Charlotte, N.C.-based Premier reported a spike in yearly adjusted profit but a slight decrease in fourth-quarter profit due to severance-related costs.
The group purchasing organization and performance improvement company reported adjusted fully distributed income of $51.6 million during the fourth quarter, down 3% from the same period last year, despite a 13% rise in quarterly revenue to $301.4 million.
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 2013. This figure reports the financials as if all members have exchanged their stock and the company was fully public. Premier's fourth-quarter profit under standard accounting rules increased 57% to $50.4 million.
Premier executives said profit was dampened by severance costs of $4 million to $5 million related to “certain year-end personnel changes” impacting 30 employees, primarily in the performance services business, which includes data software and consulting services. The changes came after Keith Figlioli resigned as senior vice president of healthcare informatics in June. Kelly Rakowski was named the new leader of its consulting business this month.
Fourth-quarter revenue in the performance services segment was $84 million, up 19% from the same quarter last year thanks to significant contributions from recently acquired CECity and Healthcare Insights, as well as other PremierConnect software sales. That gain in the performance segment was offset by the one-time severance payments.
Premier has invested heavily in this business through a number of acquisitions, and CEO Susan DeVore emphasized during a conference call Monday the importance of the segment's offerings.
“In healthcare, value is the new economy, and measurement is the new currency,” DeVore said.
The supply-chain segment, which includes the GPO and other products, fared better with revenue of $217.4 million, up 11% from last year. The company attributed the gains to a 16% rise in product sales amid expansion of the company's private label drugs and specialty pharmacy businesses, as well as a 7% rise in revenue from GPO administrative fees driven by increased use of contracts among existing members, recruitment of new members and stable patient utilization rates among member hospitals.
Premier noted that supply-chain revenue growth was partially offset by a decline in specialty pharmacy revenue related to hepatitis C drugs. Hepatitis C-related declines have been felt at prominent drugmaker Gilead, which makes Harvoni and Sovaldi.
Premier reported adjusted fully distributed income of $233.3 million for the entire fiscal year, up 12% from last year. Fiscal 2016 revenue was $1.16 billion, up 15% from last year.
Looking ahead at fiscal 2017, Premier said it expects revenue between $1.45 billion and $1.52 billion, an increase of 25% to 30% largely due to supply-chain revenue growth.
