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Uncertainty kills Teijin's bid for US HME market

Uncertainty kills Teijin's bid for US HME market But Teijin’s loss may be PE firm’s gain

YARMOUTH, Maine - Teijin Limited's recent announcement that it was exiting the U.S. homecare market is a textbook example of the cooling off of a once red-hot market, say industry analysts.

“We've seen these guys coming in and going out like a revolving door,” said Rick Glass, president of Steven Richards & Associates. “The U.S. is such a big market that it looks desirable to these overseas players and then they get in here and find out it's a little more complicated than that.”

Teijin announced in late April that it was selling Braden Partners—better known as Pacific Pulmonary Services—and Associated Healthcare Systems to PPS HME, an affiliate of Quadrant Management, a New York-based private equity and restructuring firm.

When Teijin acquired Braden Partners, the provider was in growth mode. In 2010, one year after Teijin made the acquisition, it received nearly $46.1 million from Medicare for stationary oxygen concentrators, according to the HME Databank. But by 2015, the latest figures available, that had dwindled to $13.1 million.

“Business conditions grew negative due to developments such as the U.S. healthcare reform, placing downward pressure on profits,” Teijin said in a press release. “Based on current conditions and the outlook going forward, (we) ultimately decided to withdraw from the U.S. market.”

Investors like predictability, which is in short supply due to healthcare reform efforts, say analysts.

“We're not going to see the investment we saw previously from foreign entities until we get at least a stable mandate (one the Affordable Care Act),” said Brad Smith, managing director/partner at Vertess. “Whether good, bad or indifferent, a stable environment is what you need to attract investors.”

There's also the issue of Pacific Pulmonary Services' recent $11.4 million settlement with the government for allegedly making patient referrals to sleep clinics in exchange for CPAP referrals.

Still, analysts see signs of optimism, pointing to last year's acquisition of American HomePatient by Lincare, which is part of industrial gas giant Linde, which is merging with Praxair.

“There may be some signs of hope for the Aprias and the Rotechs of the world,” said Glass.

In another sign that bigger may be better, Quadrant Management, which already owns other home healthcare providers, including Landauer Metropolitan in Mount Vernon, N.Y., which it bought out of bankruptcy for $22 million in 2013, now has an opportunity to “take a more serious jump in the water,” say analysts.

“I think they are in a position to come in at the bottom of the market and build a national company,” he said. “They can greatly increase the size of the business and greatly expand the geographic reach of their company.”


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