Apria CFO likes the national's market position
COSTA MESA, Calif. -- Even though Apria's top brass wouldn't turn down a good acquisition offer (see story on page 1), they feel confident the company is properly positioned for future reimbursement challenges.
While Lincare generates the bulk of its profits from Medicare's fee-for-service home respiratory business, Apria has a much more diversified business portfolio, which includes dozens of managed care contracts. As Medicare moves to transition more beneficiaries to HMOs, Apria officials consider the company well positioned to accommodate that change.
"If you are in managed care, you are not allowed to cherry pick and just do oxygen," said Apria CFO Amin Khalifa. "You've got to do the whole thing. So we do ventilators, pain management a lot of wheelchairs and some of those things are lower margins than just doing oxygen and respiratory drugs."
During AAHomecare's Legislative Conference last month, former CMS Administrator Tom Scully said that as many as a half of all Medicare beneficiaries will migrate to PPO plans in five years (see story on page 4). Currently, 89% of Medicare beneficiaries are insured by the traditional plan, which pays reimbursement off a fee schedule; 11% of beneficiaries are enrolled in Medicare HMOs.
Scully's prediction seems to bolster Apria's confidence in its future success. Additionally, given Lincare's focus on Medicare's traditional fee-for-service plan, its profits will probably never be higher, said one industry watcher.
"We think the world is changing -- it always changes," Khalifa said. "Lincare will have to get national contracts and do some changes to their system and business model, but they are a good company and I think they will get there."