Merger will create nation's largest member-owned healthcare supply chain company

Irving, Texas-based nonprofit hospital network VHA Inc. will merge with UHC, a Chicago-based alliance of academic medical centers, to form the nation's largest member-owned healthcare supply chain firm, the Dallas Business Journal reports.

The resultant company, which has not yet been named, will serve more than 5,000 healthcare system members and affiliates, and about 30 percent of hospitals in the U.S. Included in that figure are the vast majority of academic medical centers and health systems, Curt Nonomaque, the new company's president and CEO, told the Business Journal. The organization will remain headquartered in Irving but maintain an office in Chicago, and employee about 2,000 people. The deal is expected to close by late March.

The new firm will also serve more than 118,000 non-acute care customers, service all providers ranked in the top 10 hospitals by U.S. News & World Report, and have more than $50 billion worth of purchasing volume, according to the company announcement.

"VHA was founded on the idea that healthcare organizations perform better and faster when working together," Nonomaque said in the announcement. "This combined organization will have even greater ability to harness the power of healthcare's brightest minds to provide targeted expertise to improve financial, operational and clinical performance."

The deal is another indication of shifts in the healthcare purchasing market, according to Crain's Chicago Business, as lower hospital reimbursements and patient volumes leave providers in search of ways to reduce their medical supply expenses. This has dramatically increased competition in the supply chain market and reduced hospitals' use of group purchasing organizations, according to the article.

For example, Kaiser Permanente has implemented new software to increase efficiency in ordering and use of supplies, as compared to five years ago, when the integrated provider relied on frontline workers to order supplies and recalled or expired supplies had to be manually tracked down and returned, a process that took valuable time away from patient care. Similar efforts by Intermountain Healthcare are expected to save $200 million by 2018.

To learn more:
- read the company announcement
- read the Business Journal article
- here's the Crain's article