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Blackstone Collects Debt-Funded Dividend from Apria Healthcare Within Weeks of Billing Fraud Settlement

February 2, 2021

Apria Healthcare provides home respiratory therapy, home infusion therapy and home medical equipment. Private equity firm the Blackstone Group has owned Apria since it took the company private in October 2008.[i]

In December, as the COVID-19 pandemic spiked in cities across the US, Blackstone collected a $200 million debt-funded dividend from the healthcare company.[ii] Ten days later, Apria agreed to pay a $40.5 million settlement for billing fraud stemming from profit-driven business practices serving sick and elderly patients.[iii]

In January, Apria filed to go public through an IPO.[iv]

Apria’s fraud settlement

On December 21, the US Attorney for the Southern District of New York announced that Apria agreed to pay $40.5 million to settle allegations of fraudulent billing practices.[v] According to the lawsuit, Apria engaged in several schemes in violation of the False Claims Act related to the rental of costly non-invasive ventilators (NIVs). Apria allegedly expanded its use of NIVs because programs like Medicaid paid as much as $1,400 per month to cover their costs. [vi]

In a press release announcing the settlement, the US Attorney’s Office wrote:

“…while Apria knew that it was responsible for monitoring patients’ utilization of their NIVs and to stop billing when NIVs were no longer being used, it did not have enough staff, or “respiratory therapists,” to conduct such monitoring. As a result, Apria routinely billed Medicare and other programs when it did not know whether NIVs were still being used by patients and, therefore, remained medically necessary. Further, even when Apria had information indicating that patients were no longer using their NIVs, it often continued to bill the federal health programs.”[vii]

Though Blackstone owned Apria for the duration of the alleged fraudulent activity and multiple Blackstone executives serve on Apria’s board[viii], it was not a party in the lawsuit. However, the US Department of Justice signaled earlier this year that it will more actively pursue False Claims Act actions against private equity firms that own health care companies.[ix]

Blackstone CEO Stephen Schwarzman has been a major contributor to and confidante of President Donald Trump.[x]

Debt-funded dividends

Despite the impending fraud settlement, on December 11 Apria completed a $260 million dividend recapitalization, taking on debt to pay a $210 dividend to private equity owner Blackstone and other owners.[xi]

The Private Equity Stakeholder Project has previously raised questions about whether it is appropriate for private equity firms to use their health care portfolio companies as vehicles to raise debt in order to pay themselves dividends, especially as the COVID-19 pandemic strains the resources of critical health care services. Dividend recapitalizations burden companies with higher debt and leave them on the hook for interest payments, while providing payouts to the private equity owners. The need to make up for these capital extractions combined with the high returns typically expected by private equity investors may incentivize risky profit-seeking behavior that can hurt patient care.[xii]

Read our report “Dividend Recapitalizations in Health Care: How Private Equity Raids Critical Health Care Infrastructure for Short Term Profit

Over the course of its ownership of Apria, Blackstone has repeatedly taken money out of the company through aggressive fees and dividends.

In 2008, Blackstone collected an $18.7 million transaction fee related to its acquisition of the company. [xiii]

In 2010, Blackstone attempted to collect a $500 million dividend from Apria but failed to receive consent from bondholders. Ratings agency Moody’s downgraded Apria’s credit rating nonetheless, citing the risk that Blackstone might pursue a similar transaction in the future.[xiv]

Recent dividends collected from Apria:[xv]

Dec-20$200.3 million dividend to stockholders +$9.7 million to stock appreciation rights (SARs) holders$260 million of Incremental Term Loans.
Jun-19$175 million to stockholders and SARs holders$150 million Term Loan from Citizens Bank and syndicate of lenders
Jul-18$75 million 

Additionally, Apria appears to have paid Blackstone millions of dollars in fees. Under a fee agreement signed when Blackstone took over the company in October 2008, Apria paid Blackstone an annual management fee of equal to the greater of $7 million or 2% of the Company’s EBITDA for the preceding year, as well as a $1.2 million fee for the year ended December 2008 (during which Blackstone owned April for less than three months).

Under the agreement, Apria also paid a transaction fee equal to 1% the value of any transactions (e.g. acquisition, divestiture, disposition, merger, consolidation, restructuring, refinancing, recapitalization). The agreement was set to terminate twelve years from the date of the agreement—October 28, 2020. Blackstone collected a lump sum termination fee to end the agreement in 2014.[xvi] Between the beginning of the fee agreement and its termination, Blackstone would have collected $43.2 million in management fees in addition to the lump sum payment.

COVID-19 pandemic has been a boon to Apria’s business as executives have pushed for relaxation of federal billing rules

The COVID-19 pandemic, which has substantially increased the demand for respiratory care, has been a been boon to Apria Health’s home respiratory therapy business.

In an April 2020 article, Apria Healthcare CEO Dan Starck noted that “Given the scale of the pandemic, home respiratory care providers are anticipating a need to increase the supply of equipment and therapies to meet growing patient demand.”[xvii]

In July, Apria Healthcare division president Bill Guidetti noted that “respiratory care suppliers have seen a dramatic increase in the number of patients served.”[xviii]

Apria Healthcare has also benefited from the Trump Administration’s relaxation of rules for federal reimbursement during the COVID-19 pandemic. In a January 2021 filing, Apria Healthcare noted that the US Centers for Medicare & Medicaid Services’ (CMS)’ competitive bidding process for medical products “historically put downward pressure on the amounts [Apria is] reimbursed” by Medicare.

In April 2020, Apria CEO Starck applauded the federal Centers for Medicare & Medicaid Services’ (CMS)’ relaxation of Medicare billing rules for home respiratory therapies in response to the COVID-19 pandemic, noting that “burdensome paperwork and proof of delivery requirements have been relaxed,” (emphasis added) and further urged CMS to delay implementation of a competitive bidding payment system. Apria’s Guidetti also publicly called for a delay in CMS billing rules in July, saying “Washington must take decisive action to reduce regulatory red tape.”[xix]

Apria also actively lobbied the US Centers for Medicare and Medicaid Services to “Delay/Postpone Competitive Bidding due to COVID-19.”

In October 2020, CMS excluded 13 of 16 medical products from competitive bidding requirements that took effect in January 2021, including all of the products that Apria supplies.[xx] Many of products excluded from competitive bidding are unrelated to or only loosely related to COVID-19 symptoms.

In other words, around the same time that Apria was settling with the US Department of Justice for allegedly fraudulently billing Medicare and paying hundreds of millions of dollars in dividends to its private equity owners, all of the products Apria supplies were removed from CMS competitive bidding requirements.

Cares Act subsidies

Apria Healthcare also received federal government subsidies under the CARES Act.

In its January 2021 prospectus, Apria Healthcare notes that as a result of the CARES Act, the company has benefited from “an increase in Medicare reimbursement rates” and the “suspension of Medicare sequestration.”

Apria also utilized CARES Act rules to defer millions of dollars in taxes for years, according to its S-1 filing.

Blackstone as a health care investor

Blackstone is one of the largest health care investors in the US, with 55 health care acquisitions totaling $26.2 billion since 2007.[xxi]

Its physician staffing company TeamHealth is the largest physician staffing in the US. TeamHealth has garnered extensive scrutiny for “surprise billing” and aggressive pursuit of debt collection. Blackstone’s TeamHealth has spent heavily on a dark money advertising campaign to prevent federal legislation aimed at halting “surprise” medical billing.[xxii]

Blackstone’s TeamHealth is the subject of an ongoing class action lawsuit filed in July 2020 alleging that “The TeamHealth Fraudulent Billing Enterprise maximizes its profits by sending fraudulent bills to patients for the care they receive from TeamHealth physicians. TeamHealth has inflated the rates it charges patient-consumers far above those that it knows it is legally entitled to collect from those patients.”[xxiii]


[ii] Pitchbook, accessed December 2020.






[viii] Michael Audet and Neil Simkins,, accessed Dec 31, 2020.


[x]“Schwarzman’s Wallet Props Up Wall Street Elite’s Giving to Trump,” Bloomberg, Aug 6, 2020.

[xi] pg. 14.






[xvii]“Here’s Something Feds Did Right on COVID-19,” Medpage Today, Apr 6, 2020.

[xviii]“In Battling COVID-19, Home Respiratory Care Has Proven Itself a Critical Tool,” Morning Consult, Jul 24, 2020.

[xix]“Here’s Something Feds Did Right on COVID-19,” Medpage Today, Apr 6, 2020.

[xx], accessed Feb 2, 2021. Apria Inc Form S-1, Jan 15, 2021.

[xxi] Pitchbook, “The Healthcare PE Investment Landscape” Q3 2020 report.

[xxii]“Investors’ Deep-Pocket Push To Defend Surprise Medical Bills,”, Sept 11, 2019.


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