NEWS RELEASE

Novation Signs 17 Medical-Surgical Distribution Agreements

Contracts Offer Five-Year Price Protection for VHA and UHC Members

IRVING, TX; May 25, 2006 — Hospitals across the country are feeling the financial impact of increased distribution costs due to the rising costs of petroleum, labor and spikes in the prices of raw materials. However, Novation, the health care contracting services company for VHA Inc. and the University HealthSystem Consortium (UHC), has signed 17 new medical-surgical distribution agreements that will ensure that VHA and UHC members will not experience higher supply distribution costs for the next five years.

VHA and UHC members purchase approximately $4.5 billion in medical-surgical products through Novation annually.

The new Novation medical-surgical distribution agreements, which take effect Sept. 1, 2006 and run through August 31, 2011, are with the following companies:

• American Medical Depot
• Buffalo Hospital Supply
• Cardinal Health
• Claflin Company
• Hardin’s-SYSCO
• Kreisers, Inc.
• McKesson Medical-Surgical
• Medline Industries
• Midland Hospital Supply
• Midland Medical Supply
• Midwest Medical Supply
• N.S. Low & Co.
• Owens & Minor
• Professional Hospital Supply
• Seneca Medical
• Shared Services Systems
• The Burrows Company

The essential ingredient to the new agreements is Novation’s one-cost plus approach, which separates the cost of products from the cost of service and provides members with a single, fixed percentage that represents all costs for distribution services. The percentage charge for distribution services varies by distributor and is based on volume, and members must select one primary distributor. This accurate and easy-to-understand formula applies to both contracted and non-contracted products, enabling members to forecast medical and surgical supply costs with greater certainty.

Approximately 60 percent of all medical-surgical products are delivered to hospitals through a distributor. The rest are sent directly from manufacturers. By working with a single distributor, hospitals are able to build reliable distribution schedules and maintain more efficient supply handling practices.

“Through its contracting practices, Novation has managed to maintain the price of base distribution services for the last five years for VHA and UHC member hospitals, even during periods when fuel costs have jumped significantly,” said Larry Dooley, vice president of contract and program services at Novation. “The new distribution agreements are the only group purchasing distribution agreements in the industry that offer a single markup for both contract and non-contract purchases. Through the new agreements, member distribution costs will remain virtually flat for the next five years. That’s significant in today’s marketplace.”

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About Novation
Founded in 1998, Irving, Texas-based, Novation is the leading health care contracting services company, delivering unmatched savings and value to nearly 2,500 members of VHA Inc. and the University HealthSystem Consortium (UHC), two national health care alliances and nearly 12,000 members of Provista, LLC. Through its competitive contracting process, Novation develops and manages contracts with more than 500 suppliers. Novation offers the most extensive range of advanced contracting services, including: contract development, contract and supplier management, custom contracting, enhanced savings programs, online contract management and analytical tools, order management and online supplier connectivity. VHA, UHC and Provista members used Novation contracts to purchase more than $33.1 billion in 2007.

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