Your Primer to Healthcare Mergers and Acquisitions
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8 Ways DME Companies Can Thrive

Oct 25, 2016

by Bradley M. Smith

By Bradley Smith, ATP, CM&AA

Volume 3 Issue 22, October 25, 2016

Several years ago, DME competitive bidding was instituted by Medicare and the impact has been dramatic. Many smaller DMEs that could not successfully compete sold their assets, restructured their business, or simply closed their doors.

Other DME companies, however, saw an opportunity to be exploited. In my national DME merger and acquisition practice, I've seen a number of success stories of companies that have both survived and thrived in this increasingly competitive environment. Here's what they did:

1. They ruthlessly assessed the healthcare marketplace.

Successful DME entrepreneurs realized quickly that healthcare is now being shaped by economics, managed care, rapid innovation, strongly-stated customer preferences, digital marketing, and new direct access to DME products. They then made a commitment to adapt to these changes rather than pretend they weren't taking place.

2. They partnered with investors and capital.

Successful DME entrepreneurs scrapped the traditional "go it alone" strategy in favor of a new affiliation model, where competitors actively partner with one another in selected areas. They also brought in new investors, especially private equity groups (PEGs) that had abundant financial resources and saw an opportunity for disruptive innovation.

3. They adopted a millennial perspective.

Rather than the lethargic approach characteristic of many DME operators from the Baby Boomer generation, successful DME entrepreneurs have acted with a sense of urgency and agility that's characteristic of high-tech firms, where most of the key employees are from the millennial generation.

4. They sharpened their strategic clarity.

Traditional DME companies often had a general sense of their strategic goals rather than a precise understanding of what would be necessary to succeed in a changed and changing marketplace. The most successful DME entrepreneurs set aside their historic biases, systematically assessed their risk/benefits, identified the resources necessary to succeed, and then aligned those resources strategically prior to taking action.

5. They focused on precise execution.

In the past, DME companies often had good, but general plans for the future. However, few were able or willing to execute those plans with precision.

The DME companies that thrived (and there are quite a few) acted with conviction, evaluated their results, and made course corrections in order to keep on growing and diversifying. They were and are ambitious, in the best sense of that word.

6. They targeted their offerings.

Traditional DME companies tended to offer a full line of products, regardless of whether those products were profitable or in high demand. By contrast, today's progressive DME companies tend to "drill down to core offerings," all the while paying attention to cross-selling opportunities. This allows them to quickly eliminate underperforming products, thereby increasing profitability.

7. They've learned to learn quickly.

In order to take the actions described above, successful DME companies have learning quickly from their mistakes and successes alike, incorporating those lessons into new offerings and new initiatives. Mostly, they've learned that the DME market is shifting, like the rest of the healthcare industry, to a value-based, outcome-measured model.

8. They've become fanatical about measurement.

Funding entities and payers, whether public institutions, managed care organizations (MCOs), commercial insurance, or even consumers who pay cash, want to know about observable outcomes and value in terms of their healthcare. Healthcare companies that can't deliver these outcomes and value - or can't communicate them effectively - simply can't compete in this rapidly-changing market.

Bradley M. Smith

Bradley M. Smith ATP, CM&AA

Managing Director/Partner

For over 20 years, Brad has held a number of significant executive positions including founding Lone Star Scooters, which offered medical equipment and franchise opportunities across the country, Lone Star Bio Medical, a diversified DME, pharmacy, health IT, and home health care company, and BMS Consulting, where he has provided strategic analysis and M+A intermediary services to executives in the healthcare industry. In addition, he is a regular columnist for HomeCare magazine and HME News, where he focuses on healthcare marketplace trends and innovative business strategies for the principals of healthcare companies. At VERTESS, Brad is a Managing Director and Partner with considerable expertise in HME/DME, home health care, hospice, pharmacy, medical devices, health IT, and related healthcare verticals in the US and internationally.

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