Invacare 2012 Annual Report Download - page 22

payments for 13 months before the beneficiary assumes ownership of the standard power wheelchair. The
Affordable Care Act imposes a “productivity adjustment” to the annual fee schedules of all Medicare providers,
including HME providers, that limits any annual cost of living increases applied to the fee schedules. The
Affordable Care Act also includes a new tax on U.S. sales of medical device manufacturers or importers, such as
Invacare. The yearly 2.3% sales-based excise tax on medical device manufacturers went into effect on January 1,
2013. The excise tax will not apply to medical devices that the Secretary of Treasury determines are generally
purchased by the general public at retail for individual use. In December 2012, the Internal Revenue Service
issued final regulations on the 2.3% excise tax on medical devices as part of the Affordable Care Act. The excise
tax will be deductible by the manufacturer on its federal income tax return. The company has reviewed the final
regulations and believes that most of its products will be exempt from the tax based on the retail exemption
provided in the regulations. The company does believe that certain products that it sells for institutional use will
be subject to the excise tax. Based on its interpretation of the regulations, the company expects the impact from
the tax will be less than $1.5 million on an annual basis. The company intends to pass this tax on to the market.
With respect to reimbursement in the United States, the Centers for Medicare and Medicaid Services (CMS)
began implementation January 1, 2011 in the first nine metropolitan areas of the Medicare National Competitive
Bidding (NCB) program. In January 2013, CMS announced new, substantially lower Medicare prices which will
become effective in July 2013 for the second round of the NCB program, which was expanded to include an
additional 91 metropolitan areas. The company remains judicious in its extension of credit to customers and
monitors whether other payors begin to model their payments on the NCB program. The company also closely
watches state Medicaid budgets and how deficits may impact coverage and payments for home medical
equipment and institutional care products.
Although reductions in Medicare payments are not beneficial to the homecare industry, the company
believes that, over the long term, it can still grow and thrive in this environment. No significant cost-of-living
adjustments have been made over the last few years to the reimbursement and payment amounts permitted under
Medicare with respect to the company’s products, but the company will continue to try to respond with improved
productivity. In addition, the company’s respiratory therapy products (for example, the low-cost HomeFill®
oxygen delivery system) can help offset the Medicare reimbursement cuts to the homecare provider. The
company will continue to focus on developing products that help the provider improve profitability. Additionally,
the company continues to focus on low-cost country sourcing and/or manufacturing to help ensure that the
company is one of the lowest cost manufacturers and distributors to the homecare provider.
BACKLOG
The company generally manufactures most of its products to meet near-term demands by shipping from
stock or by building to order based on the specialty nature of certain products. Therefore, the company does not
have substantial backlog of orders of any particular product nor does it believe that backlog is a significant factor
for its business.
EMPLOYEES
As of December 31, 2012, the company had approximately 6,200 employees, including approximately 200
employees related to discontinued operations.
FOREIGN OPERATIONS AND EXPORT SALES
The company also markets its products for export to other foreign countries. In 2012, the company had
product sales in over 80 countries worldwide. For information relating to net sales, operating income and
identifiable assets of the company’s foreign operations, see Business Segments in the Notes to the Consolidated
Financial Statements.
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