Quebec company says 'oui' to HME

Thursday, June 16, 2011

MONTREAL - Providers may see gloom and doom in the HME industry, but a Canadian company has a different view.

Bio-Solutions, which manufactures an organic insecticide and a nutritional supplement for poultry, announced earlier this week that it planned to expand into the U.S. HME market.

"Recently, after having multiple organically built 'mom and pop' operations approach us, our board and management have decided this would be a beneficial direction to grow and expand our company," stated Dr. Gilles Chaumillon, CEO and president of Bio-Solutions, in a release.

It's not surprising that our neighbors to the north would be interested in HME, say industry analysts.

"The US healthcare market is among the biggest in the world," said Bob Leonard, an analyst with The Braff Group, a Pittsburgh-based M&A firm. "Canada is a very small market in every industry. They look across the border at the U.S. and say 'wow.'"

Wow is right. Home medical equipment is a $26 billion a year industry and, according to Bio-Solutions' release, it is growing at a pace of 6% annually.

What about competitive bidding?

"We at Bio see a vast opportunity with Round 2 of Medicare competitive bidding being initiated before 2013," stated Chaumillon. "Recent changes will dictate that DME companies must transition away from the traditional fee schedule and enter competitive bidding."

Bio-Solutions is right about that, says analyst Rick Glass.

"If the dynamic with Round 2 looks like Round 1, it's going to require a different business model," said Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based M&A firm. "You are operating as a distribution company as opposed to a high-service level company. There's not going to be any room to enjoy taking care of people in the new HME world."

This isn't the first time a foreign company has bought into the U.S. HME market. The most notable: Tokyo-based respiratory giant Teijin in 2008 acquired three regional respiratory providers.

With all the issues HME providers face--audits, reimbursement cuts and documentation requirements, to name a few--it may seem hard to believe there are interested buyers from outside the market.

"Arguably, I don't think a company like that is going to jump in without doing their homework," said Wayne Stanfield, executive director of NAIMES. "If they've got money, they are going to think outside the box and make money despite all the things going on in our market."

The Montreal-based Bio-Solutions is incorporated in Nevada and is trading on Over-the-Counter Bulletin Board and Pink Sheets. The company has hired consultants here to help it move forward, stated the release.