What changed in this filing

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Item 1. Business

2024-02-20 compared with 2023-02-21 · 108 added, 132 removed, 566 unchanged (30% of the section changed)

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Our solutions deliver cost-effective, clinically proven, long-term treatment for people with these chronic diseases.

We employ a direct-to-patient and -provider model within our lymphedema portfolio, through which we obtain patient referrals from clinicians, manage insurance claims on behalf of our patients and their clinicians, deliver our solutions directly to patients and train them on the proper use of our solutions.

We generally employ a direct-to-patient and -provider model within our lymphedema portfolio, through which we obtain patient referrals from clinicians, manage insurance claims on behalf of our patients and their clinicians, deliver our solutions directly to patients and train them on the proper use of our solutions.

This model allows us to engage directly with patients and clinicians, which are both critical audiences to which we can provide clinical evidence and education.

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They gather and submit documentation for payer reimbursement, train patients on use of the device, and provide ongoing patient support.

For the year ended December 31, 2022, we generated revenue of $246.8 million and had a net loss of $17.9 million.

For the year ended December 31, 2023, we generated revenue of $274.4 million and had net income of $28.5 million.

Our revenue increased 11% during the year ended December 31, 2023, compared to the year ended December 31, 2022.

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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 current lymphedema products are the Flexitouch and Entre systems.

Our current lymphedema products are the Flexitouch Plus and Entre Plus systems.

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

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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.

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.

In December 2020, we received 510(k) clearance for two new indications for our Flexitouch Plus system:

phlebolymphedema and lipedema.

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.

We introduced our Entre system in the United States in February 2013 and the second generation, Entre Plus, in March 2023.

The Entre Plus 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 Plus system.

Sales and rentals of our lymphedema products generated $241.7 million, or 88%, of our revenue in 2023, and $212.3 million, or 86%, of our revenue in 2022.

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.

AffloVest is a portable, battery-powered, 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 $32.7 million, or 12%, of our revenue in 2023 and $34.5 million, or 14%, of our revenue in 2022.

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.

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

We are a national, accredited provider of home medical equipment services approved for coverage by private payers, Medicare, the Veterans Administration and certain Medicaid programs in the United States.

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

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

As of December 31, 2023, we employed 254 field sales representatives for our lymphedema products and a team of 16 supporting our airway clearance products.

This compares to 241 field sales representatives (excluding 9 key account managers) for our lymphedema products and a team of 10 specialists supporting our airway clearance products as of December 31, 2022.

Our reimbursement function includes payer relations and reimbursement operations.

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We believe these investments are critical to driving payer, clinician and patient adoption of our technologies, and together with our commercial infrastructure, represent a significant competitive advantage.

Health insurance coverage for our Flexitouch and Entre systems is in place with private payers, Medicare, the Veterans Administration and certain Medicaid programs.

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.

Health insurance coverage for our Flexitouch Plus and Entre Plus systems is in place with private payers, Medicare, the Veterans Administration and certain Medicaid programs.

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

In 2023 we served over 77,000 patients with our compression therapy devices and cumulatively have served over 472,000 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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Respiratory DME partners serve the role of receiving prescriptions, verifying coverage criteria, shipping, billing and training the patient.

Coronavirus (COVID-19)

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, 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.

Overview of Lymphedema and Chronic Venous Insufficiency

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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.

Lymph nodes are located in several areas of the body, including superficial and deep lymph nodes under each arm, at the hip, in the groin, above the collar bones in the neck, in the abdomen, tonsils and spleen, and in bone marrow.

Lymph nodes are located in several areas of the body, including superficial and deep lymph nodes under each arm, at the hip, in the groin, above the collar bones in the neck, in the abdomen,

tonsils and spleen, and in bone marrow.

Lymph vessels and lymph nodes work together with larger lymph structures to help maintain a normal healthy fluid balance.

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Chronic Venous Insufficiency and Phlebolymphedema

The most common form of lymphedema in the Western world is phelobolymphedema, a mixed etiology swelling due to chronic venous insufficiency (“CVI”) and lymphatic insufficiency.

The most common form of lymphedema in the Western world is phlebolymphedema, a mixed etiology swelling due to chronic venous insufficiency (“CVI”) and lymphatic insufficiency.

The inability of the lymphatic system to adequately drain the interstitial fluid that accumulates in severe chronic venous hypertension causes this ‘combined’ condition, phlebolymphedema.

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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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.

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.

In the fourth quarter of 2016 we expanded the indications for use of the Flexitouch system.

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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.

Our Flexitouch head and neck system is the only pneumatic compression device with an indication to treat patients suffering from debilitating head and neck lymphedema.

Our Flexitouch head and neck system is the only pneumatic compression device with an indication to treat patients suffering from debilitating head and neck lymphedema and our therapy is protected with several patents issued in 2022.

We estimate the market opportunity for our Flexitouch head and neck system is approximately $1 billion in the United States, which is based on 75% of the total number of patients suffering from cancers of the head and neck and our average selling price per device.

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

Current Treatment and Limitations

Traditional Treatment and Limitations

A traditional treatment for lymphedema is complete decongestive therapy consisting of manual lymphatic drainage, which is a specialized application of gentle pressure to the skin applied by a trained therapist that encourages drainage of lymph fluid, as well as decongestive exercises, skin care and compression with multilayered bandages, compression garments or pumps.

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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.

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

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

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

The standard of care treatment for CVI is compression therapy.

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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.

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

Overview of Bronchiectasis

Bronchiectasis is a COPD-associated condition where the lung’s bronchi become inflamed, widened, permanently damaged and scarred.

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Airway clearance therapies help break this vicious cycle and need to be used regularly to maintain a healthy respiratory system.

Cystic fibrosis is an inherited disease that causes thickened mucus to form in the lungs, pancreas and other organs.

In the lungs, this mucus blocks the airways, creating lung damage and making it hard to breathe.

There is no cure for COPD or cystic fibrosis.

Market Opportunity

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High frequency chest wall oscillation is used to treat bronchiectasis and over 40 other International Classification of Disease (“ICD”)-10 diagnosis codes.

Over 30,000 people in the U.S.

struggle with the effects of cystic fibrosis every day.

Cystic fibrosis treatment includes airway clearance therapy, of which HFCWO is the standard of care.

The Cystic Fibrosis Foundation Patient Registry reports 77% of cystic fibrosis patients use HFCWO.

Current Treatment and Limitations

Traditional Treatment and Limitations

Airway clearance therapy (“ACT”) utilizes physical or mechanical means of percussion or vibration to mobilize mucus and phlegm to facilitate airway clearance by coughing.

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AffloVest is a HFCWO therapy vest that has eight anatomically positioned oscillating motors that create individual pressure waveforms to target all lobes of the lungs to loosen, thin and mobilize lung secretions.

Our goal is to become a leader in the at-home treatment of underserved chronic diseases.

Our goal is to become the leader in the at-home treatment of select underserved chronic diseases.

We intend to leverage our established product, service and fulfillment platforms to be a global provider of clinically proven easy-to-use and cost-effective solutions.

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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.

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.

We intend to strengthen our distribution network by continuing to recruit, train and retain talented sales representatives.

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We intend to continue this strategic approach to further expand coverage for our solutions, as well as to meet payer-specific requirements on behalf of patients.

We market Flexitouch and Entre systems as at-home therapies for the treatment of lymphedema and chronic venous insufficiency.

We market Flexitouch Plus and Entre Plus systems as at-home therapies for the treatment of lymphedema and chronic venous insufficiency.

We market AffloVest as an at-home therapy intended to promote airway clearance.

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We believe our products have unique features and benefits that address the shortcomings of traditional treatments, are more cost-effective and enable more consistent and effective therapy, leading to enhanced patient quality of life, improved clinical outcomes and reduced cost of care.

Flexitouch System

Flexitouch Plus System

Our Flexitouch Plus system is a fully automated, programmable, advanced pneumatic compression device, or APCD, designed for treatment of lymphedema in the home setting.

Our Flexitouch system has received 510(k) clearance for the treatment of lymphedema, phlebolymphedema, lipedema, certain types of other edema, venous insufficiencies and certain types of leg ulcers.

Our Flexitouch Plus system has received 510(k) clearance for the treatment of lymphedema, phlebolymphedema, lipedema, certain types of other edema, venous insufficiencies and certain types of leg ulcers.

We introduced our first-generation Flexitouch system in the United States in 2003, our second-generation Flexitouch system in 2006, and our third-generation Flexitouch system, the Flexitouch Plus, in 2018.

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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.

Entre Plus System

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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Our Entre system is a pump with garments covering the arm or leg with eight chambers that inflate in sequence and remain inflated for a preset time period.

All chambers deflate at once.

Our Entre system moves fluid from fingers or toes toward areas closer to the trunk.

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

In 2023, our second-generation system, Entre Plus, was introduced.

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.

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

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 viewable using Kylee.

We acquired the AffloVest business in September 2021.

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Patients reported a significant increase in their ability to control lymphedema through treatment with our Flexitouch system, with an increase in function and a reduction in pain.

Of the 98 patients who responded, 66% reported being "very satisfied"

with the treatment by our Flexitouch system and 29, or 30%, of patients reported being "satisfied"

with the treatment by our Flexitouch system.

Of the 98 patients who responded, 66% reported being "very satisfied" with the treatment by our Flexitouch system and 29, or 30%, of patients reported being "satisfied" with the treatment by our Flexitouch system.

Comparison of our Flexitouch System with Simple Pneumatic Compression Devices

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The primary objective of the study was to compare treatment protocol adherence, satisfaction and perceived changes in emotional and functional status between patients with cancer-related lymphedema and non-cancer-related lymphedema using our Flexitouch system.

Ninety percent of the 155 study patients reported being "satisfied"

with our Flexitouch system.

Of these patients, more than 65% reported being "extremely satisfied."

Further, 95% of patients reported a positive limb volume outcome, which was defined as a patient perceiving that limb volume had been maintained or reduced with device use.

Ninety percent of the 155 study patients reported being "satisfied" with our Flexitouch system.

Of these patients, more than 65% reported being "extremely satisfied." Further, 95% of patients reported a positive limb volume outcome, which was defined as a patient perceiving that limb volume had been maintained or reduced with device use.

Of these patients, 42% reported limb volume decreases as much as 20%, and an additional 20% reported decreases of less than 20%.

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The results showed a 96.2% reduction in hospitalizations, 82.4% reduction in emergency room visits, and 87.3% reduction in antibiotic usage for the post-AffloVest group.

The AffloVest has a history of clinical evidence, and Tactile Medical is committed to supporting additional studies to further support the benefits of this differentiated HFCWO technology.

In 2023, a patient preference study was published demonstrating a strong preference for the AffloVest over traditional bladder-style vests.

93% of symptomatic adults preferred the AffloVest to bladder-style vests and 90% reported the AffloVest therapy would fit with their lifestyle.

The independent, randomized study of 30 vest-naïve adults was published in RT Magazine in June 2023.

Sales and Marketing

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.

Unlike many of our competitors, we generally 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 for the majority of this business.

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

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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 respiratory DME channel also already serves the chronic respiratory community, enabling them to identify complex respiratory 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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The chart below describes our U.S.

direct-to-patient and -provider model for our lymphedema business.

direct-to-patient and -provider model for the majority of our lymphedema business.

We sell the AffloVest to DME providers in the U.S.

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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.

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

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

As of December 31, 2023, 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, 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.

As of December 31, 2023, we employed 270 field sales representatives who provide support throughout the United States for our lymphedema and respiratory therapies compared to 251 field sales representatives as of December 31, 2022.

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 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.

Private insurers and other payers represented approximately 54% and 57% of our revenue in 2023 and 2022, respectively, while Medicare represented approximately 24% and 19% of our revenue in 2023 and 2022, respectively, Veterans Administration hospitals represented approximately 10% of our revenue in each of 2023 and 2022, and DME distributors represented approximately 12% and 14% of our revenue in 2023 and 2022, 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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Our payer relations function focuses on payer policy development and education for our entire portfolio, as well as contract negotiations for our direct business, and data analysis.

Our reimbursement operations function is responsible for verifying patient insurance benefits, individual patient case development, prior authorization submissions, case follow-up, and appeals when necessary.

The reimbursement operations function is organized into “regional payer lanes” so that each case is handled throughout the process by experts in specific payer requirements.

The reimbursement operations function is organized into regions so that each case is handled throughout the process by experts in specific payer requirements.

We have strong and established payer relationships, including most of the largest private payers in the United States.

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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 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 have enjoyed a consistent commercial payer

approval rate of greater than 80% for the last seven years, and a greater than 90% Medicare claims submitted approval rate for the last seven 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.

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We receive no additional reimbursement for patient support, but provide high-quality customer service and continuity to enhance patient comfort, satisfaction, compliance and safety with our products.

Our Flexitouch Plus system controller is reimbursed under HCPCS code E0652, and our Entre system controller is reimbursed under HCPCS code E0651.

Garments that cover various parts of the body are used with these systems and billed using HCPCS codes E0667, E0668 and E0669.

Our Flexitouch Plus system controller is reimbursed under HCPCS code E0652, and our Entre Plus system controller is reimbursed under HCPCS code E0651.

Garments that cover various parts of the body are used with these systems and billed using HCPCS codes E0656, E0657, E0667, E0668 and E0669.

Our head and neck garments do not currently have billing codes assigned.

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Our research and development and clinical operations functions include scientists, clinical monitors and project managers with expertise in pneumatics, electronics, garment design, embedded software, mechanical design, sensors, manufacturing technologies and clinical trial management.

Our current research and development efforts are focused primarily on increasing efficacy, improving design for ease-of-use, enhancing clinical functionality and reducing production costs of our solutions.

Our current research and development efforts are focused primarily on improving design for ease-of-use, enhancing clinical functionality and reducing production costs of our solutions.

Our clinical development efforts are focused on further differentiating our products from our competitors.

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We forecast our component needs based on historical trends, current utilization patterns and sales forecasts of future demand.

We establish our relationships with our third-party manufacturers and suppliers through supplier contracts and purchase orders.

We establish our relationships with our third-party manufacturers and suppliers through supplier contracts and

purchase orders.

In most cases, these supplier relationships may be terminated by either party upon reasonable notice.

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Our quality management system has been certified to ISO 13485:2003 in 2012, 2014 and 2017, and to ISO 13485:2016 in 2019, 2020, 2021, 2022 and 2023.

In 2021, we also received our Medical Device Single Audit Program (“MDSAP”) certification.

In 2021, we also received our Medical Device Single Audit Program (“MDSAP”) certification, which was renewed in 2023.

An MDSAP allows an MDSAP-recognized Auditing Organization to conduct a single regulatory audit of a medical device manufacturer that satisfies the relevant requirements of the regulatory authorities participating in the program.

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Order Fulfillment and Patient Education

With respect to our Flexitouch and Entre systems, once we have a complete patient order and appropriate documentation from the payer, we package and ship the system, configured to their physician's prescription, directly to the patient.

With respect to our Flexitouch Plus and Entre Plus systems, once we have a complete patient order and appropriate documentation from the payer, we package and ship the system, configured to their physician's prescription, directly to the patient.

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

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and Lympha Press USA.

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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We believe our manufacturing competitors' complete reliance on DME distribution intermediaries compresses their margins and limits their ability to invest in clinical evidence and product features that address consumer preferences.

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.

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.

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.

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In the United States, the FDA regulates medical devices, including the following activities that we perform, or that are performed on our behalf with respect to our devices:

product design and development, pre-clinical and clinical testing, manufacturing, labeling, storage, premarket clearance or approval, record keeping, product marketing, advertising and promotion, sales and distribution, and post-marketing surveillance.

product design and development, pre-clinical and clinical testing, manufacturing, labeling, storage, servicing, premarket clearance or approval, record keeping, product marketing, advertising and promotion, sales and distribution, and post-marketing surveillance.

Failure to comply with applicable U.S.

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Unless an exemption applies, each medical device we seek to distribute commercially in the United States requires marketing authorization from the FDA prior to distribution.

The two primary types of FDA marketing authorization applicable to a device are premarket notification, also called 510(k) clearance, and premarket approval.

The two primary types of FDA marketing authorizations applicable to a device are premarket notification, also called a 510(k) clearance, and premarket approval.

The type of marketing authorization is generally linked to the classification of the device, which is based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device's safety and effectiveness.

Our Flexitouch, Entre and AffloVest systems (all models) are Class II devices under the FDA classification system requiring 510(k) clearance.

All of our past and current models of our Flexitouch, Entre and AffloVest systems are Class II devices under the FDA classification system requiring 510(k) clearance.

We obtained 510(k) clearance for our Flexitouch system in October 2006 and for a discontinued predecessor system in July 2002.

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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.

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

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

Thus, modifications or changes in use of our existing devices will be evaluated to ensure ongoing compliance to the FDA requirements.

Further, even after a device receives clearance or approval by the FDA and is placed on the market, numerous regulatory requirements apply.

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● quality system regulation, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;

● labeling regulations and the FDA prohibitions against the promotion of products for un-cleared, unapproved or "off-label"

uses, and other requirements related to promotional activities;

● labeling regulations and the FDA prohibitions against the promotion of products for un-cleared, unapproved or "off-label" uses, and other requirements related to promotional activities;

● medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

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Any new Class II devices developed by us will be submitted to the FDA as required by the 510(k) process.

Under this process, when a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is "substantially equivalent"

to a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a premarket approval application, which is commonly known as the "predicate device."

In 2019, the FDA released an optional Safety and Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.

Under this process, when a 510(k) clearance is required, we must submit a premarket notification to the FDA demonstrating that our proposed device is "substantially equivalent" to a previously cleared and legally marketed 510(k) device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not yet called for the submission of a premarket approval application, which is commonly known as the "predicate device." In 2019, the FDA released an optional Safety and Performance Based Pathway for 510(k) clearance, which allows a submitter to demonstrate that an eligible new device of a well-understood type meets FDA-identified performance criteria to demonstrate that the device is as safe and effective as a legally marketed device.

If the FDA determines that the device, or its intended use, is not substantially equivalent to a previously-cleared device or use, the FDA will issue a not substantially equivalent decision.

This means the device cannot be cleared through the 510(k) process and will require marketing authorization through the premarket approval pathway.

In September 2023 the FDA released additional draft guidance around best practices for selecting a predicate device to support a premarket notification submission which further provides best practices for selecting a predicate device.

A premarket approval application must be submitted to the FDA if the device cannot be cleared through the 510(k) process.

The premarket approval application process is much more demanding than the 510(k) premarket notification process and requires the payment of significant user fees.

The premarket approval application process is much more demanding and in-depth than the 510(k) premarket notification process and requires the payment of significant user fees.

A premarket approval application must be supported by valid scientific evidence, which typically requires extensive data, including but not limited to technical, pre-clinical, clinical trials, manufacturing and labeling to demonstrate to the FDA's satisfaction reasonable evidence of safety and effectiveness of the device.

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:

Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include, but are not limited to, any of the following compliance and enforcement actions:

warning letters, fines, injunctions, civil or criminal penalties, recall or seizure of our products, operating restrictions, partial suspension or total shutdown of production, denying our request for 510(k) clearance or premarket approval of new products, rescinding previously granted 510(k) clearances or withdrawing previously granted premarket approvals.

We are also subject to announced and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities of our subcontractors.

We are also subject to announced and unannounced inspections by the FDA, and these inspections may include the manufacturing facilities or other sites of our subcontractors to audit any part of our quality system.

We were audited three times since January 2010 by the FDA and found to be in compliance with the Quality System Regulation.

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Centers for Medicare and Medicaid Services

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.

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

To attain and maintain accreditation, among other requirements companies are required to institute policies and procedures that 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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● purchase, lease, or order of, or the arrangement or recommendation of the purchasing, leasing, or ordering of any item or service reimbursable in whole or in part under Medicare, Medicaid or other federal healthcare programs.

The Federal Anti-Kickback Statute applies to certain arrangements with healthcare providers, product end users and other parties, including marketing arrangements and discounts and other financial incentives offered to our clinicians in connection with the sales of our products.

The Federal Anti-Kickback Statute applies to certain arrangements with healthcare providers, product end users and other parties, including marketing arrangements and discounts and other financial arrangements offered to our clinicians in connection with the sale of our products.

The statute is very broad, but includes statutory safe harbors (such as a discount safe harbor) to ensure that if a company tailors its conduct in accordance with a safe harbor, it will not violate the statute.

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In addition, to the extent we are found to not be in compliance, we may be required to curtail or restructure our operations.

The Ethics in Patient Referrals Act, commonly known as the "Stark Law,"

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

payable by Medicare to an entity, including a company

The Ethics in Patient Referrals Act, commonly known as the "Stark Law," 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.

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.

Additionally, because some of these laws continue to evolve, we lack definitive guidance as to the application of certain key aspects of these laws as they relate to our arrangements with providers with respect to patient training.

Additionally, because some of these laws continue to evolve, we lack definitive guidance as to the application of certain key aspects of these laws as they relate to our arrangements with providers.

We cannot predict the final form that these regulations will take or the effect that the final regulations will have on us.

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False statements.

The federal false statements statute prohibits knowingly and willfully falsifying, concealing, or omitting a material fact or making any materially false statement in connection with the delivery of healthcare benefits, items, or services.

The federal false statements statute, relating to health care matters, prohibits knowingly and willfully falsifying, concealing, or omitting a material fact or making any materially false statement in connection with the delivery of healthcare benefits, items, or services.

In addition to criminal penalties, violation of this statute may result in collateral administrative sanctions, including exclusion from participation in Medicare, Medicaid and other federal health care programs.

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The Federal False Claims Act provides, in part, that the federal government may bring a lawsuit against any person whom it believes has knowingly presented, or caused to be presented, any false or fraudulent request for payment from the federal government, or who has made a false statement or used a false record to get a claim paid or to avoid, decrease or conceal an obligation to pay money to the federal government or knowingly retained an overpayment.

In addition, amendments to the Federal False Claims Act have made it easier for private parties to bring whistleblower lawsuits against companies.

The Federal False Claims Act’s qui tam provisions have made it easier for private parties to bring whistleblower lawsuits against companies.

The Civil Monetary Penalties Law provides, in part, that the federal government may seek civil monetary penalties against any person that, like under the Federal False Claims Act, presents or causes to be presented claims to a Federal health care program that the person knows or should know is for an item or services that was not provided as claimed or is false or fraudulent or that has made a false statement or used a false record to get a claim paid.

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In addition, the federal government may also seek exclusion from participation in all federal health care programs.

In addition, we bill Medicare Part B and other insurers directly for each sale to patients.

In addition, we bill Medicare Part B, Medicaid, the Veterans Administration and other insurers directly for lymphedema products provided to patients.

As a result, we must comply with all laws, rules and regulations associated with filing claims with the Medicare program, including the Social Security Act, Medicare regulations, the Federal False Claims Act and the Civil Monetary Penalties Law, as well as a variety of additional federal and state laws.

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Physicians and other clinicians, who are responsible for prescribing our products for patients, are expected to create and maintain the medical records that form the basis for the claims we submit to Medicare and other insurers.

Any failure to properly document the medical records for patients using our products could invalidate claims, impair our ability to collect submitted claims and subject us to overpayment liabilities, Federal False Claims Act liabilities and other penalties including exclusion from the Medicare, Medicaid or private insurance programs.

State fraud and abuse provisions.

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We may be subject to a variety of domestic and foreign anti-corruption laws with respect to our regulatory compliance efforts and operations.

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).

Foreign Corrupt Practices Act (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 other federal and state anti-corruption laws to which we may be subject, including, the U.S.

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State and federal transparency/reporting requirements.

As part of the Patient Protection and Affordable Care Act, or ACA, the Federal government has created a transparency program known as Open Payments (the Physician Payments Sunshine Act) which requires manufacturers of drugs, devices, biologicals and medical supplies to report annually to the CMS, an agency within the U.S.

As part of the Patient Protection and Affordable Care Act, or ACA, the Federal government has created a transparency program known as Open Payments (the Physician Payments Sunshine Act) which requires applicable manufacturers of drugs, devices, biologicals and medical supplies to report annually to the CMS, an agency within the U.S.

Department of Health and Human Services, or HHS, information related to payments and other transfers of value provided to physicians and teaching hospitals (“covered recipients”) and certain ownership and investment interests held by physicians and their immediate family members.

Beginning in 2021, tracking and reporting was expanded to include additional covered recipients, namely physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse-midwives.

Failure to submit timely, accurate and complete information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1.0 million per year for "knowing failures to report."

Certain states require implementation of commercial compliance programs and compliance with the device industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, impose restrictions on marketing practices, and/or prohibition and tracking and reporting of gifts, compensation and other remuneration or items of value provided to physicians and other healthcare professionals and entities.

Failure to submit timely, accurate and complete information may result in significant civil monetary penalties for "knowing failures to report." Certain states have their own versions of the Physician Payments Sunshine Act, and may also require implementation of commercial compliance programs and compliance with the device industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, impose restrictions on marketing practices, and/or prohibition and tracking and reporting of gifts, compensation and other remuneration or items of value provided to physicians and other healthcare professionals and entities.

The laws described above impact the kinds of financial arrangements we may have with hospitals, healthcare professionals or other potential purchasers of our products.

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The standards promulgated under HIPAA's regulations include those that:

● restrict the use and disclosure of individually identifiable health information, or "protected health information";

● establish standards for common electronic healthcare transactions, such as claims information, plan eligibility, payment information and the use of electronic signatures;

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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.

In October 2021, we discontinued our Flexitouch (classic) system Medical Device License in Canada, but our Flexitouch (Plus) system License remains current as of the date of this filing.

Third-Party Reimbursement

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The Medicare and Medicaid statutory framework is subject to administrative rulings, interpretations and discretion that affect the amount and timing of reimbursement made under Medicare and Medicaid.

CMS, which is the agency within the Department of Health and Human Services that administers both Medicare and Medicaid, has the authority to decline to cover particular products or services if it determines that they are not "reasonable and necessary"

for the treatment of Medicare beneficiaries.

A coverage determination for a product, which establishes the indications that will be covered, and any restrictions or limitations, can be developed at the national level by CMS through a National Coverage Determination, or NCD, or at the local level through a Local Coverage Determination, or LCD, by a regional Medicare Administrative Contractor, which is a private contractor that processes and pays claims on behalf of CMS for the geographic area where the services were rendered.

Obtaining a coverage determination, whether an NCD or LCD, is a time-consuming, expensive and highly uncertain endeavor, especially for a new device.

Under a NCD that has been effective since January 14, 2002, pneumatic compression devices, or PCDs, including our products, are covered for the treatment of lymphedema or for the treatment of chronic venous insufficiency with venous stasis ulcers.

A LCD, administered by the four Medicare Administrative Contractors responsible for processing durable medical equipment claims, sets forth additional coverage criteria that impacts Medicare coverage for our products.

Under the current NCD that has been effective since January 14, 2002, pneumatic compression devices, or PCDs, including our products, are covered for the treatment of lymphedema or for the treatment of chronic venous insufficiency with venous stasis ulcers.

A LCD, administered by the two Medicare Administrative Contractors responsible for processing durable medical equipment claims, sets forth additional coverage criteria that impacts Medicare coverage for our products.

The validity of the coverage criteria in the LCD is currently under dispute in the District Court of the District of Columbia.

Our Medicare business was 24% of revenue in 2023 compared to 19% in 2022.

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 Medicare 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.

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

We also continue to closely monitor our Medicare business to identify trends that could have a negative impact on certain Medicare patients' access to our products, which in turn could have an adverse effect on our business and results of operations.

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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.

While this approach has had positive impact, we do not know if or when additional payers may adopt the LCD criteria nor do we know how they will choose to interpret it.

While this approach has had positive impact, we do not know if or when additional payers may adopt more restrictive criteria like the LCD nor do we know how they will choose to interpret it.

We believe a reduction or elimination of coverage or reimbursement of our products by Medicare would likely cause some commercial third-party payers to implement similar reductions in their coverage or reimbursement of our products.

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Despite any measures taken to protect our intellectual property, unauthorized parties may attempt to copy aspects of our systems or to obtain and use information that we regard as proprietary.

Our patent portfolio consists of three sets of patents, including patents relating to our Flexitouch system and other wearable compression-related technologies.

Our patent portfolio consists of four sets of patents, including patents relating to our Flexitouch system, our AffloVest system and other related technologies.

As of December 31, 2023, we owned about 171 issued patents globally, of which 63 were issued U.S.

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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, Entre, AffloVest, and AffloVest Pro with the United States Patent and Trademark Office on the Principal Register.

We have registered the trademarks Tactile Medical, Flexitouch, Flexitouch Plus, the Flexitouch logo design, ComfortEase, Entre, AffloVest, AffloVest Pro, and Kylee 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.

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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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, paid maternity/paternity leave, and a company volunteer program implemented in 2022 providing employees paid time to give back to the community.

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

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, paid maternity/paternity leave, and a company volunteer program providing employees paid time to give back to the community.

Diversity, Equity, and Inclusion :

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Talent and Retention:

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.

In 2023, we continued to focus on recruitment, hiring, and retention to ensure high quality talent and a strong fit for specific roles within the Company.

Our recruitment efforts are expanding through strong recruiting and hiring processes, as well as the expansion of our new internship program in 2023.

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

communication efforts.

We also introduced a number of new learning and development options for our team members in 2023.

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