Greetings, and welcome to the VieMed Investor Presentation. At this time, all participants are in a listen-only mode. You can submit your questions on the webcast at any time by typing them in the Ask a Question field on the left side of your screen. If you are connected by phone and require operator assistance during the conference, press star zero on your telephone keypad. On the webcast, for any assistance, click the question mark icon on the upper right corner of your screen. Please note that this conference is being recorded. I will now turn the conference over to your host, Glen Akselrod, President of Bristol Capital. Thank you. You may begin.
Thank you, Diego, and thank you everybody for joining our webcast today with VieMed. The purpose of today's presentation is to give our audience a better understanding of the business through a PowerPoint review and discussion with management. That discussion will be led by Casey Hoyt, CEO, who is also joined by Todd Zender, Chief Operating Officer. We will break for a Q&A at the end of the formal presentation. When we do break, we encourage questions to take place. As a reminder, we're only taking questions through the portal. If you're listening over the telephone, please access the web link sent earlier today to ask a question. Remember, you can submit a question using the text box within the portal at any time. I'll ask the questions on the air for everyone to hear, and management will then answer.
I'm not gonna reference any names, but simply read the questions asked. If I can't get to your question online and in our available hour, it has not yet been addressed and can be, I'll get back to you via email. If for some reason you're experiencing any issues once we start, remember, you can also email me, glenn@bristolir.com. I will be happy to assist. I'm not going to read the forward-looking statements, but I do state that they apply, and I reference them on this, page two of this PowerPoint. With that said, once again, thank you for joining us. Remember, this is fairly informal, and we do encourage questions to help you better understand the business and its growth path. Now I'll turn the call over to Casey to just start his part of the discussion and presentation.
Great. Thanks, Glenn, and thanks everyone for joining the call today. We're just gonna hop right into this investor presentation. We'll try to be as efficient as possible to allow for plenty of time for Q&A on the backside of the presentation. Starting on slide 3, VieMed at a glance. We are the largest independent provider of non-invasive ventilation in the country. We've established that status through deploying respiratory therapists across the country, across a 45-state region, to treat very sick patients. Our patient is typically struggling with COPD or some sort of neuromuscular disease that's leading to where their lungs are failing them. What we do is we intervene at a critical moment in time when they are really prone to going back inside of the hospital or the ER.
We prevent those costly readmissions from happening by offering a next level type of TLC type of care in the home. Highly profitable organization with a 40% CAGR in revenue since 2010. These respiratory therapists are on call 24/7, operating out of their vehicles and designed to kind of drop everything they have going on and go at a moment's notice for our patients. The company is headquartered in Lafayette, Louisiana. We're currently serving over 35,000 patients. Currently listed on the NASDAQ under the ticker symbol VMD, as well as dual listed on the TSX under VMD.TO. This next slide's about our timeline. We started the company back in 2006 under the name Sleep Management.
I'm one of the original founders with my good friend and current president, Mike Moore, who is a respiratory therapist by trade. In 2010, we started one of the first home sleep testing companies in the country called Home Sleep Delivered. Home Sleep Delivered is still a sub of ours today, but it's an important piece of our history because we had to really develop a new sales pitch and embrace new innovation and new technology. Our manufacturer at that point in time was Philips of our CPAPs, and they were keeping a very watchful eye on that whole transition that we made into home sleep. Fast-forward to 2012, that was probably one of the reasons that they offered us the opportunity to bring the Trilogy ventilator, the non-invasive vent, into the home market space.
From 2012 to 2015, you can see that we are rapidly growing. In 2015, PHM, Patient Home Monitoring, who was trading up in Canada on the TSX Venture Exchange at this time, finds us, they acquire us, they hire myself and Mike to be the CEO of the organization, and off we go. Our job was to integrate and organize the 11 businesses that they had previously rolled up. As we go to 2017, we realized that we had two different strategies for capital, and so we set a strategy to spin out from the PHM companies. At this point in time, we're on the TSX Venture Exchange, and we quickly uplisted to the Toronto Stock Exchange shortly thereafter.
2019, we take our story down south to the U.S. and uplist onto the NASDAQ. As you can see, our annual revenues are $80.3 million at this point in time, and then we finished 2021 with $117 million on the top line. We will talk a little bit more in greater detail about the financials as we get into the back half of the presentation. Our, you know, our key investment consideration, we are treating these COPD patients. COPD is the third largest killer in the U.S. behind cancer and congestive heart failure. We've got about $50 billion being spent annually on the disease, and it's just a high market growth opportunity for this business model. It's definitely servicing the 10,000 baby boomers that are turning 65 every day.
That's the push of the aging population that struggles with this disease. We have an opportunity as well to expand our service offering into the VA, which we've been working on for the past couple of years. The VA is the second largest payer in the country behind Medicare, and we're getting very close to making non-invasive vent the gold standard of care for those guys. They're just always a little bit behind with their bureaucratic ways. These are all favorable market trends that you know we are increasing the need for that's supported by government and effective home care solutions to reduce patient hospital admissions, increasing the system efficiency, offering better comfort and family lifestyle options, and ultimately it saves money for the patient, insurers, and governments that are doing business with us.
This next slide is about the Medicare population and how it's growing. We've got 63 million beneficiaries in 2021 that were enrolled with Medicare. That's expected to grow up to 80 million by 2030. The DME industry as a whole has to invest. It's going from $58.3 billion in 2019 to $98.4 billion that they will have to invest in 2028. This aging population is all playing into our hand right now. This next slide is about the NIV market penetration. This is really how we hone in on our market space, if you will. If you think about the COPDers in the country, we have got 25 million estimated.
About 16 million of those are diagnosed, but roughly 10% are at stage 4 of the disease state, which is the most severe level of disease state, either when their lungs are most prone to failing them and leading them to chronic respiratory failure. About half of those are actually at chronic respiratory failure, which is when they become candidates for a non-invasive vent. So w have got 1.25 million patients out there walking around that need us today, and currently we have less than 70,000 Medicare beneficiaries that are on service. This is representative of less than a 6% market penetration number. Ninety-four percent of these guys that need us today are really walking around going in and out of the hospital and burdening these facilities with unnecessary visits. VieMed is the third largest provider.
We are the largest independent, but we do have two large nationals that are greater than us, Apria and Lincare. Collectively, the top 10 providers in this space control 63% of the overall market. How do we do it? We are putting these registered respiratory therapists on call 24/7, as I mentioned. They are all trained as COPD educators. They are trained to get in there and assess and service the medical equipment that's in the home. We have a chief pulmonologist that oversees all of our staff and all of our clinical protocols. Then the latest thing that we added on at the beginning of last year was a behavioral health component, and we're plugging in the gaps right now with behavioral health specialists that work alongside of the respiratory therapists. They handle all things that go beyond respiratory.
We have patients that are very sick and towards the end of life, and often working through that transition of going from dealing with their respiratory disease to transitioning to hospice can be more of a behavioral health component than anything else. 50% of the reasons that these folks go back into the hospital are anxiety and emotional driven. Our new division, VieMed Clinical Care, has been super helpful in not only vent retention, but increasing the quality of life for these patients and giving them the confidence that they need to improve quality of life. Our patients are very, very sick. A win for them is if they get to go to the mailbox, if they get to do the dishes or something like this.
What we do is we document these activities of daily living reports as with our therapist in the home, and then they'll report that back to the physician. Any little nugget that they get of where they're improving, that's a win for us. Overall, this is affordable for patients. The majority of all these services are paid for and reimbursed by Medicare or other commercial providers. This next slide is an overview of all the products that we use while in the home, and the major theme here is that we're a device-agnostic company. We're not a Philips company. We are not a ResMed company. We're the paint shop that will sell Sherwin-Williams or Benjamin Moore. Doc, you just pick which paint you want. That kind of goes for all the products. We have non-invasive vents at the top.
Percussion vest is a product that's very complementary to the respiratory disease and COPD in the non-invasive vent. It treats bronchiectasis, the stiffening of the lung disease. We have 3 different manufacturers that we use for that. CoughAssist for our neuromuscular patients to help them produce secretions and cough. Oxygen therapy. Our oxygen offering is fairly unique to our competitors around the country. We have a tankless model where we put out a stationary concentrator alongside of a portable oxygen concentrator that can be latched to the hip of the patient and offer them a lot of portability for what they need to get out and about in the town. That's typically for our stage 1, 2, and 3, and ultimately 4 guys.
Sleep therapy, we do a remote sleep offering where we have a therapist that mails out the machine or the home sleep study first. We get it back in-house, we get the results, and then we'll follow up with AutoPAP and hold the hand of the patient with a telehealth call or even just a phone call to make sure that they are getting compliant with their sleep therapy. The last bullet is remote patient monitoring. We'll talk a little bit more about some technology that we're using in the home in the coming slides. The proven growth strategy, how do we do it? You know, when we're selecting a location, we look at all sorts of wonderful data points. We certainly look at COPD prevalence.
We target hospitals and facilities that have high readmissions and, you know, maybe are struggling with those readmission burdens. We look at the scripts that the doctors are writing and pay attention to what the competitors are doing too, but really at the end of the day, the biggest thing we are looking for is to find that person that has existing relationships. Oftentimes a clinician that we can train how to walk and talk the VieMed way, convert them into a salesman, if you will. They are called patient care coordinators in our organization, but they're typically a clinician that we have trained how to sell. It's a very unique lean deployment model. We don't rely on brick-and-mortar facilities to function as a part of our business model. So they keep inventory in the trunks of their cars.
These folks are monitored by GPS, and they are very lean and mean, and they're designed to just respond faster than the competitor and always have the things that they need to service the patient at a moment's notice. It's a high service model, high touch, so we always explain our business as human interaction in the home coupled with high tech. We'll talk a little bit more about that in the coming slides here. Okay. These are some of our studies that we've produced over the years. Our first one all the way to the left was our proof of concept study with KPMG. It showed that patients were three times more likely to die in the first 90 days if they go untreated.
That was important that we understood that we needed to get these folks on therapy sooner rather than later in order for them to really receive the mortality benefit. The mortality benefit in KPMG showed up as for every 6 patients we put on therapy, we save a life. It was a 16% reduction in mortality. We saw the same thing with the next study. The American Journal of Managed Care are very similar, had 12% reduction in mortality, and then Respiratory Medicine, which was published, had a 50% reduction in all-cause mortality. This is the data that docs are really wanting to see to establish it as the gold standard of care.
If you think about numbers needed to treat to save a life, a doc needs to prescribe 1,000 flu shots in order to save one life or 72 cases of Lipitor before they'll save one life-threatening heart attack. It's a major clinical needle mover that we're showing here. We also showed some cost savings for the payer in KPMG. North of $20,000 per patient per year whenever you stratified the study by the most expensive patients. That one wasn't published, but we've got a spoiler alert headed our way, another cost study that's coming here in the coming months and will be published that shows some other cost savings, which is one of the first published studies that shows cost savings in our space for non-invasive ventilation. We're very excited about that tool headed our way.
The technology that I've been hinting around and touching on, we developed an in-house platform, we call it Engage. What it is it's a hub that we put in the home with the patient. It has a telehealth feature that goes back and forth from our respiratory therapist to the patient. They can quickly pull us up, and we can identify if it's just a panic attack or something or an easy reason that we can talk them off of a ledge and prevent them from going back into the hospital. We can also solve really easy problems that the machine's not plugged into the wall or if we need to silence an alarm or something like that along the way.
The thesis behind developing this was that we needed to get our length of stay from 17 months to 18 months or 19 months to try to improve quality of life by extending it. We're seeing those numbers. We're in the middle of a national rollout with it right now. In the first 90 days, we used to lose 20% of our patients. We would lose 8% month 1, 6% month 2, and another 6% in month 3 to death. We've gotten that down to 13% on everyone who's on the Engage platform. We know that this works. We know that it's gonna help increase our length of stay, and we're in the middle of a national rollout of this. We've also developed a Connect app, which is a smartphone app for it.
In the event that we can't get a tablet out in the home due to some supplier restraints with the tablets, we can put a smartphone app on them to get Engage up and running as soon as possible. We're very excited about these initiatives. We are gonna continue to bolt things on that make sense. The other piece of this is that we are capturing data. This data we can report back to payers with positive outcomes and really be relevant as we develop these value-based discussions and arrangements, which is the future of reimbursement in our mind for our industry. The objectives over the next 24 months, growing our active patient base is just through developing new areas is always on the top of the totem pole.
The game at VieMed has always been to find people faster, get them in areas where we're not in, get them trained the right way, and so on and so forth. We are really good at doing that, and we're ahead of schedule this year. I think we set a goal out for 25 new areas, and we're trending to be ahead of schedule. We certainly wanna communicate the findings of these new research studies that are headed out. When you reflect on a 6% market penetration number, why what's taking so long with the 94%? We believe that we need more data. We have been investing in these studies along the way to really make this the gold standard of care for every physician across the country. All of that data helps do that, accomplish that goal.
Diversifying the payer base goes back to working with the VA and really other commercial payers that we have room to grow with. We are always grinding in that realm. Expand technology capabilities to increase our length of stay. We talked about that. We're gonna continue to build off of Engage and make it talk to as many different Bluetooth elements that are in the home and give us the data that we need to respond to truly drive length of stay. In expanding our service offerings and home-based products and offerings through strategic partnerships, this is really hinting around to the joint ventures that we're discussing with hospitals in an effort to become a preferred partner, offer our service as a continuation of their care from the facility to the home.
These are all hot topics right now, and we are very relevant and have some wonderful conversations and strategies working as we speak. Growing our clinical resource and recruiting platform through VieMed Healthcare Staffing, we started a staffing division at the end of October in 2021. We were already executing through COVID on a good bit of staffing business for the VA centers around the country. We were using a third party to fulfill that. We brought that in-house at the end of 2021, and now we are expanding that as a permanent offering for VieMed. The other piece of this is that it's our own internal recruiting platform. It has beefed up how fast we can find our clinicians in the environment of being in a labor shortage.
We've been able to have one of the greatest hiring rates in a long time, maybe in existence of the company here at the beginning of 2022. Pursue strategic acquisitions is a new way of growing for us as well. We have traditionally been an organic growth engine. That is changing for us. We have an active M&A pipeline. We're working through deals. We're analyzing companies in certain areas around the country, geographic footprints that we're not in, with contracts that we don't have, possibly with different types of patients that we're not servicing. There's a lot of synergies that we can create. The Philips recall has uncovered a lot of folks that are struggling right now with just accessing equipment.
VieMed has equipment to offer, and so we have lifelines by way of M&A to offer other companies that are struggling out around the country, then teach them the high margin vent business. We have got deals that we're working through right now. Hopefully, we expect that to be a part of our strategy by the end of 2022 or certainly early 2023. Okay, I'm gonna transfer the next section over to Todd Zehnder, our COO, and he will wrap it up.
All right. Thanks, guys. Moving into kind of a COVID/regulatory update. Obviously, everybody knows COVID has been hard on the country over the last couple of years, hard on respiratory patients, providers, physicians, but there have been a couple of good things as a result of it. CMS has made many improvements to the ability to treat patients both telephonically through remote patient monitoring, making it easier on patients to get the therapies that they need. Through the respiratory pandemic, it became, I guess, important to get patients treated as efficiently and effectively as possible. As a result of the beginning of the pandemic, non-invasive vents were pulled from the 2021 competitive bidding round early.
As important, about 7 or 8 months later, our other two most significant products, oxygen and sleep therapy, were also removed from competitive bidding as a result of a lack of savings through the process, which shows that the pricing that we're receiving and the reimbursements appear to be somewhat stable. As of the second quarter of this year, we are officially seeing consecutive months of pre-pandemic VieMed growth. We are seeing patient adds like we used to. That's really as a result of hiring more good people through the pandemic, training them effectively, but probably most importantly, having access to physicians and hospitals and just patients in general going back to the ED on a more regular cadence. That's a very encouraging thing from us, and you'll see it in our guidance numbers.
We just recently announced that our the OIG report that was put out a couple years back claiming that 98% of our patients were not medically necessary has been overturned by CMS in an emphatic way. We did receive basically a full 100% medical necessity overturn, but we have a handful of patients that we're working on getting cleared up with CMS. We have about a 20% failure rate for those 8 patients. We don't think any of those will be failed at the end of the day. But nevertheless, this is a significant move for our industry and for vent patients, that we are treating the right patients as we've always contended. A little bit on our model.
We do make up about 70% of our revenue or just a little bit over 70% of our revenue is from ventilation. Firstly, all of our products are paid on a rental basis, so we buy the equipment and rent them out. When it comes to ventilators, they are uncapped, meaning the patient, as long as the patient is alive and not in a facility, we get to continue to bill for that therapy. It comes along with respiratory therapists, supplies, all the maintenance because we own it in perpetuity. Our other major revenue items being oxygen, CPAP, and percussion vests do have capped periods. As I mentioned, the pricing for ventilation is a bundled rate. It's an uncapped bundled rate due to it being classified as a life-saving device and frequent and substantial service.
Looking at our historical revenues, there is a little choppiness when it came to COVID because we shifted our resources to states and so forth through our sales of equipment and our call centers and so forth. What's most exciting is last year we had another core revenue record. We've set core revenue records in consecutive years every year. If you look at this year, we're on our way to another core revenue record growth. If you look at the guidance of second quarter, if you use the midpoint of second quarter over second quarter last year, we're showing about a 23% increase in revenue.
That's getting back to what we used to say, you know, we can grow into the mid- to high-20s or even into the 30s, which is our expectation when we wake up in the morning. What drives that is our vent patients. Those are back in a growth trajectory. You can see at the end of the quarter, we ended at just over 8,400, which was once again a company record. The balance sheet and the capital structure is extremely clean. We have less than 40 million shares, 39.6, I guess as of the end of the quarter. We are in a share repurchase program currently. We began that in March of this year and have continued to buy into this quarter.
As of the quarter end, we had roughly $29 million of cash, $25 million on a net basis, as the only debt we carry on the balance sheet is that $4 million really related to our corporate headquarters. We continue to grow. We're hiring across all of our divisions. We are staffing up in order to keep this patient growth and revenue growth that we are accustomed to. As you can see, as of May 31st, we are just shy of 700 employees. We as a management team and a board are heavily invested into the company. We own roughly 17% of the company.
Looking at the valuation, you can see at the end of the month we had about a $225 million market cap, which puts us at a roughly $200 million enterprise value. You can see on our historical EBITDA of roughly a little bit under $30 million, this is trading at 6x or so. For a company that's growing and growing debt-free, we feel like it's a very healthy opportunity from a valuation standpoint. I'm gonna skip over this slide. This just shows the corporate structure, very clean. Lastly, our board of directors. We are extremely proud of the board that we've put together. We have five outside directors and three insiders being Casey, Dr. Fraser, and myself.
Our outside board is an extremely talented group of individuals that all have a different role, a different skill set in their careers. All of them have healthcare experience and significant healthcare experience in different aspects of the business. So we are extremely blessed to have the board that we've put together. That's gonna conclude our prepared remarks, Glen. We will open it up for questions at this time.
Oh, that's great. Thanks, guys. We do have quite a few questions in the queue, so I'll just get going. To our audience, again, if you do have a question, please use the question text box. First question is, can you just go into a little bit more detail to describe what is a non-invasive vent versus an invasive vent, I would take it?
Well, you can use the machine in both settings for non-invasive and invasive. What non-invasive means is that you don't have to intubate the patient. You don't have to cut a hole in their neck, jam a tube down their throat. You're basically using a mask. It's no different than a CPAP mask. What you're doing is it's using a average volume assured pressure support mode that gets down to the lungs and gets the gas exchange right. It pumps out that carbon dioxide and lets the good gas, oxygen in. It's a very extremely more comfortable way of treating these patients rather than intubating them.
Yeah. Thank you. Can you discuss the reimbursement environment and compare, contrast commercial versus government payers?
Yeah, I mean, I briefly touched on it. We are currently, we feel in a very stable environment, with competitive bidding being tabled during the last round due to we and our competitors submitting bids that did not show significant savings to the government, which in our opinion means that we bid or our reimbursements currently are at a fair market value. We are subject to CPI adjustments. We got a increase this year as a result of last year's inflation, and we would like to think that with all the inflationary pressures that are around right now, we would see some sort of CPI increase for next year as well. That's really for the Medicare environment. On a commercial plan, that's just individualized.
Every payer and every provider will have a different relationship, and we are in with most payers on a state-by-state basis. We would generally say that our reimbursement structure, specifically, for vents, oxygen, and PAPs, is along the lines of very similar with our government contracts to our commercial payers.
Okay, thank you. Next question: Has the successful OIG appeal provided any additional marketing benefits since the announcement?
That's hard to actually say whether we have gotten more business or less business. We don't think we were losing business as a result of it, but it takes some explaining from our sales force and really for investors for that matter. It's hard to say that we turn on any new benefit as a result of it.
Well, I mean, you have an overhang from investors that I think were paying close attention to the regulatory environment, and the fact that we did receive relief was a very big deal for investors, more so than our patients or our referral sources.
Okay, thank you. If you are able to increase the number of products and services sold, would this lead to operating leverage and higher revenues per sales rep?
Yes, as long as the products are complementary to our existing referral sources and/or for our therapists to be able to use to be able to provide treatment in the home. The operating leverage piece would be as long as we don't have to, as a drastic example, hire a fleet of nurses to go administer whatever the product is. That's why you'll see us utilize products, but they are generally gonna be sold to pulmonologists and internal medicine family docs that treat respiratory diseases and have therapies that can be administered by RTs in the home.
Okay, thank you. Is your current distribution system and the quality of team employees and sales reps a competitive advantage for you versus your competitors?
Yes. Our existing sales force and our model being the high-touch, high-tech model is definitely a competitive advantage. We utilize a very different model than many of our competitors. Yeah, our employees and the way we do business is a competitive advantage.
Are there any other modes that investors should think about when it comes to competition?
Any other what, Glen?
Modes. Other additional competitive advantages beyond just the team.
Just that our model is a little bit different than theirs. It's not that. Okay, you know, the competitor is more your one-stop-shop durable medical equipment business. They want the wheelchair, the walker, the bed, the commode, the CPAP, the vent, right? They oftentimes are in the van in the parking lot waiting for case management to deploy it, and off they go. That works for them. They're profitable, they're successful. Where we went out with our more niche focus on complex respiratory is that we're dealing with a clinician that's dressed in scrubs, working inside of the hospital, walking shoulder to shoulder with the pulmonologist, really educating them on what a good-looking chart a good chart should look like, and getting their agreement that this patient would benefit from the vent.
We oftentimes become an extension of case management to help them work through their stack of charts to deploy that patient and pair them up with the right provider. We're very much on the front end of the sales process, if you will, with a more clinical approach than just more of a delivery approach from our competitor.
Okay, thank you. I guess sticking with this theme, can you discuss the unique recruiting or retention strategies for your workforce, I guess in this public setting, number 1, and then producing differentiated recruiting retention performance as compared to the rest of the market?
Well, look, we try and have tried everything with recruiting. The only thing I can say about that is that what's really working well is our VieMed Healthcare Staffing division. They're kicking a lot of butt right now, and they're good at finding people, they're good at getting them in the door, and we're converting at a higher rate than we ever have.
Okay, excellent. Sort of sticking with this theme and given the fact that we've heard a lot about this in the media, are you finding it difficult to hire and retain employees right now?
Not at this time. I know that's a crazy answer, but we're doing really well right now in finding clinicians.
Okay, thank you. Can you talk a little bit about the Philips recall and how that impacted VieMed today?
Yeah. The Philips recall, we saw this one coming back in, I guess, July of last year and really got ahead of it. We started ordering from a bunch of our other manufacturers, some across the pond and some domestic. We stock our shelves pretty heavy, but Philips own 50% of the overall sleep market, so this has been a devastating blow to all sleep apnea patients across the country, to all durable medical equipment businesses that are, you know, trying to help these patients right now with finding equipment. We've been in a unique position because we have equipment, and it's one of these things where we're helping patients find and going out and making sure that they have the equipment they need, and it's allowed our sleep business to grow at a rapid rate.
Okay, thank you. I guess Philips aside, going back to the macroeconomy again and supply chain issues that we're hearing about in the media, are you experiencing any supply chain issues for your business?
We have not had to turn down a patient yet, and that's something we are pretty proud of or defer setups. We've been ahead of it on the sleep business. You know, as Casey alluded to, we've been ahead of it on the vents. The only thing that's gotten tight a couple of times has been portable oxygen concentrators. With our largest supplier is Inogen, and they are back manufacturing and distributing to companies like ourselves, and so we are in good shape there as well. Now, we've had to make some big purchases and had to prepay from some certain things. Once again, as a result of our clean balance sheet, we have been able to do that.
Okay, thank you. How many patients can a single respiratory therapist handle given the 24/7 strategy?
It really depends on the area, the traffic, the types of patients. When I say that rural areas with mountain ranges and things like that, high congestion, traffic areas, patients, if you have a higher load of invasive versus non-invasive vents, those all matter. We like to think that on average, our RTs can handle between 50 and 60. It also matters if we have an oxygen driver in the region or not. If they are doing all the oxygen as well or doing all the percussion vest drop-offs and so forth. There's a lot of different things, but if they're a pretty much steady vent RT, somewhere between 50 and 60.
Okay, thank you. This next question, I think you touched on part of it, but I'll ask it just for you to elaborate a little bit more. I have always understood the business to involve severe COPD. How common is it for a patient to leave the program? And then as a follow-up to that, those that remain, how long do they typically stay on the program prior to expiration?
Very uncommon for a patient to leave the program. The only reason we'll lose a patient, I mean, I shouldn't say the only, but the majority of the reasons that someone would shift would be payer-related in the event that we wouldn't have a payer contract that they switch to. From a clinical standpoint, they rarely leave, Lynn. I mean, to elaborate on that, the most common reason is due to death. Expanding on the comment, our average length of stay for our vent patients is 17 months.
Okay, thank you. I have a few questions regarding competition, so I'm just gonna characterize it all in one question and have you, answer it. Maybe if you could be a little bit more specific on who your main competitors are and I guess what the competitive landscape looks like for you.
Well, the big nationals are Lincare, Apria, and AdaptHealth. AdaptHealth is a little bit harder to track just because they purchase companies and allow them to keep their brand and name. You have to do a lot of digging to figure out who the AdaptHealth companies are. AdaptHealth has really become probably the largest player here in the country. The rest of our competitors are really mom and pops in just various regions. We consider the most threatening competitor, someone who has a bleeding heart, respiratory therapist, clinician that truly cares about taking care of patients the right way, has a nice program, is accredited with respiratory therapists, delivers that service protocol in the home.
Those guys who are doing the right things by the patients are more of a threat to our model than the bigger nationals who are more one-stop shops.
Okay, thank you for that. Can you expand on the potential hospital joint ventures expanded service offerings?
That is really just an initiative to make the hospital a partner of ours and become a preferred provider of the hospital. We're working on a bunch of different strategies with that. I'd rather not share or go into too much detail on what our strategy is. There is many DMEs around the country that are hospital-owned that don't really have the service arm attached to it, and so they have more closets with equipment in it. What we offer is the service piece to their business model, and so those are the things that we're working on.
Okay, thank you. I'm gonna read this question word for word just to make sure I don't screw it up for you. Is there a competitive advantage by being focused on one core therapy class, or is it a disadvantage not being able to service all of the comorbid patients' needs?
I'd say both. There's an advantage because we like to think that we are the best-in-class when it comes to respiratory therapy. I think that our brand as a result of that and from a physician's standpoint and patient standpoint, we probably have a top-in-class brand. The negative is when you are dealing with some payers, they want to have someone that does everything from bent metal down to a ventilator, and that could be the disadvantage.
Okay, thank you. I have got a few couple of questions here on competitive bidding. I'll start with that. With the competitive bidding on the back burner, can you talk about the current stability of the regulatory environment?
Yeah, I mean, I kind of talked to it a little bit earlier. I think that right now, with competitive bidding on pause , I guess as a minimum until 2024, and we would think that if it is coming in 2024, we would have been hearing and had to start our bidding processes by now. We think that rates appear in a fair range with competitive bidding being suspended. That means that the rates that people bid and said they could provide services for were above where the rates were at the time. It doesn't appear that the rate cuts are high on the agenda. But this is CMS, and we always have to be aware that they have to do things on their own.
We did get an increase as a result of inflationary costs from last year. Like I said earlier, we do. We all see the inflation that's happening out there this year, and we would expect to see some CPI increase for next year.
Okay. Thank you. I believe you covered part of this again, but just in case, what percentage of revenue currently is COPD related versus apnea, and which patients are the most profitable?
If you're just saying sleep, roughly ±10% and the other 90% would be COPD or other related, I guess respiratory issues. Sleep would not be a respiratory disease. We think of it more by product, and 70% or a little bit higher than 70% of our revenue comes from ventilators. Which patients are the most profitable? We tend to see that if we can keep patients alive for 17 months, vent patients are the most profitable. We have patients that expire in the first 30 days, and those are not very profitable. The most profitable is ones that we can have multiple products on that our RT can service at once.
Okay. Thank you. Can you spend a little bit of time discussing your sales force and your sales force strategy?
Our sales force are typically clinicians, or we like to prefer them to be clinicians. Not all of them are. They're generally trained to take care of patients, and then we teach them how to be managed by the numbers and be driven by quotas and so on and so forth, really becoming a sales rep. We don't call our salesmen salespeople. We call them patient care coordinators just because they have a different mindset than your typical sales rep. Our strategy has always just been to spend more time training a clinician how to sell versus training a salesman how to be clinical.
Okay, thank you. Do you believe your company will be more diversified in 10 years in terms of payers and in terms of revenue of different products and services?
Yes. It already is moving in that direction. I mean, we get better and better with commercial contracts. We still haven't completely cracked the nut with the VA being the second-largest payer, but those types of wins. As we get value-based arrangements down the road, that will even diversify our payer mix more. It's continued to diversify with every year that goes by.
Okay, thank you. I actually have a few questions on this VA opportunity and it's a good time to ask them. Can you just, I guess, update the listeners on where that is and whatever next steps are, I guess, in line for VieMed?
Yeah, the VA is three times more likely to have. These patients are three times more likely to have COPD, so it's a major opportunity to help a lot of veterans. Unfortunately, they don't recognize the non-invasive vent as the gold standard of care to treat COPD despite having studies, despite having Medicare doing it since 2012. They're just behind the game. Very bureaucratic organization, slow-moving. They don't like to do new things. Where we're at with them right now is that we're in the middle of a pilot study with the VA, and we are proving out the benefits of treating these patients in the home with non-invasive vents and only doing it with VA patients, which is something that they've asked us to do.
Once we get the results and the findings of that, we then will have the proof that they have asked for, and hopefully we'll establish it as the gold standard of care for everyone in the country to go out and pursue the treatment on veterans.
Thank you. Can you discuss any reimbursement risk that VieMed, I guess, is exposed to?
I mean, we're always exposed to CMS changing reimbursement, but I've kind of alluded to that a couple of times already. We think that the reimbursement is pretty stable right now.
Okay. Thank you. Just going through some other questions. Where are you seeing inflationary pressures in your business?
It's across a lot of different areas. We are seeing some pricing increase on supplies. It's been relatively, you know, managed, I guess it's been managed well, and we haven't seen significant increases. Shipping costs, fuel costs. We've seen some labor cost increases, professional services. It's creep, but it's not any one significant item.
Okay. Thank you. Given all the reasons you cite for why a seriously ill COPD patient should get a home-based NIV, why are 94% of Americans still not getting it?
A lack of education to the physician, the lack of studies and research, which is why we've been investing in the Harvard Study and the American Journal of Managed Care. You know, once you get docs on stage at the American Thoracic Society and on chest, kinda beating on their chest about the data that proves the good we've been doing in the home for the past few years, I think that's what the country needs. Even our competitors need to go out and find these patients and get them on care, prevent them from going back into the hospital.
Thank you. What is your payer coverage and what percentage of the managed care insurance coverage do you nationally or perhaps more relevant in the states in which you operate have?
It's hard to say what our payer coverage is. We're covered in every state for Medicare purposes. We have commercial contracts very likely in all of the 45 that we're doing business in. We don't have every managed care contract out there. We work on the ones where our salespeople are active, and we work on areas where we're recruiting. As far as a percentage of total plans, that's really impossible for us to cite that number. We are significantly more covered than we were 3-5 years ago, but it's always something that we're gonna try to increase as well.
Okay, thank you. If your test with the VA goes well, are you being considered a sole provider as an exclusive provider, or are there other competitors to you that are part of that?
There would be other competitors that would be a part of that. We're not blind to the fact that we're gonna be an exclusive provider to the VA, but we would definitely be way ahead of the curve in getting this rolled out.
Okay, thank you. Can you talk a little bit more about the relationships that you acquired over the past two years during COVID and I guess the transformation of part of your business model? That's how that's impacted your company short term and long term.
COVID for us, we started providing a lot of our hospital referral sources in the states with ventilators. We offered staffing solutions throughout the country. We provided PPE. We, you know, we were just very nimble in just offering whatever solutions our folks needed to treat the COVID patients. As we responded and became a solutions provider, the conversations transitioned after COVID into what else can VieMed do for us, and how can we be more helpful in that continuum of care? If there's one thing that we learned during COVID, is we don't have enough hospital beds in this country to treat the patients that we have. Everybody was woken up to the fact that we've got to have a continuation of care in the home in some way, shape, or form.
Even Medicare created these hospital-to-the-home codes for the hospitals to make more money once they partner up with guys like VieMed. As a result of our effort of just being problem solvers throughout the turmoil that was going on, the conversations and the ways that we get in the room with the C-level are so much more strategic and helpful and collaborative as we go forward.
Okay, thank you. Speaking of COVID, have COVID fatalities impacted your business and your addressable market in the near term, and if so, how?
It's hard to say, but it's a very good question. Our compliance with our engaged patients has improved, as I mentioned earlier, went from 20% to 30%, but our overall length of stay did not move. Our thesis, which we can't really prove, but I don't mind talking about, is that we were receiving a lot more sick patients. It makes a lot of sense that folks were on the sidelines letting their disease progress, afraid to go in and address it. By the time they did get in there, they were in later stages of their disease state. You know, while we've gotten that, we haven't been able to move our overall length of stay number just yet, but we expect that to change here in the future.
Thank you. Is your outgoing M&A activity picking up as multiples are starting to come down?
Our activity is ramping up. I think one of the things that we are seeing is that the multiples that sellers expected probably at the beginning of this year or even late last year are not realistic compared to where the public multiples are. We have seen some re-engagement by people who are willing to accept lower multiples. Once again, this is still kind of a new process for us, so it's hard to say that, if the whole market is moving towards us as a result of multiple compression.
Okay, thank you. Just a quick follow-up on the VA opportunity. What are the time horizons for the current test, and how many patients are in this test, and how long has it been going on, and when do you expect it to finish?
It just started. We have a $500,000 budget that we are starting with, and so it's gonna be, you know, 50-100 patients that we put in there, depending on how severe they are and how long they stay under care.
Okay, thank you. Next question is, your CapEx has increased, somewhat or substantially. Can you please discuss your current CapEx needs and I guess, what you've seen in it historically?
I'm not sure if it's fair to say that our CapEx has significantly increased. We generally buy equipment for our increasing patients. We'd like to say that the vast majority of our CapEx is growth CapEx. When we're adding vent patients, when we're adding oxygen, when we're adding CPAP and vests, CapEx is gonna go up. Substantially all of our CapEx at this point is for those four products. We have purchased our real estate over the last few years, but outside of that, everything is for medical CapEx.
Okay, great. Thanks. What would you view as the greatest bottleneck for growth, for VieMed?
The last couple years it was access to physicians, patients, hospitals. At this point, it's back to our single biggest governor is whether we can find enough salespeople or not. We're only as successful as finding good salespeople. Our protocols are in place. Our technology is in place. Access is back. We're back full sprint towards trying to hire every good clinician salesperson in the country.
Okay, super. Thank you. I've got a couple more questions for you. I'm recognizing the time constraints, and then we'll end the call. Next question is, since you're a spin-out from PHM, you have obviously had about four and a half years as a standalone company. Can you talk about hindsight, you know, things you did really well, things you did poorly, things you'd like to redo, just, I guess, at a very high level?
I think we are very proud of the spin-out that we effectuated. Both sides have done really well. VieMed got back to its organic growth engine, and now it was Protech and now it's Quipt. Quipt has done a good job. They're growing in the right direction. We made a very sound move for all investors that were involved during that time. Yeah, I mean, that's. I wouldn't consider anything that we did wrong there. I thought we made all the right moves and both sides are healthy. I enjoy watching Quipt grow just as much as I like watching VieMed grow. I guess what I'd say we're probably about as proud of is that we've organically grown the business like we said we were. During COVID, we pivoted to help systems, to help states.
We added new lines of revenue while things were a little bit slower from our organic growth model. Now that that's drying up, we're back to full sprint on our organic growth.
Okay, thank you. One last question, and then I'll ask you for some closing remarks. Apart from findings of different researchers, are you making any efforts to educate the end customer directly? And do you pay referral fees in your industry for referral sources?
We don't necessarily go to patients with education. Our way of educating is educating physicians, case managers, people who are the conduit to patients. We don't have a direct marketing campaign to patients. This is a very clinical product. It's much easier for us to educate the physicians and case managers. On the last part, absolutely not. Referral fees are completely off the table.
Perfect. Really appreciate it. That concludes the Q&A portion of our presentation. To our audience, if you still have any questions, please email me, Glen@bristolir.com, and I'll be happy to get back to you. Casey, Todd, any closing remarks you'd like to leave with the group?
No. I mean, I think those were all very thoughtful questions. Thanks to everyone for presenting them. We were happy to answer them and would love and welcome all feedback. We think that VieMed's a wonderful opportunity for all investors right now, and we're excited about the positive momentum that we have on the back half of this pandemic into getting back to our explosive growth mode, and so that's what we will be doing. Stay tuned.
Super. Thanks, guys. Thanks to our audience, and this concludes our presentation.