Apria Healthcare Group Inc. is “on track” with digesting a new acquisition as well as its ongoing rework of how it bills and collects for its services, a company official said.
The Lake Forest-based home healthcare provider could see as much as $95 million in revenue from its March deal for a home health business, Chief Financial Officer Chris Karkenny said.
Apria, which provides breathing treatments and other medical services to patients in their homes, spent $22 million to buy the home healthcare division of Danbury, Conn.-based industrial gas maker Praxair Inc.
Progress
Karkenny cited progress on folding the acquisition into the Apria fold, as well as a separate effort to resume control over much of the company’s billing operations after a period of outsourcing, as bright spots despite a swing to a loss in the second quarter.
Praxair brought Apria about 85 new branches and a range of home respiratory services and equipment. The acquisition also allowed the company to build up scale in the wake of competitive bidding for Medicare and other reimbursement pressures.
“We’re really excited about how this is going,” Karkenny said on a recent earnings call. “Acquisitions like this are exciting for the company to do.”
Apria has transitioned 82% of the former Praxair patients to its program, and has consolidated 50 of 51 branches, he said.
The company also is “in full swing” on taking back billing and collections functions that it had previously outsourced.
“2011 is a transitional year,” Karkenny said. “This does take time.”
Apria is continuing to hire billing and collections workers through the fourth quarter, he said.
Investors Warned
Earlier this year, Apria warned investors that it would rework how it bills for its services, and that change stood to affect the company’s performance.
In a Securities and Exchange Commission filing, Apria outlined some of its reasoning for bringing its billing and collections back in-house.
In 2009, Apria outsourced certain billing, collection and administrative and clerical functions to Intelenet Global Services Private Ltd. in India and Plano, Texas-based Perot Systems Corp., which is now part of Round Rock, Texas-based Dell Inc.
The following year “we experienced negative reactions from federal and state regulators, (payers), patients and referral sources as a result of the actual or perceived concerns caused by the outsourcing of portions of our business operations,” Apria said.
After seeing increases in accounts receivable, reserves, write-offs of accounts receivable and loss of revenues, Apria decided to take billings and collections back.
The transition has resulted in various one-time costs and operational inefficiencies, according to Apria. The company said that despite training new workers, “there will likely be a significant delay before our new work force will handle these functions as efficiently as they were handled before the outsourcing.”
Apria was once one of Orange County’s highest-profile public companies.
That changed about three years ago, when Blackstone Group LP, a New York private equity firm, took it private in a $1.6 billion buyout.
Apria has generally stayed out of the limelight since going private, but some details about the company are released for the benefit of bondholders.
Apria swung to a net loss of $9.4 million in the three months ended June 30. Last year, Apria posted a profit of $3.4 million for the three months ending in June 2010.
Revenue was $576.3 million, up 11% from the June 2010 quarter. Apria said the growth came from more home infusion therapy revenue as well as integrating the Praxair buy.
Karkenny also said that Apria is pursuing deeper partnering activities with its managed-care customers, which make up about 70% of its approximately $2 billion in yearly revenue.
Apria has more than 1,800 contracts with managed-care companies nationwide, which is “really in stark contrast to those competitors out (there) that compete against us,” he said.
Lots To Do
Overall, Apria feels “good about the quarter. It was a good quarter. We still have a lot of work to do,” Karkenny said before ending the call without taking questions.
Apria now has 13,800 employees companywide in 550 locations.
Separately, Apria signed a lease for 20,000 square feet of space in Phoenix at the Papago Spectrum business park, according to the Phoenix Business Journal.
Apria is using the space to put an unspecified number of administrative support team workers, the paper reported.
Apria came about through the 1995 combination of Abbey Healthcare Group Inc. of Costa Mesa and Fountain Valley-based Homedco Group Inc.
The company worked through some early difficulties, which included problems combining its predecessors’ billing systems to become one of the largest home healthcare companies.
