H-Source Brings A New Tool To The Healthcare Supply Chain

As healthcare providers focus more on developing methods to save costs, innovative solutions relating to the supply chain grow in appeal. No organization is going to completely eliminate financial concerns by finding new approaches to equipment acquisition and allocation, but every bit helps in times of tightening budgets.

A web-based marketplace with data, reporting, and accounting features specific to software systems in hospitals, H-Source might be one of the new tools that can help healthcare professionals looking for an advantage.

To learn more, Surgical Products interviewed John Kupice, CEO of H-Source.

What unique challenges do you see in the healthcare marketplace as hospitals and other facilities try to develop supply chain efficiencies?

Margins are very tight. The national average profit margin for hospitals has decreased over the last three years from 4.1 percent to 2.2 percent, primarily due to declining reimbursements. We always say: “You’ll never be reimbursed more than you are today for your services. It will only decrease.”

The rising cost of labor in healthcare is another challenge. Labor is the largest expenditure for hospitals at an average of 33 percent of the overall budget, and hospitals have gotten as lean as they can in this area. Supply chain is the second largest expenditure, at an average of 31 percent of budget, so it is a natural focal point for cost reduction.

The most successful hospitals and executives in this environment will be those who control costs by managing inventory levels and short-date items, monitoring physician preference purchases, controlling the process of product conversions and equipment upgrades, and considering alternate purchasing options.

How does the H-Source model address these challenges?

The H-Source model is simple and very compelling. It provides a cloud-based platform and inventory management system that allows healthcare providers to collaborate and communicate directly with each other.

Using the H-Source platform to purchase and sell medical supplies, capital equipment, and non-controlled pharmaceuticals directly with each other, hospitals drive down their supply chain costs. Sellers recover costs and buyers reduce spending. It’s a mutually beneficial transaction, a win-win.

H-Source is used by the full continuum of care providers, including surgical centers, rehabilitation hospitals, long-term care facilities, and pharmacies. This wide spectrum of providers is critical to our model. Often slightly used capital equipment — like an MRI machine, CT system, or hospital bed — is useful to another member facility.

Logistically, how does the interface work?

The platform user interface is very simple to use. If you are familiar with buying from an online retailer like Amazon, you will be able to use the H-Source system.

Medical facilities list their idle or excess inventory on the exchange – supplies, medical devices, capital equipment, and pharmaceuticals. Then member facilities search for products they need on the exchange. Items are searchable by model number, description, or manufacturer. Item listings always contain the lot number, expiration date, quantity, unit of measure, seller, and price.

Buyers place items in their cart and purchase them in a single transaction, regardless of whether there are items from multiple sellers. To streamline the transaction, the system generates a single purchase order for the buyer with H-Source as the vendor. This convenient feature negates the need to set up each seller as a vendor with the Accounting Department. Instead, buyers simply pay H-Source, who then pays the various sellers.

The system also generates a shipping label and packing slip for each seller for their respective items sold. The items are shipped by the sellers. H-Source integrates with various logistics carriers such as UPS, FedEx, and local couriers.

Working with H-Source allows healthcare providers to buy and sell items with all facilities on the system. In a time when the number of suppliers is being limited, H-Source facilitates transactions with all active members, as well as connects the dots intra-organizationally.

Hospitals are obviously going to be especially concerned about the quality of the equipment they’re using. What safeguards do you have built in to the model to make sure care isn’t compromised?

Hospitals have been loaning and borrowing with each other for many, many years. H-Source has simply codified that into a convenient platform, so quality requirements are the same as any loan-and-borrow or distribution program.

All member facilities are vetted before being admitted to this private network of healthcare facilities, and every member is a medical facility that understands the importance of product integrity and quality. All medical supplies must be unopened, undamaged, and unexpired, for example.

What is the learning curve like with the platform? And what supports do you have in place as hospitals start working with H-Source?

Ease-of-use was a key requirement as we built the platform. Anyone who has bought from an online retailer can readily use our system. We also offer training videos, FAQs, sales technicians, and extensive customer care capabilities.

Are there any success stories you can share?

We recently distributed a press release regarding Colorado Hospital Association successes. Many of the facilities in Colorado are H-Source members, and over the last 12 months they have recovered costs on over 10 million dollars-worth of products and capital equipment.

Another exciting example is a critical access hospital that is operating on very thin margins. They are able to buy small quantities of products — “breaking boxes” — at a reduced price from larger facilities, helping them to stay in operation and effectively manage inventory.

We have numerous examples of these successes across the United States. As the platform spreads and more facilities become H-Source members, the opportunities to reduce and recover expenses will grow and members will realize ever-increasing value.

Anything else you’d like to add?

We believe that successful hospitals will be those that can control costs, and the H-Source platform is a simple and compelling piece. H-Source exists to help healthcare facilities collaborate to control supply chain costs, improve efficiency, and reduce waste.