Rehab's a tough business to be in

Sunday, August 31, 2008

When Apria Healthcare announced in June that it had sold its rehab business to Earth City, Mo.-based United Seating & Mobility, there was more to the story. After the sale, United Seating turned around and sold small parts of that business to three other providers: Rehab Tech in Illinois; Rehab Specialties in Texas; and Universal Rehab Equipment in Nevada. Still, United Seating picked up a good chunk of business—11 locations, including “market-leading” locations in Pittsburgh and Phoenix, where it didn’t have a presence. That brings its total number of locations to 26. Bob Gouy, president of United Seating, spoke with HME News in July about what the deal means for United Seating and the rehab industry.

HME News: Why didn’t United Seating keep all of the Apria business?

Bob Gouy: We’re part of a sister company called Wheelchair Professionals-it’s a group of about 40 independent providers that contract with insurers to provide nationwide coverage for mobility products and services. So we didn’t want to compete with strong providers already in those marketplaces that we have relationships with.

HME: How will United Seating integrate Apria’s business?

Gouy: For seven of the locations, the rehab business operated within larger, home medical equipment locations, so for those, we just extracted the employees and operations and rolled them up into existing locations. We hope to leverage revenues a little bit. When you’re in a business with tight margins, small locations that generate very small returns can eat you up. You have to be smart.

HME: And those that weren’t rolled up?

Gouy: For the others, like in Pittsburgh and Phoenix, we’re pulling out employees and operations and opening new locations. One was a standalone location. They’ll all carry the United Seating name.

HME: Does the Apria business open up United Seating to new payers?

Gouy: It does, mostly with private-pay insurers. That’s one of their strengths as an organization.

HME: What does the Apria-United Seating deal mean for the rehab industry at large?

Gouy: That it’s a pretty tough business to be in. Providers are looking very carefully at all segments of their businesses. Rehab, with its small margins, isn’t an attractive business for a provider like Apria. It’s not something they have to do.

HME: How do you see the make up of the rehab industry changing in the next year or so?

Gouy: There’s a lot of possibility for consolidation, but the businesses don’t carry a lot of value, so no one wants to pay a lot of money for them. More and more, we’re seeing companies approach us for possible acquisition that are so far in debt, you can’t help them. It’s troubling. That’s going to continue working its way out.