Bad debt, billing error dog Rotech's earnings

ORLANDO, Fla. - Rotech Healthcare posted contractual and bad debt adjustments totaling $9.6 million for the first quarter of 2012, according to an earnings report the provider released this week.

Rotech attributed the "higher than normal" adjustments to its implementation of a new electronic order intake system in the second half of 2011, which delayed paperwork.

Also delivering a blow: A correction of Medicare overpayments of $2.2 million or less in each of the fiscal years 2009, 2010 and 2011. The overpayment was identified during an internal review and in the process of preparing financial statements for the first quarter ended March 31, 2012. It is the result of a programming logic problem within the company's billing system, according to the provider.

"We are not aware of any other overpayment issues as a result of this or any other programming error," stated the report. "The company has voluntarily issued refunds related to the aforementioned overpayment."

Other highlights:

• For the three months ended March 31, 2012, Rotech reported net revenues of $117 million. Patient growth contributed $6.7 million in net revenues.

• The provider's core product lines of oxygen and CPAP grew 5% over the same period a year ago. However, decreases in nebulizer medication reimbursement and volume reduced net revenues by $4.1 million for the quarter; and Medicare oxygen patients hitting their 36-month rental cap reduced net revenues by $2.4 million for the quarter.

• Adjusted EBITDA1 decreased to $21.3 million for the quarter, down from $27.8 million for the same quarter one year ago.

"While we are pleased with continued patient growth, nevertheless our first quarter 2012 financial results were negatively impacted by contractual and bad debt adjustment levels of nearly $10 million higher than prior year," stated Philip Carter, president and CEO. "We are making efforts to reduce these higher than normal adjustment levels but such efforts may not result in any material reductions until at least the end of the second quarter of 2012."