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by: Liz Beaulieu - Friday, September 12, 2014

In this sneak peek of the M&A Insider that will appear in the October issue, The Braff Group looks at HME deal trends from 2006 to date.

As the firm notes in its analysis below, the last three quarters of activity have been relatively steady, with 15-18 deals per quarter.

What might that mean? Take in the graph and read analysis below for the full picture.

Based on proprietary data collected and analyzed by The Braff Group, after four quarters of deal flow bouncing up and down between Q4 2012 and Q3 2013, the home medical equipment sector has recorded three rather steady—and reasonably strong—quarters of M&A activity (15-18 deals per quarter). This may reflect a “settling in” of the market after the jarring announcements of competitive bid pricing for Round 2 and the Round 1 re-bid. As far as emerging trends, we note a somewhat anecdotal, but perhaps no less revealing, development. After repeated—and misguided—predictions of wide-spread Armageddon following each major reimbursement jolt over the past 20 plus years (rent-purchase, oxygen modality neutrality, the six point plan, OBRA ‘90, BBA ‘97, O2 caps), the doomsdayers may finally have gotten it right—sort of. For the first time since we’ve been covering the sector, we are beginning to hear more than just a few recordings of “this phone number is no longer in-service” as competitive bidding, somewhat predictably, is making the industry a bit less competitive. Where the sky-is-falling crowd continues to get it wrong, however, is the breadth of the retreat. Certainly some players that failed to earn bids have rolled in their wheelchairs.  But far more are tenaciously working the edges of the markets—from focusing on non-competitive bid products, to targeting non-Medicare beneficiaries—to keep their doors wide open.

If you want specific deal numbers per quarter, here they are:

2006

Q1: 16

Q2: 18

Q3: 14

Q4: 12

2007

Q1: 9

Q2: 15

Q3: 15

Q4: 6

2008

Q1: 6

Q2: 12

Q3: 7

Q4: 10

2009

Q1: 6

Q2: 16

Q3: 17

Q4: 10

2010

Q1: 9

Q2: 8

Q3: 9

Q4: 11

2011

Q1: 22

Q2: 18

Q3: 11

Q4: 17

2012

Q1: 26

Q2: 16

Q3: 24

Q4: 27

2013

Q1: 11

Q2: 20

Q3: 9

Q4: 17

2014

Q1: 15

Q2: 18

by: Liz Beaulieu - Tuesday, September 2, 2014

We’re used to CMS breaking news late on the Friday before a long holiday weekend. And Friday, Aug. 29, was no exception.

(It turns out Invacare took a page from CMS’s playbook and also announced late on Friday that it was selling Altimate Medical to strengthen its balance sheet and reduce debt.)

At about 3:20 p.m. EST, CMS sent out an “MLN Connects Provider eNews – Special Edition” offering a settlement to acute care hospitals and critical care hospitals to resolve appeals of patient status denials.

There has already been at least one concession made when it comes to audits and the almost guaranteed appeals that come with them: A pilot project by the Office of Medicare Hearings and Appeals (OMHA) that brings provider and CMS together with a facilitator to work out a settlement. The idea: alleviate a massive backlog of appeals—think nearly half a million of them!—at the administrative law judge (ALJ) level.

In this white flag of sorts, “CMS is offering an administrative agreement to any acute care hospital or critical access hospital willing to resolve their pending appeals (or waive their right to request an appeal) in exchange for timely partial payment (68% of the net payable amount).”

“CMS encourages hospitals with patient status claim denials currently in the appeals process to make use of this administrative agreement to alleviate the burden of current appeals on both the hospital and Medicare system,” the agency states in the bulletin.

I particularly enjoyed this headline from Modern Healthcare, whose dedicated staff reported on the news the next day, a Saturday: “CMS offers holiday sale on audit appeals.”

I have since received a few emails from HME providers, wondering why CMS isn’t extending the same offer to them. One wrote to me: “Hospitals are given preferential treatment and the rest of us are treated like second class citizens.”

Would you drop an appeal for partial payment? This provider said he would.

Of course, the bigger question, here, is why CMS is willing to acknowledge a “burden of appeals” but isn’t willing to reform the very program that got everyone into this mess in the first place? It seems to be so unwilling to do this that not only the HME industry but also the hospital industry has had to introduce legislation to try and force the agency’s hands.

by: Liz Beaulieu - Wednesday, August 27, 2014

There are three excellent panel discussions at the HME News Business Summit this year (It’s Sept. 7-9 at The Marquette Hotel, so there’s still time to register!).

I touched on these panels in a previous blog.

But I wanted to give you a better idea of where we’re headed with the panels on partnerships and strategic planning.

Where does HME fit in?

For the panel on partnerships, we’ll have four HME providers talking about how they’ve been able to further embed themselves in the continuum of care. They’re prepared to answer questions like:

*What are your outlooks and perceptions (either real or perceived) on the role of HME plays in the healthcare landscape in terms of providing solutions vs. simply providing products?

*How have these partnerships changed how other healthcare providers view your company and what you do?

*Why have you made partnerships part of your business plan?

*Who are the healthcare providers out there to build relationships with? What healthcare providers have you had the most success with?

*How have you been able to build partnerships with other healthcare providers? How do you open doors at a hospital system or a nursing agency? Do you get outside help?

*Who are the key contact points at the hospitals/facilities/providers with whom you work with?

*What’s the business case for these partnerships: What are you looking to get out of it? What are they looking to get out of it? Who shares in the risk?

*Is there a way to monetize these partnerships? What are some non-traditional sources of funding, such as grants?

*What kind of investments are involved in building these partnerships? What capital and labor investments are involved?

*What are the advantages and disadvantages of these partnerships?

*What has been the impact of competitive bidding on whether you’ve sought out partnerships and how you’ve built these partnerships?

*What has been the impact to your referrals sources and overall business as a result of an increased physician/hospital/system integration and/or alignment?

*How do partnerships open the door to other payers, such as managed care companies?

What’s your strategy? 

For the panel on strategic planning, we’ll have three HME providers talking about how they take a systematic approach to overcoming the challenges and leveraging the opportunities in the industry today. They’re prepared to answer questions like:

*Give us an example of an issue or challenge that you have tackled with strategic planning.

*Why did you use a strategic plan?

*How far into the future did you plan? One year or multiple years?

*How did you communicate your strategic plans to employees? How well was it received?

*Did you use a particular planning mode? How well did it work?

*What metrics/methods did you use to measure performance?

*What results did you expect to achieve? Did you achieve them? Explain.

*What’s the best way to stimulate strategic thinking?

·      What was the worst thing that happened in the past year? What must happen to fix it?

·      What was the best thing that happened in the past year? What do you need to do to make it a repeatable experience?

*How do you get input from as many employees as possible on current issues in your company as part of assessing your current situation? Does this help with staff buy-in?

*What have you learned from your experience of formalized planning?

*What do you think are the potential consequences for an HME company deciding to do nothing?

Who wouldn’t want to know the answers to these questions? It’s information you can take to the bank.

by: Liz Beaulieu - Thursday, August 21, 2014

The Open Door Forum yesterday was pretty much all hospice, all the time (Oasis, payment rates, cost report, cap survey), so you won’t be seeing a story about it in HME News.

But there was an interesting question asked during the Q&A portion of the forum that’s worth mentioning here.

Someone from a hospital called in to ask CMS officials why physicians are getting such detailed requests for documentation from DME providers.

He said: “We’re getting requests from DME providers for some level of documentation from the physician that there has been a face to face by the nurse practitioner. We’re wondering, in a situation where (patients have been hospitalized), wouldn’t the medical record itself serve that purpose? Can you clarify what’s really needed at this point? There have been situations where discharges are delayed. Physicians, especially in the surgical world, are tied up. We’re not sure what’s required and they’re asking for some detailed information.”

Where do I begin…That the hospital sees the DME provider as a nuisance for trying to follow the rules? That CMS policies can sometimes defy common logic? That patients are getting delayed in their discharges due to that lack of common logic? That hospitals still don’t know what’s going on with the face to face?

CMS didn’t have anyone present at the forum to answer his question. Randy Throndset, director of the Division of Home Health, Hospice and HCPCS, advised him to send an email to the Open Door Forum email address.

Welcome to our world, hospitals.

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.

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