MedScope, the suburban Philadelphia-based PERS company founded in 2001 by father-son duo Ray and Greg Smith, is not your typical PERS business.
Established shortly after Greg graduated from college, MedScope flies more under the radar than most, but Smith and his father have built a successful business focused almost exclusively on the healthcare vertical.
In fact, you can’t find many interviews, news stories, or conference appearances by either of the two company heads, so we were thrilled when Greg agreed to exclusively sit down with PERS Insider to talk about what’s next for his company after recently closing a credit facility with long-time PERS industry lender CIBC, facilitated by Henry Edmonds of The Edmonds Group.
MedScope wasn’t founded with PERS in mind. The original idea was to build a personal medical data business, but Smith recalls the moment when PERS came across the founders’ radar.
The business concept "was to collect people’s medical information and make it accessible during an emergency,” said Smith.
“We quickly realized that a small annual charge would require a whole lot of subscribers. And with the tightening of regulations on medical data, we thought it would be an uphill climb.”
Then came the “aha moment” for the entrepreneurs.
“My dad’s mom was on a Medicaid waiver program. One of the services she had was a PERS device. And we felt like, wow, if we could pair our medical data service with a PERS device, we can complete that loop,” said Smith.
From that point forward, PERS was in the MedScope driver’s seat.
Smith said, “What we found as we started to move forward with that business was that the PERS service took off like a rocket, and the medical data service was hardly used at all.”
Eventually abandoning the original business idea, Smith and his father made the decision to focus exclusively on PERS, and found their business centered on the healthcare side of the industry before the industry made such distinctions.
“Back then, 20 years ago, there wasn’t even a definition between direct-to-consumer and healthcare PERS.” However, Smith said, “We became, by default, a healthcare PERS dealer. We do have a small subset of our customer base that is direct-to-consumer, but 90% of our customer base is healthcare.”
“It’s (healthcare) where we gained traction,” Smith continued. “It was an area we understood very well because we saw it originally from the consumer side. It was an area we felt we could beat the competition in.”
“What really makes MedScope different, is not necessarily the hardware or the product that any PERS dealer can get, it’s the service delivery model, and the efficiency in which we deliver the device to the end user,” said Smith.
MAMA Makes The Connection
The Medical Alert Monitoring Association (MAMA), the trade association for the PERS Industry, has been focused on supporting its members by generating accurate and detailed data on the industry. For the last few years, MAMA has hired Henry Edmonds of The Edmonds Group to conduct an annual market study which includes confidentially surveying all PERS companies in North America. The study is shared at MAMA’s annual conference each fall. The MAMA Annual Market Survey is widely considered the definitive report on the PERS industry and is extensively cited and relied on by owners, potential investors, and lenders alike.
After being interviewed by Henry Edmonds for the annual MAMA industry survey of PERS dealers, Greg Smith reached out a few months later.
During their earlier conversation, Smith had a hunch that the industry veteran would have some helpful guidance for his team who, behind the scenes, was looking to upgrade the company’s financial relationships.
Edmonds describes the finance situation MedScope was in when he first started working with them, “MedScope had been working with a local bank that didn’t specialize in the PERS industry. They wanted to move to a PERS industry lender who really understood their business and could provide a long-term facility that fit the company’s needs.”
Smith recalls how accurately Edmonds associated the laborious busywork involved with the annual process MedScope had to endure while working with their non-industry lender, “I think Henry termed it,” Smith said, “unnecessary brain damage.”
CIBC Enters the Conversation
Looking for more flexible terms and a lender that understood the business, Edmonds and Smith quickly aligned on CIBC as the ideal lending partner.
“While we talked to several banks, CIBC was the front runner all along. It was very apparent that they wanted our business. What they were offering was very competitive from a terms standpoint, and our personalities just meshed,” said Smith.
“CIBC is one of the most knowledgeable PERS lenders,” said Edmonds. “They are also very focused on training their customers to understand how to work well with banks. This makes them an excellent partner, particularly for first-time industry borrowers.”
With the ink now dry on the credit facility, Smith and Edmonds explain the doors now open to MedScope.
According to Edmonds, the goal of the deal was “to provide the company with additional liquidity and help fund ongoing growth.”
Smith adds, “It’s all about positioning for the company. It’s a comfort level that translates to excitement – we’re well prepared to capitalize on larger opportunities.”
How Did COVID Impact MedScope’s Healthcare-Focused Business?
All while the loan was being negotiated, Smith and MedScope shared the industry-wide headaches associated with the impact of COVID-19 and the 3G sunset.
“From a referral standpoint, we saw, I don’t want to say significant, but I will say a marginal slow down because care managers took a while to learn how to do remote assessments,” said Smith.
On the flip side, Smith saw an uptick in success of in-home installations where permitted, “Our installers said for those patients who were comfortable having a live installer in their home, it was far easier because everybody was home.”
MedScope is looking to the latter half of 2021 to make a full rebound.
“We’re seeing referrals rebound as case managers can get back out there and meet face-to-face with clients. I think we're all just hoping for this vaccine distribution to speed up,” he said. “We do feel that we’re well positioned for the second half of ‘21.”
And for the 4G conversion, Smith says no sweat.
“We started early, and we are well ahead of the curve. We think we’ll have our transition complete in the third quarter of ‘21,” he said.
Advice for PERS Companies Looking to Borrow
Now that he’s been through it as a first-timer, Smith has some tips for any other PERS dealers out there who might too be looking to increase their credit facility and secure larger loans.
“Make sure your books are accurate and tight before applying for the loan. Making sure we had clean and legible financials indicated a clear picture of how MedScope was performing. And that made the application and the entire loan process pretty streamlined and seamless,” said Smith.
Edmonds echoed, “Industry experienced lenders will lend you the most money on the best terms. They are also most likely to be supportive if you hit a bump in the road since they really understand your business. It’s critical to have consistent, accurate, industry standard financial reporting to successfully work with these lenders.” He adds, “If you’re already working with a lender and looking to increase the facility size, it’s a good time to shop around to ensure you’re getting the best terms.”
Smith’s Views on the Future of the PERS Industry
As Smith looks into his PERS industry crystal ball, he sees the direct-to-consumer and healthcare businesses joining forces.
“I personally see a lot of consolidation,” he says. “I think the differences between direct-to-consumer and healthcare PERS will become more apparent as time marches on. And I think the two business models heavily compliment each other.”
“I think you’ll start to see more pairings of direct-to-consumer PERS companies merging with healthcare PERS companies to create an all-in-one, one-stop-shop.
But ultimately I see more of everything. More growth, more people aging in place. I think the trend is set to continue for the next 20 years, easily. And I see much more PERS utilization as the age-in-place trend continues to grow,” said Smith.
And with MedScope now set up to take advantage of the industry growth opportunities, expect to see this family-run company continue to make an impact within the PERS market.