Home Health & Hospice Week

Fuel costs, hurricane expenses and ASP declines contribute to woes.

A variety of factors are hitting Apria Healthcare Group Inc. hard.

Slow-downs in Apria's durable medical equipment, respiratory medication and infusion therapy business lines have caused the Lake Forest, CA-based company to cut its earnings forecast for the year.

The news that Apria expects full year revenue growth from 2 percent to 3 percent instead of 5 percent to 6 percent sent the company's stock down 17 percent to a two-year low, although the stock price has since rebounded somewhat, press reports note. At press time Apria's stock was trading at about $24.50.

Increases in fuel and health benefit costs, hurricane-related expenses and decreases in the average sales prices (ASPs) for Medicare-reimbursed respiratory drugs also contributed to the decline, Apria says in a release.

Analysts warn of further bad news for both Apria and competitor Lincare Inc. if Medicare reduces the inhalation drug dispensing fee as threatened (see Eli's HCW, Vol. XIV, No. 36). The same goes for smaller, privately-owned inhalation drug providers.

Good news: Analyst Balaji Gandhi of Pacific Growth Equities in San Francisco says Apria's revenue slowdown does not appear to be an industry-wide problem, the Los Angeles Times reports. "Many of the smaller players ... continue to grow and do well," Gandhi told the paper.

Lawsuit settled: Apria also finalized its $17.6 million settlement of a whistleblower suit and saw another qui tam suit dismissed, the company says.

CFO Amin Khalifa declined to comment on whether Apria has found a buyer, after putting itself up for sale this summer, the Times says.

Wachovia analyst William Bonello isn't counting on the company finding a suitor, according to TheStreet.com. When Apria stock was trading at about $35, Bonello said "we think it is unlikely that a financial or strategic buyer will pay even the current price, given the low growth and limited free cash flow available to cover the cost of debt."