As long promised, VHA posted some more revealing financial information on the public portion of its Web site last week, but the hospital alliance, which jointly owns Novation, the hospital industry's largest group purchasing organization, is remaining silent on executive compensation.
After studying the issue "very carefully" and discussing it with its board and shareholders, VHA opted instead to form a compensation committee made up of board members to review the organization's overall compensation philosophy and oversee the program, said Robert Chapel, VHA's senior vice president, chief financial officer and treasurer. "We looked at the issue very carefully (with the board and members) and the consensus was that there was not a lot to be gained from disclosing salaries," Chapel said.
VHA, which has been providing limited financial information to the public since 2000, has been working on providing more financial transparency for some time, Chapel said. But VHA's largest competitor, Premier, beat it to the punch, disclosing similar financial information about its operations in recent months in response to a self-commissioned study on best ethical practices conducted in 2002 in the wake of public scrutiny of the GPO industry's business practices (Feb. 16, p. 17).
Premier likewise decided to stop short of revealing what it paid its top executives and board members. As private, for-profit companies, GPOs are not required by law to publicly disclose any financial information, but public opinion has swayed in recent years toward becoming more forthcoming about operations.
"We applaud (VHA) for joining us in voluntarily disclosing essential financial information," said Hunter Kome, a Premier spokesman. "The public has an obvious interest in the cost of healthcare, and we do believe it's important to show how organizations like ours operate and support the operations of hospitals."
Unlike Premier, VHA was inspired by the recent attention on opaque business practices at publicly traded companies, Chapel said, not by the Senate Judiciary Committee's subcommittee on antitrust, which spearheaded a wide-ranging, two-year investigation of GPOs.
"(The subcommittee) did not ask us to be more transparent," Chapel said. "First and foremost, we're concerned with our members. If we did something that provides more disclosure that makes the Senate subcommittee happy, so be it, but that's not the driver."
The new financial information, which was extracted from the cooperative's audited financial statements, includes net income, consolidated statements of cash flows, consolidated balance sheets, and statements of changes in patrons' and shareholders' equity.
For 2003 VHA reported net income of $114 million on revenue of $451 million, a 25% profit margin. That compared with net income of $72 million on revenue of $448 million in 2002, a 16% profit margin.
The same information also will be included in an annual report that will be published online later this month.
Although Consorta, a GPO serving primarily Roman Catholic-sponsored hospitals, has released a five-year comparative income statement, other national GPOs probably won't be following suit. Broadlane, one of several GPOs that have aggressively challenged the dominance of VHA and Premier in recent years, said in a written statement that "Releasing this type of information would put Broadlane at a competitive disadvantage, especially in relation to some of the entrenched behemoth players in the market."
Meanwhile, officials at MedAssets, another aggressive GPO player, had "no comment" on its plans or VHA's newest disclosure.