Costa Mesa’s Apria Starting to Shake Off Post-Merger Malaise
It’s been a long, difficult first year for Apria Healthcare Group Inc.
The $1-billion-plus corporate giant of the home health-care business, formed by the merger of two rival Orange County corporations last June, suffered a sustained bout of organizational indigestion--a common reaction to corporate mergers these days.
The sheer volume of business resulting from the combination of the former Homedco Group Inc. and Abbey Healthcare Group Inc. overwhelmed the new firm’s internal systems, for example. As the company consolidated sales branches and laid off 1,200 employees, including 100 salespeople, calls from customers clogged its telephone lines.
Its accounting system couldn’t process thousands of suppliers’ bills. And smaller competitors found opportunities to snap up customers by offering services specially packaged to meet their needs.
Indeed, the company spent months “putting out fires,” Jeremy M. Jones, Apria’s chairman and chief executive, acknowledged in an interview this week. “It takes longer to accomplish these things than you realize.”
At the company’s first annual meeting Wednesday, however, executives pointed to signs that Apria is shaking off its malaise.
Jones described in detail a move he insists Apria couldn’t have undertaken otherwise--its recently announced plan to diversify into the hospice business by purchasing Miami-based Vitas Healthcare Corp.
“We are really pleased with our progress over the last 12 months,” he told shareholders gathered at the company’s corporate headquarters in Costa Mesa. “We feel we are a pretty tough company to compete with.”
Apria, considered the largest nationwide provider of intravenous equipment, respirators, other home health supplies and related services, reported revenue of $1.1 billion last year. The new company, intended to be a streamlined combination of two former intense competitors, uses the vast scope of its national sales and service network to compete for national contracts with managed care companies.
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Analysts express renewed confidence in the company’s prospects, noting that its sales growth has resumed this year. “Overall, [Apria] has done a good job, but they’ve had to take their medicine,” said David Carlson, an analyst at Putnam Investment Management Inc., which holds a 5.3% stake in the company.
“Things are starting to turn up well for them. Their sales force is back out in the field and focused on revenue growth.”
But competitors continue to see opportunities to pick off business.
For instance, Apria just lost a sizable chunk of its California business with MedPartners/Mullikin Inc. The giant Birmingham, Ala.-based medical services company withdrew its $1.5-million-a-year contract with Apria to supply MedPartners/Mullikin patients with beds, wheelchairs and other home health supplies.
Dave Brown, a MedPartners/Mullikin contracts administrator, said service problems arising from the merger prompted him to make the switch.
“Everybody was real unstable about their jobs and the service levels were affected by that,” said Brown, who noted that he went for months without seeing an Apria sales representative.
MedPartners/Mullikin switched its business to RORR Home Healthcare Inc., a small Irvine-based supplier that promised better service.
Thomas R. Rowley, RORR’s president, says he hopes he can build the company’s relationship with MedPartners/Mullikin to expand its business outside California to neighboring states.
Apria remains MedPartners/Mullikin’s supplier of home infusion services in California.
For months last year, Apria was focusing inward, acknowledged Jones, its chief executive. He recalls that right after the merger, the company’s accounting system was inundated with 96,000 bills from landlords, telephone companies and other suppliers to company operations across the country that it couldn’t track.
“Some of our managers in local markets found themselves telling local vendors, ‘You’ll have to trust us,’ ” he said.
Apria didn’t get caught up on paying its bills until February, he said.
And as the company was eliminating more than 100 sales branches as part of a cost-cutting consolidation, he says, customer service phone lines became overtaxed. Customers frustrated at being put on hold too long no doubt gave up and went elsewhere.
Jones says the company has moved aggressively to improve service and lock up big national contracts with managed care companies, such as Minneapolis-based United HealthCare Corp. It has installed a new phone system, promises to keep customers on hold no longer than 15 seconds, and has reorganized its sales staff to provide closer contact with customers.
On top of that, he says, the company is in the process of putting in a computerized accounting system that will give it the best internal information system in its industry.
But he still hasn’t made believers of customers such as Minga Kelly.
Kelly, a manager with the San Gabriel Medical Group, says she’s met with an Apria representative only once since the merger. She says she prefers companies with a “personal touch”--companies whose representatives regularly stop by to keep her posted on new equipment.
As for Apria, Kelly says she expects service will improve. “There’s always a wait-and-see time after a merger.”
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Apria’s First Year
Apria Healthcare was created a year ago with the merger of rivals Abbey Healthcare Group and Homedco Group. Quarterly sales and net income in millions of dollars:
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1995 Net sales Net income (loss) 1st qtr. 284.6 15.8 2nd qtr. 287.3 4.5 3rd qtr.* 277.7 (112.2) 4th qtr. 284.0 17.4 1996 1st qtr. 295.3 20.3
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* Loss attributed to merger expenses
Note: Quarterly figures restated to reflect the combined results of Abbey and Homedco
Combining Forces
Apria is completing the following elements of its consolidation plan:
* Reduce staff by 1,220 employees
* Consolidate 120 offices
* Convert more than 400 branch locations to a standard information system
Source: Apria Healthcare, Bloomberg Business News; Researched by JANICE L. JONES / Los Angeles Times
