HomeTown Health

Group Purchasing Organization

OverviewApril 29, 2010

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About HealthTrust • We are a Group Purchasing Organization (GPO)

Established in 1999 Offering contracts in the areas of supplies, pharmaceuticals,

medical devices, capital equipment, HR and other service-related offerings

• Membership includes over 1,400 acute care hospitals and 440 surgery centers

• 99% member retention rate• “Patients first” mission. All contract decisions are approved

by the appropriate clinical advisory board• We leverage our members’ $17 billion of annualized

compliant purchasing volume to negotiate the lowest pricing in the industry

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Annual Sales Volume

2004 2005 2006 2007 2008 2009$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

$14.0

$16.0

$18.0

$6.5 $7.6

$8.5 $9.8

$14.1

$17.0

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Equity IDNs

Unique Combination of Members

For-Profit Non-Profit Alternate Sites

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GPO A

GPO B

GPO C

GPO D

GPO E

GPO F

0%

5%

10%

15%

20%

25%

30%

6.9%

9.7% 10.5% 10.7%

15.0%

25.6%

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Key differentiator: Industry-leading Pricing

We have grown from $4 billion to $17 billion in 10 years. Why?• Lowest Pricing in the

Industry— as measured by our customers

• Over the past 18 months of due diligence, the average price savings for our customers versus other GPOs has averaged 7%

• One Price For All — with market-share tiers and SIPs

• Sustainable Model — driven by a “patients first” mission, an aligned membership, and executed with a provider-centered perspective

Internal Due Diligence Prior 18 months

Consorta Transaction

• Consorta joined HPG as equity partner in 2007– 11 not for profit companies with 186 acute care

hospitals and hundreds of alternate sites and clinics

• Renegotiated or “refreshed” the contract portfolio over a year and a half to:– Create incremental price savings due to

additional committed volume.– Shrink contracting cycle

• Results:• Over $9 Billion spend was “refreshed”• 4.22% savings ($390 Million to existing

members)

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Compliance

• Compliance = Savings• Compliance Measurement

– 80% of total facility supply spend should go through HT (if covered under HT contract)

– Not contract specific although some contracts have % requirements to achieve tiers

• Exclusive GPO – can not belong to other GPO

• Contract Status – Sole, Dual, Multi, Optional

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Key Differentiator: Rigorous Clinical Review

HealthTrust’s “Patients First” philosophy drives all contractual decisions and clinical programs

• Goal “Patients First” mission Evaluate and determine suppliers / products that meet only the

highest clinical standards in every category• Clinical Advisory Board — Form and Function

Nine standing advisory boards – led by licensed clinicians Ad-hoc boards and member summits Average 15 members / three-year rotating terms Refresh approximately 250 categories per year

Nursing Food & Nutrition

Laboratory Radiology Pharmacy

Information

SystemsSupply Chain Surgery Cardiolog

y

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Key Differentiator: Rigorous Clinical Review

• Clinical Review Process Facility-level clinical evaluation Solicit input across membership Follow standardized processes, e.g. scoring matrices Utilize outside reference sources (ECRI, SG2, AORN, AAMI) to

compliment new technology assessments• New Technology Assessment and Information• Clinical Education and Implementation Support• Environmental Sustainability Program

Nursing Food & Nutrition

Laboratory Radiology Pharmacy

Information

SystemsSupply Chain Surgery Cardiolog

y

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Key Differentiator: Broadest Contract Coverage

• Comprehensive portfolio Medical/Surgical, Commodities and Distribution – Sole

agreements or dual/multi-source with standardization incentives (SIPs), where possible

Capital Equipment – Everyday best-pricing with Group Buy opportunities

Pharmacy – Portfolio includes branded contracts with progressive therapeutic initiatives and sole-source generic awards

Food – Pool Healthtrust volume with Sodexho (Entegra) to further enhance pricing and rebates

Non-Clinical – Coverage for all provider spend, e.g. I.T., HR benefits, energy, parcel, office supplies, etc.

• Medical Device Sourcing Solutions National agreements for cardiovascular – customized for members Provide strategic sourcing for all orthopedic categories Process steps include: data capture, spend utilization,

reimbursement evaluation, benchmarking, strategy development, physician engagement and contracting10

Key Differentiator: Operations Expertise

• Account Management – supporting daily operations Managers are experienced supply chain and clinical

professionals Responsible for overall relationship, support of

implementation, contract conversions, compliance and savings opportunities

Quarterly business reviews Customer Service call center – Issues are logged, tracked

for resolution and trended for root cause analysis and vendor accountability

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Integrity & Culture• Unsurpassed Ethics and Compliance

Admin fees do not exceed 3% allowable by OIG Safe Harbor Guidelines

No private label programs No financial investments or ventures with suppliers Officers have no stock or options in any supplier

• Healthcare Group Purchasing Industry Initiative (HIGPII) Founding member Established to promote and monitor best ethical and

business practices Requirements:

• Open and competitive purchasing process• Maintain written business code of conduct• Public accountability

• Commitment to supplier diversity and small companies

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System Tools & Resources

Member Web site – (SCRUBS)• News & key resources• HT University – Continuing

EducationOnline Catalog – (CatScan)• Line item pricing at individualized

facility level (your Tier)• Customized Distributor Markup • Contract or Item Export

Capability• Normalized Product Descriptions• UNSPSC Codes

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Electronic Letters of Commitment (CCM)

• Electronic exchange directly between the facility and vendors

• Multiple workflow options• E-mail notifications of activity

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Rebates

• All rebates are paid to HPG. They are processed and sent to facilities monthly

• 100% are returned to facilities (must be reflected in cost reports)

• Extensive projection and tracking system• Monthly and YTD detail reports including

contract and associated sales are available on-line

• HPG has more rebates then other GPOs, keep this in mind during conversions. Approx 19% of contracts have rebates

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Audit

• 5 areas of focus - pricing, rebates, membership, freight, admin fees.

• Yearly plan based on risk factors – complexity of contract, highest spend, prior audit results, management requests, CS calls, years since last audit

• 2009 Results– Reviewed $3.5 Billion spend – Recovered $10.8 Million in 2009

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Spend Analytics

• Two components: the tool and the operational expertise

• Selection of BravoSolution as best-in-class• Pilots in process – full release scheduled Q2, 2010• Cost will be below market competitors• Functionality will include:

Price auditing Optimization reports Compliance / coverage reports Future Phase –

Benchmarking Cross-reference database

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Additional Services• Supply Chain Consulting - driving operational

improvements Supply Management Action Teams – Value Analysis Integration Operations Assessments Shared service and consolidated Service Center operations and

financial reporting• Labor Management

Management of contract labor Nurse and allied health recruiting Certification and training at deep market discounts Scheduling technology, A/P management and productivity

tracking• Alternate Care – AdvantageTrust

Leveraging acute care pricing to serve non-acute market Portfolio offerings for distinct classes of trade

• Long-term care, physicians clinics and home health

• Objective Extend portfolio value to other industries (growth) Add purchasing volume (leverage) to further enhance price

advantage for all members• 140 current members

$600M in Committed Volume• Case Studies

Office Supplies – $70M to $200M in three years – largest Staples customer

Car Rental – $5M to $25M in three years. The incumbent, Hertz, lost but became a CoreTrust member

CoreTrust Purchasing Group

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Some member companies include:

THANK YOU

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