CHAD sees better days ahead

Sunday, July 2, 2006

CHATSWORTH, Calif. - Sales of CHAD Theraputics' Total O2 home oxygen filling station increased only 3% for fiscal year 2006, but the company's CEO expects changes in Medicare reimbursement to bolster future orders.

Medicare's new policy to cap oxygen reimbursement at 36 months has "intensified pressure on homecare providers to reduce operating and equipment costs," CEO Earl Yager stated in a June 29 release.

Over time, he said, this decrease in reimbursement will stimulate demand for the Total O2, which was designed to reduce provider deliveries and costs by allowing patients to fill portable cylinders in their homes. Rather than rushing out to buy the unit, however, many of CHAD's customer have adopted a "wait and see approach" until CMS clarifies how the cap will work, Yager said.

Among the questions that still need to be answered: Once CMS transfers equipment title to the patient after 36 months, who is responsible for repairing and maintaining it? If the provider fills that role, how much will CMS reimburse him? Additionally, providers wonder, how will portable oxygen be provided after the 36-month cap?

Yager made his comments in the company's report on its financial results for fiscal year 2006.

Overall, CHAD suffered a net loss of $673,000 for fiscal year 2006.

Revenue from sales of oxygen conservers and therapeutic devices declined 11% for fiscal year 2006 compared to the fiscal year 2005, reflecting a 29% decline in sales to domestic customers and a 331% increase in international sales. The decline in domestic sales was primarily due to pricing pressures and the reduction in sales to a major customer.

CHAD is in discussions with several parties concerning the distribution of both the Total O2 and products it is developing for the sleep disorder market, the company stated.