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DME Trends And The Strategic Sale of Assets

An increasing number of durable medical equipment (DME) providers are turning to mergers and acquisitions to increase their bottom line. As the healthcare market evolves and becomes increasingly competitive, the strategic sale of assets provide a profitable solution toward consolidating growth.

Smaller providers face difficulty maintaining their space in the industry as reimbursement rates are constantly cut and competitive bid areas are won by larger businesses. Once distressed due to the inability to meet rising costs, selling a product line can help them regain their strength.

Buyers acquire a company’s assets to quickly grow specific lines of business or capture market share. The sellers’ goal is often to narrow or shift product focus to lines of business that are more profitable at their scale and volume.

DME Trends and the Strategic Sale of Assets 

Sellers find it difficult to scale under the margin compression that reimbursement cuts have created. With revenue nearing cost of goods on certain items many companies are evaluating the options to sell or alternatively invest and achieve the economies of scale needed for viability.   

When insurance reimbursement rates are cut, it can make it difficult for a DME to launch a new product and remain profitable while learning how to bill and be reimbursed. Once a line is acquired they are often responsible for marketing the product to a new or existing demographic which requires time and capital.

Reimbursements are not guaranteed, plus the process of collecting them is time-consuming and expensive. A business must have the capital to remain profitable during the reimbursement process.

The purchaser must first look into their own resources to allocate available funds to take on the new line of business. If proper funding fails to exist they will evaluate their own strengths and weaknesses to gain enough capital to redeploy to other assets.

Their strengths may be found in existing resources, such as a corporate development team to cultivate relationships with other providers and quickly develop a strategic transaction.

Purchasers must also have a strong team put in place consisting of sales, compliance officers, and billers to efficiently push their new product and quickly collect payments to maintain costs and drive the ROI.

Integration of the acquired assets is the most important area of focus and often the largest challenge. The smooth transition of business will affect future retention and under certain type of capital structures, the Seller’s final payout.

The High Activity For DMEs Will Increase

This trend has catalyzed the high activity we see in today’s DME industry. As smaller companies continue to struggle with rising healthcare costs, selling an individual line will help them maintain their marketplace position by freeing up resources to focus on core competencies.

Durable medical equipment buyers are thriving in acquisition mode. Companies with the operational competencies and capital to acquire new lines buyers are thriving with the ability to market towards particular market niches and meet their individual goals for expansion.

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