Power in numbers: Providers rethink their independence

Sunday, December 31, 2006

SPARTANBURG, S.C. - Independent providers in the Southeast who no longer want to go it alone in an increasingly competitive HME world have a new option.

Southern Home Medical Equipment has begun rolling up independents, giving them the resources they need to compete but allowing them to maintain their autonomy, company officials say.

"We had been thinking about how to compete, and we realized we needed to not only grow but grow quickly," said Dennis Nowak, a respiratory therapist with ApneaRx, who also serves as Southern Home Medical's vice president. "But we didn't necessarily want to get involved with a major corporation, because we like what we're doing. We wanted to stay involved."

In late December, Southern Home Medical signed letters of intent to purchase three companies in South Carolina: Mobile Healthcare in Greenville (five employees, $900,000 in annual revenues); Adaptive Medical in Spartanburg (six employees, $1 million in revenues); and ApneaRx in Clemson (three employees, $500,000 in revenues). Terms of the deals were not disclosed, but part of the purchasing package was company shares, Nowak said.

Southern Home Medical plans to acquire at least 10 independent providers in the Southeast by the end of 2007. Officials estimate there are 111 providers within a 300-mile radius of Spartanburg.

Independent providers who become affiliates of Southern Home Medical receive a number of big-company perks, company officials say. They become stockholders in the company and have access to operating capital from outside investors to grow their businesses; they enjoy purchasing power with manufacturers; and they get to pick each other's brains on marketing, billing and other business-related topics.

"If one provider in the group has already gone through accreditation, we can take that strength and layer it over all of us," said Greg Tucker, the owner of Adaptive Medical who also serves as Southern Home Medical's president and CEO.

At the same time, affiliates don't have to worry about the No. 1 fear of joining a big company: lack of control.

"If someone's been in business for 10 years and they've built a credible reputation, why would you take that goodwill and throw it away by, say, switching their name to Southern Home Medical," Tucker said. "Even with 100 locations, the names will stay intact."

Most importantly, joining Southern Home Medical means affiliates have an exit strategy, something that has become more and more elusive now that national providers like Apria and Lincare have virtually stopped making acquisitions.

"There was a time when you started an HME company and down the road, you looked at talking to one of the bigger players about merging with them or having them buy your company," Tucker said. "But the acquisition process has been drying up. If no one was going to knock on our doors, we had to create our own big name. You can't do that with private dollars--not with what we had in our pockets, anyway. We needed a different type of currency."

The company was co-founded by Tucker, Nowak and four others: Todd Shriver, the co-founder of Mobile Healthcare; Bernard Ross, president and co-owner of Laurel Baye Allied Health Resources; Ed Vick, the owner of Atlantic Sales and Repair; and Alan Richey, who heads up several HME companies in South Carolina and Georgia.