NEWS RELEASE

Novation Releases January 2009 Budget Impact Projections Report

Study Helps Health Care Providers Manage Spiraling Costs During Ailing Economy

IRVING, TX; February 20, 2009 — Leading the industry in price management strategies for the members of VHA Inc., University HealthSystem Consortium (UHC) and Provista, LLC, Novation, the healthcare industry’s leading contracting services company, today released its January 2009 Budget Impact Projections Report. The report is designed to give health care providers the latest information they need to meet supply-related budgeting processes and more effectively manage supply costs. The report is published each January and July and features data from a number of resources, including Novation’s extensive database, suppliers, raw materials resources, the U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) and Consumer Price Index (CPI). The January 2009 report projects a national market price change increase of 3.3 percent, while Novation projects a 1 percent contract price increase.

“Novation recently surveyed alliance members and found that more than 60 percent of respondents have been negatively impacted by the economy,” said Jody Hatcher, president of Novation. “Our job is to provide innovative contracting solutions that drive down supply costs and to help the members we serve survive this economic crisis. The Budget Impact Projections Report is a valuable tool that contains information about key raw materials that are influencing prices as well as provides contract price projections on a product segment basis.”

Novation uses all available resources to create pioneering contracting services and approaches to drive down health care supply costs. The Budget Impact Projections Report is one example of cutting-edge reports Novation provides members to help manage their budgets. Other reports issued by Novation include, the Drug Price Forecast, which offers Novation’s best estimate of the change in the cost of pharmaceuticals likely to be purchased by acute care facilities and the National Economic Impact Report, which surveys economic trends and impact on hospitals.

Key report findings include:

• Hospital services, including inpatient and outpatient services all encountered increasing inflation, but at a much lower rate compared to the previous year. All three fall around 5 percent.
• The inflation rate of pharmaceuticals rose 7.7 percent compared to 4.2 percent the previous year.
• Water transportation costs increased 18.9 percent in the past 12 months.
• Paper products encountered significant increases over the past 12-month period when compared to previous years, while plastic products only saw an inflation rate of 1.6 percent.

Raw materials:

• Overall food prices may increase 3.5 to 4.5 percent in 2009 and early 2010.
• Continued decline in oil consumption in 2009. Gasoline prices are projected to average $1.87 per gallon in 2009 and $2.18 per gallon in 2010.
• Latex prices decreased by 33 percent in the last 12 months and are 18 percent lower than prices three years ago.
• Plastic resins decreased by 17 percent in the last 3 months and are 5.6 percent lower than 12 months ago.
• Steel prices continue to drop attributable to falling oil prices and low demand due to the weak economy.
• Nickel, aluminum and copper decreased over 40 percent during the past 12 months.

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About Novation
Founded in 1998, Novation is the leading health care supply contracting company for more than 25,000 members of VHA Inc. and the University HealthSystem Consortium (UHC), two national health care alliances, and 5,500 members of Provista, LLC, representing 28,000 sites. Novation provides alliance members contract and price management and spend management services. Based in Irving, Texas, Novation develops and manages competitive contracts with more than 600 suppliers. VHA, UHC and Provista members used Novation contracts to purchased nearly $37.8 billion in 2009.

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