Getting to Know the UMCSC

December 1, 2011

Confidential Information – Do Not Distribute

UMCSC Founding Vision

The Upper Midwest Consolidated Services Center is a local, member-driven supply network of VHA Upper Midwest member organizations. The

members of the UMCSC will initially focus on committing to centralized sourcing and contracting, with future plans to explore other potential

supply chain management initiatives and shared business solutions.

UMCSC reflects vision that healthcare providers and suppliers must work closely together in order to deliver increased clinical effectiveness and

economic efficiency

UMCSC Confidential Information – Do NOT Distribute to Third Parties

Member-drivenVHA-supported

3

ab

• Custom Packs• Distribution Models• Committed Purchase Services

• Central Procurement

• Separate legal entity - LLC is governed and financed by participating members

• The UMCSC is not a GPO- However, it will enhance existing VHA/Novation agreements based on the

members’ ability to commit to volume, market share and compliance

• Direct Member involvement - Mayo Clinic and member supply chain executives will be leading the

UMCSC sourcing and contracting initiatives- Strong history of working with strategic suppliers

Differentiating the UMCSC from other Regional Supply Networks

1. Altru Health System Grand Forks ND2. Bay Area Medical Center Marinette, WI WI3. Beaver Dam Community Hospitals, Inc. Beaver Dam WI4. Bellin Memorial Hospital Inc Green Bay WI5. Beloit Health System Beloit WI6. CentraCare Health System St Cloud MN7. Elmhurst Memorial Healthcare Elmhurst IL8. Essentia Health Duluth MN9. Froedtert & Community Health, Inc Milwaukee WI10. Grand Itasca Clinic and Hospital Grand Rapids MN11. Gundersen Lutheran, Inc. La Crosse WI12. Jamestown Hospital Jamestown ND13. Lake Region Healthcare Fergus Falls MN14. LifeCare Medical Center Roseau MN15. Mayo Clinic Rochester MN16. Little Company of Mary

Hospital and Healthcare Center Evergreen Park IL17. Medcenter One Health Systems Bismarck ND18. Meriter Health Services Madison WI19. North Memorial Health Care Robbinsdale MN20. Prairie Lakes Healthcare System Watertown SD21. ProHealth Care, Inc. Waukesha WI22. Rice Memorial Hospital Willmar MN23. Ridgeview Medical Center Waconia MN24. Sanford Sioux Falls SD25. Silver Cross Hospital Corp. Joliet IL26. Sherman Health Systems Elgin IL27. St. Luke's Hospital of Duluth Duluth MN28. Swedish Covenant Hospital Chicago IL29. SwedishAmerican Health System Rockford IL30. ThedaCare, Inc. Appleton WI31. Trinity Health Minot ND32. UW Health Partners Watertown Watertown WI

Regional Medical33. Wisconsin Valley Health Network Wausau WI

34. Jefferson Regional Medical Center Jefferson Hills PA35. St. Clair Hospital Pittsburgh PA36. Kingman Regional Medical Kingman AZ37. Excela Health Greensburg

PA

UMCSC Membership DemographicsAlliance Wide Totals as of October 2011

• Number of members 37• Number of hospitals 133• Number of outpatient surgery centers 35• Number of licensed patient beds 14,352• Number of outpatient radiology centers 88• Annual supply spend (including drugs) $4.2 Billion• Annual surgeries performed (inpatient/outpatient) 527,000+• Number of OR suites (total of inpatient/outpatient) 752• Number of employees 150,000+• Number of states with member hospitals/clinics 18

UMCSC Progress to Date

• Formed July 1, 2008• Approved Contracts to Date: 202 supplier agreements• Categories:

• Savings to Date: > $ 75 Million• UMCSC operational expenses below forecast

Category # of Agreements

Commodities 29

Clinical Preference 79

Physician Preference 84

Additional Products 10

• Class A-Stockholder-Available to organizations whose 2007 supply spend > $75M-Representation on all 4 governing bodies of the UMCSC

• Class B-Stockholder

-Pay a fee equal to 1% of spend through the UMCSC as a contribution toward annual operating expenses

-Representative at 4:1 ratio of Class B members on boards and committees (member of a cohort)

• Class C-Non Stockholder-Access portfolio of contracts

-Pay a fee equal to 2% of spend through the UMCSC-No representation on governing bodies

UMCSC Structure – 3 Classes of Membership

Each member has committed to annually purchase from the UMCSC portfolio in the following manner:

UMCSC Spend Requirements

Category A Member

B Member

C Member

Commodity Items 90% 85% 75%

Clinical Preference 80% 75% 65%

Physician Preference

25% 20% 15%