New Neoforma president says Internet success rests on `strengthening resolve, aligning interests’

New Neoforma president says Internet success rests on `strengthening resolve, aligning interests’

In the three months since Dan Eckert became president and COO of Neoforma at the beginning of 2001, the third-party e-commerce provider has taken a number of steps to bolster its position within the Internet marketplace, among them divestiture of unprofitable divisions and an infusion of additional capital.

Those moves–like the promotion of Eckert to the presidency created for him–will determine if Neoforma can survive in a market that is becoming increasingly crowded despite a shrinking number of players.

How does a marketplace reach saturation point despite being populated by fewer competitors?

The players get bigger, and their manner of conduct becomes increasing self-serving as a result.

For example, consider one industry official’s assessment of the Global Healthcare Exchange (GHX). The online provider was originally created by five industry giants–Johnson & Johnson, GE Medical Systems, Baxter Intl., Abbott Laboratories and Medtronic Inc.–but now is scheduled to go live with a component of more than 70 manufacturers that collectively have built-in access to literally billions of dollars in worldwide medical device and med-surg supply transactions.

“I absolutely believe that the Global Healthcare Exchange was created with the intent of keeping an entity like Neoforma from reducing the costs of medical devices, medical supplies and the supply chain,” said the health care industry official. “There is no doubt in my mind that it was done with the intent of keeping product and supply costs status quo.”

Whether true or not, nobody would contend the rest of the industry was going to make it easy.

In the land of giants

“Dan has proven his ability to lead large health care supply organizations, is extremely results oriented and commands tremendous respect from customers, employees and our senior leadership team,” said Bob Zollars, Neoforma’s chairman of the board and chief executive officer, at the time of Eckert’s promotion.

That Eckert should be in the position of running Neoforma’s day-to-day operations is something of a surprise but not startling. He was promoted from his position of senior vice president of marketplaces, in which he was, and remains, responsible for Neoforma’s marketplace solutions.

He joined Neoforma as executive vice president in sales in August 1999. In his new role he will be responsible for all operations including the development, operation, revenue generation and sales and marketing activities of the company’s health care marketplaces.

He should come to the task well equipped. Eckert is the former president and COO of Fisher Healthcare, spent six years at McKesson Corp., where he held positions as senior VP of corporate sales for the Health Systems Group, and was senior VP of sales and marketing and VP of acute care for McKesson/General Medical Corp. He was also a director of national accounts for Owens & Minor and began his career in the health care supply field with Johnson & Johnson.

“Dan’s … leadership and supply chain experience are critical as we continue to grow and intensify our focus on achieving significant operational milestones,” added Zollars.

Eckert will have just over a year to make good on his company’s promises.

Battle of the buck

Neoforma’s publicly stated intent is to begin turning a profit by the first quarter of 2002. The litany of odds-stacked-against statistics is familiar–plunging stock prices not much different than any number of failed companies, and a capital burn rate just short of bonfire proportions.

Yet Neoforma has persisted, and its recent deal to team with Allegiance, its expanding relationship with Novation and its influx of new operating capital shows a resiliency not common among the recently departed.

“We’re going well, we’re focused, and we’ve kicked up our performance level,” said Eckert. “Things are going great.”

Onward and upward

One of the more significant moves by Eckert and Neoforma was to enlist Novation’s additional buy-in to the tune of $20 million in operating capital, a strategy that not coincidentally also put Novation’s partners on notice.

“Until the point that VHA and UHC bought in –until they invested directly and until we modified our operating agreement–they did not have the up-front involvement in the game with their dollars flowing in,” Eckert says. “By restructuring our operating agreement, we are providing significant value on the front end and to share in the investment of it does two things–it helps to strengthen their resolve and align our incentives.”

Much of the resistance among suppliers centers around the perception of third-party providers becoming re-intermediaries, says Eckert, and providing little more than another layer of expense.

He says that won’t be the case at the new Neoforma.

“We have seen a mix of suppliers that very early on saw the value in this, and they’re saying, `We’re ready to participate, we’re ready to pay some fees up front,'” says Eckert. “I do see some of the cost being switched to the provider side in the future. One of the very important things Neoforma can do is to enable every trading partner and share in the value captured through supply chain improvement.”


COPYRIGHT 2001 J.B. Lippincott Company

COPYRIGHT 2001 Gale Group