all three major transaction sets within the supply chain: purchase orders, order confirmations and invoices. Allegiance, a leading manufacturer and provider of health care products and services, is Aurora's primary distributor of medical-surgical supplies.

"We believe that what we have achieved with Allegiance represents the only situation in the country where a health care provider is using a web-based system to accomplish all three of these functions via XML," Peterson said.

"This clearly is where our industry needs to go," said Tom Kapfer, president of the Midwest Region for Allegiance. "The potential here for greater efficiency, accuracy and clinical safety is enormous. That's why we've invested heavily in e-business technology that is automating heath care's supply chain."

Peterson attributes much of Aurora's early success in creating a web-based supply chain to the health care provider's new Internet-based requisitioning process, called IREQ. Developed by Aurora's own Information Services Department, IREQ will be available to any Aurora employee who purchases supplies. Access at any point in the supply chain requires only a PC with a web browser. The IREQ system allows users to choose supplies with a virtual "shopping cart," typically picking among items they buy routinely. The system is tied directly to Aurora's mainframe-based materials management and inventory control system.

"With IREQ, we've taken the paper out of the purchasing process, which improves productivity and eliminates much of the potential for error, especially pricing errors," Peterson said.

The system also adds discipline to the purchasing process. By shifting purchasing to the web-based system, Aurora is moving toward ensuring that the only products that are ordered via IREQ menus are those that fall under negotiated contracts that provide volume-based discounts.

IREQ orders can be reviewed immediately by Aurora's purchasing professionals and then submitted through the Internet to Aurora's suppliers. Aurora receives XML confirmations back through Medibuy, and XML confirmations and invoices back from Allegiance through the same web-based system.

"XML gives us a common platform on which we can communicate with multiple distributors and vendors," said Dave Piotter, director of corporate purchasing for Aurora. "We're hopeful that many of the small vendors we do business with will move in this direction. These are people who now require phone calls and faxes."

One of the key advantages of this system is its ability to flag "exceptions - that is, situations where information does not agree. Price changes are a common problem, for example. With the XML web-based system, all price disparities can be automatically called to the attention of the Aurora purchasing department, which can resolve these issues long before they reach accounts payable.

The IREQ system eventually will allow Aurora's purchasing professionals to generate detailed, real-time reports showing the volume of purchases and other data critical to management of the supply chain.

Aurora launched its IREQ system in spring 2001 and began transmitting purchases through Medibuy in November 2001. Aurora and Allegiance first achieved comprehensive, integrated XML-based purchase orders, order confirmations and invoices in March 2002.

Medibuy (www.medibuy.com), based in Nashville, Tenn., offers comprehensive supply chain solutions that integrate health care providers with their trading partners to conduct e-business.

Cardinal Health Inc.(www.cardinal.com) is a leading provider of products and services supporting the health care industry. Allegiance Healthcare (www.allegiance.net), a Cardinal subsidiary, is a leading provider of health care products and cost-management services needed by hospitals, laboratories and others in health care. Aurora Health Care (www.AuroraHealthCare.org) is a community-owned Wisconsin health care provider and a national leader in efforts to improve the quality of health care. Aurora has care sites in more than 75 communities throughout eastern Wisconsin.

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