Chicago-area giant oozes confidence

Wednesday, December 31, 2003

CHICAGO - Despite all the nail biting surrounding the reimbursement cuts imposed by the new Medicare Prescription Drug Act, Ultra Care appears to have less to worry about than many HMEs.

In November, the city’s largest independent acquired the HME, infusion and home respiratory services CareMed of Chicago, the University of Chicago Hospital’s homecare business. The deal, precipitated by U of C’s decision to focus on its core activities (patient care, teaching and research) boosted Ultra Care’s annual revenue by 45%, or $9 million, to about $30 million, said CEO Bruce Callahan.

“We feel like we are in a good position no matter what happens in the [Medicare] reimbursement world,” said Callahan. “We can do more acquisitions. We are in the game to survive to be in a strong market position.”

The acquisition strengthens Ultra Care’s hand by providing more quality business in its core business areas of home infusion and respiratory therapy. It allows the company to become a bigger volume purchaser and negotiate better prices with vendors. The deal also makes the company an attractive acquisition target for someone wanting to establish a platform in the Midwest, Callahan said.

Infusion therapy comprises 31% of Ultra Care’s business. The rest comes from HME, with home respiratory therapy contributing two-thirds of that, Callahan said.

When it comes to dealing with future Medicare cuts, it helps that Ultra Care’s payor mix is dominated by commercial and managed care payors, which generate 70% of the company’s revenue. Medicaid contributes 12% and Medicare 18%.

“When managed care started emerging in the early ‘90s, we embraced it and aggressively went after contracts with HMOs and PPOs and other hybrid plans,” Callahan said. “Many of the other companies in our area chose to avoid managed care. Some are in business with bigger chunks of Medicare, some didn’t make it.”

The CareMed acquisition comes with another benefit. By acquiring CareMed from the University of Chicago Hospital, Ultra Care gained access to referral sources and new business that has been “off limits for companies like ours for the last seven or eight years,” Callahan said.