American HomePatient last week strengthened its hold as a regional home-care provider when it bought 24 branch offices from rival Medserv/Primedica of Marietta, Ga.
Terms of the deal weren't released. The 24 facilities provide home respiratory therapy and home medical equipment, and are located in the Southeast and Southwest. With this acquisition, the Franklin, Tenn.-based home-care chain now operates through 104 branches in 16 states.
"The deal is a very positive move in the sense that American HomePatient utilized some of its cash proceeds from the sale of (Diversicare Management Services)," said James Baker, a healthcare analyst with Equitable Securities Corp., Nashville, Tenn.
Last March, Diversicare changed its name to American HomePatient and announced it was transforming itself into a company totally devoted to home care. It sold its long-term-care management subsidiary, Diversified Management Services, to a newly formed company run by Diversicare's former president and chief executive officer, Charles Birkett (March 14, p. 20).
American HomePatient received $23 million in proceeds from that sale-an undisclosed portion of which was used to finance the Medserv/Primedica purchase, Mr. Baker said.
The news marks the largest purchase made by American HomePatient in the past two years and the first of its kind since the Diversicare dismantling. Since January, the chain has added 38 centers to its network through acquisitions and start-up operations.
Both Mr. Baker and American HomePatient President and CEO Edward Wissing said the Medserv/Primedica deal falls in line with the company's strategy to become a leading home-care provider in rural and secondary markets.
American HomePatient is one of several regional providers attempting to capitalize on the fragmented home-care market by buying up facilities in locations untouched by the three largest home-care services companies-Caremark International, Coram Healthcare Corp. and W.R. Grace.
So far, analysts say the strategy appears to be successful. The American HomePatient's net income for the first quarter ended March 31, rose 33% to $1.6 million, or 30 cents per share, compared with $1.2 million, or 24 cents per share, in 1993. Revenues climbed 25% to $20 million.
To help steer its growth, American HomePatient recently added to its management team by naming Len Serafino vice president of managed care. Mr. Serafino, whose previous home-care experience included stints with T2 Medical and Caremark International, will oversee managed-care development, contract negotiations and administration for the company.