MedAssets, Inc. (MDAS) recently announced the renewal of its multi-year agreement with Kaiser Permanente, the largest healthcare provider in California. The agreement entails MedAssets to continue as the exclusive group purchasing organization for Kaiser Permanente.
The announcement triggered a rise of 3.8% in MedAssets’ share price in the trading session, with the stock closing at $21.11 on Jan 15.
Per the deal, MedAssets will provide Strategic Sourcing and Spend Analytics solutions to Kaiser Permanente. Both Strategic Sourcing and Spend Analytics are web-based business intelligence tools designed to facilitate improved business decisions.
These innovative business solutions primarily cater to the supply chain management activities within a business. This functional area is critical for achieving high levels of operational efficiency.
Strategic Sourcing and Spend Analytics support the cost-reduction initiatives and improve contract negotiations for a company.
Such innovative and effective business solutions from MedAssets are fast gaining popularity. This is validated by the company’s renewal of a couple of deals in the recent past. Allina Health, a not-for-profit health system, has extended its prior agreement with MedAssets to align hospital and physician reimbursement strategies more efficiently across its own healthcare domain.
Similarly, MedAssets also got its contract renewed with Advocate Health Care – a 12-hospital, 3,300-bed health system, as part of its performance improvement relationship that aimed to improve operational efficiencies and standards of care at the latter.
Likewise, California-based Marin General Hospital (MGH) also appointed MedAssets for a comprehensive cost and operational management improvement program.
The abovementioned contract renewals assure the company of a steady flow of revenues in the forthcoming quarters. MedAssets provided its guidance for 2013, expecting revenues to be in the range of $671-$677 million. The Zacks Consensus Estimate for the same is pegged at $675 million.
We believe companies like MedAssets are poised to gain in the long run now that healthcare providers are striving to realize more financial and operational gains while simultaneously delivering improved customer service.
Currently, MedAssets carries a Zacks Rank #3 (Hold).
Investors interested in the medical services industry can consider better-ranked stocks like Air Methods Corp. (AIRM), Envision Healthcare Holdings, Inc. (EVHC) and Charles River Laboratories International, Inc. (CRL). All these stocks carry a Zacks Rank #2 (Buy).