Inogen sweeps majority of bid areas

Friday, April 22, 2016

GOLETA, Calif. – Inogen has accepted contracts for respiratory products in 93 of the 117 competitive bidding areas as part of the Round 2 re-compete, the company says.

Inogen achieved similar penetration in the original Round 2, says President and COO Scott Wilkinson.

“We have looked at it from a market access standpoint and we, ultimately, will have roughly 90% market access through the Medicare program in both scenarios, so our position is pretty much unchanged,” he said.

As a result of the new payment amounts for the Round 2 re-compete, Inogen has adjusted its anticipated total revenue headwind to 3.5% to 4%, from 2.5% to 3.5%. The company says the new amounts represent a 17.4% reduction, on average, for stationary oxygen concentrators, and an 11.3% reduction, on average, for POCs.

Inogen is holding firm, however, on its 2016 guidance of revenues of $187 million to $191 million; adjusted EBITDA of $37 million to $39 million; and net income of $12 million to $14 million.

“The company believes its current guidance is still achievable because of the declining Medicare rental revenue as a percent of total revenue, and the company’s guidance having already factored in an estimate of the reimbursement decline,” the company states in a recent Form 8-K.

Inogen says it has lowered Medicare’s contribution to its total revenues from 26.5% in 2014 to 21% in 2015.

“The company believes it is well diversified between its sources of revenue, business channels and geographies,” it states.

The Round 2 re-compete, like the Round 1 re-compete, combines oxygen, and sleep and aerosol therapy into one product category. The company plans to stick to its strategy of offering sleep and aerosol therapy, subcontracting this business in certain areas, Wilkinson says.

“While it has not been an area of strategic focus, Inogen has provided sleep and aerosol products as part of our offering for several years,” he said.

In areas where it has not been offered contracts, Inogen says it will, once again, grandfather existing patients—meaning it will continue to service these patients but will accept the lower payment amounts starting July 1, 2016, when the Round 2 re-compete amounts go into effect. It will also continue to accept new patients in these areas for cash pay and private insurance rentals.

Inogen noted that, because the reductions associated with POCs are less steep, it believes the new payment amounts will accelerate the adoption of non-delivery oxygen technology, including its Inogen One product line.

“The company believes this reimbursement premium will provide further incentive for home healthcare providers to adjust their business models to incorporate non-delivery technology,” the company states.