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 June 30, 2001

                                       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 54,109,795  shares of common stock,  $.001 par value,  outstanding at
July 20, 2001.

<PAGE>


                           APRIA HEALTHCARE GROUP INC.

                                    FORM 10-Q

                       FOR THE PERIOD ENDED JUNE 30, 2001






PART I. FINANCIAL INFORMATION
-----------------------------

Item 1.       Financial Statements

              - Condensed Consolidated Balance Sheets
              - Condensed Consolidated Income Statements
              - Condensed Consolidated Statements of Cash Flows
              - Notes to Condensed 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 and Use of Proceeds

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>
<TABLE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS


                           APRIA HEALTHCARE GROUP INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>

                                                                                JUNE 30,   DECEMBER 31,
(dollars in thousands)                                                            2001        2000
-------------------------------------------------------------------------------------------------------
                                                                              (unaudited)
                                     ASSETS

CURRENT ASSETS
<S>                                                                            <C>          <C>
  Cash and cash equivalents ...............................................    $  26,632    $  16,864
  Accounts receivable, less allowance for doubtful accounts of $36,469
    and $39,787 at June 30, 2001 and December 31, 2000, respectively ......      157,071      145,518
  Inventories, net ........................................................       22,623       22,404
  Deferred income taxes ...................................................       33,673       33,067
  Prepaid expenses and other current assets ...............................       10,799        8,617
                                                                               ---------    ---------
          TOTAL CURRENT ASSETS ............................................      250,798      226,470

PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $327,128
  and $310,741 at June 30, 2001 and December 31, 2000, respectively .......      153,580      134,812
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET .................................       43,540       40,630
DEFERRED INCOME TAXES .....................................................       60,853       75,076
INTANGIBLE ASSETS, NET ....................................................      165,169      137,928
OTHER ASSETS ..............................................................        1,649        1,687
                                                                               ---------    ---------
                                                                               $ 675,589    $ 616,603
                                                                               =========    =========


                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable ........................................................    $  55,485    $  54,250
  Accrued payroll and related taxes and benefits ..........................       28,948       28,449
  Accrued insurance .......................................................        9,507        9,980
  Income taxes payable ....................................................       13,702       13,378
  Other accrued liabilities ...............................................       28,879       24,555
  Current portion of long-term debt .......................................       20,937        1,999
                                                                               ---------    ---------
          TOTAL CURRENT LIABILITIES .......................................      157,458      132,611

LONG-TERM DEBT, net of current portion ....................................      320,716      337,750

COMMITMENTS AND CONTINGENCIES (Note H)

STOCKHOLDERS' EQUITY Preferred stock, $.001 par value:
    10,000,000 shares authorized; none issued .............................            -            -
  Common stock, $.001 par value:
    150,000,000 shares authorized; 54,177,527 and 53,153,890 shares
    issued at June 30, 2001 and December 31, 2000, respectively;
    54,091,427 and 53,067,790 outstanding at June 30, 2001 and
    December 31, 2000, respectively .......................................           54           53
  Additional paid-in capital ..............................................      360,470      343,621
  Accumulated deficit .....................................................     (162,148)    (196,471)
  Treasury stock, at cost; 86,100 shares at June 30, 2001
    and December 31, 2000 .................................................         (961)        (961)
                                                                               ---------    ---------
                                                                                 197,415      146,242
                                                                               ---------    ---------
                                                                               $ 675,589    $ 616,603
                                                                               =========    =========

See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>

                           APRIA HEALTHCARE GROUP INC.

                    CONDENSED CONSOLIDATED INCOME STATEMENTS
                                   (unaudited)

<CAPTION>
                                                           THREE MONTHS ENDED        SIX MONTHS ENDED
                                                                JUNE 30,                  JUNE 30,
                                                           ------------------       -------------------
(dollars in thousands, except per share data)                2001       2000          2001       2000
-------------------------------------------------------------------------------------------------------

<S>                                                        <C>        <C>           <C>        <C>
Net revenues ...........................................   $283,480   $252,570      $554,834   $503,292
Costs and expenses:
   Cost of net revenues:
      Product and supply costs .........................     49,775     46,966       101,702     96,412
      Patient service equipment depreciation ...........     22,477     19,410        43,441     38,263
      Nursing services .................................        306        417           660        870
      Other ............................................      3,017      2,588         6,050      5,337
                                                           --------   --------      --------   --------
          TOTAL COST OF NET REVENUES ...................     75,575     69,381       151,853    140,882

Provision for doubtful accounts ........................     11,069      8,399        19,219     19,018
   Selling, distribution and administrative ............    158,097    137,737       306,491    271,262
   Amortization of intangible assets ...................      3,126      2,486         5,962      4,926
                                                           --------   --------      --------   --------
          TOTAL COSTS AND EXPENSES .....................    247,867    218,003       483,525    436,088
                                                           --------   --------      --------   --------

          OPERATING INCOME .............................     35,613     34,567        71,309     67,204
Interest expense, net ..................................      8,027     10,307        16,435     20,908
                                                           --------   --------      --------   --------
          INCOME BEFORE TAXES ..........................     27,586     24,260        54,874     46,296
Income tax expense .....................................     10,339     10,189        20,551     19,444
                                                           --------   --------      --------   --------
          NET INCOME ...................................   $ 17,247   $ 14,071      $ 34,323   $ 26,852
                                                           ========   ========      ========   ========


Net income per common share:
   Basic ...............................................   $   0.32   $   0.27      $   0.64   $   0.51
   Diluted .............................................   $   0.31   $   0.26      $   0.62   $   0.50

Weighted average common shares outstanding:
   Basic ...............................................     53,748     52,326        53,570     52,258
   Diluted .............................................     55,748     53,661        55,616     53,804



See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>

                           APRIA HEALTHCARE GROUP INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<CAPTION>

                                                                                 SIX MONTHS ENDED
                                                                                     JUNE 30,
                                                                             ------------------------
(dollars in thousands)                                                          2001          2000
-----------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
<S>                                                                          <C>           <C>
Net income ...............................................................   $  34,323     $  26,852
Items included in net income not requiring cash:
  Provision for doubtful accounts ........................................      19,219        19,018
  Depreciation and amortization ..........................................      57,022        52,242
  Amortization of deferred debt costs ....................................       1,176         1,357
  Deferred income taxes and other ........................................      18,817        17,939
Changes in operating assets and liabilities, exclusive of
  effects of acquisitions:
  Accounts receivable ....................................................     (30,772)      (17,591)
  Inventories ............................................................         (56)       (2,128)
  Prepaid expenses and other assets ......................................      (2,160)        4,266
  Accounts payable .......................................................       1,235        (6,361)
  Accrued payroll and related taxes and benefits .........................         500        (2,314)
  Other accrued liabilities ..............................................       1,545        (8,941)
                                                                             ---------     ---------
          NET CASH PROVIDED BY OPERATING ACTIVITIES ......................     100,849        84,339

INVESTING ACTIVITIES
  Purchases of patient service equipment and property, equipment
    and improvements, exclusive of effects of acquisitions ...............     (66,903)      (42,744)
  Proceeds from disposition of assets ....................................         202           230
  Cash paid for acquisitions and payments of contingent consideration ....     (35,038)      (10,143)
                                                                             ---------     ---------
          NET CASH USED IN INVESTING ACTIVITIES ..........................    (101,739)      (52,657)

FINANCING ACTIVITIES
  Proceeds from revolving credit facility ................................      29,300             -
  Payments on revolving credit facility ..................................     (29,300)            -
  Payments on term loan ..................................................           -       (10,000)
  Payments on other long-term debt .......................................        (872)       (3,143)
  Repurchases of common stock ............................................           -          (958)
  Issuances of common stock ..............................................      11,530         2,373
                                                                             ---------     ---------
          NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ............      10,658       (11,728)
                                                                             ---------     ---------

NET INCREASE IN CASH .....................................................       9,768        19,954
Cash and cash equivalents at beginning of period .........................      16,864        20,493
                                                                             ---------     ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...............................   $  26,632     $  40,447
                                                                             =========     =========

See notes to condensed consolidated financial statements.
</TABLE>

<PAGE>


                           APRIA HEALTHCARE GROUP INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - BASIS OF PRESENTATION

The accompanying  unaudited condensed  consolidated financial statements include
the accounts of Apria Healthcare  Group Inc.  ("Apria" or "the company") and its
subsidiaries. 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, 2000, included in the company's 2000 Form 10-K.

For all periods presented herein, there were no differences  between  net income
and comprehensive income.


NOTE B - RECLASSIFICATIONS, ACCOUNTING ESTIMATES AND RECENT ACCOUNTING
         PRONOUNCEMENTS

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.

Recent  Accounting  Pronouncements:  During  the first  quarter  of 2001,  Apria
adopted  Statement  of  Financial   Accounting   Standards   ("SFAS")  No.  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
amended by SFAS No. 137,  "Accounting  for  Derivative  Instruments  and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133" and further amended
by SFAS No. 138,  "Accounting  for Certain  Derivative  Instruments  and Certain
Hedging  Activities".  SFAS No.  133,  as amended,  establishes  accounting  and
reporting  standards  for hedging  activities  and for  derivative  instruments,
including  certain  derivative  instruments  embedded  in  other  contracts.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in  the   statements  of  financial   position  and  measure  those
instruments  at fair  value.  Changes in the fair value of  derivatives  must be
recorded  each  period.  SFAS  No.  133  also  requires  formal   documentation,
designation at the time the hedge transaction is initiated and assessment of the
effectiveness of the  transactions  that receive hedge  accounting.  At June 30,
2001,  Apria had no derivative  securities  that require fair value  measurement
under  SFAS  No.  133.  Accordingly,  adoption  of SFAS  No.  133 did not have a
material effect on the financial statements.

In July 2001,  the  Financial  Accounting  Standards  Board issued SFAS No. 141,
"Business  Combinations"  and SFAS  No.  142,  "Goodwill  and  Other  Intangible
Assets".  SFAS No. 141 requires that all business  combinations be accounted for
under the purchase method.  The statement further requires separate  recognition
of intangible assets that meet one of two criteria. The statement applies to all
business combinations initiated after June 30, 2001.

SFAS No.  142  requires  that an  intangible  asset  that is  acquired  shall be
initially  recognized and measured  based on its fair value.  The statement also
provides  that  goodwill  should  not be  amortized,  but  shall be  tested  for
impairment  annually,  or more frequently if  circumstances  indicate  potential
impairment,  through a comparison of fair value to its carrying amount. Existing
goodwill  will  continue to be amortized  through the remainder of 2001 at which
time  amortization  will  cease and the  company  will  perform  a  transitional
goodwill impairment test. SFAS No. 142 is effective for fiscal periods beginning
after December 15, 2001. Apria management is currently  evaluating the impact of
the new accounting  standards on existing goodwill and other intangible  assets.
While  the  ultimate  impact  of the  new  accounting  standards  has  yet to be
determined, goodwill amortization expense for the six months ended June 30, 2001
was $4,701,000.


NOTE C - REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK

Net  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 third-party payors, including private insurers,
managed care organizations, Medicare and Medicaid.

Due to the nature of the industry  and the  reimbursement  environment  in which
Apria  operates,  certain  estimates  are  required to record net  revenues  and
accounts receivable at their net realizable values.  Inherent in these estimates
is the  risk  that  they  will  have to be  revised  or  updated  as  additional
information becomes available.  Specifically, the complexity of many third-party
billing  arrangements and the uncertainty of  reimbursement  amounts for certain
services from certain  payors may result in  adjustments  to amounts  originally
recorded. Such adjustments are typically identified and recorded at the point of
cash application, claim denial or account review.

Management  performs  various  analyses to evaluate the net realizable  value of
accounts receivable.  Specifically,  management considers historical realization
data,  accounts  receivable  aging  trends,  operating  statistics  and relevant
business  conditions.  Also, focused reviews of certain large and/or problematic
payors are performed.  Because of continuing changes in the healthcare  industry
and third-party reimbursement,  it is possible that management's estimates could
change in the near  term,  which  could  have an 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
income  statements  from the date of  acquisition.  During the six-month  period
ended June 30, 2001, cash paid for  acquisitions  was  $35,038,000.  Included in
this  amount  is  contingent  consideration  of  $1,870,000.  At June  30,  2001
outstanding contingent consideration totaled $5,116,000.

For the  acquisitions  that closed  during the  six-month  period ended June 30,
2001, $33,339,000 was allocated to intangible assets, which includes amounts not
yet paid. 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

At June 30, 2001,  Apria's  $200,000,000 9 1/2% senior  subordinated  notes were
outstanding  and  borrowings  under  the  then-existing  credit  agreement  were
$140,000,000.

On July  20,  2001,  Apria  closed  a new  $400,000,000  senior  secured  credit
agreement with a syndicate of lenders led by Bank of America,  N.A. The previous
credit  agreement and the  subordinated  notes,  both of which were scheduled to
mature in late 2002,  were repaid in full concurrent with the closing of the new
senior secured credit agreement.  In connection with the early retirement of its
debt,  Apria will write-off the unamortized  balance of deferred  financing fees
attributable  to the  subordinated  notes  and the  previous  credit  agreement.
Accordingly,   Apria  will  record  an  extraordinary  charge  of  approximately
$1,600,000, net of tax, in the third quarter of 2001.

The senior credit  facilities  consist of: a  $100,000,000  five-year  revolving
credit facility; a $125,000,000 five-year term loan; and a $175,000,000 six-year
term loan. On July 20, 2001, borrowings under the revolving credit facility were
$43,000,000,  outstanding  letters  of  credit  totaled  $1,000,000  and  credit
available under the revolving facility was $56,000,000.

Borrowings   under  the  senior  credit   facilities   are   collateralized   by
substantially all of the assets of Apria. The credit agreement contains numerous
restrictions,  including but not limited to, covenants requiring the maintenance
of certain  financial  ratios,  limitations  on additional  borrowings,  capital
expenditures,  mergers,  acquisitions and investments and,  restrictions on cash
dividends,  loans and other  distributions.  The agreement also permits Apria to
expend a maximum of $100,000,000 per year on acquisitions.

The senior credit agreement permits Apria to select one of two variable interest
rates.  The base rate is expressed  as the higher of (a) the Federal  Funds rate
plus 0.50% and (b) the Prime Rate.  The  Eurodollar  rate is based on the London
Interbank Offered Rate. Interest on outstanding balances under the senior credit
agreement are determined by adding a margin to the Eurodollar  rate or base rate
existing at each  interest  calculation  date.  Margins  currently  in effect on
initial borrowings under the revolving credit facility and the $125,000,000 term
loan are 1.75% for Eurodollar loans and 0.75% for base rate loans. Commencing on
September 30, 2001, the applicable margins for the revolving credit facility and
the $125,000,000 term loan will be based on Apria's leverage ratio, which is the
ratio of its funded debt to its last four  quarters of EBITDA,  as defined.  The
applicable margin ranges from 1.50% to 2.25% for Eurodollar loans and from 0.50%
to 1.25% for base rate loans.  For the  $175,000,000  term loan, the margins are
fixed at 3.00% for Eurodollar loans and at 2.00% for base rate loans. The senior
credit  agreement also requires payment of commitment fees ranging from 0.25% to
0.50% on the unused portion of the revolving credit facility.

The $125,000,000 term loan is repayable in 20 consecutive quarterly installments
of $5,500,000 to $7,000,000 each, commencing December 31, 2001. The $175,000,000
term loan is  repayable in 20  consecutive  quarterly  installments  of $437,500
each, commencing December 31, 2001, and four of $41,562,500 each, three of which
are  payable  on the  last  business  day of each  calendar  quarter  commencing
December 31, 2006 and the last of which is payable on July 20, 2007.


NOTE F - EQUITY

The change in stockholders'  equity, other than from net income, is attributable
to the  exercise  of  stock  options  and the tax  benefit  associated  with the
exercise of nonqualified stock options.  For the six months ended June 30, 2001,
proceeds  from the exercise of stock  options  amounted to  $11,530,000  and the
related tax benefit amounted to $5,320,000.


NOTE G - INCOME TAXES

Income taxes for the six months ended June 30, 2001 and 2000 have been  provided
at the effective tax rate expected to be applicable for the year.

At December 31, 2000, Apria's federal net operating loss carryforwards  ("NOLs")
approximated  $173,000,000,  which will begin expiring in varying amounts in the
years 2003 through 2013. Additionally,  the company has various state NOLs which
began expiring in 1997 and an  alternative  minimum tax credit  carryforward  of
approximately  $8,000,000. 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 NOLs  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.  The company excludes the $57,000,000 of potentially  expiring NOLs from
its  deferred  tax assets.  In 2001,  for federal tax  purposes,  NOLs are being
utilized to the extent of the company's federal taxable income.


NOTE H - COMMITMENTS AND CONTINGENCIES

Apria and  certain of its  present  and former  officers  and/or  directors  are
defendants in a class action lawsuit,  In Re Apria  Healthcare  Group Securities
Litigation,  filed  in the U.S.  District  Court  for the  Central  District  of
California,  Southern  Division  (Case  No.  SACV98-217  GLT).  This  case  is a
consolidation  of three similar  class  actions filed in March and April,  1998.
Pursuant to a court order dated May 27,  1998,  the  plaintiffs  in the original
three class  actions  filed a  Consolidated  Amended  Class Action  Complaint on
August 6, 1998. The amended complaint purports to establish a class of plaintiff
shareholders who purchased Apria's common stock between May 22, 1995 and January
20,  1998.  No class has been  certified  at this time.  The  amended  complaint
alleges,  among other things,  that the defendants made false and/or  misleading
public  statements  regarding Apria and its financial  condition in violation of
federal  securities laws. The amended complaint seeks  compensatory and punitive
damages as well as other relief.

Two similar class actions were filed during July 1998 in the Superior  Court for
the State of  California  for the County of Orange:  Schall v. Apria  Healthcare
Group Inc.,  et. al. (Case No.  797060) and Thompson v. Apria  Healthcare  Group
Inc., et al. (Case No. 797580).  These two actions were  consolidated by a court
order dated  October 22, 1998 (Master Case No.  797060).  On June 14, 1999,  the
plaintiffs filed a Consolidated  Amended Class Action Complaint asserting claims
founded on state law and on Sections 11 and 12(2) of the 1933 Securities Act.

Apria believes that it has meritorious  defenses to the plaintiffs'  claims, and
it intends to vigorously  defend itself in both the federal and state cases.  In
the  opinion of Apria's  management,  the  ultimate  disposition  of these class
actions will not have a material adverse effect on Apria's results of operations
or financial condition.

Since  mid-1998  Apria has received a number of subpoenas and document  requests
from U.S.  Attorneys'  offices and from the U.S.  Department of Health and Human
Services.  The  subpoenas  and requests  generally  ask for  documents,  such as
patient  files,   billing  records  and  other  documents  relating  to  billing
practices,  related  to  Apria's  patients  whose  healthcare  costs are paid by
Medicare and other federal programs. Apria is cooperating with the government in
connection with these  investigations and is responding to the document requests
and  subpoenas.  In  July  1999,  Apria  received  notification  that  the  U.S.
Attorney's office in Sacramento closed its criminal  investigation file relating
to eight subpoenas that had been issued by that office.

In January 2001, Apria was informed by the U.S. Attorney's office in Los Angeles
that the billing  investigation  being conducted by that office is the result of
qui tam litigation filed on behalf of the government against Apria, and that the
government is investigating  certain  allegations for the purpose of determining
whether it will intervene in that  litigation.  The complaints in the litigation
are under seal, however, and the government has not informed Apria of either the
identity of the court or courts where the proceedings  are pending,  the date or
dates instituted, the identity of the plaintiffs or the factual bases alleged to
underlie the proceedings.  To date, the U.S.  Attorney's office has not informed
Apria of any decision to intervene  in the qui tam  actions;  however,  it could
reach a decision with respect to intervention soon.

Apria has  acknowledged  that there may be errors and  omissions  in  supporting
documentation  affecting  a  portion  of  its  billings.  If a  judge,  jury  or
administrative  agency were to determine that such errors and omissions resulted
in the submission of false claims to federal healthcare  programs or significant
overpayments by the government, Apria could face civil and administrative claims
for refunds,  sanctions and penalties for amounts that would be highly  material
to its  business,  results of  operations  and  financial  condition,  including
exclusion of Apria from participation in federal healthcare programs.

Since  early  2001,  Apria  has  had  discussions  with  representatives  of the
government  concerning the results of a sampling of 300 patient files  submitted
by Apria in response to government  subpoenas.  The  government's  sample of 300
patient files  includes  approximately  2,300  "claims" or monthly  invoices for
services  and  products  over a  three-and-one-half  year period  from  mid-1995
through  year-end 1998. The government has alleged that certain of these claims,
involving up to approximately  $110,000 of aggregate billings,  are inadequately
supported by required  documentation  with the result, in the government's view,
that Apria is liable for  overpayments and penalties under the False Claims Act.
On July 12, 2001,  government  representatives and counsel for the plaintiffs in
the qui tam actions  asserted that, by a process of  extrapolation  from the 300
patient sample to all of Apria's billings to the federal  government  during the
sample  period,  Apria is liable to the  government  for treble  damages of $309
million (based on an extrapolation to $103 million from the alleged false claims
in the  sample),  plus  penalties  of $5,000 to $10,000 for each of over 900,000
allegedly false claims,  or a range of total liability from $4.8 billion to over
$9 billion.

Apria considers these  assertions and amounts to be unsupported both legally and
factually. 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  believes  that the number of sample  invoices
affected by substantive errors or omissions in supporting  documentation is much
less than the  government  and the qui tam  plaintiffs  assert.  Further,  Apria
believes that most of the alleged  errors and omissions  should not give rise to
any liability,  for refunds or otherwise. In fact, 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.

Apria believes that the claims  asserted are  unwarranted and that Apria is in a
position to assert numerous meritorious defenses.  However, Apria cannot provide
any  assurances  as to the  outcome  of  these  proceedings.  Management  cannot
estimate  the  possible  loss or  range  of loss  that  may  result  from  these
proceedings and therefore has not recorded any related accruals.

Apria is also engaged in the defense of certain claims and lawsuits  arising out
of the ordinary  course and conduct of its  business,  the outcomes of which are
not  determinable  at this time.  Apria has  insurance  policies  covering  such
potential  losses  where such  coverage  is cost  effective.  In the  opinion of
management, any liability that might be incurred by Apria upon the resolution of
these claims and lawsuits will not, in the  aggregate,  have a material  adverse
effect on Apria's results of operations or financial condition.


NOTE I - PER SHARE AMOUNTS

The following  table sets forth the  computation  of basic and diluted per share
amounts:
<TABLE>
<CAPTION>

                                                                 THREE MONTHS ENDED      SIX MONTHS ENDED
                                                                       JUNE 30,              JUNE 30,
                                                                 ------------------     ------------------
(in thousands, except per share data)                               2001     2000         2001     2000
----------------------------------------------------------------------------------------------------------

NUMERATOR:
<S>                                                               <C>       <C>         <C>       <C>
  Net income ...............................................      $17,247   $14,071     $34,323   $26,852
  Numerator for basic and diluted per share amounts - net
    income available to common stockholders ................      $17,247   $14,071     $34,323   $26,852

DENOMINATOR:
  Denominator for basic per share
    amounts - weighted average shares ......................       53,748    52,326      53,570    52,258

      Effect of dilutive securities:
        Employee stock options .............................        2,000     1,335       2,046     1,546
                                                                  -------   -------     -------   -------
        Total dilutive potential common shares .............        2,000     1,335       2,046     1,546
                                                                  -------   -------     -------   -------
  Denominator for diluted per share amounts -
    adjusted weighted average shares .......................       55,748    53,661      55,616    53,804
                                                                  =======   =======     =======   =======

BASIC NET INCOME PER COMMON SHARE ..........................      $  0.32   $  0.27     $  0.64   $  0.51
                                                                  =======   =======     =======   =======
DILUTED NET INCOME PER COMMON SHARE ........................      $  0.31   $  0.26     $  0.62   $  0.50
                                                                  =======   =======     =======   =======

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

    Exercise price exceeds average market
      price of common stock ................................        1,815     2,659       1,900     2,608

Average exercise price per share that exceeds
  average market price of common stock .....................      $ 27.12   $ 18.34     $ 27.08   $ 18.42
                                                                  =======   =======     =======   =======
</TABLE>

<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, 2000, as filed with the Securities and Exchange Commission on March
22, 2001 and Amendment  No. 2 to Form S-3  Registration  Statement,  as filed on
July 26, 2001.  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. Those risks include:  whether
the company will be able to resolve issues  pertaining to the  collectibility of
its accounts  receivable,  healthcare reform and the effect of federal and state
healthcare regulations, the ongoing government investigations regarding patients
covered by Medicare and other federal  programs,  pricing  pressures  from large
payors and changes in governmental  reimbursement  levels,  the effectiveness of
the company's operating systems and controls, and the successful  implementation
of the company's acquisition strategy.
--------------------------------------------------------------------------------


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


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

     NET REVENUES.  Net revenues were $283.5  million and $554.8  million in the
second  quarter and first six months of 2001,  respectively,  compared to $252.6
million and $503.3 million for the corresponding  periods in 2000. The increases
in net revenues are primarily  due to new  contracts  with regional and national
payors,  the  acquisition of  complementary  businesses  and price  increases in
certain managed care contracts.

                                              SIX MONTHS ENDED JUNE 30,
                                     ------------------------------------------
                                            2001                    2000
                                     ------------------     -------------------
(dollars in thousands)                   $          %           $          %
-------------------------------------------------------------------------------

Respiratory therapy ............     $363,411     65.5%     $326,207     64.8%
Infusion therapy ...............      107,259     19.3%       95,449     19.0%
HME/other ......................       84,164     15.2%       81,636     16.2%
                                     --------    -----      --------    -----
     Total net revenues ........     $554,834    100.0%     $503,292    100.0%
                                     ========    =====      ========    =====

     Use of Estimates in Recording  Net Revenues.  Substantially  all of Apria's
revenues  are  reimbursed  by third party  payors,  including  private  insurers
Medicare,  Medicaid  and managed  care  organizations.  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 as additional  information
becomes available.

     Medicare  Reimbursement  Update. The Medicare,  Medicaid and SCHIP Benefits
Improvement  and Protection Act of 2000 provides  reinstatement  of the Consumer
Price  Index-based  reimbursement  increase in 2001 for certain  durable medical
equipment  products and services.  The increase,  which went into effect July 1,
2001 and continues through December 31, 2001, includes a transitional  allowance
that will  effectively  compress a full year's  Consumer Price Index update into
six months.

     GROSS  MARGIN.  Gross  margins  for the second  quarter of 2001 and the six
months ended June 30, 2001 were 73.3% and 72.6%, respectively, compared to 72.5%
and 72.0% for the same periods last year.  The  improvement is  attributable  to
better utilization of inventory and patient service  equipment,  the increase in
the share of higher-margin  respiratory  revenues to total net revenues, a shift
toward  the  higher-margin  therapies  within  the  infusion  line and the price
increases reflected in net revenues.

     SELLING,   DISTRIBUTION  AND  ADMINISTRATIVE.   Selling,  distribution  and
administrative expenses, as percentages of net revenue, were 55.8% and 55.2% for
the second quarter and first half of 2001, respectively,  versus 54.5% and 53.9%
for the corresponding  periods in 2000. The increases are mainly attributable to
merit and other compensation increases.

     PROVISION FOR DOUBTFUL  ACCOUNTS.  The provision for doubtful  accounts was
3.9% of net revenues  for the second  quarter of 2001 and 3.5% for the first six
months of 2001 compared to 3.3% and 3.8% for the corresponding  periods in 2000.
The  decrease  between  the  six-month  periods  is  due to a  reduction  in the
percentage of older  accounts to total  accounts  receivable  and a reduction in
collection periods. See "Liquidity and Capital Resources - Accounts Receivable".

     AMORTIZATION OF INTANGIBLE  ASSETS.  Amortization  expense was $3.1 million
and  $6.0  million  for the  second  quarter  and  first  six  months  of  2001,
respectively,  compared to $2.5  million and $4.9  million in the  corresponding
periods of 2000. The increases are directly  attributable  to intangible  assets
that were  recorded  in  conjunction  with  acquisitions  consummated  after the
subject periods of 2000.

     INTEREST EXPENSE.  Interest expense was $8.0 million for the second quarter
of 2001,  down from $10.3  million in the  second  quarter of 2000.  For the six
months ended June 30, 2001 interest  expense was $16.4 million compared to $20.9
million in the same period in 2000.  The  decreases  are due to the reduction in
long-term debt and decreases in interest rates between the periods.

     INCOME TAXES.  Income taxes for the six months ended June 30, 2001,  and in
the  corresponding  period of 2000, have been provided at the effective tax rate
expected to be applicable for the year.

     At December 31, 2000,  Apria's  federal net  operating  loss  carryforwards
("NOLs") approximated $173 million, which will begin expiring in varying amounts
in the years 2003 through 2013. Additionally, the company has various state NOLs
which began expiring in 1997 and an alternative  minimum tax credit carryforward
of approximately  $8 million.  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 NOLs  generated  prior to 1992 are each
limited to approximately $5 million per year.  Because of the annual limitation,
approximately  $57 million of each of Apria's  federal and state NOLs may expire
unused.  Apria  excludes the $57 million of  potentially  expiring NOLs from its
deferred tax assets. In 2001, for federal tax purposes,  NOLs are being utilized
to the extent of the company's federal taxable income.


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

     CASH FLOW.  Operating  cash flow was $100.8 million in the first six months
of 2001  compared with $84.3 million in the  corresponding  period in 2000.  The
cash flow  increase  was  primarily  attributable  to the increase in net income
before items not requiring cash. The larger  increase in accounts  receivable in
the first half of 2001,  when compared to the same period in 2000, was offset by
decreases in other working capital requirements.

     Cash used in investing activities increased to $101.7 million for the first
half of 2001  compared to $52.7  million  during the same period last year.  The
increase is attributable to an increase in patient service  equipment  purchases
to support the revenue growth and increased acquisition activity.

     Financing  activities  provided cash of $10.7 million  during the first six
months of 2001 compared to $11.7 million used during the corresponding period of
2000.  The  variance  is due to the  absence of term loan  payments  in the 2001
period that  resulted  from large  prepayments  made in the latter part of 2000.
Also  contributing  to the variance is the increase in 2001 in proceeds from the
exercise of employee stock options.

     ACCOUNTS  RECEIVABLE.  Accounts  receivable,  before allowance for doubtful
accounts, was $193.5 million at June 30, 2001 and $185.3 million at December 31,
2000.  The  increase  is  due  to  continued  quarter-over-quarter  net  revenue
increases.  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)  were 50 days at June 30, 2001  compared to 51 days at
December 31, 2000.  Accounts aged in excess of 180 days as a percentage of total
accounts  receivable  decreased to 20.4% at June 30, 2001 from 23.8% at December
31, 2000.

     Evaluation of Net Realizable Value. Management performs various analyses to
evaluate  the  net  realizable  value  of  accounts  receivable.   Specifically,
management  considers  historical  realization data,  accounts  receivable aging
trends,  operating  statistics and relevant business  conditions.  Also, focused
reviews of certain large and/or  problematic  payors are  performed.  Because of
continuing changes in the healthcare industry and third-party reimbursement,  it
is possible that  management's  estimates  could change in the near term,  which
could have an impact on operations and cash flows.

     Unbilled  Receivables.  Delays  between the date of service and billing can
occur due to delays in obtaining certain required  payor-specific  documentation
from internal and external  sources.  Such earned but unbilled  receivables  are
aged from date of service and are  considered in Apria's  analysis of historical
performance  and  collectibility.  Earned but  unbilled  receivables  were $26.8
million and $17.9 million at June 30, 2001 and December 31, 2000,  respectively.
The increase is largely due to the  acquisitions  effected during the first half
of 2001. The  time-consuming  processes of converting patient files onto Apria's
systems and  obtaining  provider  numbers  from  government  payors  often delay
billing of the newly acquired business.

     LONG-TERM  DEBT.  At June 30,  2001,  Apria's  $200  million 9 1/2%  senior
subordinated  notes were  outstanding  and  borrowings  under the  then-existing
credit agreement were $140 million.

     On July 20, 2001,  Apria closed a new $400 million  senior  secured  credit
agreement with a syndicate of lenders led by Bank of America,  N.A. The previous
credit  agreement and the  subordinated  notes,  both of which were scheduled to
mature in late 2002,  were repaid in full concurrent with the closing of the new
senior secured credit agreement.  In connection with the early retirement of its
debt,  Apria will write-off the unamortized  balance of deferred  financing fees
attributable  to the  subordinated  notes  and the  previous  credit  agreement.
Accordingly,  Apria will record an extraordinary  charge of  approximately  $1.6
million, net of tax, in the third quarter of 2001.

     The senior credit facilities consist of: a $100 million five-year revolving
credit facility; a $125 million five-year term loan; and a $175 million six-year
term loan. On July 20, 2001, borrowings under the revolving credit facility were
$43  million,  outstanding  letters  of credit  totaled  $1  million  and credit
available under the revolving facility was $56 million.

     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  income  statements from the date of
acquisition.  During the  six-month  period ended June 30,  2001,  cash paid for
acquisitions   was  $35.0  million.   Included  in  this  amount  is  contingent
consideration of $1.9 million.  Outstanding contingent consideration at June 30,
2001 totaled $5.1 million.

     For acquisitions  that closed during the first half of 2001,  approximately
$33.3 million was allocated to intangible assets, which includes amounts not yet
paid. Goodwill is being amortized over 20 years and covenants not to compete are
being amortized over the life of the respective agreements.

     FEDERAL  INVESTIGATIONS.  The U.S.  Attorney's  office  in Los  Angeles  is
conducting  an  investigation  of  Apria's  billing   documentation.   The  U.S.
Attorney's  office has informed Apria that this  investigation  is the result of
qui tam litigation filed by one or more individuals on behalf of the government,
but has not yet informed Apria whether it will intervene in the qui tam actions;
however,  it could reach a decision  with respect to  intervention  soon. If the
U.S. Attorney were to intervene in the qui tam cases, or if qui tam actions were
to proceed  without such  intervention,  the amount of the claim could be highly
material.  On July 12,  2001,  government  representatives  and  counsel for the
plaintiffs in the qui tam actions  asserted that, by a process of  extrapolation
from a 300 patient sample to all of Apria's  billings to the federal  government
during the sample period from mid-1995 through year-end 1998, Apria is liable to
the government for treble damages of $309 million (based on an  extrapolation to
$103 million from the alleged  false  claims in the sample),  plus  penalties of
$5,000 to $10,000 for each of over 900,000 allegedly false claims, or a range of
total  liability  from $4.8 billion to over $9 billion.  Although Apria believes
that such  assertions  are  unwarranted,  and is prepared to  vigorously  defend
against any  attempt to impose  material  liabilities  or  penalties,  Apria can
provide no assurance as to the outcome of these proceedings.  In the event Apria
was found liable or otherwise reached settlement on any such claim in a material
amount, Apria's liquidity and capital resources could be adversely affected. See
"Note H to the Condensed Consolidated Financial Statements".

     RECENT ACCOUNTING  PRONOUNCEMENTS.  During the first quarter of 2001, Apria
adopted  Statement  of  Financial   Accounting   Standards   ("SFAS")  No.  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
amended by SFAS No. 137,  "Accounting  for  Derivative  Instruments  and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133" and further amended
by SFAS No. 138,  "Accounting  for Certain  Derivative  Instruments  and Certain
Hedging  Activities".  SFAS No.  133,  as amended,  establishes  accounting  and
reporting  standards  for hedging  activities  and for  derivative  instruments,
including  certain  derivative  instruments  embedded  in  other  contracts.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in  the   statements  of  financial   position  and  measure  those
instruments  at fair  value.  Changes in the fair value of  derivatives  must be
recorded  each  period.  SFAS  No.  133  also  requires  formal   documentation,
designation at the time the hedge transaction is initiated and assessment of the
effectiveness of the  transactions  that receive hedge  accounting.  At June 30,
2001,  Apria had no derivative  securities  that require fair value  measurement
under  SFAS  No.  133.  Accordingly,  adoption  of SFAS  No.  133 did not have a
material effect on the financial statements.

     In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business  Combinations"  and SFAS  No.  142,  "Goodwill  and  Other  Intangible
Assets".  SFAS No. 141 requires that all business  combinations be accounted for
under the purchase method.  The statement further requires separate  recognition
of intangible assets that meet one of two criteria. The statement applies to all
business combinations initiated after June 30, 2001.

     SFAS No. 142 requires  that an intangible  asset that is acquired  shall be
initially  recognized and measured  based on its fair value.  The statement also
provides  that  goodwill  should  not be  amortized,  but  shall be  tested  for
impairment  annually,  or more frequently is  circumstances  indicate  potential
impairment,  through a comparison of fair value to its carrying amount. Existing
goodwill will  continue to be amortized  through the remainder of fiscal 2001 at
which time  amortization  will cease and the company will perform a transitional
goodwill impairment test. SFAS No. 142 is effective for fiscal periods beginning
after December 15, 2001. Apria management is currently  evaluating the impact of
the new accounting  standards on existing goodwill and other intangible  assets.
While  the  ultimate  impact  of the  new  accounting  standards  has  yet to be
determined, goodwill amortization expense for the six months ended June 30, 2001
was $4.7 million.

     OTHER.  Apria's  management  believes  that  cash  provided  by  operations
together  with cash invested in its money market  account and amounts  available
under its existing  credit  facility  will be  sufficient to finance its current
operations for at least the next year.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Apria does not currently  utilize  derivative  financial  instruments  that
expose the company to  significant  market  risk.  However,  Apria is subject to
interest rate changes on its variable  rate term loans under the company's  bank
credit  agreements.  Based on the term debt outstanding at June 30, 2001 and the
new term loans funded in July 2001, along with current market perception,  a 100
basis point change in the  applicable  interest rates would increase or decrease
Apria's annual cash flow and pretax earnings by approximately $2.9 million.  See
"Note E to the Condensed Consolidated Financial Statements".
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

            Apria  and  certain  of  its  present  and  former  officers  and/or
            directors  are  defendants  in a class action  lawsuit,  In Re Apria
            Healthcare Group Securities  Litigation,  filed in the U.S. District
            Court for the Central  District  of  California,  Southern  Division
            (Case No.  SACV98-217  GLT). This case is a  consolidation  of three
            similar class actions filed in March and April, 1998.  Pursuant to a
            court order dated May 27, 1998, the plaintiffs in the original three
            class actions filed a Consolidated Amended Class Action Complaint on
            August 6, 1998. The amended complaint  purports to establish a class
            of plaintiff shareholders who purchased Apria's common stock between
            May 22, 1995 and January 20,  1998.  No class has been  certified at
            this time. The amended complaint alleges,  among other things,  that
            the  defendants  made  false  and/or  misleading  public  statements
            regarding Apria and its financial  condition in violation of federal
            securities  laws.  The  amended  complaint  seeks  compensatory  and
            punitive damages as well as other relief.

            Two  similar  class  actions  were  filed  during  July  1998 in the
            Superior Court for the State of California for the County of Orange:
            Schall v. Apria Healthcare Group Inc., et. al. (Case No. 797060) and
            Thompson v. Apria  Healthcare  Group Inc., et al. (Case No. 797580).
            These two actions were  consolidated  by a court order dated October
            22, 1998 (Master Case No. 797060).  On June 14, 1999, the plaintiffs
            filed a Consolidated Amended Class Action Complaint asserting claims
            founded  on  state  law and on  Sections  11 and  12(2)  of the 1933
            Securities Act.

            Apria believes that it has  meritorious  defenses to the plaintiffs'
            claims,  and it  intends  to  vigorously  defend  itself in both the
            federal and state cases. In the opinion of Apria's  management,  the
            ultimate disposition of these class actions will not have a material
            adverse  effect  on  Apria's  results  of  operations  or  financial
            condition.

            Since mid-1998 Apria has received a number of subpoenas and document
            requests from U.S.  Attorneys' offices and from the U.S.  Department
            of Health and Human Services.  The subpoenas and requests  generally
            ask for documents,  such as patient files, billing records and other
            documents relating to billing practices, related to Apria's patients
            whose  healthcare  costs  are paid by  Medicare  and  other  federal
            programs.  Apria is  cooperating  with the  government in connection
            with these investigations and is responding to the document requests
            and subpoenas.  In July 1999, Apria received  notification  that the
            U.S.   Attorney's   office  in   Sacramento   closed  its   criminal
            investigation  file relating to eight subpoenas that had been issued
            by that office.

            In January 2001, Apria was informed by the U.S. Attorney's office in
            Los Angeles that the billing  investigation  being conducted by that
            office is the  result of qui tam  litigation  filed on behalf of the
            government  against Apria,  and that the government is investigating
            certain  allegations for the purpose of determining  whether it will
            intervene in that  litigation.  The complaints in the litigation are
            under seal,  however,  and the  government has not informed Apria of
            either the identity of the court or courts where the proceedings are
            pending,  the  date  or  dates  instituted,   the  identity  of  the
            plaintiffs or the factual bases alleged to underlie the proceedings.
            To date,  the U.S.  Attorney's  office has not informed Apria of any
            decision to  intervene  in the qui tam  actions;  however,  it could
            reach a decision with respect to intervention soon.

            Apria has  acknowledged  that there may be errors and  omissions  in
            supporting  documentation  affecting a portion of its billings. If a
            judge,  jury or  administrative  agency were to determine  that such
            errors and omissions  resulted in the  submission of false claims to
            federal  healthcare  programs  or  significant  overpayments  by the
            government,  Apria  could face civil and  administrative  claims for
            refunds,  sanctions  and  penalties for amounts that would be highly
            material  to its  business,  results  of  operations  and  financial
            condition,  including  exclusion  of  Apria  from  participation  in
            federal healthcare programs.

            Since early 2001, Apria has had discussions with  representatives of
            the  government  concerning the results of a sampling of 300 patient
            files  submitted by Apria in response to government  subpoenas.  The
            government's  sample of 300  patient  files  includes  approximately
            2,300 "claims" or monthly  invoices for services and products over a
            three-and-one-half  year period from mid-1995 through year-end 1998.
            The government  has alleged that certain of these claims,  involving
            up to approximately $110,000 of aggregate billings, are inadequately
            supported  by  required   documentation  with  the  result,  in  the
            government's  view,  that  Apria  is  liable  for  overpayments  and
            penalties  under the False Claims Act. On July 12, 2001,  government
            representatives  and  counsel  for  the  plaintiffs  in the  qui tam
            actions  asserted that, by a process of  extrapolation  from the 300
            patient sample to all of Apria's billings to the federal  government
            during  the sample  period,  Apria is liable to the  government  for
            treble  damages of $309 million (based on an  extrapolation  to $103
            million from the alleged false claims in the sample), plus penalties
            of  $5,000  to  $10,000  for each of over  900,000  allegedly  false
            claims,  or a range of total  liability from $4.8 billion to over $9
            billion.

            Apria considers these  assertions and amounts to be unsupported both
            legally and factually.  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 believes that
            the number of sample  invoices  affected  by  substantive  errors or
            omissions  in  supporting   documentation  is  much  less  than  the
            government  and  the  qui  tam  plaintiffs  assert.  Further,  Apria
            believes that most of the alleged  errors and  omissions  should not
            give rise to any liability, for refunds or otherwise. In fact, 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.

            Apria  believes that the claims  asserted are  unwarranted  and that
            Apria is in a  position  to assert  numerous  meritorious  defenses.
            However,  Apria cannot  provide any  assurances as to the outcome of
            these  proceedings.  Management cannot estimate the possible loss or
            range of loss that may result from these  proceedings  and therefore
            has not recorded any related accruals.

            Apria is also engaged in the defense of certain  claims and lawsuits
            arising out of the ordinary course and conduct of its business,  the
            outcomes  of which  are not  determinable  at this  time.  Apria has
            insurance   policies  covering  such  potential  losses  where  such
            coverage  is cost  effective.  In the  opinion  of  management,  any
            liability  that might be  incurred by Apria upon the  resolution  of
            these  claims  and  lawsuits  will  not,  in the  aggregate,  have a
            material   adverse  effect  on  Apria's  results  of  operations  or
            financial condition.

ITEMS 2-5.  NOT APPLICABLE

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)  Exhibits:

                 None.

            (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



August 2, 2001              /s/  JOHN C. MANEY
                            ----------------------------------------------------
                            John C. Maney
                            Executive Vice President and Chief Financial Officer
                            (Principal Financial and Accounting Officer)