Item 1A. Risk Factors
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 10, 2025, which could materially affect our business, financial condition or future results. Except as set forth below, there have been no material changes in our risk factors from those disclosed in that Annual Report.
A reduction or elimination of coverage or reimbursement of our products by third-party payors, including Medicare, in the future could adversely affect our business and results of operations.
A substantial portion of our revenues are derived from reimbursement by Medicare and other third-party payors for our ventilator products and services. Currently, ventilators are covered under the National Coverage Determination ("NCD") for the DME Reference List, effective since April 1, 2003, for the treatment of neuromuscular diseases, thoracic restrictive diseases, and chronic respiratory failure resulting from chronic obstructive pulmonary disease ("COPD"). While the DME Reference List has been updated, no standalone NCD has been issued for ventilators. On September 11, 2024, CMS initiated a national coverage analysis ("NCA") for noninvasive positive pressure ventilation ("NIPPV") in the home for treating chronic respiratory failure due to COPD. A proposed decision memo was published on March 11, 2025, with a final decision expected by June 9, 2025, although this date may be subject to change. We have actively participated in the analysis process, including the submission of formal comments, and continue to engage with CMS, the Department of Health and Human Services, and members of Congress on matters related to ventilator coverage.
A new NCD that clearly defines the medical necessity criteria for ventilator devices could significantly affect patient access, reimbursement, and utilization of ventilator therapies, and may have a material impact on our business. Because Medicare coverage criteria often influence commercial payors, including Medicare Advantage plans, changes to Medicare policy may have broader implications for coverage and reimbursement across our payer base. If coverage or reimbursement by Medicare or other third-party payors is reduced or eliminated, or if we are unable to expand or maintain coverage with additional commercial payors, our business, financial condition, and results of operations could be materially and adversely affected.
Adverse global macroeconomic conditions, including supply chain disruptions, tariffs, and fluctuations in foreign currency exchange rates, could negatively impact our operations, costs, and profitability.
Our business may be affected by a range of global macroeconomic conditions, including newly imposed tariffs, disruptions to the supply chain, and fluctuations in foreign currency exchange rates. While nearly all of our revenues are generated within the United States and denominated in U.S. dollars, we rely on both domestic and international suppliers for the medical equipment and supplies we rent and sell to patients. As a result, our cost structure and operational efficiency are subject to global market dynamics that may influence the availability and pricing of key products.
In the first quarter of 2025, the United States government implemented new tariffs on a wide range of imported goods from several countries. These actions led to reciprocal measures by impacted trade partners. Although medical equipment has typically been excluded from prior tariff rounds, the breadth of the new measures and the potential for further expansion have introduced uncertainty regarding future equipment costs and sourcing stability. Alternative sourcing arrangements, engagement with domestic manufacturers where feasible, and optimization of inventory and supply chain planning may help mitigate potential disruptions and support margin stability.
Additionally, global supply chain constraints continue to pose risks to our ability to acquire essential equipment and components in a timely and efficient manner. Factors such as raw material shortages, longer lead times from suppliers, and increased transportation expenses may limit our responsiveness to patient needs and may affect our ability to scale the business effectively.
Although our operations are primarily domestic, we are indirectly exposed to foreign currency exchange rate fluctuations through our international sourcing activities. Changes in the value of the U.S. dollar relative to other currencies, including the Canadian dollar and Chinese yuan, may impact the prices we pay to suppliers, which could increase our cost of goods sold and reduce our gross margins.
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If these macroeconomic pressures persist or worsen, our ability to manage supply continuity, control costs, and meet patient demand could be adversely affected. As a result, our financial condition, operating results, and long-term strategic objectives may be negatively impacted.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.