The constantly changing healthcare market forces durable medical equipment (DME) providers to quickly adapt in order to remain compliant and successful as new healthcare reforms and policies are put into place. Some of these policies may make it difficult for some medical suppliers to keep up with the market, but they do not have to go out of business.
Mergers and acquisitions are a common solution for those seeking exit strategies, and also for larger DMEs looking to gain more market share. It allows for smaller businesses to remain intact and even grow, providing a solution for all parties involved.
Trends Leading to Increased Mergers and Acquisitions
As healthcare reform continues to occur, we can expect more mergers and acquisitions to take place within the durable medical equipment provider field. Healthcare costs are rising, but reimbursements are being cut, creating a difficult environment for smaller medical suppliers to stay afloat.
DMEs must have the resources available to withstand the time consuming and expensive reimbursement process, especially when insurance companies do not even guarantee payment. Medicaid plans and Managed Care Organizations (MCOs), noted for lengthy delays in reimbursement and slow response, aren’t helping to simplify things either.
Under their complicated plans and policies, the coverage plans provided to individuals do not ensure reimbursement, and to make matters worse, may be superseded by Centers for Medicare and Medicaid Services, Federal, or State requirements.
Competitive bid areas (CBA) can also make it more difficult for medical suppliers to maintain lower costs, as winners with the best electronic bid are awarded the best price for supplies. Those who lose out in CBAs often face prices that are unsustainable, while the winners are able to pick up more market share.
However, these conditions do not mean that smaller medical suppliers will be forced out of business. Even as the healthcare market continues to make it difficult for DMEs to adjust, mergers and acquisitions provide profitable solutions for all businesses involved.
Supporting Medical Suppliers and Smooth Integrations
As some smaller companies are looking to leave the market, larger DMEs are able to act as a resource since they are looking to expand. Based on the equipment provided and audience demographic, DMEs may look to acquire the entire medical supplier or individual lines of business. This gives them the ability to offer a multitude of partnership opportunities.
These opportunities differ based on the type of new or currently existing challenges within the healthcare market, which affect the types of relationships and support provided to smaller suppliers. With the goal of creating long-term value for smaller and mid-sized DMEs, many of the larger companies have corporate development teams in place with their finger on the pulse of market trends and ability to detect and adhere to particular needs of other DMEs to ensure a smooth transition.
The process of executing a seamless transition is often led by the larger provider, so it is common for streamlined processes to be developed and implemented to make sure business stays on track, and to prepare for scalable growth as the company expands.
Many corporate development teams do not seek to significantly rebrand or pivot existing companies. Whether a supplier is partially or fully acquired, the goal is to keep it strong and thriving, resulting in a new and valuable source of profit for the larger company. Therefore, a quick and easy transition of patients and supplies is absolutely necessary.
Maintaining existing employees and technology generally also support a smooth integration between two companies. By creating an effective training program for both the buyer and seller’s employees, the existing workforce power will have the ability and resources available to sustain order fulfillment and continue acquiring the target demographic.
By collaborating with larger DMEs, smaller companies do not have to be forced out of the market, especially when a well-planned integration process is implemented. Generally the larger company will have the resources available to maintain the existing workforce and provide extraordinary care for current and future patients.
Andrew Amoth is Strategic Partnership Coordinator at Aeroflow Healthcare, a national provider of durable medical equipment (DME) products and construction company programs.