Information Technology and HME Mergers and Acquisitions
IT can definitely help providers strategically consider whether it's time to sell, and to increase their business's valuation.
Believe it or not, one tool that can definitely help HME providers both increase the value of their business and better determine if they should sell, and if so, how it can factor into the due diligence process.
“It’s a tough process to sell your life’s business,” says Greg Timmons, president and CEO of MedAct Software (McKinney, Texas; medactsoftware.com). “How you put a valuation on it is difficult.”
Having a sound information technology infrastructure can boost a business’s value in the same way a homeowner might boost a home’s value by adding improvements. IT is a resource that HME business buyers want to see in place, in the same way home buyers might want to see granite counter tops in the kitchen.
Timmons says IT helps M&As in four ways:
- Operational value. This is for the DME that’s looking to sell in the next 12 to 18 months, so that the provider has enough time to demonstrate the value that the software will confer in increased efficiency and profitability.
- Value of information. When a provider business has all of its financial, revenue and patient information in a centralized, state-of-the-art information system, the buyer is assured that the seller is getting all the revenues from patients and referrals that can be obtained.
- Information integrity. A centralized data system also demonstrates that the financials being provided are trustworthy, because all the information is in a centralized repository and available for inspection. It also will show that the provider is following all the necessary claims documentation practices and procedures.
- Integration value. A centralized data system is going to be very important to a buyer looking for easy integration value. If the buyer has to contend with a collection of disparate systems and databases, trying to bring that into the buyer’s system could prove problematic and expensive.
This is also an important consideration for providers that have their data stored remotely, such as in a hosted system. Timmons advises providers with those systems find out up-front how much and in what format they will get their data when they are prepping to sell.
All of these four values or appeals of IT are important, because they increase confidence and speed up the process, which is critical, Timmons says. The longer the due diligence, the more the buyer will “ding” the seller.
“If you’re a buyer, you’re looking for ways to reduce your price point,” he says. “So you’re digging and digging to try and understand what you’re getting and what you’re getting has integrity to it.”
And, as mentioned, the purchasing provider will also seek the smoothest possible integration path.
“The more that it is computerized and put into relational databases, the easiest it is to convert that over to your system as the buyer, or to use that system going forward,” he notes, adding IT can be a true selling point to buyer’s with legacy systems. “Maybe you, as the buyer, don’t have state-of-the-art technology, but the company you’re purchasing does. You just bought an asset.”
This article originally appeared in the March 2013 issue of HME Business.