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Document Shredding Companies Realizing Potential in Medical / Pharma Waste Collection

An interesting trend has occurred in the past few years, as numerous document destruction contractors, many who already service medical offices and healthcare facilities, have expanded their services to include the collection and disposal of medical and pharmaceutical waste.

Although the business of collecting and disposing of infectious/hazardous waste can be a very lucrative one, entry into this market can be a bit more difficult than starting up a document shredding business.

Nevertheless, with companies like Stericycle charging very high rates for the collection and disposal of such waste, document shredding companies stand a very good chance of claiming some of this business once they secure the necessary permits (required by their state and local government agencies) to collect and/or process medical and pharmaceutical waste.

“We’ve seen in several markets shredding companies extend into medical waste and the growth has been remarkable,” says Jim McGuire, president of Shotgun Capital Advisors, a merger and acquisitions advisory company in Southlake, Texas. “The medical waste industry is not very sexy. However, the margins and the exit multiples are extremely good.”

“The medical waste industry is where shredding was 20 years ago,” adds Tom Funke, president of Paper Tiger Shredding and Medi- Waste Disposal in Lincoln, Neb. “Shredding is a commodity nowadays.”

Getting into the medical waste industry, Document Shredding Companies Realizing Potential in Medical / Pharma Waste Collection however, can be a daunting experience due to federal, state and local regulations addressing everything from packaging, transporting and labeling to reporting, treatment and disposal. While federal regulations from the U.S. Department of Transportation, the Occupational Safety and Health Administration and the U.S. Environmental Protection Agency address medical waste issues such as transportation, employee safety and emissions from incineration, there are many regulations, that vary from state to state. Several states, including California, have their own set of laws and regulations for the management of medical waste.

“It’s very complex,” says Mary Ellen Lynch, who formerly worked at the U.S. Environmental Protection Agency and is now a partner at The E-N-D Group in the Washington, D.C., area, which assists clients in understanding requirements for managing and transporting hazardous materials. “All 50 states regulate the management and disposal of medical waste in one way or another. “It’s not just picking up waste,” she adds. “It’s specialized.”

While document destruction companies have to deal with the Health Insurance Portability and Accountability Act, those privacy-related regulations are entirely different from picking up regulated medical waste, pharmaceuticals or other types of wastes from medical facilities, notes Alice Jacobsohn, director of the Healthcare Waste Institute, a policy-making group which is part of the Solid Waste Management Association. “There’s no overlap [with the regulations],” she points out. “The market is not the same.”

The complex and oft-times conflicting regulations pose the biggest barrier for document destruction companies wanting to enter the medical waste industry, according to McGuire and others.

“You need to be astute when it comes to understanding regulations surrounding hazardous waste,” McGuire says. “To a large part, those regulations don’t exist in the shredding industry. Outside of that, there aren’t any other barriers to entry other than starting up a separate business or separate business entity and growing that business in conjunction with the existing shredding business.”

Rob Marshall of Marshall Shredding and co-owner of MedSharps, a medical waste removal and disposal company, agrees about the regulations.

“There‘s very little regulatory oversight in the shredding world,” he says. “One guy in a truck can go and start a shredding business. With medical waste, you have a lot of laws and record-keeping and permitting that you have to follow and adhere to. So it makes it a much higher hurdle to cross.“

Marshall Shredding, started in 2001 in San Antonio, Texas, already was providing document shredding services to healthcare clients before it branched into medical waste.

“My customers kept asking me if I ever looked into it [handling medical waste],” Marshall recalls. “I had, but the leap was too great for me to take and to try to learn all of the regulations and formalities to do medical waste. I wasn’t prepared for that at the time.”

In 2009, all that changed, when Marshall partnered with Bill Jewett, who was just launching MedSharps in San Antonio.

MedSharps both transports medical waste and treats it in an autoclave, where heat, pressure and steam sterilize it, converting it from regulated medical waste to a municipal solid waste that can safely be disposed of in a landfill. MedSharps also treats medical waste brought to it by third-party transporters.

A similar scenario played out at Paper Tiger Shredding in Lincoln, Neb., when its numerous healthcare customers began seeking another waste company to handle their medical waste.

“Over the years, while providing document shredding and records management services to medical facilities, we kept hearing complaints from our clients . . . about the high prices, escalating fees and poor service they were receiving from their medical waste disposal companies,” says company president Tom Funke. The result, Funke says, was the launching in August 2011 of Medi-Waste Disposal, which, like Paper Tiger Shredding, services clients throughout Nebraska, Iowa and northern Kansas. Those clients include hospitals, medical clinics, funeral homes, a tattoo parlor, dentist offices and even companies — much like Sunshine Cleaning in the motion picture of the same name — that provide cleanup services after suicides.

Having an established healthcare clientele for its shredding and records management services made it easier for Medi-Waste to provide medical waste services. It also allows Paper Tiger Shredding and Medi-Waste to offer bundled prices for its services.

Funke says that allows customers to get shredding and medical waste removal services for the same price they were previously paying for medical waste services alone. Paper Tiger, which Funke purchased in 2004, handles some 500,000 pounds of paper monthly. Medi-Waste transports approximately 20,000 pounds of medical waste each month. The companies employ a total of 14 workers.

Medi-Waste currently only transports medical waste to a third-party processor. That is expected to change before the end of the year, when the company completes a new 7,500-square-foot building and installs the same type of autoclave used at MedSharps to handle treatment and disposal of medical waste. Funke also is on track to franchise Medi-Waste to other parts of the country. Initially, those franchisees will only transport medical waste to third-party processors, due to the prohibitive cost of an autoclave.

McGuire says that is the way document destruction companies typically get into the medical waste industry. He compares the transport of medical waste to an established permitted treatment facility to on-site shredding companies who haul their loads to a local recycler.

Document destruction companies aren’t the only businesses looking to get into the medical waste business. Funke cites a medical billing company in Lincoln that entered the market. And Lynch notes that “quite a number of companies” that provide unrelated to services to hospitals also are looking into handling medical waste.

“I’m not surprised there’s a lot of interest out there,” Lynch says. “In terms of what they need to know or think about, what I tell clients is they really need to understand how complicated and detailed this is going to be. They need to take the time to do their planning because healthcare waste is a really unique waste stream. Any service provider needs to understand that waste stream in detail. They need to understand that the regulations related to the management and transportation of medical waste are extensive and diverse. They’re not easy to categorize. And they’re often difficult to understand in the context of all of the other regulations.”

“I would not discourage a company from trying to get into the business,” she adds. “I just think it’s important for them to understand that it’s very involved, and they need to do the research to understand the market.”

Companies wanting to get into the medical waste industry may also have to contend with competition, including behemoth Stericycle, the nation’s largest provider of medical waste services.

“You have to have the intestinal fortitude to compete against a very large, very well funded publicly traded company with a national presence that’s been doing it for 25-plus years,” McGuire advises.

He adds that document destruction companies may find the medical waste industry a wide open market compared to the shred industry.

“The upside is, in comparison to the shredding industry — where there’s 1,400 independent and three or four national service providers — in the medical waste community you really have one large national, publicly traded organization and just under 300 independent providers in the United States,” he says. “It’s nearly one-fifth as competitively intensive as the shredding industry.”

Both Funke and Marshall say they have no regrets about moving into the medical waste arena. Marshall admits he has been surprised at how fast MedSharps has grown, prompting him to more than triple the number of employees between 2008 and today. Marshall Shredding handles about 300 tons of paper monthly, while MedSharps does the same volume or slightly more.

“I feel it was a very wise move for us,” Funke says of Medi-Waste. “The beauty of medical waste is that at the end of the day, I’m picking up medical waste in a $60,000 straight truck and not a $250,000 shredding truck.”

McGuire predicts those getting into the medical waste industry today will face a bright future, especially with the huge increase of people who will be able to obtain medical care under the Patient Protection and Affordable Care Act.

“It’s a great industry,” he says of medical waste. “It’s been around for a while. It’s not going to go anywhere. It’s recession resistant, much like the shredding industry. There’s always going to be medical waste and with Obamacare in the future, there’s expected to be a 30 percent pop in volume, driven largely by the uninsured now being insured.”

Marshall admits that while getting into the medical waste industry was the right move for him, it may not be for everybody. “It‘s definitely a lot dirtier of a job than what we are accustomed to. Document storage, document imaging would be a lot cleaner, simpler process. You’ve got to deal with some pretty smelly disgusting stuff,” he adds. “There is the ‘ick factor’ that goes with it.”

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