Cardinal Health closes healthcare loop

AssuraMed deal allows company to target homecare market through various channels
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Friday, March 1, 2013

DUBLIN, Ohio, and TWINSBURG, Ohio – One of Cardinal Health’s many plans in the wake of its expected acquisition of AssuraMed may hit a sour note with HME providers.

Cardinal Health execs say that they plan to use AssuraMed as a platform to begin offering Cardinal Health-branded products not only through providers but also direct to consumers, something they say competing distributors are already doing.

“Given that we operate in the middle of the healthcare continuum, we are no strangers to meeting the needs of our suppliers upstream while growing our own products and service offerings to customers downstream,” said Don Casey, CEO of the medical segment at Cardinal Health. “We believe we can manage this appropriately as we have in the past.” 

In a press release and in a teleconference following the announcement, Cardinal Health execs highlighted AssuraMed’s two separate business units: Edgepark Medical Supply, which sells supplies direct to consumers; and Independence Medical Supply, which sells supplies through the provider channel. 

Execs say AssuraMed will give Cardinal Health, which provides mostly medical-surgical products to hospitals, pharmacies, ambulatory surgery centers and physician offices, a shot in the arm in the homecare market. AssuraMed boasts more than $1 billion in annual sales and provides 30,000 products to more than 1 million patients nationally, many with chronic diseases like diabetes.

“It’s been a central tenet of our strategy to be able to serve the healthcare system across the continuum of care,” Casey said. “While we were already servicing the home health care market to some extent, AssuraMed offers us a platform from which to serve this growing channel as care increasingly moves to the home.”

Other plans in the wake of the acquisition include leveraging AssuraMed’s small parcel distribution capabilities; its medical billing and reconciliation infrastructure; its 1,200 payer contracts and 20,000 referral sources; and its service model of more than 6,000 patient touch points per day.

“This transaction will create a robust platform for future Cardinal Health product and service offerings,” Casey said.

Cardinal Health execs also believe the deal will further ingratiate the company with its existing customers, like physicians, and better position it to follow patients from hospital to home.

“If you imagine the value that we can create in the provider’s office, not only by providing clinical support services to them, but also to be able to say, ‘Look, we can help you with your patients when they go home,’” said George Barrett, chairman and CEO of Cardinal Health, during the teleconference. “That, I think, is a powerful combination, so we’re enthusiastic about that.”

As part of the $2.07 billion deal, which is expected to close in April, Cardinal Health will also get Invacare Supply Group (ISG), which AssuraMed bought from Invacare for $150 million in January. Execs say the close timing of the two deals is coincidental.

“Our acquisition of ISG was independent of the sale of AssuraMed to Cardinal Health,” said Michael Petras, CEO of AssuraMed. “We run our business, day-to-day, the best we can in a way that supports our internal growth, profitability and operational goals. As part of that strategy, we often pursue multiple business development opportunities.”

Comments

I get confused with distributors who set themselves up to compete against itself.

This set up has it going direct to consumers and trying to provide to consumers through HME's.

Seems like a strange business model to me, and how can one be successful at both?

The only way to grow the direct to consumer model is to gain market share from the HME providers.

Am I missing something?