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Supply Watch2016

About Supply Watch

Thank you for allowing ROi to help you serve your patients. Theinformation contained within this document is designed to provideROi member facilities with an overview of recent trends and supplyexpense dynamics that impact the upcoming fiscal year. Thisdocument is a compilation of data from a variety of industry sourcesand publications as well as the insight of ROi’s Contracting andUtilization experts. These projections represent industry inflationaryperformance, actual pricing through ROi contracts and programs, andthe expected impact of upcoming contract bids. Most contractedproducts should reflect lower inflationary impact than the generalindustry projections. The percentages express the best estimatepossible from all input elements.

Supply Watch 2016

SUPPLY WATCH 2016

Resource Optimization & Innovation, LLC (ROi) all rights reservedCONFIDENTIAL & PROPRIETARY: FOR USE BY MEMBERS OF ROi

2

About ROi

ROi believes in the power of provider collaboration to transformhealth care. A recognized leader in health care supply chainmanagement through our vertically integrated supply chain model,we were founded more than a decade ago by Mercy, one of thenation’s largest non-profit health care systems, and today servefellow providers across the United States who share a passion forsupply chain excellence. As a provider-owned Accountable SupplyChain Organization, we focus on all aspects of supply chain fromplanning through fulfillment and consumption to ensure the highestquality of care is delivered in the most cost effective manner. ROiworks alongside our fellow providers from single hospitals andsurgery centers to mid- and large-size IDNs to deliver supply chainsolutions in the following areas: strategic contracting and sourcing,centralized distribution and transportation, custom procedure traymanufacturing, medical device reprocessing, medical device implantoptimization and private label products. ROi is the only provider tobe ranked by Gartner as a top 10 health care supply chain for sevenstraight years. Learn more at: www.roiscs.com.

http://www.roiscs.com/





3Resource Optimization & Innovation, LLC (ROi) all rights reservedCONFIDENTIAL & PROPRIETARY: FOR USE BY MEMBERS OF ROi

SUPPLY WATCH 2016

Key Initiatives 4

Product Area Projections

Administrative Services 7

Diagnostic Imaging 7

Environmental Services 8

Facility Engineering 8

Food Service 9

Labor, Construction & IT 11

Laboratory 11

Medical Devices 13

Medical Surgical Products 16

Departmental Expectations

Clinical Services 18

Medical Devices 22


Support Services 26

Contacts

Leadership 31

Capital Management 31

Clinical Services 31

Medical Devices 31


Support Services & Distribution 32

Supply Watch 2016

Initiative Start DateEstimated

ImpactComments

Laboratory

Anatomical Pathology Equipment, Reagents & Disposables

January 2016 2-5% New contracting opportunity planned

Autoimmune Equipment, Reagents & Consumables

February 2016 2-5% New contracting opportunity planned

Blood Bank Equipment, Reagents & Consumables

February 2016 2-5% New contracting opportunity planned

Blood Collection Needles and Tubes April 2016 0-3% Category renegotiation planned

Lab Distribution September 2016 Unknown Category renegotiation planned

Molecular Diagnostics April 2016 Unknown Category renegotiation planned

Point-of-Care (POC) Equipment & Testing Cartridges

February 20160-4%

Category renegotiation and enhanced utilization management planned

Rapid Diagnostic Test Kits August 2016 0-3% Category renegotiation planned


ImpactComments

Diagnostic Imaging

PACS January 2016 5-10% New contracting opportunity planned

Radiopharmaceuticals May 2016 10% New contracting opportunity planned

With the ongoing downward pressure on hospital reimbursement, ROi continues to seekways to help its members maintain margins by accelerating cost savings from contracting andutilization activities. Significant raw material cost increases are projected to continue through2016 and will create challenges in cost containment. The following are some of the plannedinitiatives that will help contain cost growth:

KEY INITIATIVES

SUPPLY WATCH 2016


4


ImpactComments

Medical Devices

Cardiac Rhythm Management Devices December 2015 5% Category renegotiation planned

Cardiac/Vascular Surgery Products June 2016 1%Category renegotiation, enhanced utilization management and expanded supplier coverage planned

Core Cardiology Products January 2017 3-5% Market bid (RFP) planned

Drug Eluting Stents January 2017 3-5% Market bid (RFP) planned


ImpactComments

Medical Devices (Continued)

Electrophysiology Products December 2015 2-3% Market bid (RFP) completed

Gastric Banding Implants July 2016 2% New contracting opportunity planned

Heart Valves & Rings March 2017 2-3% Market bid (RFP) planned

Neuromodulation Implants June 2015 2-5%Category renegotiation, enhanced utilization management, and expanded supplier coverage planned

Ophthalmology Products(Non-Acute & Acute)

Ongoing 1% Expanded supplier coverage planned

Perfusion/Blood ManagementProducts & Capital

August 2015 0-3%Expanded supplier coverage and expanded product coverage planned

Peripheral Vascular Products July 2016 3-5%Category renegotiation and supplier compression planned

Small Joint Implants July 2017 0-3% New contracting opportunity planned

Spine Implants & Bone/Biologic Products

January 2016 2-5%Category renegotiation and supplier compression planned

Surgical Mesh Products February 2107 2-5% Market bid (RFP) planned

Surgical Power Equipment & Related Disposables

December 2016 2-4% Market bid (RFP) planned

Trauma Implants November 2015 7-10%Category renegotiation and supplier compression completed

Women’s/Men’s Health Products September 2015 5-10%Category renegotiation and supplier compression completed

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SUPPLY WATCH 2016



ImpactComments

Medical Surgical Products

Advanced Energy, Electrosurgery February 2016 0-11%Category renegotiation and pricing enhancement planned

Advanced Wound Care Products June 2016 0-2%Category renegotiation, enhanced utilization management, and expanded supplier coverage planned

Anesthesia & Spinal Procedure Trays June 2016 1-2%Enhanced utilization management planned

Bed Surfaces & Rentals Ongoing 0-5%Category renegotiation and enhanced utilization management planned

Breast Pumps & Related Disposables Ongoing 8-10% Product conversion planned

Dialysis Catheters March 2016 0-5% Expanded supplier coverage planned


ImpactComments

Medical Surgical Products (Continued)

Enteral Feeding Supplies March 2016 2-5% Category renegotiation planned

Gastrointestinal Endoscopy (GI) Disposable Products

December 2015 0-5%Renegotiation and supplier compression planned

External Defibrillation Units (AEDs) July 2016 2-4% Renegotiation planned

Hemostasis Products October 2015 16%Pricing enhancement and rebate performance completed

Orthopedic Casting & Splinting October 2016 2-3% Market bid (RFP) planned

Orthopedic Soft Goods and Bracing January 2017 3-5% Market bid (RFP) planned

Pediatric Products, Misc Ongoing 2-3%Renegotiation and expanded supplier coverage planned

Respiratory Therapy Capital Equipment Ongoing TBD Expanded supplier coverage planned

Respiratory Therapy Disposable Products

June 2015 3% Formulary development completed

Specialty Urology Products September 2015 2-5%Pricing enhancement and supplier compression completed

Surgical Drapes, Gowns and Standard Packs

February 2016 5-7% Market bid (RFP) planned

Vascular Access – Hemodialysis, Ports, PICCs and other Catheters

July 2016 1-4% Market bid (RFP) planned

SUPPLY WATCH 2016


ImpactComments

Support Services & Distribution

Coffee Program April 2016 $200K Enhanced savings opportunities planned

EVS Floor Equipment March 2016 Under EvaluationPricing enhancement and additional service options planned

Industrial Batteries Contract Coverage July 2016 Under EvaluationPricing enhancement and additional product coverage planned

Linen Processing January 2015 3%Enhanced savings opportunities and additional product coverage planned

Respiratory Therapy Capital Equipment Ongoing TBD Expanded supplier coverage planned

UV Bio-Decontamination Disinfectant Technology

June 2016 Under Evaluation Pricing enhancement planned


6

Product Category Industry ROi Contract # Supplier Comments

Coworker Apparel 0% 0% RAS01019 Scrubs & BeyondContracted supplier does not foresee a price increase in 2016

Office Paper 1% 1% RAS01598 Office Depot

According to market analysts, there are no major increases forecasted for copy paper, with only a 1% average gain expected in 2016

Office Supplies 1-2% -6% RAS01598 Office Depot

Transitioning to Office Depot will result in ROi Core product savings of ~6%. New core list pricing is set to take effect in January 2016

Travel: Air 1-2% 1-2% RAS00466 Executive TravelIf oil prices remain stable we will see moderate increases, less than 2%

Travel: Car Rental 0% 0% RAS00486 EnterpriseCar Rental rates projected to be flat lined and current rates for Enterprise are firm through calendar year 2016

Travel: Lodging 4-6% 1-3% RAS00466 Executive Travel

Moderate increases utilizing the ROi Concur booking tool. Hotel contracts are being re-negotiated in December 2015 to minimize these increases

Toner Cartridges 0% 0% RAS00550 ToshibaAt this time, there are no expected toner price increases expected during 2016

Listed on the following pages are key inflationary indices for ROi contracted product areas, indicating projected increases expected within the industry and corresponding cost impacts for products covered by ROi contracts. The information gathered below is a compilation of estimates from industry sources, suppliers and the insight of ROi’s Integrated Sourcing Solutions team. These tables list the various departments and product areas along with ROi’s projected change for all products within each area based upon industry trends.

When utilizing this information, please budget accordingly based upon the level of compliance with ROi contracts in each product area and with any projected volume adjustments.

PRODUCT AREA PROJECTIONS

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SUPPLY WATCH 2016


Diagnostic Imaging

Projections:


Breast Biopsy TBD5%

savings

RR001464RRCE01344RRCE00502

BardDevicorHologic

Currently ROi has contracts in place with the 3 vendors with the majority of the U.S. market share. Our goal is to drive additional savings through supplier consolidation, eliminating at least 1 vendor

Radio-pharmaceuticals

10-20% -10% TBD TBD

Manufacturer drug costs are driving industry increases. We anticipate an overall savings of 10% through our RFP process

Projections:

Administrative Services


Cleaning Chemicals 3-5% 0% RES01029 Diversey Firm pricing through December 2016

Disposable Paper 3% 0%RES00004V1RES01954

Kimberly ClarkGeorgia Pacific

Both agreements have fixed pricing in place through December 2016

Linens & Textiles 0% -6% RES0002V1 Standard TextilesProjecting 6% savings in negotiated price reduction for 2016 calendar year

Soaps, Lotions, Disinfectants

3-8% 0% RES00839 Ecolab Firm pricing through December 2017

SUPPLY WATCH 2016


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Environmental Services

Projections:

Facility Engineering


Batteries 2-3% 0% RFM00030 Energizer Firm pricing through May 2018

Building Automation

4% for labor

Tiered Discount Schedule

RFM00489 Johnson Controls

Johnson Controls is forecasting a cost increase of 4% labor with no anticipated increases in equipment. This projection is based on a general trending of overall market inflation and historical year over year benchmarking. ROi has firm tiered discounting through the life of the agreement.

Elevators 3-4% 2%RFM00035V1RRFM01634RFM01635

OtisSchindlerThyssen-Krupp

Industry preventative maintenance and labor rate increases are tied to collective bargaining agreements with the International Elevator Constructors Union and are projected in the range of 3-4% for 2015. Material adjustments are tied to metal indexes which are projected 0% due to weakening demand. ROi Contracts allow up to 2% increase in 2016.

Maintenance Supplies/Lighting

0-5% 0-2% RFM00031V1 Grainger

ROi anticipates an overall modest price increase across most categories. While some categories are decreasing or remaining neutral, others will increase modestly. Overall 2016 ROi contracted prices will be 0% to modestly higher.

Medical Gases 10-15% 4-6%RFM00023 RFM00025RFM00012

Air ProductsPraxairAirgas

Demand for industrial and medical gases remains high. Supply remains tight as there are few ‘new’ sources available. Look for industry as a whole to increase pricing over the next year based on supply/demand.

Projections:

SUPPLY WATCH 2016

Facility Engineering (Continued)


Air Filters 3% 0-2%RFM01702RFM00036

CamfilRamAir

Manufacturers are expecting modest price increases in raw materials. ROi contract prices with RamAir are fixed through 2016. Camfil prices may rise up to 2% in 2016.

Paint 0-3% 0-3% RFM01276 Sherwin-Williams

Manufacturers have seen stabilization in raw material costs, including the cost of Ti02, the main ingredient in paint. Sherwin-Williams anticipates a slight industry price increase not to exceed 3%. ROi contract prices may increase up to 5% annually.

Water Treatment 2.5% 0-2% RFM00005-1 Nalco

Price inflation for chemical products will be approximately 2.5%. ROi pricing is fixed through 2016. Garratt-Callahan may increase pricing up to 2% in 2016.

Projections:

Food Service


Adult Enterals, Food Supplements

2.5% 0% RND00006-1 AbbottContract price protection through May 2018

Beverages –Carbonated & NCB

10% 3% RND00857 Pepsi 3% cap on pricing annually

Cleaning Chemicals & Ware washing

3-4% 2% RES00007V2 Ecolab Moderate increases expected

Coffee Unknown 5% TBD TBDNegotiating with current suppliers to bring a 5% price reduction to ROi members

Food Disposables 2-4% 2%RNDV00475RAS00011V1RND00582

D&W Fine PackXpedxFoodbuy

Moderate increases expected

Infant Formula & Accessories

2.5% 0%RND00034V1RND01663

Mead JohnsonAbbott Nutrition

No cost for in-hospital stay and limited take home supply, firm pricing on specialty items through December 2017 for both sources

Projections:


SUPPLY WATCH 2016


10

Food Service (Continued)

Consumer Price Index (CPI) for Food (not seasonally adjusted)

Changes in Food Price Indexes, 2012 through 2015

ItemRelative

Importance

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Fore

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16

Consumer Price Indexes Percent Percent Change

All food 100.0 0.3 1.6 1.6 1.4 2.4 2.6 2.0 to 3.0 2.0 to 3.0

Food away from home 40.9 0.2 2.7 2.4 2.1 2.4 2.7 2.0 to 3.0 2.5 to 3.5

Food at home 59.1 0.3 0.8 1.1 0.9 2.4 2.6 1.5 to 2.5 2.0 to 3.0

All Meats 13.2 0.1 -0.2 2.3 2.1 7.2 3.1 2.5 to 3.5 2.5 to 3.5

Meats 8.6 0.1 0.3 3.4 1.2 9.2 3.3 2.5 to 3.5 2.0 to 3.0

Beef and Veal 4.1 -0.6 5.0 8.2 2.0 12.1 4.1 5.5 to 6.5 2.0 to 3.0

Pork 2.6 0.6 -8.1 -3.6 0.9 9.1 2.8 -4.0 to -3.0 1.5 to 2.5

Other meats 1.9 0.7 2.8 3.5 -0.1 3.9 2.4 2.5 to 3.5 2.5 to 3.5

Poultry 2.5 -0.5 -0.7 1.0 4.7 2.0 2.6 1.5 to 2.5 2.5 to 3.5

Fish & seafood 2.0 0.8 -1.5 -0.3 2.5 5.8 2.9 1.0 to 2.0 2.5 to 3.5

Eggs 0.9 9.2 35.3 12.4 3.3 8.4 4.3 12.5 to 13.5 2.5 to 3.5

Dairy products 6.3 -0.3 -2.5 -1.1 0.1 3.6 2.8 0.5 to 1.5 2.0 to 3.0

Fats and oils 1.7 0.8 -1.9 -1.1 -1.4 0.1 2.8 -0.5 to 0.5 1.5 to 2.5

Fruits & Vegetables 9.7 1.2 0.1 -0.8 2.5 1.5 3.0 0.0 to 1.0 2.0 to 3.0

Fresh 7.5 1.7 -0.4 -1.4 3.3 1.9 3.1 -0.5 to 0.5 2.5 to 3.5

Fresh fruits 4.0 2.4 -1.7 -3.4 2.0 4.8 3.0 -1.0 to 0.0 2.5 to 3.5

Fresh veg 3.5 0.8 1.3 1.0 4.7 -1.3 3.2 0.0 to 1.0 2.0 to 3.0

Processed 2.1 -0.2 1.5 1.2 0.3 0.1 2.8* 0.5 to 1.5 1.5 to 2.5

Sugar and sweets 2.1 0.1 4.4 3.2 -1.7 -0.8 2.2 1.5 to 2.5 2.0 to 3.0

Cereals & bakery products

8.0 -0.2 1.1 1.1 1.0 0.2 2.6 0.5 to 1.5 2.5 to 3.5

Nonalcoholic beverages 6.7 0.4 1.5 1.1 -1.0 -0.5 1.5 2.0 to 3.0 1.5 to 2.5

Other foods 10.5 -0.4 1.2 1.5 0.5 1.0 2.0 1.5 to 2.5 2.0 to 3.0

Orange indicates an adjustment downward, and black indicates no change from last month's forecast. 1 -BLS estimated expenditure shares, December 2014. Food prices represent approximately 14 percent of the total CPI. 2- The most recent forecast was published on September 25, 2015. *Annual data for processed fruits and vegetables are only available from 1999. This is a 15-year historical average. Source: Bureau of Labor Statistics. Forecasts by Economic Research Service. [Contact: Annemarie Kuhns 202-694-5351, [email protected] or David Levin 202.694.5353, [email protected]]

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SUPPLY WATCH 2016


Projections:

Labor, Construction & IT


Computer, Hardware

1 - 6% 1 - 6% Multiple Multiple

Price increase due to higher than expected growth predominately in Cloud based services. There will also be increased price competition from Cloud offerings in other areas such as: database management system (DBMS), application infrastructure, and middleware.

Computer, Software


Price increase due to higher than expected growth predominately in Cloud based services. There will also be increased price competition from Cloud offerings in other areas such as: database management system (DBMS), application infrastructure, and middleware.

Recruiting 1 - 6% 1 - 6% Multiple MultiplePrice increases due to increased demand and shortage of candidates.

Services andContingent Labor


Price increases due to increased demand and growth in the Healthcare Sector. The fastest growing segments will drive higher rates charged by suppliers.

Projections:

Laboratory


Arterial Blood Gas

3%

1%0%TBD

0%

RL00442

RL00427RL00391

RL01804

Instrumentation LabsRadiometerAbbott Point of Care - iSTATSiemens Health Care

New agreement February 2016

New agreement January 2018Check local agreement for annualrenewal dateNew agreement February 2020

Automated ESR Testing

0-3% 1% RL00047 HemaTek Price protection through December 2016

Blood Bank Equipment& Consumables

5% 3% RL00034V1Ortho ClinicalDiagnostics

TBD

Blood Collection Tubes & Needles

1-4% TBD

RL01320

RL01264

RL01319

Greiner Bio-OneNorth AmericaBecton, Dickinsonand CompanyBecton, Dickinsonand Company

New agreement August 2016



Projections:

SUPPLY WATCH 2016


12

Laboratory (Continued)


Chem/IA Equipment & Consumables

3-5% 0% RL00476V1Roche DiagnosticsCorporation

Price protection through October 2017

CoagulationEquipment & Supplies

1-3% 0%

RL00012V1

RL00448V1

Siemens Health Care Diagnostics

Diagnostica Stago

Price protection through July 2019

Price protection through June 2018

Drugs of AbuseTesting

0-3% 0% RL00653V1 MedTox Price protection through January 2018

Electrophoresis 0-3% 0% RL00049V1 Sebia Price protection through May 2017

Flu testing, MolecularTechnology

0-3% 2% RL01565 Quidel TBD

Hematology Equipment & Consumables

3-5% 0% RL00042V1Sysmex Corporation


Histology Reagents & Consumables

1 -3%3%0%

RL01318RL01696

Statlab Medical Sakura Finetek

Price protection through May 2018

Ketone Testing 1 – 4% 0% RL01660 StanBio Price protection through July 2017

Kits - Pregnancy, Strep, Mono, HIV, Other Lateral Flow Immunoassay

0-3% 0%RL00896RL01468RL01565

Sekisui DiagnosticsOraSure TechQuidel

Price protection through February 2017

Lab Distribution 1 – 3%1%TBD

RL01611RLDS01843

Cardinal HealthFisher Healthcare

TBD

Lancets 0 - 3%

TBD2%0%0%

RPL01301RL01906RL00610RL01564

Regard Owen MumfordNova Biomedical Roche Diagnostics

Price protection through Nov 2016Price Protection through 2022Price Protection through 2018

MicrobiologyEquipment,Consumables & TestKits

1 – 3% 0%

RL01313

RL01571

RL00011V1

bioMerieux, Inc (BacT/ALERT)bioMerieux, Inc (Vitek)Beckman Coulter (MicroScan)




Projections:

SUPPLY WATCH 2016

Laboratory (Continued)


Microbiology Media

1-4% 0% RL00004V1 Remel, Inc Price protection through Nov 2017

Molecular Diagnostics

3-5% 0%RL00456V1RL00045V1

CepheidMeridian Bioscience

Pricing is subject to change based upon IDN aggregated volume

Molecular Film Array Testing

1-4% 0% RL01642 BioFire Diagnostics Price protection through February 2018

POC Blood Analyzers and Supplies

1-4% 3% RL00391Abbott Point of Care iSTAT

TBD

POC Blood Glucose Meters & Supplies

1-3% 0%RL00610RL01564

Nova BiomedicalRoche Diagnostics

Price protection through 2022Price protection through Oct 2018

Quality Control Material

0 - 4% 2% RL00029 BioRad Laboratories TBD

Special Protein Testing

0 – 3% 2% RL001895 The Binding Site TBD

Urinalysis Equipment,Reagents &Consumables

1-3%0%0%TBD

RL01621RL00044RL00001

ARKRAYIris DiagnosticsSiemens Health Care

Price protection through April 2017New agreement February 2016Price protection through May 2018

Women’s Health 0 – 3% 0% RL01627Becton, Dickinson and Company (Affirm)

Price protection through July 2017

Projections:

Medical Devices


Cardiac Rhythm Management Devices

-2%Minus 3-7%

RHP00004V2RHP00005V2RHP00006V2RHP00007V2

MedtronicBoston ScientificSt. Jude MedicalBiotronik

3 of 4 CRM contracts renegotiated in Fall 2015 secondary to change in member utilization for additional savings value; implemented 12/1/15.

Drug Eluting Stents & Interventional/ Core Cardiology Products

-5%Minus 5 -7%

RHP00342RHP00451V1RHP00343

RHP00453

RHP00012RHP00344RHP00452RHP01655

Abbott Vasc-DESAbbott Vasc–ICBoston Scientific–DESBoston Scientific–ICJ&J Cordis-ICMedtronic-DESMedtronic-ICTerumo–IC, Radial

Current agreements in place through December 2016. Awards: DES - Dual source awards to preferred suppliers; IC – primarily non-committed with price enhancements. New Technology releases expected in CY16 and 17 for Bioabsorable DES options, currently challenged by study findings including restenosis.

Projections:



SUPPLY WATCH 2016


Electro-physiology Products

UnknownMinus 0 – 3%

RHP00578RHP00580RHP00577RHP00581

Biosense WebsterBoston ScientificCR BardSt. Jude Medical

Contracts renegotiated December 2015, value opportunity available for facility standardization to preferred supplier.

Heart Valves -Tissue & Mechanical

1 -2%Minus 3 - 5%

RHP00573V1

RHP00574V1RHP01834 RHP00575V1RHP00TBD

Edwards LifeSciencesMedtroinicOnyXSt. Jude MedicalSorin

Current agreements in place through February 2017, dual- or Tri-Source across all product types (tissue, mechanical and rings) with preferred optimizations available for enhanced value.

Neuro-modulation Implants

UnknownMinus 0 - 5%

RHP00883RHP00884RHP00885

Boston ScientificMedtronicSt. Jude Medical

Current agreements in place through April 2018, price capitation strategy employed; possible supplier/product coverage expansion.

Ophthalmology Implants & Related Products

Unknown 0% RMS00077 Alcon

Alcon renegotiation is completed; ROi will continue to negotiate additional contract coverage with other suppliers (e.g. AMO and B&L).

Orthopedic Implants-Knees/Hips/Shoulders

-1.5%Minus

3%

RHP00019V2RHP01666RHP01274RHP01017V1RHP00017V2RHP000016V2RHP00018V2RHP00793RHP00015V2

BiometBiomet-ShouldersConforMISIntegraJ&J – DePuySmith & NephewStrykerTornierZimmer

Current agreements in place through Spring 2017. Awards: Vendor compression by community/member market based on a “Top 3” preferred supplier selection; Capitated pricing by component category; Separate contracts for hip/knee implants vs. shoulder implants. Industry news: Biomet being acquired by Zimmer. This will impact the ROi contract strategy. With member support, ROi is preparing to either rebid with a new compression strategy or negotiate pricing enhancements under remaining Top 3/5 compression strategy.

Perfusion Products & Capital

UnknownMinus

1%RHP00684RHP00682

MaquetMedtronic

Strategy will be to focus on non-contracted product coverage additions while driving supplier compression with market share commitment.

Peripheral Vascular Interventional Products

1 – 2%Minus 3 – 5%

RHP00618V1RHP00619V1RHP00760V1RHP00620V1RHP01498RHP00644V1RHP00622V1RHP00626V1RHP00621V1RHP00627RHP00623V1RHP00624V1RHP00616V1

Abbott VascularAngiodynamicsArgon MedicalAtrium MedicalBlockade MedicalBoston ScientificCook MedicalCovidien (eV3)CR BardJ&J CordisMedtronicMerit MedicalTerumo Medical

Current agreements in renegotiation for June 2016. Additional contracts designed to drive optimal value at the category vendor compression level with market share commitment. 2016 initiative will support supplier compression overall with product category differentiation.

Projections:


14


15

SUPPLY WATCH 2016



Perfusion Products & Capital

UnknownMinus

1%RHP00684RHP00682

MaquetMedtronic

Strategy will be to focus on non-contracted product coverage additions while driving supplier compression with market share commitment.

Peripheral Vascular Interventional Products

1 – 2%Minus 3 – 5%

RHP00618V1RHP00619V1RHP00760V1RHP00620V1RHP01498RHP00644V1RHP00622V1RHP00626V1RHP00621V1RHP00627RHP00623V1RHP00624V1RHP00616V1

Abbott VascularAngiodynamicsArgon MedicalAtrium MedicalBlockade MedicalBoston ScientificCook MedicalCovidien (eV3)CR BardJ&J CordisMedtronicMerit MedicalTerumo Medical

Current agreements in renegotiation for June 2016. Additional contracts designed to drive optimal value at the category vendor compression level with market share commitment. 2016 initiative will support supplier compression overall with product category differentiation.

Spinal Implants -1.5%Minus 2 - 5%

RHP00725RHP00731RHP00003RHP00726RHP01316RHP00852RHP00293RHP01617RHP00727RHP01789RHP00730RHP00729RHP00222RHP00209RHP00253

AesculapAllosourceDePuy SynthesGlobusK2MLife SpineMedtronic Sofamor Danek NuVasiveParadigm SpineSpineSourceSpineWaveStryker SpineUlrich SpineZimmer Spine

Contracts currently in renegotiation with strategies related to: Vendor compression by community/member market; Continued capitated pricing by component category; Moderate physician selection choice with price reductions as well as new vertical integration strategy to replicate across the membership (from Mercy-Springfield).

Surgical Mesh and Fixation Implants

1 – 3%Minus 2 - 10%

RMS00871RMS00872RMS00873RMS00110V1

RMS00533V1

CR Bard (fixation)CR Bard (biologic)LifeCell (biologic)CR Bard (synthetic)J&J (synthetic)

Current agreements being extended with reassignment of tiers for select members who continue high performance; fixation category has been further covered with a second supplier contract option.

Trauma Implants 3 - 4%Minus 3 - 7%

RHP00834RHP00831RHP00826V1RHP00833RHP00832RHP02050

BiometDePuy SynthesEmerge MedicalStrykerSmith & NephewAcumed

Contracts renegotiated December 2015; designed to drive value with supplier compression and committed market share by IDN member.

Projections:

SUPPLY WATCH 2016


16



Advanced Energy, Electrosurgery

2-4%Minus 3-5%

RMS00227RMS00662RMS00081RMS00446V1

CovidienMedtronicMegadyneJ&J Ethicon

Exploring opportunities to expand portfolio for additional coverage while enhancing member value for preferred award suppliers in specific categories.

GI Endoscopy Disposables

UnknownMinus

2%RHP00022 Boston Scientific

Contract renegotiation underway for January 2016, optimization of the Boston Scientific preferred agreement for additional savings/rebates, while compressing the secondary suppliers.

Hemostasis Products

UnknownMinus 16%

RMS00170 Baxter BioSciencePreferred source agreement has been extended with additional price enhancements.

Pediatric Care Products

2-5%Minus 0-8%

RMS01492RMS00617RMS01024RMS00128

RMS01038RMS01047

RMS00169

Natus MedicalNeoChildNeoMedChildren's Medical Ventures (Philips)VermedCovidien (enteral feeding)Procter & Gamble

New and/or expanded pediatric specialty product coverage continues to be focus; Member product standardization opportunities being explored.

Respiratory Therapy, Disposables

2-4%Minus 5-8%

RMS00079RDS00824RMS00056V1

CareFusion TriAnimMedline

Current high volume contract with CareFusion has been renegotiated with price enhancements. Product Formulary development by select ROi members will be further implemented and expanded to other members as directed.

Specialty Urology Products & Capital

UnknownMinus 0-5%

RMS00957RMS00960RMS00961

Boston ScientificCR BardCook Medical

Current agreements extended until Fall 2017 following renegotiation and pricing enhancement.

Surgeon’s Gloves 1-5%Minus 5-7%

RMS00101V1RMS00100

MolnlyckeCardinal

Preferred, highly committed award to Molnlycke agreement extended with price enhancements for continued high commitment performance.

Surgical Drapes, Gowns, Standard Packs, and Related Disposables

2-5%Minus

5%

RMS00716-RMS00722

RMS00807RMS00477

Halyard

3MCardinal Health

Currently renegotiating. Price enhancements expected with additional value for product standardizations and conversions based on utilization review and adjustment to be assessed.

Suture/Endomechanical Products

0 -5%Minus

15-20%RMS01893 Covidien

Current agreements renegotiated and extended to April 2020. Sole sourced agreement with rebate and tier enhancement opportunities for additional ROi member growth.

Wound Care, Advanced

2-3%Minus 5 -7%

RMS01042RMS01043RMS00931RMS00531RMS01317RMS01288

MolnlyckeMedlineConvaTecJ&JSmith&NephewSystagenix

Current agreements now aligned co-terminus for RFP bid in 2016. Medline and Molnlycke awarded preferred commitment status. Reassessment across membership will provide strategy direction for current dual source preferred awards.

Projections:

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Laboratory

In the current calendar year ROi is focusing on negotiating agreements in a number of categories, including: anatomic pathology, expansion of lab distribution, fecal occult blood testing, microbiology manual media, immunology, and blood bank.

Beginning in Q2 2016, ROi will renew agreements in the categories of automated blood culture equipment, automated microbial identification and susceptibility analyzers, and molecular diagnostics. In Q4 2016, ROi will focus on renewing women’s health testing agreements.

The introduction of new molecular testing platforms will provide rapid results with high levels of accuracy. Members should continue to balance savings expectations with increased costs to acquire new technology. ROi continues to explore additional opportunities in molecular, infectious disease, and pathology.

ROi is monitoring efforts towards more effective lab test utilization. This could result in additional insourcing opportunities.

Pharmacy

Pharmacy Strategic Planning

Meeting the objectives of the Affordable Care Act and the growth of Accountable Care Organizations will require increased efficiency and optimized outcomes under reduced reimbursement. Overall spending will likely increase in 2016 with the continuing expansion of Medicare/Medicaid.

Pharmacy may aid organizational success by contributing to drug utilization efforts, playing a greater role in interdisciplinary patient care teams and ambulatory care to improve quality and continuity of patient care, and improving compliance among discharged patients to reduce re-admission.

Other issues that impact Pharmacy expenditures include: Patient population/mix, increases or decreases in a facilities patient days, facility type (Class of Trade), strength of formulary, acceptance and use of emerging biosimilar drugs, and utilization of Therapeutic Interchange Programs.

Clinical Services

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Departmental Expectations

Projecting Future Drug Expenditures

Significant increases in generic drug prices have been seen since 2013 and are expected to continue in 2016. Factors contributing to the changing market are: merging of manufacturers, delayed introduction of generic molecules from manufacturers due to FDA citations, reduction in the number of generic pharmaceuticals produced by multiple manufacturers, drug shortages due to aging manufacturing plants, manufacturer’s increased use of limited distributors, and continued speculation about future caps on pharmaceutical prices mandated by the Affordable Care Act.

As reported last year, drug shortages are not likely to be abated over the next five years. In 2014 we reported that some 82 drug entities were listed on the FDA’s Shortage website. This year 70 drugs are currently listed on the FDA’s website. Additional costs of alternative sources and therapies should be considered. Also to be considered are those drugs that have been discontinued by the manufacturer.

Branded drugs losing patent protection in 2015 include: Abilify ®, Copaxone®, Gleevac®, Namenda®, Provigil®, Combivent®, Zyvox®, Prezista ®, and Avodart®. Branded drugs losing patent protection in 2016 include: Crestor®, Benicar®, Benicar HCT®, Cubicin®, Vfend®, Cancidas®, Glivec®, Zyvox®, Blopress®, and Baraclude®. A check of the FDA’s Approved Drug Listing (The Orange Book) found limited generic alternatives of these products currently available. This is particularly true of the sterile injectables.

Expensive specialty drug products are expected to continue to dominate new product development. The trend toward specialty biologic and oncolytic approvals will largely contribute to projected increases in drug spend, particularly in the Oncology and Ambulatory Care arenas. In 2013, nearly 28% of total medication spending was attributed to biologic agent and this is expected to grow to 50% by 2018. New agents that were approved in late 2014 through 2015 include agents for treatment of lymphomas, MS, and hepatitis C.

Of significant interest will be the introduction of other Biosimilars to the market. For example, Tbo-filgrastim (Granix®) and Filgrastim-sndz (Zarxio®) have both achieved approval through different sections of the approval pathway. Granix was approved as a separately licensed biologic with a single indication and an inability to automatically substitute for Neupogen. Zarxio® was approved through the 351(K) pathway allowing for extrapolation of five indications from Neupogen® and can pursue an interchangeability designation. Specific guidance for interchangeability and labeling is currently pending from the FDA.

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Appropriate utilization will be imperative for managing costs associated with new biological and oncolytic agents, including development of formularies and appropriate use protocols. New molecular entities should also be expected to require an accompanying pharmacogenomic assay for patient selection or optimal dosing.

The use of specialty pharmacies or closed distribution channels will likely continue to expand. The recent move to an exclusive specialty pharmacy distribution model by Genentech is estimated to cost hospitals and health systems more than $250 million a year. As hospitals and health systems typically do not receive similar volume discounts from these suppliers, the impact can be significant. A recent example of this trend can be seen with the introduction of Zarxio®, the first biosimilar to launch in the United States. Even though it shares five of the same indications as Filgrastim® which is available through the main wholesalers, it is only available through specialty distribution.

All estimates use some historical data to make suggested pharmaceutical spend percent increases. While there is some validity in using historical data, there are some other factors that might assist a member facility to refine its pharmacy budget estimate:

• Patient Population/Mix – patient-type being treated at the facility (Oncology, Transplant, Burn versus General Med/Surg, Ortho, OBGyn).

• Facility Type - what impact will greater utilization of alternate care, clinics, etc., have on pharmaceutical expenditures? Recent studies have reported growth of clinic drug expenditures up 12.6% while non-federal hospitals were up 8.7% compared to the previous 12 months.

• Review of the individual facilities 80/20 Report - what drugs make up an individual members top dollar spend and are contracts available to help control the cost? Unfortunately, most Branded or proprietary drugs are not price protected so they are subject to price increases over time.

• Strength of Formulary – does the facility have a strong Formulary that is being adhered to?

• Utilization of Therapeutic Interchange (TI) - what opportunities exist to reduce cost through TI without negatively impacting patient care or outcomes?

• Acceptance and use of biosimilar drugs.

Other factors over which the facility has little or no influence that will impact the drug budgetare:

• Drugs scheduled to come off Patent and Patent life extended due to revisedindications.

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• Newly approved drug modalities.

• Change in treatment protocols as the result of new drugs entering the marketplace.

• Change in manufacturer’s distribution method (e.g., expanded use of Specialty Pharmacies).

• Products discontinued because of the following:

– Raw material issues.

– Old production facilities not being upgraded thus reducing manufacturing capacity .

– FDA Actions against drug manufacturers interrupting manufacturing.

– Changes in supplier pricing strategies, sales must meet production costs and profit margins.

Sources:FDA Website - http://www.fda.gov/Drugs/default.htm

• Drugs Off Patent, Discontinued Drugs, ANDA’s, Orange Book

American Journal of Hospital Pharmacy - http://www.ajhp.org/Schumock, Glen T., et al; National trends in Prescription Drug Expenditures and Projections for 2014. AJHP, Vol 71 March 15, 2014

American Journal of Hospital Pharmacy - http://www.ajhp.org/Schumock, Glen T., et al; National trends in Prescription Drug Expenditures and Projections for 2015. AJHP, Vol 72 May 1, 2015

Diagnostic Imaging

Breast Biopsy – Contrast MediaThere is ongoing discussion within the industry of a possible iodine shortage, which would potentially create a negative impact for many diagnostic imaging procedures. All ROi contrast media contracts have price protection for the term of the agreements. We continue to have ongoing innovative discussions on how to address the iodine shortage in the event it is to become reality.

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Product CategoryProjected

ChangeFactors

Branded Drugs 2-3% New products coming to market and competition from therapeutic alternatives.

Lost Patent Protection -10% Competition from generic alternatives.

Generic Multisource 5-7% Increases in oral solid generics mitigated by decreases in generic injectable pricing.

IV Solutions 6-15%Highly committed IDNs benefit from greater price protection. Market instability continues due to national shortages, and contributes to broad range of projected change.

Biotech Drugs 25-50% New molecular entities coming to market. Specialty and closed distribution channels.

Plasma Products 3-5%Price increases in plasma-derived products. Potential for blood factor consignment may be mitigating factor.

Oncolytics 10-15% New entities coming to market. Continued trend to hospital-based infusion.

https://webmail.mercy.net/owa/redir.aspx?C=kU0p94OkEU-Fsrbg4jcvop4qYaML2NEI7D-Yp2QUdVZU5fpCijY-bUEU5hJYmZE0DVCLMB1KGZY.&URL=http://www.fda.gov/Drugs/default.htm

https://webmail.mercy.net/owa/redir.aspx?C=kU0p94OkEU-Fsrbg4jcvop4qYaML2NEI7D-Yp2QUdVZU5fpCijY-bUEU5hJYmZE0DVCLMB1KGZY.&URL=http://www.ajhp.org/

https://webmail.mercy.net/owa/redir.aspx?C=kU0p94OkEU-Fsrbg4jcvop4qYaML2NEI7D-Yp2QUdVZU5fpCijY-bUEU5hJYmZE0DVCLMB1KGZY.&URL=http://www.ajhp.org/

There are a number of areas where, based on contracting in 2016, ROi members will experience a benefit. It should be noted that secondary to ROi’s utilization of three benchmarking and market intelligence tools, the Medical Device contract portfolio is incrementally improving its position as a best in class contract offering to the ROi members. Notable Medical Devices agreements include:

Total Joint ImplantsTotal Joint Implants are currently contracted through early 2017, with awards made to a selection of preferred suppliers within a supplier compression strategy employed by all ROi member organizations.

With these awards made, ROi and members should be aware that Zimmer (one of the contracted, but non-preferred awarded total joint implant suppliers) has completed its acquisition of Biomet (one of the three preferred total joint implant suppliers awarded in the early 2014 contracting initiative). ROi has confirmed that this merger has impacted the suppliers’ strategy for their service and support of ROi member organizations. As a result, ROi is prepared to challenge all total joint suppliers with a rebid of these contracts in 2016 which may or may not adjust the current award platform and strategy for this category. At this time, ROi has engaged with key member physician leaders to begin this strategy design discussion so that negotiations with the remaining four total joint suppliers under contract can begin. If consensus is given to rebid, ROi estimates there to be as much as seven percent additional member value from such work.

Medical Device Implant Solutions ProgramThis program provides an alternative business model that is changing the way implants are marketed, serviced and distributed in health care. Early results of the program include:

• Average spine implant cost savings of 35% for ROi member, Mercy• Standardization of spine implants• Innovative ownership and engagement by key spine implanting surgeons

By partnering with the original equipment manufacturer (OEM), ROi is able to distribute and service the same spine implants directly to the member facility at a reduced cost. The process eliminates the usual “middle men” of the implant industry, such as the sales team, distributors, and other marketing forces, and consolidates the number of various implant vendors.

Through the ROi program the role of the vendor, GPO, distributor, and sales representative are now internalized and managed by ROi. This includes hiring additional FTEs to manage the sale and service of the spine implants. Instead of being employed by an outside commercial spine company, those FTEs are employed by ROi.

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Medical Devices


22

ROi has developed an aggressive timeline, including detailed communication and sales cycle expectations, for this Medical Device Implant Solutions Program across all ROi members over the next two years.

Cardiac Rhythm Management DevicesContract renegotiation for pacemakers, ICDs, CRT-Ds, and CRT-Ps was scheduled for April 2016, however, due to ROi members adjusting their implant utilization, renegotiations were opened earlier than previously scheduled. As a result of these negotiations and agreement extensions, an additional 5% in member savings value was created. In addition, formal agreement considerations for member-directed bulk buys which can yield an additional 5% -7% in value are now available.

Drug Eluting StentsCurrently, Boston Scientific enjoys a preferred award status which benefits many ROi members. Boston Scientific, Abbott Vascular, and Medtronic have all released evolutionary products, or product extensions, to their current drug eluting stent offerings and each have a five year pipeline of aggressive new technologies for future clinical consideration. The existing high preferred dual source awarded contracts are scheduled to be renegotiated in January 2017.

Peripheral Vascular Interventional ProductsPeripheral Vascular contracts are currently in renegotiation with a targeted implementation date of June 2016. With support of ROi’s CV/IR Service line, our continued effort is to drive additional supplier compression within these product subcategories while allowing for optimal savings benefit for our members in the range of 5% - 9%. Such compressions demand heavy compliance by membership and therefore ROi‘s focus is now on contract utilization monitoring with strong member engagement.

Trauma ImplantsWith support of key member physician leaders, ROi contracts were renegotiated effective November 1, 2015. Implemented savings totaling 12% was ROi’s first ever attempt towards supplier compression with a focus on implant standardization and supplier service requirements.

Ophthalmology Implants and Related ProductsROi has contracted with a single supplier, Alcon Laboratories, in this medical device category for several years. The changing member utilization patterns and openness to driving towards a more competitive environment has ROi membership now seeking supplier product usage with alternative suppliers like AMO and Bausch & Lomb.

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As a result, ROi is currently focused to secure additional contract coverage options with alternative suppliers in 2016 to meet this member need.

Surgical Mesh ProductsIn 2014, ROi membership endorsed the strategy for two year extensions to all existing biologic and synthetic surgical mesh contracts for tier adjustment refreshes based on continued high performance of these agreements. The Fixation subcategory was expanded to a multi-sourced award with new product availability. These contracts are scheduled for review and possible renegotiation in Fall 2016, depending on market dynamics and member direction.

There are a number of areas where, based on contracting in 2016, ROi members will experience a benefit. It should be noted that secondary to ROi’s utilization of three benchmarking and market intelligence tools, the Medical Surgical Products contract portfolio is incrementally improving its position as a best in class contract offering to the ROi members. Notable Medical Surgical Products agreements include:

Surgical Drapes, Gowns, Standard Packs and DisposablesIn 2015, with ROi' Surgery Service Line endorsement, we bid this $13M spend category which included sterile and bulk non-sterile products. RFP responses are under review with expected awards to be made in January 2016. A supplier compression strategy is expected along with a ROi Private Label solution in select product categories. Estimated member value will be between 5% - 7% in annual savings.

Advanced Energy, Electrosurgery Capital and DisposablesIn 2015, ROi suppliers presented additional savings for member performance enhancements and extended contract terms. Estimates of member value are expected to be as high as 11% based on supplier compression and product standardization with implementation in February 2016.

Advanced Wound Care ProductsCurrently, ROi‘s multi-awarded contract portfolio was in need of operational clean-up and contract termination. This is in preparation for member engagement and data review to facilitate the development of a comprehensive strategy for continued supplier compression awards. Subject matter experts in wound care delivery will be part of this strategy development and engagement. Currently contracted suppliers include Medline, Smith & Nephew, Convatec, and 3M. These contract awards are scheduled July 2016.

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Orthopedic Soft Goods

Since 2010, ROi members have maintained a dual source award to DJO and DeRoyal with additional specialty product coverage by Breg. Currently in contract extension through July 2016, these suppliers and their product portfolios will be rebid by ROi under the direction of various clinical stakeholders for award in Summer 2016. A secondary consideration for rebidding these categories is the retirement of the Hanger/CARES program that ended in October 2015; this stock and rebill program is currently in assessment by ROi members for continuation at their local level. Such programs will still be available for interested ROi members, but our contracting focus will be to secure the most aggressive point of acquisition product value for orthopedic soft goods and cold therapy products available.

Anesthesia Trays and Related Disposables

2016 ROi contracting efforts will be focused upon existing contract price enhancement, agreement structure, and commitment opportunities as well as a complete portfolio of products offered. This work is estimated to bring ROi member value of 1% - 2% in annual savings with implementation in Summer 2016.

Gastrointestinal (GI) Disposable Products

In 2015, assessment of continued preferred supplier status awarded to Boston Scientific was performed. Result was additional price enhancements for highly performing organizations with rebate potential across this very comprehensive product portfolio. The secondary suppliers such as Cook, Olympus, US Endoscopy, Endochoice, and Halyard/Ballard will continue to be available but additional compression is expected. Member value is expected to be between 0% - 5% annually.

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Food & NutritionThe all-items Consumer Price Index (CPI), a measure of economy-wide inflation, fell 0.2% from August to September, but is unchanged from September 2014 levels. The CPI for all food rose 0.4% from August to September and is 1.6% above the September 2014 level. The degree of food price inflation varies depending on whether the food was purchased for consumption away from home or at home.

The food-away-from-home (restaurant purchases) CPI was up 0.5% in September and is 2.9% higher than September 2014. The food-at-home (grocery store or supermarket food items) CPI rose 0.3% in September and is 0.8% higher than last September.

The Economic Research Service (ERS), revises its food price forecasts if the conditions (such as the feed grain crop outlook or weather-related crop conditions) on which they are based change significantly. Despite the effects of the drought in the Southwest and California, retail food price inflation rates approached the 20-year historical average of 2.6% per year. In 2014, the food-at-home CPI increased 2.4% while overall food price inflation was close to its 20-year historical average, inflation across food categories covered a broad spectrum. The most notable annual inflation was seen in those foods located on the perimeter of the grocery store—retail beef and veal, pork, eggs, fish and seafood, dairy, and fresh fruit all experienced above-average price increases. Alternatively, items in the center aisles of grocery stores experienced below-average inflation or, in some instances, even deflation. In 2014, prices fell for fresh vegetables, sugars and sweets, and nonalcoholic beverages.

For 2015, ERS predicts that supermarket (food-at-home) prices will see slightly lower-than-average food price inflation, increasing 1.5 - 2.5%. However, food price inflation is expected to vary by category. Beef and veal prices are expected to continue to experience the effects of the Texas/Oklahoma drought. Farmers' decisions on calving and herd sizes will be felt down the line due to the 16- to 18-month production process. Egg prices are expected to rise 12.5 - 13.5% due to the effect of Highly Pathogenic Avian Influenza (HPAI) on table-egg-laying flocks. In contrast, the effects of Porcine Epidemic Diarrhea virus (PEDv) on the hog industry are subsiding, and the hog industry has started to expand in 2015, resulting in a decrease in farm-level hog prices.

In particular, the ongoing drought in California could have large and lasting effects on fruit, vegetable, dairy, and egg prices. Conversely, if oil prices continue to remain low throughout 2015 and 2016, subsequent decreases in production and transportation costs may be passed on to the retail level.

Looking ahead to 2016, ERS predicts supermarket prices to rise 2% – 3%, a rate of inflation that remains in line with the historical average.

Support Services

These forecasts are based on an assumption of normal weather conditions; however, severe weather or other unforeseen events could potentially drive up food prices beyond the current forecasts.

Sources: USDA - http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx

IT Hardware & SoftwareThe U.S. dollar spending growth rate on devices (including PCs, ultra-mobiles, mobile phones, tablets, and printers) for 2016 was decreased by 1.3 percentage points to 5.1%. The smartphone market is becoming polarized between the high- and low-end market price points. As a result, the market opportunity is becoming increasingly limited for midrange smartphones.

Data center systems spending is projected to reach $143 billion in 2016, a 1.8% increase from 2015. Growth for the enterprise communications applications and enterprise network equipment segments of the market have been increased from the previous quarter's forecast, while growth for the servers and external controller-based storage segments has been lowered. These growth fluctuations are due to a higher than previously anticipated switch to cloud-based services.

In the enterprise software market, spending is on pace to total $335 billion, a 5.5 percent increase from 2015. More price erosion and vendor consolidation is expected in 2016 because of fierce competition between cloud and on-premises software providers. In particular, in the customer relationship management (CRM) market, a key cloud battleground, seat prices for segments such as sales force automation (SFA) are expected to decline by 25 percent through 2018. This will be caused by vendors discounting their cloud offerings heavily to try and maintain their customer base. There will also be increased price competition from cloud offerings in other areas such as database management system (DBMS), application infrastructure, and middleware.

The outlook for IT services in 2016 has been reduced to 2.5% growth, down from the 4.1% growth forecast in the previous quarter. Globally, reductions to software support services contributed disproportionately to a lower outlook through 2018, because of lower growth rates expected for enterprise software. Regionally, short-term growth rates were lowered slightly in Russia and Brazil, due to declining economic conditions and political uncertainty in both countries.

Telecom services spending is projected to grow 0.7% in 2016, with spending reaching $1,638 trillion. A multitude of factors have affected each national market with the primary driver for growth being a reduction in expectations for mobile voice revenue across several markets in Western and Eastern Europe (such as Austria and Italy).

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http://www.ers.usda.gov/data-products/food-price-outlook/summary-findings.aspx









Services, Contingent Labor & RecruitingThe U.S. temporary staffing industry is projected to reach an all-time high of $121 billion in 2016, according to the U.S. Staffing Industry Forecast.

Temporary healthcare staffing revenue is projected to grow by an upwardly revised 17% in 2016, driven by double-digit growth in each healthcare staffing sub-segment: Travel nursing, per diem nursing, locum tenens and allied health.

Travel nursing is projected to be the fastest growing segment, with revenue growth of 23% in 2016. Along with a generally improving economy, the growth in healthcare staffing revenue can largely be attributed to an increase in the number of newly insured due to the Affordable Care Act, which has increased demand for healthcare services while simultaneously decreasing hospitals’ bad debt expense (as more insured means less uninsured admissions). As shown in the following table, the U.S. Congressional Budget Office projects an additional six million non-elderly Americans will gain access to insurance in 2016 as a result of ACA, which should help make next year another strong one for healthcare staffing.

Projected change in insured (US residents younger than 65):

The remaining segments of IT, finance/accounting, marketing/creative, office/clerical, industrial, legal and clinical/scientific segments are also expected to increase by 7%.

Gross Domestic Product (GDP) growth is the biggest driver and most important predictor of growth in the overall U.S. staffing industry. The forecast is based on Staffing Industry Analysts’ expectation that U.S. GDP growth will accelerate to 2.9% in 2016, representing the fastest growth in a decade.

The forecasted growth rates for the U.S. temporary staffing industry are based on estimates of volume growth in the number of temporary workers placed, along with projections of expected increases in average bill rates. The increase in bill rates can be attributed to accelerating wage inflation due to lower unemployment rates and fewer available candidates.

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Through 2015 In 2016Exchanges 11 million 10 million

Medicaid/CHIP 10 million 2 million

Employment-based (-1 million) (-5 million)Nongroup/Other (-3 million) (-1 million)Total 17 million 6 million

Minimum wage increases in several states are projected to have a ripple effect of boosting pay and bill rates in the industrial and office/clerical staffing skill segments. In addition, bill rates in the industrial and office/clerical staffing skill segments have risen due to pass-through of new administrative and health insurance costs related to the Affordable Care Act (ACA) employer mandate which took effect January 1, 2015.

While the likelihood of a recession occurring in 2015 or 2016 is low, an unexpected downturn in the overall economy remains the most severe risk to the forecasted growth rates of the industry. Place and search, and Recruitment Process Outplacement (RPO) are expected to grow by 7% in 2016.

Linens and TextilesThe U.S. Department of Agriculture’s (USDA) first 2015/16 world cotton projections anticipate that consumption will exceed production for the first time in six years, but that global ending stocks will remain excessive. World stocks more than doubled between 2010/11 and 2014/15, due mainly to cotton policies in China, which supported domestic and world prices above market-clearing levels. For 2014/15, China’s government has shifted from a price support to an income support program and intends to impose much stricter limits on imports. China’s policy reversal is largely responsible for driving this season’s A Index down an estimated 25%. Responding to sharply lower prices, world consumption is projected to exceed production by 3 million bales in 2015/16, drawing world stocks down to about 107 million bales, the equivalent of 92% of projected global consumption.

With most of the world’s stock draw down occurring in China, ending stocks in other countries are reduced slightly. The A Index is expected to remain level with the current season at $0.68 per pound. U.S. cotton production is pegged at 14 million bales for 2015/16, as producers are anticipated to reduce planted area by about 12%. Domestic mill use is projected marginally above the 2014/15 level and exports are projected marginally lower, with ending stocks about unchanged from the beginning level.

Source:

USDA Cotton Outlook - www.usda.gov/oce/forum

National Cotton Council – http://ww.cotton.org/econ/prices/monthly.cfm

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Raw Cotton “A” Index Pricing in Cents Per Pound: Source National Cotton Council

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecCalendar

Year Average

Crop Year

Average

2010 77.39 80.05 85.8 88.08 90.07 93.04 90.35 104.7 126.5 155.4 168.2 105.4 165.1

2011 178.9 213.1 229.6 216.6 165.5 167.1 114.1 116.8 110.6 104.6 95.45 155.7 99.82

2012 101.1 100.7 99.5 100.1 88.53 82.18 83.97 84.4 84.15 81.95 80.87 83.37 89.24 87.96

2013 85.51 89.71 94.45 92.68 92.74 93.08 92.62 92.71 90.09 89.35 84.65 87.49 90.42 90.65

2014 90.96 94.05 96.95 94.2 92.71 90.9 83.84 74 73.38 70.34 67.56 68.3 83.09 70.78

2015 67.35 69.84 69.35 71.7 72.86 72.35 72.35 71.82 68.74 70.7 0


http://www.usda.gov/oce/forum

http://ww.cotton.org/econ/prices/monthly.cfm

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Integrated Sourcing Solutions Contacts

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Leadership

Clinical Services

Capital Management

Jessica Wray Executive Director 314-364-6513 [email protected] Aubry Director – Capital 417-820-9529 [email protected] Larsen Contract Manager – Medical Products 314-364-6560 [email protected]

Jessica Wray Executive Director 314-364-6513 [email protected] Bosworth Sr Contract Manager – NonAcute 314-364-6572 [email protected] Collier McCormack Sr Contract Manager – Radiology 314-364-6508 [email protected] Densmore Contract Process Coordinator – Lab/Rad 314-364-6437 [email protected] Halvachs Sr Contract Manager – Pharmacy 314-364-6423 [email protected] Lambert Contract Manager – Pharmacy 314-364-6543 [email protected] Little Utilization Director, Pharmacy 314-364-6595 [email protected] Lochmann Contract Manager – Pharmacy 314-364-6519 [email protected] Meinert Contract Manager – Laboratory 314-364-6521 [email protected] Nieters Contract Process Coordinator – Rx 314-364-6512 [email protected] Webb Sr Contract Manager – Pharmacy 314-364-6503 [email protected]

Medical Devices

Kelle Laws Executive Director 314-364-6570 [email protected] Cenac General Manager – Implant & Service 314-364-6556 [email protected]

SolutionsKelly Revelle Contract Manager – Medical Devices 314-364-6590 [email protected] Richardson Director – Products & Devices 314-364-6522 [email protected] Shelley Sr Contract Manager – Ortho/Neuro 314-364-6567 [email protected] Smith Sr Contract Manager – Cardiology/CV 314-364-6514 [email protected] Werner Contract Process Coordinator 314-364-6417 [email protected]


Jessica Wray Executive Director 314-364-6513 [email protected] Miller Director, Medical Surgical Contracting 314-364-6594 [email protected] Corley Watkins Sr Clinical Resource Manager 314-364-6573 [email protected] McReynolds Contract Process Coordinator 314-364-6428 [email protected] Steiner Contract Manager – Medical Products 314-364-6511 [email protected] Trapp Contract Manager – Medical Products 314-364-6442 [email protected]

Scott Alexander Vice President 314-364-6516 [email protected]

mailto:[email protected]




























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Support Services & Distribution

Jessica Wray Executive Director 314-364-6513 [email protected] Halbert Sr Contract Manager 314-364-6517 [email protected] Haynes Contract Process Coordinator 314-364-6433 [email protected] Safarian-Schweitzer Sr Contract Manager 314-364-6584 [email protected] Webb Sr Contract Manager 314-364-6518 [email protected] Whittaker Contract Manager 314-364-6533 [email protected]







645 Maryville Centre Drive Suite 200 St. Louis, MO 63141roiscs.com

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