Option Care extends operational footprint

BANNOCKBURN, Ill. – Health system partnerships fueled third quarter growth at Option Care Health, and the acquisition of Rochester Home Infusion will further accelerate that growth, said company execs on a recent earnings call. 

The company paid $27.4 million for the Rochester, Minn.-based RHI at roughly a low double-digit adjusted EBITDA multiple. RHI’s relationships in Rochester and across the Upper Midwest region are “highly complementary” to Option Care’s commercial efforts, said Michael Shapiro, CFO and senior vice president. 

“There’s one or two notable health systems in that area, where they are really focused on,” he said. “As well, they're casting a pretty broad shadow across the Upper Midwest – Wisconsin, Minnesota, Iowa –combining their health system centric relationship management with our infrastructure, technology and procurement. We see that as an exceptional way for us to extend our operational footprint with what we see is a very strategically well-positioned operator within admittedly a relatively finite geographic area.” 

Bigger picture 

Option Care saw its quarterly net revenue exceed $1 billion for the first time, driven by double-digit revenue growth, said Shapiro. 

“Our mantra is that revenue only counts if it hits the bank account, and cash flow in the quarter was very strong,” he said. “Cash flow from operations of $87 million drove an increase in our cash balances to more than a $0.25 billion for the first time despite investing in Rochester Home Infusion in the quarter. We exited the quarter at a net debt to adjusted EBITDA ratio of 2.5 times and our capital structure has never been stronger.” 

Cost pressures 

The company is currently seeing inflationary impact of about $10 million to $12 million a quarter, affecting its gross margin, which declined 140 basis points year over year, driven partially by “unprecedented” cost pressures, including clinical labor, transportation, medical supplies and several key business services, said CEO John Rademacher. 

“We do not see cost pressures subsiding in the near term, and in fact, we have seen heightened pressure in several areas,” he said. “As always, we continue to relentlessly focus on operational efficiencies to offset the pressure. And in some instances, we have negotiated improved reimbursement for therapies and services most impacted by the inflationary environment with payers.”