Health Informatics( formerly Computers in Health Care)

Kathryn J. Hannah Marion J. BallSeries Editors

Health Informatics Series( formerly Computers in Health Care)

Series Editors

Kathryn J. Hannah Marion J. Ball

Dental InformaticsIntegrating Technology into the Dental EnvironmentL.M. Abbey and J. Zimmerman

Health Informatics SeriesEvaluating the Organizational Impact of Health Care Information Systems, Second EditionJ.G. Anderson and C.E. Aydin

Ethics and Information TechnologyA Case-Based Approach to a Health Care System in TransitionJ.G. Anderson and K.W. Goodman

Aspects of the Computer-Based Patient RecordM.J. Ball and M.F. Collen

Performance Improvement Through Information ManagementHealth Care’s Bridge to SuccessM.J. Ball and J.V. Douglas

Strategies and Technologies for Healthcare InformationTheory into PracticeM.J. Ball, J.V. Douglas, and D.E. Garets

Nursing InformaticsWhere Caring and Technology Meet, Third EditionM.J. Ball, K.J. Hannah, S.K. Newbold, and J.V. Douglas

Healthcare Information Management SystemsA Practical Guide, Second EditionM.J. Ball,D.W. Simborg, J.W. Albright, and J.V. Douglas

Healthcare Information Management SystemsCases, Strategies, and Solutions, Third EditionM.J. Ball, C.A.Weaver, and J.M. Kiel

Clinical Decision Support SystemsTheory and PracticeE.S. Berner

Strategy and Architecture of Health Care Information SystemsM.K. Bourke

Information Networks for Community HealthP.F. Brennan, S.J. Schneider, and E. Tornquist

Informatics for the Clinical LaboratoryA Practical Guide For the PathologistD.F. Cowan

(continued after index)

Ursula Hübner Marc A. ElmhorstEditors

eBusinessin Healthcare

From eProcurement to Supply Chain Management

With Forewords by Dimitris Karagiannis

and Nancy LeMaster

Ursula Hübner, PhD Marc A. ElmhorstProfessor of Health Informatics trinovis GmbH

Hannover, Germany

Osnabrück, Germany

Series Editors:Kathryn J. Hannah, PhD, RN Marion J. Ball, Ed.D.Adjunct Professor, Department of Community Health Science Faculty of Medicine The University of Calgary Calgary, Alberta T2N 4N1, Canada

British Library Cataloguing in Publication Data

eBusiness in Healthcare. - (Health informatics) 1. Medical supplies - Purchasing - Data processing 2. Hospital purchasing - Data processing

I. Hubner, Ursula II. Elmhorst, Marc 362.1'1'0687

Library of Congress Control Number: 2007929731

ISBN 978-1-84628-878-4 e-ISBN 978-1-84628-879-1

Printed on acid-free paper.

© Springer-Verlag London Limited 2008

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and patents Act of 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms of licences issued by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be sent to the publishers.

The use of registered names, trademarks, etc. in this publication does not imply, even in the ab-sence of a specifi c statement, that such names are exempt from the relevant laws and regulations and therefore free for general use.

Product liability: The publisher can give no guarantee for information about drug dosage and application thereof contained in this book. In every individual case the respective user must check its accuracy by consulting other pharmaceutical literature.

9 8 7 6 5 4 3 2 1

Springer Science + Business Mediaspringer.com

and Quantitative MethodsUniversity of Applied Sciences

and

The Johns Hopkins UniversitySchool of NursingBaltimore, MD 21205 USA

Professor Emerita, School of NursingJoint AppointmentHealth Sciences InformaticsSchool of MedicineJohns Hopkins UniversityandFellow, Center for Healthcare ManagementIBM ResearchBaltimore, MD 212 USA10

Faculty Associate

3. Electronic commerce

This book is dedicated to all pioneers of eBusiness in healthcare, both on the side ofthe healthcare providers, and of the suppliers. Their vision, and the time and

resources they invested, not only leads to the implementation of modern supply chains,but also contributes to better patient care.

Foreword

An interchange of solution patterns between different industry sectors such as insurance,banking, and telecommunication has always been quite common. Many solutionpatterns such as different management approaches, document management, processoptimization—or outsourcing as a current example—have successfully been copied andadapted. In my personal experience, this was—and partly is—not the case in healthcare.I vividly remember my own workshops in hospitals at the end of the 1990s wherethe discussion of (business-) process optimization was met with great skepticism. Thehealthcare sector is undeniably very specific; just think about aspects such as patientsinstead of customers, different form of financings, non-profit organizations, etc. Insofarit was possibly on my own account that my workshops in hospitals in the 1990s havenot been especially successful.

I have been looking forward to this book, written by experienced practitioners andacademics, because it ventures to apply the concepts of “eBusiness” and “Supply ChainManagement” to the area of healthcare management, where up to now these terms arenot (yet) common practice.

The term “eBusiness,” originally coined by IBM, has made quite a history since then.Up to the disillusionment taking place after the turn of the millennium, undreamed-ofbusiness opportunities were connected to it. Today it is undisputed that the Internet andits deriving technologies have changed our way of living and working fundamentally.Thus the visions formulated at the end of the 1990s are now step-by-step becomingreality. The definition and application of eBusiness in healthcare is the central themeof this book. However, the authors do not stop at describing already existing eBusinesstechnologies but also discuss potentials that still lie ahead.

Furthermore, the concept of “Supply Chain Management” strikes attention whenreading the title, as indeed intended by the authors. The orientation toward the patient’swelfare as the highest priority of every organization in healthcare inevitably leads tothe commitment to constantly modernize existing treatment methods and structures.Enhanced by concrete case-studies, the book outlines very practically how the conceptof “Supply Chain Management”—originating from the production area—can be appliedin healthcare in order to reduce costs and improve processes while quality standards arealways maintained.

This book is equally suited to practitioners in healthcare management and to studentsin this field. I especially like its international orientation. I am confident that all readersacross the world will benefit from this book. I will certainly use it in my lectures invarious different study programmes.

Dimitris KaragiannisUniversity of Vienna

Austria

vii

Foreword

In the future, healthcare providers will be unable to achieve their mission of providinghigh-quality patient care while being good stewards of their community’s resourceswithout becoming experts at managing their supply chain. Ensuring consistent, high-quality outcomes means ensuring each patient receives the right product, at the rightplace, at the right time and at the right cost.

The growing cost of new technology coupled with the aging population means thehealthcare industry can’t afford to be wasteful. It must develop processes to providefront-line care-givers (physicians and nurses) with the “right” information to makeinformed decisions. The book provides direction and concrete examples of the strategiesthat organizations can implement to become experts in supply-chain management.Hopefully, everyone within the industry will continue to collaborate and innovate sothat in the future we can insure our supply chain is streamlined and efficient and ourfocus is on the patient.

Nancy LeMasterVice President, Supply Chain Operations, for BJC HealthCare

St. Louis, MissouriUSA

ix

Series Preface

This series is directed to healthcare professionals who are leading the transformationof health care by using information and knowledge to advance the quality of patientcare. Launched in 1988 as Computers in Health Care, the series offers a broad range oftitles: some are addressed to specific professions such as nursing, medicine, and healthadministration; others to special areas of practice such as trauma and radiology. Stillother books in the series focus on interdisciplinary issues, such as the computer-basedpatient record, electronic health records, and networked healthcare systems.

Renamed Health Informatics in 1998 to reflect the rapid evolution in the disciplinenow known as health informatics, the series continues to add titles that contribute tothe evolution of the field. In the series, eminent experts, serving as editors or authors,offer their accounts of innovation in health informatics. Increasingly, these accountsgo beyond hardware and software to address the role of information in influencingthe transformation of healthcare delivery systems around the world. The series alsoincreasingly focuses on “peopleware” and the organizational, behavioral, and societalchanges that accompany the diffusion of information technology in health servicesenvironments.

These changes will shape health services in the new millennium. By making fulland creative use of the technology to tame data and to transform information, healthinformatics will foster the development of the knowledge age in health care. Ascoeditors, we pledge to support our professional colleagues and the series readers asthey share the advances in the emerging and exciting field of health informatics.

Kathryn J. HannahMarion J. Ball

xi

Acknowledgments

This book is based on the accumulated results and experience of three successiveresearch and development projects, the first of which started almost ten years ago.It was initiated by Johannes Mönter, one of the German pioneers of eBusiness inhealthcare, who combines the understanding of revolutionizing supply chain processesin healthcare with the sense of utilizing modern technology. To him we owe the first andcontinuing opportunity to test solutions practically and conduct research in this field.More application sites were to follow – in particular the University Hospital Göttingen(UKG) and the Medizinische Hochschule Hannover (MHH) - which also providedexcellent realistic conditions for answering the research questions and which wereextremely helpful when supporting our students and research assistants in collecting thenecessary data. We especially thank Detlef Bruer (UKG) and Peter Bernhardi (MHH).

In the very first project, we had to learn right from the beginning that eBusiness inhealthcare does not only concern the supply chain managers, but also at least to the sameextent the clinicians, in particular the nurses. Gerold Kammeyer, nursing manager atDiepholz District Hospital, and Werner Sander, CEO at Diepholz, made us understandthe relevance of up-to-date supply chain data for patient care, as well as for managingthe healthcare enterprise.

We also wish to thank our colleagues who contributed to this book by providingexcellent chapters. We thank them too for their patience in answering the many emailswe sent – some across many hundreds of miles, others just next door.

This book would not have been possible without the extremely kind and reassuringhelp of Hannah Wilson and Grant Weston at Springer, London, who managed the projectmarvelously.

The critical discussions and good comments made by the Osnabrück students whoread the manuscript in the “Process Management” seminar definitely deserve acknowl-edgment. Their keen interest in the topic was a great source of motivation to finish thebook.

There are many people who contributed to the technical making of the book.We particularly thank Björn Sellemann, Daniel Flemming, and Erling Henze at theUniversity of Applied Sciences Osnabrück for producing figures and tables and formanaging the different versions of the digital documents.

Finally, we thank our families who with great patience put up with many “lost”weekends and monosyllable conversations at breakfast while the book was being written.

Ursula HübnerMarc A. Elmhorst

xiii

Road Map

xv

Contents

Foreword vii

Dimitris Karagiannis

Foreword ix

Nancy LeMaster

Series Preface xi

Acknowledgments xiii

Road Map xv

Contents xvii

Contributors xix

List of Abbreviations xxi

Trademarks xxvii

Part I Elements of eBusiness

Chapter 1. Introduction to eBusiness 3

Ursula Hübner

Chapter 2. Opportunities of Supply Chain Management in Healthcare 27

Volker Gehmlich

Chapter 3. Business Process Analysis 57

Stefan Junginger and Eva Kabel

Part II Technical Background

Chapter 4. Integrated Information Systems 81

Martin Staemmler

Chapter 5. Achieving Interorganizational Connectivity 103

Ursula Hübner

Chapter 6. From Product Identification to Catalog Standards 127

Frank Brüggemann and Ursula Hübner

xvii

xviii Contents

Part III Applications and Experiences

Chapter 7. The Evolution of eBusinessin Healthcare 157

Karen M. Conway and Richard Perrin

Chapter 8. An Integrated Strategyfor eProcurement: The Casefor Leeds Teaching Hospitals 177

Keith E. Lilley

Chapter 9. Supply Chain Management on Clinical Units 197

Barbara L. Van de Castle and Gina Szymanski

Chapter 10. Business Analysis 219

Marc A. Elmhorst

Chapter 11. Logistics Services and Beyond 245

Michael Schüller and Ursula Hübner

Chapter 12. The Expert’s Opinion:Part I – The Healthcare Providers 259

Ursula Hübner

Chapter 13. The Expert’s Opinion: Part II – The Suppliers 279

Ursula Hübner

Part IV Outlook

Chapter 14. The Supply Chain Model of eBusiness in Healthcare 297

Ursula HübnerSubject Index 319

Contributors

Frank Brüggemann, MDGesellschaft für Standardprozesseim Gesundheitswesen mbHHannover, Germany

Karen M. Conway, BACorporate CommunicationsGHX, LLC Westminster, CO, USA

Marc A. Elmhorsttrinovis GmbHHannover, Germany

Ursula Hübner, PhDFaculty of Business Management and Social SciencesUniversity of Applied Sciences OsnabrückThe Johns Hopkins University School of Nursing Baltimore, MD, USAOsnabrück, Germany

Volker Gehrnlich, Dipl. Hdl., MBA h.c.Faculty of Business Management and Social SciencesUniversity of Applied Sciences OsnabrückOsnabrück, Germany

Stefan Junginger, PhDBOC Information Technologies Consulting GmbHBerlin, Germany

Eva Kabel, Dip1.-BW (BA)BOC Information Technolgies Consulting GmbHBerlin, Germany

Keith E. Lilley, BA (Hons), MBA, MCIPSThe University of YorkYork, UK

Richard A. Perrin, BA, MBAAdvanTech, Inc.Annapolis, MD, USA

xix

xx Contributors

Michael Schüller, PhDFaculty of Business Management and Social SciencesUniversity of Applied SciencesOsnabrück, Germany

Martin Staemmler, PhDSchool of Electrical Engineering and Computer ScienceMedical InformaticsUniversity of Applied SciencesStralsund, Germany

Gina M. Szymanski, MS, RNDepartment of OncologyThe Sidney Kimmel Comprehensive Cancer CenterThe Johns Hopkins HospitalBaltimore, MD, USA

Barbara L. Van de Castle, MSN, RN, APN, BC, OCNDepartment of OncologyThe Sidney Kimmel ComprehensiveCancer CenterThe Johns Hopkins Hospital Baltimore, MD, USA

Readers

Alan Hogg, MA (principal reader), University of Applied Sciences Osnabrück,Germany

Abigail Joseph-Magwood, BA (Hons), Postgrad Dipl., University of Applied SciencesOsnabrück, Germany

List of Abbreviations

AABAP Advanced Business Application ProgrammingABC Acitivity Based CostingADT Admission, Discharge, TransferAHSC American Hospital Supply CompanyAIDC Automatic Identification and Data CaptureANSI American National Standards InstituteAPI Application Programming InterfaceAS Application ServerASCII American Standard Code for Information InterchangeASP Application Service ProviderASTM American Society for Testing and MaterialsATC/DDD Anatomical Therapeutic Chemical / Defined Daily Dose

Classification

BB2B Business to BusinessB2C Business to ConsumerBAPI Business Application Programming InterfaceBC Business ConnectorBFI Business Function IdentifierBME Federal Association for Materials Management, Purchasing and

Logistics (Germany)BNP Business Networking PlatformBO Business Object TypeBPA Business Process AnalysisBPEL Business Process Execution LanguageBPM Business Process modelingBPML Business Process modeling LanguageBPMN Business Process modeling NotationBPSS Business Process Specification Schema

CC2B Consumer to BusinessCAP College of American Pathologists

xxi

xxii List of Abbreviations

CC Core ComponentCEN European Committee for StandardisationCEO Chief Executive OfficerCHeS Coalition for Healthcare eStandardsCIO Chief Information OfficerCIS Clinical Information SystemCOINS Controlling Information SystemCORBA Common Object Request Broker ArchitectureCPA Collaborative Partner AgreementCPFR Collaborative Planning, Forecasting and ReplenishmentCPH Collaborative Procurement HubCPP Collaboration Protocol ProfileCPS Clinical Product SpecialistCSD Central Supply DepartmentCT Computer TomographyCTQs Critical to Quality ObjectivesCU Currency UnitsCVA Clinical Value AddedCVAC Clinical Product Value Analysis CommiteecXML Commercial XML

DDBMS Database Management SystemDCOM Distributed Component Object ModelDESADV Despatch Advice or International Advance Ship NoticeDFSS Design For Six SigmaDICOM Digital Imaging Communication in MedicineDMADV Define Measure Analyse Design VerifyDMAIC Define Measure Analyse Improve ControlD-MIM Domain Message Information ModelDPMO Defects per Million OpportunitiesDRG Diagnosis Related GroupsDSO Days Sales OutstandingDURG Drug Utilization Research Group

EEAI Enterprise Application IntegrationEAN International Article Number (formerly: European Article

Number)EANCOM European Article Number CommunicationebMSG ebXML Messaging ServiceebREQ ebXML ReqiurementsebRIM ebXML Registry Information Model SpecificationebRS ebXML Registry Services SpecificationsebTA ebXML Technical ArchitectureebXML Electronic Business XMLECCC Electronic Commerce Council of CanadaECCMA Electronic Commerce Code Management AssociationECHR Efficient Consumer Healthcare ResponseECR Efficient Consumer Response

List of Abbreviations xxiii

ECRI formerly the Emergency Care Research InstituteEDI Electronic Data InterchangeEDIFACT Electronic Data Interchange for Administration,

Commerce and TransportEDIFICE Electronic Data Interchange Forum

for Companies Interested in Computingand Electronics

EGAR European Generic Article RegisterEHR Electronic Health RecordEPC Event-driven Process ChainEPR Electronic Patient RecordERP Enterprise Resource PlanningESA Enterprise Service Architecture

FFDA Food and Drug AdministrationFI Financial Information SystemFTP File Transfer Protocol

GGMDN Global Medical Device NomenclatureGDTI Global Document Type IdentifierGHX Global Healthcare ExchangeGIAI Global Individual Asset IdentifierGLN Global Location NumberGPDS Global Production and Development SystemGPI Classification German Proprietary StandardSystem for Medical-Surgical Supplies

and Medical Technical DevicesGPO Group Purchasing OrganizationGRAI Global Returnable Asset IdentifierGSCF Global Supply Chain ForumGSG Gesellschaft für Standardprozesse

im GesundheitswesenGSRN Global Service Relation NumberGTIN Global Trade Item NumberGUI Graphical User Interface

HHIBC Health Industry Bar CodeHIBCC Health Industry Business Communication CouncilHIMSS Healthcare Information and Management

System SocietyHIPAA Health Insurance Portability and Accountability ActHISh Health Information System used in HospitalHL7 Health Level SevenHMO Health Maintenance OrganizationHR Human ResourcesHTTP Hypertext Transfer ProtocolHTTPS Hypertext Transfer Protocol SecureHUG Healthcare User Group

xxiv List of Abbreviations

IICD International Classification of Diseases and Related

Health ProblemsICT Information and Communication TechnologyICU Intensive Care UnitID Identification NumberIDN Integrated Delivery NetworkIDOC Intermediate DocumentIEC International Electrotechnical CommissionIHE Integrating the Healthcare EnterpriseINN International Non-proprietary NameIOM Institute of Medicine (Washington DC, USA)IOS Inter-organizational Information SystemIP Internet ProtocolISBN International Standard Book NumberISO International Organization for StandardizationIT Information TechnologyJJ2EE Java to Enterprise EditionJAN Japanese Article NumberJava EE Java Platform Enterprise EditionJIT Just in TimeKKLE Klinik Logistik Eppendorf GmbHKMS Knowledge Management SystemLLAN Local Area NetworkLIC Labeller Identification CodeLIS Laboratory Information SystemLSP Logistic Service ProviderMMDC Material Distribution CenterMHH Medizinische Hochschule HannoverMM Materials ManagementMMIS Materials Management Information SystemMOM Message Oriented MiddlewareMRI Magnetic Resonance ImagingMRO Maintenance, Repair and OperationsNNCPDP National Council for Prescription Drug ProgramsNDC National Drug CodeNHRIC National Health Related Item CodeNHS National Health ServiceOOASIS Organization for the Advancement of Structured Information

StandardsOCI Open Catalog Interface

List of Abbreviations xxv

ODETTE Organization for Data Exchange by Tele Transmission inEurope

OECD Organization for Economic Cooperation and DevelopmentOLAP Online-Analytical-ProcessingOR Operating RoomOTC Over the CounterOU Organizational Unit

PPACS Picture Archiving and Communication SystemPASA NHS Purchasing and Supply AgencyPCN Labeller Product or Catalogue CodePICC Peripherally Inserted Central Line CatheterPIP Partner Interface ProcessPO Purchase OrderPOAs Purchase Order AcknowledgementPOES Physician Order Entry System

Q

RR&D Research and DevelopmentRFC Remote Function CallRFID Radio Frequency IdentificationRIM Reference Information ModelRIS Radiological Information SystemRMI Remote Method InvocationR-MIM Refined Message Information ModelROI Return of InvestmentRPC Remote Procedure Call

SSCM Supply Chain ManagementSCOR Supply Chain Operation Reference-modelSKU Stock Keeping UnitSLA Service Level AgreementSME Small and Medium-sized EnterpriseSMTP Simple Mail Transfer ProtocolSNOMED Systematized Nomenclature of MedicineSOA Service-Oriented ArchitectureSOAP Simple Object Access ProtocolSOC Standards of CareSQL Structured Query LanguageSRM Supplier-Relationship ManagementSSCC Serial Shipping Container Code

TTCP Transmission Control Protocol

UUBL Universal Business LanguageUCC Uniform Code Council

xxvi List of Abbreviations

UDDI Universal Description, Discovery and IntegrationUKE University Hospital Hamburg-EppendorfUMDNS Universal Medical Device Nomenclature SystemUML Unified Modeling LanguageUN/CEFACT United Nations Centre for Trade Facilitation and Electronic

BusinessUN/EDIFACT United Nations Electronic Data Interchange For Administration,

Commerce and TransportUNSPSC United Nations Standard Products and Services CodeUNDP United Nations Development ProgrammeUPN Universal Product NumberURL Uniform Resource Locator

VVAD Vascular Access DeviceVAN Value Added NetworkVMI Vendor Managed Inventory

WWFMS Workflow Management SystemWGKT German Scientific Association for Technology in HospitalsWHO World Health OrganizationWSDL Web Service Description LanguageWTO World Trade Organization

XxCBL XML Common Business LanguageXML Extensible Markup LanguageXPDL XML Process Definition Language

Y

Z

Other

3LGM2 Three-Layer Graph-based Meta Model

Trademarks

ABAP is a trademark of SAP AG.ADONIS is a registered trademark of BOC GmbHARIS is a registered trademark of IDS Scheer AG.ASTM is a registered trademark of The American Society for Testing and Materials.Baxter is a registered trademark of Baxter International Inc.BMEcat is a trademark of BME - Bundesverband Materialwirtschaft, Einkauf und

Logistik e.V.BAPI is a registered trademark of SAP AG.Citrix MetaFrame is a registered mark of Citrix Systems Inc.CORBA is a registered trademark of the Object Management Group.Corporate Modeler is a registered trademark of Casewise.DICOM is a registered trademark of National Electrical Manufacturers Association

(NEMA).Forrester is a registered trademark of Forrester Research Inc.Gartner is a registered trademark of Gartner Inc.GHX is a trademark and AllSource is a registered trademark of Global Healthcare

Exchange, LLC.HIBCC is the registered service mark of the Health Industry Business Communica-

tions Council.HL7 is a registered trademark of Health Level Seven (HL7)HTTP and XML are registered trademarks of the W3 Consortium.Java is a registered trademark of SUN Microsystems, Inc.JD Edwards and PeopleSoft are registered trademarks of Oracle Corporation and/or

its affiliates.Microsoft Excel, Microsoft PowerPoint, Microsoft Word and Microsoft Visio are

registered trademarks of Microsoft Corporation.Omnicell and Omni Rx One–Cell are trademarks of Omnicell Inc.Oracle is a registered trademark of Oracle Corporation.PAR Excellence is a registered trademark of PAR Excellence Systems Inc.PIP is a registered trademark of RosettaNet.ProVision is a product of Proforma Corporation.PunchOut is a registered trademark of Ariba, Inc.Pyxis® is a registered trademark of Cardinal Health, Inc.SAP IS-H is a registered trademark of SAP AG.SAP NetWeaver is a registered trademark of SAP AG.SAP R/3 is a registered trademark of SAP AG.SCOR is a registered trademark of the Supply Chain Council.Six Sigma is a registered trademark of Motorola Inc.SNOMED, SNOMED CT and SNOMED RT are registered trademarks of the College

of American Pathologists.

xxvii

xxviii Trademarks

UML is a registered trademark of the Object Management Group.UNSPSC is a registered trademark of UNDP.WebSphere is a registered trademark of IBM Corporation.WebLogic is a registered trademark of BEA Systems, Inc.

Part IElements of eBusiness

1Introduction to eBusinessUrsula Hübner

Executive Summary

General RemarksWhen speaking about eBusiness as applied to the healthcare market, two questionsarise immediately. First, what is eBusiness? Second, why is eBusiness inhealthcare different from eBusiness in other industries? In this chapter, we shallgive an overview of the foundations of eBusiness, explain the importance ofeBusiness within the healthcare domain, and describe the peculiarities of thehealthcare market. This chapter acts as a framework for the topics in the followingchapters, and describes the context of the economic and business issues, thetechnologies, and their applications which will be further elaborated in thosechapters.

It is the goal of this book to raise the awareness of, and interest in,electronically mediated business processes in healthcare in a large audienceof managers, clinicians, pharmacists, scientists, and students. Within the arenaof eBusiness in healthcare, we focus on purchasing and selling online as themost advanced application. Here we shall consider both the perspective of thehealthcare providers and that of the suppliers, showing the interdependenciesbetween the two and developing concepts for a new synergistic cooperation.By taking an international approach to the topic, our aim is to demonstratethe many similarities of eBusiness problems and their solutions among thedifferent countries and to permit analysis of the differences that are oftendefined by the national healthcare systems and their rules. Case studies fromhealthcare institutions and suppliers in the United States, the United Kingdom,and Germany will illustrate the achievements, barriers, and future plans, thusenabling newcomers to learn from previous experiences. This book explicitlyaddresses clinicians by demonstrating the interconnection between patient careprocesses and management issues at the level of medical supplies. It makes a pleafor a multidisciplinary effort, so that the right product is procured for the rightpatient, at the right time.

As a rather new discipline, eBusiness in healthcare needs further scientificbacking. Against this background, this book will not only provide answers, butwill also raise questions for future research. Managing change and innovation, and

3

4 Part I. Elements of eBusiness

establishing the critical mass for eBusiness in healthcare is a major undertaking.The aim of this book is to support this process.

eBusiness – An IntroductioneBusiness is not simply the electronic version of conducting business. It does notmerely apply new technology to old structures and processes. eBusiness enablesa variety of new types of relationships between customers and suppliers fromclosely interwoven relationships in supply chains to loose, transient relation-ships mediated by electronic marketplaces. Building upon existing definitions,we understand eBusiness as a global concept that includes all internal andexternal business processes of an organization that aim at facilitating business byconnecting the business partners and that integrate and synchronize the necessaryelectronic media. Benefit arises from eBusiness in terms of reduced costs foroperating in the market (transaction costs), in particular reduced process costs,and improved knowledge sharing.

Within eBusiness, eCommerce is dedicated to electronic trading with its classicbusiness-to-business (B2B) and business-to-consumer (B2C) relationships. Amongthe many different technical and organizational approaches for connecting thebusiness partners, electronic marketplaces play an important role. They are eitherforums–understood in its literal meaning–for presenting goods and negotiatingprices, or they act as technical hubs for providing connectivity and applications.

In either case, the underlying technology goes far beyond simple emailexchange via the Internet. Workflow-oriented systems with well-defined inter-faces that support standards and provide secure data exchange are a prerequisitefor exploiting the benefit of eBusiness.

To date, after the initial economic turbulence, eBusiness is a well-establishedand growing part of the economy in many countries. Online trading among firms(B2B) holds the greatest share of eCommerce, both in terms of financial volumeand number of firms active in the field. B2C–though better known by the public–is only successful in certain sectors (e.g., tourism and some subsectors within theretail trade) and comprises a smaller volume than B2B. The larger a companyis, and the higher its level of information and communication technology (ICT)use is, the more active it is in eBusiness. Company size and the level of ICTare not independent of each other, however. Larger companies have typicallymore ICT, which hints at the strong overall impact of ICT on eBusiness. Thesame holds true for countries: eBusiness flourishes in countries with an excellenttechnical infrastructure but also with a supportive political, social, and economicenvironment.

eBusiness in HealthcareeBusiness has become a fact of life in all sectors, including healthcare. Statisticstrying to reflect these activities and trying to compare healthcare with othersectors, however, fail to achieve their aim. This is because healthcare is differentfrom other industries in many respects and its market is exactly defined by thesepeculiarities.

Supporting electronic processes in healthcare has a long tradition, as intelemedicine, for example. eHealth is the term most commonly in use todayand it embraces all aspects of providing connectivity for care, contents, and

1. Introduction to eBusiness 5

commerce in healthcare. eBusiness in healthcare is the subset within eHealth thatcovers the commerce domain. We therefore define all electronically supportedprocesses of healthcare providers originating from business management, andall processes of suppliers and manufacturers in healthcare, as eBusiness inhealthcare. In accordance with the customs of the healthcare market, we speak ofeProcurement (online purchasing) when describing the healthcare providers’ sideand of eCommerce (online selling) when referring to the suppliers’ side.

The healthcare market–in particular, the medical supplies market–is highlyspecific, and electronic media that support online purchasing and selling must bebuilt to account for these circumstances. Procuring medical supplies, includingdrugs, medical-surgical products, medical devices and other products that eitherstay with the patient or are directly used in the patient care process requiresdetailed product and process knowledge. This is also true for so-called “simplecommodities.” In no other sector than in healthcare are products also purchased bythe process owners–i.e., the clinicians and the pharmacists. Technical and organi-zational procedures in eBusiness in healthcare must therefore take the knowledgefactor into account when automating the supply chain.

There are only a few other industries besides healthcare in which poor outcomeshave such tremendous consequences, including death. This strongly influencesthe customers’ behavior. Healthcare providers must operate in a quality drivenway (also in terms of product quality) because their customers, the patients,base their decisions on quality rather than on price. The costs of care, however,including the costs of medical supplies, are an important factor for staying inbusiness and play a major role in today’s healthcare politics. Reduced processcosts on the healthcare providers’ side as well as the suppliers’ side are thereforea major driving force and motivation for adopting eBusiness procedures by bothparties. Unlike in other industries, prices of goods such as medical supplies are notnegotiated online. This is why the classic exchange model of electronic market-places has never been accepted in healthcare and why reducing prices is achievedby volume bundling rather than auctions.

eBusiness in healthcare is special because healthcare is special and it needs thecombined endeavours of its stakeholders to gain momentum.

The Foundations of eBusiness

Business in a Networked WorldThere is more to eBusiness than purchasing or selling via the Internet, and its resultsextend beyond simple process automation. Switching from a paper-based paradigmto an electronic paradigm always combines unknown opportunities with the necessityof re-engineering major structures and processes within an organization. eBusiness,in particular, allows thinking in terms of new and altered business relationships andnetworked cooperation between customers and suppliers. Not only can customers andsuppliers get into contact more directly with each other (disintermediation), but alsonew types of organizations such as electronic marketplaces come into existence (reinter-mediation), offering catalogs, auctions, and exchanges. Old confines of enterprisesbreak down to give way to virtual enterprises. Many of these strategies are inspired bytechnology, namely the Internet with its potential for enabling improved searching and

6 Part I. Elements of eBusiness

transmitting of information. After the early years of eBusiness, which were characterizedby wildly exaggerated promises and the eventual crash of many “dot-com” businesses,the surviving firms have consolidated and electronic business has both become pervasivein many traditional companies and has had an impact on their bottom lines. Empiricalevidence indicates that eBusiness initiatives lead to improved economic performancein terms of a higher gross margin and bigger revenue per employee [1]. From theperspective of economic theory [2, 3], web-enabled technologies shape the nature ofconducting business by influencing cost and resources structures–in particular, by

(i) decreasing transaction costs, or costs associated with operating in the market–inparticular, information-processing transaction costs (Transaction Cost Theory)

(ii) improving knowledge sharing among business partners (Network Theory)(iii) causing greater information transparency of some internal resources, forcing the

firm to rethink its strategy and to redefine its core resources (Resource-based View)

Furthermore, the eBusiness literature recognizes the opportunity of allowing access toa market share not confined by geographical constraints, thus enhancing the overallscalability of the business approach [2].

There are many definitions of eBusiness. Most of the recent definitions agree on aglobal understanding of the term, emphasize the use of electronic media irrespective oftheir particular nature (Internet, classic EDI, webEDI, and others) and pursue the ideaof business networks [4]. Based on a summary of existing definitions, eBusiness willbe understood here as a concept that orchestrates all electronic means for conductingbusiness, including all internal and external business processes of an organization thatare aimed at networking business partners and their customers.

In eBusiness jargon, the relationships between different types of business partnerssuch as business organizations (B), consumers (C), and government agencies (G) aretypically denoted by <business partner>2<business partner>, and expressions like B2Bor B2C have become commonly accepted. The set of combinations between possiblebusiness partners is often visualized in a matrix as shown in Table 1-1.

Not only are there different business approaches, products, and services behindthese acronyms but also different technological requirements. Whereas B2B needsintegrated enterprise resource planning (ERP) systems for fully exploiting the potentialsof eBusiness, B2C solutions can be set up employing online shops with interactive webpages for interfacing with the customers.

Table 1-1. Customer/supplier matrix in eBusiness, including examples.

Customer/Buyer/Recipient

Consumer/Citizen Business Government

Consumer/Citizen

C2C electronicauctions (Ebay.com)

C2B sellingused car to dealer

C2G online filingof tax forms

Supplier/Provider

Business B2C selling booksonline (Amazon.com)

B2B electronic supplychain in automotiveindustry (Covisint.com)

B2G online filingof tax forms

Government G2C reservationservice for federalparks (recreation.gov)

G2B call for bids(e-vergabe.bund.de)

G2G disastermanagement(disasterhelp.gov)

1. Introduction to eBusiness 7

As reflected in recent publications [10], it has become common to distinguisheCommerce from eBusiness as a subset of the latter that focuses on the selling of productsand services with the help of electronic means. In the context of eCommerce, one of themost powerful solutions is eProcurement. It embraces all business-to-business transac-tions focusing on online purchasing, and describes business activities from the buyingside rather than the selling side. Systems bringing together multiple buyers and sellersare known as electronic marketplaces. In the early days of eBusiness, electronic market-places were regarded as a means mainly for coordinating multiple open, on-the-spottrading opportunities. As a consequence of marketplace type relationships, close bondsestablished between firms fell apart in favor of loose, arm’s length types of cooperationgoverned by the market [5]. As eBusiness grew more mature, the picture of electronicmarketplaces became more differentiated and today there are many different waysof classifying electronic marketplaces [6, 7]. Markus and Christiaanse [3] distinguishbetween transaction (negotiations, exchanges and auctions) and collaboration market-places (information and knowledge sharing for planning and forecasting), dependingon the type of processes they support. Whereas transaction marketplaces tend to serveprocesses ranging from attracting information and negotiating to performing transac-tions, collaboration marketplaces tend rather to support fulfilling orders and renderingservices.

The different types of marketplaces have different effects on the relationships amongfirms. Although some types of marketplaces cause the destruction of matured relation-ships, others help to tighten those same types of relationships by interleaving the businessprocesses. Attempts to create strong, long-lasting links constitute the concept of supplychains which, though closely related to eBusiness, regard technology as only one of thebuilding blocks of an overall strategy for dissolving boundaries between enterprises. Infact, supply chains existed before web-enabled technologies emerged. Through the highdegree of connectivity enabled by open networks and the use of standards, however,supply chains now permit an even better and unrestricted flow of information betweenthe enterprises involved, thus enabling forecasting and advanced planning based oninformation from the downstream section of the supply chain. Collaborative planningin manufacturing and replenishing vendor-managed inventories are good examples ofprocesses that benefit from undistorted real-time information on the current demand forgoods.

Adopting new technology is a proven method of transforming organizations. Asa catalyst for formal, systematic, and structured approaches, information technologyfosters the implementation of well-defined methods, clear rules for decision-making, leanprocesses, consistent data, coherent planning, and rigorous analysis of all informationavailable for achieving the best possible outcome. Intraorganizational transformations,at the level of process and information management in particular, must precede theexternal changes. Only then can the benefit of eBusiness be unfolded.

The Role of Process and Information ManagementNot only in eBusiness do modern approaches to conducting business refer to processesrather than functions, and strive towards streamlining internal and external processeswith the goal of becoming more suitable for satisfying customer needs. Informationand communication technology (ICT) has become both a tool and an enabler for re-engineering processes and for achieving a smooth flow of information. As eBusinessis unthinkable without suitable processes, the adoption of eBusiness approaches indeedoften goes hand-in-hand with business process re-engineering.

8 Part I. Elements of eBusiness

ICT is still regarded as a competitive advantage of companies despite recent statementschallenging this fact [8]. It was argued that ICT has become commonplace in firms andno longer permits any differentiation between them. Although the use of ICT is verywidespread, ICT does not always mean ICT. Adequate ICT infrastructure is one of thekey prerequisites for implementing eBusiness. As a result, research into the readiness ofcompanies for eBusiness includes indicators such as the use of ERP systems, narrowbandand broadband access to the Internet, and a presence on the web for predicting theamount and type of eBusiness activities such as selling or buying online. Whereas accessto the Internet in companies from industrialized countries is high [9, 10], the use ofsophisticated information systems, such as ERP systems and supply chain management(SCM) systems, has not yet reached the level of penetration necessary for completelyreplacing paper-based trading with electronic trading.

The “eBusiness w@tch” survey conducted in 2005 [10] in the European Union showsthat only 28% of all companies in the EU 7 countries (UK, GE, IT, FR, SP, CZ, andPL) use ERP systems, only 19% use specific ICT solutions to support procurementprocesses, and only 15% use SCM systems. The figures demonstrate that sophisticatedbusiness ICT and its use are not commonplace and still merit our attention and interest.

What is the Status Quo of eBusiness?There are many salient examples of eBusiness that illustrate the existence of onlinebusiness in our daily life (see Table 1-1). It is much harder, however, to trace the degree(and therefore the success) of electronic business transactions in statistical data [11].As a result, figures must be handled with care, especially when it comes to comparingdata. Nonetheless, general trends have become obvious over the last few years since theso-called Internet hype.

First, B2B scenarios outnumber B2C applications, not only in absolute terms but alsoin the proportion of overall business. In the United States, B2B accounts for 90% ofall online transaction volume and the percentage of electronic wholesale trade exceedsthat of electronic retail trade by almost 10 times [12]. In Canada, only 75% of thetotal amount of eCommerce in private firms can be attributed to business transactionsbetween firms [13]. In the European Union (EU), more than 50% of the firms purchaseonline, with variations depending on sector. Because eProcurement is a major use caseof B2B, the data reflect the prevalence of B2B. In contrast, only 17% accept onlineorders (B2C) [10].

This might seem surprising at first glance. With its roots in EDI-enabled transactions,however, B2B looks back on a much longer history than B2C. Eighty-five percent ofeCommerce sales in commercial wholesale trade are still EDI-based [14].

Second, there is a big variation between distribution channels as to whether electronicmeans are employed for buying and selling. In the United States, mail orders andelectronic shopping, where about one third of the sales is based on electronic transactions(see Figure 1-1), have a top ranking. Within this channel, “books and magazines” arenumber one, closely followed by “office equipment and supplies” and “electronics andappliances.” [14]

Third, company size has a strong influence on purchasing and selling online withlarger companies being more active in all types of eBusiness [9, 10]. One of theunderlying factors is ICT infrastructure. As larger companies tend to be better equippedwith sophisticated information systems and to be better connected, they have a sounderbasis for conducting electronic business.

1. Introduction to eBusiness 9

Figure 1-1. Percentage of eCommerce value of total value in the United States [14].

Fourth, there is also a considerable variation between business sectors. Accordingto the eBusiness Index [10], IT services, the automotive industry, and pharmaceuticalcompanies come off well (first three places). The differences between the sectors canagain be explained by differences in the ICT infrastructure of the firms: the better theICT infrastructure, the more eBusiness activities take place (see Figure 1-2).

Fifth, online buying and selling is a growing market. Although there are variationsin the rate of increase among sectors, eBusiness activities are gaining more and moreground. This holds true for B2B as well as for B2C. Retail eCommerce sales, althoughstill below 5%, have been climbing steadily since 1999 [15]. In specific markets, B2Cmay gain momentum, as developments from tourism such as online reservation of hotelrooms and flight tickets suggest [10, 12].

Sixth, eBusiness flourishes in countries that provide a supportive environment interms of technological, social, political, and business issues. On the macroeconomiclevel, eReadiness is a country’s ability to promote and support all facets of the digitaleconomy, including eBusiness and ICT services [16]. eReadiness is expressed as acomposite value which aggregates quantitative and qualitative measures of the digitalperformance of nations. Among other indicators, broadband infrastructure and Internetsecurity, as well as education and training in ICT, contribute to it. Figure 1-3 shows the2006 results of selected countries among the top 30 of 65 countries.

Seventh, as digital information streams between businesses are becoming moreintegrated, the importance of eBusiness standards is becoming paramount [17]. EDI usedto be the standard choice in communication between limited numbers of well-definedbusiness partners. This has changed dramatically with the advent of the Internet. Not onlyis there a need for standardized business transaction protocols, but also for standardizedcatalog formats and classification systems for products and services. New XML-basedtransaction standards are emerging and competing for market share. All the same, there isa need for a unified approach. In view of this, the United Nations (UN/CEFACT Forum)