EXHIBIT 10.7


                             AMENDMENT NUMBER THREE
                                     TO THE
                               HOMEDCO GROUP, INC.
                               401(K) SAVINGS PLAN


As a result of the merger between Homedco Group, Inc. and Abbey Healthcare Group
Incorporated to form Apria  Healthcare  Group Inc. the following  amendments are
made to the Homedco Group, Inc. 401(k) Savings Plan (Restated  Effective October
1, 1993) (the "Plan").  Unless otherwise stated,  these amendments are effective
as of January 1, 1996.

1.   Plan  section  1.1 is amended by adding the  following  sentence to the end
     thereof:

     Effective as of January 1, 1996,  the Plan is renamed the Apria  Healthcare
     Group Inc. 401(k) Savings Plan.

2.   A new Plan section 1.4,  entitled MERGER OF ABBEY PLAN, is added to read as
     follows:

     Effective  as of December  31, 1995,  the Company  hereby  merges the Abbey
     Healthcare Group Incorporated 401(k) Plan (the "Abbey Plan") into this Plan
     as the surviving  qualified  profit  sharing plan of the Company.  The plan
     merger shall be implemented in accordance with Code sections 401(a)(12) and
     414(l) and related regulations.

     Except as otherwise  explicitly stated in this Plan, the provisions of this
     Plan shall apply as of January 1, 1996 and shall  supersede the  provisions
     of the Abbey  Plan.  Notwithstanding  the  foregoing,  nothing in this Plan
     shall be  interpreted  to deny a  Participant,  spouse or  Beneficiary  any
     benefit,  right or feature  protected  under  Code  section  411(d)(6)  and
     related  regulations  to which the person is otherwise  entitled under this
     Plan or the Abbey Plan prior to its merger into this Plan.

3.   Plan section 2.1(n),  which was previously amended by Amendment Number Two,
     is further amended in its entirety to read as follows:

     (n)  "ELIGIBLE EMPLOYEE" means any Employee employed by an Employer, except
          (i) an  Employee  classified  by the  Employer  as in  "temporary"  or
          "per-diem"  status,  (ii) an Employee  classified as an Albany Nursing
          Agency  Employee,  (iii) an Employee who is a member of a unit covered
          by a collective  bargaining  agreement under which retirement benefits
          were the subject of good faith  bargaining  and no provision  was made
          for including such Employee in the Plan,  (iii) a  non-resident  alien
          Employee  with no U.S.  source  income  from an  Employer,  and (iv) a
          Leased Employee.

          Notwithstanding  the foregoing,  effective as of the Merger  Effective
          Date and through December 31, 1995, an Eligible Employee shall include
          only (i) an Employee of Homedco Group,  Inc.  (which is the Company in
          effect  immediately  prior  to the  Merger  Effective  Date)  and  its
          Affiliates (determined immediately prior to the Merger Effective Date)
          and (ii) an Employee, who is first credited with an Hour of Service on
          or after the Merger  Effective Date.  After the Merger  Effective Date
          and prior to January 1, 1996,  individuals who were employees of Abbey
          Healthcare  Group  Incorporated or its affiliates,  as defined in Code
          sections  414 and 1563,  determined  immediately  prior to the  Merger
          Effective Date, shall not be eligible to participate in this Plan.

4.   Plan section 2.1(v) is amended in its entirety to read as follows:

     (v)  "INVESTMENT  FUND" means any of the following  funds of the Trust Fund
          or such other funds as the Committee may designate:

          (1)  A  "SHORT-TERM  BOND  FUND"  which  shall  be  invested  with the
               objective of providing interest income and reasonable security of
               capital by investing  primarily in debt instruments  having short
               to  intermediate  term  maturities  (generally less than 7 years)
               including  money  market  instruments  and  guaranteed   interest
               contracts  issued by an insurance  company or such other  similar
               investment  vehicles  providing  for fixed rates of interest  and
               relative security of principal as the investment manager,  acting
               in accordance  with the terms of the Trust  Agreement,  considers
               advisable.

               Effective January 1, 1996, no new amounts may be invested in this
               Short-Term Bond Fund. If a Participant  fails to make a valid and
               affirmative   election  to  transfer   amounts  invested  in  the
               Short-Term  Bond Fund on December  31,  1995 from the  Short-Term
               Bond Fund to one or more available  Investment  Funds,  effective
               January 1, 1996, the amount  invested in the Short-Term Bond Fund
               shall automatically be transferred to the Fixed Income Fund on or
               about January 1, 1996.

          (2)  A "BALANCED  FUND" which shall be invested  with the objective of
               producing  moderate  growth with moderate price risk by investing
               in  such  debt  and  equity  securities,  cash,  such  short-term
               interest  bearing  securities  or in  any  pooled  fund  of  such
               securities as the investment  manager,  acting in accordance with
               the terms of the Trust Agreement, considers advisable.

          (3)  An "EQUITY INDEX FUND" which shall be invested with the objective
               of duplicating  the  performance  of a market index,  such as the
               Standard and Poor's 500 stock  average,  by investing in all or a
               statistical  sampling of the stocks within the selected index, or
               in any pooled fund of such securities as the investment  manager,
               acting  in  accordance  with the  terms of the  Trust  Agreement,
               considers advisable.

          (4)  An  "AGGRESSIVE  GROWTH  FUND" which  shall be invested  with the
               objective  of above  average  capital  appreciation  by investing
               primarily in selected equity securities, such short-term interest
               bearing  securities,  or in any pooled fund of such securities as
               investment  manager,  acting in accordance with the provisions of
               the Trust Agreement, considers advisable.

          (5)  A "MONEY  MARKET FUND" which shall be invested with the objective
               of  attaining  current  income while  preserving  the capital and
               liquidity  of the fund by investing  primarily  in United  States
               Treasury securities, such as bills, notes, bonds and other direct
               obligations of the United States  Treasury that are guaranteed as
               to payment of principal and interest by the full faith and credit
               of  the  United  States   government,   and  such  other  similar
               securities as the investment  manager,  acting in accordance with
               the  terms of the  Trust  Agreement,  considers  advisable.  This
               investment fund shall become available under the Plan on or about
               January 1, 1996.

          (6)  A "FIXED  INCOME FUND" which shall be invested with the objective
               of attaining  fixed interest  income and security of principal by
               investing  primarily  in  governmental,  corporate  and  personal
               obligations,  trust and  participation  certificates,  mortgages,
               guaranteed interest contracts,  and such other similar securities
               as the  investment  manager,  acting  in  accordance  with  Trust
               Agreement, considers advisable. This investment fund shall become
               available under the Plan on or about January 1, 1996.

          (7)  An  "INTERNATIONAL   FUND"  which  shall  be  invested  with  the
               objective  of long-term  growth by investing  primarily in stocks
               and debt obligations of companies and governments both within and
               outside of the United States,  including emerging markets, and in
               such other similar securities as the investment  manager,  acting
               in accordance  with the terms of the Trust  Agreement,  considers
               advisable.  This investment fund shall become available under the
               Plan on or about January 1, 1996.

5.   A new sentence is added to the end of Plan section 3.1 to read as follows:

     An Eligible  Employee who was a  participant  in the Abbey Plan on December
     31,  1995,  the date of the merger of the Abbey Plan into this Plan,  shall
     continue to be a Participant in this Plan on and after January 1, 1996.

6.   A new paragraph is added to the end of Plan section 3.2 to read as follows:

     This  paragraph  applies only to Eligible  Employees who were  employees of
     Abbey  Healthcare  Group  Incorporated  or  its  affiliates,  but  not  yet
     participants in the Abbey Plan, on the Merger  Effective Date. The one year
     of  Service  requirement  of  subsection  (b)  shall  not  apply to such an
     Employee  prior to  January 1, 1996.  The  Employee  will be deemed to have
     satisfied the Service  requirement  of  subsection  (b) if the Employee has
     completed at least 6 months of Service before January 1, 1996.

7.   The final  paragraph in Plan section 3.4 is amended in its entirety to read
     as follows:

     Any  Participant  who transfers out of employment as an Eligible  Employee,
     but  who  remains  an  Employee  shall  become  an  Inactive   Participant.
     Specifically and effective January 1, 1996, a Participant, who ceases to be
     an Eligible  Employee upon transfer to "temporary" or "per-diem"  status or
     who transfers to Albany Nursing Agency employment, shall become an Inactive
     Participant  as of  the  effective  date  of  such  transfer.  An  Inactive
     Participant  shall not be eligible to make the Pretax Deferral  provided in
     section  4.1, but shall retain his or her account and the right to transfer
     to and from available investment funds.

8.   A new paragraph is added to the end of Plan section 3.5 to read as follows:

     Service with Abbey Healthcare  Group  Incorporated and its affiliates shall
     be  counted  as  Service  under  this  section,  notwithstanding  any  Plan
     provision to the contrary.

9.   The first  paragraph of Plan section 4.1 is amended in its entirety to read
     as follows:

     Each Participant may elect to have the Employer contribute to the Plan each
     Plan  Year,  on the  Participant's  behalf,  an  amount  equal to any whole
     percentage  from 1 percent to 16 percent  (subject  to the  maximum  amount
     allowed by law) of the Participant's  Compensation as a Pretax Deferral, in
     accordance with the rules set forth in this Article and such other rules as
     the Committee may prescribe. In the case of a participant in the Abbey Plan
     who, pursuant to Plan section 3.1, continues as a Participant in this Plan,
     the  Participant's  deferral  election in effect under the Abbey Plan shall
     continue in effect under this Plan on and after January 1, 1996, unless and
     until the Participant  makes a new deferral election in accordance with the
     provision of this Plan and such other rules as the Committee may prescribe.

10.  The first paragraph of Plan section 5.1 as amended by Amendment  Number Two
     is further amended in its entirety to read as follows:

     Each Participant,  who is an Employee of the Company or an Affiliate on the
     last day of the Plan Year, or who retired,  became  disabled or died during
     the Plan Year, shall be entitled:

     (a)  For Plan Years ending  before  January 1, 1996,  to an  allocation  of
          Employer  Matching  contributions  equal to 100 percent of the first 2
          percent  of  Compensation  plus 50  percent  of the next 4 percent  of
          Compensation deferred by such Participant under section 4.1 during the
          Plan Year; and

     (b)  For Plan Years beginning on or after January 1, 1996, to an allocation
          of Employer Matching  contributions equal to 50 percent of the first 8
          percent of Compensation deferred by such Participant under section 4.1
          during the Plan Year

     Notwithstanding the foregoing, a Participant,  who incurs a Separation from
     Service between the Merger  Effective Date and September 30, 1995, shall be
     entitled to an allocation of Employer Matching  contributions  equal to 100
     percent of the first 2 percent of Compensation  plus 50 percent of the next
     4 percent of Compensation  deferred by such  Participant  under section 4.1
     during the Plan Year ending September 30, 1995, even though the Participant
     is not an Employee of the  Company or an  Affiliate  on the last day of the
     Plan Year. The Employer  shall  contribute to the Trust Fund an amount that
     shall equal (after  taking into account  allocable  forfeitures)  the above
     allocations attributable to its Participants for the Plan Year.

11.  A new Plan section 8.5, entitled INVESTMENT FUND TRANSFERS FROM ABBEY PLAN,
     is added to read as follows:

     Effective January 1, 1996, no new amounts may be invested in the investment
     funds existing under the Abbey Plan on December 31, 1995.  Amounts invested
     in such funds  shall  automatically  be  transferred  to  Investment  Funds
     available  under  this Plan on or about  January  1, 1996  pursuant  to the
     following  schedule,   if  the  Participant  fails  to  make  a  valid  and
     affirmative  election to transfer  amounts invested in the investment funds
     under the Abbey Plan to one or more  Investment  Funds available under this
     Plan by December 20, 1995:


     --------------------------------------------------------------------
        TRANSFEROR ABBEY PLAN                          TRANSFEREE
          INVESTMENT FUND                            INVESTMENT FUND
     --------------------------------------------------------------------

        Money Market Account                         Money Market Fund

     Guaranteed Interest Account                     Fixed Income Fund

      Bonds & Mortgage Account                         Balanced Fund

        Stock Index Account                          Equity Index Fund

     International Stock Account                     International Fund

        U.S. Stock Account                         Aggressive Growth Fund

     ---------------------------------------------------------------------


12.  Except as  amended  above,  the Plan as in effect  prior to this  amendment
     shall continue unchanged.


IN WITNESS  WHEREOF,  Apria Healthcare Group Inc. has caused this Plan amendment
to be executed this 29th day of December, 1995.


                                APRIA HEALTHCARE GROUP INC.


                                By  /s/ SUSAN K. SKARA
                                    --------------------------------

                                Its Vice President
                                    --------------------------------