Stick to your kitting

ATLANTA - Looking to sell your business? Is now a good time? In the HME industry, there are no easy answers. At Medtrade, in a session entitled, “The Great What If? Mergers and Acquisitions in a Fractured Market,” Patrick Clifford, managing director of The Braff Group, will explain why “buying strategies are as varied as interpretations of the latest musings from CMS, and valuations are seemingly as random as a RAC audit.”

HME News: Why is the M&A market for HME so fractured right now?

Patrick Clifford: As an HME provider you're basically in one of three buckets. You're in a geographic market affected by competitive bidding and you didn't win the contract. You're in an affected market and you did win a contract. Or you're outside the competitive bidding area, primarily due to geography, but also given what you supply.

HME: What do we know about the market, and what can we reasonably predict about what we don't know?

Clifford: What we know right now is that the rates are in place for Rounds 1 and 2 of bidding. The unknown is what will happen in 2016, though it's anticipated that CMS will lower the rates in 2016 for the rural market.

HME: Much of the talk about M&A centers on valuation, which you say is “seemingly as random as a RAC audit.” What can providers do to make this part of the process less random?

Clifford: Many people have tried to reinvent themselves. So if they didn't win a Medicare contract, they look at what might make them more valuable—if they have a non-Medicare payer contract desirable to a buyer, for example.

HME: So, what are a provider's best options right now?

Clifford: A provider's best option is to stick to your knitting. Manage it as best you can; make it profitable. Buyers are looking for well-run, profitable businesses. Deals are still getting done, at least in specific segments, and those companies that are still running a good business are still attractive.