Positive Signals From Regulators Spells Good News for This Industry

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Pay-As-You-Go (PAYGO) is a legislative policy that essentially means any new laws passed must maintain budget neutrality — if a bill increases spending, cuts to other spending must be enacted in order to offset this. 

When Congress passed the $1.9 trillion American Rescue Plan last March, PAYGO necessitated cuts. Among these cuts was a 4% reduction in Medicare spending amounting to $36 billion. In addition, another 2% from budget sequestration — delayed last year because of COVID-19 — is scheduled to kick in.

This was bad news for many in the medical community, including those in the durable medical equipment (DME) industry led by the likes of Stryker Corp. SYK and Invacare Corp. IVC, which is expected to reach $271 billion by 2026, according to Grand View Research. Medicare spending represents an outsized portion of the DME industry’s revenues.

Fortunately, Congress has acted, avoiding these cuts. The bill, delaying nearly all of the combined 10% of cuts, passed both the US House and Senate, spelling good news for DME providers.

In more good news for the industry, the Centers for Medicare and Medicaid Services (CMC) announced increased funding directly for DME of about 5%. The increase is much larger than in typical years, which generally range from 1% to 3%. Last year the increase was just 1%.

The CMC also raised rates for oxygen products. The move comes after “five years of persistent advocacy to Congressional offices and CMS,” according to an official statement from the American Association for Homecare. The increases will be up to 11% in competitive bidding areas.

These moves by regulators will help the industry continue to thrive, especially for those companies that are positioned well. With its recent string of acquisitions, Quipt Home Medical Corp. QIPT QIPT seems to be doing just that. The company has been expanding rapidly and purchasing carefully chosen competitors, allowing the DME provider to gain a strategic position in the space. If you’re interested in learning more, check out its website here.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.