Home medical equipment (HME) company AdaptHealth (Nasdaq: AHCO) is riding high in early 2024.
For starters, 2023 was the fourth year in a row that the Plymouth Meeting, Pennsylvania-based AdaptHealth grew both its bottom and top line. On top of that, the company is seeing all-time high census numbers in core parts of the business while gaining ground with Humana Inc. (NYSE: HUM) on a critical partnership announced last May.
AdaptHealth is also making progress on its hunt for a new CEO, according to Richard Barasch, the company’s chairman and interim CEO.
“Stated simply, we had a terrific fourth quarter and ended 2023 with a great deal of positive momentum throughout our business,” Barasch said during a Feb. 27 earnings call highlighting Q4 and year-end financial results.
AdaptHealth went public in July 2019 via a special purpose acquisition company (SPAC) merger with DFB Healthcare Acquisitions Corp. It currently provides medical equipment and supplies to about 4.1 million patients annually, with a team of about 11,000 employees.
In terms of its patient population, AdaptHealth has “ongoing relationships” with more than 1.5 million people with sleep apnea, more than 230,000 people with diabetes, and more than 300,000 people with chronic respiratory conditions, according to the company.
“We finished the year with a very favorable quarter driven by continued strength in our sleep and respiratory product lines and the expected improvement in our Humana contract,” Barasch continued.
For full-year 2023, AdaptHealth’s net revenue was about $3.2 billion, a nearly 8% increase compared to slightly under $3 billion the prior year. Net loss attributable to AdaptHealth was $678.9 million compared to net income of $69.3 million, largely resulting from a $830.8 million pre-tax write down of goodwill, according to the company.
For the fourth quarter, AdaptHealth’s revenue was $858.2 million, a 10% bump compared to $780.3 million during the same period in 2022. Net loss attributable to AdaptHealth in Q4 was about $254.5 million.
“This is the fourth year in a row that AdaptHealth grew both top and bottom line,” Barasch said. “And it’s especially notable that nearly 95% of the 2023 revenue growth was not acquired.”
Humana arrangement offers compelling roadmap
In May, AdaptHealth announced that it had entered into an agreement to become the capitated provider of durable home medical equipment and supplies to Humana Medicare Advantage (MA) HMO members in 33 states, plus the District of Columbia.
The value-based pricing model was estimated to cover 1 million members.
Humana is one of the largest MA payers in the U.S. The company additionally owns numerous clinical capabilities, including senior primary care and home health business, through its CenterWell arm.
In addition to AdaptHealth, Humana has a similar arrangement with Rotech Healthcare Inc.
“Partnering with national DME partners under a value-based arrangement aligns with our goal to enhance access to the home care services we provide to patients across the country,” Kirk Allen, senior vice president of Home Solutions at Humana, said in a statement.
Terms of the DME provider contracts were not disclosed.
After setting the foundation in 2023, the Humana contract is now performing as originally planned, AdaptHealth’s Barasch said.
“We are on track to substantially complete patient conversion this quarter,” he said. “We value our relationship with Humana, [and we] are working hard to be a good partner. We’ve learned valuable lessons and onboarding these types of agreements, and are now in a position to do more of the same.”
The hunt for a new CEO
Stephen Griggs stepped down as AdaptHealth’s CEO last summer. The move was a “mutual decision” between Griggs and AdaptHealth’s board of directors.
Now, AdaptHealth appears close to finding a permanent replacement.
“We now have a couple of very promising candidates and are currently advancing through the recruiting process,” Barasch said during the earnings call. “We will keep you updated as we move forward. But as you can see from our results, our progress has not slowed down during this process.”
