AdaptHealth's Q2 2025: Unpacking Contradictions in Sleep Market, Diabetes Performance, and Divestiture Strategy

Sleep business market and share performance, impact of payer rate negotiations on financial guidance, diabetes segment performance, divestiture strategy, and respiratory segment growth drivers are the key contradictions discussed in AdaptHealth's latest 2025Q2 earnings call.



Significant Capitated Contract Award and Revenue Growth:
- AdaptHealth Corp. reported signing a definitive agreement with a major national healthcare system, covering more than 10 million members, with a total of over $1 billion in expected revenue over the contract term.
- This contract was structured as a capitation payment model, which is projected to provide adjusted EBITDA margins in line with the company's enterprise margins.
- The strategic partnership is expected to elevate capitated revenue to at least 10% of the company's total revenue, enhancing its recurring revenue mix.

Sleep Health Segment Recovery and New Starts:
- The Sleep Health segment's new starts accelerated to approximately 128,000 in Q2, marking the highest quarter in two years.
- This growth is attributed to standardizing scheduling practices, offering expanded appointment availability, and improving setup times by a third.
- The efforts to enhance patient choice and convenience are anticipated to further drive new setup growth.

Respiratory Health Segment Growth and Census High:
- The Respiratory Health segment achieved a record high 329,000 patients in its oxygen census in Q2, with a 5.6% increase in revenue from the prior year quarter.
- The growth is driven by strong oxygen starts and a focus on strong sales incentive-based compensation changes.

Debt Reduction and Financial Health:
- AdaptHealth Corp. reduced its debt balance by $150 million in Q2, with a total of $175 million year-to-date.
- This reduction is supported by proceeds from the divestiture of certain incontinence and infusion assets, aiming to reach a net leverage target of 2.5x.