Do health systems want in or out?

Monday, March 21, 2016

The issue of whether HME businesses are a good fit with health systems has been debated for decades and a Michigan health system’s decision to sell its HME business to a regional chain has begun the discussion anew.

North Ottawa Community Health System in Grand Haven, Mich., recently sold its HME business to CareLinc Home Medical & Equipment Supply in Grand Rapids due to declining Medicare reimbursement. A hospital official told the local newspaper that the organization “knew it was something we would not be able to sustain, but at the same time there is a need in the community.” Selling the property to CareLinc seemed to be the solution to relieve the hospital of its obligations, but hand the business off to an experienced company.

Mergers and acquisitions specialist Jonathan Sadock, managing partner with Paragon Ventures in Philadelphia, has seen a lot of hospital-HME deals and concedes that “the motivations for investing or divesting in a particular business unit, whether an HME or infusion company, is not an easy one to make, because a lot of ramifications go along with the decision.”

Usually the reason for a transaction is twofold, Sadock says: keeping patients within their systems and helping to reduce readmission rates.

“Some are embracing it tightly, while others are running away from it as fast as they can,” he said.

Given what happened in Michigan, Sadock believes there could be more hospitals exiting the HME business to focus on their core competencies.

“Hospitals are really good at managing their business within their walls and purview, but outside it becomes a much different business—it requires a radically different management technique to control those assets outside the hospital,” he said.

Even so, there are various ownership/partnership models between hospitals and HME companies that have been successful. One example is Highmark Health, constructed in 2014 as a business unit of Allegheny Health Network and HM Health Solutions in Pittsburgh.

Brian Holzer, its president of HME Home and Community Services, says the key to cohesion with the model is ownership by both the payer and acute-care organization, in tandem with offering a portfolio of homecare services.

“We wanted a differentiated patient experience that included home health, HME, infusion and hospice,” he said.“This ability to integrate the portfolio of services within the post-acute spectrum drives a large amount of sustainable volume into the model.” hme