Smaller acquisitions reign

SPRINGFIELD, Ohio - Big-dollar deals in the HME industry may be rare these days, but providers like Med-Ox Home Medical are still making smaller acquisitions here and there to soften the blow of declining Medicare reimbursement.

Med-Ox bought the assets of Linn Homecare in Newark, Ohio, in May, increasing its roster of oxygen patients by "several dozen," says Mark Auckerman, managing member.

"The margins are getting so thin, it takes a lot more patients to generate the same income that those patients would have generated 10 years ago," he said. "It's a volume game, and if we're in it for the long haul, which we are, we have to look for ways to do more volume."

Med-Ox will operate Linn Homecare as Med-Ox, and it plans to retain the two employees based there.

About a year and a half ago, Med-Ox also picked up about two-dozen oxygen patients from MedMart in Cincinnati, which was exiting that line of business.

"Every little bit helps," Auckerman. "Companies with certain weaknesses are being exposed now, because it's harder to continue day to day under these conditions."

Right now, much of the consolidation in the industry is happening among smaller providers, says Rick Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based mergers and acquisitions firm.

"It's virtually impossible for the small guys to stay in business," he said. "So these types of deals give a smaller provider the scale they need to compete. It's potentially significant for them."

Med-Ox now has six branches in Ohio, including a branch in Elyria, part of the Cleveland metropolitan statistical area (MSA) that's included in Round 1 of competitive bidding. Thanks to several years of focusing on operational efficiencies--everything from implementing a paperless billing system to conducting its own hydrostatic testing on cylinders--Med-Ox is in as good a position as any provider to survive the program if it sticks around, Auckerman said.

"Our average biller can manage twice the patient accounts that they could when we first started because of the efficiencies," he said. "We've gotten to the point that, if we can't do it, we don don't know who will be able to."