Federal Reserve Chairman Alan Greenspan described the unprecedented stock market growth between 1994 and 1999 as irrational exuberance. The phrase was extended to describe the unparalleled growth of technology companies during the same period and, in particular, the wild and crazy dot-com revolution of 1999 and 2000.

One manifestation of this phenomenon occurred when health care e-commerce start-up companies were created to revolutionize the health care supply chain by leveraging Web technology.

Many companies were building business models around a Web-based platform, but few realized Web technology is ill-fitted to support highly complex, high-volume health care supply chain processes. These misconceptions led to unrealistic expectations of a Web-enabled supply chain, preventing health care e-commerce to materialize as envisioned.

As supply chain managers begin to consider realistically how they can leverage technology to enhance operations, they should assess e-commerce technology based on fact. A basic understanding of both the Internet and the Web can explain why health care's flirtation with Internet e-commerce did not meet initial expectations:

• The Internet and the World Wide Web, or Web, are not the same
• The two terms can never be used interchangeably
• The Web is only one of several aspects of the Internet
• A Web site is not necessary to conduct Internet e-commerce transactions
• An intermediary or dot-com company is not needed to exchange business transactions via the Internet.

How it all began

The Internet is a complex web of smaller networks--a network of networks, combining academic, military and commercial networks from the United States and abroad. Its origins have been traced to the 1960s during the Cold War.

The United States' Department of Defense (DoD) needed a system capable of redundant communications, in the event of a nuclear attack. If one location were destroyed, computers located in other strategic locations would continue to communicate.

In the 1960s, different companies were contracted to build computers for the DoD's system, but each company used its own proprietary operating system. A system was needed to allow these different machines to talk to each other using common protocols.

In 1969, the DoD's Advanced Research Projects Agency (ARPA), established a pioneer network, linking four remotely located computers. This seminal network, the ARPANET, became the foundation of today's Internet.

The ARPANET continued to exist as a military strategy in the 1970s. During this period ARPA supported the development of data transfer protocols and packet switching technology, which still exist today.

The network rapidly expanded in the 1980s. The National Science Foundation sponsored a high-speed backbone connecting five supercomputers in 1982. Eventually, the network's military use became deemphasized, and more educational and scientific organizations began connecting to this emerging worldwide network.

The system improved the dissemination of research and scientific information, although commercial use did not emerge until the early 1990s.

It was then a graphical user interface (GUI) emerged, allowing public access to information on servers linked to the Internet.

Until the early 1990s, organizations used the Internet extensively, without using a Web site, because the Web did not exist.

Much of today's Internet use is still independent of the Web.

Exploring the Internet

Internet technology encompasses several aspects. Tel-Net is a protocol that allows users to access computers linked to the Internet from remote locations; and e-mail allows Internet users to send messages.

A Web page may have an link that allows the viewer to send e-mail, but e-mail is independent of the Web.

Usenet is a group of computers linked to the Internet in which messages surrounding specific topics, organized into newsgroups, are exchanged. Search tools are used to locate documents stored in servers connected to the Internet.

Before the Web, search tools had such names as Veronica (very easy rodent-oriented network index to computerized archives), Archie and Jughead, which were accessed via the Internet. Today, many search tools, or search engines are accessed through a Web page.

File transfer protocol (FTP) is used to store and access files on Internet-connected servers. FTP is used to upload Web pages to a host server, to be accessed later by users.

Transmission control protocol/Internet protocol (TCP/IP) is the common communication method. It allows information to be exchanged between different machines. Accomplishing these tasks doesn't require the Web or a Web site.

The Web is a relatively new feature of the Internet and is simply a GUI that allows Internet access. It organizes information stored on the Internet, into a number of interrelated Web pages that include text, images, sound, video and other data.

These pages reside in servers connected to the Internet, and users access these sites with a Web browser by typing in a uniform resource locator (URL), or address, in the form of a hypertext transfer protocol (HTTP) address. Clicking on hyperlinks allows the user to surf the Web. Web pages are written in hypertext markup language (HTML). Far from being a programming language, HTML is an archaic, inflexible language convention, used to format information for a browser. Web page developers have found ways to get around HTML's limitations. However, these enhancements don't add the necessary power to support complex business processes. Web pages are static displays of data, graphics and other types of information.

When health care companies spoke about revolutionizing the supply chain by leveraging Web technology, there was little to be leveraged.

Broadening the scope

As a new period emerges, a broader, more inclusive vision of e-commerce is needed. Baptist Health Systems, which was on Hospital & Health Networks' 100 Most Wired Hospitals for 2001, has created an e-commerce task force, functioning under the auspices of a multi-disciplinary e-health planning committee.

Its definition of e-commerce covers any transaction in which goods or services are exchanged electronically by any means, including the Internet.

For Baptist, the Internet is not a strategy; it's a tool to support strategic goals.

Baptist uses the Internet and other forms of e-commerce to create an easier way for patients, insurers, vendors and other organizations to conduct business and access the organization's services.

This inclusive approach is necessary as the organization continues to experience the convergence of various tech-nologies that may be leveraged to improve business processes, including procurement.

Overcoming e-hurdles

An important obstacle for health care e-commerce is a lack of standards. According to experts, they will not be adopted fully until 2005.

The Coalition for Healthcare e-Standards (CheS) is a not-for-profit group of manufacturers, GPOs, distributors, health care supply chain professionals and supply chain companies. It promotes and pursues the rapid adoption of common standards, including the universal product number (UPN). These initiatives have been stepped up and elevated to the federal government level.

The World Wide Web Consortium (W3C) is an international group that oversees aspects of Web technology. Its Web site features specifications, guidelines, software and tools to assist in the development of Web technology.

Various health care groups are developing e-commerce standards. However, it is unlikely the Web would support these, unless the W3C adopts them as recommendations for Web deployment technical standards. Work groups within the W3C have been working on schema for extensible markup language (XML) purchase orders (P.O.). However, early specifications for an XML P.O. schema lack such elements as a lot number, UPN and expiration date. But because XML is flexible, these elements may be included in the near future.

EDI has been used extensively in health care to support various transactions, including insurance claims, P.O.s, confirmations, fund transfers and invoicing. But, the recent emergence of XML has challenged EDI's dominance.

XML has been touted as the cure for the business process shortcomings of HTML and the Web. It is a simple, highly flexible, open standard, that may be used by companies to invent their own defining tags about what each piece of information refers to. XML will play an important role in resolving many of the Web's present shortcomings, but it may not be the only solution, says Tim Bray, CEO, Antarcti.ca Systems, coauthor of the W3C's XML specifications.

In an article appearing on the Hot Links Web site, Bray cautions against thinking of XML as a silver bullet. "In the rush to create Web-based e-commerce applications, people have lost sight of the fact that the Web does not work well in some ways," he says. XML will be part of, but not the only solution to these remaining problems.

Lessons in convergence

Convergence occurs when different forms of technologies are developed independently and meet at some point to combine and form new, breakthrough technologies. A consensus is forming that supports a convergence of EDI and XML into new hybrid technology that may accelerate the adoption of Internet-based e-commerce.

EDI/XML translation software will make it possible for different systems to exchange transactions, says Ken Vollmer, research director of B2B integration, Giga Information Group, in his article "Don't believe the hype: EDI and XML are just perfect together," Jan. 15, 2001, InternetWeek.com. Web Services that offer hybrid EDI\XML translation may resolve another major obstacle to Internet e-commerce in health care--a lack of integration with existing systems, he says.

"Companies can spend from one to three times as much on supply chain integration as they do on the software," says Tim Wilson, reporter, InternetWeek.com, in his article "Supply Chain Suites Resisted," Oct. 8, 2001. EDI/XML hybrids may solve this problem.

The XML-EDI Group, a not-for-profit consortium of business and technical experts, is pursuing this direction. XML enabled information systems, with translation at both ends of the health care supply chain, may provide another solution.

Into the future

The five-year outlook is bright. Business models based on a path to profitability will be replaced by solid business models based on traditional ROIs. Intermediaries will play a role if they can demonstrate value to buyers and sellers, and remain profitable on their own merits. Some may provide aggregation and Web services, using emerging technologies and hybrids.

System developers across the supply chain will continue to build Internet-enabled applications. Vendor fulfillment systems will continue to offer customers expanded capabilities, access to history and business intelligence. Vendors and health care organizations will continue to incorporate Internet- and Web-based technologies to support their strategic direction.

Niche companies offering application service provider (ASP) and Web-based solutions, providing business intelligence and business process support, will continue to emerge, developing partnerships to offer services a-la-carte on a common Web site. Some large networks will centralize and automate their supply chain processes rapidly via ASP-based systems. There will not be a one-size-fits-all solution.

Health care will conquer the fear of adopting common standards. Highly centralized and integrated networks will allows users to continue leveraging their assets by using state-of-the-art systems and Internet-based technology.

For these organizations their e-commerce partner will be their materials management information systems vendor, said Frank Arduini, vice president, e-commerce, Allegiance, McGaw Park, Ill., at AHRMM's 2001 annual conference,

Bill Gates, chairman, Microsoft, Seattle, wrote The Road Ahead to relay his vision of an Internet-enabled economy. The purest form of e-commerce will emerge ultimately, when buyers and sellers are linked directly and can leverage technologies. He believes servers distributed worldwide will accept bids, resolve offers into completed transactions, control authentication and security and handle all aspects of the marketplace, including the transfer of funds. "The Internet will carry us into a new world of low friction, low overhead capitalism, in which market information will be plentiful and transaction costs will be low," he says.

As for health care, the implications are obvious, and the opportunities are endless.

Frank Fernandez is assistant vice president and corporate director of materials management, Baptist Health Systems of South Florida, Miami. He chairs Baptist's e-commerce task force, is a member of the Coalition for Healthcare e-Standards' (CheS) UPN group and serves on Premier's strategic advisory committee.

This article first appeared in the January 2002 issue of Materials Management in Health Care