As I mentioned, there was clearly a trend toward leveraging scale for greater cost savings and efficiencies. Like many organizations, VHA and UHC also found efficiencies and savings through combining their contracting operations. That said, the joint venture between VHA and UHC that formed Novation has resulted in one of the most successful and long-lasting ventures to date within the healthcare industry – and even outside the industry for that matter. 

If you consider that only a small fraction of joint ventures actually survive given the long-term requirement for ongoing, effective collaboration, it’s especially impressive to realize that not only is Novation still thriving and creating staggering value for the members of VHA and UHC after 12 years, but we’ve also grown our supply purchase volume from $12 billion in 1998 to almost $38 billion in 2009.

The No. 1 measure of Novation’s success is our ability to drive savings for the members we serve, so I’m very proud that we continue to offer the best-priced portfolio with the largest spectrum of coverage in the industry. What I’m even more pleased about is the focus of pervasive improvement within our teams that continues to drive us toward greater accomplishments.

I don’t know of any successful company that doesn’t make mistakes every day. In fact, correcting what hasn’t worked is how we’ve transformed Novation into the industry leader. The biggest mistake we could ever make would be to forego an opportunity to improve our position for fear of making a mistake. 

Twelve years ago, we were formed to help VHA and UHC members save money through economies of scale. Not surprisingly, we accomplished that and more, and we continue to lead the industry in developing innovative solutions that drive down costs.

In the past, volume purchasing was seen as one of several ways hospitals could save money – today, Novation has become a catalyst through which members achieve significant supply cost reduction.

Beyond our ability to deliver unmatched savings through our national contract portfolio, our data and analytics capabilities have emerged as the strongest in the industry. Not only has the visibility we’ve gained into market pricing sharpened our contracting decisions, but our advanced analytical tools and capabilities are giving members the knowledge and power they need to speed their decision-making processes, and therefore their access to significant savings in the form of lower supply costs. 

The future of GPOs is contracting, contracting-related services and the data and tools that integrate it into a single offering – given how members are accessing and using our data and tools, our analytical offerings are quickly gaining equal footing with our contracting services.

Given the dynamic environment we’re in, members need our help now more than ever to reduce costs, and I am passionate about helping them drive costs out of their organization so that they remain viable for the communities they serve. Even with ongoing success, we still have a tremendous opportunity to inject creativity into the process of reducing supply costs for hospitals. I am fortunate that I’ve been able to participate in multiple aspects of our business and that’s afforded me the benefit of serving members from a variety of perspectives. This multi-faceted view of members has been exceedingly helpful in my current role. 

I believe you have to have a passion for this business, and I’m fortunate enough to wake up everyday thinking about how we can find creative solutions to member pain points. Given the uncertainties that lie ahead for the provider community – whether economic or legislative – it’s clear that members will need our help to drive costs out of their organizations. Against that backdrop, we’ve never been more energized or passionate about reducing supply costs. 

Novation has had a history of strong leaders, each with a blend of unique styles and strengths. The culmination of their direction and leadership resulted in Novation achieving and sustaining industry leadership. Thanks to their efforts, Novation is well-positioned to take advantage of innovative processes and advancements in technology that will drive our ongoing progress.

I am passionate about what we do and about continuously making things better for the members we serve. I believe that to remain relevant and valuable for member organizations, we have to know more about their businesses than they do, so I take a very hands-on approach. I spend a lot of time with members, traveling to their organizations and hearing directly from them what challenges they face, and how we can better align our offerings to combat their challenges, and I encourage others on our team to do the same.

I’m not afraid to take risks to achieve more positive outcomes for members. It’s imperative that we continue to deliver not only market-leading savings, but also innovative and diverse solutions that deliver a competitive advantage for their organizations. I don’t subscribe to the belief that we should do something simply because it’s what we’ve always done. Almost daily, I challenge our teams to focus their efforts only on those things that make a difference for members. If it doesn’t make a difference, we shouldn’t be doing it. For every effort we make toward something that’s not making a difference, we forego an opportunity to focus our energies on something that will make a difference.

I am a strong believer in diversity – not only in the traditional sense as evidenced by the strides we’ve made through our Supplier Diversity program, but also in how we apply innovative thinking and diverse points of view to our business. That philosophy is reflected in many of our recent hiring decisions where we’ve broadened our search beyond healthcare to ensure a diverse talent pool with expertise from all industries. I firmly believe that the broader our exchange of diverse opinions is, the stronger our collective decision-making will be. We’re also enriching our talent pool with those who have excelled in global organizations with world-class expertise in areas of significant value to members, such as strategic sourcing.

Our five strategic priorities are: Advancing price leadership; increasing member engagement, interaction and commitment; expanding our supply chain data, intelligence and tools; delivering growth, diversification and financial returns; and advancing organizational effectiveness. Let me focus on just a couple of those here.

Price leadership: The No. 1 measure of our success is our ability to deliver best pricing to the members we serve. In the current economic environment, members are coping with greater economic pressures than we’ve seen in 20 years. Declines in reimbursements, tougher access to capital at higher costs, rising supply costs, increasing demands, decreasing operating cash are just some of the issues I hear from members every day.  

With these pressures and the uncertainties surrounding the impact of healthcare reform, first and foremost, members need our help controlling costs. In turn, we’re committed to widening the pricing gap we have over other GPOs by a 3-to-7 percent differential.  

While our competitors continue to employ some very savvy selling techniques, their offerings consistently lack the substance hospitals need to drive significant and sustainable cost savings.

In contrast, our unprecedented visibility into market pricing is driving our ability to continuously attack pricing like never before. We are the only GPO taking full advantage of business intelligence to aggressively drive down pricing across our entire contract portfolio, and we continue to attack pricing on multiple fronts.

Supply chain data, intelligence and tools: As we evolve, the future of group purchasing organizations is contracting, contracting-related services and the data and tools that integrate our services into a single offering. In December, Novation partnered with VHA and UHC to form a comprehensive data, analytics and procurement services bureau to better serve all of our companies. Dan Sweeney leads our Information and Data Services team, which is responsible for the product development and business infrastructure that supports our analytical and procurement offerings for members and also provides the internal reporting services and development to support the needs of our supply chain business units and field staff.  

Long term, our future is about integrating our tools and analytics capabilities in such a way that our tools and technology become part of – and enhance and support – the member organizations’ daily operations. We’ll continue to invest in the automated tools and information members seek to increase their use of analytics and business intelligence to drive greater competitive advantages for their organizations.

Of course, the driving force behind all of our strategic priorities is our people. I believe we have the strongest talent in the industry, and we’re continually focused on opportunities that further enhance our customer-focused model and bolster our ability to deliver greater positive outcomes for the members.

Novation is owned by – and we work for – members. We don’t work for investors. Our profits reduce healthcare costs – they don’t enrich executives or investors. Therefore, we’re not in the business of generating revenue or increasing shareholder profits. We’re in the business of generating savings for the member organizations we serve. Among the areas generating the greatest savings for members are pharmacy, capital, medical/surgical and physician preference items.

We’re seeing tremendous interest in physician preference items as surgeons return as hospital employees. Given the dynamics of the current environment, hospitals are more willing to approach surgeons for help with cost reduction. Likewise, surgeons are more willing to work with hospitals. Some GPOs are reluctant to pursue a physician preference contracting strategy, however, striking a balance between national terms and conditions and local negotiations can be achieved. Data is critical to the discussion, and Novation has the most relevant and comprehensive business intelligence and industry expertise to assist members in working with surgeons and suppliers.

The other dynamic is that most suppliers are realizing that the process of continuing to negotiate locally is very costly. Relevant terms and conditions within national agreements that support the broad member population reduce the need for hospitals to re-work terms and conditions for local pricing. Currently, Novation has 161 agreements that provide the basic terms and conditions for local agreements. Our agreements also provide new technology language that mandates that new products be added as soon as they’re launched.