SOURCE: Novation

August 09, 2005 08:00 ET

New Group Purchasing Model Forged by VHA, Novation and Providence Health System Yields $10 Million in Supply Savings During First Year

Customized Group Purchasing Model ProvSource Proves Smart, Valuable

IRVING, TX -- (MARKET WIRE) -- August 9, 2005 -- Through the creation of an innovative, customized group purchasing model called ProvSource, Novation, the supply company of VHA Inc., and VHA have helped Providence Health System achieve overall supply cost savings of $10 million during its first year in operation.

Over the past two years, Providence's internal supply chain team had saved the system an additional $37 million, through the use of more efficient contracting practices and through the use of tools like Marketplace@Novation, Novation's e-commerce exchange. However, Providence recognized that more could be done, so they agreed to partner with VHA and Novation to form ProvSource. The three-year collaboration began last June and has a goal of assisting in achieving $75 million in supply savings over three years. With $10 million in savings already documented, the ProvSource team expects to accelerate the savings rate over the next two years.

"A lot of time and commitment from the Providence and Novation staffs have made the creation of ProvSource possible," said Rhonda Thweatt, senior product manager, ProvSource. "We are confident about the long-term savings the collaboration will yield and already have developed 15 new agreements. We tackled the really large areas first, like medical-surgical distribution, so we anticipate ramping up savings even more quickly in the near future."

ProvSource uses a three-prong approach to identify supply savings opportunities. Novation's national portfolio is positioned as the first solution. Second, the Novation portfolio options may be enhanced to provide added benefit. The third approach is developing customized agreements when hospital system requirements are unique. Agreements for medical-surgical distribution, laboratory distribution and wound closure and endomechanical products have been the primary focus thus far.

"Clearly, this model has proven successful," said Dave Hunter, system director, supply chain management, Providence Health System. "We're developing better agreements, building a stronger supply chain presence and yielding tremendous savings."

Providence funds four full-time staff, including Novation/VHA staff members who work on site exclusively with Providence staff. The team meets monthly to discuss priorities and measure progress. The system purchases more than $500 million in supplies, drugs and professional services annually.

About Novation

Based in Irving, Texas, Novation was established in January 1998 through a combination of the supply programs of VHA and UHC, two national health care alliances. Novation serves the purchasing needs of more than 2,500 members and affiliates of VHA and UHC. These organizations used Novation contracts to purchase more than $23 billion in supplies in 2004.

About VHA

VHA Inc. is a national alliance of leading not-for-profit health care organizations that work together to improve the health of the communities they serve. VHA delivers industry leading supply chain management services and enables regional and national member networks to improve clinical and operational performance and drive sustainable results. Based in Irving, Texas, VHA has 18 local offices serving more than 2,400 health care organizations across the United States.

About Providence Health System

Providence Health System is a not-for-profit organization that includes 17 acute care hospitals, 12 freestanding long-term facilities, and 19 low income and assisted living facilities operating in Alaska, Washington, Oregon and California.

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