What changed in this filing

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Item 1. Business

2023-02-21 compared with 2022-02-23 · 91 added, 100 removed, 607 unchanged (24% of the section changed)

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Patients with lymphedema or chronic venous insufficiency are typically treated by vascular surgeons, vascular medicine physicians, oncology care teams, wound physicians, nurses and therapists.

Our advanced Flexitouch system provides effective automated, at-home lymphatic drainage therapy.

Its patented, curved chambers stimulate the lymphatic system to remove excess fluid and reduce swelling.

The pneumatic chambers sequentially inflate and deflate for only a few seconds each, creating a gentle wave-like application of pressure to stimulate the movement of lymphatic fluid and direct it towards properly functioning areas of the body.

Peer-reviewed, published studies have shown that our Flexitouch system provides improved patient quality of life and clinical outcomes, and delivers significant cost savings to payers and patients.

The first generation of our Flexitouch system received 510(k) clearance from the U.S.

Food and Drug Administration, or the FDA, in July 2002 and our second-generation Flexitouch system received 510(k) clearance from the FDA in October 2006.

In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in

treating lymphedema in the head and neck.

Our current lymphedema products are the Flexitouch and Entre systems.

A predecessor to our Flexitouch system received 510(k) clearance from the U.S.

Food and Drug Administration (the “FDA”) in July 2002, and we introduced the system to address the many limitations of self-administered home-based manual lymphatic drainage therapy.

We began selling our more advanced Flexitouch system after receiving 510(k) clearance from the FDA in October 2006.

In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck.

In June 2017, we announced that we received 510(k) clearance from the FDA for the Flexitouch Plus, the third-generation version of our Flexitouch system.

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phlebolymphedema and lipedema.

Our Flexitouch system generated $176.2 million, or 85%, of our revenue in 2021, and $163.9 million, or 88%, of our revenue in 2020.

The Entre system is marketed to patients for whom a basic pump is suitable or who do not yet qualify for insurance reimbursement for an advanced compression device such as our Flexitouch system.

Our Entre system generated $26.7 million, or 13%, of our revenue in 2021, and $23.2 million, or 12%, of our revenue in 2020.

On September 8, 2021, we acquired the assets of the AffloVest respiratory therapy product line from International Biophysics Corporation (“IBC”), a privately-held company which developed and manufactures AffloVest.

AffloVest is a portable, battery-powered wearable vest, that treats patients with chronic respiratory conditions such as chronic obstructive pulmonary disease (“COPD”)-associated breathing conditions like bronchiectasis, or conditions resulting from neuromuscular disorders and cystic fibrosis, by managing airway clearance.

Since patients with chronic pulmonary conditions typically require a host of comprehensive respiratory solutions, such as oxygen, nebulizers and non-invasive ventilation, we use respiratory DME providers as our method of distribution.

These respiratory DME providers provide a full range of solutions for these patients with complex diseases, and represent a large, developed channel.

The AffloVest product line generated $5.1 million, or 2%, of our total revenue from September 9, 2021 through December 31, 2021.

We introduced our Entre system in the United States in February

The Entre system is sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device such as our Flexitouch system.

Sales and rentals of our lymphedema products generated $212.3 million, or 86%, of our revenue in 2022, and $202.9 million, or 98%, of our revenue in 2021.

On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line from International Biophysics Corporation (“IBC”), a privately-held company which developed and manufactured AffloVest.

AffloVest is a portable, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions such as bronchiectasis or conditions resulting from neuromuscular disorders.

The AffloVest product line generated $34.5 million, or 14%, of our revenue in 2022 and $5.1 million, or 2%, of our revenue in 2021.

To support the growth of our business, we invest in our commercial infrastructure, consisting of our direct sales force, DME sales team, patient training resources, reimbursement capabilities and clinical expertise.

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Our field commercial team is focused on increasing clinician awareness of our lymphedema solutions.

As of December 31, 2021, this team consists of approximately 220 field sales representatives, 30 field managers and 94 Field Support Specialists.

The AffloVest device is sold through DME providers throughout the United States, supported by a team of 11 sales representatives.

As of December 31, 2022, we employed a field staff of 287, which consisted of 250 field sales representatives and 24 field managers for our lymphedema products, as well as a team of 13 supporting our airway clearance products.

This compares to a field staff of 262 as of December 31, 2021, which consisted of approximately 233 field sales representatives and 19 field managers for our lymphedema products, as well as a team of 10 supporting our airway clearance products.

In concert with COVID-19 social distancing requirements and recommendations, beginning in 2020, our patient training model includes both in-person training and virtual patient training options.

This provides additional options for us to connect with patients to ensure they receive the appropriate training, while protecting the health and limiting the exposure of both our trainers and patients.

In 2021, patient training was primarily provided by a team of employee trainers, in addition to a small number of independent healthcare practitioners that act in the same capacity as employee trainers to educate patients on the proper use of our solutions.

In 2022, we provided patient training primarily through a team of employee trainers to educate patients on the proper use of our solutions.

Our reimbursement function includes payer relations and reimbursement operations.

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Based on our estimates, we are contracted or enrolled as an in-network provider with payers covering nearly 275 million lives in the United States.

Over 245,000 patients have been treated with our Flexitouch system since its launch in 2004, and approximately 45,000 Flexitouch systems were shipped in 2021.

More than 77,000 patients have been treated with our Entre system since its launch in 2013, and approximately 20,000 Entre systems were shipped in 2021.

In 2022 we served over 65,000 patients with our compression therapy devices and cumulatively have served over 395,000 patients since they launched.

This compares to over 330,000 patients cumulatively as of December 31, 2021.

AffloVest also benefits from a relatively mature reimbursement landscape.

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The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic.

We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols.

While we saw some level of recovery in the second quarter of 2021, the second half of 2021 was negatively impacted by the prolonged recovery from COVID-19 and increased variant cases during the period, which extended and expanded restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment.

We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols, including during most of 2021 and the first quarter of 2022.

We have also seen staffing challenges, both in our organization and at the

clinics we serve, as another lingering consequence of the COVID-19 pandemic.

While we saw some level of recovery in 2022 after the first quarter, ongoing consequences of the pandemic remain uncertain.

There are no reliable estimates of how long the pandemic will last, whether any recovery will be sustained or will reverse course, the severity of any resurgence of COVID-19 or variant strains of the virus, the effectiveness of vaccines and attitudes towards receiving them, or what ultimate effects the pandemic will have.

For that reason, we are unable to reasonably estimate the long-term impact of the pandemic on our business at this time.

Since the onset of COVID-19, we have remained proactive to ensure we continue to adapt to the needs of our employees, clinicians and patients.

For a detailed listing of the changes to our business practices since the onset of the pandemic, refer to previous reports filed with the Securities and Exchange Commission.

Continued modifications to our business include, but are not limited to:

● Incorporating remote and flexible work arrangements for employees whenever possible, including real-time, online training of our new sales representatives.

In addition, we are monitoring pandemic conditions to assess whether our in-office and remote work strategy remains both productive and competitive.

● Eliminating employee travel restrictions in alignment with the opening of healthcare facilities and clinics while also continuing to maintain social distancing contact restrictions to reduce exposure.

● Utilizing employee trainers and a small number of independent healthcare practitioners to educate patients on the proper use of our solutions virtually or in-person.

● Continuing to host large virtual medical education programs, while also beginning to schedule smaller in-person meetings and restoring attendance at key professional congresses.

● Supporting clinicians and patients by using rigorous infection control practices when in-person visits are required.

● Following government guidelines related to vaccinations of our staff in light of customer vaccination requirements and our focus on safe interactions with patients and customers.

We cannot assure you that these changes to our processes and practices will be successful in mitigating the impact of COVID-19 on our business.

We continue to evaluate and, if appropriate, will adopt other measures in the future related to the ongoing safety of our employees, clinicians and patients.

Additional information related to the COVID-19 pandemic is included elsewhere in this report.

Overview of Lymphedema and Chronic Venous Insufficiency

The lymphatic system, a fundamental part of the cardiovascular system, consists of lymph vessels and lymph organs that protect the body against harmful bacteria and transport lymph fluid from the body’s tissues

back to the cardiovascular system.

Lymph vessels are thin-walled capillaries that absorb fluids, bacteria and proteins, and propel them to lymph nodes, small lymph organs that filter and process the lymph fluid by eliminating waste and bacteria.

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CVI is prevalent among patients who are obese or pregnant and may also be caused by high blood pressure, trauma, lack of exercise, smoking, deep vein thrombosis and inflammation of the vein walls.

As the valves deteriorate, blood is no longer able to effectively travel in the normal direction, leading to increased pressure in the vascular system, stretching and dilating vessels, which exacerbates the problem.

As the valves deteriorate, blood is no longer able to effectively travel in the

normal direction, leading to increased pressure in the vascular system, stretching and dilating vessels, which exacerbates the problem.

Prolonged or untreated chronic venous insufficiency may cause an increase in the buildup of interstitial fluid (the fluid surrounding cells), which in turn, can cause skin and tissue changes that can permanently damage the lymphatic system.

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Based on a study performed by Dr.

Steven Dean et al., it is estimated that more than 16

million people in the United States are living with lymphedema due to CVI.

This, in addition to the estimated five million individuals living in the U.S with cancer-related and primary lymphedema, increases the prevalence estimates to over 20 million individuals.

Steven Dean et al., it is estimated that more than 16 million people in the United States are living with lymphedema due to CVI.

This, in addition to the estimated five million individuals living in the U.S.

with cancer-related and primary lymphedema, increases the prevalence estimates to over 20 million individuals.

For people with cancer, the build-up of lymph fluid can be caused by surgery, especially when lymph nodes are removed, radiation therapy that can damage lymph nodes and vessels, infections that damage surrounding tissue or cause scarring, and other conditions.

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Patient symptoms often include significant skin changes, pain and discomfort, as well as difficulty breathing and swallowing.

The American Cancer Society estimates that 430,000 people in the United States suffer from cancers of the head and neck, and more than 65,000 new patients are diagnosed each year.

The American Cancer Society estimates that there are 430,000 survivors of head and neck cancers in the United States, and more than 65,000 new patients are diagnosed each year.

In a 2016 clinical publication, researchers at Vanderbilt University School of Medicine estimated that more than 75% of patients with head and neck cancer develop lymphedema requiring treatment.

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In addition, in September 2021, we initiated a randomized, controlled clinical trial evaluating the effectiveness of our Flexitouch Plus system for the treatment of head and neck lymphedema.

This study will represent the largest randomized, controlled clinical trial ever conducted for the treatment of head and neck cancer-related lymphedema.

The trial will consist of approximately 250 subjects enrolled at six clinical sites and will span the next two years.

We believe this study will represent the largest randomized, controlled clinical trial ever conducted for the treatment of head and neck cancer-related lymphedema.

The trial will consist of approximately 250 subjects enrolled at ten clinical sites and will span three years.

Current Treatment and Limitations

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Typically, this therapy begins with clinic visits three to five times per week for four to eight weeks, which is costly, inconvenient for the patient, and time consuming.

At that point, clinical improvement plateaus or reimbursement for the therapy ends and patients transition to self-administered home-based care.

Manual lymphatic drainage is difficult for patients to self-administer due to limited range of motion and treatment techniques that are difficult to replicate, and pump-based compression using simple pumps can be uncomfortable and have not demonstrated the clinical and economic benefits of our Flexitouch advanced pneumatic pump.

Access to therapy clinics can also be limited, leading to many patients not completing their prescribed in-clinic treatments.

Following the in-clinic visits, typically clinical improvement plateaus or reimbursement for the therapy ends, and patients transition to self-administered home-based care.

Manual lymphatic drainage is difficult for patients to self-administer due to limited range of motion and treatment techniques that are difficult to replicate, and pump-based compression using simple pumps can be uncomfortable and has not demonstrated the clinical and economic benefits of our Flexitouch advanced pneumatic pump.

To address these limitations, our at-home Flexitouch system was developed to provide automated lymphatic drainage therapy through an advanced, easy-to-use, self-applied at-home system.

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Enhancing standard of care treatments for CVI with our pneumatic compression systems has been proven to reduce the recurrence of ulcer formations as well as recurrent skin infections (cellulitis) leading to better patient quality of life and lower overall cost of clinical care.

In 2022, three independent societies’ consensus endorsements were published in Phlebology:

The Journal of Venous Disease .

Experts from the American Venous Forum, American Venous and Lymphatic Society and Society for Vascular Medicine provided the consensus guidance on diagnosis and patient treatment pathways for lymphedema.

Over a majority of the panel (92%) agreed with the statement that sequential pneumatic compression should be recommended for lymphedema patients, with 34% strongly agreeing.

In addition, 72% of the panel agreed with the statement that all patients with CVI (stages C3-C6) should be considered as lymphedema patients, with 38% strongly agreeing.

Overview of Bronchiectasis and Cystic Fibrosis

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● Increase awareness of our solutions and establish them as the standards of care.

We believe that many patients with lymphedema, chronic venous insufficiency and bronchiectasis remain undiagnosed or undertreated.

We believe that many patients with lymphedema, chronic venous insufficiency and chronic respiratory conditions remain undiagnosed or undertreated.

We intend to further educate physicians, nurses, therapists, patients, payers and DME providers to raise awareness of these diseases, the associated health burdens of such diseases on patients and society, and the clinical and economic benefits of using our products.

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In addition, we plan to launch more extensive direct-to-provider and patient marketing programs that we believe will further increase awareness of our solutions.

● Expand our sales and customer support teams.

We plan to expand our direct sales and marketing organization to drive greater product adoption by patients suffering from lymphedema and CVI and their clinicians.

● Utilize direct sales and customer support teams.

We rely on a large direct sales force and marketing organization to drive greater product adoption by patients suffering from lymphedema and CVI and their clinicians.

We also intend to expand and support our respiratory DME channels, in an effort to help demonstrate HFCWO as a staple among the host of treatments they bring to chronic respiratory patients.

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Each connector has eight outflow ports into which the garment hoses are connected.

Our unique garments contain up to 32 air chambers, are made of a soft, pliable fabric and are designed with hook-and-loop fasteners to fit snugly around affected areas for maximum comfort and optimum pressure delivery.

Our unique garments contain up to 32 air chambers, are made of a soft, pliable fabric and are designed with zippers and hook-and-loop fasteners to fit snugly around affected areas for maximum comfort and optimum pressure delivery.

The garments come in a variety of sizes that can be easily adjusted to patients of all sizes.

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A typical therapy session using our Flexitouch Plus system lasts up to one hour, with additional treatment options available if prescribed by a clinician.

Beginning in November 2022, Flexitouch Plus controllers include Bluetooth capability that enables therapy data from the controller to be reported through Kylee, a companion application.

We introduced our Entre system in the United States in February 2013 to offer a lightweight, portable pneumatic compression solution for patients with cognitive or dexterity issues who need a basic (simple) pump or for patients who do not yet qualify for insurance coverage of an advanced compression device such as our Flexitouch Plus system.

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The system can be programmed to a variety of pressures delivering a prescribed treatment customized to meet the patient's needs.

In 2022, we introduced Kylee™, a free mobile application to help patients learn about lymphedema, track their symptoms and treatment, and share their progress with their doctor.

The purpose behind Kylee is to help support and encourage patients to embrace self-care and become more educated about their condition.

Our customers can use Kylee to track their orders for our devices and view onboarding tutorials for using the

Once a patient starts using the device, they can use Kylee to record their treatments and symptoms, and capture photos of their condition for sharing with their healthcare team.

Flexitouch Plus controllers include Bluetooth technology, which is now viewable using Kylee.

We acquired the AffloVest business in September 2021.

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Comparison of our Flexitouch System with Simple Pneumatic Compression Devices

A prospective, randomized controlled trial published in Supportive Care in Cancer demonstrated that our Flexitouch system provides better clinical outcomes as compared to those achieved with a simple pneumatic compression device for home-based treatment of breast cancer-related lymphedema.

A prospective, randomized controlled trial published in Supportive Care in Cancer demonstrated that our Flexitouch system provides better clinical outcomes as compared to those achieved with a simple

pneumatic compression device for home-based treatment of breast cancer-related lymphedema.

The study was conducted in the United States and involved 36 patients.

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Eight percent of patients reported skin ulceration of the affected extremity in the year before presentation for treatment.

The number of lower-extremity ulcers pre- and post-Flexitouch system use decreased from seven to two ( P =0.007).

The number of lower-extremity

ulcers pre- and post-Flexitouch system use decreased from seven to two ( P =0.007).

Overall, 46% of the patients had complete limb girth measurements at the ankle and calf, and there was a statistically significant decreased overall limb girth after Flexitouch system treatment in pre- and post-ankle (28.3 cm vs.

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An open label, randomized wait-list controlled trial published in the Supportive Care in Cancer journal supported the safety and feasibility of the Flexitouch system APCD for the treatment of secondary lymphedema in head and neck cancer, or HNC, patients.

This study was conducted in the United States and included 49

head and neck cancer patients.

This study was conducted in the United States and included 49 head and neck cancer patients.

Eligible patients had completed treatment for HNC, were disease free, and had lymphedema at enrollment.

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Sales and Marketing

Unlike many of our competitors, we utilize a direct-to-patient and -provider model to market our pneumatic compression portfolio solutions directly to patients and clinics, providing high-quality customer service and capturing both the manufacturer and distributor margins.

Unlike many of our competitors, we utilize a direct-to-patient and -provider model to market our lymphedema products directly to patients and clinics, providing high-quality customer service and capturing both the manufacturer and distributor margins.

The direct channel allows us to focus on two of our primary call points, vascular and oncology.

For AffloVest, we utilize the respiratory DME channel as our go-to-market method.

Our utilization of the thousands of respiratory DME representatives gives us access to a larger channel than competitors that market and sell directly.

The respiratory DME channel also already serves the chronic respiratory community, enabling them to identify candidates who are regularly on other

respiratory therapies (such as oxygen, nebulizers, non-invasive ventilators, etc.) and who might benefit from the use of our AffloVest.

Our utilization of DME representatives gives us access to a larger channel than competitors that market and sell directly.

The respiratory DME channel also already serves the chronic respiratory community, enabling them to identify candidates who are regularly on other respiratory therapies (such as oxygen, nebulizers, non-invasive ventilators, etc.) and who might benefit from the use of our AffloVest.

The below chart reflects these models:

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These DME providers are staffed by trained respiratory therapists who are required in some states to set up patients on at-home prescription respiratory therapies like AffloVest.

We market and educate DME providers and clinicians about the AffloVest advantages.

market to, and educate, DME providers and clinicians about the AffloVest advantages.

As of December 31, 2022, we also employed a small group of respiratory specialists, who educate DME provider representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest.

The chart below describes our DME model.

As of December 31, 2021, we employed a field staff of 252 Tactile employees, made up of sales and service representatives, as well as managers, who provide support throughout the United States for our lymphedema and respiratory therapies.

As of December 31, 2022, we employed a field staff of 287 Tactile employees, made up of sales representatives, as well as managers, who provide support throughout the United States for our lymphedema and respiratory therapies.

Our marketing team leads our efforts in brand development, product messaging, tradeshow attendance, medical educational forums, website development, social media and advertising.

Reimbursement, Payer Relations and Customer Support Process

Private insurers and other payers represented approximately 68% and 71% of our revenue in 2021 and 2020, respectively, while Medicare represented approximately 17% and 16% of our revenue in 2021 and 2020, respectively, Veterans Administration hospitals represented approximately 13% of our revenue in both 2021 and 2020, and DME distributors represented approximately 2% of our revenue in 2021.

Private insurers and other payers represented approximately 57% and 68% of our revenue in 2022 and 2021, respectively, while Medicare represented approximately 19% and 17% of our revenue in 2022 and 2021, respectively, Veterans Administration hospitals represented approximately 10% and 13% of our revenue in 2022 and 2021, respectively, and DME distributors represented approximately 14% and 2% of our revenue in 2022 and 2021, respectively.

When we sell our solutions directly to patients, we generally bill third-party payers, such as commercial insurance or Medicare, on behalf of our patients and bill the patient for their copayment obligations and deductibles.

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These contracts allow us to be an in-network provider for patients, enabling them to access our systems at a competitive rate and copay comparable to other suppliers and easing our administrative burden in processing authorizations and claims.

We have enjoyed a consistent commercial payer approval rate of greater than 80% for the last ten years, and a greater than 90% Medicare claims submitted

approval rate (post-arbitration and based on the number of claims, not dollar amount of claims, submitted across all our products) since we began doing business with Medicare in 2007.

We have enjoyed a consistent commercial payer approval rate of greater than 80% for the last six years, and a greater than 90% Medicare claims submitted approval rate for the last six years (post-arbitration and based on the number of claims, not dollar amount of claims, submitted across all our products).

We began doing business with Medicare in 2007.

We have an in-depth understanding of specific payer coverage criteria, and our submission materials are tailored to address an individual payer's distinct requirements.

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We utilize third-party carriers for delivery and pick up of our devices.

After delivery and when requested by our patient, we coordinate a virtual or at-home visit from one of our licensed trainers to provide education, clinical support or customer service.

These trainers are healthcare professionals, licensed in their state of residence, instructed on proper use of our products.

After delivery and when requested by our patient, we coordinate a virtual or at-home visit from one of our trainers to provide education and instruction on use and care of their therapy system.

These trainers are professionally trained and instructed on proper use of our products.

Patient visits are coordinated from our offices in Minneapolis and training sessions are assigned by our staff.

Additional materials including training videos and support content is available on our website to support patients and their training needs.

Kylee™ allows patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources.

Our AffloVest product is packaged and shipped to the DME provider or drop-shipped directly to a patient, as directed.

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and Lympha Press USA.

Other competitors are Airos Medical, Inc.

and NormaTec Industries.

Other competitors are Koya Medical, Inc.

and Aria Health.

Given the growth of the pneumatic compression pump market, we expect that the industry will become increasingly competitive in the future.

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To pursue a direct-to-patient and -provider sales model, our manufacturing competitors would need to meet national accreditation and state-by-state licensing requirements, secure Medicare billing privileges, as well as compete directly with the home medical equipment providers that many rely on across their entire home care businesses.

and as new companies enter the market with new technologies and distribution strategies.

We anticipate that, given the size of the available market, we will face increased competition in the future as existing companies and competitors develop new or improved products and distribution strategies and as new companies enter the market with new technologies and distribution strategies.

Our ability to compete successfully and to increase our market share is dependent upon our reputation for providing responsive, professional and high-quality products and services and achieving strong customer satisfaction.

Competitors within the airway clearance market consist largely of three other HFCWO vest manufacturers:

Hill-Rom, Philips Medical and Electromed.

Baxter (formerly Hill-Rom), Philips Medical and Electromed.

While we believe AffloVest’s portability and our use of DME distributors are differentiators, we anticipate that given the size of the airway clearance market, we will continue to see vigorous competition.

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All of our Class II devices have obtained 510(k) clearance and that status remains current as of the date of this filing.

After a device receives 510(k) clearance or a premarket approval, in general any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new clearance or approval.

require a new clearance or approval.

Thus, modifications to our existing devices will be evaluated to ensure ongoing compliance to the FDA requirements.

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Centers for Medicare and Medicaid Services, or CMS, requires providers of products or services to attain and maintain accreditation in order to participate in federally funded healthcare programs.

To attain and maintain accreditation, companies are required to institute policies and procedures that, among other things,

formalize the interaction of the company with patients.

To attain and maintain accreditation, companies are required to institute policies and procedures that, among other things, formalize the interaction of the company with patients.

Accrediting bodies that are approved (“deemed”) by CMS will perform audits of these policies and procedures every three years.

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prohibits a physician from making referrals for certain "designated health services"

payable by Medicare to an entity, including a company that furnishes durable medical equipment, in which the physician or an immediate family member of such physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement unless an exception applies.

payable by Medicare to an entity, including a company

that furnishes durable medical equipment, in which the physician or an immediate family member of such physician has an ownership or investment interest or with which the physician has entered into a compensation arrangement unless an exception applies.

Violation of the Stark Law could result in denial of payment, disgorgement of reimbursements received under a noncompliant arrangement, civil penalties and exclusion from Medicare or other governmental programs.

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Foreign Corrupt Practices Act, commonly known as the FCPA, is a criminal statute that prohibits an individual or business from paying, offering, promising or authorizing the provision of money (such as a bribe or kickback) or anything else of value (such as an improper gift, hospitality, or favor), directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision in order to assist the individual or business in obtaining, retaining, or directing business or other advantages (such as favorable regulatory rulings).

In addition to the FCPA, there are a number of other federal and state anti-corruption laws to which we may be subject, including, the U.S.

In addition to the FCPA, there are other federal and state anti-corruption laws to which we may be subject, including, the U.S.

domestic bribery statute contained in 18 USC § 201 (which prohibits bribing U.S.

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Travel Act (which in some instances addresses private-sector or commercial bribery both within and outside the United States).

Also, a number of

other countries have their own domestic and international anti-corruption laws, such as the UK Bribery Act 2010.

Also, a number of other countries have their own domestic and international anti-corruption laws, such as the UK Bribery Act 2010.

We could be held liable under the FCPA and other anti-corruption laws for the illegal activities of our employees, representatives, contractors, collaborators, agents, subsidiaries, or affiliates, even if we did not explicitly authorize such activity.

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Failure to comply with applicable foreign regulatory requirements may subject a company to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, criminal prosecution or other consequences.

The European Union is the primary regulator in Europe, which has adopted numerous directives/regulations and has promulgated standards regulating the design, manufacture, clinical trials,

labeling and adverse event reporting for medical devices.

The European Union is the primary regulator in Europe, which has adopted numerous directives/regulations and has promulgated standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices.

Medical devices that comply with the requirements of applicable directives/regulations will be entitled to bear the CE conformity marking, indicating that the device conforms with the essential requirements of the applicable directives/regulations and, accordingly, can be commercially distributed throughout the member states of the European Union, and other countries that comply with or mirror these directives.

We have the authorization to affix the CE Mark to our Flexitouch (classic) system to commercialize these devices in the European Union.

The notified body who inspected us issued our initial ISO 13485 certification in October 2014 and our EC-Certificate in December 2014.

At this time, we have no products that are CE marked.

In March 2012, we received our Medical Device License in Canada for our Flexitouch (classic) system and in June 2021 for our Flexitouch (Plus) system.

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Our Medicare business was 19% of revenue in 2022 compared to 17% in 2021.

Because Medicare criteria is extensive, we have a team dedicated to educating prescribers to help them understand how Medicare policy affects their patients and the medical record documentation needed to meet both NCD and LCD requirements.

We maintain open communication with physician key opinion leaders and with Medicare contractors to provide data as it becomes available that could potentially influence coverage decisions.

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Commercial payers that reimburse for our products do so in a variety of ways, depending on the insurance plan's policies, employer and benefit manager input, and contracts with their provider network.

Moreover, Medicaid programs and some commercial insurance plans, especially Medicare Advantage plans

(commercial insurers that are administering Medicare benefits to certain beneficiaries), are frequently influenced by Medicare coverage determinations.

Moreover, Medicaid programs and some commercial insurance plans, especially Medicare Advantage plans (commercial insurers that are administering Medicare benefits to certain beneficiaries), are frequently influenced by Medicare coverage determinations.

In working with payers who follow Medicare criteria, we have focused on clear communications with insurers to ensure mutual understanding of criteria interpretation, which differs significantly among the plans from very restrictive to quite lenient, and we then work closely with prescribers to educate them accordingly.

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patents covering various aspects of our Flexitouch system expired in 2017.

We have registered the trademarks Tactile Medical, Flexitouch, the Flexitouch logo design, AffloVest, and AffloVest Pro with the United States Patent and Trademark Office on the Principal Register.

We rely in the United States on common law rights to the Entre and Tactile Medical design trademarks and have applied to register the Tactile Medical trademark in Australia, China, the European Union and Japan.

We have registered the trademarks Tactile Medical, Flexitouch, the Flexitouch logo design, Entre, AffloVest, and AffloVest Pro with the United States Patent and Trademark Office on the Principal Register.

We rely in the United States on common law rights to the Tactile Medical design trademark.

The Tactile Medical

trademark is registered in Australia and Japan, and the AffloVest trademark is registered in Australia, the European Union, New Zealand and the United Kingdom.

Our business is affected by seasonality.

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Human Capital Resources

As a company, our focus is on developing and selling solutions that help increase clinical efficacy, reduce overall healthcare costs and improve the quality of life for patients with chronic conditions by treating

them at home.

We believe the strength of our employees is the cornerstone to achieving these goals.

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We continue to explore and utilize benefits options in line with our growing and diverse workforce to attract and retain top talent.

These benefits include but are not limited to retirement savings, an employee stock purchase plan, a variety of health insurance options, including dental and vision, discounts on healthy foods and fitness memberships, disability insurance, and paid maternity/paternity leave.

Our Remote Work Policy also allows for a flexible work schedule and location, depending on business needs and the specific role.

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We seek fair labor practices throughout our business, including from our partners and key suppliers who share our values for human rights, dignity, and respect.

We have implemented a Supplier Code of Conduct, requiring from our suppliers the same commitment to human rights, fair labor practices, and anticorruption that we value here at Tactile Medical.

We have adopted a Human Rights Policy formalizing this commitment and implemented a Supplier Code of Conduct, requiring from our suppliers the same commitment to human rights, fair labor practices, and anticorruption that we value here at Tactile Medical.

Health and Safety :

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We provide all employees training on workplace safety and require employees to follow standards and practices supporting a safe and healthy work environment.

Our commitment to the health, safety, and wellness of employees, patients, and business partners alike can be demonstrated by our expedient COVID-19 response.

We revamped our business processes to allow for social distancing, limited face-to-face interactions by operating virtually when able, and provided additional PPE for applicable employees while serving over 65,000 patients and avoiding employee lay-offs.

Talent and Retention:

In 2021, we focused on recruitment, hiring, and retention to ensure the highest quality talent and best fit for specific roles and the Company.

Our recruitment efforts are expanding through strong recruiting and hiring processes and implementing an applicant tracking system.

This applicant tracking system will support continuous improvement in our hiring process and will be leveraged for coaching and employee growth.

We have also implemented a company intranet to facilitate employee inclusion, provide resources, and advance transparent communication efforts.

The result of the culmination of the above is measured by our employee engagement.

We annually participate in a survey conducted by a third party in conjunction with the Top Workplaces employer recognition award program.

In 2021, our employees’ responses qualified Tactile Medical as a Top Workplace in Minnesota for the 12 th year in a row.

In 2022, we continued to focus on recruitment, hiring, and retention to ensure high quality talent and a strong fit for specific roles and the Company.

Our recruitment efforts are expanding through strong recruiting and hiring processes, as well as utilization and enhancements of our recruiting platform we implemented in 2021.

The company intranet facilitates employee inclusion, provides resources, and advances transparent communication efforts.

We have also implemented an internal platform for employees to acknowledge achievements of colleagues and highlight company values, encouraging a culture of collaboration and positive reinforcement.

We continue to be diligent and remain focused on our employee engagement strategies, including through exit interview analyses, talent management and retention risk analyses and an employee engagement survey that we rolled out in December 2022.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business