ELYRIA, Ohio--Uncertainty about Medicare reimbursement changes for oxygen and power mobility has "seriously disrupted" the domestic market, Invacare Corp. announced in its third-quarter earnings report Thursday.

"The Medicare changes are so dramatic that if they are implemented in their current form, there will be customers who will not be able to change their infrastructure quickly enough to survive," the company stated. "As the industry's largest creditor, [Invacare] would certainly encounter increased bankruptcies in its customer base if there are no meaningful adjustments."

Net earnings for the quarter, ended Sept. 30, excluding charges related to restructuring activities, were $12 million, down from $17.2 million for the same period last year. Net sales dropped 4 percent to $379.5 million versus $395.3 million in 2005.

For the North American market, net sales decreased 5 percent to $248.3 million from $260.5 million last year.

Respiratory product sales decreased 15 percent for the quarter, largely because of slower demand for its HomeFill oxygen system, the company said, and sales to small providers and independents dropped 34 percent.

Medicare's overhaul of the oxygen reimbursement payment structure and the Deficit Reduction Act's 36-month rental cap on oxygen equipment (see HomeCare Monday, July 31) have slowed purchases until providers have a clearer view of future reimbursement levels. And a September Office of Inspector General report that calls for further reduction of the rental cap to 13 months compounds providers' concerns, Invacare said.

Rehab sales decreased 9 percent, consumer power wheelchairs were down 17 percent and custom power sales dropped by 12 percent during the quarter. New documentation requirements for power mobility devices are causing problems, the manufacturer stated, and sales continue to be "acutely impacted" by Medicare- and Medicaid-related reimbursement issues.

Following the release of CMS' new power mobility fee schedule--which cuts reimbursements by more than 40 percent for some items--providers have reduced their purchases and lowered their inventory levels for PMDs, Invacare said.

"There is no way to predict the potential consequences to our provider customers if the new fee schedule is implemented in its present form," the company's statement read, adding that "the financial viability of a portion of the provider base which is focused in this product line will be compromised."

"Our provider customers are frightened and concerned about the future viability of their businesses," said Chairman and CEO Mal Mixon. "They are more aggressively refurbishing used equipment and purchasing only equipment that is absolutely necessary." Providers also are hesitant to invest in new ambulatory oxygen systems, such as HomeFill, because they would not be able to recover their investments if the capped rental period is reduced to 13 months, he continued.

"In addition, the rate of physician approvals on power wheelchairs has fallen as physicians balk at the necessity to spend significantly more time responding to provider requests for increased documentation to prove medical need," Mixon said. "The industry is currently caught in a major web of reimbursement uncertainties and disabled consumers are not getting the product they need."

Because of the reimbursement changes, Invacare said previously announced cost-cutting measures--including head count reduction, transfer of additional manufacturing to China and increased Asian sourcing, and shifting resources from product development to manufacturing--continue. The company has eliminated approximately 535 positions since a restructuring in July 2005.