Morningstar | Premier's Narrow Moat Remains Intact After Divesting Specialty Pharmacy Operations
Premier is one of a few entities in the U.S. healthcare system that have both the financial incentive and the business expertise to improve the cost of care on a national scale. Between its supply-chain business and its performance services segment, Premier can connect the dots between costs and outcomes for its hospital clients and help drive measurable cost savings on a facility-by-facility basis. We think this will be an increasingly enviable position as care providers are required to transition more fully into value- and outcomes-based reimbursement models, which we view as a structural eventuality for the industry.In our opinion, Premier has fortified its positioning in this market over the past decade under the leadership of CEO Susan DeVore. By restructuring the company under a single sales organization, improving the company’s access to capital, and establishing capabilities that span a facility’s entire supply chain, Premier has positioned itself as a premier partner for care providers looking to deliver high-quality, low-cost healthcare. DeVore’s strategy has centered on internal development, accelerated through external acquisitions, to round out the company’s procurement reach (specialty pharmacy, direct sourcing, ambulatory group purchasing) and add market-leading capabilities to its technology platform (physician reporting, budgeting modules, labor productivity). We think this has been an effective strategy to better Premier’s position as a comprehensive solution to all problems emanating from a healthcare provider’s supply chain. DeVore has been successful at widening and reinforcing the underlying competitive advantages that underpin Premier’s narrow moat, strengthening its bargaining power and leveraging its data warehouse to be an increasingly valuable partner to the healthcare provider group it serves. This has allowed the company to earn returns substantially ahead of its cost of capital, something that we believe will prove resilient over time.Premier is a holding company. The company, together with its subsidiaries and affiliates, is a healthcare performance improvement company. The company provides technology-enabled platform that provides supply chain services, clinical, financial, operational and value based care software-as-a-service informatics products, consulting services and performance improvement collaborative programs. The company has two business segments: Supply Chain Services, which assists its members in managing their non-labor expense and capital spend through a combination of products, services and technologies; and Performance Services, which provides information technology analytics and workflow automation and consulting services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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