HME Mergers and Acquisitions Down

PITTSBURGH–HME mergers and acquisitions declined in 2006
because of reimbursement uncertainties, according to a report from
The Braff Group, an M&A firm that specializes in the home care
sector.

Based on preliminary year-end numbers, the report listed a 44
percent decline in overall HME transactions, with 53 deals in 2006
versus 95 in 2005. For the fourth quarter, the drop was even
sharper with only 8 transactions completed compared to 21 for the
same period in 2005, a 62 percent decline.

The report covers transaction trends in the home health,
hospice, staffing, HME, infusion therapy and specialty pharmacy
markets. Over all of these markets in 2006, there were 207 deals
compared to 265 transactions in 2005, a decline of 22 percent.

“Not unexpectedly, in a year of substantial unknowns regarding
potential further cuts to oxygen reimbursement, the greatest
decline came from the home medical equipment sector,” said company
President Dexter Braff. “While Medicare legislation passed at year
end did not include these cuts, an atmosphere of heightened risk
remains which will likely make 2007 another challenging year for
M&A in the HME arena.”

While deal volume in infusion therapy and specialty pharmacy
remains strong, the report said, the brightest spot in 2006 was the
home health care sector, which set a transaction record of 86
deals, up 6 percent over the previous year’s record of 81. This
marks the first time that home health has led all the other sectors
in transaction activity, the report said, attributing the volume to
a combination of high demand from buyers, stable reimbursement and
a favorable industry outlook.

For comments from Braff and others on the state of HME, see
“Will a New Congress Reshuffle the Deck?” in
the January issue of HomeCare magazine.