VHA Members Receive First Quarterly Returns Under New Business Model

VHA Returned $43.3 Million for 3rd Quarter

Marking another milestone in the implementation of its new business model, VHA Inc. announced today that it returned $43.4 million in cash to its 475 Shareholder and Partner members for their participation in the health care alliance during the third quarter, ended Sept. 30, 2005.

VHA provides supply chain management services and supports the creation of local, regional and national networks that enable members to work together to discover and develop answers to common operational and clinical challenges.

Through its supply chain management services, which include contracting services through Novation, VHA helps hospitals and other health care facilities save money on purchases of products and services they use every day to take care of patients. Novation manages nearly 900 contracts for hundreds of thousands of products that members voluntarily purchase based on the clinical and financial value they see in the products.

In changing its business model on July 1, VHA moved to a charge model that requires members to pay VHA for the services they access from VHA -- each member pays a different amount, based on that member's level of participation in VHA. Under the new model, VHA collects administrative fee revenue from suppliers on each member's behalf. The average fee is less than 2.1 percent of the purchase volume. Each quarter, VHA distributes 100% of the fee revenue, net of the charges members pay.

The transition to a new business model offers members greater transparency into VHA by providing them with a clear understanding of the total charges they pay for VHA services. Moving from an annual cash distribution plan to a quarterly distribution also improves members' cash flow. The quarterly payments were sent via an electronic funds transfer.

In addition to the cash payment, the members also received an electronic statement that provides them with a clearer understanding of the administrative fees generated by their purchases, along with a clear accounting of the charges they paid VHA. This improves members' ability to assess the value of their relationship with VHA.

"Getting the electronic quarterly statement gives us a good understanding of where we stand with VHA and how we participate, and the transfer of funds makes the relationship very tangible," said Rich Klosky, director of materials management at Jefferson Regional Medical Center, Pittsburgh, Pa. "The fact that this happens quarterly, gives us a good benchmark."

Members say the day-to-day supply savings VHA provides are essential to their organizations' financial health and represent the vast majority of the financial benefit they obtain through VHA. Members value the cash return because it provides funds that can be used for a variety of purposes within their organizations.

"This has been a significant year of change at VHA," said Curt Nonomaque, VHA's president and chief executive officer. "We implemented our new strategic vision, launched a new business model, created a new supply chain analytics division, negotiated a new relationship with GHX and acquired Goodroe Healthcare Solutions. All of these changes will enable us to serve member needs better than ever, and the changes in our business model are enabling us to create greater value for our members."

As a private company, VHA is not required to release financial information, but it does so each spring via an annual report that is posted on its public Web site.

About VHA

VHA Inc., based in Irving, Texas, is a national 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 18 offices across the U.S., VHA has a track record of proven results in serving more than 2,400 health care organizations nationwide.

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