After 7 Years of Losses, Anna Jaques Hospital Achieves Financial Turnaround in a Year, Bond Rating Improves.

Yankee Alliance, Premier Help Massachusetts Hospital Ensure Future

CHARLOTTE, N.C. -- In less than a year, Anna Jaques Hospital (AJH) in Newburyport, MA, with help from its new partners, Yankee Alliance and Premier, has reversed seven years of operating losses and posted an operating surplus, bringing financial stability to the hospital that serves more than 165,000 residents in the Merrimack Valley, north of Boston.

Despite strong community support and revenue growth of 8 to 12 percent annually, expenses had been growing about 10 to 15 percent annually. The 123-bed hospital in a historic seaport on the New England coast had lost $20 million since 1999, throwing a cloud over its future.

As a result of the losses, Moody's Investors Service had lowered the hospital's credit-worthiness outlook to negative, threatening the hospital's ability to continue serve its community.

Yet in a complete turnaround only a year after the hospital began working with new group purchasing partners, Yankee Alliance and Premier, to bring supply expenses in line, Moody's has upgraded the hospital's financial outlook from negative to stable, citing the improved control of expenses, among other factors.

"One of the major factors in the turnaround of AJH is Yankee Alliance and Premier," said CFO Mark Goldstein. "In just under 12 months, we were able to take the organization from negative cash flow and a $1.5 million loss to a $56,000 operating surplus." AJH's goal for the 2007 fiscal year is an operating surplus of $1.5 million. That's good news for staff, physicians, and patients, alike.

In 2006, AJH reduced expenses by 4 percent, saving more than a million dollars in supply costs simply by switching to Premier and Yankee contracts from Novation and Amerinet, their former GPO, according to Goldstein, who came from Boston Medical Center with a clear mandate to bring financial stability.

Goldstein and his team launched new efforts to control costs and change the hospital's purchasing processes. That included a review of its GPO partners and the selection of Premier and Yankee Alliance.

Yankee Alliance, a group affiliate of Premier, is a regional alliance of 54 hospitals in New England and New York and more than 2,400 other healthcare sites nationwide. Healthcare organizations that are members of Yankee Alliance can access Premier contracts and services on an aggregated basis as well as regional Yankee contracts.

"Yankee Alliance has the ability to leverage the volume of all their members, which allows even a small hospital to purchase materials at a higher tier," said Mark Gahagen, region director for Premier. "In addition to using regional contracts, Yankee members are able to take advantage of higher tiers and enhanced tiers on the standard Premier agreements."

In spring 2006, Richard Doolan, with 30 years of materials management experience, came on board as materials manager to lead the purchasing staff in a new direction. Chris Johnson, the Yankee Alliance account representative for AJH, helped train staff and make the transition to the new contracts as smooth and effective as possible.

AJH leadership wanted to make the changes as seamless as possible, so they began the turnaround by implementing "exact match" contracts. Using Supply Chain Advisor, Premier's online automated contract management system, "We went line by line, and in a short time, we had more than 100 contracts activated," Johnson noted.

Goldstein believes that the Yankee Alliance/Premier business model is ideal for community hospitals such as AJH. "They have a different business model than other GPOs that I've been involved with," he said. "They are more of a service-driven organization."

He also has high praise for his own team. "This doesn't work without a well-organized team, including purchasing and materials," said Goldstein. "We have a terrific staff that has helped turn around our hospital."

About Premier, 2006 Malcolm Baldrige National Quality Award recipient

Serving 1,700 hospitals and more than 45,500 other healthcare sites, Premier Inc. is the largest healthcare alliance in the United States dedicated to improving patient outcomes while safely reducing the cost of care. Owned by not-for-profit hospitals, Premier operates the nation's largest healthcare purchasing network, the most comprehensive repository of hospital clinical and financial information and one of the largest policy-holder owned, hospital professional liability risk-retention groups in healthcare. Headquartered in San Diego, Premier has offices in Charlotte, N.C. and Washington. For more information, visit www.premierinc.com.