Home-based respiratory care company Viemed (Nasdaq: VMD) is ready to make a splash in the home medical equipment (HME) market.
For starters, the Lafayette, Louisiana-based Viemed recently restructured its sales force to better capitalize on emerging opportunities across its footprint. The company additionally continues to see positives from its technology investments.
What’s more, Viemed is also fueled by macro-level tailwinds, according to CEO Casey Hoyt.
“The aging population continues to be a significant factor in our industry dynamics,” Hoyt said during his company’s Q4 and year-end earnings call on March 7. “Simultaneously, technological advancements and increased awareness are shaping the adoption of our specialized home medical services. We believe the home medical equipment markets hold promising opportunities for continuous expansion, and we stand ready to leverage our expertise in navigating this landscape.”
In the fourth quarter of 2023, Viemed saw its net revenue hit a high-water mark of $50.7 million, a 35% increase year-over-year, according to the company.
For the year, the company’s net revenue came in at $183 million, up 32% compared to 2022.
A good chunk of Viemed’s growth was tied to its 2023 acquisition of Tennessee-based Home Medical Products (HMP), a large regional provider of respiratory-focused home medical solutions.
“We continue to stay optimistic that we will be able to continue our high organic growth rates, as well as continue our evaluation of inorganic opportunities,” Viemed COO Todd Zehnder said during the call.
Sales, technology innovation strategies
Nearly half of Viemed’s payer mix was traditional Medicare as of the end of last year’s third quarter. About one-quarter of its payer mix was commercial, with Medicare Advantage (MA), Medicare and private pay making up the remainder.
As for services, 58% of the Viemed business is on the ventilation side, with sleep, oxygen and other services making up the rest.
Viemed’s sales-force restructuring was a major highlight of the fourth quarter, according to Hoyt.
Specifically, Viemed worked to reinforce its training and management infrastructure while reorganizing its national network to create a more regional and localized approach.
“Our new structure, which launched in early 2024, paved the way for multiple territory sales managers and national sales directorship promotions,” Hoyt said. “After the restructuring, we’ll finish the year with 106 sales territories with the current bandwidth to expand as needed to another 30.”
Meanwhile, on the technology front, Viemed improved its ability to better capture “sophisticated data” around clinical outcomes and cost savings. That ability gives it a potential leg up in value-based care arrangements and pilots, according to Hoyt.
Viemed currently has at least one pilot program with the U.S. Department of Veterans Affairs.
M&A on the horizon
On the M&A front, the business is at a point where dealmaking is primed to pick up, too.
Viemed’s HMP deal, completed June 1, 2023, added geographic, product and payer diversification. The purchase price was about $29 million.
“An undeniable highlight of our strategic endeavors was the targeted acquisition of HMP, which was immediately created accretive to net income and EPS, highlighting the effectiveness of our M&A strategy and integration capabilities,” Hoyt said.
As a business, Viemed is coming off of seven consecutive years of positive net income, with profitable growth every year since its public formation. It’s also at a point in its company trajectory where “free cash flow is really ramping up,” according to Zehnder.
In other words, Viemed could have plenty of dry powder to work with in regard to executing more HMP-like transactions.
Viemed views M&A activity as a complementary strategy to its steady organic growth, but in reviewing opportunities, the company will remain a disciplined buyer, its leadership team noted.
“Our team does fully expect to incrementally grow inorganically through strategic JV partnerships and acquisitions in 2024,” Hoyt said.
Viemed’s regulatory outlook
The Medicare 75/25 blended rate provision for DME was not in the government spending package set for consideration in early March.
Even so, Viemed’s leadership team believes the reimbursement climate is “strong,” and the company isn’t anticipating a net deterioration of average reimbursement rates.
“Importantly, should the 75/25 rate be extended through the legislation, we are poised to experience some potential upside,” Hoyt said.
Viemed also stands to benefit from the federal government’s crackdown on MA payers. The U.S. Centers for Medicare & Medicaid Services (CMS) has been working to increase MA transparency and accountability.
“With these positive regulatory shifts, we anticipate a noteworthy improvement in the behavior and compliance of Medicare Advantage payers,” Hoyt explained.
Graphics courtesy Viemed
