Spokane startup e-business H-Source LLC, which is promoting its website at www.h-source.com as a marketplace for hospitals and medical providers to buy, sell, and trade medicines and equipment, is pursuing funding to help it to expand the website and attract more users, says founder and President Murray Walden.
“I think people like to think that a website goes viral just because it exists, but it doesn’t; not in health care,” Walden says. “It’s a secondary market, not a consumer market, so we’re trying to get funding to make it more broadly used. We’re getting very good feedback.”
The company, which is located in the McKinstry Innovation Center, at 850 E. Spokane Falls Blvd., and also has offices in Seattle and Portland, has hired Denver-based investment firm CIM Securities and is preparing a private-placement memorandum for $1.5 million to go out to the investment market, CEO John Kupice says. The company plans to use the capital it raises to overhaul the website and expand its sales force. Future target markets for H-Source include Texas, the Interstate 95 corridor from Washington, D.C., to Boston, and the Northwest, Kupice says.
Kupice says the company hopes to go national within the next 18 months, and hopefully will tap into the international market soon thereafter.
“We really do want to take it international, specifically to Asia and parts of Europe,” he says. “We’re hoping to have the assets to move products regionally, locally, and internationally.”
The company currently generates revenue by charging a monthly membership fee, Walden says. Soon, he says it will charge a small transactional percentage fee as well.
H-Source’s goal Walden says, is to reduce waste and encourage communication between medical centers by creating a private marketplace for hospitals and medical practices to be able to move surplus products.
“There’s only two ways hospitals survive—either more people get sick, or they improve efficiency,” Walden says. By using a service such as H-Source, hospitals can reduce or eliminate wasted products, thereby increasing efficiency, Walden says.
As an example of how an organization can end up with extra goods, Walden says that many medical supply manufacturers only deal in large batches, which might be more than a hospital needs. These extra products are often discarded, he says.
“A hospital may want to buy just two of something to let the physicians try it, but the manufacturer says they have to buy 10,” he says. “H-Source gives critical access to small hospitals to be able to tap into that inventory.”
Also, oftentimes, a doctor will leave a practice or retire, leaving the practice with surplus products, or a physician decides to switch vendors or upgrade, resulting in unused products.
Larger, more competitive hospitals also upgrade products to keep up with the market, Walden says.
“Sacred Heart and the University of Washington are constantly upgrading because they need to stay up to speed as teaching hospitals,” he says. “Just because their beds are two years old doesn’t mean they can’t be used at a smaller hospital; and the product is coming from somebody they trust.”
Kupice says about 15 regional hospitals so far are actively using H-Source.
“We’ve come through the personal concept phase and are actively rolling it out to market,” Kupice says.
However, hospitals farther afield are starting to take notice as well. Walden says a hospital in the Southwest now is listing products on the site.
An important aspect of H-Source is its potential to reduce medical waste, Kupice says. The company is applying to become a certified member of Practice Greenhealth, a nonprofit aimed at helping health care companies create sustainable practices.
“Health care’s a little slower, but people are starting to figure out the cost of landfills and are looking for solutions in hospitals,” Walden says.
Walden founded H-Source about a year and a half ago, he says, but at that time it was more of a beta test and users had to contact him directly to get access to the website.
“It wasn’t really a release, but it was available,” he says.
The company launched the full website only about three months ago. Shortly before that, Kupice says, H-Source became one of only eight companies that are designated as a preferred partner by the Washington State Hospital Association.
Walden says H-Source only sells unopened products that haven’t expired, but are not returnable to the manufacturer.
“We’re sending brand-new products, surplus stuff,” he says. “It’s not so unlike most of the things you buy on the retail market.”
However, unlike most retail websites, H-Source isn’t open to the public. Every user’s medical credentials are checked before they’re allowed access.
“You have to be verified and credentialed,” Walden says. “We only allow access that we verify; it’s not open to the public. It’s not shoes and belt buckles.”
Users can search products available on the site based on medical specialty, product code, or more general terms, Walden says.
Another key concept of the site, Walden says, is the ability for organizations to create their own custom networks within H-Source.
“Clearly, there are groupings of hospitals that want to communicate privately with each other,” he says.
For example, he says, children’s hospitals could choose to just communicate with other children’s hospitals, or medical centers in a certain geographical area or within a certain provider system could choose to transfer only products between each other.
“Some groups just want to trade within their local secure network,” Kupice says.
The practice of hospitals trading supplies isn’t new, Walden says. Rather, H-Source would create a centralized marketplace for it.
“Hospitals have been trading for years,” he says. “We’re just formalizing the process; it’s more of a central marketplace for hospitals to be able to talk to each other.”
Walden was a medical device sales representative for 15 years before launching H-Source, he says. While in the field, Walden says, he witnessed firsthand the quantity of medical products that are still usable, but end up being thrown out, he says.
“I understand the life cycle of how these products are made and used, and I understand the nature of hospital purchasing and contracting,” he says.
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