OIG report looks scary, but we expect little to come from it
Our View: While the OIG report could cause some stock price volatility, mgmt is confident in its position and does not anticipate booking a liability.
First impression: The U.S. Department of Health and Human Services Office of Inspector General (OIG) on Friday issued a report stating that most of the company's Medicare claims for monthly rental of non-invasive ventilators did not comply with regulations.
The OIG audited claims for 100 patients and states that 98 were non- compliant, and then extrapolates to estimate overpayments of $29.1MM from 2016-2017.
VMD has issued a strong response to the OIG's report, noting that 42 of the 100 patient claims had already been audited by a CMS contractor as part of a prepayment review, which approved 41 of the 42 claims.
Importantly, the OIG is not alleging fraudulent activity, so the "reopening period" is limited to four years.
As such, the majority of the claims for the 2016-2017 period in question have already lapsed the window, and management estimates the $29.1MM figure is already down to $11MM, and continuing to decline with the passage of time.
Given its strong confidence in the company's compliance with regulatory requirements, management does not expect to receive an overpayment determination from CMS, and does not anticipate booking a liability on the balance sheet for this matter.
Note also that the OIG does not set clinical policy and its powers are limited to recommending that CMS take action.
The final decision on whether to issue an overpayment determination and recoup any funds lies with CMS, and at this point it is not clear when this issue could reach some sort of resolution.