Since the Great Depression, Hill-Rom Holdings has ranked as one of the top suppliers of hospital beds around the country. Today, CEO John Greisch is betting there’s more money to be made in blood pressure monitors and retina scanning devices than adjustable mattresses.

Under Greisch, a Baxter International executive before he landed at Hill-Rom in 2010, the company has completed seven acquisitions in the past five years to expand sales into physicians offices, urgent care clinics and home health programs. The dealmaking has left the company with a load of debt, about $2.1 billion, but yielded impressive top-line gains.

While the overall hospital bed market is estimated to grow at just 1 percent a year, Greisch has doubled Hill-Rom’s revenue since 2010 to $2.74 billion in the fiscal year ended Sept. 30. Over that same time, operating margins have expanded three full points to 15.4 percent, while its share price has tripled in value to a recent multiyear peak of $88. Most analysts rate the stock a “buy” because it still is priced at a price-earnings discount to other medical technology peers.

“We’re less tied to both hospitals and hospital beds today,” says Greisch, 62. “As time goes on, more and more care is occurring outside hospitals, and so we’ve had to be prepared to diversify.”

The company has changed in other ways. In 1929 it was founded by William Hillenbrand as a maker of hospital furniture and, later on, was added to a casket business he also owned, operating from Batesville, Ind., about 55 miles northwest of Cincinnati. The two halves were split apart in 2008. In 2015, Greisch moved the headquarters to Chicago, where talent recruitment is easier, though Batesville remains a primary manufacturing base.

Twenty years ago, Hill-Rom ​ reaped almost two-thirds of sales from hospital beds; today they account for less than 20 percent. Foreign sales have climbed steadily, too, to more than 30 percent of total revenue. The company has more than 10,000 employees spread among plants from Beaverton, Ore., to Cary, N.C., with foreign facilities in Mexico, Singapore and Germany, among other places. Its East Loop head office employs 120.

Hill-Rom might be growing faster if health care weren’t under such cost-containment pressures. Within the nation’s 5,700 hospitals, the bed count has fallen 3 percent since 2014 to about 900,000. The American Hospital Association estimates that a quarter of its members operate at a deficit. On the premise that bigger is better and cheaper, more hospital chains are merging. Recent deals include Advocate Health Care of Downers Grove and Milwaukee-based Aurora Health Care, and Catholic Health Initiatives and Dignity Health, which, post-merger, will be based in Chicago.

“The number of people going into hospitals and staying overnight is down,” says Ashley Thompson, senior vice president of policy at the AHA. “But activity is up on the outpatient side. They are still getting services performed.”

To get into the middle of those outpatient services, Hill-Rom’s biggest move was its $2.05 billion acquisition of Welch Allyn in Skaneateles Falls, N.Y., in 2015. More recently, it spent $330 million last February for Milwaukee-based Mortara Instrument. These companies have given Hill-Rom an impressive pipeline of new products, including the Retinavue from Welch Allyn, which allows family doctors, not just ophthalmic specialists, to screen patients for diabetic retinopathy, a leading cause of blindness. Hill-Rom also recently launched a wearable airway clearance device that allows patients with cystic fibrosis to breathe better when they are away from hospitals and electrical outlets. “It’s totally mobile, giving people a more free lifestyle,” Greisch says.

There is still new technology being added to hospital beds—most beds sell for $5,000 to $30,000 each—much of it involving wireless hookups that can sense when a patient has gotten out or even shifted position. Hill-Rom has come up with an operating table tied to robotic surgery that can “tilt” a patient into a new position rather than move her to keep the robot operating seamlessly with no interruption.

Jack Stephens, senior vice president of product strategy at hospital supplies distributor McKesson Medical-Surgical in Richmond, Va., says that Hill-Rom and such brands as Welch Allyn “are at the top of the list of preferred products that we’re selling to doctors. Hill-Rom has been smart in engaging patients in physicians offices for treatment before they ever get to a hospital.”

Even so, practitioners everywhere are holding back on investment where they can. “Some health systems tell us they have to strip out 35 percent of their cost structure if they want to operate profitably,” Stephens says. That has led to a pruning of capital spending budgets.

Because its debt load is so heavy, Hill-Rom probably will have to pause its dealmaking, says analyst Mike Matson of Needham in Boston, but not for too long. “The company generates a lot of cash and it will pay down its debt rapidly,” he says. “Maybe in a year or so you could see them ready to do another deal of $300 million or so in size.”

The debt has been worth it, Matson adds. “Without Welch Allyn and the others, this company would be still selling beds and growing at more like a 1 percent pace each year, and nobody would be paying attention to it,” he says. Instead, Greisch forecasts that Hill-Rom’s revenue can grow at a 5 percent “core” pace before accounting for more acquisitions.

At that rate, investors should be able to rest easy.





Source link

If you are looking to make money from running your own business at home, visit the links below.

Computers and Software Buyers Guide

Compare Computers and Laptops

Mobile Phones Buyers Guide

Compare Mobile Phones