Selling a medical supply or DME business
Durable medical equipment and medical supply companies are valued on payer relationships, accreditation status and inventory economics. Reimbursed product lines carry compliance obligations that transfer with the business, and referral concentration is the risk buyers examine hardest.
Written and reviewed by Antoine Campbell. Last reviewed .
Product and payer mix
Rental fleets look like revenue and behave like capital. Buyers separate them and value the fleet on its condition and remaining life.
- Reimbursed versus cash-pay product lines
- Rental versus sale revenue, and the capital tied up in rental fleets
- Payer mix across Medicare, Medicaid, commercial and private pay
- Competitive bidding exposure where applicable
- Manufacturer and distributor agreements, and whether they transfer
Accreditation and enrollment
DME suppliers billing Medicare must meet supplier standards and accreditation requirements administered through CMS and its contractors, and enrollment does not simply move with a purchase agreement. As with home care, the change-of-ownership pathway governs the closing schedule.
Referral concentration
Referral arrangements in healthcare are regulated. Any compensation touching a referral source is examined closely, and informal arrangements that were never documented become a diligence problem.
- Referring physicians, clinics, hospitals and discharge planners by volume
- Whether relationships are institutional or personal to the owner
- Marketing and sales rep structure, and whether reps stay
- Compliance with referral and anti-kickback rules
Inventory and operations
- Inventory turns and obsolescence by product line
- Denials rate, days sales outstanding and collection performance
- Warehouse, delivery fleet and service capability
- Documentation supporting medical necessity for billed items
What Maurant needs to evaluate this
- Three years of tax returns and current financials
- Revenue by product line and payer
- Accreditation certificates and enrollment documentation
- Referral source report by volume
- Inventory listing with aging
- Audit and recoupment history
When Maurant is not the right buyer
- Suppliers with unresolved audit or recoupment exposure
- Businesses dependent on one referring physician
- Operations with undocumented referral compensation arrangements
Questions owners ask
- Does accreditation transfer?
- Generally not automatically. Accreditation and enrollment both have change-of-ownership processes that set the timeline.
- How is a rental fleet valued?
- On condition, remaining life and the revenue it currently produces, separately from the operating business.
- Is cash-pay retail worth more than reimbursed lines?
- It carries less compliance risk and collects faster. Whether it is worth more depends on margin and durability.
Sources
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