PITTSBURGH – A leading healthcare institution and a technology company are beginning to market a computerized sourcing model to allow providers and suppliers of medical and pharmaceutical products to more efficiently negotiate prices.

The initiative was designed by the University of Pittsburgh Medical Center and CombineNet, a Pittsburgh-based company that has developed computerized approaches for making purchasing decisions based on a variety of factors, such as cost and quantities of different types of supplies.

Three facilities, including UPMC, the Charleston (W.Va.) Area Medical Center, and the Northwest Hospital and Medical Center, Seattle, are participating in the initial round of purchasing through the concept. The three organizations expect to purchase $1 billion in pharmaceuticals and medical-surgical supplies through CombineMed. Supplier bids will be analyzed until April, when contracts will be awarded.

“What we’re doing is moving the entire supply chain process, which is almost all on paper, to electronic,” said Robert DeMichiei, chief financial officer at UPMC. “As an industry, we have to rely heavily on technology as a mainstay, changing what we do with staffing and workflow.”

The approach, called Expressive Commerce, is initially being offered to other hospitals and systems through Monday. Organizations that sign up with the venture can participate in the next round of negotiations with a wide array of suppliers, project organizers said.

The technology matches providers’ needs with suppliers’ sealed proposals, which are submitted via a secure Web site. Proposals can be creative and include conditional options that produce price variations based on volume and market share-based discounts and rebates.

The offers also can include options for factors like payment terms, packaging options and substitute items, DeMichiei said. “The win could be more profit for the supplier and lower cost for the buyer,” he added.

The CombineNet technology centers around a combinatorial optimization engine that enables the analysis of disparate data to find the best option for an organization, said Tom Finn, president of the CombineMed venture. Other industries have moved to such sourcing approaches, he added.

“As an industry, we’re about 10 years behind corporate America in embracing these types of technologies,” DeMichiei said. “The technology will be a struggle for hospital systems. Many don’t have enterprise resource planning systems in place” to take advantage of this.

The approach differs from reverse auctions, which healthcare organizations have used to get low bids on supplies through an artificially short timeframe. Price is only one of many factors that affect Expressive Commerce bidding.

The joint venture hopes its initial efforts will serve as a proof-of-concept for group purchasing organizations, the large organizations though which thousands of healthcare organizations traditionally have bought a wide array of healthcare supplies.