UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                       For the period ended March 31, 1999

                                       OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934


                         Commission File Number: 1-14316


                           APRIA HEALTHCARE GROUP INC.
             (Exact name of registrant as specified in its charter)



            DELAWARE                                      33-0488566
  (State or other jurisdiction of                      (I.R.S. Employer
   incorporation or organization)                    Identification Number)


  3560 HYLAND AVENUE, COSTA MESA, CA                        92626
(Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (714) 427-2000

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                                            Yes  X     No          
                                                ---       ---

There were 51,870,190  shares of common stock,  $.001 par value,  outstanding at
May 10, 1999.

<PAGE>



                           APRIA HEALTHCARE GROUP INC.

                                    FORM 10-Q

                       For the period ended March 31, 1999






PART I. FINANCIAL INFORMATION

Item 1.           Financial Statements (unaudited)

                  Consolidated Balance Sheets

                  Consolidated Statements of Operations

                  Consolidated Statements of Cash Flows

                  Notes to Consolidated Financial Statements

Item 2.           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

Item 3.           Quantitative and Qualitative Disclosures About Market Risk


PART II.  OTHER INFORMATION

Item 1.           Legal Proceedings
Item 2.           Changes in Securities
Item 3.           Defaults Upon Senior Securities
Item 4.           Submission of Matters to a Vote of Security Holders
Item 5.           Other Information
Item 6.           Exhibits and Reports on Form 8-K


SIGNATURES
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
<TABLE>
                           APRIA HEALTHCARE GROUP INC.

                           CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                         March 31,  December 31,
                                                           1999         1998 
                                                           ----         ---- 
                                                        (unaudited)
                                                         (dollars in thousands)
                  ASSETS

CURRENT ASSETS
<S>                                                      <C>          <C>      
  Cash and cash equivalents ..........................   $  90,172    $  75,475
  Accounts receivable, less allowance for doubtful
    accounts of $35,695 and $35,564 at March 31, 1999
    and December 31, 1998, respectively ..............     135,463      132,028
  Inventories ........................................      18,394       16,617
  Prepaid expenses and other current assets ..........       5,247        4,917
                                                         ---------    ---------
          TOTAL CURRENT ASSETS .......................     249,276      229,037

PATIENT SERVICE EQUIPMENT, less accumulated
  depreciation of $258,254 and $249,921 at March 31,
  1999 and December 31, 1998, respectively ...........     127,477      130,652
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET ............      48,810       51,996
INTANGIBLE ASSETS, NET ...............................      86,853       84,365
OTHER ASSETS .........................................         966          548
                                                         ---------    ---------
                                                         $ 513,382    $ 496,598
                                                         =========    =========

           LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable ...................................   $  54,604    $  51,252
  Accrued payroll and related taxes and benefits .....      23,655       25,455
  Accrued insurance ..................................      13,472       13,092
  Other accrued liabilities ..........................      57,382       49,870
  Current portion of long-term debt ..................      71,578       74,439
                                                         ---------    ---------
          TOTAL CURRENT LIABILITIES ..................     220,691      214,108

LONG-TERM DEBT .......................................     408,605      414,147

COMMITMENTS AND CONTINGENCIES ........................           -            -

STOCKHOLDERS' DEFICIT
  Preferred stock, $.001 par value: 10,000,000
    shares authorized;  none issued ..................           -            -
  Common stock, $.001 par value: 150,000,000
    shares authorized; 51,799,035 and 51,785,263
    shares issued and outstanding at March 31, 1999
    and December 31, 1998, respectively ..............          52           52
  Additional paid-in capital .........................     326,084      325,903
  Retained deficit ...................................    (442,050)    (457,612)
                                                         ---------    ---------
                                                          (115,914)    (131,657)
                                                         $ 513,382    $ 496,598
                                                         =========    =========
</TABLE>
                 See notes to consolidated financial statements.
<PAGE>
<TABLE>
                           APRIA HEALTHCARE GROUP INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)
<CAPTION>
                                                           Three Months Ended
                                                               March 31, 
                                                        -----------------------
                                                           1999         1998 
                                                           ----         ---- 
                                                         (dollars in thousands,
                                                         except per share data)

<S>                                                     <C>           <C>      
Net revenues ......................................     $ 228,294     $ 250,538
Costs and expenses:
   Cost of net revenues:
      Product and supply costs ....................        45,325        61,143
      Patient service equipment depreciation ......        17,746        20,055
      Nursing services ............................           551           736
      Other .......................................         2,447         3,924
                                                        ---------     ---------
                                                           66,069        85,858
   Selling, distribution and administrative .......       124,449       141,946
   Provision for doubtful accounts ................         8,629        13,795
   Amortization of intangible assets ..............         1,873         3,564
                                                        ---------     ---------
                                                          201,020       245,163
                                                        ---------     ---------
          OPERATING INCOME ........................        27,274         5,375
Interest expense, net .............................        11,312        11,482
                                                        ---------     ---------
          INCOME (LOSS) BEFORE TAXES ..............        15,962        (6,107)
Income taxes ......................................           400           500
                                                        ---------     ---------
          NET INCOME (LOSS) .......................     $  15,562     $  (6,607)
                                                        =========     =========

Basic income (loss) per common share ..............     $    0.30     $   (0.13)
                                                        =========     =========
Diluted income (loss) per common share ............     $    0.30     $   (0.13)
                                                        =========     =========

</TABLE>
                 See notes to consolidated financial statements.

<PAGE>
<TABLE>

                           APRIA HEALTHCARE GROUP INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<CAPTION>

                                                            Three Months Ended
                                                                March 31, 
                                                          ----------------------
                                                            1999         1998 
                                                            ----         ---- 
                                                          (dollars in thousands)
OPERATING ACTIVITIES
<S>                                                       <C>          <C>      
Net income (loss) ....................................    $ 15,562     $ (6,607)
Items included in net income (loss) not
  requiring (providing) cash:
    Provision for doubtful accounts ..................       8,629       13,795
    Provision for excess/obsolete equipment ..........       1,605        2,637
    Depreciation .....................................      22,594       27,435
    Amortization of intangible assets ................       1,873        3,564
    Amortization of deferred debt costs ..............       1,050          380
    Gain on disposition of assets ....................         (69)         (52)
Changes in operating assets and liabilities,
  net of effects of acquisitions:
    (Increase) decrease in accounts receivable .......     (12,064)      13,564
    Increase in inventories ..........................      (2,884)        (480)
    (Increase) decrease in prepaids
      and other assets ...............................        (232)       3,665
    Increase (decrease) in accounts payable ..........       3,352       (2,024)
    Increase (decrease) in accruals and
      other liabilities ..............................       5,822      (11,747)
Net purchases of patient service equipment,
  net of effects of acquisitions .....................     (14,826)      (8,638)
                                                          --------     --------
          NET CASH PROVIDED BY OPERATING ACTIVITIES ..      30,412       35,492

INVESTING ACTIVITIES
    Purchases of property, equipment and
      improvements, net of effects of acquisitions ...      (1,687)      (3,445)
   Proceeds from disposition of assets ...............         110           68
   Acquisitions and payments of
      contingent consideration .......................      (4,835)        (745)
                                                          --------     --------
          NET CASH USED IN INVESTING ACTIVITIES ......      (6,412)      (4,122)

FINANCING ACTIVITIES
   Payments under term loan ..........................      (6,938)           -
   Payments of other long-term debt ..................      (1,835)      (2,705)
   Capitalized debt costs, net .......................        (680)      (1,018)
   Issuances of common stock .........................         150        1,499
                                                          --------     --------
          NET CASH USED IN FINANCING ACTIVITIES ......      (9,303)      (2,224)
                                                          --------     --------

NET INCREASE IN CASH AND CASH EQUIVALENTS ............      14,697       29,146
Cash and cash equivalents at beginning of period .....      75,475       16,317
                                                          --------     --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...........    $ 90,172     $ 45,463
                                                          ========     ========
</TABLE>
                 See notes to consolidated financial statements.

<PAGE>

                           APRIA HEALTHCARE GROUP INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of Apria
Healthcare  Group Inc.  ("Apria" or "the  company")  and its  subsidiaries.  All
significant intercompany transactions and accounts have been eliminated.

In the opinion of management,  all  adjustments,  consisting of normal recurring
accruals  necessary for a fair presentation of the results of operations for the
interim periods presented,  have been reflected herein. The unaudited results of
operations for interim periods are not necessarily  indicative of the results to
be  expected  for  the  entire  year.  For  further  information,  refer  to the
consolidated  financial  statements  and  footnotes  thereto  for the year ended
December 31, 1998, included in the company's 1998 Form 10-K.


NOTE B - RECLASSIFICATIONS AND USE OF ACCOUNTING ESTIMATES

Reclassifications:  Certain amounts from prior periods have been reclassified to
conform to the current year presentation.

Use  of  Accounting  Estimates:  The  preparation  of  financial  statements  in
conformity with generally accepted accounting  principles requires management to
make assumptions  that affect the amounts  reported in the financial  statements
and accompanying notes. Actual results could differ from those estimates. Due to
the  nature  of the  industry  and the  reimbursement  environment  in which the
company  operates,  certain  estimates  are required in recording  net revenues.
Inherent  in these  estimates  is the risk that they will have to be  revised or
updated,   and  the  changes  recorded  in  subsequent  periods,  as  additional
information becomes available to management.


NOTE C - REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK

Revenues are  recognized on the date services and related  products are provided
to  patients  and  are  recorded  at  amounts  estimated  to be  received  under
reimbursement  arrangements with a large number of third-party payors, including
private insurers, managed care organizations, Medicare and Medicaid.

Apria  establishes   allowances  for  revenue  adjustments  which  are  normally
identified and recorded at the point of cash application or upon account review.
Revenue  adjustments  result  from  differences  between  estimated  and  actual
reimbursement amounts, failures to obtain authorizations acceptable to the payor
or other specified billing documentation, changes in coverage or payor and other
reasons  unrelated to credit risk.  The  allowance  for revenue  adjustments  is
deducted  directly from gross accounts  receivable.  Management also establishes
allowances for those accounts from which payment is not expected to be received,
although services were provided and revenue was earned.

Management   performs  various  analyses  to  estimate  the  revenue  adjustment
allowance  and the  allowance for doubtful  accounts.  Specifically,  management
considers  historical   realization  data,  accounts  receivable  aging  trends,
operating  statistics  and  relevant  business  conditions.  Apria  periodically
refines its procedures for estimating the allowances for revenue adjustments and
doubtful accounts based on experience with the estimation process and changes in
circumstances.  Because of  continuing  changes in the  healthcare  industry and
third-party reimbursement, it is reasonably possible that management's estimates
of net  collectible  revenues could change in the near term,  which could have a
favorable or unfavorable impact on operations and cash flows.


NOTE D - BUSINESS COMBINATIONS

Apria periodically  makes  acquisitions of complementary  businesses in specific
geographic  markets.  The  transactions  are  accounted for as purchases and the
results of operations of the acquired companies are included in the accompanying
statement of operations from the date of acquisition.  Acquisitions  that closed
during the three-month  period ended March 31, 1999 resulted in cash payments of
approximately $4,835,000. Of that amount, $4,361,000 was allocated to intangible
assets and $243,000 to patient  service  equipment.  Goodwill is being amortized
over 20 years  and  covenants  not to compete  are being amortized over the life
of the  respective agreements.


NOTE E - LONG-TERM DEBT

Apria's  credit  agreement  with Bank of America  and a  syndicate  of banks was
amended and  restated  for the third time in April of 1999.  The  agreement  was
amended to remove the requirement  that the company issue  $50,000,000 in senior
subordinated notes or senior  subordinated  convertible  debentures by April 23,
1999.  In  connection  with this  amendment,  Apria made a required  $50,000,000
repayment  of the term  loan.  The  agreement  was also  amended  to remove  the
requirement  that the company  maintain  minimum  cash  balances of  $35,000,000
through  the  consummation  of the debt or equity  offering.  In  addition,  the
agreement still allows Apria to complete $62,000,000 of acquisitions in 1999.


NOTE F - EQUITY

The  change  in  stockholders'  equity,  other  than from net  income,  resulted
primarily from the exercise of stock  options.  For the three months ended March
31, 1999, proceeds from the exercise of stock options amounted to $150,000.


NOTE G - INCOME TAXES

Current income tax expense  includes  federal and state tax amounts  accrued and
paid on a basis other than or in addition to taxable income.

At December 31, 1998, Apria's federal  net operating  loss  carryforward ("NOL")
approximated $380,000,000, expiring in varying amounts in the years 2003 through
2013.  Additionally,  the company has various state operating loss carryforwards
which began to expire in 1997.  As a result of an ownership change in 1992 which
met specified  criteria of Section 382 of the Internal Revenue Code, future  use
of a  portion of  the federal  and  state operating loss carryforwards generated
prior to 1992 are each  limited to approximately  $5,000,000  per year.  Because
of the annual  limitation, approximately $57,000,000 of each of Apria's  federal
and state NOLs may expire unused. In  considering  the  positive  and  negative
factors at this time, management concluded  that it is more likely than not that
Apria will be unable to utilize the NOLs except for future reversals of existing
taxable  temporary differences.


NOTE H - COMMITMENTS AND CONTINGENCIES

Apria is engaged in the defense of certain  claims and  lawsuits  arising out of
the  ordinary  course and conduct of its  business,  the outcome of which is not
determinable  at this time. In the opinion of  management,  any  liability  that
might be  incurred  by the  company  upon the  resolution  of these  claims  and
lawsuits will not, in the aggregate,  have a material  adverse effect on Apria's
consolidated  results of operations and financial  position.  Apria provides for
probable  losses related to certain  matters  arising in each period and revises
estimates for certain matters arising in previous periods.  Management is unable
to estimate the range of possible loss for all other claims and lawsuits.

<PAGE>

NOTE I - PER SHARE AMOUNTS
<TABLE>
The following  table sets forth the  computation  of basic and diluted per share
amounts:
<CAPTION>
                                                          Three Months Ended
                                                               March 31, 
                                                       ------------------------
                                                          1999           1998 
                                                          ----           ---- 
                                                             (in thousands,
                                                         except per share data)

NUMERATOR:
<S>                                                     <C>           <C>       
  Net income (loss) .................................     $ 15,562      $(6,607)
  Numerator for basic per share amounts - income
   (loss) available to common stockholders ..........     $ 15,562      $(6,607)

  Numerator for diluted per share amounts - income
   (loss) available to common stockholders ..........     $  5,562      $(6,607)


DENOMINATOR:
Denominator for basic per share amounts - weighted
  average shares ....................................       51,796       51,674

  Effect of dilutive securities:
    Employee stock options ..........................          868            -
                                                          --------      -------
    Dilutive potential common shares ................          868            -
                                                          --------      -------
Denominator for diluted per share amounts - adjusted
   weighted average shares ..........................       52,664       51,674
                                                          ========     ========

Basic income (loss) per common share ................     $   0.30      $ (0.13)
                                                          ========      =======
Diluted income (loss) per common share ..............     $   0.30      $ (0.13)
                                                          ========      =======

Employee stock options excluded from the
   computation  of diluted  per share amounts:

    Exercise price exceeds average market
      price of common stock .........................        2,171        2,154
    Other ...........................................            -          155
                                                          --------      -------
                                                             2,171        2,309
                                                          ========      =======
Average exercise price per share that exceeds
  average market price of common stock ..............     $  16.15      $ 19.15
                                                          ========      =======
</TABLE>
Due to the net loss  reported for the three  months  ended March 31,  1998,  the
impact of employee stock options is antidilutive. There is no difference between
basic and diluted per share amounts.
<PAGE>

CAUTIONARY  STATEMENT  FOR  PURPOSES  OF  THE  "SAFE  HARBOR"  PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: APRIA'S BUSINESS IS SUBJECT TO
A NUMBER OF RISKS, SOME OF WHICH ARE BEYOND THE COMPANY'S  CONTROL.  THE COMPANY
HAS DESCRIBED  CERTAIN OF THOSE RISKS IN ITS FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL
5,  1999.  THIS  REPORT  MAY BE USED  FOR  PURPOSES  OF THE  PRIVATE  SECURITIES
LITIGATION  REFORM  ACT OF  1995  AS A  READILY  AVAILABLE  DOCUMENT  CONTAINING
MEANINGFUL CAUTIONARY STATEMENTS  IDENTIFYING IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN ANY  FORWARD-LOOKING
STATEMENTS THE COMPANY MAY MAKE FROM TIME TO TIME.  THESE RISKS INCLUDE  WHETHER
APRIA WILL BE ABLE TO RESOLVE  ISSUES  PERTAINING  TO  MANAGEMENT  STABILITY AND
RECRUITING,  THE COLLECTIBILITY OF ITS ACCOUNTS RECEIVABLE,  THE COST OF AND THE
COMPANY'S  ABILITY TO IMPLEMENT  ITS  REORGANIZATION  PLAN,  APRIA'S  ABILITY TO
SERVICE  ITS  DEBT,  HEALTHCARE  REFORM  AND THE  EFFECT  OF  FEDERAL  AND STATE
HEALTHCARE  REGULATIONS,  THE ONGOING U.S. ATTORNEYS'  INVESTIGATIONS  REGARDING
APRIA'S BILLING  PRACTICES,  PRICING  PRESSURES FROM LARGE PAYORS AND CHANGES IN
GOVERNMENTAL  REIMBURSEMENT  LEVELS,  THE  EFFECTIVENESS OF APRIA'S  INFORMATION
SYSTEMS AND CONTROLS,  INCLUDING ITS ABILITY TO RESOLVE ANY REMAINING  YEAR 2000
COMPLIANCE  ISSUES, THE HIGHLY  COMPETITIVE  MARKET,  RECENT LOSSES, AND APRIA'S
HIGH    LEVERAGE    AND     RESTRICTIONS    ON    ITS    BORROWING     CAPACITY.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

RESULTS OF OPERATIONS
---------------------

     NET  REVENUES:  Apria  had net  revenues  of $228.3  million  for the first
quarter of 1999,  down from $250.5  million for the first  quarter of 1998.  The
primary  reason for the  decline is the recent  exit from the  infusion  therapy
service  line  in  certain   geographic   markets  where  profit   margins  were
consistently  below acceptable levels. The variance between the first quarter of
1999 and the first  quarter of 1998  attributable  to this partial exit from the
infusion business is approximately  $12.7 million.  Also impacting 1999 revenues
was a 5% reduction of the Medicare  reimbursement rates for home oxygen therapy,
as  mandated  by the  provisions  of  the  Balanced  Budget  Act  of  1997.  The
reimbursement  rate  reduction,   which  decreased  first  quarter  revenues  by
approximately $2.5 million,  became effective January 1, 1999 and is in addition
to a 25% rate reduction effected in January 1998. Additionally, starting in late
1997 and continuing into 1998,  Apria  performed a  comprehensive  review of its
managed  care  contracts  and  renegotiated  or  terminated  those  not  meeting
profitability   standards.  The  termination  of  such  contracts  accounts  for
approximately  $4 million of the revenue  decrease  between the first quarter of
1999 and the first quarter of 1998. An  unfavorable  consequence of the infusion
therapy exit and the  termination of the  low-margin  managed care contracts was
the loss of related business that Apria would have preferred to retain.

     The table  below  sets  forth a summary of net  revenues  by service  line.
Respiratory  therapy shows a slight increase despite the Medicare  reimbursement
reduction.  The  quarter-to-quarter  decrease  in infusion  therapy  revenues is
largely  explained by the exit of this  business in selected  areas as described
above.  The infusion  line was also  impacted by the  termination  of low-margin
contracts.  The decrease in the HME/other line was primarily attributable to the
contract review process and, to a lesser extent, decreases in the medical supply
and nursing lines which Apria began exiting in late 1997.

                                         Three Months Ended March 31, 
                                ---------------------------------------------
                                       1999                       1998 
                                ------------------         ------------------
                                    $          %               $          % 
                                --------    ------         --------    ------
                                            (dollars in thousands)
Respiratory therapy..........   $145,223     63.6%         $142,810     57.0%
Infusion therapy.............     42,237     18.5%           57,752     23.0%
HME/other....................     40,834     17.9%           49,976     20.0%
                                --------    ------         --------    ------
  Total net revenues.........   $228,294    100.0%         $250,538    100.0%
                                ========    ======         ========    ======

     Due to the nature of the  industry  and the  reimbursement  environment  in
which Apria operates,  certain estimates are required in recording net revenues.
Inherent  in these  estimates  is the risk that they will have to be  revised or
updated,   and  the  changes  recorded  in  subsequent  periods,  as  additional
information  becomes  available to management.  Specifically,  the complexity of
many third-party billing  arrangements and uncertainty of reimbursement  amounts
for certain  services and/or from certain payors result in adjustments to billed
amounts.  Such  adjustments  are fairly common and are typically  identified and
recorded at the point of cash application,  claim denial or upon account review.
Examples of revenue  adjustments include subsequent changes to estimated revenue
amounts or denials for  services  not  covered  due to changes in the  patient's
coverage;  failure subsequent to service delivery to obtain written confirmation
of authorization or other necessary  documentation;  and differences in contract
prices due to complex  contract terms or a biller's lack of  familiarity  with a
contract or payor.

     GROSS  PROFIT:  The gross  margin  for the first  quarter in 1999 was 71.1%
versus  65.7%  in the  same  quarter  last  year.  The  improvement  is  largely
attributable to the exit from low-profit  service lines and contracts and better
pricing negotiated for inventory, patient service equipment and related goods.

     Gross  margins  in the  first  quarter  of 1999  for  respiratory  therapy,
infusion  therapy  and  home  medical  equipment/other  were  78%,  59% and 58%,
respectively.

     SELLING,   DISTRIBUTION  AND  ADMINISTRATIVE:   Selling,  distribution  and
administrative  expenses  were $124.4  million or 54.5% of net  revenues for the
first quarter of 1999,  compared to $141.9  million or 56.7% for the same period
last year.  The  primary  component  of the  decrease  is a  reduction  in labor
expenses. During the first quarter of 1998, Apria was in the process of reducing
its  workforce  in response to the 25%  Medicare  reimbursement  reductions  and
therefore  the  financial  results did not yet reflect the full  savings of that
labor  reduction  effort.  Since then,  Apria has  continued to reduce  staffing
levels,  particularly  in the  functional  area of  reimbursement,  an area that
experienced  significant  staffing  increases  during the period of billing  and
collection  difficulties arising from the 1995 Abbey/Homedco  merger. During the
second half of 1998,  Apria also effected  significant  labor  reductions at its
corporate  headquarters  and  reduced  staff  in  conjunction  with  the exit of
selected infusion therapy businesses.  From the end of the first quarter in 1998
to the end of the first quarter in 1999, Apria's full-time  equivalent employees
decreased by 971.

     The  impairment of computer  hardware and software  recognized in the third
quarter  of 1998 has  resulted  in a decrease  in  depreciation  expense.  Also,
certain  costs  associated  with the  selected  infusion  therapy exit have been
eliminated.  Finally, the successful  implementation of spending controls at the
field  locations and corporate  headquarters  has contributed to the decrease in
selling, distribution and administrative expenses.

     PROVISION FOR DOUBTFUL ACCOUNTS:  The provision for doubtful accounts, as a
percentage of net  revenues,  was 3.8% in the first quarter of 1999, as compared
to 5.5% in the first quarter of 1998.  The  improvement in the provision rate is
largely  due to an  improvement  in  the  aging  of  accounts  receivable  and a
shortening in collection  periods.  Accounts in excess of 180 days were 30.5% of
total accounts receivable at March 31, 1998; this compares to 20.1% at March 31,
1999.  Days sales  outstanding  (calculated  as of each  period-end  by dividing
accounts receivable, less allowance for doubtful accounts, by the 90-day rolling
average of net revenues) decreased to 53 days at March 31, 1999, from 83 days at
March 31, 1998.

     During  the  second  half  of  1998,   management   reviewed  the  historic
performance  and  collectibility  of  Apria's  accounts  receivable   portfolio.
Management  considered  the  continued  high-level  of bad debt  write-offs  and
reviewed its existing policies and procedures for estimating the  collectibility
of its  accounts  receivable.  In  response,  management  decided  to change the
collection policy and is formally shifting the focus of the collection  function
to the more  current  balances and is  assigning  the older  accounts to outside
collection  agencies.  Management  believes this  concentration  on more current
balances  will  limit  the  amount  of  receivables  that age  beyond  180 days.
Consequently,  the  accounts  that do age  beyond 180 days are likely to be more
difficult  to  collect.  Accordingly,  with this  change in  collection  policy,
management  increased the allowance percentage applied to balances over 180 days
outstanding.

     AMORTIZATION OF INTANGIBLE  ASSETS:  Amortization of intangible  assets was
$1.9  million in the three  months  ended March 31, 1999 versus $3.6 million for
the same period in 1998.  The decrease is due to the  impairment  of  intangible
assets of $76.2 million that was recorded in the third quarter of 1998 and, to a
lesser extent, the expiration of certain non-compete covenants.

     INTEREST  EXPENSE:  Interest expense was $11.3 million in the first quarter
of 1999 and $11.5 million in the first quarter of 1998. Although there was a 12%
reduction in the average  long-term debt balance between the two periods,  Apria
is now  incurring  interest on its bank loans at higher rates as a result of its
November 1998 amended and restated credit agreement.

     INCOME TAXES:  Income taxes were $400,000 for the first quarter in 1999 and
$500,000 for the same period last year.  The  recorded  amounts for both periods
include  federal and state taxes payable on a basis other than or in addition to
taxable  income.  At December  31,  1998,  Apria's  federal net  operating  loss
carryforward ("NOL") approximated  $380,000,000,  expiring in varying amounts in
the years 2003  through  2013.  Additionally,  the  company  has  various  state
operating  loss  carryforwards  which began to expire in 1997. As a result of an
ownership  change in 1992 which met  specified  criteria  of Section  382 of the
Internal  Revenue  Code,  future  use of a  portion  of the  federal  and  state
operating  loss  carryforwards  generated  prior  to 1992 are  each  limited  to
approximately   $5,000,000   per  year.   Because  of  the  annual   limitation,
approximately  $57,000,000 of each of Apria's  federal and state NOLs may expire
unused.  In  considering  the  positive  and  negative  factors  at  this  time,
management  concluded  that it is more likely than not that Apria will be unable
to utilize the NOLs except for future  reversals of existing  taxable  temporary
differences.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     OPERATING  CASH FLOW:  Cash  provided  by  operating  activities  was $30.4
million  for the  three-month  period  ended March 31,  1999,  compared to $35.5
million  for the same  period in 1998.  The higher net income in the 1999 period
was offset by an increase in accounts receivable, as compared to a decrease last
year, and an increase in patient service  equipment  purchases.  The decrease in
accounts receivable in the first quarter last year was due, in part, to the fact
that  revenues  were being  recorded  at a lower  level due to the 25%  Medicare
reimbursement  rate reduction,  but cash was still being collected on the higher
pre-reduction-based revenues. The equipment purchases increased during the first
quarter of 1999, primarily to support a recently-signed national contract and to
support a new equipment utilization model currently being implemented.

     ACCOUNTS  RECEIVABLE:  Accounts  receivable,  before allowance for doubtful
accounts,  increased to $171.2  million at March 31, 1999 from $167.6 million at
December 31, 1998.  The slight  increase can be attributed to a slowdown in cash
collections from fourth-quarter levels. Days sales outstanding (DSO - calculated
as of each  period-end  by dividing  accounts  receivable,  less  allowance  for
doubtful  accounts,  by the 90-day rolling average of net revenues) at March 31,
1999 remained unchanged from December 31, 1998 at 53 days.

     During  the last  three  fiscal  years,  results  of  operations  have been
adversely affected by high levels of accounts receivable  write-offs.  Initially
caused  by  the   disruptive   effects   of  system   conversions   and   branch
consolidations,  the high level of accounts  receivable  write-offs were largely
due to billing  problems  such as untimely  billing,  improper  and/or  untimely
preparation of, and deficiencies in, reimbursement documentation,  problems with
the billing systems and the high  concentration of managed care payors from whom
it has been difficult to collect.

     Also during the last three  years,  management  has  instituted a number of
measures in response to these problems.  During 1998, management reorganized its
field operations to create a separate "revenue  management"  organization  which
encompasses the functions of order-taking, patient qualification,  documentation
coordination,  timely  filing  and  prompt  follow-up.  The  revenue  management
organization  reports  directly to corporate  headquarters and specifically to a
newly created Executive Vice President position.  The new organization structure
was  intended to  facilitate  improved  communications  and  accountability.  In
conjunction with the  reorganization,  processes and procedures were reviewed to
identify  additional  opportunities  for  improvement.  As a result,  additional
personnel  were  placed in  quality  assurance  positions  to help  ensure  that
products   and   services   were  more   accurately   and   timely   billed  and
responsibilities were consolidated to allow specifically  qualified personnel to
support,  direct and train the revenue management staff. Task forces were formed
to visit the billing  centers to ensure  compliance  with  policies and standard
procedures.  Software  enhancements  to simplify the  order-intake  process were
introduced and the billing and accounts  receivable  modules are currently being
rewritten to address the  system-caused  difficulties.  Although  management has
been  proactive in addressing  the issues  leading to the high level of accounts
receivable  write-offs  recognized in recent periods,  there can be no assurance
that the collectibility of Apria's recorded accounts receivable will continue to
improve in the near future.

     Included in accounts  receivable  are earned but  unbilled  receivables  of
$27.2  million  and $25.3  million  at March 31,  1999 and  December  31,  1998,
respectively.  Delays in billings can occur, from a few days to several weeks or
more,  from the date of  service  due to delays in  obtaining  certain  required
payor-specific   documentation   from  internal  and  external   sources.   Such
documentation  would  include  internal  records of proof of service and written
authorizations  from physicians and other referral sources.  Earned but unbilled
receivables are aged from date of service and are considered in Apria's analysis
of historical performance and collectibility.

     LONG-TERM  DEBT:  Apria's  credit  agreement  with  Bank of  America  and a
syndicate of banks was amended and restated for the third time in April of 1999.
The agreement was amended to remove the  requirement  that the company issue $50
million  in  senior  subordinated  notes  or  senior  subordinated   convertible
debentures  by April 23, 1999. In connection  with this  amendment,  the company
made a required $50 million  repayment of the term loan.  The agreement was also
amended  to remove  the  requirement  that the  company  maintain  minimum  cash
balances of $35 million through the consummation of the debt or equity offering.
In  addition,  the  amendment  still  allows  Apria to  complete  $62 million of
acquisitions in 1999.

     At March 31, 1999,  total borrowings under the credit agreement were $281.1
million,  outstanding letters of credit totaled $10 million and credit available
under the revolving  facility was $20 million (subject to a temporary  borrowing
restriction  under the  indenture  governing  Apria's $200 million 9 1/2% senior
subordinated notes).  Reflecting the $50 million debt repayment discussed above,
total borrowings under the credit agreement were $231.1 million at May 10, 1999.

     PURCHASE  COMMITMENTS:  Apria had been a party to an  agreement to purchase
medical  supplies  with  minimum  annual  volume  requirements.  Because  of the
company's  strategic  decision to exit the low-margin  medical supply  business,
management  had been working with the vendor to restructure  the agreement.  The
negotiations have been completed and a new agreement, without any minimum volume
requirements, is now in effect.

     BUSINESS   COMBINATIONS:   Apria   periodically   makes   acquisitions   of
complementary  businesses in specific geographic  markets.  The transactions are
accounted  for as  purchases  and the  results  of  operations  of the  acquired
companies are included in the accompanying statement of operations from the date
of acquisition.  Acquisitions  that closed during the  three-month  period ended
March 31, 1999 resulted in cash payments of approximately $4.8 million.  Of that
amount,  $4.4 million was allocated to intangible assets and $243,000 to patient
service  equipment.  Goodwill is being amortized over 20 years and covenants not
to compete are being amortized over the life of the respective agreements.

     YEAR 2000 COMPLIANCE:  As the year 2000 approaches,  an issue impacting all
companies has emerged regarding how existing  application  software programs and
operating  systems can  accommodate  this date value.  In brief,  many  existing
application programs in the marketplace were designed to accommodate a two-digit
date position which represents the year (e.g.,  "95" is stored on the system and
represents the year 1995). Consequently, the year 1999 could be the maximum date
value that systems would be able to accurately process.

     Internal operating systems. Beginning in late 1997, Apria conducted a
comprehensive review of its operating and field information  systems,  including
an assessment of the nature and potential  extent of the impact of the year 2000
issue.  As a result,  Apria began the  modification  process of its  software in
order  for its  computer  systems  to  function  properly  in the year  2000 and
thereafter. Apria utilized internal resources to reprogram and test the software
for the necessary year 2000  modifications.  Apria's  systems also underwent two
external  assessments  of the year 2000 issue and  received a "low" risk rating.
The  modification  and testing were  completed on schedule  and  management  now
considers its operating and field information  systems year  2000-compliant.  To
further ensure a smooth  transition into the year 2000,  management  will, among
other measures,  suspend software updates between November 1999 and January 2000
and form a special team to address any related problems that may arise.

     Apria has not  developed  a formal  contingency  plan in the event that the
modifications  to its internal  operating  systems prove to be inadequate.  Such
inadequacies could result in system failure or miscalculations. This would cause
disruptions to normal  business  processes  including,  among other things,  the
temporary  inability to process  transactions and generate  billings.  If such a
disruption  continued for an extended  period,  it could have a material adverse
effect on the results of operations, cash flow and financial condition of Apria.

     Apria is currently in the process of assessing and addressing any potential
issues with its ancillary software packages that perform less-critical functions
and  any  other   electronic   mechanisms   that   could   have   date-sensitive
microprocessors.

     External  risks.  Apria depends on electronic  interfaces  with many of its
business  partners to conduct many of its day-to-day  functions.  Such functions
include  payments to and from  suppliers  and payors,  transfer of funds between
Apria's banks,  and electronic  billing and supply  ordering.  Apria has been in
contact with its more critical  business  partners to obtain  assurance of their
year  2000-readiness  and is currently in the process of  scheduling  live tests
with the regional  Medicare  carriers  responsible for processing  approximately
one-fourth of Apria's reimbursements.  As a contingency, in the event of failure
on the part of an external agent, the exchange of data and payments can continue
via paper documents and more  traditional  methods.  Further,  Apria has revised
contracts with certain of its managed care payors to include remedies should the
payors fail to  reimburse  the  company on a timely  basis due to their own year
2000 problems.

     Another area of potential risk is with certain  patient  service  equipment
items that have  microprocessors  with date functionality that could malfunction
in  the  year  2000.  Although  Apria  has  found  that  the  majority  of  such
microprocessors   include  duration  time  clocks  and  not  date  time  clocks,
management  has  initiated  formal  communications  with its suppliers to obtain
assurance that the equipment they supply is year 2000-compliant.  To date, Apria
has received year 2000-compliance  certification  letters from substantially all
of its primary vendors and  approximately  59% of the entire set of vendors from
which it requested such assurance.

     If Apria is  unable  to  resolve  all its year 2000  issues  with  external
agents, it may have a material adverse effect on the company's business, results
of operations or financial condition.

     Costs.  Apria  does not  believe  the  costs of its year  2000  remediation
efforts  are  material.  To date,  such costs have been  expensed  as  incurred.
Management's  expectations  about year 2000-related costs yet to be incurred are
subject to various  uncertainties  that could  cause the actual  costs to differ
materially from those expectations.  Such uncertainties  include the adequacy of
the modifications made to Apria's operating and field information  systems,  the
success of the  company in  identifying  and  resolving  any  problems  with its
ancillary  systems  or  electronic  mechanisms  and the year  2000-readiness  of
Apria's business partners.

     OTHER:  Apria's  management  believes  that  cash  provided  by  operations
together  with cash  invested in its money market  account will be sufficient to
finance its current operations for at least the next year or until the borrowing
restriction described above is eliminated.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Apria currently utilizes no material derivative financial  instruments that
expose the company to  significant  market  risk.  However,  Apria is subject to
interest rate changes on its variable  rate term loan under the  company's  bank
credit  agreement  that may affect the fair value of that debt and cash flow and
earnings.  Based on the term debt  outstanding at March 31, 1999 and the current
market  perception,  a 50 basis point increase in the applicable  interest rates
would  decrease  Apria's  annual cash flow and  earnings by  approximately  $1.1
million.  Conversely, a 50 basis point decrease in the applicable interest rates
would increase annual cash flow and earnings by $1.1 million.
 
<PAGE>

PART II - OTHER INFORMATION

ITEMS 1-5.  NOT APPLICABLE

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)      Exhibits:

            Exhibit
            Number      Reference
            ------      ---------
            10.1        Third Amendment to Amended and Restated Credit Agreement
                        dated  April 22, 1999, among  Registrant  and certain of
                        its subsidiaries, Bank  of  America  National  Trust and
                        Savings  Association  and  other  financial institutions
                        party to the Credit Agreement.

            27.1        Financial Data Schedule.

            (b)         Reports on Form 8-K:

                        No reports on Form 8-K were filed during the quarter for
                        which this report is filed.

<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                            APRIA HEALTHCARE GROUP INC.
                            ---------------------------
                                    Registrant



May 14, 1999                /s/  JOHN C. MANEY  
                            -----------------------------------         
                            John C. Maney
                            Executive Vice President and Chief Financial Officer
                            (Principal Financial Officer)