New company focuses on fee-for-service reimbursement
April 19, 1999 3 minutes read
New company focuses on fee-for-service reimbursement
By KAREN PIHL-CAREY
HHBR Staff Writer
In an industry where Medicare-dependent companies are dying one right after the other, a new home healthcare company in Nashville, TN, may have found the secret to survival.
Auxi Health was created by Monterey Capital (Houston) by combining eight independent home healthcare companies into one. The combined businesses, which provide nursing care, infusion therapy, and respiratory therapy out of 32 offices, had about $60 million in total revenues over the past year.
What Auxi is doing that makes it unique and that may set a precedent for other home health companies to follow is this: It is limiting the amount of revenue brought in from Medicare to only 10% of the total. That means 90% of its revenues will come from private insurances and people who can afford to pay out of their own pockets.
In comparison, a little more than 73% of all home health revenues come from Medicare, according to Home Health Data Quarterly.
In late March, Auxi acquired PharmaThera, a home infusion company based in Memphis, TN, making PharmaThera president, Larry Robinson, the COO of Auxi. Terms of the transaction have not been announced. PharmaThera will serve as a platform company for Auxi, providing back office support. The company, which employs about 200 people at its eight locations in Tennessee, Mississippi, Arkansas, Georgia, and Texas, will retain the PharmaThera name.
PharmaThera, which accounts for about $20 million of the $60 million in combined revenues, is the largest of the eight companies that joined together. The others are: Always-Care (Olivette, MO); Missouri Home Health (Rollas, MO); First Home Health (Chapmanville, WV); Hawkeye Health Services (Knoxville, IA); Home Medicare (Eastman, GA); Jackson Healthcare (Temple, TX); and Procare Home Health Services (Douglas, GA).
In choosing the companies, which give Auxi a total of 3,000 employees, Monterey weeded through 200 home health agencies looking for firms that focused on profits, but required little from Medicare. Specifically, it wanted sound companies that had been operating for at least 10 years and that derived less than 15% of their total revenues from Medicare.
"In today’s market, Medicare reimbursement for home care is a losing proposition," Auxi President/CEO Paul Touchton told The Commercial Appeal of Memphis, TN.
Ever since the government changed the way it reimburses home health agencies for Medicare patient services, hundreds of agencies have closed. According to the National Association for Home Care (Washington), a total of 1,067 home health agencies have closed since Oct. 1, 1997. Broken down, that is 522 agencies in Texas, 123 in Louisiana, 55 in Missouri, 49 in both Florida and in Indiana, and dozens more in other states. The figures collected came from state agency reports and were not available for Tennessee. The Journal reported in September that at least 27 Tennessee agencies have closed.
Touchton told the Journal in September that plans to make Auxi a public company are on hold "until we see better multiples" in the market.
In the meantime, Auxi will continue to provide services to Medicare patients, but only until the company reaches that 10% revenue threshold. That threshold could increase if Medicare reimbursements are increased, stated American Capital Strategies (Bethesda, MD), the group that purchased $12.1 million of subordinated debt issued by Auxi. Fleet Capital has provided additional financing.
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