CEO Dave Cormack said it clearly, “Their customer base is right in the sweet spot of our customer base.” Cormack wants to grow by acquisition, consolidate his customer base with others, and expand his services. It is a wise strategy. Other industries have followed this path, and quite frankly, it’s about time that DME & other businesses in the home health care ecosystem do the same.
Consolidation among DME providers will drive a similar consolidation among the companies that develop technology for them. Simply put, there will be fewer deals for the software companies to win. The ones that win will be those that provide the highest business value at the most compelling price, and deliver it in a model that is easy to implement & use. Even so, compared to other industries, DME is still highly fragmented. Just as there are many DME providers, so too are there many software companies selling to them, and none with a dominant market position. That is the definition of a market ripe for consolidation and it is still anyone’s market to win in DME. It will likely take a few years to settle.
So how will this go? The industry has focused long and hard on improving billing practices and decreasing the time it takes to get reimbursed. Companies like Brightree and Care Centric have built businesses that include both billing-related software and actual billing services. The next great opportunity is in using technology to increase business productivity. DME has seen little in the way of productivity improvement in recent years and has suffered through decreasing reimbursements while energy and labor costs continue to rise.
Resource and staff utilization is inefficient in DME, relative to other industries. For example, research conducted by Ankota, Inc. indicates that DME providers can cut operating costs such as mileage and fuel expenses by 25-35% immediately, simply through better scheduling and route planning. The same applies to home health care, respiratory therapy, rehab, and others that depend on home delivery and mobile work forces. Further, the addition of real time, mobile technologies and practices known in other industries as business performance management (BPM) will allow them to better model capacity and use it more efficiently. Technology can improve tracking and accountability, reduce mileage, eliminate paperwork, and improve quality.
The immediate business benefits include more deliveries in less time and at lower costs. Higher revenue. Lower marginal costs. That sounds simple, right?
The software companies that help DME companies actually run their businesses better and more profitably will be the ones that win. If you are a DME company, make software companies prove that they can reduce your operating costs and improve productivity. You should be able to tell whether they have expertise in business performance management and they should be able to prove it.
Those are the ones you can bet on.