HME News is the monthly business newspaper for home medical equipment providers. This controlled circulation publication reaches 17,100 home medical equipment services providers, including traditional HME dealers & suppliers, hospital- and pharmacy-o
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■■ Chris Wagner says TV advertising is key to getting the word out that Health Source is open for business. See story this page. M&A;: Contracts not "golden ticket" 15 Private equity frm invests in Texas provider 15 New website brings "cool" factor 16 Reporter's Notebook: bidding fallout 17 Providers www.HMeNewS.CoM / April 2013 / HMe NewS Briefs MedCare adds partner GREENSBURG, Pa. – MedCare Equipment Company, an HME provider based here, has added the University of Pittsburgh Medical Center (UPMC) as a partner, according to a press release. Since 2008, MedCare has grown through partnerships with area hospitals and healthcare providers, all of whom have a share in the company's operations and business success. Other partners include Excela Health, Conemaugh, Heritage Valley and Butler. With the latest addition, MedCare now serves 35,000 patients annually and employs 250 people in 15 locations, according to the release. The company will ad new locations in Bridgeville, Pa., and in Mercer County, Pa. New executive lineup at Dynamic Healthcare HARRISBURG, Pa. – Dynamic Healthcare Services in February announced a new executive team. CEO Terry Luft named Michael Conner as chief operating offcer; David Petrosky as chief fnancial offcer; and Mary Kay Fehl as vice president of operations and special projects, according to a press release. The new team will build on DHS's growth over the past year, ever since it was acquired by GMH Ventures in January 2012. GMH is a family-owned private equity frm. In November, DHS acquired both Hazleton, Pa.-based Evanko Respiratory and Hometown Oxygen, with locations in Monroeville and Latrobe, Pa. Griffn diversifes into diabetes products CHARLOTTE, N.C. – Griffn Home Health Care recently rounded out its product offerings when it added diabetes testing supplies. The provider, which was founded in 1983, also offers a full line of home medical equipment, including beds and wheelchairs; respiratory and sleep therapy; and medical supplies like enteral nutrition and incontinence supplies. Taking the bull Market watch Contracts not by the Longhorn Satori Capital invests in 'rapidly growing market leader in industry with favorable demographics' By Theresa FlaherTy, Managing editor AUSTIN, Texas – After seven years of "winging it," provider Britt Peterson knew it was time to bring in some outside help. "We got to a size where we wanted to have people who could really guide us," said Peterson, founder and CEO of Longhorn Health Solutions. Enter Satori Capital, which in Februar y announced it "Everyone had invested else is in the provider. Terms of eliminating the deal were services; not disclosed, we're going but Satori typically invests in in the other "middle mar- direction." ket" companies Britt with revenues peterson, between $25 longhorn m i l l i o n a n d Health $200 million, Solutions according to its website. It's the Dallas-based private equity frm's frst foray into health care. "Longhorn is a rapidly growing market leader in an industry with favorable demographics and a value-creating service model," said John Grafer, principal with Satori. "They need capital to support that growth." Longhorn provides disposable medical supplies, including incontinence and diabetes supplies, as well as enteral nutrition products and durable medical equipment. The provider is about 80% Texas Medicaid—it has contracts with managed care organizations STAR+PLUS and STAR—and about 12% to 15% Medicare. Despite the notoriously low rates paid by most Medicaid plans, Longhorn won't skimp on services, says Peterson. "Where everyone else is eliminating services and downgrading product, we are going in the other direction," said Peterson. "We communicate the value we provide, we touch these patients' lives and make sure the services are utilized correctly." To do that, Longhorn, which covers the entire state, runs an effcient ship. Routed deliveries are made from several strategically located distribution centers, and the provider's buying power LO NG HOR N s EE pa g E 1 6 Three plead guilty in $11M fraud scheme Therapy Supply House launches new website HOUSTON – Provider Therapy Supply House has introduced a new website designed to help those with visual impairments shop for medical equipment online, according to a press release. Text and images on the website—www.therapysupply.com—have been enlarged and formatted for easier navigation. 'golden ticket' By Theresa FlaherTy, Managing editor OME HME providers who want to offoad their businesses now that they've accepted contracts for Round 2 of competitive bidding may fnd it a tough sell, say M&A; analysts. "It's not a golden ticket," said Jonathan Sadock, managing partner with Paragon Ventures. "There are buyers, but they are not going to spend crazy amounts of money to acquire a contract that is going to take unbelievable amounts of effciency to try to squeeze any proft out of it." Round 2 payment amounts, announced Jan. 30, averaged 45% lower than current fee schedule amounts. They go into effect July 1. J Sadock Right after the announcement, there was a defnite uptick in market activity, say analysts. Those that are buying include providers who won contracts in markets where they don't have a presence and those who want to ramp up their presence in existing markets, they say. "We had calls from bottom feeders looking to pay cents on the dollar and calls from legitimately large companies, maybe with Don Davis some equity backing, that are looking for opportunities," said Don Davis, president of Duckridge Advisors. If providers were hoping that large national providers would go on buying sprees, they may fnd themselves waiting, say analysts. "The national players that won tell me they are going to wait for July 1 to come and go," said Patrick Clifford, a managing director with The Braff Group. "They are not feeling compelled to make S T I C k E T sE E pa g E 16 Speculative bidders begin 'hawking' their businesses By Theresa FlaherTy, Managing editor N MCALLEN, Texas – A Texas couple who ran a home medical equipment company and an ex-worker pleaded guilty in an $11 million healthcare fraud investigation, according to the Associated Press. RGV DME owner Marcelo Herrera; his wife, Carla Cantu Herrera; and Ramon De La Garza pleaded guilty to conspiring to defraud Medicare and Texas Medicaid. 15 Wagner, who opened Port Charlotte, Fla.-based Health Source with his wife, Melonie, and his business partner, Phillip Bane, late last year. Health Source focuses on home modifcations, and also offers lift chairs, scooters, power wheelchairs, orthotics tracts than one alarming trend became apparent: Some providers were awarded contracts that they have no ability to service. Premier Home Care received an inquiry letter from a broker representing a company that accepted contracts and is looking to sell. With one location and about $1.6 million in annual sales, the provider managed to get offered 60 contracts in 40 areas. "They put that in and CMS approved it?" said Wayne Knewasser, vice president of government relations for the Louisville, Ky.-based provider. "CMS (is supposed to) evaluate the net worth of a company and its expertise and area coverage, but it allowed them to go willy-nilly and bid on areas that they aren't in or even near. It's a sad state of affairs." Even more troublesome: There may not be takers, at least for now, says one broker who contacted the four nationals— Lincare, Apria, Rotech and American HomePatient—on behalf of a provider in the Midwest with a similar story. S TORy s EE pa g E 17 H Aw k S s E E pag E 1 7 HealtH Source'S SHowroom features dozens of lift chairs for customers to try out, as well as scooters and other HME TV ads show and tell By elizaBeTh Deprey, associate editor PORT CHARLOTTE, Fla. – While most retailers sell products, retail HME providers have to sell themselves, says provider Chris Wagner. "People don't know about the products we have, but it's easy to frame that in a commercial," said O SOOnER had providers begun accepting Round 2 con-