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VHA SUPPLY CO. WILL ABSORB ACCESS PHYSICIAN SERVICES'

Executive Summary

VHA SUPPLY CO. WILL ABSORB ACCESS PHYSICIAN SERVICES' purchasing program from VHA Enterprises under a corporate restructuring, Voluntary Hospitals of America announced in an Oct. 28 press release. The other services provided by VHA Physician Services will be merged into the corporate parent, Voluntary Hospitals of America. The physicians' purchasing program, ACCESS, offers discounts on medical and surgical supplies, laboratory services and office supplies. ACCESS "operates 10 networks and serves 70 VHA hospitals and more than 1,445 physicians nationwide," a company backgrounder says. The corporate parent, VHA, will acquire the other support services offered by VHA Physician Services, which include practice management, marketing, consulting and computer networkings to VHA hospitals and their medical staffs. Following an organizational review initiated in June, which resulted in the resignations of VHA Chairman and CEO Con Arnwine and VHA Enterprises President and CEO Thomas Reed, VHA decided that structural changes would take place at VHA Enterprises, according to a September press release. Reportedly, the review and subsequent changes occurred in response to financial losses incurred by VHA Enterprises managed care company, Partners National Health Plans. Partners is a joint venture with Aetna Life Insurance Company, formed in 1985. Revenues from VHA Enterprises for the first six months of 1988 were $ 109.4 mil., an 84% increase over the prior year's revenues. The approximately $ 13 mil. net loss incurred by VHA Enterprises so far this year can be attributed to development costs associated with expansion, the parent company explained. VHA said that it decided to clarify the service/business distinction between VHA and VHA Enterprises by shifting all the for-profit businesses into VHA Enterprises. VHA said it is now considering merging VHA Supply Co. with VHA Enterprises. The management changes in both companies, as well as changes implemented in the structure of VHA Enterprises' board of directors, were done in an effort "to better coordinate the operations" of both entities, VHA said in the October release. Also the corporate staff functions of VHA and VHA Enterprises have been combined, VHA noted. VHA board member Gordon Sprenger, president and CEP of LifeSpan Inc., has been elected "voluntary" chairman of VHA's board of directors, VHA said. LifeSpan is the parent corporation of Abbott-Northwestern Hospital and six other hospitals in Minnesota. Following the resignations of Arwine and Reed, two acting CEOs were placed in the empty slots. Wade Mountz, former chairman of the executive committee of VHA's board, took over as acting CEO of VHA and acting chairman of VHA Enterprises. VHA Enterprises Chairman Allen Hicks obtained the responsibilities of acting president and CEO for VHA Enterprises. VHA is currently focusing on the selection of a new president and CEO. "A broad national search is underway by Heidrick & Struggles, and we expect to fill the position in the first quarter of 1989," Mountz said in the October news release. Heidrick & Struggles is an executive search firm headquartered in Chicago.

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