Harris Williams professionals regularly attend industry conferences and events. On the flight home, they share three key takeaways to help shape your strategy.
Report by: Turner Bredrup, managing director, and Tyler Bradshaw, vice president, both of the Healthcare & Life Sciences Group
Why is this an important event for professionals active in this industry?
Bradshaw: MedTrade is the largest home medical equipment (HME) trade show and conference in the U.S. Attendees can get updated on the latest information and expectations relative to Centers for Medicare and Medicaid Services’ (CMS) reimbursement policy and the Competitive Bidding Program. Attendees gathered to hear the latest buzz surrounding Round 2020 competitive bidding, plus gather insights as the industry looks toward Round 2021 pricing and competitive bidding goals.
Reimbursement policy in Washington has a direct impact on the top line of all these businesses, and therefore, the bottom line. Everyone wants to know what is being done in Washington to drive the industry’s policy and agenda going forward to make sure that patients are getting the proper access to products. It’s also a great conference because companies exhibit the latest and greatest products, and there is, of course, a networking aspect as you walk the floor.
Which trends, companies or business models were top-of-mind at the event?
Bradshaw: The industry continues to tell a more positive story about highlighting the role of HME as a critical component of delivering effective care. At the end of the day, people want to be out of facilities and receiving care in their homes. Having access to the right products and therapies allows you to be in your home, which can improve outcomes and reduce the cost burden on the overall healthcare system.
The industry also continues to grow and build sophistication around contracting, negotiations and overall payor relations. Historically, the industry focused on Medicare only. Now, the industry has expanded its agenda and focus to Medicaid payors, Managed Care Organizations (MCOs) and other plans caring for this expanding patient population. We are seeing HME suppliers becoming more skilled in payor relations and contract negotiation, and this will only continue.
What opportunities are these dynamics creating for strategic buyers and private equity investors?
Bradshaw: The complex rehab technology (CRT) industry, which is effectively a subset of broader home care, continues to be a really attractive segment. In fact, Harris Williams recently advised both NuMotion and National Seating Mobility (NSM) in very successful transactions. CRT is legislatively carved out from competitive bidding, which allows companies to negotiate rates directly with payors. That’s a direct result of the segment’s aggressive campaign to help Washington appreciate that wheelchairs and other mobility devices are critical to these fragile patients’ lives. Pushing price reductions beyond the economics these companies could handle would not serve those patients.
The home oxygen and respiratory categories also continue to be attractive to investors. These are companies that deliver oxygen, cannulas, and related breathing supplies. It's also a big industry, and it's highly fragmented, although it is undergoing significant consolidation. There are several platforms that have taken advantage of the market dislocation from competitive bidding and made acquisitions of smaller players wanting to exit the market.
In addition, there continues to be interest in distribution models, particularly in how e-commerce in home medical equipment will play out. Many HME products can increasingly be purchased online. The distributors have found ways to make sure that demand is being driven to their sites, but Amazon, Walmart and others will continue to be growing players in this category. At the end of the day, patients are going to need these products, and the dealer network is going to continue to need to be supplied. That should be another category that benefits from these tailwinds. It's just a matter of who's a winner at the end of the day.
Bredrup: The home medical equipment industry is a critical component of delivering effective care as the medical industry transitions patient care from facility-based to home-based care. It is the enabler of effective home treatment and will, therefore, be an active and growing industry for years to come.
Published November 2019