Premier reports strong performance services revenue growth
Premier saw strong year-over-year revenue growth in its performance services segment in the second quarter of its fiscal 2019, the company reported Tuesday.
The Charlotte, N.C.-based healthcare improvement company's net revenue was $421.9 million in the second quarter of 2019, up 2.6% year-over-year from $411.4 million. Nearly 78% of that was from the company's supply chain services segment, which saw its revenue grow 1% year-over-year. Revenue growth was much stronger in the company's performance services segment, however, jumping 10% year-over-year.
Premier CEO Susan DeVore said on the company's earnings call Tuesday that Premier feels good about its performance in consulting, technology and applied services. On the group purchasing organization front, she said Premier has been a "market taker" for the past five to six years.
"We continue to be a market taker, although it feels like a more normalized level," she said.
Premier drew $104.8 million in net income during the quarter, up from $19.8 million in the second quarter of 2018. On a non-GAAP adjusted basis, net income grew 26% year-over-year. The company's non-GAAP adjusted earnings before interest, taxes, depreciation and amortization was $142 million in the second quarter of 2019, up from $133.5 million in the prior-year period.
Premier's results were impacted by its adoption of the revenue recognition standard ASC 606 in July 2018. The company did not restate prior periods, which means the results under the new standard are not indicative of the results of operations under the previous standard.
DeVore said on Tuesday's call that the regulatory environment has begun to look more favorable for Premier in recent months. As the Trump administration pushes providers to adopt more extensive risk-based payment vehicles, they'll increasingly call upon Premier to help them adopt new models, she said.
"The ACO rules came out actually moving providers to double-sided risk in a more accelerated fashion," DeVore said. "We think that creates opportunity for more infrastructure needs, if you will, as these health systems accept more risk."
Mike Alkire, Premier's chief operating officer, said on the call that Premier is finalizing an agreement with Advocate Aurora Health, the country's 10th largest not-for-profit health system formed through a merger last year. Premier will provide the system with supply chain and performance improvement services, GPO services and financial and operational intelligence, he said.
DeVore added that deal is a "big one for us" because Advocate Health Care did not do business with Premier prior to the merger.
Premier also re-signed its agreement with Bon Secours Health System, Alkire said.
Alkire also announced that the company's new generic-sourcing subsidiary, ProvideGx, is collaborating with Baxter Healthcare Corp. to make more generic drugs available through Premier's group purchasing organization.
Alkire said the two companies are collaborating to offer providers competitive prices for metoprolol injections, an emergency blood-pressure medication often used on heart attack patients, for example. He did not disclose the financial terms of Premier's Baxter deal.
Premier reiterated its fiscal 2019 guidance, including total net revenue of between $1.655 billion to $1.721 billion and non-GAAP adjusted EBITDA of $550 million to $572 million.
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