MedAssets, the Alpharetta, Ga.-based provider of group purchasing and revenue cycle management tools and services, reported that revenue rose 5.6% to $175.7 million in the third quarter and net income went up 12.1% to $7.7 million.
Quarterly growth was fueled by a 10.7% increase in the company's revenue-cycle management business. Revenue in that segment rose to $69.9 million in the third quarter of 2014, compared to $63.1 million in the same quarter in 2013.
Revenue in MedAssets' spend and clinical resource management business, which includes group purchasing services, went up 2.5% to $105.8 million in the quarter, compared to $103.2 million in the third quarter of 2013.
The company attributed growth in the third quarter to a 2% increase in group purchasing net administrative fees and an 8.2% increase in other service fees. Net administrative fees are fees that GPOs earn by negotiating supply contracts with medical device manufacturers and suppliers on behalf of their hospital members. The fees—usually 3% or less—are a percentage of the contact amount.
Company executives told investors that they saw improvement of contract utilization in the quarter. This means that some hospitals are choosing higher commitment to contracts, which lessens product choice but can mean greater savings for the hospital or health system by shifting more volume to one supplier. The average health system is about 60% compliant to GPO agreements but some systems such as Tenet Healthcare Corp. and Kaiser Permanente have committed 90% of purchases through their contracts. Both systems are members of MedAssets.
Sg2, the company it acquired in August for $142 million, contributed $1.1 million in total net revenue in the third quarter. Sg2, based in Skokie, Ill., provides healthcare analytics, market intelligence and clinical consulting services.
MedAssets said it expects revenue between $715 million and $721 million for 2014, a 5.1% to 6% increase over 2013.
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