Home Health Depot pulls trigger

INDIANAPOLIS - With the economy humming and private equity money flowing, Home Health Depot's Nate Feltman says the time was right to sell the last of the company's business to Clearwater, Fla.-based Lincare.

Previously, Home Health Depot sold its complex rehab and home access businesses to National Seating & Mobility in 2014 and 2016, and its hospice business to National HME/Hospice Cloud earlier this year. NSM and National HME are both backed by PE firms.

“We timed our sales around a lot of different factors, but right now, we're in a very good market to sell,” said Feltman, president and CEO, and a co-owner of the company with David Hartley. “Two years from now, I'm not sure it will be that same market.”

Hartley bought Home Health Depot in 2004 for $85,000. A former manufacturer sales rep for companies like TiLite, he initially focused on building a complex rehab book of business, but after bringing Feltman on board in 2010, the company diversified into respiratory and other product lines.

Together, Hartley and Feltman, who each owned 40% of the business at the time of the sale to Lincare, grew Home Health Depot into a regional presence by 2014, with 260 employees in 25 locations in six states with revenues of $32 million.

“It was a good run,” Feltman said. “Dave and I feel like we did what we set out to do, which is grow a really nice company, and do well by our investors, employees and patients.”

During its heyday, Home Health Depot was following the industry mantra of diversification to a T, but it began selling off businesses in 2014 because management felt it was spread too thin, Feltman says.

“We grew so fast,” he said. “We had five different divisions with five different sales forces and five different software programs. We started to feel like we couldn't pay attention as much as we needed to.”

After shedding its complex rehab, home access and hospice businesses, Home Health Depot could have homed in on the rest of its business—respiratory and HME—with specialization replacing diversification as a strategy for many providers, at least on the product side. But Feltman says it would have been difficult to do “comfortably.”

“It would have been a massive change on the run—a massive change to management, which was set up for a bigger company, to staffing and to our customer base,” he said, “and it wouldn't have released any value for our work and our investment.”

While one could look at Home Health Depot's decision to sell as yet another sign of the downturn of the industry, Feltman doesn't see it that way.

“It's not like we sold a distressed company; we sold a successful company,” he said. “The message is you can build a business and it can be attractive to other companies and private equity.”

Industry analyst Don Davis agrees that, from a business standpoint, Home Health Depot has been a success—it grew, became attractive to several buyers, and then sold.

“But from an industry standpoint, you feel bad when a company like that, that's regional with young smart talent, leaves the market,” said Davis, president of Duckridge Advisors.