With breathing space, Rotech prepares to execute

ORLANDO, Fla. - Rotech Healthcare emerged from Chapter 11 bankruptcy Sept. 27, and it isn't looking back.

The company plans to evolve with the industry, says CEO Steve Alsene.

“Reimbursement and continued qualification of patients is more complicated,” he said. “That takes a lot of coordination and additional work nowadays. We are making sure we are good and tight, and making sure we get reimbursed for the services we provide.”

Under the reorganization plan, approved in August, Rotech reduced its debt from about $600 million to just under $300 million. Its annual cash interest payments were reduced from $60 million to $20 million.

Rotech also secured $358 million in financing from Wells Fargo to further pay down its remaining debt and fund ongoing business operations, Alsene says.

“This give us the time and resources to go after acquisitions and execute plans without the excessive pressure of the legacy debt we've had for so many years,” he said.

In addition to acquisitions, Rotech will focus on growing its existing market share, as well as its managed care and Veterans Affairs contracts, which currently comprise slightly more than 50% of its payer mix.

“That's been a positive for the company over the last five or six years,” said Alsene.

One thing Rotech isn't worried about: damage control. When it filed for bankruptcy protection in March, it set plans to honor outstanding bills. That strategy, as well as communication with payers, patients and referral sources, helped preserve Rotech's reputation, says Alsene.

“We've seen no real negative effect,” he said. “Most vendors were paid in full so we didn't have any significant impact on our supply chain ability to get equipment and get patients set up quickly.”

While its debt level remains sizable and the future of the HME industry, in general, remains uncertain, Rotech appears confident in its future, say analysts.

“I think the amount left on the books is an indicator of their ability to survive and prosper in today's HME world,” said Rick Glass, president of Steven Richards & Associates. “If they didn't have that confidence, there would have been pressure to relieve more of the debt.”