Reliable Medical Supply positions for growth

But, ‘we want to stay localized and not get so crazy big that we lose sight of what we’re doing’
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Friday, November 30, 2018

BROOKLYN PARK, Minn. – Reliable Medical Supply has grown organically to four locations in Minnesota, but with an outside investor now on board, it has set its sights on expanding through acquisition into new geographical markets.

The first area of focus for the company, whose top product categories are complex rehab and vents: buying another company that will allow it to better serve patients in western Wisconsin.

“There are patient access issues out there,” said Debra Kalk, president and CEO. “There are no suppliers serving that area, especially on the vent side. To give those patients access and two-hour response times and 24/7 on-call services, we need to be strategically closer.”

In late November, Reliable Medical Supply announced a recapitalization of its equity by Seven Hills Capital, a Chicago-based “operator-centric” private equity firm.

Reliable Medical Supply is now on the hunt for a like-minded, but smaller, company.

“We want to find a mom-and-pop that has the same values, the same culture, the same mission statement as we do of putting the patient first,” Kalk said.

After working through the growing pains of adding a Rochester, Minn., branch a few years ago, Reliable Medical Supply believes it now has the systems and processes in place to expand in as seamless a way as possible.

“When we opened in Rochester, it was a struggle,” Kalk said. “We’re just now seeing normal referral patterns there. But I think we have it down now.”

Reliable Medical also has the benefit of specializing in two product categories that have, so far, not been included in Medicare’s competitive bidding program, which has significantly reduced reimbursement for other product categories. It also does business with a mix of Medicare and non-Medicare payers.

“They’re very well diversified,” said Bradley Smith, a managing director and partner at Vertess, which facilitated the transaction. “Their product mix is diversified, with about half in complex rehab and half in other tranches, and their payer mix is diversified. They’re pretty insulated from risk.”

Reliable Medical Supply interviewed a number of both outside and strategic investors, but chose Seven Hills because of its focus on health care and its respect for its mission. The firm now participates on the provider’s board of directors.

“There were a number of companies that were interested, including national providers,” Kalk said. “But we didn’t want that. We want to stay localized and not get so crazy big that we lose sight of what we’re doing.”