Invacare 2014 Annual Report Download - page 8

I-4
North America Market
While institutional care likely will remain an important part of the health care system, the Company believes it is not the
best and most cost-effective environment of care for many patients, particularly those with chronic medical conditions. It appears
that the steady growth in United States Medicare-aged patients with chronic illnesses is placing unprecedented pressure on the
financial stability and sustainability of the Medicare program. The Company believes that these patients largely prefer care and
treatment provided to them in their home. Initiatives by the United States government, such as patient-centered medical homes
and Accountable Care Organizations, can align incentives for healthcare providers to partner closely across all medical specialties
and settings and have the potential to significantly alter the trajectory of rising health care costs.
The Company believes that many medical professionals and patients prefer home health care over institutional care, when
appropriate, because home health care results in greater patient independence, increased patient responsibility and improved
responsiveness to treatment. An article in the New England Journal of Medicine notes that several engineering and electronics
companies have developed products for monitoring health at home and that Massachusetts General Hospital in Boston is
experimenting with Internet video-conferencing to permit virtual visits from patients' homes. Furthermore, health care
professionals, public payors and private payors appear to favor homecare as a cost-effective, clinically appropriate alternative to
facility-based care.
Technological advances have made medical equipment increasingly adaptable for use in the home. Current hospital procedures
often allow for earlier patient discharge, thereby lengthening recuperation periods outside of the traditional institutional setting.
In addition, continuing medical advances prolong the lives of adults and children, thus increasing the demand for home medical
care equipment. As health care consumers, the baby boomer population likely will have strong opinions and preferences about
their treatment settings. Data from the AARP Public Policy Institute and a Harris Interactive poll suggest that 89 percent of people
aged 50 and older want to receive medical services in their home as they age and 65 percent would prefer home care while
recuperating from surgery.
The Company believes that home health care and home medical equipment will play a significant role in reducing health
care costs. The Agency of Healthcare Research & Quality, along with Johns Hopkins, examined extensively the benefits of Hospital
at Home and those studies indicate that the Hospital at Home program results in lower length of stay, costs, readmission rates and
complications than traditional inpatient care. In addition, surveys indicate higher levels of patient and family member satisfaction
with homecare than with traditional care. Costs of care were 32% lower for Hospital at Home patients than for hospital inpatients,
and ever critical readmission rates were 42% for Hospital at Home patients, compared with 87% for hospital inpatients.
Europe/Asia/Pacific Market
The Company believes that, while many of the market factors influencing demand in North America are also present in
Europe and Asia/Pacific—aging of the population, growing number of patients with chronic illnesses, as well as technological
trends—each of the markets of Europe and in Asia/Pacific has distinctive characteristics. The health care industry tends to be more
heavily socialized and, therefore, is more influenced by regulation and fiscal policy. Variations in product specifications, regulatory
approval processes, distribution requirements and reimbursement policies require the Company to tailor its approach to the local
market. Management believes that as the European markets develop more common product requirements and the Company
continues to refine its distribution channels, the Company can more effectively penetrate these markets with global product
platforms that are localized with region-specific adjustments as necessary. Likewise, the Company expects to increase its sales in
the highly fragmented Australian, New Zealand and Asian markets as these markets, and the Company’s distribution within them,
develop.
Reimbursement
The Company is affected by government regulation and reimbursement policies in virtually every country in which the
Company operates. In the United States, the growth of health care costs has increased at rates in excess of the rate of inflation and
as a percentage of GDP for several decades. A number of efforts to control the federal deficit have impacted reimbursement levels
for government sponsored health care programs, and private insurance companies and state Medicaid programs often peg their
reimbursement levels to Medicare.
Reimbursement guidelines in the home health care industry have a substantial impact on the nature and type of equipment
an end-user can obtain and, thus, affect the product mix, pricing and payment patterns of the Company’s customers who are medical
equipment providers. The Company believes its strong market position and technical expertise will allow it to respond to ongoing
reimbursement changes. However, the issues described above will likely continue to have significant impacts on the pricing of
the Company’s products.