Hasco Medical looks to roll up HMEs

MOBILE, Ala. - Hal Compton thinks the HME industry is ripe for consolidation and that 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, 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."