NEWS RELEASE

Novation Releases First of Two 2008 Budget Impact Projections Report

The Definitive Supply-Related Budgeting Trends Study for the Health Care Industry

IRVING, TX; March 11, 2008 — According to Novation’s January 2008 Budget Impact Projections report, the definitive supply-related budgeting trends study for the health care industry, in 2007 health care providers, along with the rest of the country, saw price increases in a majority of categories primarily due to the cost of gasoline. The report, published in January and July by Novation, the healthcare industry’s leading contracting services company, captures data from the U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) and Consumer Price Index (CPI).  Alliance members leverage the detailed price projection information provided in the report to assist in supply-related budgeting processes and to more effectively manage supply costs.

“We have been developing these reports for several years and our alliance members depend on this data to make smart, critical decisions about their most commonly purchased products,” said Jody Hatcher Novation senior vice president. “We also issue a similar report for pharmacy that is also generated twice a year. These reports are another example of the tremendous value we bring to hospitals and the healthcare industry.”

The PPI measures the average change over time in the selling prices received by domestic producers of goods and services. In 2007, the PPI price increases were split 50-50, with Gasoline costs driving more than 40 percent of the increase. The categories indexed were: Finished Goods, Hospital Services, Surgical and Medical Instruments, X-Ray and Electromedical Equipment, Prescription Drugs, Capital Equipment, Gasoline, Natural Gas, Paper Products and Plastic Products.

The CPI saw prices increase in eight of 10 categories, with Gasoline escalating cost increases by more than 50 percent over 2006. The categories indexed were: CPU-Urban, Hospital Services, Inpatient Services, Outpatient Services, Medical Care Services, Medical Care Commodities, Prescription Drugs and Medical Supplies, Nonprescription Drugs and Medical Supplies, Electricity and Gasoline.

In addition, the report offers a price change table that compares national price change projections against Novation’s contract price projections in 11 product categories. The January report projects a national price change increase of 3.4 percent for 2008, while Novation projects a 1.6 percent increase.

Key report findings include:

• Increases in inflation from 7 to 10 percent in Hospital Services, including Inpatient and Outpatient Services, compared to the previous year. (CPI)
• A 7.2 percent increase from December 2006 to November 2007 in Finished Goods, after experiencing 0.9 percent inflation the previous 12-month period. (PPI)
• Increase in Prescription Drugs by 4.5 percent over the most recent 12-month period. (PPI)
• Increase of 3.2 percent over last year in Surgical and Medical Catheters. (PPI)
• In the Nutrition category,  Eggs saw a dramatic increase of more than 34 percent, while Dairy rose at 14 percent and Coffee and Chicken saw increases of approximately 7 percent.(PPI)
• An 8.9 percent increase in Air Travel and Car Rental at 0.7 percent. (PPI)

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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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