An ebay for medical devices?

Novation aptitude

Is it a game-changer, or "game over" for the medical device industry’s business model?

Aptitude LLC, an online marketplace aimed at streamlining the hospital purchasing process by connecting medical device suppliers with their counterparts in the hospital industry, is set to launch early next week at the IDN Summit in Orlando.

The web portal, created as a wholly owned subsidiary of Irving, TX.-based group purchasing organization Novation, is billed as the "industry’s first online direct contracting market."

"The way I would describe it is that Aptitude is very much like ebay, which provides a marketplace where buyers and sellers can come together," Aptitude general manager Troy Kirchenbauer told MassDevice.com. "You have pre-defined buyer and seller entities in the market and the market is infused with data that’s provided by the participating hospitals."

Kirchenbauer, who’s held executive positions at Novation since 2001, said Aptitude is the result of a substantial investment the GPO made 2 years ago to re-engineer the way hospitals and medical device suppliers do business. The goal is to lower the cost and time associated with purchasing medical equipment.

"We’ve really spent the last couple of years looking at market models and trying to find alternative ways to bring buyers and sellers together in healthcare, which would reduce the cost of brokering those relationships and create incremental benefit for both the buyer and the seller, to help alleviate the challenges they experience today in the market," Kirchenbauer explained.

Unlike a typical e-sourcing application, Aptitude is built on a foundation of data that Kirchenbauer said will make the contracting process more transparent.

"Hospitals are providing monthly feeds of all of their purchasing information at the invoice level to Aptitude. That serves as the basis for the market, not only to facilitate brokering between the buyers and the sellers but to manage the performance of those agreements on behalf of buyer and seller," he explained.

Here’s how it works: Hospital sourcing and purchasing managers put out requests for bids on specific product categories, such as blood pressure cuffs or endotrachial tubes and other devices.

"They can see who the players are in the market. They can see how they already work with those players, what the current spend is and, in a couple of seconds, submit an RFP that would likely take a month for them to build today on their own," Kirchenbauer told us.

Medical device companies that sign up with the service will receive the information and then be able to respond quickly to those RFPs directly. And participating medtech makers will receive "unparalleled transparency on that buyer’s profile," Kirchenbauer added.

"[Medical device companies] can understand their current market share position, the total category potential of the buyer and see line-item information and use automation to respond to cross-reference request," he said. "From there, the seller provides a fairly structured pricing response, with many potential options for the buyer to consider, and they can do that in a way where they can visualize how the buyer will compete with current pricing today."

Medical device companies will have to pay a subscription fee to be a part of the service, plus transaction fees paid to Aptitude. But Kirchenbauer said the business model differs from the GPO model because Aptitude does not actively negotiate on behalf of the purchasing hospital.

Aptitude’s senior director of marketing & research, Justin Hibbs, said the portal isn’t designed to eliminate medical device sales reps or remove physician’s influence in purchasing decisions.

"We don’t want to eliminate the human aspect of [selling medical devices]. We want to facilitate the process to make it more efficient and make it a more logical approach," Hibbs told us.

Medical device companies involved in the recently concluded pilot project have been excited by a new level of access to data on their potential clients, he said. In particular, device companies will be able to see market share data on a hospital-to-hospital basis, hospital purchasing patterns and the total spend on particular device categories.

Aptitude is slated to launch April 21 with 20 product categories and 20 suppliers, with a goal of 75 product categories and 70 suppliers by the end of the year, Hibbs said.

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