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Braff Group: 2008 Nose Dive for HME M&A Activity
PITTSBURGH — The Braff Group said earlier this month that even amid a worldwide recession, there were a record number of mergers and acquisitions in some sectors of home health in 2008. Home medical equipment, however, was not one of them.
In its fourth quarter report for 2008, the investment banking company, which handles mergers and acquisitions involving HME, home health agencies, hospice, staffing, infusion therapy and specialty pharmacy, said the home health sector did not "escape the malaise that has settled over the merger and acquisition environment."
Still, health care M&A activity for the year was off only 7 percent from 2007, compared to the 37 percent plunge the U.S. recorded in total M&A activity for 2008. Altogether, there were 224 health care service transactions last year compared to 240 in 2007.
Three sectors — home health, hospice and staffing — actually posted increases, according to the company. There were a record 119 total HHA deals, a 3.5 percent increase over 2007's 115. Hospice activity spiked 36.4 percent, from 11 deals to 15, and staffing increased 4.3 percent from 23 to 24.
HME, on the other hand, ended the year with 34 deals, a 29.2 percent drop from 48 in 2007. Infusion therapy dropped from 27 deals to 19, 29.6 percent less than in 2007, and specialty pharmacy fell 18.8 percent, from 16 deals to 13 in 2008.
In describing HME's M&A activity for the year, the Braff report pointed to Congress' delay of competitive bidding, "a delay that was financed by a 9.5 percent cut in reimbursement. With competitive bid pricing in the first 10 MSAs averaging about 26 percent below then-current Medicare rates — and with many believing that momentum is gaining to eliminate competitive bidding entirely in exchange for less draconian reimbursement concessions — from a financial perspective, this could be viewed as a big win for the industry. But from an M&A perspective, it is not.
