Increased resources, investment in technology, and streamlined operations create opportunities to decrease costs for the company and its patients, and improve productivity through higher volumes. To put it simply, integration gives businesses the strategic ability to scale and run more efficiently.

Competitive bid areas create risks and rewards
The Competitive Bidding Program creates higher risks related to the unknowns in securing contracts in needed areas. For example, with the DMEPOS (Medicare’s Durable Medical Equipment, Prosthetics, Orthotics, and Supplies) bidding program, suppliers submit bids to provide certain medical equipment and supplies, giving winners exclusive billing permissions in these competitively-bid areas.
Once a business loses a competitive bid area (CBA), they lose access to Medicare billing privileges, which can significantly impact both smaller and larger corporations, as Medicare is a major payer for the traditional medical equipment offered by most.

Businesses that lose bids often face unstable prices, and will seek partnerships with bid winners to stay afloat. As a result, bid winners can acquire more market share while providing quality services and products.

As more state Medicaid and MCOS are attracted to competitive bids, they have begun to implement bid programs of their own, as well as enter exclusive or preferred agreements. Risk analysis of these types of payers has begun to play a larger role in acquisitions and valuations to determine the best paths forward.

Expect more mergers and acquisitions
Due to the uncertainty that remains in upcoming healthcare reforms and new policies, many providers simply feel uncomfortable waiting. They feel as if it’s safer to evaluate their ability to sustain their competitive nature and move toward either acquiring more business now or selling, before the market changes again.

As capital needs continue rising, businesses must look toward growth and securing economies of scale in order to maintain their position(s) within the healthcare industry. As such, partnerships or full acquisitions will continue to take place to strengthen margins and grow quickly into new areas.

About the author: Ryan Bullock is the chief of operations at Aeroflow Healthcare, a national provider of durable medical equipment (DME) products.

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