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The California Attorney General announced a $40 million nationwide settlement with Apria Healthcare Group, Inc. and Apria Healthcare LLC resolving allegations that the respiratory services provider violated the Federal False Claims Act (FCA), along with numerous state anti-fraud laws by seeking Medicaid reimbursement for ventilation machines that were not medically necessary or reasonable.

Of the $40 million nationwide settlement, $4,812,000 relates to violations of Medicaid laws. California’s share of the Medicaid-related settlement is $206,338.30.

In February 2017, a civil action was filed against Apria in a New York District Court claiming the company sought reimbursements for non-invasive ventilators (NIVs) when it was medically unnecessary or unreasonable.

Apria is headquartered in Lake Forest California, and offers three categories of respiratory equipment, with each category performing more complex and costlier procedures than the last. NIVs are in the third tier, and therefore receive the highest and longest paid Medicare and Medicaid reimbursement rate due to their high maintenance.

From January 1, 2014, to December 31, 2019, it was found that Apria aimed to increase profits by attempting to persuade healthcare providers to convert patients from the second category of respiratory devices to NIVs. Apria then billed for NIVs that were either not used by patients, were used inconsistently, or only performed the function of respiratory equipment in the first or second tier. Routine physician visits to confirm individuals were following correct NIV procedures were also neglected, and in 2017, half were not completed.

After analyzing this fraudulent behavior, it was concluded by both the federal and state governments that Apria had failed its duty to correctly and accurately report NIV usage and in turn violated the Federal False Claims Act, along with numerous state anti-fraud statutes including the California False Claims Act.

Nonetheless, Apria filed documents with the Securities and Exchange Commission on January 18, 2021, announcing its intent to go forward with an Initial Public Offering (IPO),

Apria discloses in the SEC documentation, that it served nearly 2 million patients, made nearly 2.4 million deliveries and conducted more than 744,000 clinician interactions with patients in 2019. It generated $1.1 billion in net revenues, $15.6 million in net income, $174 million in adjusted EBITDA and $80.5 million of adjusted EBITDA less patient equipment capex. The company says that home respiratory and sleep therapy represent 80% of its 2019 revenue.

It went on to say “Through various strategic and operational initiatives, we have improved profitability despite reimbursement rate pressure, improving our adjusted EBITDA margin by 110 basis points from 2017-19 on a basis that excludes the impact of new accounting policies adopted in 2018 and 2019.”

Apria was a public company before, prior to 2008, when Blackstone Group bought the company for $1.6 billion. In 2014, it was rumored Blackstone Group was in discussions to sell Apria.

The settlement was negotiated by the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA), working with a team of other states and the federal government.

The DMFEA receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $33,829,000 for Federal fiscal year 2019-20. The remaining 25 percent, totaling $11,379,000 for fiscal year 2019-20, is funded by the State of California. The Federal fiscal year is defined as October 1, 2019, through September 30, 2020.