Recession, medicare funding cuts, and the specter of competitive bidding have not prevented Bruce H. Callahan from being decidedly bullish about the future of Ultra Care Inc, a 13-year-old independent HME company based in Melrose Park, Ill. Since its founding, it has grown into the largest company of its kind in the Chicago area, according to Callahan, the company’s president and chief executive officer. And he and his executive team have no intention of permitting the firm to rest on its laurels.

Ultra Care Inc’s president and CEO Bruce H. Callahan (center, bottom row) says the company’s management team is one of the keys to its success. Clockwise from top left: Ken Foerster, RPh, vice president, chief clinical officer, and chairman of the board; Dan W. Bramuchi, vice president of business development; John Walsh, vice president of operations; Andrew Miller, COO; Brian Chung, CFO; Claudia Bastidas, the former president of Oxysound turned vice president in charge of the Fox River Grove location; Callahan; and Carolyn Fischer, vice president of corporate compliance and director of human resources.

Ultra Care’s quick growth—from $350,000 in revenue in 1990 to around $15 million in 2002, to a projected $19 million-plus in 2003—is part of a concerted plan to expand through both internal growth and acquisitions. Late last year the company finalized a major expansion by acquiring Oxysound, a smaller respiratory and HME company in the northwest Chicago suburb of Fox River Grove. The acquisition gave the company a convenient entry point to the northwest Chicago region and also contributed more than 500 new patients.

Ultra Care, which currently has 120 employees at its two locations (103 at its main headquarters and 17 at the Fox River Grove facility), serves about 5,000 patients in an area that stretches from Wisconsin to the Indiana border. However, its goal is to reach $25 million in revenue by the end of 2004.

“We’re on that road right now,” Callahan says, pointing to first-quarter revenue figures in 2003 that were 60% higher than those for the same period in 2002. That compares to the industry’s overall growth rate of about 7%, he says, adding that even without the boost in revenue contributed by the Oxysound acquisition, Ultra Care still grew by 30%.

Humble Beginnings
For all its current ambitions, Ultra Care had a modest inception. The outgrowth of a Chicago pharmacy chain called Bruce and Ken’s Pharmacy, it was founded by three partners. One was Callahan’s father, Bruce G. Callahan, RPh, who retired in 1998. A second, Kenneth Foerster, RPh, vice president, chief clinical officer, and chairman of the board, runs Ultra Care’s clinical side. The founders, including a third partner who has since passed away, were independent pharmacists who sought to meet their customers’ needs for HME by adding wheelchairs and other requested items.

In 1990, after expanding their offerings from HME to home infusion services, the partners decided to spin their ancillary business off into a separate enterprise. This became Ultra Care.

The younger Callahan, whose background was in sales and marketing, was open to a new challenge after a tax processing company, at which he worked, was purchased in 1989. He helped put together the Ultra Care enterprise and bring it to the market.

In a sense, it was a task he had trained for his whole life. As a boy, he had worked in the pharmacy and seen how his father and Foerster took special care of each customer despite the demands of running a growing regional chain.

“They had seven pharmacies, but they were all neighborhood pharmacies,” he says. “They understood the importance of spending time with customers.”

The same philosophy of putting the customer first has been translated from the neighborhood pharmacy to Ultra Care, Callahan believes. He attributes the company’s success primarily to a business model that is attractive to both its clients and referral sources.

Instead of specializing, Ultra Care’s strategy is to be a single-source provider. Its mix of products is roughly 40% respiratory/oxygen, 30% home infusion therapy, 20% HME, and 10% rehabilitation equipment. Callahan expects the respiratory/oxygen and home infusion segments of the business to grow the most in the future.

A Fateful Choice
The reason Ultra Care bucked the specialization trend harks back to the company’s decision to tie its fate to the managed care bandwagon. “Back then, the health maintenance organizations really required you to provide all the services they needed,” Callahan says.

In the last few years, as HMOs have lost their prominence and become more flexible, companies have been specializing more, while Ultra Care has continued to offer a broad array of services.

“We reexamine our company on an annual basis,” Callahan says. “We just believe what we offer through a referral source is a more user-friendly company.”

The other aspect that makes Ultra Care more user-friendly, Callahan contends, is its contracts with most of the insurance providers in the Chicago area, from the largest, Blue Cross/Blue Shield, to Medicare, Medicaid, and a lot of the smaller insurance companies and preferred provider organizations (PPOs).

“We believe we can provide service to 97% of the people in our service areas,” Callahan says. “What that means is that 97 out of 100 times when we get a call, we are going to be able to provide services, no problem. To the referral sources, that is a huge burden off their minds.”

But is this multitiered service approach profitable? Since the company is private, Callahan declines to reveal specific figures, but he maintains that Ultra Care is putting “a nice profit” into the company and is willing to cut loose segments of its business that prove to be a drag on the bottom line. For example, about 5 years ago the firm opted out of the home health nursing arena.

“We ran into a situation where home nursing was growing as a part of our business, but the insurance companies were just driving down the reimbursement rates to the point where we were losing money every time we sent a nurse out,” he says.

Although it was painful to excise this part of the business, Ultra Care ultimately benefited because it was able to focus on its other core segments, Callahan says.

Demographics and Economics
Like other home medical service companies that accept Medicare and Medicaid patients, Ultra Care is concerned about both recent and potential cuts in federal and state funding for these programs. But its exposure to such cutbacks is probably less than that of other home health care firms, which Callahan estimates may derive as much as 50% to 60% of their revenues on average from Medicare and Medicaid.

Although Ultra Care’s customer base runs the gamut from toddlers to seniors, only about 15% of its clients are elderly, and, by design, only about 20% of the company’s revenue comes from government sources.

“We’re not at risk as much as the majority of companies are, but obviously, whenever your reimbursement gets cut, it hurts,” Callahan says.

Moving Forward
Despite these clouds on the horizon, Callahan is optimistic about both the industry in general and how Ultra Care is positioned to be successful within it. “Our plans are to continue to grow through internal growth and acquisition; to continue to enhance our infrastructure by introducing new technology to reduce our paperwork, improve our accuracy, and allow our staff to focus on our customers; and to grow geographically,” he says.

In Callahan’s eyes, Ultra Care could even be an ideal candidate to use as a platform from which to launch a large regional or even national industry player.

Will Callahan’s goals come true? Only time will tell. But thanks to a strong management team, this HME provider is on track to make it a reality.

Ruth Stroud is a contributing writer for Dealer/Provider.