April 18, 2011

Harrington HealthCare Joins Purchasing Coalition

SOUTHBRIDGE, Mass. - April 15, 2011 - Harrington HealthCare System has joined with 27 other healthcare systems representing more than 100 hospitals in six New England states to form a new company, the Northeast Purchasing Coalition LLC. This supply network represents close to 17,000 hospital beds, 5,000 physicians and over $2 billion in combined annual non-salary expenses.

These organizations will work together to lower costs through aggregating purchasing volume on contracts, decreasing product utilization and incorporating clinical subcommittee recommendations into their purchasing decisions.

With declining reimbursements and rising costs, this collaborative approach to non-salary cost reduction will help ensure hospital resources are preserved for direct patient care. The coalition's members, all members of VHA Inc., the national health care network, plan to leverage VHA's supply chain management expertise and Novation's contracting power to obtain better pricing on aggregated purchases. The boards of directors of VHA New England and VHA Northeast used their collective strength and enthusiastically endorsed this endeavor as their innovative way to reduce non-salary expenses-providing essential executive-level support.

"Hospitals are pressing hard to find new ways to save money and deliver efficient care without cutting staff, limiting services or sacrificing clinical quality," said Gerry Roche, Area Senior Vice President/Executive Officer for VHA Northeast and VHA New England. "By aggregating volume through VHA SupplyNetworksTM, our members can zero in on standardization opportunities and establish a platform to discuss clinical utilization, both of which hold significant potential for savings and higher quality of care. VHA SupplyNetworks also creates opportunities for operational efficiencies that aren't available through any other means in the health care industry today."

"Joining with other healthcare systems throughout New England to form Northeast Purchasing Coalition is one way we can continue to deliver our trademark Total Local Care - TLC - while maintaining the highest standards in patient care," said Thomas Sullivan, Harrington's Chief Financial Officer. "All members of the Northeast Purchasing Coalition will still have the ability to make independent decisions about product purchases, but we have agreed to aggressively pursue product standardization whenever possible in order to achieve dramatic cost savings."

Representing a strong commitment to collaboration among these hospitals, the NPC will be operated by a committee of supply executives recruited from the NPC's members who will develop the strategies, guidelines and processes to ensure the group can reach their savings objectives. The members have agreed to abide by the following principles:

• A defined purchasing decision making process
• Volume-aggregated contracting strategies
• Member commitment
• Sustained contract compliance

On average, hospital members of VHA SupplyNetworks save between 8% and 12% annually through network contracts that enable members to:

• Gain better control over the entire supply chain
• Achieve savings above and beyond what they could accomplish on their own
• Share and learn best practices from other participants
In their most mature form, VHA SupplyNetworks help members pursue higher value activities such as centralized ordering and centralized logistics. Supply networks also provide innovative platforms for utilization discussions because their collective intelligence enables the hospitals to reach a clinically supportable consensus that should lead to better clinical performance.

VHA currently supports 23 VHA SupplyNetworks nationwide. Combined, these supply networks saved participants $100 million in 2010.