Premier
Annual Report 2014

Plain-text annual report

TRANSFORMING HEALTHCARE FROM THE INSIDE 2014 ANNUAL REPORT Our Mission To improve the health of communities. Our Vision Through the collaborative power of the Premier alliance, we will lead the transformation to high-quality, cost-effective healthcare. Who is Premier? Premier, Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of approximately 3,000 U.S. hospitals and 110,000 other providers to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and advisory and other services, Premier enables better care and outcomes at a lower cost. Premier, a Malcolm Baldrige National Quality Award recipient, plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innova- tions that reinvent and improve the way care is delivered to patients nationwide. Premier is passionate about transforming American healthcare. Approximately 3,000 Hospitals are improving their performance as members of the Premier alliance. More than 1,000 Premier members use solutions from both the Supply Chain and Perfor- mance Services segments. On average, 86% of members surveyed over a three-year period view Premier as a strategic partner or organization extension. PAGE 6     TRANSFORMING HEALTHCARE FROM THE INSIDE DEAR FELLOW SHAREHOLDERS, TEAMMATES AND FRIENDS: I am pleased to report the results of Premier, Inc.’s first year as a public company. The significant change in our corporate structure has energized our approach to our mission, our vision and our drive to transform healthcare. Our IPO, and the increased access to capital it generated, better positions Premier to execute on our business strategy, deliver more and truly drive necessary change in our American healthcare system. There is little debate about the need for change. Phrases like “bending the cost curve,” “driving a mandate for change” and “achieving the three-part aim,” have become commonplace in our industry’s vernacular. But now is not the time for empty phrases and jargon-laden conversa- tions. This is the time for action. That is why Premier continues to lead; our bias for action is essential in this turbulent environment. To drive real change, you need data to reveal opportunities, technology to enable innovation and expertise to make improvement happen. Sounds simple? While it’s definitely not simple, it’s possible when health systems join together to pool data and buying power in an alliance like Premier. The reason we are growing—and performing—so well, and the reason I’m so optimistic about our future, is that we are working from the inside in a highly differentiated business model—and we believe that’s a sustained, winning position. We have a vast footprint of providers representing approximately 3,000 hospitals and 110,000 non-acute facilities; more than 60% of the U.S. community hospital market has a relationship with Premier, and there is opportunity to further expand these relationships and create new ones. PREMIER, INC. 2014 ANNUAL REPORT   PAGE 7 Working from the inside also provides Premier are winning new members and experiencing with a unique perspective on the many challenges increased contract penetration among those with confronting provider systems today: an established relationship with Premier—on both » Reimbursement for both Medicare and Medicaid is on the decline and increasingly at risk. the acute and alternate site sides of our business. We continued to expand our footprint in both » Cost management is an immediate imperative supply chain and performance services through and the industry is racing to consolidate for scale integrated offerings that address the ongoing cost, and efficiencies. » Competition among technology and service providers is fierce and inflated with big promises around untested solutions, particularly in the spaces of data analytics and population health management. quality, safety and population health management challenges facing our members. And we saw strong growth in advisory services in the quarter as our members continue to utilize our expertise in iden- tifying and driving quality improvement and cost reduction in their systems. » Data needs to be integrated for population I’m thrilled with the strides we have made in fiscal health management: • To assess and manage risk; • To clinically integrate provider networks; • To preempt and manage chronic and complex conditions; and • To quickly adapt to an advancing retail envi ronment, with a very different consumer than yesterday’s. We work on the inside to help health systems address these daunting challenges. First, we are fundamentally changing the game in the supply chain, which is one of healthcare’s largest cost drivers. By addressing challenges including ineffi- cient workflow and fragmented technologies, we believe we are uncovering unprecedented savings 2014, and we will continue to endeavor to drive more value for members and growth for this enter- prise and its investors in fiscal 2015. When I look back on the year and forward to the future, I see a company that is at the heart of an industry trans- formation. I see a company mining massive amounts of seemingly disparate data and turning that data into actionable, innovative solutions for the rapidly evolving needs of its members. And I see a company that is doing all of this from the inside—with a highly differentiated model that is delivering on these promises of growth, opportunity and transformation. Sincerely, and value for our members, and leading a much Susan D. DeVore needed disruption in this industry. As a result, we President and CEO PAGE 8     TRANSFORMING HEALTHCARE FROM THE INSIDE POSITIONED FOR GROWTH Premier is a company at the heart of an industry We expect that these acquisitions will transformation. This is a company mining massive further embed Premier into our members’ perfor- amounts of seemingly disparate data and turning mance improvement processes needed to transform that data into actionable, innovative solutions for themselves to thrive in new healthcare delivery the rapidly evolving needs of its members. And this models. Looking forward, our pipeline of potential is a company that is doing all of this from the inside, acquisitions remains active, and we have a diligent with Premier experts embedded in the member and dedicated team continuing to evaluate a systems; a highly differentiated model that is deliv- number of opportunities in growth areas that we ering on these promises of growth, opportunity, have identified. and transformation. We are driving to become the performance Our business model generated a strong cash posi- improvement engine for our members, and for tion at fiscal year end, and we began putting some the wider healthcare industry. We are doing this of it to work during the fiscal year, acquiring three with the technology, data and wrap-around advi- strategically important companies for a total of sory services required to improve cost, quality and $42.6 million in cash, and we put another $165.5 safety today, while building the analytic infrastruc- million to work acquiring two more as the new ture for population health management over the fiscal year began. long term. DISRUPTING THE SUPPLY CHAIN We are tackling the 20–30% of health systems’ costs We acquired MEMdata in April 2014 that the supply chain arena represents, including specifically to address the high-cost area of everything from commodities to the costliest and capital equipment planning, sourcing and analytics. most elusive spend areas such as physician pref- The business already is generating broad interest erence items, capital equipment and specialty from our member channel; we added six member pharmacy drugs. We are doing this through our systems by fiscal year-end, and have a strong robust Group Purchasing Organization contract sales pipeline. portfolio, our direct sourcing and specialty phar- macy programs, our analytic technology solutions and our recent acquisitions: SYMMEDRx, MEMdata and Aperek. And in early fiscal 2015, we acquired Aperek, for- merly Mediclick, a SaaS-based supply chain work flow and analytics company for $48.5 million in cash. Aperek will be instrumental in further auto- Following the acquisition of SYMMEDRx in July 2013, mating all of the supply chain management proc- we have experienced three-fold growth in the use esses for our comprehensive technology, data of this service. Why? Because we are helping our analytics and services model. members manage and standardize the notoriously high-cost and difficult-to-manage area of physician preference. Our approach helps members identify the truly differentiated product from the commod- ity. This enables us to drive down costs, while pro- viding advisory services focused on appropriate utilization and procedural standardization for the more advanced and differentiated products. We are systematically building full capabilities across the entire supply chain to integrate the pieces and attack every savings opportunity for our member base. PREMIER, INC. 2014 ANNUAL REPORT   PAGE 9 COLLABORATING FOR RESULTS Approximately 1,100 U.S. hospital members participate in at least one of our Performance Improvement Collaboratives, including QUEST for multi-dimensional improvement, ASCEND for accelerated supply chain savings, PACT and Bundled Payment for evolving delivery model development, and Partnership for Patients which addresses preventable harm and mortality. Premier’s QUEST® collaborative continues to lead management programs have blossomed from a the industry in helping our members save lives learning collaborative encompassing a few dozen and dollars. Using data and collaboration, QUEST health systems just a few years ago, to a growing participants are able to identify top performers, collection of integrated population health and ana- replicate their processes and dramatically improve lytics offerings. We have developed organic appli- results. The bar continues to rise as do results cations, as well as partnered with both Phytel and across cost, quality and safety metrics. QUEST is Verisk Health in this arena, to deliver a robust suite one of the most comprehensive hospital collab- of applications essential for population health man- oratives in the nation. Including approximately agement, including claims analytics and risk strat- 350 members, QUEST has become one of the only ification, patient outreach and care coordination, initiatives to help healthcare organizations deliver as well as bundled payment modeling and analysis the best possible care to each patient, every time. and development of clinically integrated networks. In addition to solving immediate challenges, Premier Over the past fiscal year, we have developed more members are collaborating to prepare for the evo- than 130 population health agreements, represent- lution to new care models. Our population health ing a 65% increase in revenue across analytics and services, and the number of facilities represented across these agreements has increased to approxi- mately 500, a 25% increase from a year ago. 350 U.S. Hospital Members 160,000 Deaths Avoided $13.2 Billion Saved 55,800 Readmissions Prevented 21,700 Instances of Harm Prevented Premier QUEST participant performance data is as of 6/30/2014 and represents data accumulated through year 6 of the collaborative, which ended December 31, 2013. Deaths avoided and dollars saved are over the first 6 years of the program; instances of harm are measured over the past 4 years; and readmissions prevented are measured over the past 3 years. PAGE 10     TRANSFORMING HEALTHCARE FROM THE INSIDE REVOLUTIONIZING TECHNOLOGY Healthcare providers are challenged with an over- generate predictive insights. The ware- abundance of data, that doesn’t speak the same house manages data from multiple health informa- language, therefore missing the opportunity for tion systems and data across the care continuum. dramatic improvement. Premier has developed an integrated data plat- form, PremierConnect®, that resolves the silos and opens up unparalleled opportunities. In addition, We believe it is uniquely differentiated in that it is vendor and payer agnostic and provides hard-to- find expertise in data management capabilities through the extension of Premier’s services. in February 2014, we launched PremierConnect® And we are accelerating and enhancing our offerings Enterprise, our cloud-based data warehouse and through acquisitions. In addition to SYMMEDRx, business intelligence platform. PremierConnect MEMdata and Aperek, we acquired TheraDoc, a Enterprise is fully managed by Premier, enabling market-leading provider of clinical surveillance soft- health systems to save millions of dollars by sharing ware, in early fiscal 2015. This acquisition increases the costs of building what otherwise would be indi- our scale and access across healthcare providers vidual datamarts and uncoordinated data manage- and brings together two leading companies with ment capabilities. It supports the work being done similar visions and strong capabilities in data ana- by our members through a multifaceted platform lytics and real-time electronic clinical surveillance. that combines data warehousing with the ability to acquire, standardize, transform and integrate Big Data, produce actionable analytics and Supply chain executives can make purchasing decisions based on price, quality and safety information from thousands of outcomes. Physicians and chief medical officers can monitor clinical performance, understand clinical and cost variation, access patient-level detail and support reporting requirements. Clinical integration executives can segment populations of patients to understand where to focus care management efforts. Infection preventionists can be alerted to possible harm-related events with near real-time surveillance and better coordinate care with other departments. Chief nursing officers can access staffing plans and industry best practices to minimize inefficient processes that take too long or require too many employees to complete. PREMIER’S IMPACT More than 60% of the U.S. community hospital market has a relationship with Premier. NET REVENUE OF $869 MILLION INCREASED 14% FROM 2013 ADJUSTED EBITDA OF $351 MILLION CLIMBED 12% FROM 2013 ADJUSTED FULLY DISTRIBUTED NET INCOME TOTALED NEARLY $189 MILLION A 9% INCREASE FROM 2013 GENERATED CASH FLOW FROM OPERATIONS OF MORE THAN $368 MILLION PREMIER HAS APPROXIMATELY 3,000 ACUTE CARE PROVIDERS AND 110,000 NON-ACUTE CARE PROVIDERS PREMIER HAS ACCESS TO DATA ON ONE-IN-THREE U.S. COMMUNITY HOSPITAL DISCHARGES Fiscal 2014 financial results are pro forma, reflecting the impact of the company’s reorganization and IPO on October 1, 2013. Reconciliations, as well as explanations related to the company’s use of non-GAAP financial measures, are provided in the company’s fiscal 2014 fourth-quarter press release attached as an exhibit to our Form 8-K filed with the Securities and Exchange Commission on August 28, 2014, as well as our Form 10-K for the year ended June 30, 2014, filed with the Securities and Exchange Commission on September 4, 2014. PAGE 12     TRANSFORMING HEALTHCARE FROM THE INSIDE LEADERSHIP TEAM Jeffrey W. Lemkin General Counsel Craig McKasson Chief Financial Officer Susan D. DeVore President and CEO Michael J. Alkire Chief Operating Officer Blair Childs Senior Vice President, Public Affairs Kelli Price Senior Vice President, People Terry Linn Senior Vice President, Corporate Development and Strategy Gary S. Long Chief Sales Officer Andy Brailo Senior Vice President, Member Field Services Keith J. Figlioli Senior Vice President, Healthcare Informatics Durral R. Gilbert President, Supply Chain Services Wes Champion Senior Vice President, Premier Performance Partners BOARD OF DIRECTORS Richard J. Statuto President and CEO, Bon Secours Health System Inc. Marriottsville, MD Chair of the Board Charles E. Hart, MD President and CEO, Regional Health Rapid City, SD Vice-Chair of the Board Stephen R. D’Arcy Partner, Quantum Group, LLC Grosse Pointe Woods, MI Lloyd H. Dean President and CEO, Dignity Health San Francisco, CA Susan D. DeVore President and CEO, Premier, Inc. Charlotte, NC Peter S. Fine President and CEO, Banner Health Phoenix, AZ Philip A. Incarnati President and CEO, McLaren Health Care Corporation Flint, MI Robert Issai President and CEO, Daughters of Charity Health System Los Altos Hills, CA Annual Report Design by Curran & Connors, Inc. / www.curran-connors.com William E. Mayer Senior Partner, Park Avenue Equity Partners New York, NY Keith B. Pitts Tenet Healthcare Corporation Dallas, TX Tomi Ryba President and CEO, El Camino Hospital Mountain View, CA Terry Shaw Executive Vice President, CFO, COO, Adventist Health System Altamonte Springs, FL Susan S. Wang Former Executive Vice President and Chief Financial Officer, Solectron Corporation Los Altos, CA Ellen C. Wolf Former Senior Vice President and CFO, American Water Works Company, Inc. Lewes, DE Alan R. Yordy President and Chief Mission Officer, PeaceHealth Bellevue, WA Charlotte, NC Premier Headquarters 13034 Ballantyne Corporate Place Charlotte, NC 28277 Washington, DC Public Affairs Office 444 North Capitol St., N.W. Suite 625 Washington, DC 20001 Premier Solution Center 877.777.1552 www.premierinc.com 

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