Inogen puts POCs at forefront

Company acknowledges ‘growing pains’ in HME industry, but offers POCs as solution to providing adequate service and achieving financial return
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Friday, November 11, 2016

GOLETA, Calif. – Inogen’s hybrid approach to the HME industry continues to pay off, with the company yet again posting double-digit increases in revenues and net income for the third quarter of 2016.

Inogen, which provides its portable oxygen concentrators both through HME providers and direct-to-consumer, reported total revenues of $54.4 million for the third quarter of 2016 compared to $40.8 million for the same period last year, a 33.5% increase. Net income was $3.5 million vs. $2.7 million, a 28.2% increase.

“One of the reasons that I think we are a compelling solution for the HME community (is) we know a little bit about taking care of patients, probably more so than the average manufacturer that hasn’t gone down the path of a direct-to-consumer play,” said Scott Wilkinson, president and COO.

Fairly recently, Inogen also began providing its POCs through a private label partner.

While Inogen’s business-to-business and direct-to-consumer sales were up considerably in the third quarter—65.1% and 38.6%, respectively—rental sales were down 37.2%. Still, CEO Ray Huggenberger said the company will remain in the “reimbursement business as far as we can see.”
“The issue is that what we’re undergoing right now is growing pains,” he said. “The entire reimbursement world through competitive bidding has changed significantly and the pendulum has probably swung a little bit from the left side all the way to the other side. That doesn’t mean that it won’t come back. We can’t say, ‘Let’s punt on the rental business because it provides us with a couple of difficult challenging quarters.’”

In fact, it’s those “growing pains” that are part of what’s driving Inogen’s sales and overall POC adoption, as HME providers seek to provide oxygen therapy more cost effectively. Wilkinson cited recent CMS data that showed an 8% adoption rate for 2015, up from 6.9% for 2014.

“We believe this data may represent a conservative estimate of actual portable oxygen concentrator market penetration,” he said.

In its role as a provider battling competitive bidding itself, Inogen is doing OK. In the Round 2 re-compete that went live July 1, the company has contracts for respiratory in 93 of the 117 competitive bidding areas, with reimbursement of, on average, $114.74 per month compared to $135.79 per month in the previous round. In Round 1 2017, which goes live Jan. 1, it has contracts for respiratory in 10 of the 13 CBAs, with reimbursement of, on average, $114.03 per month vs. $133.82 per month.

Wilkinson credits Inogen’s non-delivery model for allowing the company to make the contracts work.

“It’s pretty clear that the HME community is struggling with the new reimbursement cuts and the rates,” he said. “They’re looking for new solutions and how they can provide adequate service and still achieve an attractive financial return at these new rates, and POCs are at the forefront of that solution set.”