Obama Care is poised to change the medical industry tremendously, and many of these changes are already in effect. Ambulance companies are not exempt from these changes and the challenges they bring. In an industry that was once dominated by mom-and-pop companies and other small businesses, larger companies are likely going to be the future. There are simply too many changes coming to accommodate the small businesses well. The industry, as a result, is in a unique position where consolidation makes sense, and there are several reasons for this.
First, larger companies generally have lower costs. As prices rise across the board, including the costs of vital things like medical equipment, fuel and even taxes, small companies struggle to keep up. The larger the company, the larger the perks when ordering these types of items.
Big companies can negotiate shipping discounts and even purchasing discounts when buying certain items in large volumes. In the case of an ambulance company, basic medical supplies can be purchased in bulk, and therefore the price per syringe or bandage will be lower. Companies can use one billing department to handle all billing, lowering the cost per bill significantly.
Also, the larger the company, the larger the customer base. While this does not bring in more money per ambulance ride, it does increase overall cash flow. The more cash flow, the easier it will be for the company to manage its inflexible expenses.
Another reason that consolidation makes sense in this industry is the fragmentation of the market. In the past, it was very easy for entrepreneurs to start an ambulance business if they could gather the capital for a truck, some basic medical supplies and fuel. As this changes, the fragmentation of the market makes it easier for large companies to snatch up those smaller companies, and buyers often find that the price is quite low as the small business owner simply needs to get out.
Finally, the industry is shifting from small businesses to larger ones because larger companies tend to do better when the market gets competitive. When they have lower overhead costs, large companies can reduce what they charge their customers. The smaller companies cannot reduce their prices in the same way, and as a result they lose business to their larger competitors. Even if the reduction is small, it can make a big difference in determining which company gets the business.
As the world of medical transportation continues to bring challenges to companies, consolidation is the answer in many markets. The Tenney Group is ready to help companies who are looking to buy other ambulance companies which are struggling. With our help, these savvy business owners can make the most of these changes and poise themselves for future success.