Raw Material Costs Increase for Medical Products, Novation Works to Mitigate Impact

Novation, the contracting arm of health care organizations that belong to VHA Inc. and the University HealthSystem Consortium (UHC), has seen significant increases in the costs of certain raw materials used to produce medical products over the last three years. Despite these increases, Novation has maintained its commitment to mitigating the impact on the hospitals it serves. With over 2,500 health care providers across the nation, Novation has contracts with more than 900 suppliers and has purchasing volume that gives it power to negotiate on behalf of health care organizations facing price increases.

Key Takeaways:

• The costs of raw materials such as plastic, resin, steel, and latex have increased significantly over the last three years.
• Novation is working to mitigate the impact on hospitals by negotiating with suppliers and offering alternative value from the supplier.
• Novation's purchasing volume gives it power to negotiate on behalf of health care organizations facing price increases.
• The company has contracts with more than 900 suppliers and has helped VHA and UHC members purchase over $25 billion worth of medical supplies, drugs, and devices in 2005.
• Novation has successfully negotiated with suppliers to limit price increases to only the products with significant components affected by the price increases.
• The company offers its members a budget impact projection report to help them budget appropriately in a dynamic market.
• Novation's goal is to continuously monitor the supply chain for changes and work with suppliers to minimize the impact on hospitals.

Statistics:

• The costs of raw materials such as plastic, resin, steel, and latex have increased by 60% in some cases over the last three years.
• Novation has contracts with more than 900 suppliers.
• In 2005, VHA and UHC members will use Novation contracts to purchase more than $25 billion worth of medical supplies, drugs, and devices.
• Novation's purchased volume in 2004 was over $23 billion.
• The cost of stainless steel increased by 60% in 2004.
• Polyethylene represents 70% of the final product for can liners.

Sources:

• Novation Copyright 2005 Market Wire, All rights reserved.