AdaptHealth sees 'permanent shift up' on resupply rates

PLYMOUTH MEETING, Pa. - AdaptHealth executives don't expect volume for new CPAP setups to return to pre-pandemic levels in 2020, but they say that's largely offset by its strong resupply business.

Although new CPAP setups were impacted during the second quarter, PAP resupplies were up by low double digits, says CEO Luke McGee.

“We are cautiously optimistic that we've seen a permanent shift up on resupply rates,” he said.

New CPAP setups began to rebound in July, as did referrals for orthotics, walkers, commodes and other DME linked to hospital discharges that had been impacted by the pandemic.

AdaptHealth has also expanded its sales efforts for ventilators, Bi-PAP machines, oxygen concentrators and pulse oximeters to new referral partners.

“Although not a traditional distribution channel for AdaptHealth, we've been able to utilize our supply chain to provide much-needed equipment to municipalities, NGOs and hospital systems,” McGee said. “We expect this channel to generate $7 million in revenue for the next few quarters.”

AdaptHealth?reported net revenue of $232.1 million for the second quarter ended June 30, an 87% increase from the same period in 2019, including $33 million in revenue from Patient Care Solutions, an acquisition that it closed on in January.

“We continue to believe PCS will be profitable in the fourth quarter of 2020 as a result of better cash collections and improvements in vendor pricing and product formulary improvements,” said CFO Josh Parnes.

AdaptHealth's strategy is to integrate PCS and ActivStyle, which it acquired in May, to boost its medical supplies business; and to leverage Solara Medical Supplies, which it also acquired in May.

“We're a leader in sleep and diabetes, two fast-growing product categories, but we are also well diversified in other important categories in the home,” said McGhee. “Over time, we believe there is an opportunity to utilize our patient connections, referral relationships and payer contracts to offer a connected health solution.”?

AdaptHealth?expects net revenue of between $935 million to $938 million and adjusted EBITDA of $169 million to $178 million for fiscal year 2020.