At a time when many home infusion companies are struggling to stay profitable in a market of extremely tight margins, Option Care of Bannockburn, Ill., has reported record third quarter and year-to-date earnings. This success is due in part to a series of acquisitions designed to extend and strengthen the company's presence in regional markets from Maryland to California, according to Option Care's chief operating officer Bruce Kutinsky.

But the groundwork for Option Care's success took shape long before the company embarked on the acquisition path, Kutinsky says. After an attempt to expand in 1997, he explains, “Option Care realized, in 1998, that we needed to focus on our operations first.”

Growing Up and Out

So between 1998 and 1999, the company worked to standardize operations at all of its branches, establishing monitoring systems and developing guidelines for daily activities.

Taking this time to hone its internal operations allowed Option Care to pursue external growth, Kutinsky says. “The best offense is a good defense,” he adds. “And the good defense is the day-to-day management of our office. That's what we've been doing for the past year-and-a-half and you can see our results.”

Since January 1, 2001, Option Care has acquired seven companies and entered six new regions including Thousand Oaks, Calif.; St. Louis; Chicago; Columbus, Ohio; Baltimore and Newark, N.J. The company's third quarter 2001 net income grew 24 percent over its third quarter 2000 earnings, and same-store growth accounted for 21 percent of third quarter revenue increases, Kutinsky says.

Option Care's acquisition strategy is simple: “We look to acquire independent infusion pharmacies in markets where we don't exist,” Kutinsky explains. At the same time, he adds, the company looks to acquire and consolidate independent pharmacies in markets where it does exist.

This strategy makes sense for a publicly traded company in a market that rewards size, says acquisitions specialist Dexter Braff, president of The Braff Group, Pittsburgh. “There is true value to having size and depth of operation,” he says. Home care providers like Option Care must also look to grow regionally, he says, because competition in this market takes place on a regional rather than a national level.

Finally, Braff attributes some of Option Care's success to its expansion beyond traditional infusion therapy into specialty pharmaceuticals. But this expansion has not kept Option Care from focusing on its core business, he notes.

“The company has been focused during the past year or two, and the market is rewarding that focus,” he says.

The Inside Edge

A successful acquisition strategy is only the first step toward sustained growth, Kutinsky says. The next step is to ensure that each new acquisition integrates seamlessly into the company. To this end, Option Care's corporate integration specialists manage each new business for two months after the acquisition is complete.

In the final analysis, success relies on a strong internal operations framework, Kutinsky explains. Option Care's 18-month planning period now is paying off, he adds.

“The infusion industry is growing at a rate of 6 percent to 8 percent per year. But our same-store growth is significantly above that average.”