Providers chase M&A dollars
AMARILLO, Texas – Jeff Baird, chairman of the Health Care Group at Brown & Fortunato, says he has given out more financial advice in the past nine months than he has in the past 25 years. “Many new clients are not coming to us for advice on day-to-day regulation issues, but because they’re selling or buying or merging,” he said. “Our M&A practice has really exploded.” Here’s what Baird had to say about what he calls the “total reconfiguration” of the HME industry.
HME News: What’s behind all the M&A activity in the industry right now?
Jeff Baird: What we’re seeing is a large number of non-bid winners selling out or closing their doors or filing for bankruptcy. What we’re also seeing is a large number of suppliers, both national and regional, that are being very aggressive as far as buying into those competitive bid areas that aren’t covered by their contracts. We rep a number of large companies that are saying, “Gosh, we weren’t awarded any CBAs in Florida or Texas,” so they’re coming in and cherry-picking winning suppliers through asset or stock purchases.
HME: It’s not surprising that competitive bidding is driving much of the activity.
Baird: We’re also seeing DME companies chase O&P products, because they’re not covered under bidding and they still have higher reimbursement rates. That’s going to come crashing down in the not-too-distant future. CMS and the OIG are going to come in and say, “Nice try; the party is over.”
HME: Is what’s going on in the HME industry a microcosm of what’s going on in health care at large?
Baird: To give this some context, not only are we being squeezed, but also hospitals and doctors are getting squeezed hard. Our pharmacy practice is as large as our DME practice. Pharmacists used to wear the white hats; they did nothing wrong. Now we’re seeing pharmacies go out and do joint ventures and marketing agreements that are suspect at best. Everyone’s trying to chase after the decreasing dollar.
HME: So right now health care, from head to toe, is very much in flux?
Baird: In the past, we have seen shifts, but what I’m seeing now is a total reconfiguration. It’s as if someone has taken a grenade to the industry.