In brief: Industry’s warning, Philips’ lawsuit, AdaptHealth’s results, NSM’s potential sale 

ARLINGTON, Va. – The now expired 75/25 blended Medicare reimbursement rates served as a lifeline for many HME companies in non-bid, non-rural areas and immediate intervention is needed to preserve this infrastructure that allows individuals to manage their medical needs at home, according to a new report from AAHomecare. 

The report is based on a recent survey that found an overwhelming 93.5% of respondents have had to make difficult operational changes in response to the expired rates to keep their doors open. Of those: 

• 65.4% have had to reduce the amounts and/or types of products they offer Medicare beneficiaries 
• 53.3% have had to reduce staff 
• 45.8% have had to reduce their service area 
• 16.8% have had to or will have to close locations 
• 16.8% have had to stop serving Medicare beneficiaries for at least some products 
• 15% have had to stop providing HME and/or services to local facilities 
• 12.1% have had to reduce services to Medicare beneficiaries 
• 12.1% have had to stop or are considering stopping taking assignment 
• 12.1% are actively considering or will have to close entirely 

“After six months of living with significant reimbursement cuts, many home medical equipment suppliers are nearing a breaking point,” said Tom Ryan, president & CEO of AAHomecare. “Lower reimbursements even as operational and product costs continue to rise are leading many to limit their offerings, reduce service areas, lay off staff, close locations, or even consider going out of business altogether. Those decisions are difficult for suppliers to make because they know the effects they will have on seniors and people with disabilities or chronic conditions who depend on HME every day.” 

The survey, conducted in July 2024, gathered insights from more than 100 HME providers across non-bid, non-rural areas. 

Also among the survey’s findings: 86% of respondents say the expired rates have triggered rate reductions in reimbursement rates of other payers. Seventy-nine percent of respondents report cuts for Medicare Advantage plans, 51% for commercial payers, and 34% for Medicaid programs. 

AAHomecare says the findings underscore the urgent need for policymakers to restore the relief first provided by Congress for HME suppliers in non-bid/non-rural areas in 2020.  The association urges Congress and CMS to act this year to prevent further damage. 

The 75/25 blended reimbursement rates expired on Jan. 1, 2024. 

To access the report and brief, go here. 

• Hear about the industry’s latest efforts to get reimbursement relief passed in Congress 

AdaptHealth reports ‘consistent’ quarter 

PLYMOUTH MEETING, Pa. – AdaptHealth reported revenues of $806 million for its second quarter 2024, an increase of 1.6% over $793.3 million during the same quarter in 2023. 

Net income attributable to AdaptHealth Corp. was $19.4 million compared to net income of $14 million, an increase of 39%. Adjusted EBITDA was $165.3 million compared to $171 million, a decrease of 3.3%. 

“I want to recognize the team for delivering another consistent quarter with results in line with our expectations for net revenue, adjusted EBITDA and free cash flow,” said Suzanne Foster, CEO. “I joined this team because I believe in our purpose and the vital role we play in improving health care. I am optimistic about the road ahead and look forward to working as One Adapt, a unified team, to support our patients in their homes.” 

Subsequent to June 30, 2024, AdaptHealth signed a definitive agreement for the disposition of certain non-core assets, and the transaction is expected to close in the third quarter of 2024. 

AdaptHealth has updated previous financial guidance for fiscal year 2024 by adjusting the midpoint for net revenue to account for the disposition of certain non-core assets; however, the company is maintaining the midpoint for adjusted EBITDA and increasing the midpoint for free cash flow. It expects: 

• Net revenue of $3.255 billion to $3.315 billion from $3.25 billion to $3.35 billion; 
• Adjusted EBITDA of $660 million to $700 million from $650 million to $710 million; 
• Free cash flow of $160 million to $180 million from $150 million to $180 million. 

Philips blames lab for breadth of recall 

PITTSBURGH – Philips says PSN Labs conducted “numerous egregious errors in its testing and analysis” related to the company’s recalled sleep and respiratory devices, causing it “significant damage.” 

In a lawsuit filed July 29 in U.S. District Court for the Western District of Pennsylvania, Philips says PSN’s work was a big reason it initiated a worldwide recall of more than 15 million sleep and respiratory devices in June 2021 and that the company would have pursued a “different and more focused recall” had PSN not “overestimated the potential threats to patients.”  

Philips alleges that PSN, which the company relied on to research and study the polyester-based polyurethane sound abatement foam used in certain sleep and respiratory devices, as well as any volatile organic compounds, made several errors, including: 

• Repeatedly insisting that it had identified in the foam a potentially mutagenic and genotoxic VOC called dimethyl diazene that is not present in – and is not emitted from – the foam at all. Philips alleges that the dimethyl diazene that PSN supposedly detected was actually acetone, a naturally occurring and routine compound that does not present anywhere near the potential risks. 
• Insisting it had discovered that certain of the CPAP and BiPAP devices it had tested emitted ozone, another potentially toxic chemical, but was again incorrect. The company alleges PSN had not used an appropriate ozone detector in testing. 
• Insisting that another VOC – phenol – posed such a risk to PAP users that the devices could not be safely used. Yet, PSN disregarded the safety thresholds for that chemical identified in pre-clinical toxicity studies cited by multiple public health agencies, resulting in PSN vastly overstating the risk presented by the level of phenol it had detected. 

Philips alleges that PSN’s “cover-up was extensive and the depths of it have only recently been fully understood,” following its ability to obtain raw data by subpoena. 

The company has since assembled an independent science panel to review the full scope of available data and found that PSN’s findings were the “only outlier.” It says the other independent labs reinforced the conclusion that the foam carried a negligible risk of harm after evaluating samples of the same foam PSN had analyzed and performed the same VOC testing on devices containing the foam. The company also says three other labs did not identify one of the potentially hazardous VOCs that PSN mistakenly reported at all, and further testing has shown that the other compounds of concern were well within accepted toxicological threshold levels – often 100 or more times below levels of actual potential harm for users. 

Philips seeks to recover from PSN the significant expenses it incurred and reputational harm it suffered in connection with the recall because of PSN’s errors. It also seeks to recover for the harm the company suffered from PSN’s efforts to cover up its own mistakes and undermine the conclusion about the toxicity of the foam. 

Cinven preps for NSM sale 

NASHVILLE, Tenn. – Cinven has engaged sell-side advisers Harris Williams and Morgan Stanley as it prepares to sell National Seating & Mobility, PE Hub reports. The London-based private equity firm, which bought NSM in 2019 for a reported $850 million, plans to put the company up for sale sometime after Labor Day, it reports. Previously, NSM was owned by Court Square Capital Partners from 2016-19 and by Wellspring Capital Management from 2012-16. Under Cinven, NSM entered the Canadian market and grew its presence there to 23 locations. The company named Crispin Teufel as CEO in November. 

Medically Home names new CEO 

BOSTON – Medically Home’s board of directors has named Graham Barnes, who has a background that includes acute hospital staffing and scheduling, care coordination, home health and contract lifecycle management segments, as president and CEO effective immediately. "We are pleased to appoint Graham Barnes to the role of president and CEO,” said Maneesh Goyal, chairman of the board for Medically Home and COO of the Mayo Clinic Platform at the Mayo Clinic. “His track record of growing and nurturing health care companies gives us deep confidence in his ability to elevate Medically Home and build on the strong market position that has been achieved to date.” Barnes' experience also includes health care software and technology across multiple health care use cases. "I am honored to be appointed to lead Medically Home and advance its innovative model of care," he said. "Medically Home has built a safe and robust clinical, logistics, and operational model that underpins acute care at home and post-acute care at home for more than 20 organizations. There is tremendous potential to continue partnering with leading healthcare organizations to provide patients and the clinicians who serve them with our scalable care model." Cofounder and former CEO Rami Karjian will join Medically Home cofounders Raphael Rakowski and Andy Lipman in a new advisory role at Medically Home, further leveraging his background in logistics management as the company continues to advance. 

• Medically Home has backing from strategic investors like Baxter International, Global Medical Response, Cardinal Health, Mayo Clinic and Kaiser Permanente 

Philips repurchases shares to meet obligations 

AMSTERDAM – Philips will repurchase shares for an amount up to EUR 125 million to cover certain obligations arising from its long-term incentive plans. At the current share price, this represents about 4.8 million shares. The repurchases will be executed through a combination of forward transactions and open-market purchases with a financial institution. Philips expects to take delivery of the forward share purchases in 2026. The open market purchases will be executed in Q3 2024 by an intermediary to allow for share purchases during both open and closed periods. All repurchases will be executed in accordance with the EU Market Abuse Regulation and within the limits of the authorization granted by the company’s General Meeting of Shareholders on May 7, 2024.  

ReactDx launches sleep monitoring device 

MELBOURNE, Fla. – ReactDx, a division of React Health, has launched NiteWatch, a sleep monitoring device that’s cleared by the U.S. Food and Drug Administration. The company says NiteWatch empowers physicians to diagnose and manage sleep apnea in the comfort of the home. "We are thrilled to introduce NiteWatch, a significant step forward in the integration of sleep and cardiac care," said Bill Shoop, CEO of React Health. " We recognize the critical role that sleep health plays in overall well-being, particularly its relationship with cardiac health, and are committed to improving access to essential diagnostic tools. The NiteWatch is designed to complement existing services by offering a different point of entry for patients who might otherwise go undiagnosed.” NiteWatch, which has been validated against polysomnography (PSG) studies for sleep apnea and sleep staging, measures six distinct channels, including SpO2, photoplethysmogram (PPG), pulse rate, airflow, respiratory effort and heart rate variability (HRV). The device is integrated with a mobile app for seamless data transmission. ReactDx was founded in 2022, bringing together several companies in the sleep diagnostics and cardiac monitoring industries with roots dating to 1981. 

Inspire Medical Systems gets green light for V 

MINNEAPOLIS – Inspire Medical Systems has announced approval from the U.S. Food and Drug Administration for the Inspire V therapy system, which includes a next generation neurostimulator for the treatment of obstructive sleep apnea. The system also includes the associated Bluetooth patient remote and physician programmer. “We are thrilled to announce the FDA approval of our next generation Inspire neurostimulation system,” said Tim Herbert, chairman and CEO of Inspire Medical Systems. “The FDA approval marks a key milestone for the future of Inspire therapy and reinforces the many years of hard work by our team members.” Inspire says its focus remains on operational readiness, which includes product manufacturing and establishing inventory levels to support a full commercial launch in the United States. The company continues to target a soft launch in late 2024 and a full launch in 2025.