ISG deal opens up old wounds

TWINSBURG, Ohio - Some HME providers are on edge about the new ownership at Invacare Supply Group (ISG).

AssuraMed, which completed its $150 million purchase of ISG in January, has two business units: Edgepark Medical Supply, which sells supplies direct to the consumer; and Independence Medical Supply, which sells supplies through the provider channel. While AssuraMed plans to fold ISG into Independence Medical, some providers worry about buying supplies from a company that is affiliated in some way with Edgepark Medical.

“I think it's disingenuous,” said Peter Tallas, president of Charm Medical Supply in Pembroke, Mass., and a state chairman for the New England Medical Equipment Dealers association (NEMED). “No one is saying it's not permitted, but it's something I think people should be aware of. Be careful who you buy from.”

Edgepark Medical, founded in 1928, and Independence Medical, founded in 1990, became business units of AssuraMed in 2012, two years after being acquired by private equity firms Clayton, Dubilier & Rice and Goldman Sachs' Capital Partners.

Heightening concerns: Providers say Edgepark Medical has a growing foothold in the managed care organization (MCO) market. Tallas says it snapped up three new contracts in New England alone in 2012.

“Providers, who are trying to diversify away from Medicare, are trying to transition to these MCOs, and those are the contracts that Edgepark is trying to get,” said Karyn Estrella, executive director of NEMED.

Providers say Edgepark's presence in the MCO market also sends the message that non-local, direct-to-patient home delivery of supplies is an appropriate way to provide care, a message they've been fighting.

“If a lot of this business goes drop shipped, direct-to-consumer, what happens when consumers run out and don't have enough to get through a weekend?” Estrella said. “That's when they go to a local provider and then that provider is stuck in the middle. What are they supposed to do?”

A spokesman for AssuraMed emphasized that Edgepark Medical and Independence Medical are separate business units with separate management and separate operations, including separate IT systems. As for the company's presence in the MCO market: Edgepark Medical contracts directly with more than 600 MCOs, but it added only a handful of new contracts in 2012.

“AssuraMed invested $150 million in the market because it sees itself as an enabler to HME providers,” the spokesman said. “Independence Medical can enable them to be competitive long term by reducing their costs and driving operational efficiencies.”

Providers acknowledge that AssuraMed's not the first manufacturer or distributor to make waves in this way, especially with every healthcare payer out there trying to reduce costs. One provider says you can't drive yourself crazy over it.

“Things can get murky at times,” said Dave Anderson, owner of Anderson's Medical Products in Terre Haute, Ind. “If you wanted to be a purist, you'd be limiting yourself, because there are so many of these perceived conflicts of interest.”