Executive Summary

The Voluntary Hospitals of America's corporate office has held discussions with 25 regional distributors regarding contracts with VHA's new hospital supply subsidiary, and expects to sign two to six final agreements within the next 60 to 90 days. The group of 440 affiliated not-for-profit hospitals announced its intention of forming a new subsidiary company to distribute supplies and materials to VHA hospitals on June 13. With the development of an internal supply company, VHA plans to become a "fully integrated national health care delivery system," the organizaton said. VHA Supply Company services will include a "comprehensive information system, including an electronic order entry system and a supply data base," VHA noted in a release. The supply subsidiary will function through a network of regional distributors. Deliveries could begin as early as September or October, a spokesperson said. The supply company will provide as "broad a range as possible of products," with an eventual goal of encompassing all product areas, he added. The hospital group expects to realize savings of 3% to 12% for member facilities once the supply subsidiary is underway, according to the release. At present, VHA's primary supplier is American Hospital Supply (AHSC). The group has a three-year contract with AHSC that is valued at about $750 mil. The contract runs into 1987. VHA began moving in the direction of greater self-sufficiency last August, when it signed its first co-labeling agreement with an orthopedic soft goods mfr. DeRoyal Industries. Currently, "private label agreements are under negotiation for the provision of virtually all hospital supplies," VHA said. "Since its establishment in 1977, shared purchasing and materials management have been key elements in VHA's goal to improve the competitive position of the voluntary hospital sector," VHA Chairman and Chief Executive Officer Don Arnwine commented.