AdaptHealth (Nasdaq: AHCO) believes the restart of Medicare’s competitive bidding has the potential to reshape the home medical equipment (HME) industry — an opinion expressed by a number of health care organizations and stakeholders.
But during its Nov. 4 earnings call to share third-quarter 2025 financial results, the Conshohocken, Pa.-based provider noted its operating efficiency as “a unique and critical strategic asset.”
“While the final rule has yet to be released, CMS [Centers for Medicare & Medicaid Services] has not minced words about what it hopes to achieve with the redesign of the program,” AdaptHealth’s CEO Suzanne Foster said on the call. “As outlined in the proposed rule, CMS sees the successful process as one that will cause HME participants, small and large, to submit competitive bids, and it seems to view limiting the number of contracts awarded as the key mechanism for achieving that aim. Some look at the bidding program and focus only on the reimbursement risk. However, rate compression is not a foregone conclusion, and moreover, it is only half the equation.”
Based on the language in the proposed home health rule, “The other half is that if CMS retains its proposal to limit contract awards, this would, by definition, consolidate traditional Medicare market share with knock-on effects that would likely force industry consolidation more broadly,” Foster added. “As a result, competitive bidding has more potential to transform HME industry structure than perhaps any other dynamic.”
AdaptHealth, Foster said, is ready. “Our cost structure enables us to participate in the bidding program from an advantaged position. Furthermore, as government policy continues to evolve, our improving financial strength affords us the flexibility to take strategic action to consolidate market share. Where others may see risk, we see opportunity.”
‘Milestone’ third quarter
In the lead-up to those remarks on competitive bidding, Foster described the third quarter of 2025 as a milestone for AdaptHealth.
“If you recall, last year at this time, we realigned our business into four reporting segments, each under general managers and dedicated sales leaders,” she said. “This was intended to focus our efforts on improving patient service and operational efficiency. By doing so, it allowed us to better manage our resources, and that decision was a key contributor to the mid-single-digit organic growth each segment produced this quarter.”
Additionally, the company completed “substantial” improvements to operations in the third quarter “and delivered financial results that exceeded our expectations.”
AdaptHealth’s CFO, Jason Clemens, reported net revenue of $820.3 million for the third quarter, a 1.8% increase compared to the third quarter last year. “Organic revenue growth was 5.1% in the quarter,” Clemens added.
He also reported strong performances by all four of AdaptHealth’s major service segments: sleep health, respiratory health, diabetes health, and wellness at home. Each segment achieved “year-over year organic growth,” Clemens said.
Highlights included Q3 sleep health net revenue of $354.8 million, an increase of 5.7% compared to the same quarter last year.
“Sleep health starts were approximately 130,000, up 6.8% versus the prior-year quarter, resulting in our highest quarter in two years,” Clemens said. “Our sleep health census reached a new record of 1.72 million patients, up from 1.70 million in the prior quarter. Third-quarter respiratory health segment net revenue increased 7.8% from the prior year quarter to $177 million.”
Diabetes health’s net revenue increased by 6.4% to $150.1 million, “our first quarter of year-over-year growth since the first quarter of 2024,” Clemens said. “Although CGM [continuous glucose monitor] starts were softer than we expected, CGM census grew over the prior year quarter for the third consecutive quarter, driven by continued improvement in retention rates.”
“We are maintaining our full-year 2025 revenue guidance range and expect to come in very modestly above the midpoint of that range,” Clemens said. “We are also maintaining our full year 2025 adjusted EBITDA guidance, but we expect to come in at the bottom end of that range as we prudently accelerate investments in infrastructure, technology and labor to stand up our new capitated arrangement.”
New capitation partner
Foster added that Q3 was also a time to continue AdaptHealth’s “significant strides towards improving patient service and field operations.”
She referenced the company’s “success with our Humana capitated arrangement, which demonstrated for the first time that an at-scale HME provider could lift and shift significant volutes of activity while maintaining high service standards.
“Our immediate objective is to replicate that success by delivering on our promises to our new IVN [integrated value network] partner, as well as to another new capitation partner, a major payer for whom we will be the exclusive provider to an additional 170,000 lives, as announced this morning.
“As we look out on the horizon, we intend to lead the evolution of our industry by using our results to prove to every IVN and large hospital system in the U.S. that partnering with us produces better outcomes for patients.”
