The VHA hospital alliance said last week its members realized $799 million in total cash and "added value" from their participation in the Irving, Texas-based cooperative's purchasing program and other services.
Cash distributions to member organizations will total $171 million, a 13% increase from 1997. This marks the third consecutive year the alliance has rebated 100% of the company's net income to members based on their participation in VHA programs. In addition, VHA calculated that it saved members $628 million through its supply purchasing program and other initiatives in areas such as consulting and information technology.
According to VHA, members got back $40 for every $1 they spent to be part of VHA. The alliance said it had 1,800 members in 1998, compared with 1,600 at the end of 1997.
VHA member organizations purchased more than $9.2 billion in supplies and equipment through Novation-a supply company, also in Irving, Texas, the alliance formed with University HealthSystem Consortium-which began operations in January 1998. Total purchased volume, with UHC, was $11 billion in 1998.
Supply business continues to be the largest alliance activity by far, but it's gradually representing a lower percentage of overall VHA revenues, said Curt Nonomaque, VHA executive vice president and chief financial officer.
Nonpurchasing initiatives amounted to 10% of VHA's business in 1995, but that percentage rose to 25% in 1998, and Nonomaque predicted an increase to one-third of revenues in 1999. Most of those newer initiatives were developed through reinvestment of supply-business profits, but some programs are beginning to stand on their own, he said.
For example, a 2-year-old performance consulting business earned $2 million on $20 million in revenues. And the performance and outcomes measurement company HBS International, in which VHA owns a 58% stake, also earned $2 million on revenues of $20 million.