Premier is buying out two group purchasing organizations owned by the Greater New York Hospital Association that serve non-acute providers.
The Charlotte, N.C.-based GPO and performance improvement company will pay $325 million to purchase all of Essensa and GNYHA's 50% share in Innovatix, of which Premier already owns 50%. GNYHA's for-profit supply chain arm has its own regional, acute-care GPO that uses Premier contracts, and the two acquired organizations are national GPOs.
Essensa serves ambulatory providers, surgery centers, imaging centers, mental health clinics and clinical labs, while Innovatix serves 32,000 senior living facilities, independent medical oncologists and pharmacies. The companies generated about $50 million in profit and $88 million in revenue in their fiscal 2016, which ended June 30, according to GNYHA.
The transaction is expected to close before the end of the calendar year, subject to customary conditions. The purchase agreement provides that Premier will pay GNYHA a total of up to an additional $43 million if the acquired GPOs achieve certain performance targets in fiscal 2017.
“As long-standing business partners with GNYHA, we will integrate these assets and customer segments with our existing continuum of care business and expect to achieve even greater scale for top-tier pricing in both the acute and non-acute markets," Premier CEO Susan DeVore said in a statement. "These capabilities are critical to address the changing needs of healthcare, where the drive toward population health management and lower cost of care requires a cross-continuum reach.”
The transaction is expected to be immediately accretive to Premier's revenue and earnings, with an expected contribution of $53 million to $60 million toward Premier's supply chain revenue. It also generates a "meaningful tax benefit" for Premier stockholders, the company said.
Premier raised its revenue guidance range to $1.5 billion to $1.57 billion for its fiscal 2017, which started July 1, from a previous estimate of $1.45 billion to $1.52 billion. John Sganga will continue to lead the two acquired GPOs.