Premier posts strong gains in technology segment

(This story was updated at 7 p.m. Eastern)

Premier reported a jump in profits attributed to growth in its group purchasing business and even stronger growth in sales of its performance improvement technology and services.

The company reported adjusted fully distributed income of $61.7 million during the three months ended Dec. 31, the second quarter of its fiscal year. That's a 17% increase from $52.1 million reported during the same period the year before.

The adjusted income figure reflects ongoing exchanges of GPO member-owners' Class B stock into Class A stock after the company's initial public offering in late 2013. Premier reports the financials as if all members have exchanged their stock and the company was fully public. Shareholders have so far exchanged 40% of all shares that are eligible for exchange.

Without the adjustment, Premier reported $61 million in profit, down 7% in part due to higher tax-related expenses. Premier, however, says the non-adjusted figures don't accurately portray the company's operating performance, in part due to the Class B stock exchange process.

Revenue was up 17% to $291.7 million compared with the same period before. That reflects a 13% increase in supply chain revenue and a 27% increase in revenue from performance services and software.

Performance improvement, which the company has aggressively sought to expand through acquisitions, now contributes about 30% of the Premier's total revenue.

Growth in the segment in the most recent quarter was mainly driven by subscriptions and renewals of the company's PremierConnect software, as well as consulting services. Segment revenue of $88.6 million was also helped by recent acquisitions of CECity, Healthcare Insights and InflowHealth.

CECity had its strongest second quarter sales growth in its history, according to Premier COO Mike Alkire. The firm's success reflects a growing need for analytics in the ambulatory provider space, he said during a conference call Monday.

Alkire said Premier is seeing a lot of interest via e-commerce and through its GPO membership for physician performance management and value-based payment reporting software. He expects demand to increase as more providers join the CMS physician-quality reporting system. Premier has also solicited partnerships with electronic health record and pharmaceutical companies.

Premier's supply chain revenue comes from its GPO and supply chain products. Revenue from GPO administrative fees grew 7% to $120 million thanks to increased contract penetration, new recruitment and positive utilization at hospitals, according to the company. Product sales grew 22% to $81.3 million because of increased use of the company's direct sourcing and specialty pharmacy businesses.

Alkire also announced that Rockford, Ill.-based MercyRockford Health System and HealthPartners, an integrated hospital and health plan system in Bloomington, Minn., had joined the system's GPO and subscribed to its PremierConnect platform. During the second quarter, Premier picked up 17 new subscribers to its PremierConnect Supply Chain Connect software, and increased its integrated pharmacy membership, which includes specialty pharmacy services and pharmacy benefits management, to 39 providers, he said.

The company reported six-month revenue of $562.5 million, up 17% from the year-ago period. Adjusted fully distributed net income for that period was $117.8 million, up 18% from $99.9 million during the same six months in 2014.

Based on the positive second-quarter results, Premier raised its fiscal 2016 revenue guidance and now predicts a 15% to 18% year-over-year increase.

Adam Rubenfire

Adam Rubenfire is Modern Healthcare's Custom Content Strategist. He is responsible for the development of webinars, white papers and other engaging content for marketers looking to target the healthcare industry. Prior to his current role, he served as Modern Healthcare's supply chain reporter. His work has also appeared in the Wall Street Journal, Automotive News and Crain’s Detroit Business. He has a bachelor’s degree in organizational studies from the University of Michigan. He joined Modern Healthcare in 2014.

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