Industry leader â€˜cashes in’
TOPEKA, Kan. - Apria scored an acquisition coup in late January when it acquired Knoll Patient Supply, a highly respected HME here owned by former AAHomecare Chairman Steve Knoll.
Knoll generated revenue of about $5 million a year. Terms of the deal were not disclosed. This is Apria’s second high-profile acquisition in the past few months. In September, the national acquired Raymond, N.H.-based LifePlus, considered one of the best-run independent HMEs in the country. Due to the high profile and industry involvement of their owners, both the LifePlus and Knoll Patient Supply deals caught industry watchers by surprise. Executives at both HMEs, however, said their companies went out on top, which gave them leverage when negotiating the deals.
“Knoll Patient Supply has never been stronger,” Knoll, 48, told HME News last month. “We just had our best year ever and were having an even better year up until Jan. 31 when we turned it over Apria. I found an opportunity to go out on top of our game and that is a good time to go out - to cash in.”
In addition to cashing in, Knoll said, the current reimbursement climate contributed to his decision to sell. With Medicare reducing reimbursement and becoming more aggressive in its audits and with new HIPAA and FDA requirements, the industry’s risk exposure has gone up significantly, Knoll said.
“I think this is a grave concern for the industry,” he said. “It is the service value-add that keeps people at home and makes home care a good buy in the healthcare continuum. This year’s cuts ... and competitive bidding coming close behind gave me pause about just how much future there is for a service provider.”
Nevertheless, Knoll said, he is still optimistic about the industry’s future. Eventually, as healthcare remakes itself to reduce costs, as it must, clinical HMEs will find niches with doctors and healthcare facilities that value service. Likewise, as insurers cut back on their coverage, there may be increased opportunities for HMEs who can provide services for less to go direct to the consumer.
Additionally, Apria and other large companies with economies of scale and operational efficiencies will do fine in a competitive bidding environment, he said.
In fact, if Apria hadn’t made him a “flattering offer,” Knoll said, he felt well prepared to weather the storms that lay ahead.
“We’re were going to rely on our friends and the MED Group to think or way through it and come up with strategies,” he said. “My involvement at AAHomecare kept me on top of the issues, and we felt we were informed and capable of performing in that environment.”