May 05, 2008 11:22 ET

VHA Inc. Delivers $1.3 Billion in Savings and Value to Members in 2007

Three-Year Cash Distribution Total Tops $1 Billion

IRVING, TX--(Marketwire - May 5, 2008) - VHA Inc., the national health care alliance, reported today that it delivered more than $1.3 billion in savings and value to its member health care organizations in 2007 through its supply chain management programs. In addition, VHA's clinical programs helped members improve care for the 10 million patients who are treated at VHA hospitals every year. VHA serves more than 1,400 not-for-profit hospitals and more than 21,000 non-acute health care organizations nationwide.

With its 2007 performance, VHA delivered more cash and savings to its members than any other competitor in the industry. Key Financials for 2007:

--  Revenue increased 7.5 percent, from $555 million to $597 million.
--  Operating income increased 8.3 percent, from $280.9 million to $304.3
--  Cash distributions to all members decreased 3.3 percent, from $416.3
    million for 2006 to $402.4 million for 2007.  The driver was certain
    pharmaceutical products under contract ended their patent terms, resulting
    in elimination of manufacturer incentives, which are included in cash
    distributions to members. However, VHA balanced the impact of these lower
    fees by pushing for lower than market pricing on the products themselves,
    resulting in more day-to-day savings for members, as noted below. Since
    2005, members have earned more than $1 billion in cooperative cash
    distributions through participation in VHA.
--  Purchasing savings totaled $930.3 million, compared to $895.5 million
    in 2006. The 3.9 percent increase in savings is due to member utilization
    of VHA's supply contracting services and one-on-one supply chain consulting
    activities  (Note: 2006 purchasing savings have been restated to reflect a
    new formula that more closely approximates actual savings.  Member savings
    were derived through Novation contract savings and participation in VHA
--  Member loyalty and satisfaction scores with VHA hit an all-time high
    in 2007.

Curt Nonomaque, president and chief executive officer of VHA, said, "Our commitment is to make a difference in the way member hospitals serve their communities and patients, and we do that by providing services that help members improve clinically and operationally."

VHA has three strategic cores that enable it to support member needs: Clinical Improvement Services, Supply Chain Management and Member Networks.

Recognizing that its members need additional support to meet demands for improving quality, in 2007 VHA established its Clinical Improvement Services core, which leverages the clinical expertise of VHA's 150 clinical staff members and the clinical knowledge that is spread across VHA's 16 regional offices, as well as the expertise of its members. VHA's clinical improvement services platform focuses on clinical quality and patient safety and includes: a Leading Practices Portal that is designed to take members from data investigation to improvement action; Leading Practice Blueprints that are easy to follow and will help hospitals maximize their staff time and resources; a new Clinical Education Series; and Rapid Adoption Networks that will help hospitals link with their peers to accelerate performance change and improvement. As part of this agenda, VHA has rolled out 24 Leading Practice Blueprints and hundreds of member hospitals are tapping into these Blueprints to accelerate performance improvement, which is critical given that the federal government and private payors are increasingly no longer willing to pay for substandard care.

The second VHA core is supply chain management. VHA's contracting services company, Novation, helps members save on supplies, drugs, devices and capital equipment. Last year, members purchased nearly $23.9 billion in supplies and services through VHA and Novation contracts: $21.5 billion in supplies through Novation and $2.4 billion in services through VHA. These figures represent a 3.0 percent increase in Novation contract purchase volume and a 9.5 percent increase for purchased services volume by VHA members over 2006.

John Muir Health in Walnut Creek, Calif., saved $3.5 million in eight months in 2007 by working with VHA to implement six Clinical Quality Value Analysis™ teams. The teams bring together clinicians and supply chain and finance staff to make decisions about medical products, technologies and patient care services and processes. Through standardized processes, the hospital was able to save money through improved pricing and standardization, decreased utilization and participation in regional initiatives, while either maintaining or improving the quality of care.

A third core for VHA is the development and support of member networks. These networks enable members to collaborate and develop solutions for common operational and clinical challenges. VHA provides clinical staff to help manage these network activities, data collection support and implementation support to help the networks achieve their business or clinical objectives. VHA members often state that the opportunity to be involved in networks is a key benefit VHA provides that its competitors do not.

About VHA - VHA Inc., based in Irving, Texas, is a national health care alliance that provides industry-leading supply chain management services and supports the formation of regional and national networks to help members improve their clinical and economic performance. With 16 offices across the U.S., VHA has a track record of proven results in serving more than 1,400 not-for-profit hospitals and more than 21,000 non-acute health care organizations nationwide.

***** Novation and alliance contract purchasing volume for 2007 was $33.1 billion: $23.9 billion from VHA members, $5.74 billion from members of the University HealthSystem Consortium, and $3.46 billion from health care organizations that purchase through Provista.

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