Healthcare Matters

Prodigo Solutions, a P2P application vendor and unit of Pittsburgh-based UPMC, has announced that it has launched its own industry exchange. The company is calling it “ProdigoXchange,” and like other UPMC for-profit healthcare investments, Prodigo has the benefit of using UPMC –a 20 hospital IDN– as its proving ground.

The exchange offering  is being powered by a technology licensed by Prodigo from Toreion Corporation. The technology is a web-based suite of business process automation tools that not only allows customers to more fully integrate supply chain applications to back-office ERP systems, but it enables buyers and sellers to build their own trading networks.

It’s not a big secret that Prodigo Solutions has been organizing to take on GHX. UPMC doesn’t like paying tolls. It is attracted to investment opportunities that are disruptive and challenge the status quo –so it can collect the tolls. Michael DeLuca, Prodigo’s vp of technology and client services is somewhat reserved when he refers to his company’s new offering as “a competitively priced electronic exchange platform.” David Hargraves, UPMC’s vp of clinical supply chain, is far less coy: “This flexible platform that Prodigo Solutions now offers to the broad commercial marketplace makes it easy and cost-effective for suppliers to do business with us electronically, and it allows them to avoid the high costs of using an alternative exchange (i.e. GHX). With ProdigoXchange, we are proving that electronic data exchange in healthcare should be viewed and priced as a commodity, as it is in other established industries, so that we can lower the cost of delivering high-quality healthcare.”

15 years ago, B2B exchanges were the bomb –the darling of venture capitalists. Of course, it’s also true of the mid 90’s that if you could fog a mirror, VC’s stood in line with their checkbooks open. The idea of a B2B exchange made total sense to everyone back then, but pulling it off proved to be far more difficult than anyone imagined. Lots tried and the vast majority of them failed. The lucky few that “made it” consolidated to ensure survival. Why? The market came to realize that the promise of an exchange was much bigger than the technology being offered. Standardizing how business was done and making it happen on a shared platform was recognized as the value driver. And getting the buy- and sell-sides to act in true accordance with that philosophy took far longer than anticipated. It’s still a work in progress, but the value is now understood and widely accepted.

Voters appreciate a clear choice. We don’t like it when we can’t tell our candidates apart. That’s why yesterday’s Prodigo/UPMC announcement caught my attention. Although UMPC may be positioning Prodigo as a new and alternative healthcare exchange, I don’t see it that way –it’s definitely new, but is it truly a competitive alternative? By necessity, Prodigo’s approach to building distribution for its product will be more mercurial. For the foreseeable future, its Xchange technology will have to find its market in Prodigo’s installed base. The Xchange technology will allow ProdigoBuyer customers to more fully integrate the application to back office systems. Xchange also adds a new layer of integration functionality to the Prodigo Marketplace solution. Again, the technology will support tighter coordination between buyers and sellers in its supplier network. That’s all good for Prodigo customers.

When I asked Karen Conway, GHX’s top industry relations executive, to comment on the Prodigo announcement, her answer foreshadowed a distinction. “I often equate successful B2B exchanges to how a traditional community works. The members agree to share certain infrastructure (e.g., roads, power plants, and to standardize how they operate, e.g., stop on red, go on green) in order to reduce redundancy and costs, minimize errors, improve efficiency and quality. The community works together to enhance its technology, discover new ways of doing business, improve data management, etc., and in doing so, take costs out of the system versus shifting them.”

Obviously, the success of GHX forces Prodigo to position itself to the market differently. You don’t just snap your fingers and create a like minded community that spans an industry’s entire supply chain on the back of a technology you claim is incrementally better –it just doesn’t happen that way. GHX was not an overnight success. It’s been at it now for more than a decade. It has achieved critical mass in the marketplace by continuously improving its core capabilities and by delivering new solutions to an established community who share a common purpose.

No, I’m not in the bag for GHX, but I am pointing out that Prodigo will have to establish itself as “an exchange of a different color,” if not change the meaning of the term. My guess is that we’re going to hear about a more buyer-centric and private/individualized approach (with lots of emphasis on lower, shifted costs) than the community based model supported by GHX. And that’s’ OK. It gives market prospects more to think about and perhaps, a clear choice.

—Tom Finn