AdaptHealth contract to drive long-term growth but comes with short-term costs

CONSHOHOCKEN, Pa. – AdaptHealth is now the exclusive HME provider for more than 10 million new members thanks to a large, capitated contract that has been driving a period of ramped up activity – and costs – including 35 de novo locations over the past few months.

Capitated contract drives scale — and short‑term costs

While covered membership count, revenue per member, utilization and product costs for the five-year, $1 billion contract are all meeting expectations, AdaptHealth has incurred $12 million in labor expenses – higher than expected. Of that, $8 million was variable labor to accelerate the transition and $4 million was elevated wages and benefits.

“That ($4 million) will decline as we right size to the operating model and to meet the service requirements,” said CEO Suzanne Foster during a recent call to discuss the company’s first quarter 2026 earnings. “Given that this is a five-year contract with a potentially longer horizon, the extra implementation spend was the right decision for the relationship and the patients.”

Sleep Health fueled by diagnosis gap, Respiratory Health steady

AdaptHealth’s Sleep Health net revenue for the quarter grew 13.3% to $358.5 million, with PAP new starts setting another new record. With an estimated 80% of individuals with obstructive sleep apnea undiagnosed, the company anticipates increased demand to continue.

“Patient awareness is rising, driven by expanded access to home sleep studies, the development of wearable devices for early detection of obstructive sleep apnea and the integration of dual therapies,” she said. “As more patients experience the advantages of sleep therapy, our commitment remains focused on delivering high-quality care and supporting treatment adherence to fully capture the health benefits.”

Respiratory Health net revenue grew 7.6% to $178.1 million, with oxygen new starts growing 12.8%.

Diabetes segment shows execution‑driven improvement

AdaptHealth’s diabetes segment continued to show improvement, posting net revenue of $142.2 million, a 2.4% increase. In 2024, the company announced an overhaul of the segment, appointing Gary Sheehan as general manager, senior vice president of Diabetes Health.

“The improvement that the team has made over the last year has been the internal focus on us doing the best job possible,” said Foster. “All of the improvement has been on execution. We're not seeing anything different in the marketplace.”

C-suite change

AdaptHealth has announced the immediate termination of COO Toby Scott Barnhart, who has been replaced by Daniel McFadden, chief business systems officer.