View from the Top

As HME ascends the face of a politically insecure future, revenues and new market potentials remain strong. In 2003, most companies, large and small, reported peak sales, but as Washington winds up to cut reimbursements more deeply, the positive outlook is not universal. HME businesses will have to retrain themselves, like finely tuned athletes, to beat credibility issues on Capitol Hill and deal with new requirements mandated by the Medicare Modernization Act. But the numbers in HomeCare's Top Companies listings speak for themselves. The market is out there. The climb may be harrowing — but that much more worthwhile — in the years ahead.

By Tom Gray

Sometimes you win. Sometimes you lose. Sometimes, as in the past year, the home medical equipment industry seems to be doing both at once.

Economically, 2003 was a winner for the HME business, and by most accounts 2004 is shaping up to be a repeat performance. Favorable demographics and a recovering economy both kept the industry on a strong growth track.

Politically, it has been a far different story. Since last summer, HME has been hit by a major scandal and has been run over by the bandwagon of Medicare reform. As a result, it faces tougher regulations and much leaner reimbursement than it did a year ago. It may be thriving out in the field, but it's having a hard time on Capitol Hill.

The economic scorecard for 2003 shows double-digit sales growth among industry leaders and robust merger and acquisition (M&A) activity. Among the few publicly traded companies in HME, stock prices were on a tear for most of the year. Even now, after the bad news of the Medicare reform bill is factored into business outlooks, values in both public and private markets have not fallen off a cliff.

Among the majors, respiratory-therapy leader Lincare Holdings had another in a series of strong years, with 2003 revenue up nearly 20 percent over 2002 and earnings per share (EPS) up nearly 28 percent. Apria Healthcare had slower growth from its more diversified mix of respiratory, infusion and DME, but it still achieved a year-over-year sales increase of 10 percent and EPS growth of 15 percent.