Applying e-procurement system in the healthcare: the EPOS paradigm

Applying e-Procurement System in the Healthcare: the EPOS paradigm __________________________________________________________________________________

International Journal of Systems Science pg# 1

1. Introduction

The healthcare industry is considered the world’s largest industry with a budget of more than three trillion dollars and tens of millions of people under its employment (Kirch, 2002). As it is indicated in Baltacioglu et al. (2007) and Smith and Correa (2005), there is a gap of academic work related to the structures of service supply chains. They report that the healthcare industry constitutes one of the most significant segments of the service sector in all developed and developing countries. According to the authors, a study on health care industry trends and market analysis conducted by Plunkett Research reports that healthcare in the United States of America (USA) accounts for 16 percent of GDP, whereas the European Union (EU) average is around eight (8) percent. According to Smith and Correa (2005), the health care market is the largest service industry in the USA. They also mention that the health care industry supply chain has not embraced the internet and e-commerce to the same extent as other industries such as banking and retailing. As the advances of medical, biological, technological, and medical engineering sciences together with the ageing population are behind the healthcare cost inflation, the concern of hospital management is to identify ways of reducing the escalated healthcare costs, while providing at the same time better and safer services to the hospital patients (Wilson et al. 1992, Jarrett 1998, Okoroh et al. 2001, Faldalla and Wickramasinghe, 2004). Jarret (1998) states that the health care industry has been under extreme political and public pressure during the last three decades to control the rapidly increasing cost for treatment. He also notes that controlling health care costs requires that limits be placed either on prices, on quantities of services, or on both. Prices are measurable and more easily controlled than quantity. It suggests that an alternative approach to controlling prices is to restructure the market for health services to encourage greater price competition among providers. In theory, hospitals pass their costs on to customer-patients, with a slight mark-up. They waste time and resources searching for specialty items, while manufacturers and distributors are desperately searching for customers. The pharmaceutical industry has yet to confront the major issue of inefficiency. Danas et al. (2002), report that over 10% of the total production is slow-moving or completely stagnant. Based on estimates of industry professionals, three (3) billion Euros of this slow-moving or stagnant production is destroyed each year. Manufacturers, wholesalers, and distributors would prefer to move this potentially destroyed inventory if they could inexpensively and efficiently do so. In a survey that was conducted by Danas and Ketikidis (2000) in public and private hospitals in the area of Northern Greece, the inefficiencies of the hospital pharmacy inventory management were identified. Such inefficiencies included stock out incidents, which endangered patient safety and life incidents of expired drugs that had to be thrown away as ineffective.

Most of the inefficiencies that are accrued in the sensitive healthcare industry are due to inadequate information flow and quality that lead to duplication of services, waiting times and a number of medical errors underlining the importance of information systems within the healthcare industry and hence the interest of governmental approaches to healthcare informatics and healthcare institution management. As information technology and information systems have been playing a central role in other industries providing quality and competitive advantage to organisations that base their operations on them, the research regarding the use of IT in the healthcare industry must be enhanced in order to identify and implement systems that offer similar benefits. The use of a Supply Chain Management (SCM) module as part of hospital information system facilitates the flow of information regarding the consumption of drugs and other pharmaceutical supplies from the point of care

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to the suppliers. Thus, by connecting the key players of the system, the basis for efficient decision making is created and thıs could reduce the escalating healthcare costs and at the same time improve the quality and safety of healthcare delivery (Jarrett 1998, Faldalla and Wickramasinghe, 2004).

Jarrett (1998), states that the use of IT has the potential to promote supply chain integration by providing efficient, timely, and transparent business information to the appropriate parties. Hospitals have plenty of reasons to use online procurement. Real-time inventories and prices would allow purchasing departments to plan buying and to compare prices. Precise pricing information could flow from online sources to hospital systems. Online tracking of orders would allow better planning of inventories and support timely delivery. The cost to the healthcare system of supply chain inefficiencies may reach really high figures. The relationship between buyers and sellers is also in focus as the compatibility of information systems and processes, the understanding of mutual business needs, communications, commitment, flexibility and trust are factors that can reduce operating costs. In the quest for costs controlling without affecting the quality of healthcare, hospital managers must consider the supply chain management (SCM), which provides the proper concepts and tools for the optimisation of the supply chain system. To improve the supply chain system processes, the supply chain concepts utilise information systems tools and focus on the relationships between suppliers and sellers, studying the compatibility of information systems and processes, the understanding of mutual business needs, communication channels and methods, commitment to the business relationship, flexibility and trust. Procurement management has been the most valuable part in supply chain management. It is an important management tool of a firm’s overall efforts to both reduce costs (control purchasing process) and to enhance the competitive advantage (Ivang and Sorensen, (2005), Presutti (2003), Puschmann and Alt (2005), Talluri et al. (2006). SCM is the integration of key business processes from end user through original suppliers that provides products, services, and information that add value for customers and other stakeholders. While different definitions exist, it is clear that integration is a key aspect of SCM. According to Narasimhan and Kim (2002), in order to achieve integration across enterprises (external integration), firms must recognise the importance of suppliers as an integral part of the supply chain and engage in collaborative efforts with them. Several scholars, Kumar and Chang (2007), Talluri et al. (2006), Knudsen (2003), Presutti (2003) and Pan et al. (2002), acknowledge that the advent and growth of various forms of Information Technology (IT) (including e-procurement) has played a vital role in allowing supply chain members to achieve inter-firm coordination and integrate business processes. Arda and Hennet (2008) highlight that in an enterprise network several companies are interact to produce families of goods and generally are very antagonistic in the context of the network. The authors propose in order to avoid a global loss of economic efficiency the network should be equipped with a coordination mechanism. Silva et al. (2006), state that heuristics are not sufficient to deal with the complexity of the real-world problems. Their suggestion is to take full advantage of the supply-chain and the communication protocols should support the exchange of information during the optimisation processes. Therefore it is evident that the answer to efficient procurement of medical supplies is e-procurement.

The overall aim of this paper is to demonstrate / implement a prototype e-procurement system (EPOS) for the healthcare sector. E-procurement offers hospitals and ambulatory facilities several notable advantages: convenience, efficiency, broad selection, favourable pricing, information on new products and even more. Furthermore, the cutting edge of EPOS e-procurement platform involves applying software technologies that have some of the highest return-on-investment: optimisation and business rules. Optimisation and business rules



address some of the barriers in e-procurement systems. The solution that “e-Procurement Optimised System for the Healthcare Marketplace” (EPOS) proposes is a reverse auction optimised procedure. Current leading e-procurement solutions concentrate in the dynamic binding of buyer requests and seller offers. This does not fit at all with the requirements of the healthcare sector. Optimisation and business rules technologies can help meet buyers' needs and bring a higher level of efficiency to key tasks such as formatting multi-supplier catalogues, costing out indirect procurement alternatives, optimising the sourcing of indirect goods and services, mapping approval processes and following the progress of specific purchase orders (Ketikidis et al. 2007). This paper is structured as follows: The introduction presents the background of the problem, describes the supply chain management and e-procurement concepts and briefly examines the healthcare sector. In the next section, we review the literature on Information Technology (IT) with a focus on e-procurement as well as the literature on e-procurement integration into the supply chain. The EPOS Business model is described in section three (3). The analysis, design and implementation stages together with the EPOS system components are presented in section four (4). Section five (5), outlines the methodology used as well as the EPOS prototype system that were demonstrated/deployed in the pilot hospital sites. The next section (6), demonstrates the EPOS proposed framework / proposed solution to e-procurement in the health care sector. Section seven (7), the EPOS validation and assessment approach, defines and describes the objectives of the validation process and the metrics of the evaluation that were selected to evaluate the EPOS service. There follows at section eight (8) discussion on the implementation of EPOS and the results, analysis and discussions, where advantages, recommendations and the views of the hospitals (users) are also highlighted. Finally, the key conclusions from the paper are summarised in the last section. 2. Literature review There is no doubt that the world has experienced a number of dramatic changes during the last decade. Globalization and the new Information and Communication Technologies (ICT) are often mentioned as the two most prominent developments that continue to transform people’s lives in ways still to be fully comprehended. New technologies are creating opportunities to rethink business models, processes and relationships along the whole length of the supply chain in pursuit of exceptional levels of productivity, improved customer propositions and new streams of business.

The widespread use of the Internet as communication standard is considered as a fundamental strength for the development of electronic procurement. The Internet is a prerequisite for the purpose of an open tendering process. The Internet is rapidly becoming a standard office procurement tool for many medical practices. Just about anything can be purchased online, from large medical equipment to rubber gloves and pharmaceuticals. Online ordering gives the purchaser real-time information on any given product and the process can be completed in minutes. Also, online procurement brings benefits to manufacturers. Rarely dealing with end-consumers directly, manufacturers must rely on intermediaries to market and sell their products. In addition, manufacturers could build relationships with the actual customers and discover what they like and don't like about the products. They would be able to monitor demand, plan production accordingly and probably obtain new customers, improving the bottom line and the raw volume of product shipped. Makers of specialty items would especially benefit if their customers had easier access to their products. Intermediaries could also realise substantial benefits. Many already have ongoing relationships with both buyers and manufacturers, which they can bring into online

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relationships. Furthermore, group buying has power, whatever the medium, and anyone who can organise groups of buyers and lead them online will have a competitive advantage.

More recently, Ivang and Sorensen (2005), state that buyers are increasingly turning to online applications in their negotiations with their suppliers. This means that more and more suppliers are facing the demands of negotiation and trade via e-markets, auctions and e-procurement systems. It indicates that short-term oriented e-market is here to stay and will require new solutions to the classical dilemma of market economy between short-term optimisation and long-term development. Talluri et al. (2006) acknowledges that e-procurement technology has steadily increased in the past few years. Companies view these technologies as solutions to the problem. He also asserts that research in e-procurement lacks a systematic tool to help organisations to optimally integrate suppliers. Furthermore he notes that advantages of e-procurement systems include: (i) better coordination with suppliers; (ii) quicker transaction times; (iii) a higher flexibility; (v) better supplier integration; and (v) lower costs. Bui and Gachet (2006) illustrate the potential use of Web services for negotiation and bargaining in e-procurement. They propose a set of Web services that support the process of negotiation and bargaining to facilitate the matching of supply and demand of Web services. As market brokers, they explain that these web services would help (a) discover the supply /demand of web services in e-marketplaces; (b) find the most appropriate available service for a specific request; (c) facilitate services be modified if needed to satisfy user’s needs; (d) arbitrate the pricing mechanism with a resource to bargaining whenever necessary; and (e) generate a contract. Botani and Rizzi (2005) state that the recent literature has highlighted many works related to e-procurement, but there are few scientific papers dealing specifically with the definition of criteria for supplier selection in the e-procurement context. The implementation of e-procurement programmes may lead to substantial benefits in terms of supply chain integration. E-procurement technologies are IT systems that companies can use in the automation of their procurement processes.

Hospitals and pharmaceutical suppliers across the European Union (EU) are the primary target users for an efficient e-procurement mechanism. With a population of around 493 million people in the EU27 and more than 14,000 hospitals in the EU15, the enlarged European Union constitutes the second largest market for opportunities in trading for hospital materials (with the USA being the first). On the other hand, the number of suppliers in any given country of the EU15, according to estimates, could be as high as 50,000 with the largest suppliers varying by country. This is because hospitals have so many different functions and needs to satisfy with the appropriate supplies. E-procurement health care systems are large-scale systems that can involve several business processes within the hospital and numerous trading partners across the healthcare supply chain, which makes the integration process complex.

EPOS addresses the healthcare supply chain in a unified approach and proposes an innovative procurement environment based on optimization algorithms. Innovation can be seen in three different aspects, namely (1) Content, (2) Planning, (3) Price clearing. EPOS service effectively addresses this problem through the development of its fast, easy, and confidential online clearinghouse not only for pharmaceutical items but also for health and beauty care. The system has been designed, developed, installed and tested in the following pilot sites:

� PESY (Public Regional Health Authority) of Thessaly in Greece � Hospital De Vic (Spain) � Papageorgiou Hospital (Greece) � Monica Hospital (private) in Belgium

EPOS offers an efficient e-procurement mechanism where hospitals and pharmaceutical suppliers can exchange contractual information (orders, characteristics of orders), by using

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electronic means and specifically the Internet and the World Wide Web, aided by the technologies of optimisation and business rules. These technologies can help meet buyers’ needs and bring a higher level of efficiency to key tasks such as formatting multi-supplier catalogues, costing out indirect procurement alternatives, optimising the sourcing of indirect goods and services, mapping approval processes and following the progress of specific purchase orders. EPOS application provides critical decision support functionality to the purchasing departments of the hospitals and to the people that make the decisions within the supply chain. With electronic procurement in full function, a virtual marketplace is created and exchange of information occurs between the members of the supply chain, basically the suppliers of the healthcare materials and pharmaceutical companies on one end and the hospitals on the other end. The application supports product searches between a multitude of merchandise and a big number of suppliers. In this way maximum cost and time of search effectiveness is achieved as compared to the traditional way of a written, official auction sale with lots of paperwork. Supplier products and pricing information are available and are displayed through catalogues that can be accessed by the buyers through a web-based interface. On making a purchase, the decision becomes easier to take, as one can check inventory levels of already existing goods electronically. 3. EPOS: The Business Model The business model that EPOS adopts and applies, engages two types of project stakeholders: hospitals and hospital suppliers (ranging from big pharmaceutical companies to local suppliers), in a highly cooperative work through the use of the EPOS Web based service. There are two different scenarios for the application of the EPOS service. First the service can be directly installed to the Hospitals. This will enable them to manage their contracts with the suppliers, negotiate contracts, make price arrangements, evaluate different options (for suppliers and products), and dictate the business and logistical environment that both suppliers and hospitals follow. The service will lead to cost and time management effectiveness and will result as well in increased competitiveness between suppliers. The second option is the creation of an e-procurement health marketplace (EPOS service) where an intermediary (provider) will manage and connect the health care providers (hospitals) with the supply chain. The intermediary will provide new and innovative procurement processes and will act as a hub that manages and integrates the information generated from the various hospitals in the system, process it and use it for offering value added services to the hospitals as well as to the whole supply chain. Before examining the two different scenarios of EPOS service, we will assume that a healthcare provider identifies the need for certain products (from drugs to day-to-day consumables) or for medical equipment that have to be purchased for the smooth running of the hospital. For the purpose of our scenarios, we will also disregard any previous experience in e-procurement health services of the buyer hospital. Therefore the actions that are going to be followed by the hospital are:

� Initial internal product demand estimation and collection among the departments of the hospital

� Creation of a catalogue with the demanded products � Market research and selection of products and supplier � Reviews of supplies by evaluating product catalogues and visiting suppliers � Comparing prices and quality of similar products offered by different suppliers � Contacting and negotiating with suppliers � Checking for availability of the quantity requested.



� Placing order and contract signing � Shipment and delivery of the products � Receipt of the products

Hospital based EPOS Service By installing the EPOS service in the hospital a permanent list of products required is produced and the product demand of every department is continuously and up to the minute updated separately by each department. Therefore the action line followed by the hospital is the following (Figure 1):

� Introduction of initial internal product demand estimation and collection among the departments of the hospital

� Updating of the catalogues of health products from the external provider � Automatic comparison latest prices, suppliers and stock level up to the minute � Order placement � Plan and Delivery of the products � Safe receipt of products

By utilising the online EPOS service, hospitals could make the whole procurement process much easier. Ordering through EPOS gives the purchaser real-time information on any given product and the process can be completed in minutes, lowering their costs and increasing their effectiveness and productivity as well as the service offered to their patients.

EPOS service managed by intermediary (provider) The second deployment scenario as described above involves the presence of an intermediary between hospitals and suppliers, where the stakeholders can subscribe with a fee to the e-procurement health market service of EPOS. In this case, the presence of a sole service can increase diversity between hospitals and suppliers, and the whole health market place can be controlled more efficiently the more the users of the service are. Cost effectiveness is increased as well as stock management. In this case the procurement process therefore for a hospital using this service is (Figure 1):

� Initial internal product demand estimation and collection among the departments of the hospital

� Log in to the network of the service � Insert the type of product and quantity demanded � Automatically compare latest prices, suppliers and stock level up to the minute � Place order � Plan and Delivery of the products � Receive products

Figure 1. EPOS service for the Hospital and Intermediary (provider)



EPOS service strengthens the strategic management dimension of procurement decision making and reduces the huge amount of administrative hours spent to orders. Order placement and realisation becomes more accurate by diminishing errors as manual processes are removed. Therefore supply chain efficiency improves, and order tracking and tracing become quicker and easier. 4. EPOS: Analysis, Design and Implementation The main success indicators of EPOS are:

� users’ acceptance, � system integration, � reduced costs, � participation of more suppliers from more countries, and � stock management

Users’ acceptance is one of the most critical factors in the system’s success. The users are identified both horizontally and vertically. Horizontally, users’ acceptance is recognised inside the hospitals and public health institutions as well as from the suppliers’ point of view. Vertically, users’ acceptance is recognised from top management and policy makers to hospital procurement personnel and bid managers. All marketing and pilot testing efforts were focused into exploring and reaching into solid marketable conclusions regarding the user satisfaction and accommodation needs in all the above mentioned levels. System integration in the existing organisational structure is a factor that has already been taken very seriously into account from the system architecture development. The main focus of the initial system development was to be able to accommodate the country specific needs within the European public health procurement; both in organizational and infrastructural terms. Special attention was given so as to clearly pinpoint the needs in each pilot country, highlight the system integration potential according to these needs and market them accordingly to each country. Whenever and if necessary minor system integration actions were undertaken. The system offers multiple cost reductions both from operating costs and from procurement optimisation costs. These cost savings were further investigated, quantified and measured in each country pilot test and according to each target market. Participation of suppliers from more countries was a critical success factor anticipated to trigger both healthcare policy makers into adopting the EPOS system, since it will actively promote the single European Market as well as procurement managers and suppliers, since it immediately offers cost savings and a larger market accordingly. Efficient stock management will help hospitals not to pass their costs on to their-patients. EPOS had to clearly demonstrate and quantify the savings occurring from saving time and resources searching for specialty items, while manufacturers and distributors are desperately searching for customers. The cost to the healthcare system of supply chain efficiency through EPOS had to be clearly demonstrated.



4.1. EPOS – User profiles, specifications of services In order to prepare effectively the pilot sites environment in relation to the above mentioned objectives, efforts were focused on the process of preparation of end users according to the specification of the user profiles, specifications of the services to be used, the organisations’ role and reengineering aspects related to the implementation of the service, as well as beneficial factors for the hospital organisations and users. The Analysis of the system resulted in two modes of operation in the Health procurement sector in Europe, supported both by the EPOS system: In some European countries (i.e. Greece, Italy, Spain), Regional Health Authorities (RHA) have been established and they are responsible for the coordination and implementation of health care policies and services in their entire region of responsibility (i.e 17 RHAs in Greece, 18 RHAs in Spain, etc). This is not the case for other European countries in which each Hospital is responsible for its own health care procurement policy (i.e. Belgium). The Regional Healthcare Systems (RHS) are responsible for the healthcare management over a large geographical area i.e. towns or cities, villages, islands, mountainous areas etc, in which one or more health organisations can be found. These RHS are responsible for all the procurement planning, undertaking and distribution of the items to be purchased for all the hospitals, healthcare units, etc. in this area. Through the system mechanism a single procurement planning, budgeting, distribution and transport can cover all purchased items for all the organisations that belong to the area of responsibility of the Regional Healthcare Systems. Moreover, within the frame of the EPOS Project, we have identified six primary user groups of test sites involved in the validation and demonstration activities:

� Doctor (D) � Clinic Managers (CM) � Hospital Procurement Manager (H_PM) � Hospital Financial Manager (H_FM) � Regional Health Authority Financial Manager (RHA_FM) � Regional Health Authority Procurement Manager (RHA_PM)

In the following sections, we describe the two aforementioned basic approaches and procedures for the e-procurement in Healthcare sector, that were supported by EPOS: The Hospital case and the Regional Health Authority case. 4.2.1. The Regional Health Authority case Each Hospital that belongs to the Regional Health Authority of its region Hospital in certain periods of time creates a ‘need list’ of items. The need lists from all Hospitals are passed to the Regional Health Authority Procurement Manager (RHA_PM) for approval. The RHA_PM either:

� Approves a need list or � Rejects a need list and sends it back to the hospital for modification. The Hospital

modifies the need list and send it again to the RHA_PM for approval When the RHA_PM approves all need lists, she consolidates the overall Regional

need list and sends it to the Regional Health Authority Financial Manager (RHA_FM) for Approval. The RHA_FM either:



� Rejects the region’s consolidated need list and sends it back to the RHA_PM for

modification. The RHA_PM modifies the consolidated need list (asks from hospitals to do it) and sends the modified consolidated need list to the RHA_FM for approval.

4.2.2 The Hospital case The Doctors of each Clinic in the Hospital in certain periods of time create a ‘need list’ of items. The need lists from all Hospital’s Clinics are passed to the Hospital Procurement Manager (H_PM) for approval. The H_PM either:

� Approves a need list or � Rejects a need list and sends it back to the clinic for modification. The Clinic

modifies the need list and sends it again to the H_PM for approval When the H_PM approves all need lists, she consolidates the overall Hospital need

list and sends it to the Hospital Financial Manager (H_FM) for Approval. The H_FM either:

� Approves the hospital’s consolidated need list and performs a tender � Rejects the hospital’s consolidated need list and sends it back to the H_PM for

modification. The H_PM modifies the consolidated need list (asks from clinics to do it) and sends the modified consolidated need list to the H_FM for approval.

Figure two (2) illustrates the information flow among identified user groups at the levels of Regional Health Authority and Hospital processes:

Figure 2. Collaboration diagram of identified user groups in both Regional Health Authority and Hospital processes.

4.3. The EPOS architecture With EPOS all documents within the organisation can be exchanged electronically. The term ‘documents’ includes all the data collections that are sent from one Health Organisation to another (i.e. from Vendors to Catalogue Maintenance Personnel, from a Hospital to RHS



etc.). Examples of documents can be Purchase Requests, Tenders, Bids, Contracts, etc. The EPOS system was built in a way so as to create efficient e-procurement so that Healthcare Units, hospitals, regional and remote hospitals and suppliers, could:

� Exchange information, documents, tenders, etc. � Monitor the procurement planning and process using electronic means, and � Be supported by optimisation technologies and a reverse auctioning system.

EPOS functional architecture enables all procurement documents to be exchanged between the central management of the Regional Healthcare System, the Healthcare Units that belong to it and its suppliers. Within the frame of the EPOS Project, we have identified the user groups of the pilot sites involved in the verification and demonstration activities: Medical doctor, Clinic manager, Procurement manager, Financial manager, Supplier, IT specialist (for both hospitals and suppliers). Each user group has a specific role in the procurement procedure. A typical scenario of the system, involving the identified user groups and providing an overview of EPOS architecture, is depicted in figure 3. Figure 3. Typical information flow within the EPOS architecture. As the illustration suggests, a typical usage scenario may consist of up to eight steps; it may be the case that the scenario is terminated earlier (e.g. any disapproval from a clinic/procurement/financial manager, unavailability of medical items from the suppliers, etc.):

1. Medical doctors from the various departments of a hospital (e.g. Cardiology and Anaesthesia) prepare a list with the medical items they need and submit it electronically.

2. The clinic managers of the respective departments approve the lists. 3. The approved lists are automatically transferred from the various departments'

workstations/servers to the central hospital server. 4. The procurement manager of the hospital approves both lists and consolidates an

overall list. 5. The financial manager of the hospital approves the budget for the consolidated list. 6. The procurement manager publishes the tender to the Central Management Regional

Healthcare System (CMRHS) through the Internet. 7. Any interested supplier who can satisfy the tender places a bid to the CMRHS

through the Internet. 8. Finally, the procurement manager inspects the suppliers' bid and announces the

winning bid (i.e. the one with the lowest price) to the CMRHS.



During the requirements gathering and solicitation phase, textual scenarios have been created and UML Use Case analysis has been conducted. These techniques allow for the capturing of functional requirements of business systems in a simple and coherent manner and it has been proven to be easily understandable by non-technical stakeholders (Sommerville 2007, and Jacobson 1992). Consequently, they can be used as a communication bridge between software developers and business-oriented stakeholders for validating the existing requirements and identifying new. 4.3.1. The EPOS system components The EPOS system consists of major subsystems and subcomponents which are:

� Catalogue Management Subsystem � Demand Planning Subsystem � Tender Planning Subsystem � Auctioning Subsystem � Workflow Subsystem � Document Management Subsystem � Security Subsystem

The overview of the essential functionality of the system is shown in figure 4 below. It illustrates a general time order in the use of the subsystems. All subsystems run simultaneously but the output of one subsystem is a prerequisite for another to function. Moreover, the Security subsystem, the Document Manager and the Workflow cover the functionality of all the other subsystems. The functionality of each subsystem and the relations with each other are described below: Figure 4. EPOS system components – Overall Functionality Catalogue management subsystem: This is the central repository of item related information organised in categories. It includes facilities to: (1) enable authorised users to maintain the catalogue of items and (2) enable vendors to publish product related information.

Demand planning subsystem: this subsystem organises the needs of the Health Organisation users, into a unified list for the RHS (RHS Demand List). It includes facilities to: (1) enable authorised users to allocate budgets to subordinate users, (2) enable users to define demands



for their area of responsibility, (3) enable authorised users to consolidate lists of demands of subordinate users, (4) enable users to generate urgent purchase orders for the Health Organisation they belong to and (5) enable users to generate requests for service for the Health Organisation they belong to. Tender planning subsystem: It is the subsystem that is used to create a tender plan out of an RHS Demand List. The RHS Demand List contains information about the way and the time each auction will take place. Includes facilities to: (1) enable authorised users to manage (i.e. split, unify, rename) tenders, (2) enable authorised users to determine the way each auction will be executed, (3) enable authorised users to determine the time and the length of each auction, (4) enable authorised users to publish tender related information and (5) enable authorised users to reschedule and create new auctions for pending items of previous ones. Auctioning subsystem: It is the subsystem that executes the online auctions and determines the winner(s) of each auction. It includes facilities to: (1) enable vendors to view detailed information about tenders and corresponding auctions and (2) enable vendors to submit bids in order to participate in auctions. The auctioning subsystem supports both simple and combinatorial reverse auctions. Workflow subsystem: it automates EPOS processes, in whole or part. It passes documents, information or tasks from one user to another for action, according to a set of procedural rules. The objective is to simplify and streamline key business processes and to reduce the amount of manual processing and reporting that users must undertake to perform their daily tasks. Includes facilities to: (1) monitor process execution automatically, (2) issue alerts to users informing them that it is their turn to perform a task for a business process, (3) provide links that will lead users to the interface where they can perform their task and (4) enable authorised users to maintain the functionality of the workflow subsystem by modifying and activating processes. Document management subsystem: It is a central repository of process related documents. It includes an engine that manipulates documents (create, search, delete, modify). Includes facilities to: (1) enable users to search the repository for documents they have been submitted or received up to the current date and (2) enable user to view and produce hardcopies of the documents they find. Security subsystem: It is the subsystem that manipulates security and authorisation related information. Includes facilities to: (1) enable authorised users to manage user accounts and permissions, (2) authenticate the users that have access to the particular services, (3) protect the documents that will be created after each activity, through Public Key Infrastructure (PKI) and (4) timestamp the documents exchanged within the system. 4.3.2. Technology used The system is installed in a centralised application and web server serving also as the database server. The Tender Planning and the Security Subsystem are stand-alone client applications. The rest of the subsystems are web based, so no extra installation is necessary on user’s PCs. The only application needing to be installed on these PCs is third party web browser. Furthermore with the online auctioning functionality provided, cost is minimised for the buyers and real time bidding functionality is provided to the suppliers. The integrated



optimised system serves specific technological and business goals as well as the needs of public healthcare organisations. It is a useful management tool that:

� Enables time, resources and procurement planning � Shortens the procurement time � Improves the internal organisation of the Regional Healthcare Systems � Introduces and applies novel procurement models and more specific a reverse

auctions model. Through the design of the EPOS Architecture, the key technology that was used for its development was Java technology. Java is an ideal language to build components, mainly due to (1) interface/implementation separation, (2) safety and security and (3) cross platform. The multi-tier design proposed, simplifies the development, deployment and maintenance of the EPOS system. The main scope of the multi-tier design proposed is to enable the developers working on the EPOS system to focus on the specifics of programming, relying on various back-end services to provide the infrastructure and client-side applications to provide the user interaction. The system’s client parts run on Internet Explorer 5.0 or later using Windows 98, Windows NT 4.0, Windows 2000 and Windows XP or any Operating System for which Internet Explorer 5.0 or later version has been released. Non web based applications are developed in Java Virtual Machine 1.3 and run on any Operating System that supports execution of this type of applications. The server uses Linux, Oracle 9i, Apache Web Server, Java Virtual Machine 1.3 or later, OC4J and Oracle Mail Server.

5. Methodology used The EPOS project was undertaken using a standard requirements elicitation methodology aligned to a Rapid Application Development (RAD) methodology and integral feedback loop based on Prototype Assessment. The RAD development method chosen was the Rational Unified Process® (RUP). This method is an iterative software development process. The RUP is not a single concrete prescriptive process, but rather an adaptable process framework. RUP describes how to develop software effectively using proven techniques. While the RUP encompasses a large number of different activities, it is also intended to be tailored, in the sense of selecting the development processes appropriate to a particular software project or development organisation. The RUP is recognised as particularly applicable to larger software development teams working on large projects. Using the RUP, software product lifecycles are broken into individual development cycles. These cycles are further broken into their main components, called phases. In RUP, these phases are termed as: Inception Phase; Elaboration Phase; Construction Phase; Transition Phase. Phases are composed of iterations. Iterations are timeboxes; iterations have deadlines while phases have objectives. The Inception phase - In this phase the business case which includes business context, success factors (expected revenue, market recognition, etc), and financial forecast is established. To complement the business case, a basic use case model, project plan, initial risk assessment and project description (the core project requirements, constraints and key features) are generated. If the project does not pass this milestone, called the Lifecycle Objective Milestone, it can either be cancelled, or it can repeat this phase after redesign to better meet the criteria. The Elaboration phase - The Elaboration phase is where the project starts to take shape. In this phase the problem domain analysis is made and the architecture of the project gets its basic form. If the project cannot pass this milestone, there is still time for it to be cancelled or



redesigned. After this phase, the project transitions into a high-risk operation where changes are much more difficult and detrimental when made. The Construction phase - In this phase the main focus goes to the development of components and other features of the system. This is the phase when the bulk of the coding takes place. This phase produces the first external release of the software. The Transition phase - In the transition phase the product has moved from the development organisation to the end user. The activities of the phase include: Training of the end users and maintainers, Beta testing of the system to validate it against the end users' expectations. The product is also checked against the quality level set in the Inception phase. If it does not meet this level, or the standards of the end-users, the entire cycle begins again. Iterations - A typical project using the RUP will go through several iterations. Dividing the project into iterations has advantages, such as risk mitigation, but it also requires more guidance and effort than the traditional sequential approach. The RUP defines a Project Management Discipline that guides the project manager through iteration management. Using iterations, a project will have one overall phase plan, but multiple iteration plans.

5.1. Results collection approach Early in the EPOS project, in order to validate the prototype software system, the technical partners built a “mock-up” demonstration system as a vehicle to elicit initial feedback on the paper-based functional requirements that had been produced by the project with detailed input from all the main stakeholders. Primary feedback included the reduction in the number of active “roles” involved in the procurement process and the streamlining / simplification of certain business processes, as well as some country specific requirements. The feedback was validated by cross-checking across all stakeholder areas of responsibility and experience and then converted into functional requirements changes for further prototype development activity. The first prototype was presented to both the Belgian and Greek pilot sites. This incorporated all the functionality changes that were made and agreed during the initial “mock-up” assessment workshop. The prototype was presented using an agreed scenario of use that was validated by the pilot sites, further feedback on requirements, assumptions and implementation specifics was then received and incorporated into the ongoing development activity. The prototype was presented to a cross section of end-users, including those who could be expected to use the system on a day-to-day basis as well as senior management representatives to gain an understanding of the concepts and potential benefits of the EPOS system. All project work and the prototype workshops resulted in changes to the system Use Case Specification documents. These documents cover all the major functional aspects of the initial releases of the EPOS system. More features were added during the requirements analysis phase of every subsequent release of the system, and some of the existing features were subject to change and refinement during those phases. A survey was conducted in the test bed countries, aiming at identifying the current practices and the views of the three user groups of a prospective e-procurement system for the health sector. The users of the system



were cast in the following three categories: Administrators in the Health Sector; Medical Staff; Suppliers. As it was mentioned previously, all user groups were approached in each test bed country. For this cause, three different questionnaires were developed, one for each user group. The questionnaire was distributed in two phases. First, there was a testing phase, during which, a first version of each questionnaire was tested for Greek respondents only. From this early, testing phase, useful observations- remarks submerged, which led to the building of the three final questionnaires, one for each user group. This allowed the questionnaire analysis to extend to the common items from the testing phase, which enforced the conclusions from the second-phase-questionnaires analysis. The questionnaires, both from the first and the second phase of the survey can be divided into four sections: Profile of the Respondent; Current Procurement Process; Current Information Technology Use; Views and Attitudes on E- Procurement. The results from all the questionnaires provided a good source of information for more detailed analysis and input to requirements for EPOS. The cross-validation of understanding and specific requirements across functional areas, end-user groups and countries allowed the project to provide requirements specification that has a truly trans-European dimension. 5.2. Results validation workshop / Prototype deployment Detailed analysis of the questionnaire results was documented as part of the day-to-day work and specific deliverables of the EPOS project. The analysis led to the following conclusions:

Undoubtedly, according to the findings of the research, the potential users are positively predisposed towards the use of electronic procurement (78%). However, in the vast majority, the respondents envision the adoption of an e-procurement system preferably in a 5-year time span. The key issues that respondents felt would affect the use and efficacies of an e-procurement system are:

Time an electronic procurement system is expected to overpass certain legal

restrictions, to uphold some good understanding between suppliers and customers and to improve availability of the product

Cost e-procurement is anticipated to decrease costs through simplification, speeding up and enhanced effectiveness of the biding and procurement completion processes

Payment timely payment should somehow be achieved in electronic procurement

Training respondents of the survey placed training and a user-friendly interface of the system in first place of the most important attributes an e-procurement system should exhibit

Security restriction of the system to only the authorised users and the protection from viruses, worms and other malign incidents are paramount - the provision of proof for any transaction through the system is also very important, given the payment structure and the strict legal framework ruling public procurement in each of the three countries as well as the protection from loss of data



Publicity a problem posed for the e-procurement system to be developed was to ensure that the electronic means of publication comply with the legal regulations concerning transparency

Interoperability A further issue that needs to be taken into consideration is the interoperability of the prospective system with the systems already in use by hospitals and suppliers, either for warehouse management, or for order handling and transmission

Human Factor / Direct Contact

the risk of missing the contact with the client (from the part of suppliers) and generally of losing the human relations that are traditionally developed between suppliers and clients was also noted

Quality Check a further issue to be born in mind is for the system to allow for the product to be returned to the supplier long after the product delivery, since the quality check is mostly performed by doctors and nurses just before using the product

Fragmentation of the EU Market

it appears that the main barrier that needs to be overcome in a prospective e-procurement system is the fragmentation of the EU health market. The legislation, along with the scope and typical practices of the suppliers at national level, as well as the transportation costs for the procured product need to be thoroughly taken into account in order for an electronic procurement market to effectively operate.

Therefore the decision was taken to re-visit EPOS stated requirements and re-confirm the key needs for an e-procurement system as previously envisaged, and additionally, the inclusion of several new partners into the EPOS consortium has allowed for a broadening of the original “point of reference” and has added to a more general trans-European dimension for e-procurement requirements. The elicitation of this validation and re-statement of needs has taken the form of on-going dialogue between the partners. These have been facilitated by the use of the EPOS demonstration system, made available to all partners, so that past requirements can be re-assessed and new partners can explore the decisions made as reflected in the demonstration system. To support this requirements re-analysis phase, each of the user groups developed revised fully formed usage scenarios which were analysed and checked against existing EPOS functionality for the viability of customisation. 5.3. Definition of usage scenarios An example scenario document was created, containing input from Monica Hospital - Belgium, Papageorgiou Hospital – Greece, Consorci Hospitalari de Vic – Spain and the CNA (Association of Suppliers – Italy). CNA Modena associates 14.000 craftsmen and small and micro companies of the Modena province, and is organised into two complementary entities: CNA Association and CNA Servizi. The requirements capturing process within EPOS was carried out in four different steps, as described below:

� The first task performed in order to reconfirm and/or update the EPOS services was to request by all user partners (hospitals and suppliers) to define their intended usage scenario. The user partners described in simple free text



the basic elements of the scenario which best fits into their needs. This description includes the basic functionality and characteristics that the services should offer. The resulting documents from the three hospitals (Papageorgiou, Monica and Consorci Hospitalari de Vic) and the association of suppliers (CNA) were combined into a single document which was made available to the technical partners at the early stage of the project. The “Updated Scenarios” document was the first indication of the new requirements that EPOS will have to fulfil and was used as a basis for further elaboration and service refinement.

� The second task, which was carried out in parallel with the definition of usage scenarios, was a complete demonstration of all facilities of the available EPOS system. The purpose was to cover the functionality of the available system so that all users were able to spot inefficiencies and points of potential improvement. It is noted that the partner representatives who were available at the meeting and attended the demo were most suitable for this task, since they represented the administrative and procurement departments of the corresponding organisations.

In addition to the demo during the meeting, it was decided that the system was to be made available for test use and that all user partners would perform usage tests during the following two weeks. Testing user accounts were created and the system was offered for use at a specific web site address. The EPOS users had the opportunity to compare the already implemented scenarios with their own needs and to note required changes to the system functionality and other comments. Following the demo of the existing EPOS and the reflection on service tuning that the user partners had the opportunity to consider, a set of requirements and issues was defined for further examination. Additional requirements were captured in relation to e-catalogues and interoperability. These are two very specific issues, which had to be considered individually and in depth. For example, it was confirmed which interconnections between EPOS and user information systems are useful and which not and it was decided in how many levels the catalogues should expand, how catalogue updates will be managed, etc.

6. EPOS: The Proposed framework

A problem inherent to EPOS, was the lack of a unified national or EU standard cataloguing system, that would be accepted or used from all the national Healthcare Systems of the various EU countries. Thus, the EPOS development team had to come up with a solution that would: be viable if in the near future EU catalogues were be standardised; work within the three pilot sites’ national environments; have a cataloguing structure that would be understandable and applicable to all EU member states. 6.1. The EPOS solution The approach used as the best solution for realising the EPOS catalogue subsystem is a combination of: a general classification system (top level classification) in a tree form that contains categories and generic groups of medical devices only. A specific medical device codification & description schema (a second level classification/codification) that contains grouped items.



The medical device codification schema must be neutral, without any relation to a specific manufacturer. Manufacturer data consists of a third level of codification (the product data). The overall classification and codification scheme that EPOS actually developed was based on the adoption of a high level classification/nomenclature standard and in particular the Global Medical Device Nomenclature (GMDN) with a low level codification scheme based on an additional hierarchical 12 digit code that allows coverage of the needs down to the level of details necessary for e-tendering and procurement. In the absence of a definitive decision on the adoption of the GMDN and for the purposes of the initial implementations, EPOS uses generic medical device terms that are common/compatible to GMDN/UMDNS (Universal Medical Device Nomenclature System™). Identification at the level of specific product was based on supplier’s bar coding schemes with provision to avoid ambiguities. This approach was considered quite flexible, was built on a solid base of officially adopted or under adoption EU standards at the classification level, while giving the freedom of a generic codification scheme, at the lower level, specific for medical devices where there is not yet a common established approach. This scheme at the higher level was composed by the 12 categories and the approximately 7000 generic group terms provide by the GMDN. At the lower level it was comprised of product-grouping designations addressing the specific needs of e-commerce. The EPOS project use the Global Medical Device Nomenclature (GMDN) for cataloguing purposes of the procurement items. 6.1.1. Auctions The scope of the EPOS auctioning system was to provide an efficient marketplace where the healthcare organisations streamline their procurement needs and suppliers take the deals to satisfy them through advanced auction mechanisms, based on web technology. In EPOS and the health procurement in general, the major consideration was to provide a buyer-sided auction protocol, so as to better exploit the purchasing power of health care organisations. Two types of auctions are distinguished:

� Direct Auctions - They are sell-side devices where one seller offers the products he wants to sell and many buyers compete with each other for purchasing the products offering buying prices.

� Reverse Auctions - They are buy-side devices where one buyer posts the need for purchasing a set of items and many sellers compete in getting the deal.

For the needs of negotiations between enterprises, however, a number of new auction formats that allow matching buyer’s preferences with seller’s offerings in a more general sense have been developed. These auctions allow complex bids and, therefore, allow the negotiation not only on price but also on quantity and qualitative attributes.

� Combinatorial auction - Is the most fruitful type of the auctioning models, and EPOS has implemented this type of auction in the healthcare procurement context.

7. The EPOS Validation and Assessment Approach In order to achieve a realistic market validation of EPOS services, the operation of the services in pilot form were carried out, involving public and private hospitals from three



European counties (Greece, Spain and Belgium) and suppliers of healthcare items from a fourth country (Italy). The objectives of EPOS validation process were:

a) To obtain User Feedback on Service use, functionality and success value b) To ensure the Quality assessment of the service c) To analyse market evidence on EPOS function d) To analyse Market Success issues of EPOS

In order for validation actions to have effective results that can be used to create a successful marketing plan for EPOS service, the validation strategy and criteria need was structured as follows:

First of all, the complete and detailed pilot operation of the service was described by the project manager, in order for all the pilot sites to be guided correctly to the sequence of actions. The results and the quality of an evaluation depend completely on a correct completion of the pilot test activities; therefore, the structure of the pilot process needed to be very detailed. As the pilot operations process had been fully described, then the partners identified and described what needed to be validated and the way in which could be accomplished. In this assessment approach four different types of actors were identified. These actors were: Technical Partners; Demand Side (hospitals); Business Partners and the Supply Side (CNA). 7.1. Description of the pilot operation process The main goal of the EPOS market validation trials was to evaluate the intended EPOS services with real users and identify the potential of these services for marketability. The validation was done through pilot trials in which real users and future stakeholders were involved. The EPOS services were provided though an already developed system that had been technically evaluated. The outcome from the pilots was not restricted to the use of the system itself but would address the acceptability and success of the entire concept. Metrics for evaluation Metrics were specified in detail in order to evaluate the EPOS service. These metrics were categorised as follows:

� Demand Side: Hospital Users � Business Environment of e-procurement in the Health market and � Supply side: Hospital Suppliers

The metrics and methodology of the evaluation criteria were designed and delivered by the responsible partners for each one of the above categories. System understanding The suppliers express their satisfaction on how the EPOS service

is advertised, presented, documented.

System usability The suppliers measure the effort needed to become active users of the platform. In line of principle no specific assistance from an ICT expert should be needed, as the bidding process is very critical and should remain fully under control of properly qualified personnel.

Trust This is really a key point. The main resistance the suppliers show



when discussing about e-Auctioning is related to trust. The reason is that many of them fear that tricky offers could be entered so as to artificially decrease the auction price. A proper registration authority and process would be useful.

Product classification This is a very important issue, as most of the suppliers have no consolidated experience on international standardised classification schema. It has been decided that the EPOS system will manage only the general ontologies, and not product catalogues of the single users. The interoperability of such system (acting at the regional/country level) and the EPOS system (ontology) and the supplier legacy systems (catalogues) will be studied and prototyped during the project.

Auction models The EPOS system proposed different types of auctions, among which each health care organisation chose the ones suitable for their context. The suppliers reported their opinion on how these auction models had been implemented and to which extent fair competition was ensured.

Integration with legacy systems

As already mentioned before, the integration between the EPOS system and the supplier legacy systems will be realised in form of web services and taking advantage of an intermediate knowledge base maintained and managed by the Association of Suppliers (CAN).

Benefits from using the platform

The benefits of using the platform would be evaluated in quantitative (time saving, less errors, short response times) and qualitative terms (opening to the European Market, new work practice, procedure simplification, potential for aggregation to participate in large tenders, offer standardisation).

The methodology that was applied was a closed-question questionnaire with the allowance of free-text contributions. Questionnaires and interviews targeted to the system users from each pilot organisation. Supplier opinions were collected with face to face interviews, and then discussed in a workshop organised and open to all the interested companies. 8. Results, Analysis and Discussion During the EPOS project three sets of trials were realised in each of the end users’ premises. The measurable indicators which were defined in the EPOS were selected in two different lines. The first set of indicators corresponded to the system use and included measurements such as number of users, hits, auctions, logins, etc. The results verified that the users actually used the system successfully and quantified the extent of the trials. The second and most important set of measurements was focused on verifying and quantifying the ability of EPOS to electronically simplify current procedures and reduce the time and effort needed to complete an e-procurement, as compared to the conventional procurement process.

In order to quantify this, the hospitals and the representative of suppliers prepared a table with reference data against which measurements were done. These tables indicated the



main steps for completing an e–procurement process and the corresponding time and effort currently needed for each step. The corresponding time and effort using EPOS were measured during the second and third trials and compared with the reference data. It is noted that these measurements depend on many factors (e.g. size of auction, skills of personnel, etc.) and can therefore only be used as rough indications.

A calculated summary of the measurements in effort (man-hours) resulted in the following estimations: In many tasks, such as auction evaluation and results publication there was no measurable difference between EPOS and the conventional procedure. In certain tasks though, there is significant reduction in effort, such as the creation of list of needs (from 2 hours to 1 hour) and the preparation of tender (from 1 hour to 15 minutes). The total saving in effort for the entire procedure was measured as twenty seven percent (27%). The results regarding the elapsed time were the following: The time needed to complete certain tasks is significantly reduced but the amount of time-saving differs from hospital to hospital. The financial list approval takes 10 days in Papageorgiou hospital-Greece and two days in Monica hospital-Belgium according to the current procedure, while it would take one day in both hospitals using EPOS. Similar time savings were reported for auction publication. The duration of the whole procedure can be reduced from 14 to 7 days in a private hospital like Monica and from 7-8 months to one (1) month in a public hospital like Papageorgiou (excluding the period in which the auction remains open). 8.1. Business benefits The efficient e-procurement mechanism that EPOS suggests enables hospitals and pharmaceutical and medical equipment suppliers to electronically exchange contractual information. Broad, pan-European participation of companies in the healthcare supply chain is not currently being practiced and it is anticipated to strengthen the European industry. Some of the EPOS system business benefits are:

� Easy communication, available for all interested parties � Efficient management of the supply chain � Lower operational costs � Market unification � Enhanced flexibility � Minimization of the time required � Price bidding

Below is a list of the benefits that arise from utilising the system.

Customer Benefit Supporting Features Hospitals save money using the auction mechanism and suppliers will be more competitive to each other.

The Auction Mechanism performs auctions minimising the cost for the buyers and providing bidding information for the suppliers.

Hospital personnel easily define what they need.

The catalogue content is easy to review, search, and customize, all catalogue content will be specific to the individual users and suppliers.

Suppliers easily publish product related information.

Catalogue content is derived from a variety of sources, including the item master database or the supplier, but will have to be provided to OPUS according to implementation specifications.



The procurement process flow is improved and users know at any time what to do next.

The Workflow Engine is responsible for managing all the procurement process. It handles documents and process flows. It will also issues alerts and monitors process execution. It is responsible for localisation issues.

All users are enabled to easily access and to submit procurement related information.

The system is an Internet-based application that is available 24 hours a day, seven days a week.

Easy administration. The application can be hosted over the Internet by an external provider or the RHS Office and can be administered by both.

EPOS is triggered by the consumers’ request, offers the participants the ability to dynamically constellate with other medical suppliers, and promotes collective competition among the constellations.

8.2. Discussion In this section, important findings on the market characteristics and evidence for potential acceptance of EPOS are discussed. The sources of this information are:

� The feedback from users through the discussion which took place outside the formal questionnaire process

� The market survey conducted � The feedback events and contacts within dissemination and promotion activities

The picture obtained on the overall market to which EPOS is addressed consists of the following elements: The success of EPOS is not a technology-related issue, however the suitability of the solution plays an important role. The market tends to offer general solutions, tailored to the specific area. On this course there is strong competition by large vendors. These competitors are established in the market of e-business and have an ambitious eye on the area of e-procurement. However, they don’t offer a specialised vertical solution to the health sector. The needs of the health sector have proved to be quite specialised. A software product only or an e-service would not satisfy the needs of the sector, even if it is integrated and customised to the needs of each customer. The message from the market is that the e-service should be combined with expertise on legal issues and other services, such as supplier certification, catalogue maintenance and consultancy. The trans-European dimension is almost inexistent at the moment, as all health e-procurement solutions are struggling to be established in one single market.

A major inhibitor for trans-European long term growth is 1) the fragmentation of the legislative environment and the different processes of licensing of drug products in the various EU member states. 2) Stakeholders’ reluctance, conservatism and foot-dragging due to the potentially strong impact of electronic marketplaces on the re-distribution of market shares. Nevertheless the potential cost savings and the efficiency gains foreseen are much stronger incentives. In order to address trans-European procurements, a series of organisational, technical, legal and promotional problems arise, which require time and effort to be solved.

EPOS has considered this from the beginning and has taken related action. The feedback from manufacturers and hospitals showed that there is explicit need for such as service. On the contrary, traders and representatives are clearly opposed to such developments. The importance of a standardised e-catalogue has been apparent. The



possibility to control or impose such a standard is a very powerful advantage. Even if the catalogue itself would be open and theoretically can be adopted by any vendor, in practice it is crucial to have control over the catalogue because of its dynamic nature. This means that the service offered to the buyers should allow them to define new items according to their needs. Then, a well-defined, effective and fast procedure should be applied in order to process the requests, adapt the catalogue in all languages and fix the changes as part of a standard. In fact, the constitution of a state-controlled regulating body has been proposed.

During the EPOS trials, one of the immediate findings was the need for an elaborate catalogue maintenance process. In the case of trans-European e-procurement, the process must be centrally controlled and must also rely on national support. The field for such an undertaking is still wide open and a key advantage of EPOS is that a solution is already implemented in pilot form. In the current market there exist strong supplier-distributor relations. Manufacturers and especially small ones depend on the distributors and do not have the resources to submit offers in tenders by themselves. Although the additional cost allocated to the distributors is very high (from 20% to 50%) and manufacturers would like to save this cost, at the moment there is the feeling that the distributors play an important role and their cost is justified. Part of this cost goes anyway to local promotion and support. Another aspect is that the agreements between manufacturers and distributors do not allow the manufacturers to sell directly or though alternative distributors in areas where one distributor has exclusivity. This means that different distributors cannot compete among themselves in a unified European market.

Currently, it is also very often not possible for a hospital to buy directly from the manufacturer but only through the local representative. The above two limitations mean that one strong potential benefit of a pan-European EPOS (reduction of cost by avoiding intermediaries) is restricted. In order to maximise the benefit from the adoption of EPOS, it would be required that the role of the distributors and the related agreements are adapted to the new conditions in a European e-market.

The hospitals have expressed their interest for a supplier registry service, integrated with EPOS service. Private hospitals would be mostly interested in a scoring mechanism about the reliability of each supplier, similarly with other e-markets. Public hospitals are interested in passing the burden of eligibility checks and are looking for a trusted service that could certify the eligibility of each supplier. The proposed supplier registry service would need to collect and maintain the necessary certificates from the suppliers, process them and certify to the hospital the ability of each supplier to participate in a specific auction. In order for such a service to be acceptable by a public hospital it has to be covered by adaptations in the legislation.

It has become evident that the market of private hospitals is more mature, the legal barriers are much less and in general manageable, while the benefits and motivation for the hospitals is at least as strong as the public market. The most reasonable approach is therefore to address the private hospitals first and then expand to the public ones. On the other hand, the entry barriers for competition in the private sector are lower. The public sector is less mature and more challenging. However, if entry is succeeded, dominance can be achieved.

9. Concluding remarks

EPOS demonstrated a fast, easy, and confidential online clearinghouse for the healthcare marketplace. The system presents an efficient procurement mechanism (auctions) enabled by Internet speed. The application provides critical decision support functionality to the purchasing departments of the hospitals and the people that make the decisions within the



supply chain. With electronic procurement in full function, a virtual marketplace is created and exchange of information happens between the members of the supply chain, basically the suppliers of the healthcare materials and pharmaceutical companies on one end and the hospitals on the other end. The EPOS platform strengthens the strategic management dimension of procurement decision-making and reduces the huge amounts of administrative hours spent to process the orders. Order placement and fulfilment becomes more accurate (error-free) as manual processes are removed. Therefore, supply chain efficiency improves, and order tracking and tracing become quicker and easier. The limitation of the system is that in each country different policies and regulations exist in the procurement methods of hospitals. The majority of the regulations exist in the public hospital and clinics. These regulations are the main barriers to apply EPOS in these markets. Future research should be focused on e-catalogues. A multi-discursive processing model for catalogues needs to be complete, unified, and semi-automatic handling of content, together with their associated conceptual and structural descriptions. In order to fulfil these functionality requirements, a range of innovative technologies currently used in a variety of applications involving access, creation, storage, search, retrieval and exploration of information need to be exploited. Knowledge model formatting, ontology-driven processing of content and scientific visualisation of objects are some of the issues for future research. An effective public procurement policy is fundamental to the success of the EU single market in achieving its objectives: to generate sustainable, long-term growth and create jobs, to foster the development of businesses capable of exploiting the opportunities generated by the single market and competitive in global markets, and to provide tax-payers and users of public services with best value for money. Because of the economic importance of public procurement, making purchasing efficient can lead to significant savings for public authorities, and, consequently, for European tax-payers. A more open policy in public procurement also leads, of course, to many other, perhaps less obvious benefits. Fair, transparent and non-discriminatory award procedures, together with the possibility for suppliers to have recourse to national courts to assert their rights, limit the risks of fraud and corruption in administration. Acknowledgements The authors wish to thank all the partners of the OPUS and EPOS projects.



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Figure 1. EPOS service for the Hospital and Intermediary (provider)



Figure 2. Collaboration diagram of identified user groups in both Regional Health Authority and Hospital processes.



Figure 3. Typical information flow within the EPOS architecture.



C a ta lo g u e M a n a g e m e n t

D e m a n d P la n n in g

T e n d e r P la n n in g

S e c u r ity D o c u m e n tM a n a g e r

W o rk f lo w

A u c t io n in g

Figure 4. EPOS system components – Overall Functionality

Applying e-procurement system in the healthcare: the EPOS paradigm

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