MOBILE, Ala. - Hal Compton thinks the HME industry is ripe for consolidation and he's the man to do it.
The former retail executive, along with several others, formed holding company Hasco Medical about two years ago with the intent of acquiring established healthcare companies. The company went live on the OTC Bulletin Board in April and has begun sending inquiry letters to prospective sellers.
"There's not really a national player in DME," said Compton. "You've got Apria and Lincare that chase respiratory, you've got the Scooter Store which is power mobility. We think there is (opportunity) to become a national player from full-line DME to respiratory to power mobility and everything in between."
Hasco currently operates one full-line DME, the Mobile, Ala.-based Southern Medical, which serves about 3,500 patients in Alabama, Florida and Mississippi.
For now, the company's targeting the Southeast, but it is steering clear of the nine competitive bid areas, said Compton.
"We are kind of waiting to see where that lands before we jump into those markets," he said. "But, in the last month or so since (the bid amounts were announced), we have definitely seen more people getting a hold of us attempting to sell their businesses."
Hasco is offering a mix of owner-financing, cash and stock incentives to prospective sellers. The company is backed by a line of credit and a private investor--Compton's father, a former CEO of CompUSA, the electronics retail giant.
So far, Hasco has looked at companies with sales of up to $10 million that have anywhere from 0% to 80% Medicare. Individual companies would be folded under the Hasco umbrella but retain their own names.
"Our goal is not to go out and put the Hasco name on every company that we acquire," said Compton. "We are hoping to bring some synergies in as we acquire these, but a lot of them have already built names for themselves in each market."
Compton may have his work cut out for him. Other players with no HME background have been drawn to the industry's demographics, only to find out dealing with Medicare and other third-party payers is a whole different animal than other business markets.
"Traditional HME is not a retail business," said Bob Leonard, an analyst with Pittsburgh-based M&A firm The Braff Group. "Will it become one? Maybe over time, with the baby boomers, who'll have the cash and the mindset to pay for what they want."
Compton is confident he can make it work.
"Whether it's DME, computers or clothes, the model is still the same at the end of the day," he said. "It's providing a product to a consumer. Customer service is going to be the key--keeping the doctors, nurses and patients happy so they want to come see you again and again."
 

WATERLOO, Iowa - The VGM Group is on the road this summer to help competitive bidding winners and losers make the best of an impossible situation.
"People are nervous and want to know what to do," said Alan Morris, VGM's regulatory analyst. "Whether it's this year or next, our belief is that this program is ultimately going away. We try to keep people upbeat and give them tools for survival."
Providers in the first nine competitive bidding areas bid down prices, on average, 32%. No one can survive that size cut long term or do so and take good care of patients--not winning providers, not losing providers. The key, say VGM officials, is for providers to develop strategies that allow them to hold on until the program is eliminated.
During its seminar tour, VGM covers, among other things, two areas that hold that key to survival: subcontracting and grandfathering, Higley said,
In short, a grandfathered provider failed to win a bid but opts to continue servicing his existing Medicare patients--some, depending on the product category, at the new bid price and others under the current fee schedule. In a subcontracting arrangement, a winning bidder hires a losing bidder to perform certain duties, such as delivering product.
Morris and Mark Higley, VGM's vice president-development, are quick to point out that these strategies at short-term fixes, not long-term solutions.
"We believe some providers, perhaps many of them, are considering exiting this market or looking for alterative revenue sources," Higley said. "Our program allows them some time to develop their long term business plans and business strategies as compared to having to panic."
For more on VGM's competitive bidding seminars, go to http://www.vgmncbservices.com/education.asp

 

PORTLAND, Maine - Provider Jim Greatorex already rings up about $1.5 million dollars in retail sales per year at his locations in Portland and Bangor, but he has no plans to stop there.
Greatorex, president of Black Bear Medical, plans to add a mattress line from Clarkston, Mich.-based Sleep & Wellness Centers to his product mix this summer, a move that he hopes will give a "significant boost" to his retail sales.
"We like the other stuff we provide, but Medicare's ruining it for us," he said. "So we're going to be all about retail."
Greatorex came across the mattresses, which are custom designed to treat symptoms like chronic back pain, at The Heartland Conference in June. The mattresses are available exclusively to members of The VGM Group.
To get the word out, Greatorex has hired an additional sales rep, "a real go-getter."
"We're going to hit doctors' offices, pain clinics, the cancer center--there are several places to go to educate referral sources on where they can send patients with these symptoms," he said.
Greatorex plans to showcase seven of the mattresses at his location in Portland.
"That will give customers a good sense for the line," he said. "At first, we probably won't keep many in stock, but after we get going, we'll keep the best movers in the warehouse."
The mattresses, which, for a queen size, range in price from $999 to $3,000, are a "natural match" for HME providers, says Wendell Martens, managing member of Sleep & Wellness Centers.
"They help to create a continuum of care for patients and improve their quality of life by minimizing their pain and aiding in their recovery," he said.
Greatorex also plans to add a shoe line with coil springs this summer.
"We're kind of excited about these two lines," he said. "We're looking ahead to surviving Armageddon if it comes."