RS Medical will lay off 28 employees ‘right away’

The co-founder of RS Medical has returned to the helm of the Vancouver medical device company effective Monday as it prepares to lay off 28 employees in response to new Medicare reimbursement rules that have wiped out one of the company’s core markets.

Co-founder and major shareholder Rick Terrell, who retired as CEO in 2010, said he has returned as CEO and president effective Monday. John Konsin, who had been hired to implement a growth strategy, has stepped down as CEO but will remain as a part-time advisor to the company, Terrell said.

The company is likely to lay off 28 people in the Vancouver office “right away,” Terrell said. He said he didn’t know the company’s current employment number, although some sources say it’s considerably lower than the 200 employees it reported in 2012.

The company produces and sells a pain therapy system that delivers electrical nerve stimulation to the lower back. Federal regulators for years have examined rules for Medicare reimbursement of RS Medical devices. Terrell said the company learned two weeks ago that Medicare will require much more detailed information from prescribing doctors before approving reimbursements in the future. Medicare patients account for about 40 percent of the company’s business, Terrell estimated.

RS Medical sales staff members say some doctors are unwilling to go through the more extensive approval process, Terrell said. “We are caught in the middle,” he said.

But even without that challenge, the new requirement upends RS Medical’s business model, Terrell said. Until now, a doctor would prescribe an RS Medical device and the patient would be fitted with the system immediately, avoiding the need for a second visit. Adding a second doctor’s visit also adds costs. At current Medicare reimbursement levels, “we can’t afford multiple visits,” Terrell said.

The company has strong sales to Veterans Administration patients and will continue to serve that market, he said.

Despite the large setback, Terrell said he remains optimistic about the company’s future.

“If it wasn’t viable, I wouldn’t be wasting my time,” he said. “I retired in 2010 to dedicate my time to other investments. This one needs more assistance right now.”