Feb. 12, 2015: Johns Hopkins Health System and Allegheny Health Network Announce Supply Chain Joint Venture

Dear Colleagues,

Last year, Johns Hopkins Medicine entered into an agreement with Pittsburgh-based Allegheny Health Network to collaborate on cancer care, research, education and quality improvement. 

Today, I am pleased to share that one of that collaboration's first initiatives has launched: a joint venture to commonly source supplies and services across the two health systems. The goal: cost savings on supply chain purchases while maintaining—or improving upon—high standards in patient care.

The agreement, signed on Jan. 26, created a new company that will oversee sourcing solutions, including the negotiation of supplier contracts, to realize savings for both parties. The company will be owned 75 percent by the Johns Hopkins Health System and 25 percent by Allegheny Health Network. The trade name for the new company has not yet been determined.

This project dovetails nicely with the Johns Hopkins Health System's own ongoing supply chain initiative to jointly purchase supplies and services across our organization, and to identify other opportunities to realize savings in our nonlabor spend. Last fiscal year, our efforts resulted in a net savings of $13 million, while this year we are striving to achieve a net savings of $20 million across the health system.

Through these efforts, we have the potential to create one of the most efficient supply chains in the industry. This is an opportunity to build a system that's seen as the industry's gold standard for strategic sourcing and supply chain management. In fact, that's already happening: Hospitals across the country are asking us what we are doing and looking to join us in our efforts. I will keep you informed regarding these opportunities and how we will look to further expand on our mission through broader collaborations.

As you know, work is well underway to achieve Johns Hopkins Medicine's strategic goal of increasing net operating income by $244 million by fiscal year 2020 through various performance improvement initiatives. Our supply chain initiative and this new venture will be major contributors toward our achievement of that goal.

Like any new venture, this one is not without risk. For it to succeed, we'll have to work together to identify new avenues to streamline purchases and maintain clinical excellence.

This new initiative would not be possible without the members of the supply chain team, including Sam Clark, Janet Buehler, Ken Grant, Betty Gibula, Gary Dowling, Jeff Martin, Zishan Mustafa, Brian Scheinberg and John Sdanowich,for the tremendous effort they have brought to this collaboration. Please join me in celebrating and supporting this exciting agreement.

Sincerely,
 
Ronald J. Werthman
Senior Vice President of Finance/Treasurer and CFO
Johns Hopkins Health System