As Invacare (NYSE: IVC) grapples with what it calls "slowness" in its markets, the medical equipment supplier illustrated with a recent acquisition one market in which it sees potential: rentals to long-term care providers like nursing homes and assisted-living facilities.
The Elyria, Ohio-based company (pdf) announced last week when releasing its third-quarter earnings that it had purchased for $41.5 million California-based Dynamic Medical Systems, which specializes in wound-care and safe-patient-handling products, such as lifts.
The purchase opens up the Western U.S. rentals market to Invacare, which already has a presence in the business in the East, spokeswoman Lara Mahoney said. "This allows us to have nationwide footprint of rental capabilities," she said.
More importantly, though, demand for rentals by long-term care providers could help offset the stagnant economy and weakness in other markets Invacare sells to, such as home health care.
"Uncertainty related to health care reform and slowing health care spending related to difficult economic conditions around the globe are causing an unanticipated slowness in Invacare's markets," CEO Gerald Blouch said in discussing Invacare's third-quarter earnings.
As a result, the company reduced the upper end of its guidance on 2011 adjusted earnings per share. Invacare now expects a range between $2.05 and $2.10, down from its previous estimate of $2.05 to $2.15.
Blough also cited changing market dynamics as a reason for the Dynamic Medical Systems acquisition.
Mahoney wouldn't say whether Invacare anticipates greater near-term growth in the sales or rentals market to long-term care providers. Clearly, though, Invacare wants to be ready when and if there's an upsurge in demand for rentals of products like those sold by Dynamic Medical Systems, such as beds, therapeutic mattresses, bariatric lifts, and patient-transfer products.
"Markets are changing and reimbursements are changing," Mahoney said. "More people like having the option to rent because, without knowing reimbursements, they may not want to [incur] the capital expense of purchasing."
