PharmaThera takes steps to become cream of crop
PharmaThera takes steps to become cream of crop
How one provider rose to the top
When Monterey Capital combed the Midwest and Southeast for the top privately owned home health care providers, it carefully examined more than 200 companies. In the end, only eight made the grade to form a new health care company, Auxi Health. One of the eight was PharmaThera, a Memphis, TN-based home infusion provider.
Monterey Capital began looking in the home care sector for purposes of consolidation, and considered only providers that were:
— not publicly owned;
— privately held;
— dominant players;
— had a balanced referral base;
— minimized Medicare Part A.
What was it that PharmaThera did — or had been doing — that made it stand out from the crowd? According to Larry Robinson, COO of Auxi and PharmaThera’s president, it’s little more than making a series of smart business decisions and having the courage and confidence to stand by those decisions.
First, Robinson notes that PharmaThera is a diverse provider by offering a variety of services and working with a diverse range of payer sources.
"We don’t put all our eggs in one basket," he says. "We have Medicare, Medicaid, managed care, and non-managed care referral sources, and we provide adult and pediatric services."
Making good business decisions
But more important than being diverse is PharmaThera’s willingness to accept good contracts while saying no to some business opportunities, a lesson many providers would be wise to learn.
"Every managed care contract we look at has to be good for us, good for the patient, and good for the payer," notes Robinson. "We have to make money doing this. When a contract comes across my desk and the reimbursement level is below the acquisition cost of the drug, it is not hard to tell that that would not be good business for us."
Robinson notes that PharmaThera has never made decisions on whether to accept contracts based on what competitors are doing. That in itself allows Robinson to concentrate on PharmaThera’s success and which contracts will add to that success.
"There are contracts that we have turned down that others have taken, and I know of contracts we have turned down that nobody has taken," he says. "Don’t try to figure out what the competitor is going to do. Figure out what you want to do, make sound business decisions, and live by those decisions."
Robinson says that for any home infusion provider to be successful, it must keep several basic concepts in mind:
1) You must run an efficient and effective operation.
2) Be aware of all the issues relating to providing quality care.
3) For-profit businesses can only accept business that is profitable.
"You can’t make a profit-taking business that is not profitable on face evidence," he says. "Nobody can, truthfully."
By knowing the exact costs it takes to do business — something Robinson says comes with being in the home infusion business with the same company for 15 years — it often is fairly evident what is good business and bad business.
"Some of this really comes down to, Don’t make stupid decisions,’" he says. "For example, don’t get into a network thinking that after you get in you can renegotiate and surely the payer will give some concessions when it realizes that the provider can’t do something for cost."
In addition to experience and an in-depth knowledge of the industry, Robinson says another key factor lies in being privately held.
"A lot of this comes from running your own business," he notes. "You look at things in a different light when you are the owner and operator than when you are the operator but it’s owned by somebody else, or vice versa. And none of the companies [in Auxi Health] were chasing quarterly earnings or doing anything other than making good day-to-day business decisions."
Why combine?
If things were going so well for PharmaThera, why was there a need to join other home care providers to form Auxi Health? Robinson says it comes down to a free exchange of expertise and ideas.
"A lot of it was to simply improve our resources," he says. "Within any company, resources reach a limit depending on how big you are. Auxi allows us to have more resources than we had before, and each company has its own expertise. One of the things we saw was the opportunity to cross-pollinate between companies and take business lines from one company to another. If someone within the organization has developed a business line or a product that they are very successful with, I have instant access to their expertise. The key to it is what opportunities do I see in my marketplace, and who else is in Auxi is already doing that somewhere else?"
Robinson adds that one of the ideas behind Auxi Health was for the back office support functions to come from the founding companies. This will allow Auxi to remain a lean operation and for the founding companies to focus on what they do best.
Still PharmaThera
PharmaThera still remains a regional provider — with locations in Arkansas, Georgia, Missis-sippi, Tennessee, and Texas — and has only slightly changed its marketing approach. Because the other seven companies (Always Care, Missouri Home Care, First Home Health, Hawkeye Health Services, Home Medcare, Jackson Healthcare, and Procare Home Health Services) are also in the South and Midwest, PharmaThera has not expanded its geographic coverage area, but can now offer services through its Auxi Health colleagues.
"We continue to market in our regional area, so we haven’t pushed that up to a different level," Robinson explains. "What we are able to do is go back to our referral sources and introduce these services. We think that enhances our value because it is the same person they called before for infusion therapy coming in and saying, Look what else I can do.’"
Again, Robinson has a very specific business approach in mind as to what kind of new business he will be able to capture through his alignment with Auxi Health.
"We are not asking referral sources to do anything differently," he explains. "A referral source may use us for infusion therapy and make other referrals for respiratory therapy. But if there is an infusion therapy patient who needs respiratory, are we not a better choice than splitting it between two companies?"
Through Auxi, PharmaThera has, in some locations, added medical equipment, respiratory therapy, various components of nursing and other home care services to its own infusion therapy services. And with an Auxi coverage area confined to Arkansas, Georgia, Iowa, Mississippi, Missouri, Tennessee, Texas, and West Virginia, PharmaThera will continue to do what it does best: provide regional home infusion therapy. PharmaThera does not offer home infusion in Iowa, but now members in Iowa can rely on PharmaThera’s expertise to see if they may want to offer those services. Yet members who exist in PharmaThera’s coverage area will send home infusion referrals PharmaThera’s way.
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