Inogen stares down Round 2

SANTA BARBARA, Calif. - When CMS announced the payment amounts for Round 2 of competitive bidding, Inogen, which was “offered some contracts and accepted some contracts,” had some explaining to do, says Scott Wilkinson.

It just so happened that the announcement coincided with Inogen's first quarter board meeting, leaving company execs to explain to shareholders how they planned to maintain some semblance of a profit margin with a reimbursement cut of, on average, 45% for all product categories in all areas.

“We shared our operational efficiency and cost reduction program,” said Wilkinson, executive vice president of sales and marketing. “Can we meet their expectations? It's going to take some elbow grease, but I think we can. It's another curve ball, but we have a plan to make them happy.”

As both a manufacturer and provider of portable oxygen concentrators (POCs), Inogen's efforts will include driving down product cost, reducing error rates and “everything under the sun,” Wilkinson says.

Helping those efforts: Inogen's growth. The company experienced “another year of 60% to 70% growth” in 2012, Wilkinson says, with a significant portion of that growth coming from sales of POCs to providers.

“With our growth, we're in a good position,” he said. “We're not looking to let go of a lot of people, which I know is a concern for a lot of people. We've had to do that in the past, and it's not fun. I sympathize.”

Still, Wilkinson admits that he was “a little bit surprised” by the payment amounts for Round 2. If one considers the payment amounts for Round 1 as a benchmark—a reimbursement cut of, on average, 32%—they were lower than he expected.

“We don't like this anymore than anyone else does,” he said. “But we also think it's going to be tough to make it go away. The rates are coming down, through this program or another program, so you have to be able to manage your costs. You have to play ball.”