Presented by Mark Higley August 27, 2017 State of the Industry in HME/Rehab: Data, Best Practices, and Benchmarks (with some analysis & commentary) Presented by Mark Higley August 27, 2017

The number of “true” HMEs have been steadily declining (data is 2010 to 2016)… 2010 2011 2012 2013 2014 2015 2016

We can also access the state-by-state detail (I can offer Georgia detail today-- there are 222 active remaining companies in the state); I have emailed this file to Teresa… The next series of slides indicate “traditional HME companies” by tax ID (many have multiple locations) followed by the number of individual NPI/PTAN locations (we dub them “rooftops”)

In the past three and a half years, the number of home medical equipment suppliers and the number of locations has declined by 38% and 41% respectively. This is a staggering downsizing of suppliers in any environment. This consolidation is even more egregious when considered in the context of a growing population of seniors brought on by the aging of the baby boom generation. The frail elderly and the disabled are the populations which rely upon home medical equipment suppliers to maintain quality of life.

Consolidation is occurring across the healthcare continuum Consolidation is occurring across the healthcare continuum. Over the past five years, hospital system consolidation has occurred at higher rate than in any other five year period in history. Over the three year period from 2012 to 2015, 12% of all physicians in the US went from an independent practice to being employed by a health system. That’s 46,000 docs consolidating into health systems in just three years.

Drilling deeper into the home medical equipment consolidation provides a clear correlation between federal policy on the inaccurately named competitive bidding and consolidation. In the 10 most populous states, where competitive bidding is focused, there was a 47% reduction in the number of HME suppliers over three and a half years. In the fifteen lowest population states, where competitive bidding was largely absent, there was an 18% reduction in suppliers over the same period.

https://data.medicare.gov/data/supplier-directory

Projected Per Capita DME Expenditures ($) Source: National Health Expenditure Projections 2014-2022 http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2014.pdf

Baby Boomers 74.9M boomers 50% of population over 50 by the end of 2017 Targeted by marketing ONLY 5- 10% Spending to increase in 20 yrs. by $4.74T

More on Boomers 82% belong to a social networking site Spend more time online than millennials 70% of the disposable income controlled by boomers

New products will be an important part of the equation for DMEPOS suppliers and beneficiaries. The importance of new products in the DMEPOS business model will increase in coming years. Look for a change in philosophy at FDA and CMS away from being a safe keeper to much more of a facilitator of new products and technology. Smart suppliers of DMEPOS will capitalize on the flow of new products.

Growing consumerism and out-of-pocket obligations. Republican plans will likely lead to even more health plans where consumers pay large amounts out of their own pocket. This will occur in private plans and to a lesser extent in Medicaid. Higher co-pays and deductibles are problematic for healthcare providers. DMEPOS suppliers will need to get better at billing and collecting from consumers. Further, suppliers need to be more patient-centric and get better at presenting health solutions directly to patients and their families.

Benchmarking! (N=215 companies)

Vice-President, Regulatory Affairs Questions? Mark J Higley Vice-President, Regulatory Affairs VGM Group, Inc. (c) 319.504.9515 mark.higley@vgm.com