We may be nearing an inflection point in home medical equipment M&A.  After 20 plus years of consistent and substantial cuts in reimbursement, acquisition demand and transaction volumes have clearly fallen.   And with competitive bid-like pricing in place nationally, there are no longer islands of higher margin to target for acquisition.  At the same time, it’s difficult to imagine the sector being exposed to much in the way of additional cuts in reimbursement.  So HME may be entering its most stable period in years.  A period where providers can more confidently invest in systems and strategies to wring out additional basis points in profitability and turn to acquisitions to realize greater economies of scale.


Pat Clifford, MBA

Managing Director

Phone : 888-922-1834

Market Data

HME-chart1Given the roll-out of competitive bidding and substantially reduced pricing, it’s little surprise that mergers & acquisitions activity in home medical equipment is trending downward. But buried in these trends is a bit of good news. When competitive bidding was initiated in 2008 in 10 MSAs, deal volume fell precipitously. However, on the way toward adding another 92 MSAs in 2012, activity began to rise as buyers became more comfortable with the program and private equity saw opportunity in the market disruption. With bid pricing being rolled out nationwide in 2016, we are once again seeing stirrings from the PE community which may help to halt the slide (see PE chart below).
HME-chart2As we indicated in the chart on home medical equipment deal trends, seeing opportunity in the market disruption caused by competitive bidding, private equity platform and follow-on activity peaked in 2012. Although aggregate PE sponsored deal flow has fallen since, if we isolate market entry platform deals, 2015 activity alone looks pretty decent. In fact, with five new platform investments, the sector posted the third highest tally over the past decade. With the roll out of competitive bidding nationwide in 2016, much like what we saw leading up to 2012, we may be in the early stages of a second wave of investment activity (see quarterly chart below).
HME-chart3As indicated in previous graphs, the home medical equipment sector may be at the front edge of modest rebound in deal flow. Although we can’t draw strong conclusions based on a single period, we note that fourth quarter 2015 deal flow was up after two consecutive periods of decline. When our mid-year data is complete, we should be able to assess whether the uptick was an anomaly, or an early indicator of a positive trend.