U.S. Rehab: Niche Diversification Making Gains

ATLANTA — CMS paid complex rehab technology (CRT) providers more than any other payer in 2009, accounting for 39 percent of revenue, as reported in VGM division U.S. Rehab’s 2010 financial survey. The final numbers, announced at last week’s Medtrade, were: 39 percent Medicare; 29 percent private insurance; 17 percent patient pay; 9 percent other; and 6 percent specialty funding sources.

From an equipment perspective, CRT usually includes individually configured manual wheelchair systems, power wheelchair systems, adaptive seating systems, alternative positioning systems and other mobility devices. CRT is not caught up in the competitive bidding program, but Mike Mallaro, CFO for the Waterloo, Iowa-based VGM Group, and Greg Packer, director of operations at U.S. Rehab, also noted that many rehab providers are branching into specialty businesses as a way to leverage an existing customer base. The portion of rehab providers involved in three specific specialties broke out as follows: 40 percent home modifications, 30 percent vehicle modifications and 20 percent wheelchair sporting goods.

On the crucial benchmark figure of revenue per employee, Mallaro and Packer contend that if the number falls around the 25th percentile or lower, it may suggest too many staff members for the current volume of business. “However, if your number is too high, it may indicate additional staff could drive even more revenue for the company,” said Packer.

Most providers experienced slightly higher gross margins from 2005 to 2009 as a result of lower pricing from manufacturers, the presenters said.

“The demographic trends favor your business in an overwhelming way,” said Mallaro. “You’ve come through what I hope will have been the toughest of times, and I believe the best lies ahead for our industry.”