M&A: Nationals turn up the heat

Are they trying to scare or save potential sellers?
Friday, March 23, 2018

YARMOUTH, Maine – While it’s not unusual for national providers to send query letters to providers that may be looking to sell, their tone this time around feels decidedly different, some of those providers say.

A recent letter from Rotech Healthcare details the cuts in Medicare reimbursement for oxygen and CPAP, and notes that Medicaid rates are expected to decline to Medicare rates and that audits are rejecting valid claims.

"These drastic financial impacts have caused many DME companies to consider exiting the industry,” states the letter. “If you are considering exiting the DME industry, Rotech Healthcare has successfully assisted dozens of DME companies over the past couple of years and may be able to assist you and your patients through a seamless transition and asset purchase of your business.”

Provider Tyler Riddle, who has received 11 copies of Rotech’s letter, says the nationals are trying to “scare” providers into selling their businesses.

“This is the first time I’ve seen a letter like this playing up all the negatives of being in the industry,” said Riddle, vice president of Albany, Ga.-based MRS Homecare.

Provider Jason Jones says he gets letters twice a year from Rotech and has also received letters from Aeroflow Healthcare, which takes a slightly different tack.

“The Aeroflow letter is more, we want to reward you for all your hard work—let us help you exit,” said Jones, president of Troy, Ala.-based Jones Medical Supply.

That message is no accident, says Aeroflow, which also sends emails and makes phone calls to keep their name front of mind for providers who may, if not now, in the future seek an exit strategy.

“We want to focus on working with the seller to help find the value they see in their company and the transition of their patients and staff over to Aeroflow,” said Andrew Amoth, corporate development manager. “The option is there when they need it.”

While Rotech acknowledges that its acquisition program has gotten more active in the past two years, it also contends that it’s a good option for a provider that’s struggling.

“It comes to the point where we can purchase their assets or just get them out of a bind,” said CEO Tim Pigg. “But we can’t save everyone.”

Riddle, who is not looking to sell, plans to use the latest letters to educate lawmakers on the challenges providers face.

“I’ve got a stack of envelopes addressed to all of the people in Congress in Georgia that says, ‘Hey this is how bad it is,’” he said. “This is how they are marketing themselves: ‘It’s so bad, we’re your escape.’”

With 2017 in the books, and 2018 not looking much better, many providers appear to be evaluating the future, says Amoth.

“We got an unexpectedly large response to this last mailer,” he said.