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Tenet (THC) Will Not Renew Supply Chain Solutions Agreement with MedAssets (MDAS)

August 4, 2015 8:04 AM EDT

MedAssets (NASDAQ: MDAS) disclosed the following on Tuesday morning:

MedAssets, Inc. (“MedAssets” or the “Company”) received verbal notification on July 30, 2015 and written confirmation on August 4, 2015, from Tenet Healthcare (“Tenet”) (NYSE: THC) that the Company’s supply chain solutions agreement (“SCS Agreement”) with Tenet will not be renewed following its scheduled expiration on January 31, 2016. At the time of the notification, the Company was in what it believed were exclusive and advanced contract negotiations, and was surprised to learn of Tenet’s decision to not renew the SCS Agreement. The SCS Agreement includes the provision of group purchasing and outsourced procurement services, and related supply chain products.

Approximately 215 of the Company’s outsourced procurement services employees based at Tenet facilities will transition to Tenet’s employment on or by January 1, 2016.

Tenet has indicated that the SCS Agreement notification does not impact other contractual agreements the Company has with Tenet, and it intends to continue to utilize MedAssets’ Revenue Cycle Technology products covered under separate contractual agreements.

The Company expects no change to its 2015 financial outlook given that the transition is expected to occur in early 2016. The estimated 2015 net revenue from products and services impacted under the SCS Agreement represents approximately $39 to $44 million, or approximately 5-to-6 percent of the Company’s recent guidance for 2015 net revenue. The SCS Agreement is expected to contribute approximately $18 to $22 million to the estimated 2015 operating income, before allocation of segment and corporate indirect expenses, in the Spend and Clinical Resource Management segment. Based on MedAssets’ revenue recognition policy, it is expected the Company will continue to recognize a declining amount of revenue in early 2016 following the contract end date.

As previously disclosed, MedAssets is engaged in a multi-year transformation and value creation plan, and is assessing, analyzing and evaluating all aspects of its business to improve growth and profitability while maintaining the highest level of customer service and satisfaction, and creating shareholder value. As part of its full review and in consideration of this development, the Company will work to align its operating cost structure to be commensurate with expected future net revenue, while enabling it to continue to deliver a high level of customer service and support. These actions may result in expense reductions, restructuring charges, and/or investments in products or services to help drive long-term growth.

MedAssets continues to maintain a differentiated model for customer-driven sourcing of supplies and services that enables flexibility in purchasing commitment levels, and a strong, loyal base of customers that value this approach. The Company offers a robust set of total performance management solutions and expertise that deliver material, measurable financial value to its customers. Capabilities include: Sg2 intelligence and analytics; Advisory Solutions for improved operational efficiency and clinical alignment; Revenue Cycle Technology and Services; and Supply Chain Solutions.



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