FLORHAM PARK, N.J. — The name remains the same, but new owners say that buying power for The MED Group will increase dramatically. With the deal officially closing last week (terms were not disclosed), officials from Managed Health Care Associates (MHA) will soon be working with approximately 380 MED members representing 1,250 locations across the country.
Despite competitive bidding, Michael J. Sicilian, president of MHA, is confident that patient demographics, bargaining power and know-how can only expand opportunity for the group's members. "We have done our homework and understand the short-term risks and potential challenges. We are showing our commitment by jumping into it," said Sicilian, adding that The MED Group "just went from being a buying group that is in the neighborhood of $350 million a year in purchasing contracts to in excess of $5 billion a year by aligning with MHA. All of the sudden our group purchasing organization (GPO) is much more powerful."
According to Sicilian, MHA is the largest GPO in the country in the alternate site market. "We contract on behalf of our membership to maximize discounts and rebates," said Sicilian. "We have a managed care division which contracts with payers on behalf of our members to help them participate in payer networks. A clinical software division also helps to manage patient care. The MED Group is in a space that we think is absolutely terrific in terms of growth opportunity, notwithstanding short-term challenges such as competitive bidding."
The new alignment will allow MED to expand its model and make additional investments in business solutions, both companies said.
MED Group CEO Bill Elliott will be resigning from his position but will remain as a consultant to assist with the transition. All other members of MED's management team (including Jeff Woodham, Wayne Grau and David Low) will be joining MHA in full-time capacities, with MED Group headquarters remaining in Lubbock, Texas. "We think our members will fare very well under competitive bidding," said Elliott. "Our philosophy is to find market leaders and make them stronger. We think they will fare well in whatever environment comes down."
MED members did not know about the transaction, but Sicilian said personal telephone calls have gone well. "The response we are getting is universally favorable," he said. "MED is already a good company, and the demographics continue to work. The term I hear from all these calls is that this is a 'game changer' in the HME sector … All of a sudden this company is a whole lot stronger and creating a lot more value — not just to members but also our business partners."
MHA describes itself as a health care service company in the alternate site market servicing the long-term care, home infusion, specialty pharmacy and retail industries. The company has dealt with strife in other markets, and Sicilian believes he can use that experience to benefit the home care industry.
"We are still working very hard with industry stakeholders such as AAHomecare and our members to get [competitive bidding] killed," added MED's Grau. "And if we don't, we are going to continue to work even harder next year to make sure that we eliminate competitive bidding — not only Round 2 but Round 1."
"Prudent business operators also look at what it potentially will be," said Sicilian, "and you must create solutions in the event that does not change. If we stand still, our members will get hurt. Competitive bidding is not good for the industry, and we don't support it. But you can't put your head in the sand and hope it goes away … you have to have a solution that gives your members the ability to be viable and compete and be leaders."