‘94 / ’95 : Medical Supplies Group Really Delivers--at Home : Homedco House Calls Win Sales--and Friends

Kris Bhatt apologizes for the clutter of supplies stacked inside her Ford Explorer.

“I get calls on the road, so I have to have a little of everything,” Bhatt, a respiratory therapist, explained as she set out for another long day of visiting patients across two counties.

She’s a little bit like a country doctor, making rounds from the company’s regional center in Cerritos to patients’ homes, striking up friendships along the way. The people she treats are happy to be home instead of tethered to hospitals. And the costs are significantly less for insurers.

Which explains why Bhatt’s employer, Homedco Group Inc., is soaring.

The Fountain Valley company is grabbing an ever larger share of the at-home care market, a segment one analyst says is growing at a rate of 10% a year. Homedco has succeeded not only by capitalizing on the trend, but by allying itself with medical groups and buying up smaller competitors.

The result has been impressive earnings growth. Homedco’s profit was up 22% to $29.8 million for the fiscal year ended Sept. 30, the fourth straight year of double-digit increases.

Homedco stock has risen right along with the earnings. After starting the year at $30.75, the firm’s shares closed Friday at $36.50 UPDATE on Nasdaq.

“I’ve been recommending the stock for more than two years,” said analyst Randall S. Huyser of the Furman Selz brokerage in San Francisco. “It’s been a very consistent performer.”

Part of the reason for that has been Homedco’s attention to consolidation in the industry. Homedco extended its penetration deep into the Southeast and Midwest with its 1992 acquisition of Glasrock Home Health Care Inc.

“In a nutshell, they have become aggressive in acquisitions,” said Vivian R. Wohl, an analyst for Robertson, Stephens & Co. in San Francisco.

Earlier this month, the company announced it had completed two more acquisitions. As with past deals, Homedco picks up the market share of Corpus Christi, Tex.-based Am-Tex Healthcare Services Inc. and Crest Medical Inc. of Marietta, Ga., but retains only a handful of their most essential or productive employees.

Cost savings go straight to the bottom line.

“When Homedco makes an acquisition . . . it can wipe out a fair amount of existing cost structure by, for instance, closing a branch,” analyst Huyser said. It “can offer one-stop shopping for respiratory, home infusion and home medical equipment. That has proven to be attractive to managed-care payers, because Homedco is typically less expensive.”

The company has paid special attention to courting managed-care operators and health maintenance organizations, to which it provides services on a flat-rate basis. Indeed, with the rapid expansion of managed care, Homedco is increasingly having to watch its own spending.

“We see the future of health care being in prepaid plans,” said Jeremy M. Jones, the boyish-looking chief executive who formed Homedco in a 1987 management buyout of Santa Monica-based National Medical Enterprises’ home care business. “We are becoming a cost manager as well as a (care) provider.”

While cost management reduces revenues, Homedco is confident it will continue to expand thanks to two allies: government policy and demographics.

The federal government, Jones noted, has encouraged home care for more than a decade by limiting Medicare reimbursements. Doctors and hospitals recommend that patients convalesce at home because it is cheaper than extended hospitalization, and more and more medical equipment is being designed to be operated by the patient or a visiting technician without continual attention from nurses in a hospital.

“It’s a confluence of managed care and technology that is pushing people (into treatment at) home,” analyst Wohl said. “They want to be treated at home, and it is more cost-effective.”

Care at home still represents less than 2% of the government’s medical spending, but that segment is expected to grow, and experts say it is less vulnerable than other segments when reimbursements are cut.

Homedco “should benefit over the next several years, because home health care is lower-cost,” said Al Madison, an analyst for the investment banking firm Parker Hunter in Pittsburgh. “The trends are in their favor. They are a leader in home health care.”

Demographics have helped Homedco too. The population as a whole is growing older and people are living longer--often with one of the chronic ailments for which Homedco provides treatment, according to Jones.

Homedco’s business has roughly three segments. About two-thirds of revenue comes from respiratory therapy, which usually involves the supply of machines that assist patients’ breathing as they sleep. The rest comes from equipment rentals and infusion therapy, the intravenous supply of medicine and nourishment.

The services are delivered by 4,600 employees in 45 states, people such as therapist Kris Bhatt who drive from home to home delivering equipment or helping patients use it.

Bhatt tries to visit each of her 25 patients at least once a month. Showing someone how to use a respirator can take several hours, but most visits last only a few minutes as she replaces filters or checks tubing.

“She keeps everything huffing and puffing,” said Roger Wolcott, an FBI retiree who depends on a Homedco respirator at night in his Whittier home.

Wolcott, 77, suffers from a disorder that can cause him to stop breathing while he sleeps. On this visit he suspects something is wrong with his machine. The tubes are tangled, and Bhatt replaces it.

“They do well,” Wolcott said of Homedco’s visiting agents. “Sometimes they are kind of hard to get hold of, but that’s nothing to (complain) about.”

Bhatt, a mother of two, said meeting patients is the most enjoyable part of her work. On her last visit, one longtime patient, a 10-year-old, gave her “a big hug and kiss and said, ‘Kris, I love you.’ ”

Another client, Margaret Hardenbrook of Long Beach, has become such a good friend that the two are always vowing to get together for lunch.

“I usually follow her out to the car so I can get in a word about recipes and all,” said Hardenbrook, who was disabled by polio as a teen-ager and uses a wheelchair.

Bhatt said she appreciates the relationships she develops in her work.

“If you are caring and loving, it helps,” she said. “You go with a smile and professionalism--it helps the patient and the family both.”