Medicare cuts whack Rotech's earnings

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Sunday, February 26, 2006

ORLANDO, Fla. - Just like Apria and Lincare, Rotech Healthcare's recent financial performance suffered in 2005 due to cuts in Medicare reimbursement, the company reported last week.

Rotech reported net earnings of $4.3 million for the fourth quarter of 2005 that ended Dec. 31, compared to net earnings of $8.9 million for the same period last year. For all of 2005, the company reported net earnings of $5.5 million compared to $36 million for 2004. Net revenues for 2005 were $533.2 million vs. $535.3 million in 2004. EBITDA was $106.2 million for 2005 compared to $173.8 million in 2004.

The financial results for 2005 were negatively impacted by Medicare reimbursement reductions for respiratory medications and certain items of durable medical equipment effective Jan. 1, 2005, and Medicare reimbursement reductions for the rental of oxygen equipment effective April 1, 2005.

Respiratory therapy equipment and services revenues represented 87.8% and 87.6% of total revenue for the year and the quarter ended Dec. 31, 2005, respectively, versus 86.6% and 85.6% for the year and the quarter ended Dec. 31, 2004, respectively. Durable medical equipment revenues represented 11.2% and 11.6% of total revenue for the year and the quarter ended Dec. 31, 2005, respectively, versus 12.4% and 13.4% for the same periods last year, respectively.

At Apria, net income for 2005 was $66.9 million vs. $114 million in 2004. For Lincare, net income for 2005 was $213.7 million compared to $273.4 million for 2004.

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