AdaptHealth adjusts expectations for 2022

PLYMOUTH MEETING, Pa. – A larger than expected hit from the Philips CPAP recall in the fourth quarter of 2021 is creating an overhang on 2022, but AdaptHealth says it expects to take a significant share of the patient backlog when the situation improves. 

The company had previously estimated the recall’s financial impact in 2022 to be in the neighborhood of $20 million, but said during an earnings call last week that number is closer to $65 million. 

“It was a much bigger miss in the fourth quarter,” said Jason Clemens, CFO. “We expected a $10 million impact in Q4, but it came in closer to $30 million. It’s disappointing but that’s where we are.”  

AdaptHealth estimates more than 2 million CPAP devices are delivered in a typical year, but in the current environment only about 70% of newly diagnosed patients will receive them, said CEO Steve Griggs, leaving approximately 900,000 newly diagnosed patients waiting for a device by the end of 2022. 

“We are the first or second largest PAP provider in the country,” he said. “We expect to capture a significant share of this backlog and benefit from the historic organic growth of the sleep sector.” 

M&A front 

AdaptHealth also announced the acquisition of Toms River, N.J.-based Community Surgical Supply, which it closed on Dec. 31, the largest deal the company has done to date outside of the Aerocare merger, said Josh Parnes, president, who described the deal as “$100 million-plus.” 

“They are a clinical respiratory company that focuses on oxygen, vents, sleep and full-service HME,” he said. “What’s nice about that business is there are a lot of cross-pollination opportunities with our existing business. There will be good opportunities on sleep once we exit the Philips challenges.” 

As to possible acquisitions in 2022, the company will have a more “prudent focus,” says Parnes. 

“(Suppliers) that are Philips-heavy will be impacted in terms of both valuation and how we think about those deals in 2022,” he said. “Even some of the deals we did in 2021, some of those deals that had a heavy Philips allocation, affected our total supply. On the diabetes front, on other respiratory and on supply providers with wide breadth of product – we are still in the market looking strategically at opportunities and looking geographically at opportunities.”