Will O2 providers follow Apria into home infusion?

Friday, November 30, 2007

LAKE FOREST, Calif. - Interest in the home infusion market hit a "crescendo" in October, industry sources said, when Apria Healthcare signed an agreement to buy Denver-based Coram for $350 million.
While mergers and acquisitions in the home medical equipment industry have been few and far between, everyone from Walgreens to private equity firms have bought chunks of the home infusion market in the past one to two years, industry sources said.
"The home infusion market has taken its reimbursement cuts already," said Bob Leonard, an associate with the M&A firm The Braff Group. "It has become far more predictable than HME."
Apria is the first of the nationals to go from playing a minor to a major role in the home infusion market, industry sources said. A big part of its motivation for buying Coram was diversifying its product and payer mixes away from oxygen and Medicare.
"They made a decision a year ago to find a significant platform acquisition in another industry," said Rick Glass, president of the M&A firm Steven Richards & Associates. "Home infusion was a likely candidate because of its synergies with HME."
Given the uncertainties surrounding HME, including national competitive bidding and a proposal to further reduce reimbursement for home oxygen therapy, industry sources wonder if other providers will follow Apria's lead.
"Increasingly, home infusion has been a sought after market, but the Apria announcement has heightened that," said April Mason, an adviser with the M&A firm Paragon Ventures." Lincare and others looking to gain or maintain market share have to be looking at home infusion."
Apria has a good head start, industry sources said. It couldn't ask for a better stepping stone than Coram, with its 65,000 patients, 70 branches and 50 ambulatory suites.
"With a name like Coram, you're already one of the top players, if not the top player, in the home infusion market," said Michael Patton, a director of mergers and acquisitions for Provident Healthcare Partners.
Additionally, Apria already has "brand recognition" in home health care, even with private and third-party payers, sources said.