MedAssets helps hospitals widen their profit margins -- or at least not lose quite as much. The company's Spend and Clinical Resource Management (SCM) segment is its largest, with almost 65% of sales. It operates a group purchasing organization (GPO) that negotiates lower prices on medical supplies and devices for hospitals and health systems. The company's Revenue Cycle Management (RCM) segment provides software and consulting services that help track and analyze a hospital's revenue stream. Such services aim to increase collections and reduce account balances. MedAssets' customers include more than 4,200 hospitals and about 100,000 non-acute health providers mainly in the US, but also in Canada to a lesser extent.
MedAssets sells its products and services through an in-house sales team. It also maintains a software development group, which accounts for most of its R&D expenditures, for creating new software products. In some cases, rather than simply competing against other large group purchasing organizations, the company will actually contract with them as affiliates to extend its product range and share marketing efforts. Vendors, including more than 1,150 contracted manufacturers and distributors, pay administrative fees to MedAssets based on the volume purchased by its health care-providing clients.
As US health care policies shift and sway, MedAssets aims to remain a steady partner to its customers who have been scrambling to not only upgrade to electronic health record systems, adding more reimbursement codes, but also keep abreast of changes to managed care reimbursement plans and track consumer out-of-pocket payments. These expensive pressures help Med Asset's solutions look quite attractive to hospitals and health systems.
In 2011 MedAssets' revenues of $578.3 million represented a jump of about 48% from its $391.3 million achieved in 2010. This was due to the addition of a full year of revenues from its newly acquired Broadlane business and growth in administrative fees for GPO services and demand for revenue cycle technology tools and consulting services. The company was still in the red, however, with a net loss of $15.5 million, although that was an improvement of about 52% from its loss of $32.1 million in 2010. Its loss was primarily attributable to intangible amortization expenses related to its Broadlane acquisition and higher interest expenses.
While its overall strategy is focused on securing more new customers and selling those customers more products, the company has grown significantly through acquisitions. In 2010 MedAssets acquired Broadlane, a leading GPO provider for the US health care industry, for some $850 million. The larger-than-usual transaction not only brought MedAssets to the forefront of the GPO market, but also added complementary operations in areas such as supply chain, process consulting, and workforce optimization, and allowed MedAssets to provide a full range of cost management services to its clients. Broadlane's operations were merged into the MedAssets organization, with the core GPO operations combined with MedAssets' Spend Management division. Earlier acquisitions, such as its $227-million purchase of revenue management provider Accuro Healthcare Solutions (2008), also helped to build up MedAssets' services. – less