AdaptHealth ready to ‘take responsibility’

PLYMOUTH MEETING, Pa. – AdaptHealth underestimated the size and complexity of ramping up its Humana contract, resulting in a $10 million miss against expectations, company execs said on a call to discuss third quarter earnings. 

“Onboarding members is taking longer than we had anticipated, resulting in a reduction to our expected revenues from Humana,” said Richard Barasch, chairman and interim CEO. “Nevertheless, we remain confident that this agreement will achieve positive results for AdaptHealth.” 

Humana in mid-May announced it had awarded capitated care contracts to AdaptHealth and Rotech Healthcare to provide certain home medical equipment services to its Medicare Advantage HMO members effective July 1. 

One sticking point in the transition process: The company expected to buy out equipment from several competitors, but those deals “didn’t materialize,” said CFO Jason Clemens, who also pointed to Humana’s growing member base in 2023. AdaptHealth had originally anticipated onboarding about 1 million new patients. 

“It didn’t help us from a timing perspective as it just creates more and more patients that we need to push through,” he said. “But overall, that’s a very good thing as we expect to continue to grow with Humana.” 

The third quarter did meet company expectations for top line growth, says Clemens. Total sleep revenue was $315.4 million, up 17% year-over-year, while other respiratory revenue was $151.1 million, up 8%. 

“Our new PAP equipment starts were consistent with our expectations in the third quarter,” he said. “Our PAP resupply business achieved record order volumes. Our resupply census now totals over 1.5 million patients.” 

The strength in sleep offset a shortfall in the diabetes business, says Clemens. 

“As we continue to revamp our diabetes product category, CGM census was up 4.3% year-over-year, resulting in flat CGM revenue,” he said. “As expected, pump and pump supply revenue was down $9 million year-over-year as our tube-based pump volumes remain under pressure from tubeless pumps. We expect this pressure to continue into the fourth quarter.” 

No mention was made of a class action lawsuit filed Oct. 24 against AdaptHealth alleging the company misrepresented the strength of its diabetes business, causing investors to pay inflated prices for shares in the company.  

Looking ahead, AdaptHealth is ready to get back on track, says Barasch. The top priority is to fill the CEO job, now that the company and its previous pick to replace Steve Griggs, Crispin Teufel, have parted ways, he said. 

“We must take responsibility for issues, some self-inflicted, that have caused a reduction in investor confidence, including setbacks around the CEO search,” he said. “We are currently talking to highly capable candidates with the goal of having the post filled by year-end. In the meantime, we're not slowing down.”