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3 Reasons the Ambulance Industry is Ripe for Consolidation

Last updated on November 15, 2011 by Sozo Staff

For a small independent ambulance business owner, the anticipated effects of Obamacare might be intimidating. To a savvy entrepreneur looking at the larger picture, they might be intriguing. Larger companies enjoy a certain degree of immunity to industry changes that may put a mom and pop operator out of business. This makes the traditionally localized ambulance industry ideally poised for consolidation.

1. Highly Fragmented Market

The ambulance business has long been a mom and pop industry dominated by many independent, localized operations. In fact, the top 50 medical transportation companies only make up about 45 percent of industry revenue, according to Hoovers. With startup costs often consisting of nothing more than a vehicle, medical equipment, and fuel, it has always been relatively easy for ordinary folks to enter the market. However, there’s no denying that the healthcare industry is changing. As higher medical costs inevitably push a portion of ill-prepared business owners out of the market, investors may be able to swoop in and acquire valuable ambulance companies for sale at bargain prices.

2. Lower Costs for Larger Companies

All companies will face changing regulations and increasing expenses, from higher fuel prices to rising costs on medical equipment as manufacturers struggle to cover taxes. However, larger companies are better equipped to deal with these challenges. Big companies frequently enjoy purchasing and shipping discounts from distributors because they are able to buy in larger volumes. A central accounting department can handle billing and accounts receivable, including Medicaid ambulance coverage, for many branches of the business at a reduced cost. Additionally, greater cash flow from a wider customer base can make inflexible costs like gas and insurance easier to manage.

3. Upper Hand in Competition

Larger companies usually have the upper hand in the competitive marketplace. Because consolidation lowers overhead costs, big ambulance businesses may be able to keep prices lower than their competitors without impacting cash flow. But costs are not the only consideration. Small companies have always done well by offering personalized local services. Large companies that can maintain customer satisfaction and brand loyalty in individual markets stand the best chance of competing effectively with independent businesses while enjoying far higher profits than these smaller companies.

Yes, challenges in the medical transportation business are increasing. But so are the potential payoffs. As the U.S. population continues to age, the need for emergency and non emergency medical transport will continue to grow. Investors who buy ambulance companies for sale when they are ripe for the picking will be in the best position to reap the rewards.

Filed Under: Transportation

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