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by: Liz Beaulieu - Tuesday, August 19, 2014

Getting the Power Point presentations for the HME News Business Summit always makes me feel like a little kid at Christmas.

The presentations started rolling in last week, and let me tell you, they didn’t disappoint.

In fact, I think this may be the best Summit yet. I say this every year and every year it’s true.

This year’s speakers have helped me raise the bar once again.

Below are a few tidbits from two presentations to give you a taste of what you’ll hear and see next month:

How important is the role of an HME provider in helping hospitals reduce readmissions or achieve other positive outcomes?

Anyone who has checked out the educational program for the Summit knows that a big theme this year is the drive to better integrate acute and post-acute care.

So do hospitals believe HME providers play an important role in helping them reduce readmissions or achieve other positive outcomes?

After conducting exclusive research, speaker Mike Sperduti found that the majority of hospitals interviewed (60%) said HME providers do play an important role. Only 2% of hospitals said HME providers play no role at all.

Be prepared for Mike to ask you: How many of you have approached discharge planners and case managers to discuss the HME provider’s role?

As Mike says, “This is about opportunity.”

Is there such a thing as a “top performer” in a post-competitive bidding landscape?

It turns out there is, as you’ll find out from speaker Rick Glass.

In this year’s presentation on the Financial Benchmarking Survey, Rick includes a profile of an eight-year-old business faced with large reimbursement cuts as part of Round 1 and Round 2 of competitive bidding. Sound familiar?

The company responded to the losses with a “relentless focus” on improving efficiency and accelerating growth. The key: It made substantial investments in achieving those goals.

The company’s revenues were flat at $7 million in 2013 vs. 2012, but it finally saw a payoff in 2014, when revenues increased to $12.5 million and 30% EBITDA.

There’s more, of course, but that’s all you're going to get from me.

Register for the Summit to get the full picture.

by: Liz Beaulieu - Wednesday, August 13, 2014

You bet, says Dexter Braff.

In this latest sneak peek of The Braff Group M&A Insider, which will appear in the September issue of HME News, we take a look at deal trends by the nationals from 2001 to 2013.

Here’s a specific breakdown of the activity of Rotech, Lincare and Apria Healthcare during that 13-year span, based on data collected by The Braff Group:

2001

Rotech: 0

Lincare: 18

Apria: 8

2002

Rotech: 0

Lincare: 26

Apria: 18

2003

Rotech: 1

Lincare: 13

Apria: 27

2004

Rotech: 0

Lincare: 27

Apria: 27

2005

Rotech: 10

Lincare: 15

Apria: 24

2006

Rotech: 1

Lincare: 9

Apria: 3

2007

Rotech: 0

Lincare: 1

Apria: 0

2008

Rotech: 0

Lincare: 2

Apria: 0

2009

Rotech: 3

Lincare: 0

Apria: 0

2010

Rotech: 1

Lincare: 1

Apria: 0

2011

Rotech: 4

Lincare: 4

Apria: 1

2012

Rotech: 4

Lincare: 0

Apria: 0

2013

Rotech: 4

Lincare: 0

Apria: 0

It’s interesting to consider these numbers in the context of a few big milestones in the HME industry. As Braff points out in his commentary below, activity started to skid in 2005-06 with the Deficit Reduction Act, which introduced a 36-month cap on reimbursement for oxygen equipment and services.

There was a little spike in activity in 2011, especially by Rotech and Lincare (4 deals apiece), when competitive bidding went live in nine cities across the country. As you’ll recall, the nationals didn’t pick up as many contracts as they thought they would, leaving them to acquire other companies with contracts in key areas and product categories.

It’s interesting to note that Rotech continued its spike in activity in 2012 and 2013. Actually, Rotech was relatively quiet leading up to 2005-06, when Lincare and Apria were going gangbusters. With the exception of 2005, the bulk of its activity has been in 2009-13.

It’s also interesting to note that Apria has logged only one deal since 2008, when it was bought out by an affiliate of The Blackstone Group. It looks like the same thing has happened to Lincare since 2012, when it was bought out by The Linde Group (Though Managing Editor Theresa Flaherty points out that Lincare made at least one deal during that timeframe: RxStat).

Here’s the commentary from The Braff Group:

This month, we quantify what industry observers have known anecdotally for several years: that is, the marked change in acquisition activity driven by “The Nationals.”  Rarely do we see such a dramatic and immediate free-fall in deal flow. But such was the impact of the Deficit Reduction Act of 2005 (signed in early 2006), which introduced the 36-month cap on oxygen reimbursement and essentially knocked the nationals out of the arms race for more locations. In many areas, this opened the door to regional and local providers to pick up the slack. It also provided the impetus for buyers, including a wave of private equity sponsored investors, to pursue non-oxygen focused consolidation strategies, including rehab, supplies and sleep.  What will the next wave bring? Even Carnac would struggle with this one. But would anyone be surprised that, as margins continue to eat away at the value-added services that once defined the industry, if “Big Box” retailers (or the manufacturers themselves) see an opening to leverage their purchasing power and distribution capabilities to “out-efficient” even the best of the traditional providers?

by: Liz Beaulieu - Tuesday, July 29, 2014

HME News Publisher Rick Rector and I had an excellent conversation with the judges of the HME Excellence Awards this week, during which we pondered the following question:

What’s the definition of excellence and how has it changed?

We all agreed that it’s hard to look at financials the same way, with the havoc wreaked by competitive bidding and audits.

A big chunk of what the judges look at when determining the winners of the HME Excellence Awards is financials—net revenues, cost of goods sold, EBITDA—and how those financials have (hopefully) improved over a three-year term.

One judge said, these days, if a company is making any kind of improvement at all in these areas, no matter how small, it’s an achievement.

So with so many providers in the same boat—treading water or making small improvements in their financials—how do we separate the wheat from the chaff?

There are other criteria that the judges look at as part of determining the winners of the HME Excellence Awards—marketing, community involvement, staffing and quality control.

Those, along with the aforementioned financials, are still very, very important.

But there were other things that also impressed the judges about this year’s crop of finalists—everything from their efforts to diversify their product and payer mix, to their activity on social media outlets like Facebook and twitter.

One big thing the judges kept coming back to: signs that a company was “cutting edge” and “progressive.”

All the judges noted an insert submitted by one of the finalists about its efforts to help hospitals reduce readmission rates for COPD patients.

“This shows the company is up to date with market trends,” one judge said.

In a nod to the increasingly interwoven healthcare industry, the judge also said: “It also shows they understand that excellence in health care means doing more than just what’s good for your particular company.”

We’ll likely tweak the application process for the HME Excellence Awards going forward to reflect some of these added priorities in the HME industry.

And speaking of the HME Excellence Awards, first, second and third place winners have been selected and notified.

But you’ll have to attend the HME News Business Summit, Sept. 7-9 at The Marquette Hotel in Minneapolis, to find out who they are!

by: Liz Beaulieu - Thursday, July 17, 2014

I’ve had great conference calls this week with the moderators and panelists for the three panel discussions at this year’s HME News Business Summit.

(Shameless plug: It’s less than two months away, by the way, so register today!)

The topics of the panel discussions are partnership opportunities among healthcare providers, strategic planning and outside investment in HME.

I get really amped up for the Summit after these calls. Hearing the panelists chime in on what they plan to talk about during the discussions reaffirms a number of things for me…the topic, the panelists (there are some super smart people in this industry), and the impact that the discussion will have on attendees.

Below are a few gems from this week’s calls to give you a taste of what’ll you’ll hear.

On partnerships with acute-care providers in a Affordable Care Act (ACA) world:

“It’s rebundling what you already have. It’s monitoring patients post-hospital stay. It’s staying more in touch, not for all patients, but for the section that’s most at risk. It’s sales 101. They have a need and you’re taking what you already have and changing the prism.”

On not playing your part:

“The industry, as a whole, needs to move away from providing products to providing solutions. That’s why we’re viewed as vendors instead of post-acute care providers. It’s why you put on a suit, not jeans, when you go on a sales call. We need to change our image.”

On strategic planning:

“The biggest thing is explaining the monitoring process. Too many people think it’s academic and conceptual, which keeps them on the sidelines. What needle are you trying to move and how are you going to monitor whether or not it’s moving in the right direction?”

Among the questions we’ll be asking the panelists for the discussion on outside investment in HME:

How did the current regulatory environment—namely competitive bidding and audits—factor in to your decision to invest in the HME market? What is your firm’s strategy for dealing with these regulatory headwinds? What do you look for in a company? What financial benchmarks do you focus on? How are you trying to create value in the market? How do you see the HME market fitting into the greater healthcare market going forward?

You’re not going to want to miss this stuff.

by: Liz Beaulieu - Friday, July 11, 2014

It’s definitely the dog days of summer outside of HME News world headquarters in Yarmouth, Maine.

As I sit here writing this blog, waiting for our production department to finalize the HME Newswire that will go out at 6 a.m. EST on Monday, it’s a beautiful 74 degrees outside.

It’s sunny with scattered clouds.

It’s dry.

In other words, it’s a great day to be playing hooky from work and playing outside.

But apparently there’s no rest for the weary when you’re covering the fast-paced HME industry.

Yes, I just wrote fast-paced HME industry.

You see, we had 10 stories in contention for this week’s Newswire, a Newswire with space for five stories. Ten! That’s how much stuff has been going on this week.

The top story in the Newswire just broke about an hour or so ago: As promised, Rep. Renee Ellmers, R-N.C., has introduced a bill to reform the audit program.

We also have stories about Wright & Filippis selling to Lincare, a pilot program to settle appeals that are stuck at the ALJ level, and Invacare’s new pricing policy for products sold over the Internet.

A good story that didn’t make the cut for Monday’s Newswire, but will definitely be in the following Newswire: Mobility stakeholders respond to CMS’s plan to bundle monthly payments for standard manual and power wheelchairs. Tucked into that plan, CMS is also soliciting comments on whether manual and power wheelchairs should each be described under one HCPCS code. As Invacare’s Cara Bachenheimer says, “That’s just insane.”

I should stop there. I’ve already given away too much. Who knows who reads this blog?

But let me part by saying, dog days of summer…more like work like a dog!

by: Liz Beaulieu - Monday, June 30, 2014

I get quite a few things in my email inbox that aren’t quite the right fit for HME News. As I often have to explain to this PR person or that PR person, our niche in health care is pretty specific: home medical equipment.

I usually give these emails a quick read-through, anyway—what can I say, I’m a reporter and therefore curious.

Such was the case today, when I got a press release from a group called the American Society for Quality or ASQ. It bills itself as a “global community of people dedicated to quality who share the ideas and tools that make our world work better.” Pretty lofty stuff.

For its latest projects, the ASQ polled 300 of its members in the healthcare quality profession on their priorities, hurdles to cost-cutting and opportunities for belt-tightening.

It’s not surprising that reducing hospital readmissions topped the list of priorities. Others include:

•    Implementing patient care coordination programs; and
•    Redesigning the healthcare delivery model to include alternatives to physician delivery of primary care.

Hurdles to cost-cutting include:

•    A model of reimbursement that favors sick care over health maintenance; and
•    Fragmented, uncoordinated patient care.

Opportunities for belt-tightening:
•    Better implementation, distribution and acceptance of preventative medicine to keep patients healthy longer, reducing demand.

You’ve probably noticed a trend in the findings that I’ve included here. They’re all priorities/hurdles/opportunities that I believe HME providers can help with.

While not something we’d write a story about in HME News, I thought these findings were worth reading about and sharing with you.

Thinking about how to make the world work better may be a lofty goal, but definitely one worth pondering.

by: Liz Beaulieu - Tuesday, June 24, 2014

It’s only the fourth day of summer, but at HME News headquarters, we’re already thinking fall. (Which is a shame, really, because summers in Maine are so, so short!)

Why? Believe or not, we’re gearing up for our pre-show (September) and show (October) issues for Medtrade.

Most years, the show issue features a special report. This year’s topic: the changing shape of the HME industry.

As part of the report, we plan to focus on three major ways in which the industry is changing:

Consolidation (During a presentation at Medtrade Spring earlier this year, Craig Hittle of Somerset CPAs said the number of HME providers will consolidate to about 8,000 from about 10,000. I believe my memory is serving me correctly here. If not, Craig, let me know!)

Scope (HME providers are shifting to more of a post-acute care mindset and business model. This is one of my soapboxes as you’ll see here and here and here.)

Data/technology (HME providers are looking at billing and operations as more than a way to process claims and fill orders. They’re using them for analytics and business management.)

Among the questions that we’ll be asking a mix of industry leaders, attorneys, analysts, providers and vendors: How are consolidation, scope and data changing the shape of the HME industry from a big picture perspective? How are they changing how providers do business more specifically? What opportunities and challenges exist in each of these areas? How are providers reacting to these opportunities and challenges? How do these changes affect how HME is perceived by the outside world…by CMS, by lawmakers, by consumers? What will be the end result of these changes five, 10, 15 years down the road?

We also plan to profile two providers that are leading the pack in one or more of these areas.

Stay tuned.

by: Liz Beaulieu - Friday, June 13, 2014

In short: Probably not, says Dexter Braff.

In this latest sneak peek of The Braff Group M&A Insider, we take a look at sleep provider deal trends.

Here's a specific breakdown of the non-private equity vs. private equity transaction volume:

2001

Non-PE: 1

PE: 0

2002

Non-PE: 1

PE: 0

2003

Non-PE: 0

PE: 0

2004

Non-PE: 0

PE: 0

2005

Non-PE: 3

PE: 0

2006

Non-PE: 4

PE: 0

2007

Non-PE: 5

PE: 0

2008

Non-PE: 6

PE: 1

2009

Non-PE: 7

PE: 5

2010

Non-PE: 3

PE: 1

2011

Non-PE: 7

PE: 2

2012

Non-PE: 8

PE: 10

2013

Non-PE: 1

PE: 3

Commentary from The Braff Group:

This month, we take a deep dive into the sleep sector: labs, diagnostics, CPAP and supplies. Based upon proprietary data collected and analyzed by The Braff Group, deal flow in sleep (driven largely by private equity) clearly peaked in 2012 and subsequently plunged in 2013. More telling, when we looked at individual buyer activity, we saw that though quite a few have been active at one time or another, none have executed a sustained acquisition strategy. Rather, their consolidation efforts have been limited to one or two years, followed by quiet periods. So what do we make of this? Buyers have long targeted niche segments in the HME arena to establish clear differentiation in a crowded market—supplies, complex rehab, mobility and sleep. But in sleep, with greater fixed costs, high clinical intensity and growth constrained by number of beds, the market has been particularly difficult to consolidate and scale. Moreover, to a large extent, lab and diagnostic suppliers have not been able to parlay their clinical excellence to capture a disproportionate share of the profitable supply business. As such, our sense is that the CPAP replenishment business has largely moved from the sleep category to supplies—akin to diabetes—which have a very different warehouse/customer management/delivery business model. So is the traditional M&A market for sleep dead? Probably not. But rather than large-scale roll-ups, we will likely see more local provider and strategy-specific type transactions.

by: Liz Beaulieu - Wednesday, June 4, 2014

Every year around this time, there are a lot of balls up in the air at HME News.

And to keep them all up there, we need your help juggling.

The most time sensitive: the HME Excellence Awards. The deadline to apply for the awards is this Friday, June 6. We’ve received about half the number of applications this year compared to last year. This makes me sad. It has been a rough couple of years in the HME industry, and I’d like to think that those providers that are still out there doing the good work and fighting the good fight would want to celebrate that. (What makes me smile: For the first time, we received a letter of support from a manufacturer for one of the applicants!) Plus, it’s not a time-consuming process—the application is only one page! An added bonus: the three winners of the awards (first, second and third place) will receive free registration to the HME News Business Summit, Sept. 7-9 in Minneapolis!

Go here to fill out the HME Excellence Awards application today.

Speaking of the Summit, another ball in the air is the Financial Benchmarking Survey. We reveal the results of the survey and feature an analysis by Rick Glass during a lunch-time session on the second day of the Summit. The survey results are one of the few good ways that HME providers can compare how they’re doing to their peers. Unlike the awards application, the survey is not one page, but the intel you get will make it worth your while. Like with the awards, we’ve received about half the number of surveys this year compared to last year at this time. The deadline is July 3.

Go here to fill out the Financial Benchmarking Survey today.

Last but not least, the final ball in the air is the aforementioned Summit. Registration is open and unlike the awards and the survey, we have more attendees signed up this year compared to last year at this time. I like to think that the Summit continues to build on its reputation for having the most unique, forward thinking educational program for HME providers—and this year is no different.

Go here to sign up for the Summit today.

I’d like to give a shout out to all the industry leaders, like state association leaders Rose Schafhauser and Carol Napierski, and Medtrade, for helping HME News spread the good word about the awards and survey. It’s greatly appreciated!

And I promise my next blog won’t be so advertorial.

by: Liz Beaulieu - Thursday, May 29, 2014

Here's a sneak peek at The Braff Group Insider for the June issue. (Also, I want to apologize for misspelling peek in my last sneak peek...I hate it when I do that.) This graph breaks down transaction trends for the HME industry from 2009 through the first quarter of 2014. See a pattern?

 

 

 

 

 

 

 

 

 

 

 

 

Commentary from The Braff Group:

Based on proprietary data collected by The Braff Group, the 45-degree ramp up that began in 2010 has clearly reversed direction. Fifteen months past the five-year peak reached in Q4 2012, the downward trend is unmistakable. The good news is that while the market is down, it is not out. We continue to field calls from potential buyers and sellers alike. But the energy that characterized the 2010-2012 run-up has been tamped down by caution fueled by competitive bidding, shrinking margins and runaway audits that squeeze cash flow. All things considered, absent a major and unexpected development, we anticipate that over the next 12-18 months, the market will begin to level off at plus or minus 10 deals per quarter. 

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