Healthcare Hot Topics
HMS / RT / HME & Consumer Medical ProductsHome Modification & Accessibility Products
Complex Rehab & Custom Mobility

Second Quarter 2024

Sectors Covered by This Report:• Reminder that Kroll’s Healthcare Investment Banking Group and this report cover
the following segments of the product and supplies segments (providers, suppliersand manufacturers) of home health and community-based services:o Home Respiratory (Including Home Ventilator)o Ambulatory and Home Medical Equipmento Complex Rehab/Custom Mobility
o Pediatric RT/HME
o Capitated RT/HMEo Hospice and SNF RT/HMEo Consumable Home Medical Supplieso Diabetic and Wellness Footwear
o Compression and Lymphedema
o Rehab, Orthopedic and Post-Surgical At-Home Products(Note that we issue a separate Hot Topic report on labor-based home health and community-based
services, including home healthcare, hospice, home care and pediatric home health.)2Kroll’s View of M&A and Industry Activity• RT/HME: M&A activity in this segment continues to notch up, as evidenced bynumerous recent transactions and targets in the marketo While Medicare Competitive Bidding (still on hold until at least next year)
should continue to be monitored, both organic and acquisition growth
opportunities remain a focus for service providers in this service categoryo RT/HME manufacturing and supplies companies, which are “one stepremoved” from payers and payer billing, should also be reviewed andevaluated under the same heading• Hospice and SNF HME: This is a unique subsegment of RT/HME delivery
focused on high service, speedy and efficient logistics provided on a subcontracted basis for hospice and SNF labor-based service providerso M&A activity has been very solid in this segment and will likely go up
further, particularly in hospice HME – as hospice providers consolidate, so
will the hospice HME providers looking to provide standardized and highquality service levels to increasingly larger (but also smaller) hospiceproviders• Complex Rehab: Reimbursement/coding-related announcements for certain
parts of complex rehab services have been incremental positives for this sectoro There is meaningful M&A activity on the manufacturing side of thisproduct/service category. However, there has been less M&A on theprovider side, particularly by the top 2 providers. There are several
regional providers that are more active in M&A and are competing wellagainst the 2 large players in this area, and several are likely to beacquired over time.

3Complex Rehab• Eased wheelchair policy for manual wheelchairs. DME’s MACs
have announced they will allow indirect home assessments (e.g.,phone calls) for manual wheelchairs (vs. Medicare’s historal
requirement for in-person assessments). This policy will also easesituations in which replacement parts are unavailable (such as incases where the manufacturer is no longer in business) and whereordering a replacement wheelchair is the only option

Source: HME News, June 25, 2024, “DME MACS EASE WHEELCHAIR POLICIES”

4RT/HME• Medtrade and other conferences and events. As investors aretaking a look again at the overall home-based medical products andsupplies space, a reminder on a few sample of conferences andevents:o One of the bellwether events: Medtrade. The next one isscheduled for February 18-20. Attendees include providers,
distributors, manufacturers and other RT/HME/complex rehaband home medical supplies-active companies and executives

o HME News Business Summit: Scheduled for Oct 21-23, 2024
o Newer conference: HMEB FUTURE Conference. This first-time
HME Business conference on August 22 will be in parallel withthe home health/hospice/home care FUTURE conference
sponsored by Home Health Care News. A chance to getbroad-spectrum views and to have discussions with industry
participants across labor-based home health-hospice-homecare as well as across home health-based equipment, products
and supplies

o REHACARE: Scheduled for September 25-28, as always inDusseldorf, Germany. A broad range of manufacturers,suppliers, and providers will be in attendance from such areas
as rehab and complex rehab products, home respiratory, HME,
home medical supplies and other home and communityrelevant product categories
Source: summaries of recent research reports by the research firms listed
above; IBISWorld, July 2024, “Home Medical Equipment Rentals in the US –Market Size, Industry Analysis, Trends and Forecasts (2024-2029)”5

RT/HME (cont’d)• U.S. RT/HME sector size estimates vary from $37 billion in 2022
(Predence Research) to $63 billion in 2023 (Grand View Research)
to $115 billion in 2023 (Polaris Market Research). Future annual
growth estimates vary as well, in a range of 5-8%. IBISWorldestimates that the HME rental service segment of RT/HME will be$5.7 billion in 2024. All of these statistics should be taken with agrain of salt – certainly the RT/HME dealer channel (local market
delivery and billing to payers) is likely not more than $10 billion insize (see our prior report for additional estimates). However, sector
size estimates can easily be in the tens of billions of dollars if one
includes:o All forms of HME (using Medicare’s broad definition of
DMEPOS that also includes complex rehab and home medicalsupplies) as well as other DME-type products; ando RT/HME sold through a myriad of medical and consumer
channels (e.g., aside from RT/HME dealers: retail pharmacy,
HME retail, chiropractic, DIY and other retailers, online (asignificant segment as consumers are active purchasers ofmany HME-type products on a cash pay basis), rehab andother channelsSource: summaries of recent research reports by the research firms listed above; IBISWorld, July
2024, “Home Medical Equipment Rentals in the US – Market Size, Industry Analysis, Trends andForecasts (2024-2029)”6

RT/HME: Sleep Apnea• New drug reduces OSA severity. Eli Lilly’s drug, tirzepatide,
achieved an average reduction of up to 63% on the apneahypopnea index (AHI) compared to placebo as part of phase 3
clinical testing. The 63% reduction equates to 30 fewer events perhour of restricting or blocking a person’s airflow. As a secondary
endpoint, “disease resolution” was also studied where AHIs arerecorded at fewer than 5 events per hour. This endpoint showed
43% to 52% disease resolution in two studies• Double-digit CPAP mask growth. Coming off “catch-up” growth of
28% in CPAP masks in the first half of its FY’2024, Fisher & Paykel
expects to maintain around 10% growth in this product category forthe remainder of its fiscal year. Likewise, ResMed announced
double-digit CPAP mask and accessory revenue growth in its third
FY’2024 quarter

Source: HME News, June 24, 2024, “ELI LILLY SAYS TIRSEPATIDE REDUCES OSA
SEVERITY”, HME News, April 25, “RESMED REPORTS DOUBLE-DIGIT MASKREVENUE”; HME News, May 31, 2024, “F&P sees steadier growth for CPAP masks”

7Home Medical Supplies: Urological• Positive changes for urinary catheter coding. In May, CMS issued aproposal (to be finalized in fall and discussed as a late 2025/early2026 implementation) whereby 2 existing codes for intermittent
urinary catheters would be discontinued and 5 new ones would beestablished. There are 1,300 products in this this home medicalsupplies category, and the industry viewed this decades-old coding
system to be antiquated. The new codes are expected to be positive,at minimum for patient access and better care, given newtechnologies that have entered the urinary catheter segment

Source: HME News, June 14, 2024, “CATHETER PROPOSAL IS ‘HUGE STEPFORWARD’”

8

M&A Activity• M&A activity continues to be very solid with the lessened hold of
Medicare Competitive Bidding and reawakened interest among bothfinancial and strategic buyers, particularly in HME, home medicalsupplies and niche home product markets• RT/HME – Provider Services:o SG Homecare acquired SoCal-based, HME provider WesternDrug Medical Supply (June 2024). SG Homecare’s revenue is$150 million on a pro forma basis• SNF RT/HME – Outsourced Services:o MasVida Health (Brixey & Meyer) acquired Joerns’s long-termcare rental business (April 2024)• Complex Rehab – Manufacturing:o Platinum Equity is acquiring Sunrise Medical from Nordic
Capital. Sunrise is a manufacturer of manual and power
wheelchairs, along with power assist and seating &positioning products (June 2024 agreement)• RT/HME Manufacturing:o GF Health Products acquired Transfer Master Products, amanufacturer of adjustable beds for home health and other
healthcare settings (June 2024)

9Select Private Equity-Backed Companies• RT/HME Providers - Capitated:o SG Homecare (Sverica Capital)o Integrated Home Care Services (Nautic Partners)• RT/HME Providers:o Performance Home Medical (Grant Avenue)o DASCO (Silver Oak Services)• Home Ventilator Providers:o PromptCare RT (Waud Capital)o Advent Home Medical (New Harbor)• Complex Rehab Providers:o National Seating (Cinven)o Reliable Medical (Seven Hills)• Home Medical Supplies Providers:o TenderHeart (Riverglade Capital)o CHC Solutions (1315 Capital)o Strive Medical (NMS Capital)

10Select Private Equity-Backed Companies (cont’d)• Hospice HME:o DME Express (Waypoint Holdings)
o StateServ (Windrose Investors)• Complex Rehab Products Manufacturers:o Sunrise Medical (pending Nordic Capital to Platinum)o Meyra (Riverside Company)• Diversified RT/HME Suppliers:o Invacare (Azurite)o Compass Health Brands (TENEX)• Diabetic and Wellness Footwear Suppliers:o Anodyne (HealthEdge Investment)o Propet (Merit Capital)• Examples of Other Product Categories
o Kinex Medical (Merit Capital) – post-op orthopedic/rehabo CPAP.com (Cathay Capital) – e-commerce sleep apnea
equipment and supplies

11

Nick Konstantinou
Managing Director
nick.konstantinou@kroll.com+1 (216) 543 7885

Michael WeberManaging Director
michael.weber@kroll.com+1 (804) 543 1438

About KrollAs the leading independent provider of risk and financial advisory solutions, Kroll leverages our unique insights, data andtechnology to help clients stay ahead of complex demands. Kroll’s global team continues the firm’s nearly 100-year history oftrusted expertise spanning risk, governance, transactions and valuation. Our advanced solutions and intelligence provide clientsthe foresight they need to create an enduring competitive advantage. At Kroll, our values define who we are and how we partnerwith clients and communities. Learn more at Kroll.com.
M&A advisory, capital raising and secondary market advisory services in the United States are provided by Kroll Securities, LLC(member FINRA/SIPC). M&A advisory, capital raising and secondary market advisory services in the United Kingdom are provided
by Kroll Securities Ltd., which is authorized and regulated by the Financial Conduct Authority (FCA). Valuation Advisory Servicesin India are provided by Kroll Advisory Private Limited (formerly, Duff & Phelps India Private Limited), under a category 1
merchant banker license issued by the Securities and Exchange Board of India.
© 2024 Kroll, LLC. All rights reserved.

12