Operating income at VHA, the nation's largest alliance of not-for-profit hospitals, dropped 5.5% to $56.2 million in 1994 from $59.5 million in 1993 because it expanded services for members.
Revenues, however, rose 19.8% to $147.7 million in 1994 as it added about 100 new members to bring its total to 1,200.
Returns to members also grew by 12% to $394.2 million in cash and other benefits such as lower prices, VHA calculated. That represents a $10.25 return for every $1 invested by members, it said. The announcements were made last week in New Orleans, where 2,000 people attended VHA's annual meeting.
Irving, Texas-based VHA is a cooperative, and its revenues primarily stem from group-purchasing contract fees and membership assessments. Some 99 healthcare companies own stock in VHA, but all members share the returns. The group now bills itself as a "performance-improvement company," not a purchasing cooperative.
Traditionally, most of the value VHA organizations see comes from VHA's supply-management and purchasing services, said C. Thomas Smith, its president and chief executive officer. "More and more often, though, VHA is being evaluated on its ability to help providers improve performance in other areas," Smith said.
At its meeting, VHA showcased some of its enhanced services, including its beefed-up information system for clinical and financial data. Other services that absorbed operating revenues include a program to assess hospitals' readiness for integration.
Group purchasing, however, still is the bread and butter of VHA, one of the largest buyers of hospital supplies. Members bought more than $5.6 billion in goods and services through VHA contracts in 1994, up 14% from $4.9 billion in 1993. VHA expects members to spend more than $6 billion under its contracts this year.
For participation in alliance programs in 1994, VHA members will receive $122.4 million in cash distributions. The total includes $25.9 million in cooperative dividends, $61.7 million in manufacturer incentives and $34.8 million in other cash payouts.
The alliance said members also received $271.8 million in other benefits, including $252.1 million in savings through purchasing services.
At the meeting, shareholders selected Paul Wiles, president and CEO of Carolina Medicorp, Winston-Salem, N.C., as VHA board chairman. He replaces outgoing Chairman Robert Hansberger, founder of Boise Cascade Corp. and Futura Corp., Boise, Idaho.
Three new board members were named to replace retiring executives. They are Patrick Hays, head of the national Blue Cross and Blue Shield Association; Henry Walker, president and CEO of HealthPartners of Southern Arizona, Tucson; and Anthony Watkins, president of the medical and dental staff at Washington (D.C.) Hospital Center.