What Happened?
Shares of healthcare services provider AdaptHealth Corp. (NASDAQ:AHCO) jumped 8.2% in the afternoon session after the company announced it secured a five-year exclusive agreement to become the sole provider of home medical equipment for a major national healthcare system. Under the agreement, AdaptHealth became the exclusive provider of home medical equipment and supplies for the system’s network of over 10 million members. The deal was structured primarily as a capitation payment model, a system where a provider receives a set fee per patient, which covered a mix of Medicare, Medicaid, and privately insured individuals. This significant contract news appeared to overshadow the company's second-quarter financial results, which were also released. The earnings report showed a decline in both net income and revenue compared to the same period last year, but investors seemingly prioritized the long-term growth prospects offered by the major partnership over the recent dip in financial performance.
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What Is The Market Telling Us
AdaptHealth’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 3.3% on the news that industry bellwether UnitedHealth Group (UNH) slashed its 2025 profit forecast after reporting a significant surge in medical costs, sending shockwaves across the health insurance sector. The core of the issue stems from an “unprecedented medical cost trend environment,” particularly within the Medicare Advantage market, which are privately run versions of the federal health insurance program. UnitedHealth, the largest provider in this space, now expects these costs to rise by 7.5% in 2025, a significant jump from its earlier 5% projection, with the potential to accelerate to almost 10% in 2026. In response, the insurer announced it will drop plans covering over 600,000 people. The company's lowered earnings forecast has raised investor concerns that these surging costs and utilization rates are an industry-wide problem, impacting the profitability of other carriers as well.
AdaptHealth is up 2.1% since the beginning of the year, but at $9.91 per share, it is still trading 13.8% below its 52-week high of $11.49 from September 2024. Investors who bought $1,000 worth of AdaptHealth’s shares 5 years ago would now be looking at an investment worth $440.61.
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