NEWS RELEASE

60% of Hospitals Have Seen An Impact From The Current Economic Crisis

According to a Novation Study

IRVING, TX; February 26, 2009 — A recent study by Novation, the leading health care contracting services company, reveals that hospitals are indeed suffering from the economic downturn and are making drastic changes in 2009 to adapt. Novation’s first-ever National Economic Impact Survey, a forward-looking study of the members of VHA Inc., University HealthSystem Consortium (UHC) and Provista, focused on the economic trends which are impacting hospitals in the next twelve months. 60 percent of responding hospitals have seen an impact from the recent economic crisis, and nearly 47 percent foresee staff cuts in the near future.

Recent reports from the American Hospital Association and the Healthcare Financial Management Association confirm that the economic climate has caused serious problems for hospitals across the nation. Hospital margins are decreasing as a result of reduced patient volumes, increased bad debt and charity care. Many hospitals are reducing their capital spending, which affects physician recruitment and, ultimately, negatively affects profits.

“We know that the weakened economy has hit hospitals particularly hard and they are being forced to make some tough decisions,” said Jody Hatcher, president and CEO of Novation. “In November, we took a bold “no increase” pricing stance. Today, to further help hospitals, we are working with our suppliers to lower their prices – and they are responding positively.”

Highlights from the study:

• 60% of responding hospitals have seen a moderate to significant impact from the recent economic crisis.
• 47% of respondents foresee staff cuts.
• 73% of respondents have seen an increase in the cost of care related to meeting new patient safety standards.
• 84% of respondents plan on reducing spending with 49% anticipating a 6-10% reduction.
• 44% of facilities will focus on product utilization to reduce costs.
• 44% of respondents have seen a reduction in surgical procedures, with hip (orthopedic) procedures garnering the highest percentage drop at 45%.
• 69% of respondents will cancel or delay capital equipment projects.

Comments from the blind study:

• “We are looking at reducing our capital budget by $2 million, we are going to put off some imaging upgrades and delay some facilities expansions.”
• “We are carefully watching the unemployment figures in our area.”
• “We are seeing an increase in indigent patients due to layoffs.”
• “Patients’ expectations have not changed regarding the health care delivery system. They want the same, or more service, at a lower cost.”

Novation’s price management strategies use market intelligence, supply chain data and unique contracting strategies to drive down health care supply costs. Novation is working with new and existing suppliers to foster partnerships focused on extracting innovative value for members, resulting in improved margins, standardization and contracting efficiencies.

To further help health care providers manage their budgets, Novation conducts several studies throughout the year, such as the Budget Projections Impact Report released in January and July, the Drug Price Forecast Report released in January and July and others on an ad-hoc basis.

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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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