Invacare 2009 Annual Report Download - page 24

Similar trends and concerns are occurring in state Medicaid programs. These recent changes to
reimbursement policies, and any additional unfavorable reimbursement policies or budgetary cuts that may be
adopted in the future, could adversely affect the demand for the company’s products by customers who depend
on reimbursement from the government-funded programs. The percentage of the company’s overall sales that are
dependent on Medicare or other insurance programs may increase as the portion of the U.S. population over
age 65 continues to grow, making the company more vulnerable to reimbursement level reductions by these
organizations. Reduced government reimbursement levels also could result in reduced private payor
reimbursement levels because some third-party payors index their reimbursement schedules to Medicare fee
schedules. Reductions in reimbursement levels also may affect the profitability of the company’s customers and
ultimately force some customers without strong financial resources to go out of business. The reductions that
went into effect recently may prove to be so dramatic that some of the company’s customers may not be able to
adapt quickly enough to survive. The company is the industry’s largest creditor and an increase in bankruptcies
in the company’s customer base could have an adverse effect on the company’s financial results.
Outside the United States, reimbursement systems vary significantly by country. Many foreign markets have
government-managed health care systems that govern reimbursement for new home health care products. The
ability of hospitals and other providers supported by such systems to purchase the company’s products is
dependent, in part, upon public budgetary constraints. Canada, Germany, France and other European countries,
for example, have tightened reimbursement rates and other countries may follow. If adequate levels of
reimbursement from third-party payors outside of the United States are not obtained, international sales of the
company’s products may decline, which could adversely affect the company’s net sales and would have a
material adverse effect on the company’s business, financial condition and results of operations.
The impact of all the changes discussed above is uncertain and could have a material adverse effect on the
company’s business, financial condition and results of operations.
The company is subject to risks arising out of the current global economic and credit crisis.
As is the case for many companies operating in the current economic environment, the company is exposed
to a number of risks arising out of the global credit crisis. These risks include the possibility that: one or more of
the lenders participating in the company’s revolving credit facility may be unable or unwilling to extend credit to
the company; the third party company that provides lease financing to the company’s customers may refuse or be
unable to fulfill its financing obligations or extend credit to the company’s customers; one or more customers of
the company may be unable to pay for purchases of the company’s products on a timely basis; one or more key
suppliers may be unable or unwilling to provide critical goods or services to the company; and one or more of the
counterparties to the company’s hedging arrangements may be unable to fulfill its obligations to the company.
Although the company has taken actions in an effort to mitigate these risks, during periods of economic
downturn, the company’s exposure to these risks increases. Events of this nature may adversely affect the
company’s liquidity or sales and revenues, and therefore have an adverse effect on the company’s business and
results of operations.
The industry in which the company operates is highly competitive and some of the company’s competitors
may be larger and may have greater financial resources than the company does.
The home medical equipment market is highly competitive and the company’s products face significant
competition from other well-established manufacturers. Reduced government reimbursement levels and changes
in reimbursement policies, such as the competitive bidding program implemented by CMS, may drive
competitors that have greater financial resources than the company to offer drastically reduced pricing terms in
an effort to secure government acceptance of their products and pricing. Any increase in competition may cause
the company to lose market share or compel the company to reduce prices to remain competitive, which could
have a material adverse affect on the company’s results of operations.
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