AdaptHealth Conference: CFO Details CPAP Recurring Revenue, Faster Setups, and Capitated Contract Growth

Key Points

• Recurring revenue from CPAP: AdaptHealth earns roughly $60/month on a 13-month Medicare CPAP rental with resupply orders averaging about $200 and occurring just under three times per year, supported by adherence monitoring that it says lifts adherence to over 80% versus ~70% industry-wide.
• Operational improvements and patient experience: The company emphasizes service as its differentiator, cutting average time-to-setup to nine days (from above the ~17‑day national average) and using tools like an app, QR codes and AI chatbots to speed referrals and onboarding.
• Capitated contract expansion: AdaptHealth is executing a major West Coast buildout tied to a new capitated contract—about 30 de novo locations, hundreds of vehicles and ~1,200 hires—with initial revenue already started and a Humana HMO agreement covering 33 states plus DC that the company says is fully ready.

AdaptHealth NASDAQ: AHCO CFO Jason Clemens outlined how the company’s sleep apnea and respiratory businesses generate recurring revenue, discussed recent operational improvements in patient setup times, and provided updates on capitated payer contracts and regulatory developments during a question-and-answer session.

Sleep apnea: rental economics, resupply, and adherence

Clemens said obstructive sleep apnea (OSA) remains significantly underdiagnosed, citing estimates of roughly 33 million to 34 million Americans with OSA while “only 20% actually know it and are getting treatment.” He added that wearable devices and at-home sleep testing are contributing to increased demand, including “record wait times” at sleep centers.

Using a Medicare patient example, Clemens described a 13-month CPAP rental period in which the company is paid about $60 per month if the patient remains adherent. During setup, patients typically receive an initial supply bundle that includes items such as a mask, heated tubes, and cushions. Clemens characterized the model as having a recurring component through resupply, comparing it to a “razor blade” model.

He said resupply orders average about $200 and are ideally pursued every three months, though AdaptHealth resupplies patients “just under three times a year” on average, compared with an industry average closer to two. Clemens attributed the difference to adherence monitoring and technology integrated with payer eligibility rules, along with multi-channel outreach that includes the company’s app, mail, phone, text, and email. He noted the company has “hundreds of thousands” of patients registered on the app.

Adherence is a major focus in the first three months, with requirements that Clemens summarized as four hours per night or more for 20 days in a 30-day period. He said the industry runs “a touch over 70%” adherence, while AdaptHealth runs “over 80%,” supported by “hundreds of sleep coaches” and standardized setup workflows. Clemens also said patients using GLP-1 medications have been adhering better than those who are not, which he said has helped adherence rates “a bit.”

After the 13-month Medicare rental period ends, Clemens said payments stop and the patient moves into a capped period through month 60, after which they may become eligible for a new CPAP if they remain with the company.

Operational focus: speed to set up and “easy button” positioning

Clemens said AdaptHealth’s differentiation is less about device brands—since competitors often offer similar products—and more about service levels that make the company “the easy button” for referring providers. He emphasized that patient satisfaction affects referrals because unhappy patients tend to relay complaints to physicians, influencing future referral patterns.

Speed to set up was highlighted as a key metric. Clemens said that in the first quarter of the prior year the company was “struggling” and had started to exceed the national average of about 17 days. He said the company has since cut its average time to set up a CPAP patient to nine days, citing prior authorization requirements and patient contact as common bottlenecks. He pointed to tools such as QR codes for app downloads in physician offices and AI chatbots that route patients based on location capacity across nearly 700 locations.

Market growth and share claims

Clemens said the U.S. sleep apnea market is expected to grow from low single digits to mid-single digits. He also said AdaptHealth represents “about a quarter” of U.S. CPAP usage and that the company continues to validate share gains by reviewing claims data every six months. He added that the company reported record census in its last quarterly update and was “within just a couple of 100 patients” of a record setup quarter, which he said the company believes will occur in 2026.

Respiratory: longer rental cycle and different resupply profile

In respiratory, Clemens said oxygen concentrators are the largest product category, alongside non-invasive ventilation. The Medicare rental period for oxygen follows a similar structure to CPAP but extends 36 months rather than 13, with the same 60-month cycle for equipment replacement eligibility. Clemens said Medicare reimbursement in respiratory “can range” but is about $120 per month in his example. Resupply exists but is “not nearly as much or as important as the resupply for sleep,” consisting of lower-dollar items such as cannulas.

Capitated contracts: West Coast buildout, Humana, and lessons applied to Kaiser

Clemens described a major West Coast infrastructure build tied to a new capitated contract, including approximately 30 de novo locations up and down the West Coast, “hundreds and hundreds of vehicles,” and about 1,200 onshore employees being hired. He said some revenue began in December, and the company also acquired patient equipment to support February 1 start dates, with additional start dates later in the year. He said the company raised its revenue expectations for the contract versus an outlook provided in November, citing readiness of infrastructure. Clemens said the contract covers sleep, respiratory, and DME items such as beds, wheelchairs, and walkers. He also noted an acquisition in Hawaii on December 1 to enter that state.

On Humana, Clemens said AdaptHealth’s capitated agreement covers HMO Medicare Advantage patients in 33 states plus the District of Columbia, and that the company has “100%” of that HMO population “ready.” He said Humana’s PPO business is served through preferred provider status, which he described as creating a “halo effect.” He also noted eight additional states were awarded to another regional provider when the agreement was originally secured, primarily in the West where AdaptHealth historically lacked depth. Clemens said the company may be better positioned in the future as it builds infrastructure in western markets.

Discussing lessons learned, Clemens said the biggest challenge in the Humana rollout was transitioning patients from incumbent providers, which can require documentation, physician contact, and home visits to exchange equipment. He said AdaptHealth structured the Kaiser business differently by pursuing acquisitions to secure equipment and reduce friction from one-by-one patient swaps, and referenced drawing on the revolver after quarter-end in anticipation of closing remaining deals to secure patients “day one.”

Diabetes and pharmacy channel progress

Clemens said pharmacy now represents “just a touch under 10%” of diabetes revenue, up from roughly half that level about five to six quarters ago. He said growth has been driven primarily by insulin pumps—especially Omnipod—and noted commentary that Tandem’s Mobi tubeless offering is coming faster than expected and is securing pharmacy contracts. He said these products can be distributed through the company’s 50-state mail-order pharmacy and added that pumps have been up double digits over the last couple of quarters.

He said CGMs are also offered through the pharmacy channel, though he characterized pharmacy margins for CGMs as “quite thin.” He framed the CGM pharmacy offering as part of the company’s “easy button” strategy for referring providers, aiming to reduce friction around which payers or order types the company can accept.

Regulatory updates: fee schedule, competitive bidding, and SOAR Act

Clemens said CMS published a 2026 fee schedule with increases of “just over 2% across the product catalog,” which he described as largely inflation-based. He also referenced the SOAR Act, which he said is intended to increase reimbursement for respiratory and simplify restrictions to improve patient access, while noting the company has not built any impact from the act into guidance.

On competitive bidding, Clemens said CMS clarified a final rule published in late 2025 that excludes the company’s core categories—sleep, respiratory, and DME—from the competitive bid round pushed out to 2028. He said diabetes, ostomy, and urology would be included, and described ostomy and urology as “very small categories” for AdaptHealth. Regarding diabetes competitive bidding, he said CMS has indicated that the number of DMEs distributing CGMs to Medicare patients could shrink from nearly 2,000 today to “10 or less.” Clemens said AdaptHealth is the “number two player” in CGM distribution to Medicare and that the company views competitive bidding as an opportunity to grow revenue.

Margins and competitive commentary

In response to a margin question, Clemens said adjusted EBITDA margins for sleep and respiratory run in the “high 20%,” while free cash flow in both businesses is about “6%-7% of revenue.” He also referenced segment-level reporting for sleep and said resupply costs are around “60% of cost” in that context.

On competitive dynamics, Clemens said the company has seen “zero impact” from a competitor’s preferred status with Optum, citing no changes in volumes or referral patterns. More broadly, he said healthcare competition remains local and that changes “at the top of the house” at large companies do not necessarily affect local referral behavior. He added that AdaptHealth continues to set records on retention and is willing to take share from competitors in any way it can, including from patients frustrated with current providers.

About AdaptHealth NASDAQ: AHCO

AdaptHealth, Inc operates as a leading provider of home medical equipment (HME) and related services in the United States. The company focuses on delivering respiratory care, mobility solutions and bathroom safety products to patients with chronic and acute medical needs. Through its comprehensive service offerings, AdaptHealth aims to enhance quality of life and clinical outcomes for patients who require long-term support outside of a hospital setting.

The company's respiratory portfolio includes products such as continuous positive airway pressure (CPAP) devices, oxygen concentrators, ventilators, and associated supplies for patients with sleep apnea, COPD and other pulmonary conditions.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.