The revenues of home-care chains surged 47% to $5.1 billion in 1993 as companies added branches and multimillion-
dollar mergers reshaped the industry.
In 1993, the average home-care chain tracked by MODERN HEALTHCARE transformed itself from an $83 million annual business focused on a few segments of the industry into a $123 million venture offering a broader range of home-care services.
Indeed, the figures gathered in MODERN HEALTHCARE's 1994 Multi-unit Providers Survey don't tell the full story of the home-care industry activity. Some of the largest deals, such as the formation of Coram Healthcare Corp., were put together in 1994.
"There's been, and there continues to be, an active re-engineering of healthcare delivery focusing on becoming locally dominant," said Lori Price, a home-care analyst with New York-based Oppenheimer & Co. "Almost every company has been in a defensive position-defending local market share more than anything else."
Acquisitions in many cases are meant to move companies into new lines of business, Ms. Price said.
For example, Abbey Healthcare Group, a large provider of durable-medical equipment, jumped into the infusion-therapy business in September 1993 with its $197 million acquisition of Torrance, Calif.-based Total Pharmaceutical Care.
"Our strategy is to offer a fully integrated home healthcare delivery system," said Susan Turkell, spokeswoman for the Costa Mesa, Calif.-based company. Abbey will continue to expand its infusion and respiratory therapy businesses this year, Ms. Turkell said. Its 1993 revenues rose 32% to $329.1 million.
A year of growth. The MODERN HEALTHCARE survey drew responses from 59 home-care companies. Together, they added 820 home-care branches to their operations in 1993 to bring their total to 3,300, a 33% increase. In last year's survey, home-care companies said the number of branches they operated grew 16%, revenues rose 25.7% and profits climbed 58.5% from 1991 to 1992.
This year, 22 companies reported net income for both 1993 and 1992. The companies' total net income soared 90% to $177.5 million in 1993. Meanwhile, the average profit margin reported rose to 5.7% from 5.2%.
Hot competition is driving down prices for home-care services in many markets. Companies' revenues are growing rapidly anyway because of expanded operations and rising demand, analysts said.
In the home infusion-therapy segment of the industry, acquisitions and expansion drove the number of infusion-therapy branches reported up 40% to 759, survey respondents said.
Boca Raton, Fla.-based W.R. Grace paid $112 million last April for an 85% interest in a North Miami Beach, Fla.-based infusion-therapy firm, Home Intensive Care. The acquisition boosted the number of home infusion-therapy branches operated by its NMC Homecare subsidiary by 35% to 100 in 1993. The subsidiary's revenues grew 36% to $217 million.
Still in the works is a $110 million deal to acquire Marietta, Ga.-based Home Nutritional Services. The acquisition should be completed in summer. It will bring NMC into 15 new markets and create the nation's third-largest infusion-therapy company by revenues.
Meanwhile, Caremark International, the nation's largest infusion-therapy chain, bought Critical Care America in January for $175 million. Northbrook, Ill.-based Caremark will run 90 branches after it merges the company into its operations, a spokesman said.
Caremark stresses that home care is but one of the alternate-site services it offers. Its plan is to offer a variety of non-hospital services to national payers for per-capita payments, said Les Jacobson, a Caremark spokesman.
Caremark's revenues from patient-service businesses grew 7.8% to $1 billion in 1993. Patient-service revenues include some physical-therapy operations, as well as infusion therapy and other home-care services. The company closed 11 infusion-therapy branches last year as it consolidated regional operations.
The nation's next largest infusion-therapy provider, $550 million Coram, will be formed later this year from a merger of four infusion-therapy companies. They are T2 Medical, Alpharetta, Ga.; Curaflex Health Services, Ontario, Calif.; Health Infusion, Miami; and Medisys, Minneapolis.
Controversy continues to surround T2. Internal conflicts last summer killed a deal much richer for T2 shareholders than the Coram merger (May 2, p. 17). Two federal agencies are investigating its relationships with physicians. Caremark also is being scrutinized.
Coram will buy back T2's remaining partnerships with physicians, its chairman told MODERN HEALTHCARE in an earlier interview (March 7, p. 50). The company also plans to develop several non-hospital services to sell to managed-care organizations, he said.
Adding durability. The number of durable medical equipment branches reported grew 20% to 956. Fountain Valley, Calif.-based Homedco, the largest DME provider responding, said its revenues grew 55% to $470.3 million in 1993 and its net income rose 39% to $24.5 million as it added 10 branches.
Indianapolis-based Hook-SuperRx Home Health Centers, another large provider, added 42 DME branches to bring its total to 126 in 1993.
Other home-care segments grew too. The number of private-duty nursing branches jumped 45% to 1,568, respondents said.
Those numbers reflect Olsten Corp.'s August 1993 acquisition of Lifetime Corp. and its Kimberly Quality Care subsidiary. Revenues and net income for the Westbury, N.Y.-based company, now called Olsten Kimberly Quality Care, soared because of the $600 million deal. Revenues grew 252% to $1.2 billion and net income rose 324% to $89 million. With the acquisition, it added 380 home-care branches to bring its total to 600.
Excluding Olsten, the number of private-duty nursing branches reported grew 25.7% to 757 branches in 1993.
Olsten's acquisition also is behind much of the 45.3% growth in the number of Medicare-certified home-health agencies reported, which rose to 1,568 branches.
ABC Home Health Services, based in Brunswick, Ga., added 90 branches in 1993 to bring its total to 285. Only 13 of the added branches were acquisitions; the remaining 77 were start-up operations, the company said. ABC did not provide financial data.
Excluding Olsten and ABC, the number of Medicare-certified agencies reported rose 15.7% to 904 branches.