AdaptHealth rides sleep roller coaster

PLYMOUTH MEETING, Pa. – AdaptHealth had a record number of CPAP setups in the third quarter as the company chipped away at a backlog, but that was offset by a loss in resupply revenue and increased costs, say execs. 

AdaptHealth had 34% more starts in the third quarter than in the first quarter, and its PAP census grew to 27% over its lowest point in February 2022. But another recall from Philip – this time for certain masks with magnetic headgear clips or straps* – dampened the company’s progress. 

“Adjusted EBITDA was negatively impacted by lost revenue from delays in PAP resupply shipping related to the Respironics recall in August 2022 of certain PAP resupply products due to deficient warning labeling,” said Jason Clemens, CFO, during a recent earnings call. “This recall and related supply chain disruption negatively impacted results by several million dollars, but we do not expect this to impact our operations in the fourth quarter.” 

One-time costs incurred during the quarter related to the setups were “pegged at about a $6 million dollar surprise,” in labor and benefits, says Clemens. 

“We set up more than we thought; we got more than we thought,” he said. “We spent every dollar that we could to ensure folks are out there late night and over weekends and getting product on our patients. So, we were obviously glad to spend it.” 

For the diabetes business, AdaptHealth resumed double-digit growth in the quarter, though for the year, it’s likely to be just shy of the 18% growth it had previously anticipated. With CMS’s proposed expansion of coverage for CGMs, the company is confident of long-term sustained growth, says Steve Griggs, CEO. 

“Assuming that passes, that just opens up a whole new avenue of patients that are available on Medicare basis,” he said. “And we suspect that many of the commercial plans will follow suit. So, I think everybody believes that the growth rates that we've seen in the past two or three years on the CGMs will continue, maybe not quite as high, but they'll still continue throughout the next two or three years.” 

Other highlights from the call: 

AdaptHealth recently rolled out myApp, a comprehensive patient app enabling channel of choice communication with the patient, as well as the ability to place and track orders and facilitate clinical coaching. The initial launch is showing strong patient adoption with nearly 5,000 downloads, say execs. 

Revenue per employee is approximately $262,000, its highest level ever, say execs. 

“We expect to become even more efficient as we head into the new year,” said Josh Parnes, president. “As cost pressures continue, Adapt will benefit from its scale, as we will be able to leverage our technology to take market share from less efficient competitors.”