Strong sales of Premier's software and a move into the direct-sourcing business led to double-digit revenue growth in the third quarter, but increased costs and investment losses led to a sharp decrease in profit.
On an earnings call Monday, the publicly traded healthcare supply chain and performance services company announced a major third-quarter deal with Catholic Health Initiatives to implement its PremierConnect data warehouse and business intelligence product. That deal, combined with other software subscription sales and renewals, led to strong revenue in the performance services segment, at $69.6 million for the three months ended March 31, up 19% from $58.6 million during the same period the year before.
Englewood, Colo.-based CHI becomes the 11th member to join Premier's Data Alliance Collaborative, a group of providers who plan to develop data analytics methods to reduce healthcare costs and improve quality, initially by targeting medication noncompliance and preventable hospital readmissions. CHI is currently the only PremierConnect Enterprise subscriber that is not a part of the company's group purchasing organization.
In February, Premier paid $14.5 million to acquire the remaining 40% of S2S Global, the company that operated its direct-sourcing business. Revenue from that business played a role in growth this quarter, with 25% growth from the company's relatively new direct-sourcing and specialty pharmacy services.
Growth in those businesses, along with a slight increase in administrative fee revenue from Premier's GPO, led to $192.1 million in revenue for the company's supply chain services segment, up 15% from the previous year.
Total net revenue, encompassing both supply chain and performance services, was $261.7 million, up 16% from $225.6 million the year before.
Despite the strong revenue growth, a $1 million loss on investments and a 20% increase in operating expenses led to dampened profits. Premier reported net income of $72 million for the three months ended March 31, down 29.4% from $102 million reported the year before.
Premier heightened its revenue guidance for the fiscal year, anticipating stronger supply chain services revenue than what was previously expected. The company is predicting total net revenue of $988 million to $1.01 billion for the 2015 fiscal year, up from its prior guidance of $974 million to $1 billion.