Coast to Coast

Edition: April 2014 - Vol 22 Number 04
Article#: 4461
Author: Repertoire

The recent announcement that the Almon Co. has taken an equity position in Anaheim, Calif.-based Hospital Associates signals a desire by both companies to expand the scope of their major project business, as well as e-commerce capabilities. The Almon Co. owns controlling interest in Claflin Medical Equipment and the Claflin Co. The companies will continue to operate as separate businesses, and will be managed by their current management teams, but will cooperate on common growth strategies.

“We believe that Claflin Medical Equipment and Hospital Associates are the leading dedicated providers of medical equipment and integrated project management services to hospitals, health networks, and other medical providers nationally,” says Claflin CEO Ted Almon. “It is our intent to build out a national presence in this emerging space through accelerated growth of both firms.”

The transaction complements the two companies’ strengths, says Hospital Associates President Cindy Juhas. “Hospital Associates has a laser-like focus. Seventy percent of our business is concentrated on projects – new facilities, expansions or remodels – and in most of them, we provide some type of logistics services. Claflin Medical Equipment…has project business and a robust e-commerce business, and they have a department dedicated to biomedical and maintenance services.

“Hospital Associates has enjoyed steady organic growth, but in order for us to grow at a greater rate, we needed to have some outside help,” she says. Claflin was willing to invest in the company’s growth.

Expansion

Claflin Medical Equipment conducts business throughout the country through its e-commerce platform and contract relationships, says Almon. “Major project business, though, requires a facility and local staff.” The company has full-time sales and operational personnel in Indiana, Missouri, Illinois and Iowa, but not the West Coast. “Hospital Associates will fill that very large niche for us and may expand throughout the West.”

Claflin Medical Equipment began opening locations in the Midwest in 2011, says National Sales Manager K.C. Meleski. “Indiana was selected as our initial site because we were able to leverage some existing contracts and relationships we had in that geographic area,” he says. “We then continued to branch out in the Midwest from this location and have realized some logistical benefits due to the close proximity of these outposts. Our next focus at [Claflin Medical Equipment] is to expand into the Southeast, and we will have a location in Austin, Texas, later this year.”

IDN customers

Hospital Associates’ primary customers are IDNs and hospital networks. “We find that these facilities are lacking in manpower and warehouse space when it comes to outfitting their new facility, remodel or expansion,” says Juhas. “Our logistics services range from full-service, turnkey, direct-to-site delivery, warehousing, staging, assembly and deployment.”

Claflin Medical Equipment, or CME, also provides project management and logistics services, as well as minor medical equipment and biomedical repair and maintenance services. “CME has found that servicing what you sell can be a marketing advantage in some situations,” says Almon. “We feel [Hospital Associates] can access this capability through CME and expand their offering.”

The new relationship could also strengthen their mutual e-commerce capabilities. “CME has made a major effort and investment in their e-commerce platform and capabilities,” says Almon. “Hospital Associates may provide an opportunity to leverage that investment over a larger base of business.”

Adds Juhas, “Hospital Associates has a website dedicated to the logistics services they provide, and has also launched a social media campaign focusing on those services. For the short term, Hospital Associates will focus on what we do best and let Claflin focus on what they do best. At some point, we will be sharing best practices and making sure that we take advantage of each other’s strength.”

Looking ahead

Together, Claflin Medical Equipment and Hospital Associates will be well-positioned to service a changing provider infrastructure, says Almon.

“Hospitals and alternate site providers will align in new, more horizontal relationships in response to becoming accountable care organizations,” he says. “So, a patient-centered medical home, for example, will be a different facility from a traditional medical practice.

“Hospitals are looking to move traditionally inpatient procedures and services offsite to community locations. Technology is allowing these venue changes, and the physical infrastructure will need to be altered or added onto [in order to] accommodate the changes. Add in the pent-up demand for capital equipment resulting from the economic downturn from which we are just emerging, and we are quite bullish on the prospects for the equipment business.

“We are very familiar with working with hospitals on capital projects, and we think that process is very different from working with a doctor setting up an office,” adds Almon. “We have experience with the specifying consultants and architects that hospitals use, we understand formularies that will be used to brand each doctor’s practice as part of the network he has joined, and we are familiar with the contracting process hospitals and health networks use when they undertake major projects. We hope to leverage all these skills across the country and across the market.”

Says Juhas, “The growth of IDNs and hospital networks, along with the passing of the Affordable Care Act, has had a profound impact on our business. There is incredible growth in new healthcare facilities (hospitals and clinics) as well as many expansions and remodels on the West Coast. That, along with hospitals having to cut unnecessary costs, has provided a service gap that Hospital Affiliates can help bridge.

“Customers have no way to warehouse, assemble and deliver all the equipment needed for their ever-growing campuses. Four years ago, projects were 30 percent of our business; now they are 70 percent and growing. As a small business, we were growing, but lack of capital was stifling that growth. Claflin is giving us the opportunity to expand as fast as the market is expanding. Both from a capital investment and a brain trust investment, it is all positive for us.”