Costa Mesa, Calif.

Apria Healthcare is the focus of a federal investigation that could cost it billions of dollars in penalties if allegations are proven that it bilked the federal government out of $103 million in total overpayments between mid-1995 through year-end 1998.

Ironically, the news came just as Apria posted positive results for the second quarter 2001 ended June 30. Net income for the quarter was $17.2 million, or 31 cents per share, compared to $14.1 million, or 26 cents per share, for the same quarter a year ago.

Apria was notified of a federal investigation on July 12 by an attorney for the qui tam plaintiffs, and at about the same time by a government attorney. Officials believe the company could be liable to the government for three times the $103 million amount, plus penalties of $5,000 to $10,000 for every affected invoice, allegedly some 900,000 in number, or a total liability of between $4.8 billion and more than $9 billion.

“Apria considers these assertions and amounts to be unsupported legally and factually,” the company said in a written statement. “Apria's position is that the legal analysis of the government and the qui tam plaintiffs is incorrect, that their review of the sample vastly overstates the number and significance of deficiencies, and that the sampling and extrapolation methodologies under the circumstances are statistically flawed and legally problematic.”

Apria officials said the number of sample invoices affected by substantive errors or omissions in supporting documentation is much less than the government and qui tam plaintiffs assert. They also asserted that most of the alleged errors and omissions should not give rise to any liability for refunds.

In fact, officials said in the statement, Apria believes that its total obligation to refund overpayments attributable to all of the substantively deficient documentation in the government's sample should be less than $10,000 instead of the $110,000 alleged by the government in the billing sample of 300 claims it pulled from the company.

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