Premier Targets $40M in Annual Savings From Job Cuts | Healthcare Innovation

Supply chain and analytics company Premier Inc. is laying off about 100 people and eliminating more than 70 open positions—moves that comprise about 5 percent of the Charlotte-based company’s employee base—as it looks to cut costs because the growth of its Remitra invoicing and payments offering is lagging expectations and because consumers’ use of the healthcare system continues to be relatively low.

Premier President and CEO Mike Alkire and Chief Administrative and Financial Officer Craig McKasson told investors they expect to save between $18 million and $20 million this fiscal year thanks to the cuts. (On an annual basis, the savings run at between $35 million and $40 million.) The duo also have lowered their fiscal 2023 forecast for supply chain services revenues by $20 million and lowered their earnings-per-share outlook by about 4 percent because of higher interest costs.

“We remain optimistic and are taking proactive steps to position the business to weather current macro headwinds,” McKasson said on a conference call discussing Premier’s fiscal second-quarter results. “But given the uncertainty in the environment, and how it might evolve, there could be some additional pressure on profitability.”

Remitra is part of what the Premier team calls its adjacent markets group, which also includes the Contigo third-party administrator and benefit management venture and which executives expect to grow more than 30 percent annually as they look to capitalize on the traditional health system purchasing relationships Premier has built over the years. The adjacent markets businesses are in turn part of Premier’s Performance Services group, which grew its Q2 revenues 15 percent and its adjusted EBITDA by 11 percent.

Overall, Premier earned a net profit of $64.4 million in the three months ended Dec. 31, which was a 17-percent drop from the prior-year period. Revenues slipped 5 percent to $360 million, hurt by a 40 percent year-over-year drop in products sales because many customers’ inventories remain high in the wake of the COVID-19 pandemic—which is, along with higher interest rates, feeding through to the slow adoption of Remitra. Services and software license sales rose 6 percent to $169 million during the quarter.

“We do think [inventory destocking] has been normalizing down and getting back to where people’s purchasing patterns are going to start to be more normalized,” McKasson said on the call. “But to the extent that that were to vary one way or the other, that would be a headwind or a tailwind.”

Investors took in stride the guidance and layoffs news Feb. 7: In afternoon trading, Premier shares (Ticker: PINC) were down less than 1 percent to about $32.30. Over the past six months, they have lost about 15 percent of their value, trimming the company’s market capitalization to about $3.8 billion.