UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
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x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 20182021
OR
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-24260
AMEDISYS, INC.
(Exact Name of Registrant as Specified in its Charter)
| | 11-3131700 | | | | | | |
Delaware | | 11-3131700 |
| (State or other jurisdiction of
incorporation or organization)
| | (I.R.S. Employer
Identification No.)
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3854 American Way, Suite A, Baton Rouge, LA 70816
(Address of principal executive offices, including zip code)
(225) 292-2031 or (800) 467-2662
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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| Title of Each Class | | Trading Symbol | | Name of Each Exchange on Which Registered |
| Common Stock, par value $0.001 per share | | AMED | | The NASDAQ Global Select Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ☑ No o☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o☐ No þ☑
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 þ ☑ No o☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ☑ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | ��� | | Accelerated filer
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Non-accelerated filer
| ☐ | | Smaller reporting company
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Large accelerated filer þ
| | Accelerated filer o
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Non-accelerated filer o
| | Smaller reporting company ☐
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| | Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o☐ No þ☑
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based on the last sale price as quoted by the NASDAQ Global Select Market on June 29, 201830, 2021 (the last business day of the registrant’s most recently completed second fiscal quarter) was $2.3$6.9 billion. For purposes of this determination, shares beneficially owned by executive officers, directors and ten percent stockholders have been excluded, which does not constitute a determination that such persons are affiliates.
As of February 22, 2019,18, 2022, the registrant had 32,010,29232,525,719 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 20192022 Annual Meeting of Stockholders (the “2019“2022 Proxy Statement”) to be filed pursuant to the Securities Exchange Act of 1934 with the Securities and Exchange Commission within 120 days of December 31, 20182021 are incorporated herein by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
When included in this Annual Report on Form 10-K, or in other documents that we file with the Securities and Exchange Commission (“SEC”) or in statements made by or on behalf of the Company, words like “believes,” “belief,” “expects,” “strategy,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “could,” “would,” “should” and similar expressions are intended to identify forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and uncertainties that could cause actual results to differ materially from those described therein. These risks and uncertainties include, but are not limited to the following: the impact of the novel coronavirus pandemic ("COVID-19"), including the measures that have been and may be taken by governmental authorities to mitigate it, on our business, financial condition and results of operations; the impact of current and proposed federal, state and local vaccine mandates, including potential staffing shortages; changes in or our failure to comply with existing federal and state laws or regulations or the inability to comply with new government regulations on a timely basis,basis; changes in Medicare and other medical payment levels,levels; our ability to open care centers, acquire additional care centers and integrate and operate these care centers effectively,effectively; competition in the healthcare industry,industry; changes in the case mix of patients and payment methodologies,methodologies; changes in estimates and judgments associated with critical accounting policies,policies; our ability to maintain or establish new patient referral sources,sources; our ability to consistently provide high-quality care,care; our ability to attract and retain qualified personnel,personnel; our ability to keep our patients and employees safe; changes in payments and covered services by federal and state governments,governments; future cost containment initiatives undertaken by third-party payors,payors; our access to financing,financing; our ability to meet debt service requirements and comply with covenants in debt agreements,agreements; business disruptions due to natural disasters or acts of terrorism, widespread protests or civil unrest; our ability to integrate, manage and keep our information systems secure, our ability to comply with the requirements stipulated in our corporate integrity agreement,secure; our ability to realize the anticipated benefits of the acquisition of Compassionate Care Hospice,acquisitions, investments and joint ventures; changes in lawlaws or developments with respect to any litigation relating to the Company, including various other matters, many of which are beyond our control, and such other factors as discussed throughout Part I, Item 1A. "Risk Factors" of this Annual Report on Form 10-K.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on any forward-looking statement as a prediction of future events. We expressly disclaim any obligation or undertaking and we do not intend to release publicly any updates or changes in our expectations concerning the forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based, except as may be required by law. For a discussion of some of the factors discussed above as well as additional factors, see Part I, Item 1A, “Risk Factors” and Part II, Item 7, “Critical Accounting Estimates” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Unless otherwise provided, “Amedisys,” “we,” “us,” “our,” and the “Company”“the Company” refer to Amedisys, Inc. and our consolidated subsidiaries and when we refer to 2018, 20172021, 2020 and 2016,2019, we mean the twelve month period then ended December 31, unless otherwise provided.
A copy of this Annual Report on Form 10-K for the year ended December 31, 20182021 as filed with the SEC, including all exhibits, is available on our internet website at http://www.amedisys.com on the “Investors” page under the “SEC Filings” link.
PART I
ITEM 1. BUSINESS
Overview
Amedisys, Inc. is a leading healthcare services company focused oncommitted to helping our patients age in place by providing clinically excellent care and support in the home. Our operations involve serving patients across the United States through our threefour operating divisions: home health, hospice, personal care and personalhigh acuity care. We deliver clinically distinct care that best suits our patients' needs, whether that is home-based recovery and rehabilitation after an operation or injury or care that empowers patients to manage a chronic disease through our home health division, hospice care at the end of life, or providing assistance with daily activities through our personal care division or delivering the essential elements of inpatient hospital, palliative and skilled nursing facility ("SNF") care to patients in their homes through our high acuity care division.
We are among the largest pure play providers of home health and hospice care in the United States, with 472approximately 21,000 employees in 528 care centers in 38 states within the United States and the District of Columbia. Our 21,000 employees deliver the highest quality care makingperforming more than ten11.5 million visits tofor more than 376,000445,000 patients annually. Over 3,000 hospitals and 65,00090,000 physicians nationwide have chosen us as a partner in post-acute care.
Due to the age demographics of our patient base, our services are primarily paid for by Medicare which has represented approximately 73%74% to 79%75% of our net service revenue over the last three years. We also remain focused on maintaining a profitable and strategically important managed care contract portfolio. We continuously work with our payors to structure innovative contracts which reward us for providing quality care to our patients.
Amedisys is headquartered in Baton Rouge, Louisiana, with an executive office in Nashville, Tennessee. Our common stock is currently traded on the NASDAQ Global Select Market under the trading symbol “AMED.” Founded and incorporated in Louisiana in 1982, Amedisys was reincorporated as a Delaware corporation prior to becoming a publicly traded company in August 1994.
Our strategy is to becomebe the best choice for care wherever our patients call home. We accomplish this by providing clinically distinct care, being the employer of choice and delivering operational excellence and efficiency, which when combined, drive growth. Our mission is to provide best-in-class home health, hospice, personal care and personalhigh acuity care services allowing our patients to maintain a sense of independence, quality of life and dignity while delivering industry leading outcomes. We believe that our unwavering dedication to clinical quality and constant focus on both our patients and our employees differentiates us from our competitors.
Our Home Health Segment:
Amedisys Home HealthOur home health segment provides compassionate healthcare to help our patients recover from surgery or illness, live with chronic diseases and prevent avoidable hospital readmissions. Our home health footprint includes 323331 care centers located in 34 states within the United States and the District of Columbia. Within these care centers, we deploy our care teams which include skilled nurses who are trained, licensed and certified to administer medications, care for wounds, monitor vital signs and provide a wide range of other nursing services; rehabilitation therapists specialized in physical, speech and occupational therapy; and social workers and aides who assist our patients with completing important personal tasks.
We take an empowering approach to helping our patients and their families understand their medical conditions, how to manage them and how to maximize the quality of their lives while living with a chronic disease or other health condition. Our clinicians are trained to understand the whole patient – not just their medical diagnosis.
ThisOur commitment to clinical distinction is most evident in our clinical quality measures such as Star Ratings.the Quality of Patient Care and Patient Satisfaction star ratings. In the CenterCenters for Medicare and Medicaid Services (“CMS”) reports for the January 20192022 release, the Quality of Patient Care star average across all Amedisys providers is 4.40was 4.33 with 94%95% of our providerscare centers at 4+ stars and 6937 care centers rated at 5+5 stars. Our Patient Satisfaction star average as offor the last knownJanuary 2022 release was 3.96,3.60, outperforming the industry average of 3.70.by 3%. Our goal is to have all care centers achieve a 4.0 Quality Star Rating,of Patient Care star rating, and we are implementing targeted action plans to continue to improve the quality of care we deliver for our patients and further our culture of quality.
Our Hospice Segment:
Hospice care is designed to provide comfort and support for those who are dealing with a terminal illness. It is a benevolent form of care that promotes dignity and affirms quality of life for the patient, family members and other loved ones. Individuals with a terminal illness such as cancer, heart disease, pulmonary disease Alzheimer’s, HIV/AIDS or cancerAlzheimer’s may be eligible for hospice care if they have a life expectancy of six months or less.
We operate 84Since 2019, we have acquired Compassionate Care Hospice ("CCH"), RoseRock Healthcare ("RoseRock"), Asana Hospice ("Asana"), AseraCare Hospice ("AseraCare") and Visiting Nurse Association ("VNA"). With these acquisitions, Amedisys now owns and operates 175 hospice care centers in 2234 states, withinproviding care to more than 13,000 patients daily as the third largest hospice provider in the United States. Within these care centers, we deploy our care teams which include nurse practitioners and other skilled nurses, social workers, aides, bereavement counselors and chaplains.
At Amedisys Hospice, ourOur focus is on building and retaining an exceptional team, delivering the highest quality care and service to our patients and their families and establishing Amedisys as the preferred and preeminent hospice provider in each community we serve. In order to realize these goals, we invest in tailored training, development and recognition programs for our employees, including medical record training, employee skills training and leadership development. This has led to our team’s consistent achievement at or above the national average in family satisfaction results and quality scores, as well as the trust of the healthcare community.
Another element of our approach is our outreach strategy to more fully engage the entire community of eligible patients. These outreach efforts have built our hospice patient population to more accurately represent the causes of death in the communities we serve, with a specific focus on heart disease, lung disease and dementia in order to address the historical underrepresentation of non-cancer diagnoses.
By working to accept every eligible patient who seeks end-of-life care, we fulfill our hospice mission and strengthen our standing in the community.
On February 1, 2019, we acquired Compassionate Care Hospice ("CCH"), a hospice provider headquartered in Parsippany, New Jersey with 2,300 employees and 53 locations nationwide. With this acquisition, Amedisys now cares for more than 11,000 hospice patients daily with 137 hospice care centers in 33 states, making us the third largest hospice provider in America.
Our Personal Care Segment:
On March 1, 2016, Amedisys acquired its first personal care company – an important step in executing our strategy of improving the continuity of care our patients receive as their clinical needs change. We continued our strategy to expand our personal care segment in 2017 and 2018 as we completed four additional acquisitions and currently operate 10 personal-care care centers in Massachusetts and one personal-care care center in both Florida and Tennessee. We are continually looking to expand our personal care footprint to states where we have a strong home health and hospice presence.
Personal care provides assistance with the essential activities of daily living. We believe thatAmedisys acquired its first personal care company in 2016 and continued to expand our personal care segment with four additional acquisitions. We currently operate 12 personal-care care centers in Massachusetts and one personal-care care center in each of Florida and Tennessee.
Our High Acuity Care Segment:
The acquisition of Contessa Health ("Contessa") on August 1, 2021 established our high acuity care segment. Our high acuity care segment has the capability to deliver the essential elements of inpatient hospital, SNF care and palliative care to patients in their homes. In connection with the acquisition of Contessa, we obtained interests in a professional corporation that employs clinicians and eight joint ventures with health system partners. Additionally, the acquisition provided the Company with an advanced claims analytic platform, network management and additional capabilities to enter into risk-based arrangements with managed care organizations.
Our joint venture partners in the high acuity care segment represent national and large regional healthcare systems, each of which view the ability to provide inpatient level care in patients’ homes as critical to relieving capacity constraints within their facilities, providing care in a more cost-effective setting and keeping patients engaged with their health system brand by providing a superior patient experience. The patients who utilize our home-based recovery services typically have one or more chronic conditions that have historically required frequent emergency department visits and inpatient hospital stays. Our patient satisfaction scores for these home-based programs have consistently exceeded 90%, and we have successfully reduced hospital and skilled nursing readmission rates compared to historical baselines for these episodes of care.
We provide management services to the joint ventures which include the development and implementation of clinical protocols to ensure the safe and efficient delivery of services in the home and high quality outcomes; an internally-developed technology platform that provides medical documentation, analytics and claims processing capabilities; provider network development services to ensure that all care resources are highly synergisticavailable to meet patient needs; and expertise in developing and negotiating contracts with third party health insurance payors to provide reimbursement on a risk-based episodic basis. Our expertise and capabilities in these areas deliver value to both the health system and the health insurance payor and give us the opportunity for future expansion within the healthcare continuum for chronically ill patients, including primary care at home and palliative care services, especially as the U.S. population ages and consumer preferences continue to shift to home-based care. Our joint
venture partnership model with leading healthcare systems and our core skilledrelationships with health plan insurers facilitate our ability to take and manage additional risk for this patient population in value-based arrangements.
Network Partnerships:
We have a network partnership with ClearCare, Inc. ("ClearCare"), the provider of the personal care industry’s leading software platform, representing 4,000 personal care agencies in every zip code in the United States, in order to better coordinate patient care. We also have a Care Coordination Agreement with BrightStar Care to add its agencies to the Amedisys personal care network, which helps facilitate the coordination of care between our home health and hospice businesses,care centers and that by acquiringa network of personal care partners. Long term, we believe these capabilities weagreements will be ableallow us to build a nation-wide network of personal care agencies and further our efforts to provide our patients and payor partners with a true care continuum of care.in the home. These relationships will also help us as we continue to have innovative payment conversations with Medicare Advantage plans who have begun to recognize the value that combined home health, hospice, personal care and high acuity care services bring to their members and care delivery infrastructure.
Responding to the Changing Regulatory and Reimbursement Environment:
As the government continues to seek opportunities to refine payment models, we believe that our strategy of becoming a leader in providing a range of serviceservices across the at-home continuum positions us well for the future. Our ability to provide quality home health, hospice, personal care and personalhigh acuity care allows us to partner with health systems and managed care organizations to improve care coordination, reduce hospitalizations and lower costs.
Acquisitions:Innovations:
On March 1, 2018,In the coming year, our core business innovations will consist of workforce optimization, with a focus on new ways to engage, recruit and retain our clinical staff, and continuing to differentiate our service offerings as we acquired the assetsbuild out our aging-in-place capabilities. The acquisition of Christian CareContessa in 2021 will also be a platform for continued innovations as we look to expand Contessa’s lines of business to include palliative care at Home for a total purchase price of $2.3 million. Christian Care at Home provided home health services to the state of Kentucky.and home based primary care.
Acquisitions:
On May 1, 2018,2021, we acquired the regulatory assets of East Tennessee Personal Care Services for a total purchase pricehome health provider in Randolph County, North Carolina.
On July 1, 2021, we acquired VNA, a home health and hospice provider with locations in Nebraska and Iowa.
On July 12, 2021, we acquired the regulatory assets of $2.0 million. East Tennessee Personal Care Services owneda home health provider in New York.
On August 1, 2021, we acquired Contessa, a leader in hospital-at-home and operated one personal-care care center servicing the state of Tennessee.SNF at-home services.
On October 1, 2018,18, 2021, we acquired the regulatory assets of Bring Care Home, a personal carehome health provider which serviced the state of Massachusetts for a total purchase price of $5.7 million.
On February 1, 2019, we acquired 100% of the ownership interests in Compassionate Care Hospice, a nationwide hospice provider headquartered in Parsippany, New Jersey, for a purchase price of $340 million, which is inclusive of approximately $50 million in payments related to a tax asset and working capital.North Carolina.
Financial Information:
Financial information for our home health, hospice, personal care and personalhigh acuity care segments can be found in our consolidated financial statements included in this Annual Report on Form 10-K.
Human Capital
Our Employeesemployees are critical to our vision to be the leading aging-in-place company. Taking care of our people is our top priority. Our success is directly correlated with our ability to continue to attract, develop and retain the most qualified and passionate employees. Our work is not just a job but a calling. Our workforce strategy emanates from our core values of SPIRIT - Service, Passion, Integrity, Respect, Innovation and Talent. We know that by taking care of our people, they can continue to provide industry leading patient care. Our mission has never been more important than has been demonstrated during the public health emergency.
As of February 22, 2019,18, 2022, we employed approximately 21,000 people throughout the United States. We also utilize contract employees consistingin the normal course of approximately 11,000 home health careour business.
Diversity and Inclusion:
We endeavor to create a culture of caregiving where our employees 6,000 hospice carefeel as cared for every day as our patients. Success means all team members feel a sense of belonging, support and empowerment to be their best selves personally and professionally. We have committed to giving our employees 3,000 personal carea voice and have instituted numerous formal listening programs - quarterly pulse surveys, focus groups and town halls - to routinely gather feedback from our employees and 1,000 corporateaddress any concerns. Our commitment to diversity and divisionalinclusion is also broadly reflected across our policies and people practices. Under the leadership of our employee-led Diversity and Inclusion Council, over 1,100 leaders participated in diversity and inclusion training designed to support employees.a positive and inclusive work environment during 2021. Additionally, we have established three Employee Resource Groups ("ERGs") to foster connection and community within our workforce: (1) Global Black Community, (2) LGBTQIA+ and (3) disAbilities.
We are also committed to having a diverse Board of Directors. Women currently comprise over half of the directors on our Board, and in December 2020, we expanded the Board to add a woman of color.
Talent Acquisition, Retention and Development:
We strive to hire, develop and retain top talent. The core of our care delivery model is dependent upon attracting clinicians, predominately nurses. We compete for talent by offering a great culture, an opportunity to provide the highest quality clinical care and competitive market-based compensation. Our compensation plans are designed to deliver a competitive base pay as well as attractive incentive opportunities, primarily for leadership positions, but also to reward quality care. We provide significant opportunities for development and continuing education as we know that career development is a key component of attracting and retaining top talent. We continually monitor and assess employee metrics on hiring, retention and terminations to gain a deep understanding of our workforce and drive continuous improvement.
The continuing novel coronavirus pandemic ("COVID-19") and demand for clinicians has pressured the labor markets. Clinicians are becoming harder to recruit and more costly to employ. Recently announced vaccine mandates could further impact the pool of available clinicians. Innovation in recruiting and a continued focus on retention are key initiatives for the Company to ensure adequate clinical capacity for our patients.
Health and Safety:
The health and well-being of our employees is of utmost importance to us. We offer a comprehensive benefit package that provides employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs that support their physical and mental health by providing tools and resources to help them improve or maintain their health status.
Our focus on the health and safety of our employees became even more critical during COVID-19, and Amedisys took action to protect, educate and care for our employees. Measures taken to continue to support our caregivers during the pandemic include:
•Monitoring our clinical protocols for COVID-19 testing, proper usage of personal protective equipment ("PPE"), caring for COVID-positive patients and maintaining safety measures in our care centers;
•Maintaining our COVID-19 Resource Center available 24 hours a day, seven days a week for employees to access educational materials, safety documents, policies, clinical protocols and operational metrics;
•Providing access to COVID-19 self-test kits to all employees;
•Communicating each state's vaccination plan and developing a state by state protocol to work with local health departments and other health systems to obtain vaccine appointments for our clinical staff;
•Implementing a company-wide vaccine tracker to maintain documentation related to individual employee vaccination status to comply with both state and federal mandates;
•Providing paid leave during required quarantine periods; and
•Procuring millions in PPE and creating a centralized distribution center for all critical PPE, allowing us to flex our supplies on a care center by care center basis, based on need and demand.
Payment for Our Services
Home Health Medicare
The Medicare home health benefit is available both for patients who need home care following discharge from a hospital and patients who suffer from chronic conditions that require ongoing, but intermittent, care.
As a condition of participation under Medicare, beneficiaries must be homebound (meaning that the beneficiary is unable to leave his/her home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services, and receive treatment under a plan of care established and periodically reviewed by a physician.
Medicare payment rates are based on the severity of the patient’s condition, his or her service needs and other factors relating to the cost of providing services and supplies, bundled into 60-day episodes of care. An episode starts with the first day a billable visit is performed and ends 60 days later or upon discharge, if earlier. If a patient is still in treatment on the 60th day, a recertification assessment is undertaken to determine whether the patient needs additional care. If the patient’s physician determines that further care is necessary, another episode begins on the 61st day (regardless of whether a billable visit is rendered on that day) and ends 60 days later. The first day of a consecutive episode, therefore, is not necessarily the new episode’s first billable visit.
Annually, the Medicare program base episodic rates are set through federal legislation, as follows:
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| Period | Base Episode Payment |
| January 1, 2016 through December 31, 2016 | $ | 2,965 |
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| January 1, 2017 through December 31, 2017 | $ | 2,990 |
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| January 1, 2018 through December 31, 2018 | $ | 3,040 |
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| January 1, 2019 through December 31, 2019 | $ | 3,154 |
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Medicare payments may be adjusted up or down as a result of one or more of the following: (a) an outlier payment if a patient’s care was unusually costly (capped at 10% of total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of visits during the episode was four or fewer; (c) a partial payment if a patient transferred to another provider or we admitted a patient transferring from another provider before an episode was complete; (d) a payment adjustment based upon the level of therapy services required (with various incremental adjustments made for additional visits, with larger payment increases associated with the sixth, fourteenth and twentieth visit thresholds); (e) the number of episodes of care provided to a patient, regardless of whether the same home health provider provided care for the entire series of episodes; (f) changes in the base episode payments established by the Medicare program and (g) adjustments to the base episode payments for case mix and geographic wages.
CMS issued a final rule that updates the Medicare Home Health Prospective Payment System ("HHPPS") rates and wage index for calendar year ("CY") 2019. The final rule results in a 2.2 percent increase ($420 million) in payments to Home Health agencies ("HHA") in CY 2019. In addition, the most recent regulation from CMS finalizes the implementation of an alternative case-mix adjustment methodology, the Patient Drive Groupings Model ("PDGM"). The PDGM will be implemented in a budget neutral manner on January 1, 2020. See "Home Health Payment Reform" below for additional information on the most recent regulation from CMS.
As a Medicare provider, we are subject to periodic audits by the Medicare program, and that program has various rights and remedies against us if they assert that we have overcharged the program or failed to comply with program requirements. Home Health providers are subject to pre- and post-payment reviews for compliance with Medicare coverage guidelines and medical necessity. Adjustments on this basis may include individual claims adjustments or overpayment determinations based on an extrapolated sample of claims. Medical necessity reviews evaluate whether services are clinically appropriate in terms of frequency, type, extent, site and duration. Technical billing and documentation reviews focus on documentation of services. Medicare and other payors may reject or deny claims for payment if the underlying paperwork does not support the medical necessity of services or fails to establish satisfaction of a coverage rule; such as if a provider is unable to perform periodic therapy assessments required by coverage criteria or cannot provide appropriate billing documentation, acceptable physician authorizations or face-to-face meeting documentation.
Medicare can reopen previously filed and reviewed claims and require us to repay any overcharges, as well as make deductions from future amounts due to us. In the ordinary course of business, we appeal the Medicare and Medicaid program's denial of costs claimed to seek recovery of those denied costs.
Home Health Non-Medicare
Payments from Medicaid and private insurance carriers are episodic-based rates (60-day episode of care) or per-visit rates depending upon the terms and conditions established with such payors. Episodic-based rates paid by our non-Medicare payors are paid in a similar manner and subject to the same adjustments as discussed above for Medicare; however, these rates can vary based upon negotiated terms which generally range from 90% to 100% of Medicare rates.
Hospice Medicare
The Medicare hospice benefit is available when a physician and specific clinical findings support a diagnosis of a terminal condition where the patient has a terminal timeline of six months or less. Hospice care is evaluated in benefit periods; two 90-day benefit periods followed by an unlimited number of 60-day benefit periods. Payments are based on daily rates for each day a beneficiary is enrolled in the hospice benefit. The daily payment rates are intended to cover costs that hospices incur in furnishing services identified in patients' care plans, based on specific levels of care. Payments are adjusted by a wage index to reflect health care labor costs across the country and are established annually through federal legislation. Payments are made according to a fee schedule that has four different levels of care: routine home care, continuous home care, inpatient respite care and general inpatient care.
Medicare payment is provided for two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, on January 1, 2016, Medicare also began reimbursing for a service intensity add-on (“SIA”). The SIA is based on visits made in the last seven days of life by a registered nurse (“RN”) or medical social worker (“MSW”) for patients in a routine level of care.
Adjustments for medical necessity and technical billing requirements may be made to Medicare revenue based on the same claims processing or medical necessity reviews described above for Home Health services when we find we are unable to obtain appropriate billing documentation, authorizations or face-to-face documentation and other reasons unrelated to credit risk.
Two caps limit the amount and cost of care that any individual hospice provider number provides in a single year. Generally, each hospice care center has its own provider number. However, where we have created branch care centers to help our parent care centers serve a geographic location, the parent and branch have the same provider number.
Inpatient Cap -One cap limits the number of days of inpatient care an agency may provide to not more than 20 percent of its total patient care days. The daily Medicare payment rate for any inpatient days of service that exceed the cap is set at the routine home care rate, and the provider is required to reimburse Medicare for any amounts it receives in excess of the cap.
Overall Payment Cap -The other cap is an absolute dollar limit on the average annual payment per beneficiary a hospice agency can receive. This cap is calculated by the Medicare fiscal intermediary at the end of each hospice cap period to determine the maximum allowable payments per provider number. We estimate our potential cap exposure using information available for both inpatient day limits as well as per beneficiary cap amounts. The total cap amount for each provider is calculated by multiplying the number of beneficiaries electing hospice care during the period by a statutory amount that is indexed for inflation.
Payment rates for hospice care, the hospice cap amount, and the hospice wage index are updated annually according to Section 1814(i)(1)(C)(ii)(VII) of the Social Security Act, which requires CMS to use the inpatient hospital market basket, adjusted for multifactor productivity (MFP) and other adjustments as specified in the Social Security Act, to determine the hospice payment update percentage. The caps are subject to annual and retroactive adjustments, which can cause providers to be required to reimburse the Medicare program if such caps are exceeded. Our ability to stay within these caps depends on a number of factors, each determined on a provider number basis, including the average length of stay and mix in level of care.
Our revenues are derived in large part from governmental third-party payors. There are budget pressures from government and other payors to control health care costs and to reduce or limit increases in reimbursement rates for health care services. Governmental payment programs are subject to statutory and regulatory changes, retroactive rate adjustments, administrative or executive orders and government funding restrictions, all of which may materially increase or decrease the rate of program payments to us for our services. It is possible that future budget cuts in Medicare and Medicaid may be enacted by Congress and implemented by CMS. Therefore, we cannot assure you that payments from governmental or private payors will remain at levels comparable to present levels or will, in the future, be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs. See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations: Overview – CMS Payment Updates" for additional information on the most recent regulations from CMS.
Home Health Medicare
The Medicare home health benefit is available both for patients who need home care following discharge from a hospital and patients who suffer from chronic conditions that require ongoing, but intermittent, care.
As a condition of participation under Medicare, beneficiaries must be homebound (meaning that the beneficiary is unable to leave his/her home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services and receive treatment under a plan of care established and periodically reviewed by a physician. In order to provide greater flexibility during COVID-19, CMS has relaxed the definition of homebound status through the duration of the public health emergency. During the pandemic, a beneficiary is considered homebound if they have been instructed by a physician not to leave their house because of a confirmed or suspected COVID-19 diagnosis or if the patient has a condition that makes them more susceptible to contracting COVID-19. Therefore, if a beneficiary is homebound due to COVID-19 and requires skilled services, the services will be covered under the Medicare home health benefit.
Prior to January 1, 2020, Medicare payment rates were based on the severity of the patient’s condition, his or her service needs and other factors relating to the cost of providing services and supplies, bundled into 60-day episodes of care. An episode starts the first day a billable visit is performed and ends 60 days later or upon discharge, if earlier. If a patient is still in treatment on the 60th day, a recertification assessment is undertaken to determine whether the patient needs additional care. If the patient’s physician determines that further care is necessary, another episode begins on the 61st day (regardless of whether a billable visit is rendered on that day) and ends 60 days later. The table below includes the 60-day base episode payment rates.
| | | | | |
| Period | Base Episode
Payment |
| January 1, 2019 through December 31, 2019 | $ | 3,154 | |
| January 1, 2020 through December 31, 2020 (only applied to episodes beginning on December 31, 2019 or prior) | $ | 3,221 | |
Effective January 1, 2020, CMS implemented a revised case-mix adjustment methodology, the Patient-Driven Groupings Model ("PDGM"). PDGM uses a 30-day period of care rather than a 60-day episode of care as the unit of payment, eliminates the use of the number of therapy visits provided in determining payment and relies more heavily on clinical characteristics and other patient information. Under PDGM, each 60-day episode includes two 30-day payment periods. The table below includes the base 30-day payment rates.
| | | | | |
| Period | Base 30-Day Payment |
| January 1, 2020 through December 31, 2020 (only applies to episodes beginning on January 1, 2020 and thereafter) | $ | 1,864 | |
| January 1, 2021 through December 31, 2021 | $ | 1,901 | |
| January 1, 2022 through December 31, 2022 | $ | 2,032 | |
PDGM uses timing, admission source, functional impairment levels and principal and other diagnoses to case-mix adjust payments. The case-mix adjusted payment for a 30-day period of care is subject to additional adjustments based on certain variables, including, but not limited to (a) an outlier payment if our patient's care was unusually costly (capped at 10% of total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of visits provided was less than the established threshold, which ranges from two to six visits and varies for every case-mix group under PDGM; (c) a partial payment if a patient transferred to another provider or from another provider before completing the 30-day period of care; and (d) the applicable geographic wage index. Payments for routine and non-routine supplies are included in the 30-day payment rate.
As a Medicare provider, we are subject to periodic audits by the Medicare program, and that program has various rights and remedies against us if they assert that we have overcharged the program or failed to comply with program requirements. Home health providers are subject to pre- and post-payment reviews for compliance with Medicare coverage guidelines and medical
necessity. Adjustments on this basis may include individual claims adjustments or overpayment determinations based on an extrapolated sample of claims. Medical necessity reviews evaluate whether services are clinically appropriate in terms of frequency, type, extent, site and duration. Technical billing and documentation reviews focus on documentation of services. Medicare and other payors may reject or deny claims for payment if the underlying documentation does not support the medical necessity of services or fails to establish satisfaction of a coverage rule, such as if a provider is unable to perform periodic therapy assessments required by coverage criteria or cannot provide appropriate billing documentation, acceptable physician authorizations or face-to-face meeting documentation.
Medicare can reopen previously filed and reviewed claims and deny coverage of the services and require us to repay any overcharges, as well as make deductions from future amounts due to us. In the ordinary course of business, we appeal the Medicare and Medicaid program's denial of claims that we believe are inappropriate in an effort to recover the denied claims.
Home Health Non-Medicare
Payments from Medicaid and private insurance carriers are either a percentage of Medicare rates or per-visit rates depending upon the terms and conditions established with such payors. Reimbursements from our non-Medicare payors that are based on Medicare rates are paid in a similar manner and subject to the same adjustments as discussed above for Medicare; however, these rates can vary based upon negotiated terms which generally range from 95% to 100% of Medicare rates. Approximately 30% of our managed care contract volume affords us the opportunity to receive additional payments if we achieve certain quality or process metrics as defined in each contract (e.g. star ratings and acute-care hospitalization rates).
Hospice Medicare
The Medicare hospice benefit is available when a physician and specific clinical findings support a diagnosis of a terminal condition where the patient has a terminal diagnosis of six months or less. Hospice care is evaluated in benefit periods: two 90-day benefit periods followed by an unlimited number of 60-day benefit periods. Payments are based on daily rates for each day a beneficiary is enrolled in the hospice benefit. Payments are made according to a fee schedule that has four different levels of care: routine home care, continuous home care, inpatient respite care and general inpatient care. The daily payment rates are intended to cover costs that hospices incur in furnishing services identified in patients' care plans, based on specific levels of care. Payments are adjusted by a wage index to reflect health care labor costs across the country and are established annually through federal legislation.
Medicare payments include two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, Medicare also reimburses for a service intensity add-on (“SIA”). The SIA is based on visits made in the last seven days of life by a registered nurse or medical social worker for patients in a routine level of care.
Adjustments for eligibility and technical billing requirements may be made to Medicare revenue based on the same claims processing reviews described above for home health services when we find we are unable to obtain appropriate billing documentation, authorizations or face-to-face documentation and other reasons unrelated to credit risk.
Two caps limit the amount of payment that any individual hospice provider number can receive in a single year. Generally, each hospice care center has its own provider number; however, where we have created branch care centers to help our parent care centers serve a geographic location, the parent and branch have the same provider number.
•Inpatient Cap: The inpatient cap limits the number of days of inpatient care an agency may provide to not more than 20 percent of its total patient care days. The daily Medicare payment rate for any inpatient days of service that exceed the cap is set at the routine home care rate, and the provider is required to reimburse Medicare for any amounts it receives in excess of the cap.
•Overall Payment Cap: The overall payment cap is an absolute dollar limit on the average annual payment per beneficiary a hospice agency can receive. This cap is calculated by the Medicare Administrative Contractor at the end of each hospice cap period to determine the maximum allowable payments per provider number.
We estimate our potential cap exposure using information available for both inpatient day limits as well as per beneficiary cap amounts. The total cap amount for each provider is calculated by multiplying the number of beneficiaries electing hospice care during the period by a statutory amount that is indexed for inflation.
Payment rates for hospice care, the hospice cap amount and the hospice wage index are updated annually according to Section 1814(i)(1)(C)(ii)(VII) of the Social Security Act ("SSA"), which requires CMS to use the inpatient hospital market basket, adjusted for multifactor productivity and other adjustments as specified in the SSA, to determine the hospice payment update percentage. The caps are subject to annual and retroactive adjustments, which can cause providers to be required to reimburse
the Medicare program if such caps are exceeded. Our ability to stay within these caps depends on a number of factors, each determined on a provider number basis, including the average length of stay and mix in level of care.
Hospice Non-Medicare
Non-Medicare payors pay at rates that differ from established Medicare rates for hospice services, and are based on separate, negotiated agreements. We bill and are paid by these non-Medicare payors based on such negotiated agreements.
Personal Care Non-Medicare
Personal care payments are received from payor clients, including state and local governmental agencies, managed care organizations, commercial insurers and private consumers, based on rates that are either contractual or fixed by legislation.
High Acuity Care
High acuity care payments are derived from two sources: health insurance plans and health system partners. Contracts with health insurance plans provide for fixed payment rates for a 30-day or 60-day episode of care indexed to assigned patient diagnoses in return for our obligation to assume risk for the coordination and payment of required medical services necessary to treat the medical condition for which the patient was diagnosed in a home-based setting. Contracts with health system partners provide for payments on a per diem basis at the contracted rate for each day during the remainder of an inpatient acuity stay serviced at the patient's home.
The contracted payment rates are developed by our medical economics team using historical claims and inpatient admission data provided by the respective health insurance plan or health system partner. The data includes medical costs incurred outside of a patient’s historical inpatient stay that may be expected to continue under our program and an estimate of the cost of the medical services under our program which will replace the patient’s inpatient hospital stay. We mitigate the risk of excessive program medical costs by ensuring that we enroll eligible members into the plan, by effectuating clinically effective plans of care and by ensuring that all covered services are related to the condition for which the patient was admitted to the program. Additionally, we have purchased episodic stop-loss insurance for certain payor contracts.
Controls overOver Our Business System Infrastructure
We establish and maintain processes and controls over coding, clinical operations, billing, patient recertifications and compliance to help monitor and promote adherence with Medicare requirements.
•Coding – Specified international classification of disease ("ICD") diagnosis codes are assigned to each of our patients based on their particular health conditions (such as diabetes, coronary artery disease or congestive heart failure). Because coding regulations are complex and are subject to frequent change, we maintain controls surrounding our coding process. To reduce the associated risk of coding failures, we provide coding training and annual update training to clinical managers, as needed training to care center directors and provideclinical managers and training during orientation for new employees to ensure accurate information is gathered and provided to our coding team. In addition, our electronic medical records system (Homecare Homebase) includes automated edits for home health and hospice based on pre-defined compliance metrics. For home health, we also provide monthly specialized coding education, obtain outside expert coding instruction and have certified clinician coders review all patient outcome and assessment information sets (“OASIS”) and assign the appropriate ICD code. Our electronic medical records system (Homecare Homebase) includes automated home health coding edits based on pre-defined compliance metrics.
•Clinical Operations – We provide education on coverage criteria and conditions of participation and utilize outside expert regulatory services if necessary. Regulatory requirements allow patients to be eligible for home health care benefits if through a face-to-face visit with a physician, they are considered homebound and requireit is determined that skilled nursing, physical therapy or speech therapy services.services are required. These clinical services may include: educating the patient about their disease, assessment and observation of disease status, delivery of clinical skills such as wound care, administration of injections or intravenous fluids, management and evaluation of a patient’s plan of care, physical therapy services to assist patients with functional limitations and speech therapy services for speech or swallowing disorders. Patients eligible for hospice care are terminally ill (with a life expectancy of six months or less if the illness runs its normal course). Our hospice program provides care and support to our terminally ill patients with a 6-month prognosis and their families withthrough services including physicalmedical care, counseling, spiritual care, pre-bereavement and bereavement support, medication management and needed equipment and supplies for the terminal illness and all related condition. To help monitorconditions. Our high acuity care clinical protocols include utilization of the Milliman Clinical Guidelines ("MCG") criteria to ensure that patients are eligible for inpatient level care, in-person evaluations by hospital-based physicians to determine the patient's clinical eligibility for home-based inpatient care, social and promote compliance with regulatory requirements, we provide education on Medicare Guidelines for Coverage and Conditions of Participation, hold recurrent homecare regulatory education, utilize outside expert regulatory services, and have a toll-free hotline to offer additional assistance.
behavioral assessments to determine safety of the patient's home setting and an informed consent requirement to ensure that the patient and caregivers are comfortable with the delivery of inpatient level care in the home.
•Billing – We maintain controls over our billing processes to help promote accurate and complete billing. To promoteProcesses and controls have been implemented to ensure that prior to the accuracysubmission of any bills, the visit/occurrence was completed, documented sufficiently by an appropriate clinician and/or provider, and completenessthat the billed claim complies with all regulatory and payor requirements. Examples of our billing, we haveprocess monitoring controls include conducting annual billing compliance testing;testing, user access reviews for billing systems and use formalized billing attestations; limit access to billing systems; useof automated daily billing operational indicators; andindicators. We take prompt corrective action with employees who knowingly fail to follow our billing policies and procedures in accordance with a well-publicized “Zero Tolerance Policy.”
procedures.•Patient Recertification – In order to be recertified for an additional home health episode of care, a patient must continue to meet qualifying criteria and have a continuing medical need.need that requires the skills of a nurse or therapist. Changes in the patient’s condition may require changes to the patient’s medical regimen or modified care protocols within the episode of care. The patient’s progress towards established goals is evaluated prior to recertification. As with the initial episode of care, a recertification requires orders from the patient’s physician. Before any employee recommends recertification to a physician, we conduct a care center level, multidisciplinary care team conference. Specific tools are used to ensure that the patient continues to meet coverage criteria prior to recertifying.
Hospice recertification for additional benefit periods of care require continued demonstration of a terminal prognosis as determined by the hospice physician in collaboration with the attending physician and the interdisciplinary care team.•Compliance – We develop, implement and maintain ethics and compliance programs as a component of the centralized corporate services provided to our home health, hospice, personal care and personal-carehigh acuity-care care centers. Our ethics and compliance program includes a Code of Conduct for our employees, officers, directors, contractors and affiliates and a disclosure program for reporting regulatory or ethical concerns to our compliance team through a confidential hotline, which is augmented by exit interviewssurveys of departing employees. We promote a culture of compliance within our company through educational presentations, regular newsletters and persistent messaging from our senior leadership to our employees stressing the importance of strict compliance with legal requirements and company policies and procedures. Additionally, we have mandatory compliance training and testing for all new employees upon hire and annually for all staff thereafter. We also maintain a robust compliance audit program focusing on key risk areas.
Our Regulatory Environment
We are highly regulated by federal, state and local authorities. The healthcare industry is subject to numerous laws, regulations and rules including, among others, those related to government healthcare participation requirements, various licensure and accreditations, reimbursement for patient services, health information privacy and security rules, and Medicare and Medicaid fraud and abuse prohibitions (including, but not limited to, federal statutes and regulations prohibiting kickbacks and other illegal inducements to potential referral sources, self-referrals by physicians and false claims submitted to federal health care programs). Regulations and policies frequently change, and we monitor changes through our internal government affairs department, as well as multiple trade and governmental publications and associations.
Our home health and hospice subsidiaries are certified by CMS and therefore are subject to the rules and regulations of the Medicare system. Additionally, all of our business lines are likewise subject to federal, state and local laws and regulations dealing with issues such as occupational safety, employment, medical leave, insurance, civil rights, discrimination, building codes, privacy and recordkeeping. We have set forth below a discussion of the regulations that we believe most significantly affect our home health and hospice businesses.
Licensure, Certificates of Need (CON)("CON") and Permits of Approval (POA)("POA")
Home health and hospice care centers operate under licenses granted by the health authorities of their respective states. Some states require health care providers (including hospice and home health agencies) to obtain prior state approval for the purchase, construction or expansion of health care locations, capital expenditures exceeding a prescribed amount, or changes in services. For those states that require a CON or POA, the provider must also complete a separate application process establishing a location, and must receive required approvals.
CertainAdditionally, certain states, including a number in which we operate, carefully restrict new entrants into the market based on demographic and/or demonstrative usage of additional providers. These states limit the entry of new providers or services and the expansion of existing providers or services in their markets through a CON or POA process, which is periodically evaluated and updated as required by applicable state law. For those states that require a CON or POA, the provider must complete a separate application process establishing a location and must receive required approvals.
To the extent that we require a CON or other similar approvals are required to expand our operations, our expansion could be adversely affected by the inability to obtain the necessary approvals, changes in the standards applicable to those approvals and possible delays and expenses associated with obtaining those approvals.
In every state where required, our care centers possess a license and/or a CON or POA issued by the state health authority that determines the local service area for the home health or hospice care centers. Currently, state health authorities in 20 states and the District of Columbia require a CON or, in the State of Arkansas, a POA, in order to establish and operate a home health care center, and state health authorities in 1612 states and the District of Columbia require a CON to operate a hospice care center.
We operate 245 home health care centers and 51 hospice care centers in the following CON states: Arkansas (POA), California, Georgia, Kentucky, Maryland, Mississippi, Missouri, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Washington and West Virginia,CON/POA states as well as the District of Columbia. We provide hospice related services in the following CON states: Alabama, Maryland, North Carolina, Rhode Island, Tennessee and West Virginia.listed below.
| | | | | | | | | | | | | | |
| State | | Home Health | | Hospice |
| Alabama | | 30 | | 10 |
| Arkansas (POA) | | 5 | | — | |
| California | | 4 | | | 2 |
| Florida | | — | | | 6 |
| Georgia | | 60 | | — | |
| Kentucky | | 17 | | — | |
| Maine | | 3 | | — | |
| Maryland | | 9 | | 3 |
| Mississippi | | 9 | | — | |
| Missouri | | 6 | | 2 | |
| New Jersey | | 2 | | — | |
| New York | | 5 | | — | |
| North Carolina | | 9 | | 7 |
| Rhode Island | | 1 | | — | |
| South Carolina | | 26 | | — | |
| Tennessee | | 45 | | 15 |
| Washington | | 2 | | — | |
| West Virginia | | 11 | | 6 |
| Washington, DC | | 1 | | — | |
| Total Care Centers in CON/POA States | | 245 | | 51 |
Medicare Participation: Licensing, Certification and Accreditation
All providers are subject to compliance with various federal, state and local statues and regulations in the U.S. and receive periodic inspection by state licensing agencies to review standards of medical care, equipment and safety.
Our care centers must comply with regulations promulgated by the United States Department of Health and Human Services ("HHS") and CMS in order to participate in the Medicare program and receive Medicare payments. SectionSections 1861(o) and 1891 of the SSA, 42 CFR 484.1. 484.1 et seq.seq., establish the conditions that an HHAa home health agency ("HHA") must meet in order to participate in the Medicare program. Section 1861(dd) of the SSA, 42 CFR 418.1, et seq., establishes the conditions that a hospice provider must meet in order to participate in the Medicare program. Among other things, these regulations, applicable to HHAs and hospices, respectively, known as “Conditionsconditions of Participationparticipation (“COPs”),” relate to the type of facility, its personnel and its standards of medical care, as well as its compliance with federal, state and local laws and regulations.
New Additional COPs which went into effect on January 13, 2018,applicable to HHAs focus on the safe delivery of quality care provided to patients and the impact of that care on patient outcomes through the protection and promotion of patients' rights, care planning, delivery and coordination of services and streamlining of regulatory requirements.
CMS has adopted alternative sanction enforcement options which allow CMS (i) to impose temporary management, direct plans of correction or direct training and (ii) to impose payment suspensions and civil monetary penalties in each case on providers out of compliance with the COPs. CMS engages or has engaged a number of third party contractors, including Recovery Audit Contractors (“RACs”), Program Safeguard Contractors (“PSCs”), Zone Program Integrity Contractors (“ZPICs”), Uniform Program Integrity Contractors ("UPICs") and, Medicaid Integrity ContributorsContractors (“MICs”) and Supplemental Medical Review Contractors (“SMRCs”), to conduct extensive reviews of claims data and state and Federal Governmentfederal government health care program laws and regulations applicable to healthcare providers. These audits evaluate the appropriateness of billings
submitted for payment. In addition to identifying overpayments, audit contractors can refer suspected violations of law to government enforcement authorities.
All providers are subject to compliance with various federal, state and local statutes and regulations in the U.S. and receive periodic inspection by state licensing agencies to review standards of medical care, equipment and safety. We have dedicated internal resources and utilize external parties when necessary to monitor and ensure compliance with the various applicable federal, state and local laws, rules and regulations, as well as requirements of applicable accrediting organizations.
If we fail to comply with applicable laws and regulations, we could be subjected to liabilities, including criminal penalties, civil penalties (including the loss of our licenses to operate one or more of our businesses) and exclusion of a facility from participation in the Medicare, Medicaid and other federal and state health care programs. If any of our facilities were to lose its accreditation or otherwise lose its certification under the Medicare and Medicaid programs, the facility may be unable to receive reimbursement from the Medicare and Medicaid programs and other payors. We believe our facilities are in substantial compliance with current applicable federal, state, local and independent review body regulations and standards. The requirements for licensure, certification and accreditation are subject to change and, in order to remain qualified, it may become necessary for us to make changes in our facilities, equipment, personnel and services in the future, which could have a material adverse impact on operations.
Regulations and Other Factors
The healthcare industry is subject to numerous laws, regulations and rules including, among others, those related to government healthcare participation requirements, various licensure and accreditations, reimbursement for patient services, health information privacy and security rules, and Medicare and Medicaid fraud and abuse provisions (including, but not limited to, federal statutes and regulations prohibiting kickbacks and other illegal inducements to potential referral sources, false claims submitted to federal health care programs and self-referrals by physicians).
Providers that are found to have violated any of these laws and regulations may be excluded from participating in government healthcare programs, subjected to significant fines or penalties and/or required to repay amounts received from the government for previously billed patient services. Although we believe our policies, procedures and practices comply with governmental regulations, no assurance can be given that we will not be subjected to additional governmental inquiries or actions, or that we would not be faced with sanctions, fines or penalties if so subjected.operations.
Federal and State Anti-Fraud and Anti-Kickback Laws
As a provider under the Medicare and Medicaid systems, we are subject to various anti-fraud and abuse laws, including the Federalfederal health care programs’ anti-kickback statute and, where applicable, its state law counterparts. Affected government health care programs include any health care plans or programs that are funded by the United States government (other than certain federal employee health insurance benefits/programs), including certain state health care programs that receive federal funds, such as Medicaid.
Subject to certain exceptions, these laws prohibit any offer, payment, solicitation or receipt of any form of remuneration to induce or reward the referral of business payable under a government health care program or in return for the purchase, lease, order, arranging for, or recommendation of items or services covered under a government health care program. A related law forbids the offer or transfer of anything of value, including certain waivers of co-payment obligations and deductible amounts, to a beneficiary of Medicare or Medicaid that is likely to influence the beneficiary’s selection of health care providers, again, subject to certain exceptions. Violations of the anti-fraud and abuse lawsfederal anti-kickback statute can result in imprisonment, the imposition of substantial civil and criminal penalties exceeding $100,000, plus three times the amount of the improper remuneration and potentially, exclusion from furnishing services under any government health care program. In addition, the states in which we operate generally have laws that prohibit certain direct or indirect payments or fee-splitting arrangements between health care providers where they are designed to obtain the referral of patients from a particular provider.
Stark LawsLaw
The Social Security ActSSA includes a provision commonly known as the “Stark Law.” This law prohibits physicians from referring Medicare and Medicaid patients to entities for the provision of designated health services with which they or any of their immediate family members have a financial relationship, unless an exception to the law's prohibition is met. These types of referrals are known as “self-referrals.” Sanctions for violating the Stark Law include civil penalties up to $15,000$26,125 for each violation, up to $100,000$174,172 for sham arrangements,schemes to circumvent the Stark restrictions and up to $10,000$20,731 for each day an entity fails to report required information and exclusion from the federal health care programs. There are a number of exceptions to the self-referral prohibition, including employment contracts leases and recruitment agreementsleases that adhere to certain enumerated requirements.
Violations of the Stark Law result in payment denials and may also trigger civil monetary penalties and federal program exclusion. Several of the states in which we conduct business have also enacted statutes similar in scope and purpose to the federal fraudanti-fraud and abuse laws and the Stark Laws.Law. These state laws may mirror the Federalfederal Stark LawsLaw or may be different in scope. The available guidance and enforcement activity associated with such state laws variesvary considerably.
We monitor all aspects of our business and have developed a comprehensive ethics and compliance program that is designed to meet or exceedensure that Amedisys meets all applicable federal guidelines and industry standards. Nonetheless, because the law in this area is complex and
constantly evolving, there can be no assurance that federal regulatory authorities will not determine that any of our arrangements with physicians violate the Stark Law.
Federal and State Privacy and Security Laws
The Health Insurance Portability and Accountability Act of 1996, or HIPAA, requires us to comply with standards for the exchange of health information within our company and with third parties, such as payors, business associates and patients. These include standards for common health care transactions, such as:as claims information, plan eligibility, payment information and the use of electronic signatures; unique identifiers for providers, employers, health plans and individuals; and security, privacy, breach notification and enforcement.
The HIPAA transactionstransaction regulations establish form, format and data content requirements for most electronic health care transactions, such as health care claims that are submitted electronically. The HIPAA privacy regulations establish comprehensive requirements relating to the use and disclosure of protected health information. The HIPAA security regulations establish minimum standards for the protection of protected health information that is stored or transmitted electronically. The HIPAA breach notification regulations establish the applicable requirements for notifying individuals, the U.S. Department of Health and Human Services (HHS), and the media in the event of a data breach affecting protected health information. Violations of the privacy, security and securitybreach notification regulations are punishable by civil and criminal penalties.
The American Recovery and Economic Reinvestment Act of 2009 (“ARRA”) increased the amount ofCurrently, civil monetary penalties thatfor HIPAA violations can be imposedrange from $120 to $1.807 million per violation with a maximum fine of $1.807 million for multiple violations of HIPAA. ARRA also authorized statethe same provision during a calendar year. To date, the largest penalty imposed by HHS following a data breach is $16 million. State attorneys general tomay also bring civil enforcement actions under HIPAA. ARRA also requires that the Department of HealthHIPAA, and Human Services ("HHS") promulgate regulations requiring that certain notificationsattorneys general are actively engaged in enforcement. These penalties could be madein addition to individuals, to HHS and potentially to the media in the event of breaches of the privacy of protected health information.other penalties assessed by a state for a breach which would be considered reportable under a particular state’s data breach notification laws.
The Health Information Technology for Economic and Clinical Health (“HITECH”) Act was enacted in conjunction with ARRA. Among other things, the HITECH Act makes business associates of covered entities directly liable for compliance with certain HIPAA requirements, strengthens the limitations on the use and disclosure of protected health information without individual authorizations, and adopts the additional HITECH Act enhancements, including enforcement of noncompliance with HIPAA due to willful neglect. TheRecent changes to HIPAA enacted as part of ARRA reflect a Congressional intent that HIPAA’s privacy and security provisions be more strictly enforced. These changes have stimulated increased enforcement activity and enhanced the potential that health care providers will be subject to financial penalties for violations of HIPAA. In addition, the Secretary of HHS is required to perform periodic audits to ensure covered entities (and their business associates, as that term is defined under HIPAA) comply with the applicable HIPAA requirements, increasing the likelihood that a HIPAA violation will result in an enforcement action.
In addition to the federal HIPAA regulations, most states also have laws that protect the confidentiality of health information. Also,information and other personally identifiable information, and these laws may be broader in responsescope with respect to concerns about identity theft, manyprotected health information and other personal information than HIPAA. Some of these laws grant individuals rights with respect to personal information, and we may be required to expend significant resources to comply with these laws. Further, all 50 states and the District of Columbia have adopted so-called “security breach”data breach notification laws that impose, in varying degrees, an obligation to notify affected persons and/or state regulators in the event of a data breach or compromise, including when their personal information has or may have been accessed by an unauthorized person. Some state breach notification laws may also impose physical and electronic security requirements regarding the safeguarding of personal information, such as social security numbers and bank and credit card account numbers, and that impose an obligation to notify persons when their personal information has or may have been accessed by an unauthorized person. Some state security breach notification laws may also impose physical and electronic security requirements.numbers. Violation of state privacy, security and breach notification laws can trigger significant monetary penalties. In addition, certain states’ privacy, security and data breach laws, including, for example, the California Consumer Privacy Act, amended, effective January 1, 2023, as the California Privacy Rights Act, include private rights of action that may expose us to private litigation regarding our privacy practices and significant damages awards or settlements in civil litigation.
The False Claims Act
The Federalfederal False Claims Act ("FCA") prohibits false claims or requests for payment for health care services. Under the FCA, the government may penalize any person who knowingly submits, or participates in submitting, claims for payment to the Federal Government which are false or fraudulent, or which contain false or misleading information. Any person who knowingly makes or uses a false record or statement to avoid paying the Federal Government, or knowingly conceals or avoids an obligation to pay money to the Federal Government, may also be subject to fines under the FCA. Under the FCA, the term “person” means an individual, company or corporation.
The Federal Government has used the FCA to prosecute Medicare and other governmental program fraud in areas such as violations of the Federal anti-kickback statute or the Stark Laws, coding errors, billing for services not provided and submitting false cost reports. The FCA has also been used to prosecute people or entities that bill services at a higher reimbursement rate than is allowed and that bill for care that is not medically necessary. In addition to government enforcement, the FCA authorizes private citizens to bring qui tam or “whistleblower” lawsuits, greatly extending the practical reach of the FCA. In 2018, the Department of Justice ("DOJ") announced that the FCA penalties would once again be increasing. The minimum per-claim penalty will be set for 2019 at $11,181 to $22,363.range is between $11,803 and $23,607 (last updated 2021).
The Fraud Enforcement and Recovery Act of 2009 (“FERA”) amended the False Claims ActFCA with the intent of enhancing the powers of government enforcement authorities and whistleblowers to bring False Claims ActFCA cases. In particular, FERA attempts to clarify that liability may be established not only for false claims submitted directly to the government, but also for claims submitted to
government contractors and grantees. FERA also seeks to clarify that liability exists for attempts to avoid repayment of overpayments, including improper retention of federal funds. FERA also included amendments to False Claims ActFCA procedures,
expanding the government’s ability to use the Civil Investigative Demand process to investigate defendants, and permitting government complaints inand intervention to relate back to the filing of the whistleblower’s original complaint. FERA is likely to increase both the volume and liability exposure of False Claims ActFCA cases brought against health care providers.
In the Patient Protection and Affordable Care Act (discussed(enacted in more detail below)2010), Congress enacted requirements related to identifying and returning overpayments made under Medicare and Medicaid. CMS finalized regulations regarding this so-called “60-day rule,” which requires providers to report and return Medicare and Medicaid overpayments within 60 days of identifying the same.overpayment. A provider who retains identified overpayments beyond 60 days may be liable under the False Claims Act.FCA. “Identification” occurs when a person “has, or should have through the exercise of reasonable diligence,” identified and quantified the amount of an overpayment. The final rule also established a six yearsix-year lookback period, meaning overpayments must be reported and returned if a person identifies the overpayment within six years of the date the overpayment was received. Providers must report and return overpayments even if they did not cause the overpayment.
In addition to the False Claims Act,FCA, the Federal Government may use several criminal statutes to prosecute the submission of false or fraudulent claims for payment to the Federal Government. Many states have similar false claims statutes that impose liability for the types of acts prohibited by the False Claims Act. As part of the Deficit Reduction Act of 2005 (the “DRA”), Congress providedprovides states an incentive to adopt state false claims acts consistent with the Federal False Claims Act.federal FCA. Additionally, the DRA requiredrequires providers who receive $5 million or more annually from Medicaid to include information on Federalfederal and state false claims acts, whistleblower protections and the providers’ own policies on detecting and preventing fraud in their written employee policies.
Civil Monetary Penalties
The United States Department of Health and Human Services may impose civil monetary penalties ("CMP") for a variety of civil offenses related to federal health care programs. They may be imposed upon any person or entity who presents, or causes to be presented, certain ineligible claims for medical items or services, for providing improper inducements to beneficiaries to obtain services, for payments to limit services to patients, and for offenses related to relationships with excluded individuals, among other things.
Maximum CMP amounts have been increased significantly as a result of the Bipartisan Budget Act of 2018, which was signed into law on February 9, 2018. The maximum CMP has increased from $55,262 to $100,000 for: (1) knowingly making or causing to be made a false statement, omission or misrepresentation of a material fact in any application, bid, or contract to participate or enroll as a provider or supplier (42 CFR 1003.210(a)(6)), and (2) making or using a false record or statement that is material to a false or fraudulent claim (42 CFR 1003.210(a)(7)).
FDA Regulation
The U.S. Food and Drug Administration (“FDA”("FDA") Regulation
The FDA regulates medical device user facilities, which include home health care providers. FDA regulations require user facilities to report patient deaths and serious injuries to the FDA and/or the manufacturer of a device used by the facility if the device may have caused or contributed to the death or serious injury of any patient. FDA regulations also require user facilities to maintain files related to adverse events and to establish and implement appropriate procedures to ensure compliance with the above reporting and recordkeeping requirements. User facilities are subject to FDA inspection, and noncompliance with applicable requirements may result in warning letters or sanctions including civil monetary penalties, injunction, product seizure, criminal fines and/or imprisonment.
Patient Protection and Affordable Care Act
In March 2010, comprehensive health care reform legislation was signed into law in the United States through the passage of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act (collectively, “PPACA”). Since the 2016 election, it has been widely discussed that the PPACA will be “repealed and replaced.” PPACA calls for a number of changes to HHA reimbursement, many of which were outlined in the 2019 regulations. These changes are discussed in greater detail below.
The Improving Medicare Post-Acute Care Transformation Act
In October 2014, the Improving Medicare Post-Acute Care Transformation Act (“IMPACT Act”) was signed into law requiring the reporting of standardized patient assessment data for quality improvement, payment and discharge planning purposes across the spectrum of post-acute care providers (“PACs”), including skilled nursing facilities and home health agencies. The IMPACT Act requires PACs to begin reporting:report: (1) standardized patient assessment data at admission and discharge by October 1, 2018 for post-acute care providers, including skilled nursing facilities and by January 1, 2019 for home health agencies;discharge; (2) new quality measures, including functional status, skin integrity, medication reconciliation, incidence of major falls and patient preference regarding treatment and discharge at various intervals between October 1, 2016 and January 1, 2019;discharge; and (3) resource use measures, including Medicare spending per beneficiary, discharge to community and hospitalization rates of potentially preventable readmissions by October 1, 2016 for post-acute care providers, including skilled nursing facilities and by October 1, 2017 for home health agencies.readmissions. Failure to report such data when required would subject a facility to a two percent reduction in market basket prices then in effect.
The IMPACT Act further requires HHS and the Medicare Payment Advisory Commission (“MedPAC”), a commission chartered by Congress to advise it on Medicare payment issues, to study alternative PAC payment models, including payment based upon individual patient characteristics and not care setting, with corresponding Congressional reports required based on such analysis. The IMPACT Act also included provisions impacting Medicare-certified hospices, including: (1) increasing survey frequency for Medicare-certified hospices to once every 36 months; (2) imposing a medical review process for facilities with a high percentage of stays in excess of 180 days; and (3) updating the annual aggregate Medicare payment cap.
See discussion of the effects of this law on our operations below.
Pre-Claim Review Choice Demonstration for Home Health Services
On June 8, 2016, CMS announced the implementation of a three yearthree-year Medicare pre-claim reviewPre-Claim Review Demonstration for Home Health Services ("PCR") demonstration for home health services provided to beneficiaries in the states of Illinois, Florida, Texas, Michigan and Massachusetts. The pre-claim review is a process through which a request for provisional affirmation of coverage is submitted for review before a final claim is submitted for payment. On April 1, 2017, CMS paused the PCR Demonstration for Home Health Servicesdemonstration while CMS considered a number of changes. CMS revised the demonstration to incorporate more flexibility and choices for providers, as well as risk-based changes to reward providers who show compliance with Medicare home health policies.
On May 31, 2018, CMS issued a notice indicating its intention to re-launch an HHA pre-claim review demonstration project. The original program had drawn criticism that it created significant administrative burdens and reduced access to care. Now called the Review Choice Demonstration for Home Health Services ("RCD"), the revised demonstration will givegives HHAs in the demonstration states 3three options: pre-claim review of all claims, post-payment review of all claims, or minimal post-payment review with a 25% payment reduction for all home health services. Under the pre-claim review and post-payment review options, provider claims are reviewed for every episode of care until the appropriate claim approval rate (90% based on a minimum of ten pre-claim requests or claims submitted) is reached. Further, once the appropriate claim approval rate is reached, a provider can elect to opt-out of claim reviews except for a spot check of 5% of its claims to ensure continued compliance. The demonstration initially will applyapplies to HHA providers in Florida, Illinois, North Carolina, Ohio and Texas, with the option to expand after 5five years to other states in the Medicare Administrative Contractor Jurisdiction M (Palmetto). As of December 2018,In April 2019, CMS is continuing the process for Paperwork Reduction Act (PRA) approval for the restarted program. After PRA approval is received, CMS will provideannounced a June 1, 2019 start date for home healthRCD in Illinois. In July 2019, CMS announced a September 30, 2019 start date for RCD in Ohio. Thereafter, in an October 21, 2019 release, CMS announced that it will reschedule the next phase of its RCD to allow agencies in Illinois and instructions on the choice selection process. CMS will later provide notice before phasing in the other demonstration states: Ohio,Texas, North Carolina and Florida time to transition to PDGM. Throughout the first few months of 2020, CMS made various announcements about new start dates for the remaining three states, including a March 2, 2020 start date in Texas and projected start date of May 4, 2020 for North Carolina and Florida. The Texas portion began as scheduled; however, due to the ongoing Public Health Emergency ("PHE"), on March 31, 2020, CMS announced a voluntary pause of RCD for Illinois, Ohio and Texas and delay for beginning the demonstration in North Carolina and Florida. In July 2020, CMS announced its intention to resume the demonstration on August 30, 2020 for Illinois, Ohio and Texas and a voluntary phase-in for North Carolina and Florida. The voluntary phase-in was extended by CMS in October until January 1, 2021 and then again in December until March 31, 2021. Various other delays were announced throughout 2021 due to the PHE. On July 16, 2021, CMS announced full implementation of the RCD would be effective for providers in Florida and Texas.North Carolina September 1, 2021.
Home Health Value-Based Purchasing
On January 1, 2016, CMS implemented Home Health Value-Based Purchasing ("HHVBP"). The HHVBP model was designed to give Medicare-certified home health agencies incentives or penalties, through payment bonuses, to giveprovide higher quality and more efficient care. HHVBP was rolled out to nine pilot states: Arizona, Florida, Iowa, Maryland, Massachusetts, Nebraska, North Carolina, Tennessee and Washington, seven of which Amedisys currently has home health operations. Bonuses and penalties began in 2018 with the maximum of plus or minus 3% growing to plus or minus 8% by 2022. Payment adjustments are calculated based on performance in 20a variety of measures which include current Quality of Patient Care and Patient Satisfaction star measures, as well as measures based on submission of data to a CMS web portal. The measures used may be subject to modification or change by CMS.
Under the demonstration, agencies with higher performance receive bonuses, while those with lower scores receive lower payments relative to current levels. Agency performance is evaluated against separate improvement and attainment scores, with payment tied to the higher of these two scores. CMS used 2015 as the baseline year for performance, with 2016 as the first year for performance measurement. The first payment adjustment began January 1, 2018, based on 2016 performance data. Between 2018 and 2022, the payment adjustments vary (upward or downward) from 3% to 8%.
In January 2021, CMS and the Center for Medicare and Medicaid Innovation announced its intention, through rulemaking, to expand HHVBP with an implementation date no earlier than January 2022. In November 2021, CMS issued the Calendar Year 2022 Home Health Final Rule for Medicare home health providers which provides for the expansion of the HHVBP model to all 50 states beginning January 1, 2023 with calendar year 2023 being the first performance year and calendar year 2025 being the first payment year with a proposed maximum payment adjustment, increases from 3 percent to 8 percent. Based onup or down, of 5%. In doing so, the CMS published Total Performance Score results, we received a net positive adjustment in 2018 and are anticipating a net positive adjustment in 2019 as well.
final payment year of the HHVBP demonstration (2022) was cancelled.
Home Health Payment Reform
On February 9, 2018, Congress passed the Bipartisan Budget Act of 2018 ("BBA of 2018"), which funded government operations, set two-year government spending limits and enacted a variety of healthcare related policies. Specific to home health, the BBA of 2018 providesprovided for a targeted extension of the home health rural add-on payment, a reduction of the 2020 market basket update, modification of eligibility documentation requirements and reform to the HHPPS.Home Health Prospective Payment System ("HHPPS"). The HHPPS reform included the following parameters: for home health units of service beginning on January 1, 2020, a 30-day payment system will apply;was to be applied; the transition to the 30-day payment system mustwas to be budget neutral; and CMS mustwas to conduct at least one Technical Expert Panel during 2018, prior to any notice and comment rulemaking process, related to the design of any new case-mix adjustment model.
The final HHA regulations introduced by CMS (CMS-1689-FC) that updatesCalendar Year 2019 Home Health Final Rule updated the Medicare HHPPS and finalizesfinalized the implementation of an alternative case-mix adjustment methodology, PDGM, will be implementedwhich became effective on January 1, 2020. The PDGM will adjustadjusted payments
to home health agencies providing home health services under Medicare Fee-For-Service based on patient characteristics for 30-day periods of care and will also eliminateeliminated the use of therapy visits in the determination of payments. While the changes arewere to be implemented in a budget neutral manner to the industry, the ultimate impact will varyvaried by provider based on factors including patient mix and admission source. Additionally, in arriving at the calculation of a rate that is budget neutral, CMS has made assumptions about behavioral changes which were finalized in the Calendar Year 2020 Home Health Final Rule released on October 31, 2019 and resulted in a 4.36% reduction to reimbursement. The behavioral changes were related to coding practices, low utilization payment adjustment ("LUPA") management and co-morbidities. CMS is required by law to analyze data for calendar years 2020-2026, retrospectively, to determine the impact of the difference between assumed and actual behavior changes and to make any such payment changes as are necessary to offset or supplement the adjustments based on anticipated behavior. Additionally, in an effort to eliminate fraud risks, CMS reduced the upfront payment associated with requests for anticipated payment ("RAPs") to 20% in 2020 with the full elimination of RAPs in 2021.
Phase-Out of the Rural Add-On
The BBA of 2018 also mandated the implementation of a new methodology for applying rural add-on payments for home health services (“rural add-on”). Unlike previous rural add-ons, which were applied to all rural areas uniformly, the extension provided varying add-on amounts depending on the rural county (or equivalent area) classification by classifying each rural county (or equivalent area) into one of three distinct categories: (1) rural counties and equivalent areas in the highest quartile of all counties and equivalent areas based on the number of Medicare home health episodes furnished per 100 individuals who are entitled to, or enrolled for, benefits under Part A of Medicare or enrolled for benefits under Part B of Medicare only, but not enrolled in a Medicare Advantage plan under Part C of Medicare (the "high utilization" category); (2) rural counties and equivalent areas with a population density of 6 individuals or fewer per square mile of land area that are not included in the "high utilization" category (the "low population density" category); and (3) rural counties and equivalent areas not in either the "high utilization" or "low population density" categories (the "all other" category).
In the Calendar Year ("CY") 2019 Home Health Final Rule, CMS finalized policies for the rural add-on payments for CY 2019 through CY 2022, in accordance with section 50208 of the BBA of 2018. The CY 2019 through CY 2022 rural add-on percentages outlined in the rule are shown in the table below.
| | | | | | | | | | | | | | |
| Rural Add-On Percentages, CYs 2019-2022 |
| Category | CY 2019 | CY 2020 | CY 2021 | CY 2022 |
| High utilization | 1.5% | 0.5% | None | None |
| Low population density | 4.0% | 3.0% | 2.0% | 1.0% |
| All other | 3.0% | 2.0% | 1.0% | None |
Civil Monetary Penalties
HHS may impose civil monetary penalties ("CMP") for a variety of civil offenses related to federal health care programs. They may be imposed upon any person or entity who presents, or causes to be presented, certain ineligible claims for medical items or services, for providing improper inducements to beneficiaries to obtain services, for payments to limit services to patients, and for offenses related to relationships with excluded individuals, among other things.
Maximum CMP amounts have not yet been finalized.increased significantly as a result of the BBA of 2018. The maximum CMP has increased to $105,563 for knowingly making or causing to be made a false statement, omission or misrepresentation of a material fact in any application, bid or contract to participate or enroll as a provider or supplier and to $59,527 for making or using a false record or statement that is material to a false or fraudulent claim.
Environmental and Climate Change Matters
We are committed to transparency around our carbon footprint and climate risk. We have adopted an integrated approach to address climate change, with cross-disciplinary teams responsible for managing climate-related activities, initiatives and policies. Strategies and progress toward our goals are reviewed with senior leadership and the Nominating and Corporate Governance Committee of our Board of Directors. We have committed to engage a third party expert by December 31, 2022 to help collect data and measure greenhouse gas (“GHG”) emissions and will establish interim GHG targets covering scope 1 and 2 emissions in line with the Paris Agreement’s 1.5°C emissions reduction goal and report all Scope 3 emissions and a timeline for establishing Scope 3 GHG reduction targets by December 31, 2023. Additional information about our environmental and climate change related goals will be included in our inaugural sustainability report, which we expect to publish in 2022 and will be available on our website. For more information regarding climate change and its possible adverse impact on us, see “Item 1A. Risk Factors — Risks Related to Our Operations — Our operations could be impacted by natural disasters and climate change” in this Annual Report on Form 10-K.
Our Competitors
There are few barriers to entry in the home health and hospice jurisdictions that do not require certificates of needa CON or permits of approval.POA. Our primary competition in these jurisdictions comes from local privately and publicly-owned and hospital-owned health care providers. We compete based on the quality of services, the availability of personnel, the quality of services, expertise of visiting staff, and, in certain instances, on the price of our services. In addition, we compete with a number of non-profit organizations that finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to us.
Available Information
Our company website address is www.amedisys.com. We use our website as a channel of distribution for important company information. Important information, including press releases, analyst presentations and financial information regarding our company, is routinely posted on and accessible on the Investor Relations subpage of our website, which is accessible by clicking on the tab labeled “Investors” on our website home page. Visitors to our website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the Investor Relations subpage of our website. In addition, we make available on the Investor Relations subpage of our website (under the link “SEC Filings”), free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as reasonably practicable after we electronically file or furnish such reports with the SEC. Further, copies of our Certificate of Incorporation and Bylaws, our Code of Ethical Business Conduct, our Corporate Governance Guidelines and the charters for the Audit, Compensation, Quality of Care, Compliance and Ethics and Nominating and Corporate Governance Committees of our Board are also available on the Investor Relations subpage of our website (under the link “Governance”). Reference to our website does not constitute incorporation by reference of the information contained on the website and should not be considered part of this document.
Additionally, the public may read and copy any of the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. Our electronically filed reports can also be obtained on the SEC’s internet site at http://www.sec.gov.
ITEM 1A. RISK FACTORS
The risks described below, and risks described elsewhere in this Form 10-K, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows and the actual outcome of matters as to which forward-looking statements are made in this Form 10-K. The risk factors described below and elsewhere in this Form 10-K are not the only risks faced by Amedisys. Our business and consolidated financial condition, results of operations and cash flows may also be materially adversely affected by factors that are not currently known to us, by factors that we currently consider immaterial or by factors that are not specific to us, such as general economic conditions.
If any of the following risks are actually realized, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected. In that case, the trading price of our common stock could decline.
You should refer to the explanation of the qualifications and limitations on forward-looking statements under “Special Caution Concerning Forward-Looking Statements.” All forward-looking statements made by us are qualified by the risk factors described below.
Risks Related to Reimbursement
Federal and state changes to reimbursement and other aspects of Medicare and Medicaid could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our net service revenue is primarily derived from Medicare, which accounted for 73%75%, 76%75% and 79%74% of our revenue during 2018, 20172021, 2020 and 2016,2019, respectively. Payments received from Medicare are subject to changes made through federal legislation. When such changes are implemented, we must also modify our internal billing processes and procedures accordingly, which can require significant time and expense. These changes, as further detailed in Part I, Item 1, “Business: Payment for Our Services,” can include changes to base episode payments and adjustments for home health services, changes to cap limits and per diem rates for hospice services and changes to Medicare eligibility and documentation requirements or changes designed to restrict utilization. Any such changes, including retroactive adjustments, adopted in the future by the Center for Medicare and Medicaid Services (“CMS”)CMS could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
In April of 2015, Congress passed and President Obama signed the so-called “doc fix” in the formSection 6407 of the Affordable Care Act, as implemented by 42 CFR § 424.22, added Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). This law replaces a long-standing physician reimbursement formula with statutorily prescribed physician payment updates and provisions. MACRA providesrequirements for an increase of 3% of the payment amount otherwise madeface-to-face encounters to support claims for home health services furnished in rural areas and sets Medicare reimbursements for post-acute care providers to increase by 1.0% in fiscal year 2018.
On February 2, 2016, CMS published a final rule, which is currently in effect, adding new requirements for Medicaid home health services. Among other things, the final rule requires that for the initial ordering of home health services, the physician must document that a face-to-face encounter that is related to the primary reason the beneficiary requires home health services occurred no more than 90 days before or 30 days after the start of services. The final rule also requires that for the initial ordering of certain medical equipment, the physician or authorized non-physician practitioner must document that a face-to-face encounter that is related to the primary reason the beneficiary requires medical equipment occurred no more than six months prior to the start of services. The requirements for face-to-face encounters continue to be one of the most complex issues in the industry and can be the source of claims denials if not fulfilled.
On August 6, 2018, CMS published annual changes in Medicare hospice payment rates. As finalized, CMS estimates hospices will see a 1.8% increase in Medicare payments for fiscal year 2019. This increase is Section 6407(d) of the result of a 2.9% market basket adjustment less a 0.8% productivity adjustment, less 0.3% as required under the Patient Protection and Affordable Health Care Act and the Heath Care and Education Reconciliation Act (collectively, "PPACA"). CMS also increased the aggregate cap amount by 1.8% to $29,205.44. As of December 31, 2018, we expect the impact of the 2019 final rule on us to be in line with that of the hospice industry.
On November 1, 2018, CMS issued a final rule to update and revise Medicare home health reimbursement rates for calendar year 2019. CMS estimatedprovided that the net impactrequirements for face-to-face encounters in the provisions described above shall apply in the case of the payment provisions of the final rule will result in an increase of 2.2% in reimbursement to home health providers. This increase is the result of a 3.0% market basket increase less a 0.8% productivity adjustment. As of December 31, 2018, we expect the impact of the 2019 final rule on us to be an increase of 1.2%.
Additionally, CMS proposed changes to the Home Health Prospective Payment System (“HHPPS”) case-mix adjustment methodology through the use of a new Patient-Driven Groupings Model ("PDGM")physicians making certifications for home health payments. This change is proposed to be implemented January 1, 2020 and also includes a changeservices under title XIX of the Act (Medicaid) in the unit of payment from a 60-day payment period to a 30-day payment periodsame manner and eliminates the use of therapy visits in the determination of payments. While the proposed changes are to be implemented in a budget neutral manner to the industry, the ultimate impact will vary by provider based on factors including patient mix and admission source. Additionally, in arriving at the calculation of a rate that is budget neutral, CMS has made assumptions about behavioral changes which have not been finalized. The finalization of these assumptions could negatively impact our 2020 rate of reimbursement and have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.same extent as such requirements apply under title XVIII (Medicare).
There are continuing efforts to reform governmental health care programs that could result in major changes in the health care delivery and reimbursement system on a national and state level, including changes directly impacting the reimbursement systems for our home health and hospice care centers. Though we cannot predict what, if any, reform proposals will be adopted, health
care reform and legislation may have a material adverse effect on our business and ourconsolidated financial condition, results of operations and cash flows through decreasing payments made for our services.
We could also be affected adversely by the continuing efforts of governmental payors to contain health care costs. We cannot assure you that reimbursement payments under governmental payor programs, including Medicare supplemental insurance policies, will remain at levels comparable to present levels or will be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to these programs. Any such changes could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Quality reporting requirements may negatively impact Medicare reimbursement.
Hospice quality reporting was mandated by PPACA,the Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act ("PPACA"), which directs the Secretary to establish quality reporting requirements for hospice programs. Failure to submit required quality data will result in a 2 percentage point2% reduction to the market basket percentage increase for that fiscal year. This quality reporting program is currently “pay-for-reporting,” meaning it is the act of submitting data that determines compliance with program requirements.
Similarly,Section 1895(b)(3)(B)(v) of the Social Security Act requires the submission of quality data by home health agencies. Failure to submit quality data will result in a 2% reduction in the home health agency's annual home health payment update percentage. This pay-for-reporting requirement was implemented on January 1, 2007. In the Calendar Year 2015 Home Health Final Rule, CMS proposed to establishdefined a newmore explicit “Pay-for-Reporting Performance Requirement” withby which provider compliance with quality
reporting program requirements can be measured. In the Calendar Year 2016 Home Health Final Rule, CMS required home health agencies that do not submit quality measure data to CMS are subject to a 2.0% reduction in their annual home health payment update percentage. Home health agencies are required to report prescribed quality assessment data for a minimum of 70.0%90% of all patients with episodes of care that occur on or after July 1, 2015. This compliance threshold increased by 10.0% in each of two subsequent periods - i.e., for episodes beginning on or after July 1, 2016 and before June 30, 2017, home health agencies must score at least 80%, and for episodes beginning on or after July 1, 2017 and thereafter, the required performance level is at least 90%.patients.
The Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT Act”) requires the submission of standardized data by home health agencies and other providers. Specifically, the IMPACT Act requires, among other significant activities, the reporting of standardized patient assessment data with regard to quality measures, resource use and other measures. Failure to report data as required will subject providers to a 2% reduction in market basket prices then in effect. Additionally, reporting activities associated with the IMPACT Act are anticipated to be quite burdensome.
There can be no assurance that all of our agencies will continue to meet quality reporting requirements in the future which may result in one or more of our agencies seeing a reduction in its Medicare reimbursements. Regardless, we, like other healthcare providers, are likely to incur additional expenses in an effort to comply with additional and changing quality reporting requirements.
Value-based purchasing may negatively impact Medicare reimbursement.
Both government and private payors are increasingly looking to value-based purchasing to contain costs. Value-based purchasing focuses on quality of outcomes and efficiency of care, rather than quantity of care. Per the Calendar Year 2022 Home Health Final Rule for Medicare home health providers, value-based purchasing will be expanded to all 50 states beginning January 1, 2023. CMS may also create a similar plan for hospices in the future. Government and private payors’ implementation of value-based purchasing requirements could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Any economic downturn, deepening of an economic downturn, continued deficit spending by the Federal Government or state budget pressures may result in a reduction in payments and covered services.
Adverse developments in the United States could lead to a reduction in Federal Government expenditures, including governmentally funded programs in which we participate, such as Medicare and Medicaid. In addition, if at any time the Federal Government is not able to meet its debt payments unless the federal debt ceiling is raised, and legislation increasing the debt ceiling is not enacted, the Federal Government may stop or delay making payments on its obligations, including funding for government programs in which we participate, such as Medicare and Medicaid. Failure of the government to make payments under these programs could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Further, any failure by the United States Congress to complete the federal budget process and fund government operations may result in a Federal Government shutdown, potentially causing us to incur substantial costs without reimbursement under the Medicare program, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. As an example, the failure of the 2011 Joint Select Committee to meet its Deficit Reduction goal resulted in an automatic reduction in Medicare home health and hospice payments of 2% beginning April 1, 2013.2013 ("sequestration" - suspended from May 1, 2020 through March 31, 2022; reinstated at 1% for the period April 1, 2022 through June 30, 2022 and at 2% thereafter).
Historically, state budget pressures have resulted in reductions in state spending. Given that Medicaid outlays are a significant component of state budgets, we can expect continuing cost containment pressures on Medicaid outlays for our services.
In addition, sustained unfavorable economic conditions may affect the number of patients enrolled in managed care programs and the profitability of managed care companies, which could result in reduced payment rates and could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Future cost containment initiatives undertaken by private third party payors may limit our future revenue and profitability.
Our non-Medicare revenue and profitability are affected by continuing efforts of third party payors to maintain or reduce costs of health care by lowering payment rates, narrowing the scope of covered services, increasing case management review of services
and negotiating pricing. There can be no assurance that third party payors will make timely payments for our services, and there is no assurance that we will continue to maintain our current payor or revenue mix. We are continuing our efforts to develop our non-Medicare sources of revenue and anyrevenue. Any changes in payment levels from current or future third party payors could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Risks Related to Lawsour Operations
Our business may be materially adversely affected by the ongoing COVID-19 pandemic.
The outbreak of the COVID-19 pandemic has resulted in a general economic downturn and Government Regulations
We are operating under a Corporate Integrity Agreement. Violations of this agreement could result in substantial penalties or exclusion from participationvolatility in the Medicare program.stock market and has also caused and may continue to cause a decrease in our patient volumes and revenues, an increase in our costs, an inability to access our patients and referral sources, staffing shortages and medical supply shortages, any of which, or a combination of
On April 23, 2014, with no admissions of liability on our part, we entered into a settlement agreement with the U.S. Department of Justice relating to certain of our clinical and business operations. Concurrently with our entry into this agreement, we entered into a Corporate Integrity Agreement (“CIA”) with the Office of Inspector General-HHS (“OIG”). The CIA,
which, has a term of five years, formalizes various aspects of our already existing ethics and compliance programs and contains other requirements designed to help ensure our ongoing compliance with federal health care program requirements. Among other things, the CIA requires us to maintain our existing compliance program, executive compliance committee and compliance committee of the Board of Directors; provide certain compliance training; continue screening new and current employees to ensure they are eligible to participate in federal health care programs; engage an independent review organization (“IRO”) to perform certain auditing and reviews and prepare certain reports regarding our compliance with federal health care programs, our billing submissions to federal health care programs and our compliance and risk mitigation programs; and provide certain reports and management certifications to the OIG. Additionally, the CIA specifically requires that we report substantial overpayments that we discover we have received from the federal health care programs, as well as probable violations of federal health care laws. Upon breach of the CIA, we could become liable for payment of certain stipulated penalties, or could be excluded from participation in federal health care programs. Although we believe that we are currently in compliance with the CIA, any violations of the agreement could have a material adverse effect on our business and consolidatedfinancial results. The ultimate impact of COVID-19, including the impact on our liquidity, financial condition and results of operations, is uncertain and cash flows.
Wewill depend on many factors and future developments, which are subjecthighly uncertain and cannot be predicted at this time, such as the severity, scope and length of time that the pandemic continues, including regional surges in COVID-19 cases at various times, the impact of new variants of the virus, uncertainty regarding vaccine utilization and efficacy in slowing the spread of the virus, staffing shortages due to extensive government regulation. Any changesfederal, state and local vaccine mandates, the impact of COVID-19 on the national and global economy, the effect of COVID-19 on the demand for our services, our ability to ensure the lawssafety of our patients and regulations governing our business, or to the interpretation and enforcement of those laws or regulations, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our industry is subject to extensive federal and state laws and regulations. See Part I, Item 1, “Our Regulatory Environment” for additional information on such laws and regulations. Federal and state laws and regulations impact how we conduct our business, the services we offer and our interactions with patients, our employees and the publicactions taken by federal, state and impose certain requirementslocal authorities to contain or treat the COVID-19 pandemic. In addition, the COVID-19 pandemic has resulted in widespread global supply chain disruptions to vendors including critical supply shortages, significant material cost inflation and extended lead times for items that are required for our operations. Any such interruptions could increase our costs and could limit the availability of products critical to our operations.
A shortage of qualified registered nursing staff and other clinicians, such as therapists and nurse practitioners, could materially impact our ability to attract, train and retain qualified personnel and could increase operating costs.
We compete for qualified personnel with other healthcare providers. Our ability to attract and retain clinicians depends on us such as:
licensureseveral factors, including our ability to provide these personnel with attractive assignments and certification;
adequacycompetitive salaries and qualitybenefits. We cannot be assured we will succeed in any of these areas. In addition, there are shortages of qualified health care services;
qualifications of health care and support personnel;
quality and safety of medical equipment;
confidentiality, maintenance and security issues associated with medical records and claims processing;
relationships with physicians and other referral sources;
operating policies and procedures;
emergency preparedness risk assessments and policies and procedures;
policies and procedures regarding employee relations;
addition of facilities and services;
billing for services;
requirements for utilization of services;
documentation required for billing and patient care; and
reporting and maintaining records regarding adverse events.
These laws and regulations, and their interpretations, are subject to change. Changespersonnel in existing laws and regulations, or their interpretations, or the enactment of new laws or regulations could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows by:
increasing our administrative and other costs;
increasing or decreasing mandated services;
causing us to abandon business opportunities we might have otherwise pursued;
decreasing utilization of services;
forcing us to restructure our relationships with referral sources and providers; or
requiring us to implement additional or different programs and systems.
Additionally, we are subject to various routine and non-routine reviews, audits and investigations by the Medicare and Medicaid programs and other federal and state governmental agencies, which have various rights and remedies against us if they establish that we have overcharged the programs or failed to comply with program requirements. Violation of the laws governing our operations, or changes in interpretations of those laws, could result in the imposition of fines, civil or criminal penalties, and the terminationsome of our rights to participate in federal and state-sponsored programs and/or the suspension or revocation of our licenses. If we become subject to material fines, or if other sanctions or other corrective actions are imposed on us, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
We face periodic and routine reviews, audits and investigations under our contracts with federal and state government agencies and private payors, and these audits could have adverse findings that may negatively impact our business.
markets. As a result, of our participation in the Medicare and Medicaid programs, we are subject to various governmental reviews, audits and investigations to verify our compliance with these programs and applicable laws and regulations. We also are subject to audits under various government programs, including the RAC, ZPIC, UPIC, PSC and MIC programs as well as in accordance with the requirements of our CIA, in which third party firms engaged by CMS or by the Company conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare program. Private pay sources also reserve the right to conduct audits. If billing errors are identified in the sample of reviewed claims, the billing error can be extrapolated to all claims filed which could result in a larger overpayment than originally identified in the sample of reviewed claims. Our costs to respond to and defend reviews, audits and investigations may be significant and could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Moreover, an adverse review, audit or investigation could result in:
required refunding or retroactive adjustment of amounts we have been paid pursuant to the federal or state programs or from private payors;
state or federal agencies imposing fines, penalties and other sanctions on us;
loss of our right to participate in the Medicare program, state programs, or one or more private payor networks; or
damage to our business and reputation in various markets.
These results could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
If a care center fails to comply with the conditions of participation in the Medicare program, that care center could be subjected to sanctions or terminated from the Medicare program.
Each of our care centers must comply with required conditions of participation in the Medicare program. If we fail to meet the conditions of participation at a care center, we may receive a noticeface higher costs of deficiency from the applicable state surveyor. If that care center then failsattracting clinicians and providing them with attractive benefit packages than we originally anticipated or we may have to institute an acceptable planutilize contract clinicians, both of correction to remediate the deficiency within the correction period provided by the state surveyor, that care center could be terminated from the Medicare program or subjected to alternative sanctions. CMS outlined its alternative sanction enforcement options for home health care centers through a regulation published in 2012; under the regulation, CMS may impose temporary management, direct a plan of correction, direct training or impose payment suspensions and civil monetary penalties, in each case, upon providers who fail to comply with the conditions of participation. Termination of one or more of our care centers from the Medicare program for failure to satisfy the program’s conditions of participation, or the imposition of alternative sanctions, could disrupt operations, require significant attention by management, or have a material adverse effect on our business and reputation and consolidated financial condition, results of operations and cash flows.
We are subject to federal and state laws that govern our financial relationships with physicians and other health care providers, including potential or current referral sources.
We are required to comply with federal and state laws, generally referred to as “anti-kickback laws,” that prohibit certain direct and indirect payments or other financial arrangements between health care providers that are designed to encourage the referral of patients to a particular provider for medical services. In addition to these anti-kickback laws, the Federal Government has enacted specific legislation, commonly known as the “Stark Law,” that prohibits certain financial relationships, specifically including ownership interests and compensation arrangements, between physicians (and the immediate family members of physicians) and providers of designated health services, such as home health care centers, to whom the physicians refer patients. Some of these same financial relationships are also subject to additional regulation by states. Although we believe we have structured our relationships with physicians and other potential referral sources to comply with these laws where applicable, we cannot assure you that courts or regulatory agencies will not interpret state and federal anti-kickback laws and/or the Stark Law and similar state laws regulating relationships between health care providers and physicians in ways that will adversely implicate our practices or that isolated instances of noncompliance will not occur. Violations of federal or state Stark or anti-kickback laws could lead to criminal or civil fines or other sanctions, including denials of government program reimbursement or even exclusion from participation in governmental health care programs, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
We may face significant uncertainty in the industry due to government In addition, if we expand our operations into geographic areas where health care reform.
The healthproviders historically have been unionized, or if any of our care industry in the United States iscenter employees become unionized, being subject to fundamental changes due to ongoing health care reform efforts and related political, economic and regulatory influences. In March 2010, comprehensive health care reform legislation was signed into law in the United States through the passage of PPACA. However, it is difficult to predict the full impact of PPACA due to the law’s complexity and phased-in effective dates, as well as our inability to foresee how CMS and other participants in the health care industry will respond to the choices available to them under the law.
PPACA makes a number of changes to Medicare payment rates and also calls for a rebasing of the home health payment system. These reimbursement changes are described in detail in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations: Overview – Economic and Industry Factors.”
Regulations implementing the provisions of the PPACA and related initiativescollective bargaining agreement may similarly increase our costs, decrease our revenues, expose us to expanded liability or require us to revise the ways in which we conduct our business.
PPACA also calls for a number of other changes to be made over time that will likely have a significantnegative impact upon the health care delivery system. For example, PPACA mandates creation of a home health value-based purchasing program, the development of quality measures, and decreases in home health reimbursement rates, including rebasing, as further described in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations: Overview – Economic and Industry Factors.”
In addition, various health care reform proposals similar to the federal reforms described above have also emerged at the state level, including in several states in which we operate. We cannot predict with certainty what health care initiatives, if any, will be implemented at the state level, or what the ultimate effect of federal health care reform or any future legislation or regulation may have on us or on our business and consolidated financial condition, results of operations and cash flows.
In addition to impacting our Medicare businesses, PPACA may also significantly affect our non-Medicare businesses. PPACA makes many changes to the underwriting and marketing practices of private payors. The resulting economic pressures could prompt these payors to seek to lower their rates of reimbursement for the services we provide. At this time, it is not possible to estimate what impact PPACA may have on our non-Medicare businesses.
Finally, efforts to repeal or substantially modify provisions of the PPACA continue in Congress. The ultimate outcomes of legislative efforts to repeal, substantially amend, eliminate or reduce funding for the PPACA is unknown. In addition to the prospect for legislative repeal or revision, the President and members of his administration hostile to the PPACA could seek to impose substantial changes upon the PPACA through administrative action, including revised regulation and other Executive Branch action. The effect of any major modification or repeal of the PPACA on our business, operations, or financial condition cannot be predicted, but could be materially adverse.
Risks Related to our Growth Strategies
Our growth strategy depends on our ability to acquire additional care centerstimely and integratesuccessfully recruit qualified personnel and operate these care centers effectively. Ifmay increase our growth strategy is unsuccessful oroperating costs. Generally, if we are not ableunable to successfully integrate newly acquired care centers into our existing operations, our businessattract and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
We may not be able to fully integrateretain clinicians, the operationsquality of our acquired businesses with our current business structure in an efficientservices may decline and cost-effective manner. Acquisitions involve significant riskswe could lose patients and uncertainties, including difficulties in recouping partial episode payments and other types of misdirected payments for services from the previous owners; difficulties integrating acquired personnel and business practices into our business; the potential loss of key employees, referral sources, or patients of acquired care centers; the delay in payments associated with change in ownership, control and the internal process of the Medicare fiscal intermediary; and the assumption of liabilities and exposure to unforeseen liabilities of acquired care centers. Further, the financial benefits we expect to realize from many of our acquisitions are largely dependent upon our ability to improve clinical performance, overcome regulatory deficiencies, improve the reputation of the acquired business in the community and control costs. The failure to accomplish any of these objectives or to effectively integrate any of these businesses could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
State efforts to regulate the establishment or expansion of health care providers could impair our ability to expand our operations.
Some states require health care providers (including skilled nursing facilities, hospice care centers, home health care centers and assisted living facilities) to obtain prior approval, known as a CON or POA, in order to commence operations. See Part I, Item 1, “Our Regulatory Environment” for additional information on CONs and POAs. If we are not able to obtain such approvals, our ability to expand our operations could be impaired, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Federal regulation may impair our ability to consummate acquisitions or open new care centers.
Changes in federal laws or regulations may materially adversely impact our ability to acquire care centers or open new start-up care centers. For example, the Social Security Act provides the Secretary with the authority to impose temporary moratoria on the enrollment of new Medicare providers, if deemed necessary to combat fraud, waste or abuse under government programs. While there are no active Medicare moratoria as of January 30, 2019, there can be no assurance that CMS will not adopt a moratorium on new providers in the future. Additionally, in 2010, CMS implemented and amended a regulation known as the “36 Month Rule” that is applicable to home health care center acquisitions. Subject to certain exceptions, the 36 Month Rule prohibits buyers of certain home health care centers - those that either enrolled in Medicare or underwent a change in majority ownership fewer than 36 months prior to the acquisition - from assuming the Medicare billing privileges of the acquired care center. The 36 Month Rule may restrict bona fide transactions and potentially block new investments in home health agencies. These changes in federal laws and regulations, and similar future changes, may further increase competition for acquisition targets and could have a material detrimental impact on our acquisition strategy.
Risks Related to our Operations
Because we are limited in our ability to control rates received for our services, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected if we are not able to maintain or reduce our costs to provide such services.
As Medicare is our primary payor and rates are established through federal legislation, we have to manage our costs of providing care to achieve a desired level of profitability. Additionally, non-Medicare rates are difficult for us to negotiate as such payors are under pressure to reduce their own costs. As a result, we manage our costs in order to achieve a desired level of profitability including, but not limited to, centralization of various processes, the use of technology and management of the number of employees utilized. If we are not able to continue to streamline our processes and reduce our costs, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
If we are unable to provide consistently high quality of care, our business will be adversely impacted.
Providing quality patient care is the cornerstone of our business. We believe that hospitals, physicians and other referral sources refer patients to us in large part because of our reputation for delivering quality care. Clinical quality is becoming increasingly important within our industry. Effective October 2012, Medicare began to impose a financial penalty upon hospitals that have excessive rates of patient readmissions within 30 days from hospital discharge. We believe this regulation provides a competitive advantage to home health providers who can differentiate themselves based upon quality, particularly by achieving low patient acute care hospitalization readmission rates and by implementing disease management programs designed to be responsive to the needs of patients served by referring hospitals. We are focused intently upon improving our patient outcomes, particularly our patient acute care hospitalization readmission rates. If we should fail to attain our goals regarding acute care hospitalization readmission rates and other quality metrics, we expect our ability to generate referrals would be adversely impacted, which could have a material adverse effect upon our business and consolidated financial condition, results of operations and cash flows.
Additionally, Medicare has established consumer-facing websites, Home Health Compare and Hospice Compare, that present data regarding our performance on certain quality measures compared to state and national averages. Failure to achieve or exceed these averages may affect our ability to generate referrals, which could have a material adverse effect upon our business and consolidated financial condition, results of operations and cash flows.
If we are unable to maintain relationships with existing patient referral sources, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
Our success depends on referrals from physicians, hospitals and other sources in the communities we serve and on our ability to maintain good relationships with existing referral sources. Our referral sources are not contractually obligated to refer patients to us and may refer their patients to other providers. Our growth and profitability depend, in part, on our ability to establish and maintain close working relationships with these patient referral sources and to increase awareness and acceptance of the benefits of home health and hospice care by our referral sources and their patients. Our loss of, or failure to maintain, existing relationships or our failure to develop new referral relationships could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Possible changes in the case mix of patients, as well as payor mix and payment methodologies, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our revenue is determined by a number of factors, including our mix of patients and the rates of payment among payors. Changes in the case mix of our patients, payment methodologies or the payor mix among Medicare, Medicaid and private payors could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our failure to negotiate favorable managed care contracts, or our loss of existing favorable managed care contracts, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
One of our strategies is to diversify our payor sources by increasing the business we do with managed care companies. We strive to put in place favorable contracts with managed care payors; however, we may not be successful in these efforts. Additionally, there is a risk that the favorable managed care contracts that we put in place may be terminated. Managed care contracts typically permit the payor to terminate the contract without cause, on very short notice, typically 60 days, which can provide payors leverage to reduce volume or obtain favorable pricing. Our failure to negotiate and put in place favorable managed care contracts, or our failure to maintain in place favorable managed care contracts, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our industry is highly competitive, with few barriers to entry in certain states.
There are few barriers to entry in home health and hospice markets that do not require a CON or POA. Our primary competition comes from local privately-owned, publicly-owned and hospital-owned health care providers. We compete based on the availability of personnel;personnel, the quality of services;services, expertise of visiting staff;staff, and in certain instances, on the price of our services. In addition, we compete with a number of non-profit organizations that finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to us. Increased competition in the future may limit our ability to maintain or increase our market share.
Further, the introduction of new and enhanced service offerings by others, in combination with industry consolidation and the development of strategic relationships by our competitors (including mergers of competitors with each other and with insurers), could cause a decline in revenue or loss of market acceptance of our services or make our services less attractive. Additionally, we compete with a number of non-profit organizations that can finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to us.
Managed care organizations and other third party payors continue to consolidate, which enhances their ability to influence the delivery of health care services. Consequently, the health care needs of patients in the United States are increasingly served by a smaller number of managed care organizations. These organizations generally enter into service agreements with a limited number of providers. Our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected if these organizations terminate us as a provider and/or engage our competitors as a preferred or exclusive provider. In addition, should private payors, including managed care payors, seek to negotiate additional discounted fee structures or the assumption by health care providers of all or a portion of the financial risk through prepaid capitation arrangements, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
If we are unable to react competitively to new developments, our operating results may suffer. State CON or POA laws often limit the ability of competitors to enter into a given market, are not uniform throughout the United States and are frequently the subject of efforts to limit or repeal such laws. If states remove existing CONs or POAs, we could face increased competition in these states. For example, New Hampshire repealed its CON laws in 2015, and legislation was recently introduced in South Carolina that would have limited the application of its CON program. There can be no assurances that other states will not seek to eliminate or limit their existing CON or POA programs, which could lead to increased competition in these states. Further, we cannot assure you that we will be able to compete successfully against current or future competitors, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
The success of our high acuity care segment depends on on our ability to enter into capitation and other forms of risk-based contracts with managed care health plans. If we are unable to maintain relationshipsunsuccessful in obtaining these contracts or if we are unsuccessful in managing costs associated with existing patient referral sources,risk-based contracts, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
Our success depends on referralsacquisition of Contessa not only established the foundation for our high acuity care segment, but it also added key infrastructure to enable us to more quickly and effectively enter into risk-based contracts with managed care health plans. Should our high acuity care joint venture partnerships not deliver sufficient perceived value to managed care health plans, those health plans may limit or forego opportunities to partner with us in expanded risk-based contracts. Additionally, assuming risk from physicians, hospitalsmanaged care health plans requires that the appropriate clinical and other sourcesoperating protocols be in place to actuarially assess eligible members and determine historical baseline healthcare expenditures, enroll eligible members into the communities we serveprogram, effectuate a clinically effective plan of care to treat those patients primarily in a home-based setting and on our ability to maintain good relationships with existing referral sources. Our referral sources are not contractually obligated to refer patients to us and may refer their patients to other providers. Our growth and profitability depends, in part, on our ability to establish and maintain close working relationships with these patient referral sources and to increase awareness and acceptancecoordinate care throughout various phases of the benefits of home healthmember’s treatment including proactive primary care and hospicepalliative care by our referral sourcesservices. Should we be ineffective in identifying and their patients. Our loss of,enrolling members into the program or failure to maintain, existing relationships or our failure to develop new referral relationshipsshould the clinical treatment plans we implement for enrolled members not result in reduced healthcare costs during the period in which those members are enrolled, we could incur significant additional costs under these contracts that exceed the revenues we receive. These negative outcomes could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
If we are unable to provide consistently high quality of care, our business will be adversely impacted.
Providing quality patient care is the cornerstone of our business. We believe that hospitals, physicians and other referral sources refer patients to us in large part because of our reputation for delivering quality care. Clinical quality is becoming increasingly important within our industry. Effective October 2012, Medicare began to impose a financial penalty upon hospitals that have excessive rates of patient readmissions within 30 days from hospital discharge. We believe this new regulation provides a competitive advantage to home health providers who can differentiate themselves based upon quality, particularly by achieving low patient acute care hospitalization readmission rates and by implementing disease management programs designed to be responsive to the needs of patients served by referring hospitals. We are focused intently upon improving our patient outcomes, particularly our patient acute care hospitalization readmission rates. If we should fail to attain our goals regarding acute care hospitalization readmission rates and other quality metrics, we expect our ability to generate referrals would be adversely impacted, which could have a material adverse effect upon our business and consolidated financial condition, results of operations and cash flows.
Additionally, Medicare has established consumer-facing websites, Home Health Compare and Hospice Compare, that present data regarding our performance on certain quality measures compared to state and national averages. If we should fail to achieve or exceed these averages, it may affect our ability to generate referrals, which could have a material adverse effect upon our business and consolidated financial condition, results of operations and cash flows.
Our business depends on our information systems. OurA cyber-attack, security breach or our inability to effectively integrate, manage and keep our information systems secure and operational could disrupt our operations.
Most healthcare providers, including all who accept commercial insurance, Medicare and Medicaid, must comply with the HIPAA regulations regarding the privacy and security of protected health information. All 50 states also maintain laws focused on the privacy, security and notification requirements with regard to personal information, including health information. The HIPAA regulations impose significant requirements on providers and our third party vendor business associates with regard to how such protected health information may be used and disclosed. Further, the regulations include extensive and complex requirements for providers to establish reasonable and appropriate administrative, technical and physical safeguards to ensure the confidentiality, integrity and availability of protected health information. Providers are obligated under HIPAA and state law to notify individuals and the government if personal information is compromised as defined by the respective law. In addition to federal regulators, state attorneys general are also enforcing information security breaches. All 50 states have breach notification laws. In addition to state laws regarding confidentiality of medical information, several states are now focused on expanding state privacy laws regarding personal information. HIPAA directs the Secretary of HHS to provide for periodic audits to ensure covered entities (and their business associates, as that term is defined under HIPAA) comply with the applicable HIPAA requirements.
Our networks, systems and devices store sensitive information, including intellectual property, proprietary business depends on effective, secureinformation and operationalpersonal information systems which include systems provided by external contractors and other service providers. Problems with, or the failure of our technologypatients, partners and systems or any system upgrades or programming changes associated with such technology and systems could have a material adverse effect on data capture, medical documentation, billing, collections, assessment of internal controls and management and reporting capabilities. Any such problems or failures and the costs incurred in correcting any such problems or failures, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Further, to the extent our external information technology contractors or other service providers become insolvent or fail to support the software or systems we have licensed from them, our operations could be materially adversely affected.
Our care centers also depend upon our information systems for accounting, billing, collections, risk management, quality assurance, human resources, payroll and other information. If we experience a reduction in the performance, reliability, or availability of our information systems, our operations and ability to produce timely and accurate reports could be materially adversely affected.
Our information systems and applications require continual maintenance, upgrading and enhancement to meet our operational needs. Our acquisition activity requires transitions and integration of various information systems. We regularly upgrade and expand our information systems’ capabilities. If we experience difficulties with the transition and integration of information systems or are unable to implement, maintain, or expand our systems properly, we could suffer from, among other things, operational disruptions, regulatory problems and increases in administrative expenses.
We may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches, including unauthorized access to patient data and personally identifiable information stored in our information systems, and the introduction of computer viruses or other malicious software programs to our systems. Our security measures may be inadequate to prevent security breaches and our business operations could be materially adversely affected by federal and state fines and penalties, legal claims or proceedings, cancellation of contracts and loss of patients if security breaches are not prevented.
employees. We have installed privacy protection systems and devices on our network, systems and point of care tablets in an attempt to prevent unauthorized access to information in our database.created, received, transmitted and maintained by us. However, our technology may fail to adequately secure the confidentialprotected health information and personally identifiablepersonal information we create, receive, transmit and maintain in our databases. In such circumstances, we may be held liable to our patients and regulators, which could result in fines, litigation or adverse publicity that could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Even if we are not held liable, any resulting negative publicity could harm our business and distract the attention of management.
Further,Our business depends on effective, secure and operational information systems which include systems provided by or hosted by external contractors, partners and other service providers. For example, our care centers depend upon our information systems and software for patient care, accounting, billing, collections, risk management, quality assurance, human resources, payroll and other information considered to be sensitive and/or confidential. We believe that our subcontractors and vendors take precautionary measures to prevent problems that could affect our business operations as a result of failure or disruption to their information systems or networks. However, there is no guarantee such efforts will be successful in preventing a system disruption or security incident. The occurrence of any information system failure or security incident at one of these third parties could result in interruptions, delays, breaches of protected health information and personal information, loss or corruption of data and cessations or interruptions in the availability of these systems and the information they create, receive, transmit or maintain. All of these events or circumstances, among others, could have an adverse effect on our business and consolidated financial condition, results of operations and cash flows, and they could harm our business reputation.
In general, all information systems including those we host or have hosted by third parties are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, human acts, break-ins and similarother intentional or unintentional events. Our business is also at risk from and may be materially impacted and/or disrupted by information security incidents, such as ransomware, malware, viruses, phishing, social engineering and other security events. Such incidents can
range from individual attempts to gain unauthorized access to information technology systems to more sophisticated security threats. These events can also result from internal compromises, such as human error or malicious acts, and can occur on our systems or on the systems of our partners and subcontractors.
Problems with, or the failure of, our technology and systems or any system upgrades or programming changes associated with such technology and systems could have a material adverse effect on our operations, patient care, data capture and integrity, medical documentation, billing, collections, assessment of internal controls and management and reporting capabilities. If we experience a reduction in the performance, reliability or availability of our information systems, our operations and ability to produce timely and accurate reports could be materially adversely affected.
Our information systems and applications also require continual maintenance, upgrading and enhancement to meet our operational and security needs. Our acquisition activity requires transitions and integration of various information systems. We regularly upgrade and expand our information systems’ capabilities. If we experience difficulties with the transition and integration of information systems or are unable to implement, maintain or expand our systems properly, we could suffer from, among other things, operational disruptions, regulatory investigations or audits and increases in administrative expenses.
As cyber threats continue to evolve, we may be required to expend significant capital and other resources to protect against the threat of security breaches or to mitigate and alleviate problems caused by security incidents, including unauthorized access to protected health information and personal information stored in our information systems and the introduction of computer viruses or other malicious software programs to our systems. Our security measures may be inadequate to prevent security breaches and our business operations and reputation could be materially adversely affected by federal and state fines and penalties, legal claims or proceedings, cancellation of contracts and loss of patients if security breaches are not prevented. The healthcare industry is currently a target for cyber criminals and is therefore experiencing increased attention on compliance with regulations designed to safeguard protected health information and mitigate cyber-attacks on entities. There are significant costs associated with a breach, including investigation costs, remediation and mitigation costs, notification costs, attorney fees, litigation and the potential for reputational harm and lost revenues due to a loss in confidence in the provider. We cannot predict the costs to comply with these laws or the costs associated with a potential breach of protected health information, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows, and our business reputation.
If we are subject to cyber-attacks or security breaches in the future, this could result in harm to patients; business interruptions and delays; the loss, misappropriation, corruption or unauthorized access of data; litigation and potential liability under privacy, security and consumer protection laws or other applicable laws; reputational damage and federal and state governmental inquiries. Any such problems or failures and the costs incurred in correcting any such problems or failures, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Further, to the extent our external information technology contractors or other service providers have their own cyber-attack, security event or information technology failure, become insolvent or fail to support the software or systems we have licensed from them, our operations could be materially adversely affected. A failure to restore our information systems after the occurrence of any of these events could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Because of the confidentialprotected health information we store and transmit, loss of electronically stored information for any reason could expose us to a risk of regulatory action and litigation and possible liability and loss.
We believe we have all the necessary licenses from third parties to use technology and software that we do not own. A third party could, however, allege that we are infringing its rights, which may deter our ability to obtain licenses on commercially reasonable terms from the third party, if at all, or cause the third party to commence litigation against us. In addition, we may find it necessary to initiate litigation to protect our trade secrets, to enforce our intellectual property rights and to determine the scope and validity of any proprietary rights of others. Any such litigation, or the failure to obtain any necessary licenses or other rights, could materially and adversely affect our business.
Possible changes in the case mix of patients, as well as payor mix and payment methodologies, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our revenue is determined by a number of factors, including our mix of patients and the rates of payment among payors. Changes in the case mix of our patients, payment methodologies or the payor mix among Medicare, Medicaid and private payors could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our failure to negotiate favorable managed care contracts, or our loss of existing favorable managed care contracts, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
One of our strategies is to diversify our payor sources by increasing the business we do with managed care companies, and we strive to put in place favorable contracts with managed care payors. However, we may not be successful in these efforts. Additionally, there is a risk that the favorable managed care contracts that we put in place may be terminated. Managed care contracts typically permit the payor to terminate the contract without cause, on very short notice, typically 60 days, which can provide payors leverage to reduce volume or obtain favorable pricing. Our failure to negotiate and put in place favorable managed care contracts, or our failure to maintain in place favorable managed care contracts, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
A write off of a significant amount of intangible assets or long-lived assets could have a material adverse effect on our consolidated financial condition and results of operations.
A significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant adverse change in the business climate, or slower growth rates could result in the need to perform an impairment
analysis under Accounting Standard Codification (“ASC”) Topic 350 “Intangibles – Goodwill and Other” in future periods in addition to our annual impairment test. If we were to conclude that a write down of goodwill is necessary, then we would record the appropriate charge, which could result in material charges that are adverse to our consolidated financial condition and results of operations. See Part II, Item 8, Note 4 – Goodwill and Other Intangible Assets, Net to our consolidated financial statements for additional information.
Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a substantial portion of our assets. Goodwill was approximately $329.5 million as of December 31, 2018 and if we make additional acquisitions, it is likely that we will record additional goodwill and intangible assets in our consolidated financial statements. We also have long-lived assets consisting of property and equipment and other identifiable intangible assets of $73.6 million as of December 31, 2018, which we review on a periodic basis as well as when events or circumstances indicate that the carrying amount of an asset may not be recoverable. If a determination that a significant impairment in value of our unamortized intangible assets or long-lived assets occurs, such determination could require us to write off a substantial portion of our assets. A write off of these assets could have a material adverse effect on our consolidated financial condition and results of operations.
A shortage of qualified registered nursing staff and other clinicians, such as therapists and nurse practitioners, could materially impact our ability to attract, train and retain qualified personnel and could increase operating costs.
We compete for qualified personnel with other healthcare providers. Our ability to attract and retain clinicians depends on several factors, including our ability to provide these personnel with attractive assignments and competitive salaries and benefits. We cannot be assured we will succeed in any of these areas. In addition, there are shortages of qualified health care personnel in some of our markets. As a result, we may face higher costs of attracting clinicians and providing them with attractive benefit packages than we originally anticipated which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. In addition, if we expand our operations into geographic areas where health care providers historically have been unionized, or if any of our care center employees become unionized, being subject to a collective bargaining agreement may have a negative impact on our ability to timely and successfully recruit qualified personnel and may increase our operating costs. Generally, if we are unable to attract and retain clinicians, the quality of our services may decline and we could lose patients and referral sources, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our insurance liability coverage may not be sufficient for our business needs.
As a result of operating in the home health industry, our business entails an inherent risk of claims, losses and potential lawsuits alleging incidents involving our employees that are likely to occur in a patient’s home. We maintain professional liability insurance to provide coverage to us and our subsidiaries against these risks. However, we cannot assure you claims will not be made in the future in excess of the limits of our insurance, nor can we assure you that any such claims, if successful and in excess of such limits, will not have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Our insurance coverage also includes fire, property damage, cyber security and general liability with varying limits. We cannot assure you that the insurance we maintain will satisfy claims made against us or that insurance
coverage will continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms. Any claims made against us, regardless of their merit or eventual outcome, could damage our reputation and business.
We may be subject to substantial malpractice or other similar claims.
The services we offer involve an inherent risk of professional liability and related substantial damage awards. As of February 22, 2019,18, 2022, we have approximately 21,000 employees (11,000(10,900 home health, 6,0006,500 hospice, 3,0001,900 personal care, 200 high acuity care and 1,000 corporate employees). In addition, we employ direct care workers on a contractual basis to support our existing workforce. Due to the nature of our business, we, through our employees and caregivers who provide services on our behalf, may be the subject of medical malpractice claims. A court could find these individuals should be considered our agents, and, as a result, we could be held liable for their acts or omissions. We cannot predict the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business or reputation or on our ability to attract and retain patients and employees. While we maintain malpractice liability coverage that we believe is appropriate given the nature and breadth of our operations, any claims against us in excess of insurance limits, or multiple claims requiring us to pay deductibles, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
If we are unable to maintain our corporate reputation, our business may suffer.
Our success depends on our ability to maintain our corporate reputation, including our reputation for providing quality patient care and for compliance with Medicare requirements and the other laws to which we are subject. Adverse publicity surrounding
any aspect of our business, including the death or disability of any of our patients due to our failure to provide proper care, or due to any failure on our part to comply with Medicare requirements or other laws to which we are subject, could negatively affect our Company’s overall reputation and the willingness of referral sources to refer patients to us.
We depend on the servicesA write off of our executive officers and other key employees.
We depend greatly on the effortsa significant amount of our executive officers and other key employees to manage our operations. The lossintangible assets or departure of any one of these executives or other key employeeslong-lived assets could have a material adverse effect on our business and consolidated financial condition and results of operationsoperations.
A significant and sustained decline in our stock price and market capitalization, a significant decline in our expected future cash flows.flows, a significant adverse change in the business climate or slower growth rates could result in the need to perform an impairment analysis under Accounting Standards Codification (“ASC”) Topic 350 “Intangibles – Goodwill and Other” in future periods in addition to our annual impairment test. If we were to conclude that a write down of goodwill is necessary, then we would record the appropriate charge, which could result in material charges that are adverse to our consolidated financial condition and results of operations. See Part II, Item 8, Note 5 – Goodwill and Other Intangible Assets, Net to our consolidated financial statements for additional information.
Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a substantial portion of our assets. Goodwill was $1.2 billion as of December 31, 2021 and if we make additional acquisitions, it is likely that we will record additional goodwill and intangible assets in our consolidated financial statements. We also have long-lived assets consisting of property and equipment and other identifiable intangible assets of $129.6 million as of December 31, 2021, which we review on a periodic basis as well as when events or circumstances indicate that the carrying amount of an asset may not be recoverable. If a determination that a significant impairment in value of our unamortized intangible assets or long-lived assets occurs, such determination could require us to write off a substantial portion of our assets. A write off of these assets could have a material adverse effect on our consolidated financial condition and results of operations.
Our operations could be impacted by natural disasters.disasters and climate change.
The occurrence of natural disasters and extreme weather conditions, such as hurricanes, tornadoes, wildfires, earthquakes and floods, in the markets in which we operate could not only impact the day-to-day operations of our care centers, but could also disrupt our relationships with patients, employees and referral sources located in the affected areas and, in the case of our corporate office, our ability to provide administrative support services, including billing and collection services. In addition, any episode of care that is not completed due to the impact of a natural disaster will generally result in lower revenue for the episode. For example, ourOur corporate office and a number of our care centers are located in the southeastern United States and the Gulf Coast Region, increasing our exposure to hurricanes and flooding. FutureMoreover, global climate change could increase the intensity of individual hurricanes or the number of hurricanes that occur each year. Even if our facilities are not directly damaged, we may experience considerable disruptions in our operations due to property damage or electrical outages experienced in storm-affected areas by our care givers, payors, vendors and others. Additionally, long-term adverse weather conditions, whether caused by global climate change or otherwise, could cause an outmigration of people from the communities where our care centers are located. If any of the circumstances described above occur, there could be a harmful effect on our business and our results of operations could be adversely affected.
Risks Related to our Growth Strategies
Our growth strategy depends on our ability to acquire additional care centers and integrate and operate these care centers effectively, make investments and enter into joint ventures and other natural disastersstrategic relationships. If our growth strategy is unsuccessful or we are not able to successfully integrate newly acquired care centers into our existing operations, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
We may not be able to fully integrate the operations of our acquired businesses with our current business structure in an efficient and cost-effective manner. Acquisitions, investments, joint ventures or strategic relationships involve significant risks and uncertainties, including:
•Difficulties in recouping partial episode payments and other types of misdirected payments for services from the previous owners in an acquisition;
•Difficulties integrating acquired personnel and business practices into our business;
•The potential loss of key employees, referral sources or patients of acquired care centers;
•The delay in payments associated with change in ownership, control and the internal processes of the Medicare Administrative Contractors;
•The assumption of liabilities and exposure to unforeseen liabilities of acquired care centers;
•The incurrence or assumption of significant debt, which could also cause a deterioration of our credit ratings, result in increased borrowing costs and interest expense and diminish our future access to the capital markets;
•Diverging interests from those of our joint venture partners or other strategic partners - we may not be able to direct the management and operations of the joint venture or other strategic relationship in the manner we believe is most appropriate, exposing us to additional risk;
•Variability in operating results which could cause our financial results to differ from our own expectations or the investment community’s expectations in any given period, or over the long-term; and
•Pre-closing and post-closing earnings charges which could adversely impact operating results in any given period.
As a result of our acquisitions and investments, we have recorded significant goodwill and other assets on our balance sheet. If we are not able to realize the value of these assets, or if the fair value of our investments declines, we may be required to record impairment charges which could have a material adverse effect on our consolidated financial condition and results of operations.
Further, the financial benefits we expect to realize from many of our acquisitions are largely dependent upon our ability to improve clinical performance, overcome regulatory deficiencies, improve the reputation of the acquired business in the community and control costs. The failure to accomplish any of these objectives or to effectively integrate any of these businesses could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and as a result we may face unexpected liabilities.
Certain of the acquisition agreements by which we have acquired companies require the former owners to indemnify us against certain liabilities related to the operation of the acquired company before we acquired it. In most of these agreements, however, the liability of the former owners is limited, and certain former owners may be unable to meet their indemnification responsibilities. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result, we may face unexpected liabilities that could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
State efforts to regulate the establishment or expansion of health care providers could impair our ability to expand our operations.
Some states require health care providers (including skilled nursing facilities, hospice care centers, home health care centers and assisted living facilities) to obtain prior approval, known as a CON or POA, in order to commence operations. See Part I, Item 1, “Our Regulatory Environment” for additional information on CONs and POAs. If we are not able to obtain such approvals, our ability to expand our operations could be impaired, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Federal regulation may impair our ability to consummate acquisitions or open new care centers.
Changes in federal laws or regulations may materially adversely impact our ability to acquire care centers or open new start-up care centers. For example, the Social Security Act provides the Secretary with the authority to impose temporary moratoria on the enrollment of new Medicare providers, if deemed necessary to combat fraud, waste or abuse under government programs. While there are no active Medicare moratoria, there can be no assurance that CMS will not adopt a moratorium on new providers in the future. Additionally, in 2010, CMS implemented and amended a regulation known as the “36 Month Rule” that is applicable to home health care center acquisitions. Subject to certain exceptions, the 36 Month Rule prohibits buyers of certain home health care centers - those that either enrolled in Medicare or underwent a change in majority ownership fewer than 36 months prior to the acquisition - from assuming the Medicare billing privileges of the acquired care center. The 36 Month Rule may restrict bona fide transactions and potentially block new investments in home health agencies. These changes in federal laws and regulations, and similar future changes, may further increase competition for acquisition targets and could have a material detrimental impact on our acquisition strategy.
Divestitures or other dispositions could negatively impact our business, and contingent liabilities from businesses that we have sold could adversely affect our business and consolidated financial condition, results of operations and cash flows.
We continually assess the strategic fit of our existing businesses and may divest, spin-off or otherwise dispose of businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment. These transactions pose risks and challenges that could negatively impact our business and financial statements. For example, when we decide to sell or otherwise dispose of a business or assets, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all, and even after reaching a definitive agreement to sell or dispose a business, the sale is typically subject to satisfaction of pre-closing conditions which may not become satisfied. In addition, divestitures or other dispositions may dilute our earnings per share, have other adverse tax, financial and accounting impacts and distract management, and disputes may arise with buyers. In addition, we may retain responsibility for and/or agree to indemnify buyers against some known and unknown contingent liabilities related to certain businesses or assets we sell or dispose. Any of these conditions or liabilities may negatively impact our results of operations and cash flows.
Risks Related to Laws and Government Regulations
We are subject to extensive government regulation. Any changes to the laws and regulations governing our business, or to the interpretation and enforcement of those laws or regulations, could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Our industry is subject to extensive federal and state laws and regulations. See Part I, Item 1, “Our Regulatory Environment” for additional information on such laws and regulations. Federal and state laws and regulations impact how we conduct our business, the services we offer and our interactions with patients, our employees and the public and impose certain requirements on us such as:
•licensure and certification;
•adequacy and quality of health care services;
•qualifications of health care and support personnel;
•quality and safety of medical equipment;
•confidentiality, maintenance and security associated with medical records and claims processing;
•relationships with physicians and other referral sources;
•operating policies and procedures;
•emergency preparedness risk assessments and policies and procedures;
•policies and procedures regarding employee relations;
•addition of facilities and services;
•billing for services;
•requirements for utilization of services;
•documentation required for billing and patient care; and
•reporting and maintaining records regarding adverse events.
These laws and regulations, and their interpretations, are subject to change. Changes in existing laws and regulations, or their interpretations, or the enactment of new laws or regulations could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows by:
•increasing our administrative and other costs;
•increasing or decreasing mandated services;
•causing us to abandon business opportunities we might have otherwise pursued;
•decreasing utilization of services;
•forcing us to restructure our relationships with referral sources and providers; or
•requiring us to implement additional or different programs and systems.
Additionally, we are subject to various routine and non-routine reviews, audits and investigations by the Medicare and Medicaid programs and other federal and state governmental agencies, which have various rights and remedies against us if they establish that we have overcharged the programs or failed to comply with program requirements. We are also subject to potential lawsuits under the federal False Claims Act and other federal and state whistleblower statutes designed to combat fraud and abuse in our industry. Violation of the laws governing our operations, or changes in interpretations of those laws, could result in the imposition of fines, civil or criminal penalties, and the termination of our rights to participate in federal and state-sponsored programs and/or the suspension or revocation of our licenses. If we become subject to material fines, or if other sanctions or other corrective actions are imposed on us, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
We face periodic and routine reviews, audits and investigations under our contracts with federal and state government agencies and private payors, and these audits could have adverse findings that may negatively impact our business.
As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental reviews, audits and investigations to verify our compliance with these programs and applicable laws and regulations. We also are subject to audits under various federal and state government programs in which third party firms engaged by CMS, including the Recovery Audit Contractors (“RACs”), Zone Program Integrity Contractors (“ZPICs”), Uniform Program Integrity Contractors ("UPICs"), Program Safeguard Contractors (“PSCs”), Medicaid Integrity Contractors (“MICs”) and Supplemental Medical Review Contractors (“SMRCs”), conduct extensive reviews of claims data and medical and other records to identify potential improper payments under the Medicare program. The Office of Inspector General-HHS ("OIG") also conducts audits and has included various home health agency and hospice payment and quality issues in its current workplan. Additionally, private pay sources reserve the right to conduct audits. If billing errors are identified in the sample of reviewed claims, the billing error can be extrapolated to all claims filed which could result in a larger overpayment than originally identified in the sample of reviewed claims. Our costs to respond to and defend reviews, audits and investigations may be significant and could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. Moreover, an adverse review, audit or investigation could result in:
•required refunding or retroactive adjustment of amounts we have been paid pursuant to the federal or state programs or from private payors;
•state or federal agencies imposing fines, penalties and other sanctions on us;
•loss of our right to participate in the Medicare program, state programs or one or more private payor networks; or
•damage to our business and reputation in various markets.
These results could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
If a care center fails to comply with the conditions of participation in the Medicare program, that care center could be subjected to sanctions or terminated from the Medicare program.
Each of our care centers must comply with required conditions of participation in the Medicare program. If we fail to meet the conditions of participation at a care center, we may receive a notice of deficiency from the applicable state surveyor. If that care center then fails to institute an acceptable plan of correction to remediate the deficiency within the correction period provided by the state surveyor, that care center could be terminated from the Medicare program or subjected to alternative sanctions. CMS may impose temporary management, direct a plan of correction, direct training or impose payment suspensions and civil monetary penalties, in each case, upon providers who fail to comply with the conditions of participation. Termination of one or more of our care centers from the Medicare program for failure to satisfy the program’s conditions of participation, or the imposition of alternative sanctions, could disrupt operations, require significant attention by management or have a material adverse effect on our business and reputation and consolidated financial condition, results of operations and cash flows.
We are subject to federal and state laws that govern our financial relationships with physicians and other health care providers, including potential or current referral sources.
We are required to comply with federal and state laws, generally referred to as “anti-kickback laws,” that prohibit certain direct and indirect payments or other financial arrangements between health care providers that are designed to encourage the referral of patients to a particular provider for medical services. In addition to these anti-kickback laws, the Federal Government has enacted specific legislation, the physician self-referral prohibition, commonly known as the “Stark Law,” that prohibits certain financial relationships, specifically including ownership interests and compensation arrangements, between physicians (and the immediate family members of physicians) and providers of designated health services, such as home health care centers, to whom the physicians refer patients. Some of these same financial relationships are also subject to additional regulation by states. Although we believe we have structured our relationships with physicians and other actual or potential referral sources to comply with these laws where applicable, the laws are complex. It is possible that courts or regulatory agencies may interpret state and federal anti-kickback laws and/or the Stark Law and similar state laws regulating relationships between health care providers and physicians in ways that will adversely implicate our practices or that isolated instances of noncompliance may occur. Violations of federal or state Stark or anti-kickback laws could lead to criminal or civil fines or other sanctions, including repayment of federal health care program payments related to these arrangements, denials of government program reimbursement or even exclusion from participation in governmental health care programs, which could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. It is possible that a claim that results from a kickback or is made in violation of the Stark Law also may render it false or fraudulent, creating further potential liability under the federal False Claims Act, discussed above.
We may face significant uncertainty in the industry due to government health care reform.
The health care industry in the United States is subject to fundamental changes due to ongoing health care reform efforts and related political, economic and regulatory influences. In March 2010, comprehensive health care reform legislation was signed into law in the United States through the passage of PPACA, which called for a number of changes to Medicare payment rates and the rebasing of the home health payment system to be made over time. PPACA has had and will likely continue to have a significant impact upon the health care delivery system. Implementation of the regulations and related initiatives as required by PPACA may increase our costs, decrease our revenues, expose us to expanded liability or require us to revise the ways in which we conduct our business.
Various health care reform proposals similar to the federal reforms have also emerged at the state level, including in several states in which we operate. We cannot predict with certainty what health care initiatives, if any, will be implemented at the state level, or what the ultimate effect of federal health care reform or any future legislation or regulation may have on us or on our business and consolidated financial condition, results of operations and cash flows.
In addition to impacting our Medicare businesses, PPACA may also significantly affect our non-Medicare business. PPACA makes many changes to the underwriting and marketing practices of private payors. The resulting economic pressures could prompt these payors to seek to lower their rates of reimbursement for the services we provide. As a result, PPACA may continue to have residual effects on our non-Medicare business.
Finally, efforts to repeal or substantially modify provisions of the PPACA continue in Congress and in the courts. The ultimate outcomes of legislative efforts to repeal, substantially amend, eliminate or reduce funding for the PPACA is unknown. In addition to the prospect for legislative repeal or revision, administrative action, including revised regulation and other Executive Branch action, could impose changes on how the law is applied. The effect of any major modification or repeal of the PPACA on our business, operations or financial condition cannot be predicted, but could be materially adverse.
Risks Related to Liquidity
Delays in payment may cause liquidity problems.
Our business is characterized by delays from the time we provide services to the time we receive payment for these services. If we have difficulty in obtaining documentation, such as physician orders, experience information system problems or experience other issues that arise with Medicare or other payors, we may encounter additional delays in our payment cycle.
In addition, timingTiming delays in billings and collections may cause working capital shortages. Working capital management, including prompt and diligent billing and collection, is an important factor in achieving our financial results and maintaining liquidity. It is possible that delays in obtaining documentation support such as physician orders, system problems, Medicare or other providerpayor issues or industry trends may extend our collection period, which may materially adversely affect our working capital, and our working capital management procedures may not successfully mitigate this risk. CMS's inability to have its systems ready to properly reimburse home health providers under the new PDGM could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
On May 31,29, 2018, CMS issued a notice indicating its intention to re-launch a home health agency ("HHA") pre-claim review demonstration project. Now called the Review Choice Demonstration for Home Health Services ("RCD"), the revised demonstration will give HHAshome health agencies in the demonstration states 3three initial options: pre-claim review of all claims, post-payment review of all claims, or minimal post-payment review with a 25% payment reduction for all home health services. The demonstration initially will apply to HHA providers in Florida, Illinois, North Carolina, Ohio, and Texas, with the option to expand after 5 years to other states in the Medicare Administrative Contractor Jurisdiction M (Palmetto). As of December 2018, CMS is continuing the process for Paperwork Reduction Act ("PRA") approval for the restarted program. After PRA approval is received, CMS will provide a start dateReduced review options are available for home health agencies in Illinois and instructions on the choice selection process. CMS will later provide notice before phasing in the other demonstration states: Ohio, North Carolina, Florida, and Texas.that demonstrate compliance. Compliance with this process could result in increased administrative costs or delays in reimbursement for home health services in states subject to the demonstration.
Additionally, our hospice operations may experience payment delays. We have experienced payment delays when attempting to collect funds from state Medicaid programs in certain instances. Delays in receiving payments from these programs may also materially adversely affect our working capital.
Changes in units of payment for home health agencies could reduce our Medicare home health reimbursement levels.
As required byEffective January 1, 2020, CMS implemented a revised case-mix adjustment methodology, the Bipartisan Budget Act of 2018, the PDGM willPatient-Driven Groupings Model ("PDGM"). Although this change the unit of payment for home health agencies from a 60-day episode of care to 30-day periods of care. This change is proposedwas to be implemented January 1, 2020 in aan overall budget neutral manner. Thus,manner, the move to the PDGM is not supposed to result in lower net reimbursement. However,ultimate impact varied by provider based on factors including patient mix and admission source. Additionally, CMS has made assumptions about behavioral changes which have not been finalized, for example that home health agencies will change their documentation and coding practices and would putresulted in a 4.36% reduction to reimbursement. Accordingly, the highest paying diagnosis code as the principal diagnosis codeadoption of PDGM had a negative impact on our Medicare revenue per episode in order to have a 30-day period be placed into a higher-paying clinical group. CMS may take into account expected behavioral effects of policy changes related to the implementation of the proposed rule, resulting in lower reimbursement levels in some cases. Accordingly, the
implementation of the PDGM2020. Payment updates could negatively impact our 2020 raterates of reimbursement in future years and have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows. See Part I, Item 1, “Our Regulatory Environment -– Home Health Payment Reform” for additional information on the PDGM.information.
The volatility and disruption of the capital and credit markets and adverse changes in the United States and global economies could impact our ability to access both available and affordable financing, and without such financing, we may be unable to achieve our objectives for strategic acquisitions and internal growth.
While we intend to finance strategic acquisitions and internal growth with cash flows from operations and borrowings under our revolving credit facility, we may require sources of capital in addition to those presently available to us. Uncertainty in the capital and credit markets may impact our ability to access capital on terms acceptable to us (i.e. at attractive/affordable rates) or at all, and this may result in our inability to achieve present objectives for strategic acquisitions and internal growth. Further, in the event we need additional funds, and we are unable to raise the necessary funds on acceptable terms, our business and consolidated financial condition, results of operations and cash flows could be materially adversely affected.
Our indebtedness could impact our financial condition and impair our ability to fulfill other obligations.
As of December 31, 2018,2021, we had total outstanding indebtedness of approximately $8.6$448.0 million. Our level of indebtedness could have a material adverse effect on our business and consolidated financial position, results of operations and cash flows and could impair our ability to fulfill other obligations in several ways, including:
•it could require us to dedicate a portion of our cash flow from operations to payments on our indebtedness, which could reduce the availability of cash flow to fund acquisitions, start-ups, working capital, capital expenditures and other general corporate purposes;
•it could limit our ability to borrow money or sell stock for working capital, capital expenditures, debt service requirements and other purposes;
•it could limit our flexibility in planning for, and reacting to, changes in our industry or business;
•it could make us more vulnerable to unfavorable economic or business conditions; and
•it could limit our ability to make acquisitions or take advantage of other business opportunities.
In the event we incur additional indebtedness, the risks described above could increase.
The agreements governing our indebtedness contain various covenants that limit our discretion in the operation of our business and our failure to satisfy requirements in these agreements could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
The agreements governing our indebtedness (the “Debt Agreements”) contain certain obligations, including restrictive covenants that require us to comply with or maintain certain financial covenants and ratios and restrict our ability to:
•incur additional debt;
•redeem or repurchase stock, pay dividends or make other distributions;
•make certain investments;
•create liens;
•enter into transactions with affiliates;
•make acquisitions;
•enter into joint ventures;
•merge or consolidate;
•invest in foreign subsidiaries;
•amend acquisition documents;
•enter into certain swap agreements;
•make certain restricted payments;
•transfer, sell or leaseback assets; and
•make fundamental changes in our corporate existence and principal business.
Our Debt Agreements also limit our ability to reinvest the net cash proceeds from asset sales or subordinated debt issuances in certain circumstances. For example, in the event we or any of our subsidiaries receive more than $5 million in net cash proceeds from an asset sale, disposition or involuntary disposition, our Debt Agreements require us to prepay our term loan facility and revolving credit facility with all of such net cash proceeds, unless we elect to reinvest the net cash proceeds in fixed or capital assets related to our business.
In addition, events beyond our control could affect our ability to comply with the Debt Agreements. Any failure by us to comply with or maintain all applicable financial covenants and ratios and to comply with all other applicable covenants could result in an event of default with respect to the Debt Agreements. If we are unable to obtain a waiver from our lenders in the event of any non-compliance, our lenders could accelerate the maturity of any outstanding indebtedness and terminate the commitments to make further extensions of credit (including our ability to borrow under our revolving credit facility). Any failure to comply with these covenants could have a material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
The potential cessation or modification of the London Inter-Bank Offered Rate (“LIBOR”) may increase our interest expense or otherwise adversely affect us.
Our credit facility carries a floating interest rate which is tied to the Eurodollar rate (i.e., LIBOR) and the prime rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR quotations after 2021. However, on November 30, 2020, ICE Benchmark Administration (“IBA”) indicated that it would consult on its intention to cease publication of most USD LIBOR tenors beyond June 30, 2023. On March 5, 2021, the IBA announced that it will cease the publication of one week and two-month U.S. Dollar LIBOR and all non-USD (GBP, EUR, CHF and JPY) LIBOR settings at the end of December 2021, but will extend the publication of the remaining U.S. Dollar LIBOR settings (overnight and one, three, six and twelve month U.S. Dollar LIBOR) until the end of June 2023. U.S. bank regulators have advised banks to cease writing, subject to certain limited exceptions, new U.S. Dollar LIBOR contracts by the end of 2021, and the New York Federal Reserve’s Alternative Reference Rates Committee (“ARCC”) has identified the Secured Overnight Financing Rate (“SOFR”) as the recommended risk-free alternative rate for USD LIBOR. The extended cessation date for most USD LIBOR tenors will allow for more time for existing legacy USD LIBOR contracts to mature and provide additional time to continue to prepare for the transition from LIBOR. At this time, it is not possible to predict the effect any discontinuance, modification or other reforms to LIBOR, or the establishment of alternative reference rates such as SOFR, or any other reference rate, will have on the Company’s financial arrangements.
Risks Related to Ownership of Our Common Stock
The price of our common stock may be volatile.volatile, which could lead to securities litigation brought against us or cause investors to lose the value of their investment.
The price at which our common stock trades may be volatile. The stock market from time to time experiences significant price and volume fluctuations that impact the market prices of securities, particularly those of health care companies. The market price of our common stock may be influenced by many factors, including:
•our operating and financial performance;
•variances in our quarterly financial results compared to research analyst expectations;
•the depth and liquidity of the market for our common stock;
•future purchases or sales of common stock by the Company or large stockholders or the perception that such purchases or sales could occur;
•investor, analyst and media perception of our business and our prospects;
•developments relating to litigation or governmental investigations;
•changes or proposed changes in health care laws or regulations or enforcement of these laws and regulations, or announcements relating to these matters;
•departure of key personnel;
•changes in the Medicare, Medicaid and private insurance payment rates for home health and hospice;
•the operating and stock price performance of other comparable companies;
•announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; or
•market and business conditions related to COVID-19;
•general economic and stock market conditions.conditions; or
•other factors described in this "Risk Factors" section and elsewhere in this Annual Report on Form 10-K.
In addition, the stock market in general, and the NASDAQ Global Select Market (“NASDAQ”) in particular, has experienced price and volume fluctuations that we believe have often been unrelated or disproportionate to the operating performance of health care provider companies. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. SecuritiesAs a result, investors may not be able to sell their common stock at or above the purchase price. In addition, securities class-action cases have often been brought against companies following periods of volatility in the market price of their securities. Such litigation, if instituted against us, could result in substantial costs and a diversion of management's attention and resources.
The activities of short sellers could reduce the price or prevent increases in the price of our common stock. “Short sale” is defined as the sale of stock by an investor that the investor does not own. Typically, investors who sell short believe the price of the stock will fall, and anticipate selling shares at a higher price than the purchase price at which they will buy the stock. As of December 31, 2018,2021, investors held a short position of approximately 1.9one million shares of our common stock which represented 6.1%3% of our outstanding common stock. The anticipated downward pressure on our stock price due to actual or anticipated sales of our stock by some institutions or individuals who engage in short sales of our common stock could cause our stock price to decline.
Sales of substantial amounts of our common stock or the availability of those shares for future sale, could materially impact our stock price and limit our ability to raise capital.
The following table presents information about our outstanding common and preferred stock and our outstanding securities exercisable for or convertible into shares of common stock:
|
| | |
| As of December 31, 2018 |
Common stock outstanding | 31,973,505 |
|
Preferred stock outstanding | — |
|
Common stock available under 2018 Omnibus Incentive Compensation Plan | 2,350,831 |
|
Stock options outstanding | 833,315 |
|
Stock options exercisable | 462,845 |
|
Non-vested stock outstanding | 14,904 |
|
Non-vested stock units outstanding | 467,077 |
|
If we were to sell substantial amounts of our common stock in the public market or if there was a public perception that substantial sales could occur, the market price of our common stock could decline. These sales or the perception of substantial future sales may also make it difficult for us to sell common stock in the future to raise capital.
Our Board of Directors may use anti-takeover provisions or issue stock to discourage a change of control.
Our certificate of incorporation currently authorizes us to issue up to 60,000,000 shares of common stock and 5,000,000 shares of undesignated preferred stock. Our Board of Directors may cause us to issue additional stock to discourage an attempt to obtain control of our company. For example, shares of stock could be sold to purchasers who might support our Board of Directors in a control contest or to dilute the voting or other rights of a person seeking to obtain control. In addition, our Board of Directors could cause us to issue preferred stock entitling holders to vote separately on any proposed transaction, convert preferred stock into common stock, demand redemption at a specified price in connection with a change in control or exercise other rights designed to impede a takeover.
The issuance of additional shares may, among other things, dilute the earnings and equity per share of our common stock and the voting rights of common stockholders.
We have implemented other anti-takeover provisions or provisions that could have an anti-takeover effect, including advance notice requirements for director nominations and stockholder proposals, no cumulative voting for directors, a requirement that director vacancies are filled by remaining directors (including vacancies resulting from removal), and the number of directors is fixed by the Board of Directors, and the Board of Directors can increase or decrease the size of the Board of Directors without stockholder approval (within the range set forth in our Certificate of Incorporation and Bylaws). These provisions, and others that our Board of Directors may adopt hereafter, may discourage offers to acquire us and may permit our Board of Directors to choose not to entertain offers to purchase us, even if such offers include a substantial premium to the market price of our stock. Therefore, our stockholders may be deprived of opportunities to profit from a salechange of control.
Our Bylaws designate the Court of Chancery of the State of Delaware or, if the Court of Chancery does not have jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against us and our directors, officers, employees and stockholders.
Our Bylaws provide that unless we otherwise consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware or, if the Court of Chancery does not have jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of us, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or our Certificate of Incorporation or Bylaws or any action asserting a claim governed by the internal affairs doctrine. This provision would not apply to claims brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any other claim for which the federal courts have exclusive jurisdiction.
In addition, our Bylaws provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended (the “Securities Act”), unless we consent in writing to the selection of an alternative forum.
These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors, officers, employees and agents.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our executive office is located in Nashville, Tennessee in a leased property consisting of 25,097 square feet; our corporate headquarters is located in Baton Rouge, Louisiana in a leased property consisting of 85,955 square feet. We believe we have adequate space to accommodate our corporate staff located in these locations for the foreseeable future.
In addition to our executive office and corporate headquarters, we also lease facilities for our home health, hospice and personal-care care centers.centers and our high acuity care joint ventures and administrative office. Generally, theseour leases have an initial term of five years, with a three year early termination option, but range from one to seventen years. Most of theseour leases also contain an option to extend the lease period.early termination options and renewal options. The following table shows the location of our 323331 Medicare-certified home health care centers, 84175 Medicare-certified hospice care centers, and 1214 personal-care care centers and 8 high acuity care joint ventures at December 31, 2018:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| State | | Home Health | | Hospice | | Personal Care | | High Acuity Care | | State | | Home Health | | Hospice | | Personal Care | | High Acuity Care |
| Alabama | | 30 | | | 10 | | | — | | | — | | | Nebraska | | 1 | | | 7 | | | — | | | — | |
| Arizona | | 3 | | | 1 | | | — | | | 1 | | | New Hampshire | | 3 | | | 4 | | | — | | | — | |
| Arkansas | | 5 | | | — | | | — | | | — | | | New Jersey | | 2 | | | 7 | | | — | | | — | |
| California | | 4 | | | 2 | | | — | | | — | | | New York | | 5 | | | — | | | — | | | 1 | |
| Connecticut | | 1 | | | 1 | | | — | | | — | | | North Carolina | | 9 | | | 7 | | | — | | | — | |
| Delaware | | 2 | | | 2 | | | — | | | — | | | Ohio | | 1 | | | 5 | | | — | | | — | |
| Florida | | 18 | | | 6 | | | 1 | | | — | | | Oklahoma | | 6 | | | 1 | | | — | | | — | |
| Georgia | | 60 | | | 9 | | | — | | | — | | | Oregon | | 3 | | | 1 | | | — | | | — | |
| Illinois | | 3 | | | 1 | | | — | | | — | | | Pennsylvania | | 7 | | | 22 | | | — | | | 2 | |
| Indiana | | 6 | | | 6 | | | — | | | — | | | Rhode Island | | 1 | | | 2 | | | — | | | — | |
| Iowa | | — | | | 1 | | | — | | | — | | | South Carolina | | 26 | | | 9 | | | — | | | 1 | |
| Kansas | | — | | | 1 | | | — | | | — | | | South Dakota | | — | | | 2 | | | — | | | — | |
| Kentucky | | 17 | | | — | | | — | | | — | | | Tennessee | | 45 | | | 15 | | | 1 | | | — | |
| Louisiana | | 9 | | | 5 | | | — | | | — | | | Texas | | 3 | | | 12 | | | — | | | — | |
| Maine | | 3 | | | 4 | | | — | | | — | | | Virginia | | 13 | | | 6 | | | — | | | — | |
| Maryland | | 9 | | | 3 | | | — | | | — | | | Washington | | 2 | | | — | | | — | | | — | |
| Massachusetts | | 6 | | | 10 | | | 12 | | | — | | | West Virginia | | 11 | | | 6 | | | — | | | — | |
| Michigan | | — | | | 1 | | | — | | | 1 | | | Wisconsin | | 1 | | | 3 | | | — | | | 2 | |
| Mississippi | | 9 | | | 1 | | | — | | | — | | | Washington, D.C. | | 1 | | | — | | | — | | | — | |
| Missouri | | 6 | | | 2 | | | — | | | — | | | Total | | 331 | | | 175 | | | 14 | | | 8 | |
|
| | | | | | | | | | | | | | | | | | | | |
| State | | Home Health | | Hospice | | Personal Care | | State | | Home Health | | Hospice | | Personal Care |
| Alabama | | 30 |
| | 7 |
| | — |
| | New Jersey | | 2 |
| | 1 |
| | — |
|
| Arkansas | | 5 |
| | — |
| | — |
| | New York | | 5 |
| | — |
| | — |
|
| Arizona | | 3 |
| | 1 |
| | — |
| | New Hampshire | | 3 |
| | 3 |
| | — |
|
| California | | 4 |
| | — |
| | — |
| | North Carolina | | 8 |
| | 6 |
| | — |
|
| Connecticut | | 4 |
| | 1 |
| | — |
| | Ohio | | 1 |
| | 2 |
| | — |
|
| Delaware | | 2 |
| | — |
| | — |
| | Oklahoma | | 6 |
| | — |
| | — |
|
| Florida | | 20 |
| | — |
| | 1 |
| | Oregon | | 3 |
| | 1 |
| | — |
|
| Georgia | | 62 |
| | 6 |
| | — |
| | Pennsylvania | | 7 |
| | 6 |
| | — |
|
| Illinois | | 3 |
| | — |
| | — |
| | Rhode Island | | 1 |
| | 2 |
| | — |
|
| Indiana | | 5 |
| | 1 |
| | — |
| | South Carolina | | 20 |
| | 7 |
| | — |
|
| Kansas | | 1 |
| | 1 |
| | — |
| | Tennessee | | 43 |
| | 11 |
| | 1 |
|
| Kentucky | | 17 |
| | — |
| | — |
| | Texas | | 1 |
| | 1 |
| | — |
|
| Louisiana | | 10 |
| | 4 |
| | — |
| | Virginia | | 13 |
| | 2 |
| | — |
|
| Massachusetts | | 5 |
| | 9 |
| | 10 |
| | Washington | | 1 |
| | — |
| | — |
|
| Maine | | 2 |
| | 4 |
| | — |
| | West Virginia | | 11 |
| | 6 |
| | — |
|
| Maryland | | 8 |
| | 2 |
| | — |
| | Wisconsin | | 1 |
| | — |
| | — |
|
| Mississippi | | 9 |
| | — |
| | — |
| | Washington, D.C. | | 1 |
| | — |
| | — |
|
| Missouri | | 6 |
| | — |
| | — |
| | Total | | 323 |
| | 84 |
| | 12 |
|
ITEM 3. LEGAL PROCEEDINGS
See Part II, Item 8, Note 911 – Commitments and Contingencies for information concerning our legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our common stock trades on the NASDAQ Global Select Market under the trading symbol “AMED.” As of February 22, 2019,18, 2022, there were approximately 510482 holders of record of our common stock. This number of holders of record does not represent the actual number of beneficial owners of our common stock because shares are frequently held in “street name” by securities dealers and others for the benefit of individual owners who have the right to vote their shares.
Dividend Policy
We have not declared or paid any cash dividends on our common stock or any other of our securities and do not expect to pay cash dividends for the foreseeable future. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. Future decisions concerning the payment of dividends will depend upon our results of operations, financial condition, capital expenditure plans and debt service requirements, as well as such other factors asthat our Board of Directors, in its sole discretion, may consider relevant. In addition, our outstanding indebtedness restricts, and we anticipate any additional future indebtedness may restrict, our ability to pay cash dividends; provided, however, that we may pay dividends (i) dividends payable solely in our equity securities andor (ii) cash dividends if (1) no default or event of default under the Second Amended Credit Agreement shall have occurred and be continuing at the time of such dividend or would result therefrom, and (2) we demonstrate that, upon giving pro forma effect to such dividend, our consolidated leverage ratio (as defined in the Second Amended Credit Agreement) is less than 2.02.75 to 1.0 and (3) we demonstrate a minimum liquidity of $50 million upon giving effect to such dividend.1.0.
Purchases of Equity Securities
The following table provides the information with respect to purchases made by us of shares of our common stock during each of the months during the three-month period ended December 31, 2018:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | (a)
Total Number
of Shares (or Units)
Purchased | | | (b)
Average Price
Paid per Share (or Unit) | | (c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs | | (d) Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) That May Yet Be
Purchased Under the
Plans or Programs | |
| October 1, 2021 to October 31, 2021 | 1,272 | | | | $ | 160.76 | | | — | | | $ | 115,120,504 | | (2) | |
| November 1, 2021 to November 30, 2021 | — | | | | — | | | 95,118 | | | 100,122,288 | | (2) | |
| December 1, 2021 to December 31, 2021 | — | | | | — | | | — | | | 100,122,288 | | (2) | |
| | 1,272 | | (1) | | $ | 160.76 | | | 95,118 | | | $ | 100,122,288 | | (3) | |
(1)Includes shares of common stock surrendered to us by certain employees to satisfy tax withholding and/or strike price obligations in connection with the vesting of non-vested stock and the exercise of stock options previously awarded to such employees under our 2008 and 2018 Omnibus Incentive Compensation Plans.
(2)Includes amounts remaining under our existing $100 million share repurchase program, approved by our Board of Directors on December 17, 2020 (the "2021 Share Repurchase Program"), and an additional $100 million under a new share repurchase program approved by our Board of Directors on August 2, 2021 (the "New Share Repurchase Program"), which will commence upon the completion of the 2021 Share Repurchase Program.
(3)Includes amounts remaining under the 2021 Share Repurchase Program, which expired on December 31, 2021, and the New Share Repurchase Program as of December 31, 2021. Effective as of January 1, 2022, we are authorized to repurchase up to $100 million of our common stock through December 31, 2022.
|
| | | | | | | | | | | | | | | |
| Period | | (a) Total Number of Shares (or Units) Purchased | | | (b) Average Price Paid per Share (or Unit) | | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs |
| October 1, 2018 to October 31, 2018 | 2,025 |
| | | $ | 115.10 |
| | — |
| | $ | — |
|
| November 1, 2018 to November 30, 2018 | — |
| | | — |
| | — |
| | — |
|
| December 1, 2018 to December 31, 2018 | 7,379 |
| | | 124.24 |
| | — |
| | — |
|
| | | 9,404 |
| (1) | | $ | 122.27 |
| | — |
| | $ | — |
|
| |
(1) | Includes shares of common stock surrendered to us by certain employees to satisfy tax withholding obligations in connection with the vesting of non-vested stock previously awarded to such employees under our 2008 Omnibus Incentive Compensation Plan. |
Stock Performance Graph
The Performance Graph below compares the cumulative total stockholder return on our common stock, $0.001 par value per share, for the five-year period ended December 31, 2018,2021, with the cumulative total return on the NASDAQ composite index and an industry peer group over the same period (assuming the investment of $100 in our common stock, the NASDAQ composite index and the industry peer group on December 31, 20132016 and the reinvestment of dividends). The peer group we selected for 2018 is comprised of: AdusAddus Homecare Corporation ("ADUS"), Chemed Corporation ("CHE"), Encompass Health Corporation ("EHC"), LHC Group, Inc. (“LHCG”) and National Healthcare Corporation (“NHC”). The peer group we selected for 2017 is comprised of: LHC Group, Inc. ("LHCG") and Almost Family, Inc. ("AFAM"). The cumulative total stockholder return on the following graph is historical and is not necessarily indicative of future stock price performance. No cash dividends have been paid on our common stock.
| | | | 12/31/2013 | | 12/31/2014 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 | | 12/31/2018 | | 12/31/2016 | | 12/31/2017 | | 12/31/2018 | | 12/31/2019 | | 12/31/2020 | | 12/31/2021 |
| Amedisys, Inc. | $ | 100.00 |
| | $ | 200.62 |
| | $ | 268.76 |
| | $ | 291.39 |
| | $ | 360.29 |
| | $ | 800.48 |
| Amedisys, Inc. | $ | 100.00 | | | $ | 123.65 | | | $ | 274.71 | | | $ | 391.56 | | | $ | 688.08 | | | $ | 379.73 | |
| NASDAQ Composite | $ | 100.00 |
| | $ | 114.62 |
| | $ | 122.81 |
| | $ | 133.19 |
| | $ | 172.11 |
| | $ | 165.84 |
| NASDAQ Composite | $ | 100.00 | | | $ | 129.64 | | | $ | 125.96 | | | $ | 172.17 | | | $ | 249.51 | | | $ | 304.85 | |
| 2018 Peer Group | $ | 100.00 |
| | $ | 123.58 |
| | $ | 137.25 |
| | $ | 159.62 |
| | $ | 201.35 |
| | $ | 259.78 |
| |
| 2017 Peer Group | $ | 100.00 |
| | $ | 129.70 |
| | $ | 188.39 |
| | $ | 190.10 |
| | $ | 254.78 |
| | $ | 390.52 |
| |
| Peer Group | | Peer Group | $ | 100.00 | | | $ | 126.14 | | | $ | 162.75 | | | $ | 217.86 | | | $ | 273.49 | | | $ | 230.40 | |
This stock performance information is “furnished” and shall not be deemed to be “soliciting material” or subject to Regulation 14A under the Securities Exchange Act, of 1934 (the “Exchange Act”), shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this report and irrespective of any general incorporation by reference language in any such filing, except to the extent we specifically incorporate the information by reference.
ITEM 6. SELECTED FINANCIAL DATA[RESERVED]
The selected consolidated financial data presented below is derived from our audited consolidated financial statements for the five-year period ended December 31, 2018, based on our continuing operations. The financial data for the years ended December 31, 2018, 2017 and 2016 should be read together with our consolidated financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” and the information included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.
|
| | | | | | | | | | | | | | | | | | | |
| | 2018 | | 2017 (2) | | 2016 (3) | | 2015 (4) | | 2014 (5) |
| | (Amounts in thousands, except per share data) |
| Income Statement Data: | | | | | | | | | |
| Net service revenue from continuing operations (1) | $ | 1,662,578 |
| | $ | 1,511,272 |
| | $ | 1,419,261 |
| | $ | 1,266,489 |
| | $ | 1,188,111 |
|
| Operating income (loss) from continuing operations | $ | 155,148 |
| | $ | 78,524 |
| | $ | 57,340 |
| | $ | (9,166 | ) | | $ | 24,047 |
|
| Net income (loss) from continuing operations attributable to Amedisys, Inc. | $ | 119,346 |
| | $ | 30,301 |
| | $ | 37,261 |
| | $ | (3,021 | ) | | $ | 12,992 |
|
| Net income (loss) from continuing operations attributable to Amedisys, Inc. per basic share | $ | 3.64 |
| | $ | 0.90 |
| | $ | 1.12 |
| | $ | (0.09 | ) | | $ | 0.40 |
|
| Net income (loss) from continuing operations attributable to Amedisys, Inc. per diluted share | $ | 3.55 |
| | $ | 0.88 |
| | $ | 1.10 |
| | $ | (0.09 | ) | | $ | 0.40 |
|
| |
(1) | Net service revenue has been recast to present our retrospective adoption of Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date.
|
| |
(2) | During 2017, we recorded charges related to the Securities Class Action Lawsuit settlement, net and related legal fees in the amount of $29.8 million ($18.1 million, net of tax). Additionally, we recorded a charge in the amount of $21.4 million as the result of H.R. 1 (Tax Cuts and Jobs Act) enacted on December 22, 2017. |
| |
(3) | During 2016, we recorded charges related to Homecare Homebase (“HCHB”) implementation costs in the amount of $8.4 million ($5.1 million, net of tax) and recognized a non-cash charge to write off assets as a result of our conversion to the HCHB platform in the amount of $4.4 million ($2.7 million, net of tax). |
| |
(4) | During 2015, we recorded non-cash charges to write off the software costs incurred related to the development of AMS3 Home Health and Hospice in the amount of $75.2 million ($45.5 million, net of tax) and to reduce the carrying value of our corporate headquarters in the amount of $2.1 million ($1.2 million, net of tax). |
| |
(5) | During 2014, we recorded charges for relators’ fees and exit and restructuring activity in the amount of $13.9 million ($8.5 million, net of tax) and recognized non-cash other intangibles impairment charges of $3.1 million ($2.0 million, net of tax). |
|
| | | | | | | | | | | | | | | | | | | |
| | 2018 | | 2017 | | 2016 | | 2015 | | 2014 |
| | (Amounts in thousands) |
| Balance Sheet Data: | | | | | | | | | |
| Total assets (1) | $ | 717,118 |
| | $ | 813,482 |
| | $ | 734,029 |
| | $ | 681,715 |
| | $ | 666,956 |
|
| Total debt, including current portion (1) | $ | 7,387 |
| | $ | 88,841 |
| | $ | 93,029 |
| | $ | 96,630 |
| | $ | 113,586 |
|
| Total Amedisys, Inc. stockholders’ equity | $ | 481,582 |
| | $ | 515,321 |
| | $ | 460,203 |
| | $ | 409,568 |
| | $ | 397,167 |
|
| Cash dividends declared per common share | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| |
(1) | Total assets and Total debt, including current portion have been recast to present our retrospective adoption of Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
|
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations and financial condition for 2018, 20172021, 2020 and 2016.2019. This discussion should be read in conjunction with our audited financial statements included in Item 8, “Financial"Financial Statements and Supplementary Data” and Part I, Item 1, “Business” of this Annual Report on Form 10-K. The following analysis contains forward-looking statements about our future revenues,
operating results and expectations. See “Special Caution Concerning Forward-Looking Statements” for a discussion of the risks, assumptions and uncertainties affecting these statements as well as Part I, Item 1A, “Risk Factors.”
For a discussion of a comparison of the years ended December 31, 2020 and December 31, 2019, please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 25, 2021.
Overview
We are a provider of high-quality in-home healthcare and related services to the chronic, co-morbid, aging American population, with approximately 73%75%, 76%75% and 79%74% of our revenue derived from Medicare for 2018, 20172021, 2020 and 2016,2019, respectively.
Our operations involve servicing patients through our threefour reportable business segments: home health, hospice, personal care and personalhigh acuity care. Our home health segment delivers a wide range of services in the homes of individuals who may be recovering from an illness, injury or surgery. Our hospice segment provides care that is designed to provide comfort and support for those who are facing a terminal illness. Our personal care segment provides patients assistance with the essential activities of daily living. Our high acuity care segment, which was established with the acquisition of Contessa Health ("Contessa") on August 1, 2021, delivers the essential elements of inpatient hospital and skilled nursing facility ("SNF") care to patients in their homes. As of December 31, 2018,2021, we owned and operated 323331 Medicare-certified home health care centers, 84175 Medicare-certified hospice care centers, and 1214 personal-care care centers including unconsolidatedand 8 high acuity care joint ventures in 3438 states within the United States and the District of Columbia.
Care Centers Summary (Includes Unconsolidated Joint Ventures)
| | | | | | | | | | | | | | | | | | | | | | | |
| Home Health | | Hospice | | Personal Care | | High Acuity Care |
| At December 31, 2018 | 323 | | | 84 | | | 12 | | | — | |
| Acquisitions/Expansions/Denovos | 3 | | | 59 | | | — | | | — | |
| Closed/Consolidated | (5) | | | (5) | | | — | | | — | |
| At December 31, 2019 | 321 | | | 138 | | | 12 | | | — | |
| Acquisitions/Expansions/Denovos | 4 | | | 54 | | | 2 | | | — | |
| Closed/Consolidated | (5) | | | (12) | | | — | | | — | |
| At December 31, 2020 | 320 | | | 180 | | | 14 | | | — | |
| Acquisitions/Expansions/Denovos | 11 | | | 1 | | | — | | | 8 | |
| Closed/Consolidated | — | | | (6) | | | — | | | — | |
| At December 31, 2021 | 331 | | | 175 | | | 14 | | | 8 | |
|
| | | | | | | | |
| | Home Health | | Hospice | | Personal Care |
| At December 31, 2015 | 332 |
| | 81 |
| | — |
|
| Acquisitions/Start-Ups | 1 |
| | — |
| | 14 |
|
| Closed/Consolidated | (3 | ) | | — |
| | — |
|
| At December 31, 2016 | 330 |
| | 81 |
| | 14 |
|
| Acquisitions/Start-Ups | 3 |
| | 2 |
| | 7 |
|
| Closed/Consolidated | (10 | ) | | — |
| | (6 | ) |
| At December 31, 2017 | 323 |
| | 83 |
| | 15 |
|
| Acquisitions/Start-Ups | 1 |
| | 1 |
| | 1 |
|
| Closed/Consolidated | (1 | ) | | — |
| | (4 | ) |
| At December 31, 2018 | 323 |
| | 84 |
| | 12 |
|
When we refer to “same store business,” we mean•Maintained the highest Quality of Patient Care star score in the home health hospice and personal-care care centers that we have operated for at least the last twelve months; when we refer to “acquisitions,” we mean home health, hospice and personal-care care centers that we acquired within the last twelve months; and when we refer to “start-ups,” we mean home health, hospice and personal-care care centers opened by us in the last twelve months. Once a care center has been in operation for a twelve month period, the results for that particular care center are included as partindustry of our same store business from that date forward.
2018 Developments
Continued to deliver on our goal of clinical distinction4.33 stars with 94%95% of our care centers at 4+ Stars inStars.
•Outperformed the January 2019 Home Health Compareindustry on all Hospice Item Set ("HHC"HIS") release.measures while preparing for the Hospice Care Index measures.
Lowered company voluntary turnover rate to 20%.•Launched a formal Environmental, Social and Governance ("ESG") program with oversight from the Board of Directors.
•Performed 11.5 million visits.
•Expanded home health gross margin as a percentage of revenue by 40 basis points.
Signed a definitive agreement to acquire Compassionate Care Hospice, the 8th largest hospice provider in the United States (subsequently closed on February 1, 2019).
Invested inour usage and relationship with Medalogix, a predictive data and analytics company, helping to further optimize our current business and enablingpositioning us to work more closely with Medicare Advantage payors.
Acquired•Meaningfully differentiated our service offering via the assetsacquisition of Bring Care HomeContessa, a tech enabled, risk taking, high acuity in-home care asset.
•Acquired/opened 11 home health care centers and East Tennessee Personal Care Services, further solidifying1 hospice care center.
•Innovated on how we engage and recruit clinicians via our position as the largest personal care providerinvestment in Massachusetts and establishing our presence in Tennessee.ConnectRN.
•Increased total revenue 10% and operating income 98%15%.
Exceeded 7,800 in hospice average daily census.
20192022 Strategy
•Further advance our industry leading Quality of Patient Care star scores in home health.
•Drive best-in-class hospice quality as measured by the Hospice Care Index.
•Continue to better the communities and patients we serve by further incorporating Environmental, Social and Governance practices into our commitment to clinical distinction withbusiness operations.
•Advance our culture and sense of belonging through diversity and inclusion initiatives.
•Build a goal of all care centers achieving a 4.0 Quality Star Rating.
Focus on recruitment and retention oflearning culture through world class employees while fostering a cultureleadership development.
•Reduce turnover in all roles, especially focused on critical clinician positions.
•Engage our clinical staff and drive additional productivity with new opportunities and ways to work via our ConnectRN investment and other workforce optimization initiatives.
•Further expand our analytics capabilities internally and through our Medalogix investment.
•Consistently grow all lines of engagement to become the employer of choicebusiness.
•Pursue consolidations in the industry.home health and hospice industries via a regional-based acquisition strategy.
Continue to reduce voluntary turnover, specifically within our registered nurse ("RN") cohort.
Implement pay practice changes•Execute new hospital at home joint venture agreements and staffing model efficiencies to further drive operational excellence.
Invest in theexpand Contessa's service offering into new lines of business to prepare ourselves for the Patient-Driven Groupings Model ("PDGM").
Continue to build on our industry-leading hospice platform by exploring various growth opportunities including smallsuch as palliative care at home and large acquisitions and denovos.
Partner with innovative companies to drive new payment arrangements and new product offerings for Medicare Advantage payors.
Continue to focus on organic growth (denovos) and inorganic expansion in all three segments.primary care at home.
Financial Performance
Results for the year ended December 31, 2018 reflect2021 were impacted by acquisitions, COVID-19 and a full year of the resultssuspension of our focused effortssequestration (as compared to eight months in 2020). On a consolidated basis, we increased operating income $33 million on operational improvements that began during 2014.a $143 million increase in net service revenue. Our Contessa acquisition reduced operating income by $10 million.
Our home health care centers experienced growth in volumes and improvement in utilization and clinician mix which, combined with rate increases in clinician productivity which positively impacted our gross margin asand a percentagefull year of revenue andsequestration relief, led to the segment delivering a $43$47 million increase in operating income (see "Results of Operations”) despite the impact of the 2018 Centers for Medicare and Medicaid Services ("CMS") rate cut.income.
Our hospice segment achieved significant growthexperienced a 4% decline in admissions andour same store average daily census, which helped deliveris the main driver of hospice revenue, primarily due to a $10 million improvementdecline in our operating income overlength of stay due to a delay in the year ended December 31, 2017 (see “Resultstiming of Operations”).patients coming onto service and an increase in the discharge rate of our patients.
Our personal care segment completed two acquisitions in 2018. These acquisitions contributed less than $1 million in personalcontinued to be impacted by COVID-19 and staffing shortages during 2021.
Our high acuity care operating income.segment expanded its joint venture footprint and made significant investments to build the clinical, operational and technological infrastructure necessary to support the development and future growth of home recovery care programs on a national scale.
Economic and Industry Factors
Our home health, hospice, and personal care segments operate in a highly fragmented and highly competitive industry. The degree of competitiveness varies based upon whether our care centers operate in states that require a certificate of need (CON)("CON") or permit of approval (POA)("POA"). In such states, expansion by existing providers or entry into the market by new providers is permitted only where determination is made by state health authorities that a given amount of unmet healthcare need exists. Currently, 65%74% and 40%29% of our home health and hospice care centers, respectively, operate in CON/POA states.
As the Federal government continues to debate a reduction in expenditures and a reform of the Medicare system, our industry continues to face reimbursement pressures. These reform efforts could result in major changes in the health care delivery and reimbursement system on a national and state level, including changes directly impacting the reimbursement systems for our home health and hospice care centers.
Wages and other expenses increase during periods of inflation and when labor shortages occur in the marketplace. The impact of inflation on the Company is primarily in the area of labor costs. The healthcare industry is labor intensive. We have experienced, and expect to continue to experience, increases in wage costs. In addition, increases in healthcare costs are typically higher than inflation and impact our costs under our employee benefit plans.
CMS Calendar Year 2019Payment Updates
Hospice
On July 29, 2021, CMS issued the final rule to update hospice payment rates and the wage index for fiscal year 2022, effective for services provided beginning October 1, 2021. CMS estimates hospices serving Medicare beneficiaries will see a 2.0% increase in payments. This increase is the result of a 2.7% market basket adjustment as required under PPACA less a 0.7% productivity adjustment. Additionally, CMS increased the aggregate cap amount by 2.0% to $31,298. The final rule also rebases the labor shares for all four levels of care, includes updates to the hospice conditions of participation ("COPs"), which make permanent certain flexibilities allowed during the COVID-19 public health emergency, and finalizes changes to the Hospice Quality Reporting Program. Based on our analysis of the final rule, we expect our impact to be in line with the 2.0% increase.
Home Health
On November 2, 2021, CMS issued the Home Health Final Rule releasedfor Medicare home health providers for calendar year 2022. CMS estimates that the final rule will result in November 2018,a 3.2% increase in payments to home health providers. This increase is the result of a 2.6% payment update (3.1% market basket adjustment less a 0.5% productivity adjustment) plus a 0.7% fixed-dollar loss ratio adjustment, reduced by 0.1% for the rural add-on. Based on our analysis of the final rule, we expect our impact to be in line with the 3.2% increase.
The final rule also provides for the first payment rate increase for home health providers since 2010. Additionally, CMS proposed changes toexpansion of the Home Health Prospective Payment SystemValue-Based Purchasing ("HHPPS"HHVBP") case-mix adjustment methodology through the use of a new PDGM for home health payments. This change is proposedmodel to be implementedall 50 states beginning January 1, 20202023 with calendar year 2023 being the first performance year and also includescalendar year 2025 being the first payment year with a change in the unitproposed maximum payment adjustment, up or down, of payment from a 60-day payment period to a 30-day payment period and eliminates the use of therapy visits in the determination of payments. While the proposed changes are to be implemented in a budget neutral manner to the industry, the ultimate impact will vary by provider based on factors including patient mix and admission source. Additionally, in arriving at the calculation of a rate that is budget neutral, CMS has made assumptions about behavioral changes which have not been finalized.
5%.
The following payment adjustments are effective for each of the years indicated based on CMS’s final rules:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Home Health | | Hospice |
| 2022 | | 2021 | | 2020 | | 2022 (1) | | 2021 | | 2020 |
| Market Basket Update | 3.1 | % | | 2.0 | % | | 1.5 | % | | 2.7 | % | | 2.4 | % | | 3.0 | % |
| Rural Add-On Adjustment | (0.1) | | | (0.1) | | | (0.2) | | | — | | | — | | | — | |
| Productivity Adjustment | (0.5) | | | — | | | — | | | (0.7) | | | — | | | (0.4) | |
| Behavioral Assumptions | — | | | — | | | (4.4) | | | — | | | — | | | — | |
| Fixed-Dollar Loss Ratio Adjustment | 0.7 | | | — | | | — | | | — | | | — | | | — | |
| Estimated Industry Impact | 3.2 | % | | 1.9 | % | | (3.1 | %) | | 2.0 | % | | 2.4 | % | | 2.6 | % |
Estimated Company-Specific Impact (2) | 3.2 | % | | 1.9 | % | | (2.8 | %) | | 2.0 | % | | 2.4 | % | | 0.5 | % |
|
| | | | | | | | | | | | | | | | | |
| | Home Health | | Hospice |
| | 2019 (1) | | 2018 (2) | | 2017 | | 2019 (3) | | 2018 | | 2017 |
| Market Basket Update | 3.0 | % | | 1.0 | % | | 2.8 | % | | 2.9 | % | | 1.0 | % | | 2.7 | % |
| Rebasing | — |
| | — |
| | (2.3 | ) | | — |
| | — |
| | — |
|
| 50/50 Blend of Wage Index | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Nominal Case Mix Adjustment | — |
| | (0.9 | ) | | (0.9 | ) | | — |
| | — |
| | — |
|
| PPACA Adjustment | — |
| | — |
| | — |
| | (0.3 | ) | | — |
| | (0.3 | ) |
| Budget Neutrality Adjustment Factor | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Productivity Adjustment | (0.8 | ) | | — |
| | (0.3 | ) | | (0.8 | ) | | — |
| | (0.3 | ) |
| Estimated Industry Impact | 2.2 | % | | 0.1 | % | | (0.7 | )% | | 1.8 | % | | 1.0 | % | | 2.1 | % |
Estimated Company-Specific Impact (4) | 1.2 | % | | (0.7 | )% | | (2.0 | )% | | 1.6 | % | | 1.0 | % | | 2.0 | % |
| |
(1) | Effective for episodes scheduled to be completed on or after January 1, 2019. |
| |
(2) | Includes the targeted extension of the home health rural add-on payment from the Bipartisan Budget Act of 2018. |
| |
(3) | Effective for services provided from October 1, 2018 to September 30, 2019. |
| |
(4) | Our company-specific impact of the final rules differs depending on differences in the wage index and the impact of coding and outlier changes. |
As(2)Our company-specific impact of the home health final rule could differ depending on differences in the wage index, our patient case mix and other factors, such as LUPAs or outliers, which are described in more detail under Critical Accounting Estimates below. Our company-specific impact of the hospice final rule could differ based on our mix of patients and differences in the wage index.
Sequestration
In March 2020, the bipartisan Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") provided for the suspension of the automatic 2% reduction of Medicare claim reimbursements ("sequestration") for the period May 1, 2020 through December 31, 2020. The impact was an increase to our 2020 net service revenue of approximately $23 million. In December 2020, Congress passed additional COVID-19 relief legislation as part of the 2016 final rule issuedConsolidated Appropriations Act, 2021. This legislation extended the suspension of sequestration through March 31, 2021. In April 2021, Congress passed H.R. 1868, which among other items, provided for an additional extension of the temporary suspension of sequestration through December 31, 2021. The impact was an increase to our 2021 net service revenue of approximately $36 million. In December 2021, Congress
passed the Protecting Medicare and American Farmers from Sequester Cuts Act. This legislation extended the 2% suspension of sequestration through March 31, 2022; sequestration will be reinstated as a 1% reduction to Medicare claim reimbursements for the period April 1, 2022 through June 30, 2022 and 2% thereafter.
Novel Coronavirus Pandemic ("COVID-19")
Our operations and financial performance continue to be impacted by COVID-19. The financial impacts of COVID-19 during the years ended December 31, 2021 and 2020 are discussed in October 2015, CMS finalized their proposal to implementfurther detail under "Results of Operations" below. While we currently believe that we have a Home Health Value-Based Purchasing ("HHVBP") model in nine states that seeks to test whether incentives for better care can improve outcomesreasonable view of operations, the uncertainty created by COVID-19 could alter our outlook of the pandemic's impact on our consolidated financial condition, results of operations or cash flows. The following factors could potentially impact our performance: the increase or decrease in the deliverynumber of COVID-19 cases nationwide, the severity and impacts of new variants of the virus, uncertainty regarding vaccine utilization rates and efficacy, staffing shortages due to clinician quarantines as well as federal, state and local vaccine mandates, the return of patient confidence to enter a hospital or a doctor's office, the utilization of elective procedures, the ability to have access to our patients in their homes and in facilities, supply chain disruption and our ability to find suitable alternative products at reasonable prices, cost normalization around personal protective equipment ("PPE") and any future or prolonged shelter-in-place orders and other federal, state and local requirements. Potential impacts of COVID-19 on our results include lower revenue; higher salary and wage expense related to quarantine pay, contract clinicians, wage inflation and training; and increased supply costs related to supply chain constraints, PPE and COVID-19 testing. The impacts to net service revenue may consist of the following:
•lower volumes due to interruption of the operations of our referral sources, patients' unwillingness to accept services and restrictions on access to facilities for hospice services;
•lower reimbursement due to missed visits resulting in an increase in low utilization payment adjustments ("LUPAs") and lost billing periods; and
•lower hospice average daily census due to a decline in average length of stay.
On March 27, 2020, the CARES Act was signed into legislation. The CARES Act provided for the following:
•$175 billion to healthcare providers, including hospitals on the front lines of the COVID-19 pandemic. Of this total allocated amount, $30 billion was distributed immediately to providers based on their proportionate share of Medicare fee-for-service reimbursements in 2019. Healthcare providers were required to sign an attestation confirming receipt of the Provider Relief Fund ("PRF") funds and agree to the terms and conditions of payment. Our home health services. Financial impactsand hospice segments received approximately $100 million from the first $30 billion of funds distributed to healthcare providers in April 2020, which is inclusive of $2 million related to our joint venture care centers (equity method investments). We also acquired approximately $6 million of PRF funds in connection with the acquisition of AseraCare. Under the terms and conditions for receipt of the payment, we were allowed to use the funds to cover lost revenues and health care costs related to COVID-19 through June 30, 2021, and we were required to properly and fully document the use of these funds in reports to the U.S. Department of Health and Human Services ("HHS"). All required reporting was completed during the three-month period ended September 30, 2021.
For our wholly-owned subsidiaries, we only utilized PRF funds to the extent we had qualifying COVID-19 expenses; we did not use PRF funds to cover lost revenues resulting from COVID-19. The grant income associated with the COVID-19 expenses incurred is reflected in other operating income within our consolidated statements of operations.
•The temporary suspension of the automatic 2% reduction of Medicare claim reimbursements ("sequestration") for the period May 1, 2020 through December 31, 2020. See CMS Payment Updates above for details on extensions beyond December 31, 2020.
•The deferral of the employer share of social security tax (6.2%), effective for payments due after the enactment date through December 31, 2020. During 2020, we deferred approximately $55 million of social security tax. Approximately $27 million was paid during December 2021; the remaining balance is due on December 31, 2022 and is reflected in payroll and employee benefits within our consolidated balance sheet.
•The temporary suspension of Medicare patient coverage criteria and documentation and care requirements and the expansion of providing home health and hospice care to patients via telehealth.
•The ability for non-physician practitioners to certify for home health, order home health services, establish and review plans of care and certify and recertify eligibility.
Our personal care segment did not receive funds under the CARES Act; however, it did receive funds totaling $1 million from the Mass Home Care ASAP COVID-19 Provider Sustainability Program, which were used during 2020 to cover costs related to
COVID-19. The grant income associated with the COVID-19 expenses incurred is reflected in other operating income within our consolidated statements of operations.
The well-being of our employees has been one of our top priorities during this change, either positive or negative, began January 1, 2018,pandemic. We have taken the following steps to support our employees: implemented paid leave during required quarantine periods; awarded bonuses to our clinicians and arecaregivers who have seen patients during the pandemic; completed an early cash pay-out of employee paid-time-off; instituted work-from-home arrangements for our corporate and administrative support employees; allowed employees to temporarily suspend any 401(k) plan loan deductions and offered employees the option of making a withdrawal from their 401(k) plan for coronavirus-related distributions without incurring the additional 10% early withdrawal penalty; expanded access to telehealth services to all employees; provided access to COVID-19 self-test kits to all employees and created a COVID-19 Resource Center, available 24 hours a day, seven days a week for employees to access educational materials, safety documents, policies, clinical protocols and operational metrics.
The safety of our clinicians and patients has also been a focus, and as a result, we have made the following business changes: developed clinical protocols for COVID-19 testing, proper usage of PPE, caring for COVID-positive patients and maintaining safety measures in our care centers; researched each state's vaccination plan to develop a state by state protocol to work with local health departments and other health systems to obtain vaccine appointments for our clinical staff; implemented software enabling us to track staff that have been vaccinated; procured PPE and created a centralized distribution center for all critical PPE, allowing us to flex our supplies on a care center by care center basis, based on 2016 performance data. Benchmarks for future years are detailed below.need and demand.
|
| | |
| Performance Year | Year Reward/ Penalty Imposed | Maximum Reward/ Penalty |
| 2016 | 2018 | 3% |
| 2017 | 2019 | 5% |
| 2018 | 2020 | 6% |
| 2019 | 2021 | 7% |
| 2020 | 2022 | 8% |
Based onIn July 2019, we signed an agreement with ClearCare, Inc. ("ClearCare"), the provider of the personal care industry’s leading software platform, representing 4,000 personal care agencies in every zip code in the United States. Our agreement with ClearCare creates an opportunity to establish a network partnership between Amedisys and personal care agencies using ClearCare in order to better coordinate patient care.
Long term, we believe these agreements will allow us to build a nation-wide network of personal care agencies and further our performanceefforts to date,provide patients with a true care continuum in the home. These relationships will also help us as we received approximately $1 million in 2018continue to have innovative payment conversations with Medicare Advantage plans who have begun to recognize the value that combined home health, hospice, personal care and anticipate that we will receive approximately $2 million in 2019 relatedhigh acuity care services bring to HHVBP.their members and care delivery infrastructure.
Governmental Inquiries and Investigations and Other Litigation
Corporate Integrity Agreement
In connection with a settlement agreement with the U.S. Department of Justice, on April 23, 2014, we entered into a corporate integrity agreement (“CIA”) with the Office of Inspector General-HHS (“OIG”). The CIA formalizes various aspects of our already existing ethics and compliance programs and contains other requirements designed to help ensure our ongoing compliance with federal health care program requirements. Among other things, the CIA requires us to maintain our existing compliance program, executive compliance committee and compliance committee of the Board of Directors; provide certain compliance training; continue screening new and current employees to ensure they are eligible to participate in federal health care programs; engage an independent review organization to perform certain audits and reviews and prepare certain reports regarding our compliance with federal health care programs, our billing submissions to federal health care programs and our compliance and risk mitigation programs; and provide certain reports and management certifications to the OIG. Additionally, the CIA specifically requires that we report substantial overpayments that we discover we have received from federal health care programs, as well as probable violations of federal health care laws. Upon breach of the CIA, we could become liable for payment of certain stipulated penalties, or could be excluded from participation in federal health care programs. The CIA has a term of five years. We expect the CIA to impact operating expenses by approximately $1 million annually.
Subpoena Duces Tecum Issued by the U.S. Department of Justice
On May 21, 2015, we received a Subpoena Duces Tecum (“Subpoena”) issued by the U.S. Department of Justice. The Subpoena requests the delivery of information regarding 53 identified hospice patients to the United States Attorney’s Office for the District of Massachusetts. It also requests the delivery of documents relating to our hospice clinical and business operations and related compliance activities.
Civil Investigative Demands Issued by the U.S. Department of Justice
On November 3, 2015, we received a civil investigative demand ("CID") issued by the U.S. Department of Justice pursuant to the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through designated facilities in the Morgantown, West Virginia area.
On June 27, 2016, we received a CID issued by the U.S. Department of Justice pursuant to the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through designated facilities in the Parkersburg, West Virginia area.
Florida Zone Program Integrity Contractor Audit
During the three-month period ended September 30, 2017, we received a request for medical records from SafeGuard Services, L.L.C. ("SafeGuard"), a Zone Program Integrity Contractor ("ZPIC") related to services provided by some of the Florida care centers that the Company acquired from Infinity Home Care, L.L.C. The review period covers time periods both before and after our ownership of the care centers which were acquired on December 31, 2015. Subsequent to the request for medical records, we received Requests for Repayment from Palmetto GBA, L.L.C. ("Palmetto") regarding two of these care centers. As a result we recorded a reduction in revenue in our consolidated statement of operations of approximately $7 million during the three-month period ended September 30, 2017.
See Item 8, Note 911 – Commitments and Contingencies to our consolidated financial statements for additional informationa discussion of and updates regarding our CIA, the Subpoena issued by the U.S. Department of Justice, the CIDs issued by the U.S. Department of Justicelegal proceedings and the Florida ZPIC audit.investigations we are involved in. No assurances can be given as to the timing or outcome of these items.
Results of Operations
Consolidated
The following table summarizes our consolidated results of operations (amounts in millions):
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Net service revenue | $ | 2,214.1 | | | $ | 2,071.5 | | | $ | 1,955.6 | |
| Other operating income | 13.3 | | | 34.4 | | | — | |
| Cost of service, excluding depreciation and amortization | 1,233.4 | | | 1,185.4 | | | 1,150.3 | |
| Gross margin, excluding depreciation and amortization | 994.0 | | | 920.5 | | | 805.3 | |
| % of net service revenue | 44.9 | % | | 44.4 | % | | 41.2 | % |
| Other operating expenses | 711.2 | | | 668.2 | | | 607.9 | |
| % of net service revenue | 32.1 | % | | 32.3 | % | | 31.1 | % |
| Depreciation and amortization | 30.9 | | | 28.8 | | | 18.4 | |
| Asset impairment charge | — | | | 4.2 | | | 1.5 | |
| Operating income | 251.9 | | | 219.3 | | | 177.5 | |
| Total other income (expense), net | 28.3 | | | (8.4) | | | (7.1) | |
| Income tax expense | (70.1) | | | (25.6) | | | (42.5) | |
| Effective income tax rate | 25.0 | % | | 12.2 | % | | 24.9 | % |
| Net income | 210.2 | | | 185.2 | | | 127.9 | |
| | | | | |
| Net income attributable to noncontrolling interests | (1.1) | | | (1.6) | | | (1.1) | |
| Net income attributable to Amedisys, Inc. | $ | 209.1 | | | $ | 183.6 | | | $ | 126.8 | |
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Net service revenue | $ | 1,662.6 |
| | $ | 1,511.3 |
| | $ | 1,419.3 |
|
| Gross margin, excluding depreciation and amortization | 669.7 |
| | 607.9 |
| | 584.8 |
|
| % of revenue | 40.3 | % | | 40.2 | % | | 41.2 | % |
| Other operating expenses | 514.6 |
| | 499.4 |
| | 523.1 |
|
| % of revenue | 30.9 | % | | 33.0 | % | | 36.9 | % |
| Securities Class Action Lawsuit settlement, net | — |
| | 28.7 |
| | — |
|
| Asset impairment charge | — |
| | 1.3 |
| | 4.4 |
|
| Operating income | 155.1 |
| | 78.5 |
| | 57.3 |
|
| Total other income, net | 3.8 |
| | 2.3 |
| | 4.2 |
|
| Income tax expense | (38.8 | ) | | (50.1 | ) | | (23.9 | ) |
| Effective income tax rate | 24.4 | % | | 62.0 | % | | 38.9 | % |
| Net income | 120.1 |
| | 30.7 |
| | 37.6 |
|
| Net income attributable to noncontrolling interests | (0.8 | ) | | (0.4 | ) | | (0.4 | ) |
| Net income attributable to Amedisys, Inc. | $ | 119.3 |
| | $ | 30.3 |
| | $ | 37.3 |
|
Year Ended December 31, 20182021 Compared to the Year Ended December 31, 20172020
Overall,On a consolidated basis, our operating income increased $77approximately $33 million on a net service revenue increase of $151$143 million. Our 2017 operatingThese results were negatively impacted $40 million; these impacts include a $30by the acquisition of Contessa on August 1, 2021, which contributed $4 million charge for the Securities Class Action Lawsuit settlement and related legal fees, a $7 million reduction in revenue as a resultand an operating loss of the Florida ZPIC audit$10 million, which is inclusive of $1 million of amortization associated with our technology intangible asset. The year-over-year increases in operating income and charges of approximately $3 millionnet service revenue are primarily related to our home health closuresthe impact of COVID-19 on prior year’s results, the acquisition of AseraCare on June 1, 2020, rate increases, the suspension of sequestration effective May 1, 2020, improvements in clinician utilization and restructuring plan. Excluding these 2017 impacts, operating income increased $37 million, driven by continued growthdiscipline mix, higher severance incurred in our home health and hospice segments, increasesprior year related to reductions in clinical productivity instaffing primarily within our home health segment and the closure of our hospice U.S. Department of Justice ("DOJ") matters (see Item 8, Note 11 – Commitments and Contingencies to our consolidated financial statements for additional information). Partially offsetting these items, we experienced a continued focusdecline in our same store hospice average daily census, which is the main driver of hospice revenue, a decrease in other operating income due to the expiration of the CARES Act PRF funds, an increase in our cost of service resulting from increases in both our home health cost per visit and hospice cost of service per day and an increase in our other operating expenses.
Our AseraCare acquisition, which closed on maintaining cost discipline, asJune 1, 2020, includes a full year of acquired operations in the current year compared to seven months in the prior year. For the year ended December 31, 2021, AseraCare contributed $103 million in revenue and operating income of $2 million, which is inclusive of $1 million in acquisition and integration costs and $8 million in intangibles amortization. For the year ended December 31, 2020, AseraCare contributed $64 million in revenue and an operating loss of $8 million, which is inclusive of $8 million in acquisition and integration costs and $6 million in intangibles amortization.
As noted above, we received CARES Act PRF funds and Mass Home Care ASAP COVID-19 Provider Sustainability Program funds, which were used to cover COVID-19 expenses. We recorded income related to both of these programs, totaling $13 million and $34 million, to other operating income within our consolidated statements of operations during the years ended December 31, 2021 and 2020, respectively. Due to the expiration of the CARES Act PRF funds on June 30, 2021, we were not able to recognize any operating income during the six-month period ended December 31, 2021 to offset the $8 million of COVID-19 costs incurred during this period.
Our operating results reflect an increase in our other operating expenses compared to prior year. Our 2021 other operating expenses include five months of the acquired operations of Contessa and a full year of the acquired operations of AseraCare compared to seven months in the prior year, both of which have resulted in a year over year increase totaling $15 million.
Excluding the Contessa and AseraCare acquisitions, our other operating expenses increased only 3% on a 10% increase in net service revenue. In4% due to the addition our gross margin as a percentage of revenue was relatively flat despite a net reduction of $3 million in net service revenue and gross margin resulting from the 2018 changes in reimbursement andresources to support growth, planned wage increases, that became effective duringhigher health insurance costs, investments related to PDGM, higher recruiting costs, increased costs associated with insurance and legal settlements, increased information technology fees, higher travel and training spend and higher acquisition and integration costs partially offset by lower incentive compensation costs, lower employer payroll taxes associated with employee stock option exercises, lower costs directly attributable to COVID-19 and higher gains on the three-month period ended September 30, 2018.
Our 2018 operating results include the resultssale of our acquisition of Christian Care at Home which provided home health services to the state of Kentucky, East Tennessee Personal Care Services which owned and operated one personal-care care center servicing the state of Tennessee and certain personal care operations from Bring Care Home in Massachusetts. These three acquisitions accounted for approximately $5 million of our $151 million increase in revenue and $1 million of our $15 million increase in other operating expenses.fleet vehicles.
Total other income (expense), net includes the following items (amounts in millions):
| | | | | | | | | | | |
| For the Years Ended
December 31, |
| 2021 | | 2020 |
| Interest income | $ | — | | | $ | 0.3 | |
| Interest expense | (9.5) | | | (11.0) | |
| Equity in earnings from equity method investments | 4.9 | | | 4.0 | |
| Gain (loss) on equity method investments | 31.1 | | | (3.0) | |
| Miscellaneous, net | 1.8 | | | 1.3 | |
| Total other income (expense), net | $ | 28.3 | | | $ | (8.4) | |
|
| | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 |
| Interest income | $ | 0.3 |
| | $ | 0.1 |
|
| Interest expense | (7.4 | ) | | (5.0 | ) |
| Equity in earnings from equity method investments | 7.7 |
| | 3.4 |
|
| Miscellaneous, net | 3.2 |
| | 3.8 |
|
| | $ | 3.8 |
| | $ | 2.3 |
|
Interest expense includes interest expense related to the Florida ZPIC audit ofdecreased $2 million year over year as a result of a decrease in outstanding borrowings under our revolving credit facility under our Second Amended Credit Agreement (see Item 8, Note 8 – Long-Term Obligations to our consolidated financial statements for 2018. Equity in earnings fromadditional information regarding our Second Amended Credit Agreement). Gain (loss) on equity method investments includes gains of $5a $31 million and $1 million for 2018 and 2017, respectively,gain in 2021 related to oneour investment in Medalogix and a $3 million loss in 2020 from the sale of our equity method investments. Miscellaneous, net includes proceeds from legal settlements of $1 million and $2 million for 2018 and 2017, respectively. Excluding these items, total other income, net increased $1 millioninvestment in 2018 from 2017.
Our 2017 income tax expense includes a $21 million charge related to the remeasurement of our deferred tax assets and liabilities to the enacted corporate income tax rate of 21% as required by the enactment of H.R. 1 (Tax Cuts and Jobs Act), on December 22, 2017Heritage Healthcare Innovation Fund, LP (see Item 8, Note 7 -1 – Nature of Operations, Consolidation and Presentation of Financial Statements to our consolidated financial statements for additional information).
Our 2020 effective income tax rate was impacted by a $24.0 million income tax benefit recorded in connection with a stock option exercise by Paul B. Kusserow, Chief Executive Officer and Chairman of the Board of Amedisys (see Item 8, Note 9 – Income Taxes to our consolidated financial statements)statements for additional information).
Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
Overall, our operating income increased $21 million on a revenue increase of $92 million. Our decline in gross margin as a percentage of revenue was the result of the 2017 and 2018 changes to home health and hospice reimbursement which reduced revenue and gross margin by approximately $14 million, net. Our 2017 results are inclusive of a $30 million charge for the Securities Class Action Lawsuit settlement and related legal fees, a $7 million reduction in revenue as a result of the Florida ZPIC audit and charges of approximately $3 million related to our home health closures and restructuring plan. Our 37% increase in operating income despite the cumulative impact of $40 million from the items noted above was driven by the continued growth of our hospice division and continued reductions in operating expenses across the organization.
Our 2017 operating results include the results of our acquisition of three home health and two hospice care centers on May 1, 2017 and our personal care acquisitions of Home Staff, L.L.C and Intercity Home Care. These three acquisitions accounted for approximately $22 million of our $92 million increase in revenue and $5 million of our $499 million in other operating expenses.
Total other income, net includes the impact of the following items (amounts in millions):
|
| | | | | | | |
| | For the Years Ended December 31, |
| | 2017 | | 2016 |
| Interest income | $ | 0.1 |
| | $ | 0.1 |
|
| Interest expense | (5.0 | ) | | (5.2 | ) |
| Equity in earnings from equity method investments | 3.4 |
| | 5.6 |
|
| Miscellaneous, net | 3.8 |
| | 3.7 |
|
| | $ | 2.3 |
| | $ | 4.2 |
|
Equity in earnings from equity method investments includes gains of $1 million and $4 million for 2017 and 2016, respectively, related to one of our equity method investments. Miscellaneous, net includes proceeds from legal settlements of $2 million for each 2017 and 2016. Excluding these items, total other income, net increased $1 million in 2017 from 2016.
Our 2017 income tax expense includes a $21 million charge related to the remeasurement of our deferred tax assets and liabilities to the enacted corporate income tax rate of 21% as required by the enactment of H.R. 1 (Tax Cuts and Jobs Act), on December 22, 2017 (see Item 8, Note 7 - Income Taxes to our consolidated financial statements).
Home Health DivisionSegment
The following table summarizes our home health segment results of operations:
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
Financial Information (in millions): | | | | | |
| Medicare | $ | 914.5 | | | $ | 847.3 | | | $ | 859.2 | |
| Non-Medicare | 439.3 | | | 401.9 | | | 397.2 | |
| Net service revenue | 1,353.8 | | | 1,249.2 | | | 1,256.4 | |
| Other operating income | 7.3 | | | 20.2 | | | — | |
| Cost of service | 756.6 | | | 729.9 | | | 754.1 | |
| Gross margin | 604.5 | | | 539.5 | | | 502.3 | |
| Depreciation and amortization | 4.3 | | | 3.9 | | | 4.2 | |
| Asset impairment charge | — | | | 3.4 | | | 1.5 | |
| Other operating expenses | 328.5 | | | 307.2 | | | 297.2 | |
| Operating income | $ | 271.7 | | | $ | 225.0 | | | $ | 199.4 | |
| Same Store Growth (1): | | | | | |
| Medicare revenue | 8 | % | | (1 | %) | | 4 | % |
| Non-Medicare revenue | 9 | % | | 1 | % | | 16 | % |
| Total admissions | 6 | % | | 1 | % | | 7 | % |
| Total volume (2)(6) | 5 | % | | 2 | % | | 5 | % |
| Key Statistical Data - Total (3): | | | | | |
| Admissions | 353,075 | | | 331,354 | | | 328,693 | |
| Recertifications (6) | 183,134 | | | 177,631 | | | 171,421 | |
| Total volume (6) | 536,209 | | | 508,985 | | | 500,114 | |
| | | | | |
| Medicare completed episodes | 311,531 | | | 301,856 | | | 306,520 | |
| Average Medicare revenue per completed episode (4) | $ | 2,959 | | | $ | 2,836 | | | $ | 2,853 | |
| Medicare visits per completed episode (5) | 13.9 | | | 14.9 | | | 17.0 | |
| | | | | |
| Visiting Clinician Cost per Visit | $ | 93.44 | | | $ | 89.62 | | | $ | 83.11 | |
| Clinical Manager Cost per Visit | $ | 9.75 | | | $ | 9.17 | | | $ | 8.04 | |
| Total Cost per Visit | $ | 103.19 | | | $ | 98.79 | | | $ | 91.15 | |
| Visits | 7,331,935 | | | 7,388,549 | | | 8,273,308 | |
(1)Same store information represents the percent change in our Medicare, Non-Medicare and Total revenue, admissions or volume for the period as a percent of the Medicare, Non-Medicare and Total revenue, admissions or volume of the prior period. Effective July 1, 2019, same store is defined as care centers that we have operated for at least the last twelve months and startups that are an expansion of a same store care center.
(2)Total volume includes all admissions and recertifications.
(3)Total includes acquisitions, start-ups and denovos.
(4)Average Medicare revenue per completed episode is the average Medicare revenue earned for each Medicare completed episode of care. Average Medicare revenue per completed episode for the years ended December 31, 2021 and 2020 reflects the transition to PDGM effective January 1, 2020 and the suspension of sequestration effective May 1, 2020.
(5)Medicare visits per completed episode are the home health Medicare visits on completed episodes divided by the home health Medicare episodes completed during the period.
(6)Prior year amounts have been recast to conform to the current year calculation.
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
Financial Information (in millions): | | | | | |
| Medicare | $ | 830.8 |
| | $ | 793.3 |
| | $ | 822.4 |
|
| Non-Medicare | 343.7 |
| | 290.6 |
| | 249.3 |
|
| Net service revenue | 1,174.5 |
| | 1,083.9 |
| | 1,071.7 |
|
| Cost of service | 722.1 |
| | 670.9 |
| | 643.7 |
|
| Gross margin | 452.4 |
| | 413.0 |
| | 428.0 |
|
| Asset impairment charge | — |
| | 1.3 |
| | — |
|
| Other operating expenses | 279.8 |
| | 281.9 |
| | 289.4 |
|
| Operating income | $ | 172.6 |
| | $ | 129.8 |
| | $ | 138.6 |
|
| Same Store Growth (1): | | | | | |
| Medicare revenue | 6 | % | | (4 | %) | | 2 | % |
| Non-Medicare revenue | 18 | % | | 17 | % | | 3 | % |
| Total admissions | 5 | % | | 2 | % | | 2 | % |
| Total volume (2) | 7 | % | | 4 | % | | 2 | % |
| Total Episodic admissions (3) | 4 | % | | 1 | % | | 4 | % |
| Total Episodic volume (4) | 5 | % | | 3 | % | | 3 | % |
| Key Statistical Data - Total (5): | | | | | |
| Medicare: | | | | | |
| Admissions | 190,748 |
| | 190,132 |
| | 194,662 |
|
| Recertifications | 112,773 |
| | 106,774 |
| | 103,193 |
|
| Total volume | 303,521 |
| | 296,906 |
| | 297,855 |
|
| | | | | | |
| Completed episodes | 296,223 |
| | 290,227 |
| | 289,862 |
|
| Visits | 5,261,315 |
| | 5,067,436 |
| | 5,124,002 |
|
| Average revenue per completed episode (6) | $ | 2,854 |
| | $ | 2,823 |
| | $ | 2,839 |
|
| Visits per completed episode (7) | 17.6 |
| | 17.3 |
| | 17.5 |
|
| Non-Medicare: | | | | | |
| Admissions | 118,577 |
| | 107,665 |
| | 98,448 |
|
| Recertifications | 55,736 |
| | 46,364 |
| | 38,618 |
|
| Total volume | 174,313 |
| | 154,029 |
| | 137,066 |
|
| Visits | 2,772,339 |
| | 2,347,363 |
| | 2,050,975 |
|
| Total (5): | | | | | |
| Visiting Clinician Cost per Visit | $ | 81.88 |
| | $ | 82.04 |
| | $ | 81.18 |
|
| Clinical Manager Cost per Visit | $ | 8.01 |
| | $ | 8.44 |
| | $ | 8.53 |
|
| Total Cost per Visit | $ | 89.89 |
| | $ | 90.48 |
| | $ | 89.71 |
|
| Visits | 8,033,654 |
| | 7,414,799 |
| | 7,174,977 |
|
| |
(1) | Same store information represents the percent increase (decrease) in our Medicare, Non-Medicare, Total and Episodic revenue, admissions or volume for the period as a percent of the Medicare, Non-Medicare, Total and Episodic revenue, admissions or volume of the prior period. |
| |
(2) | Total volume includes all admissions and recertifications. |
| |
(3) | Total Episodic admissions includes admissions for Medicare and Non-Medicare payors that bill on a 60-day episode of care basis. |
| |
(4) | Total Episodic volume includes admissions and recertifications for Medicare and Non-Medicare payors that bill on a 60-day episode of care basis. |
| |
(5) | Total includes acquisitions. |
| |
(6) | Average Medicare revenue per completed episode is the average Medicare revenue earned for each Medicare completed episode of care. |
| |
(7) | Medicare visits per completed episode are the home health Medicare visits on completed episodes divided by the home health Medicare episodes completed during the period. |
Year Ended December 31, 20182021 Compared to the Year Ended December 31, 20172020
Operating Results
Overall, our operating income increased $43$47 million on a $91$105 million increase in net service revenue. The $43 million increase includes a $7 million reduction in revenueyear over year increases are primarily related to the Florida ZPIC audittotal volume growth, an increase in 2017. Our growthour Medicare revenue per episode, higher severance incurred in volumesprior year related to reductions in staffing and increasessignificant improvement in our operating performance driven by improvements in our clinician productivity positively impacted ourutilization and discipline mix, both of which have contributed to year over year gross margin asexpansion. These items were partially offset by an increase in our total cost per visit, a percentage of revenue, which increased despitedecrease in other operating income due to the 2018 changes in reimbursement and planned wage increases that became effective during the three-month period ended September 30, 2018. The impactexpiration of the 2018 changesCARES Act PRF funds and an increase in reimbursement was a reduction in net service revenue and gross margin of approximately $7 million.our other operating expenses.
Net Service Revenue
Our net service revenue increased $91$105 million (8%) on a 7%5% increase in total volume which is inclusive ofand a 5%4% increase in episodic volume.Medicare revenue per episode. The volume growth was driven by a 5%6% increase in same store admissions and a 130 basis point3% increase in our Medicare recertification rate. In addition tovolume. Our admissions were significantly impacted by COVID-19 in the second quarter of the prior year. The increase in volume, ourMedicare revenue per episode is up $31 per episode asthe result of a result1.9% increase in reimbursement, a full year of the 2.0% benefit related to the suspension of sequestration (effective May 1, 2020), an increase in the acuity levelfunctional impairment of our patients and a change in the source/timing and geographic dispersion of our patients.
Other Operating Income
Other operating income consists of the recognition of funds received from the CARES Act PRF, which enabled uswere available for use through June 30, 2021. For our wholly-owned subsidiaries, we utilized the funds to overcomecover COVID-19 related costs only and recognized income related to these costs totaling $7 million and $20 million during the 70 basis point reimbursement reduction effective January 1, 2018.years ended December 31, 2021 and 2020, respectively. We incurred COVID-19 related costs totaling $6 million during the six-month period ended December 31, 2021; however, we were not able to recognize any income to offset these costs due to the expiration of the CARES Act PRF funds on June 30, 2021. The COVID-19 costs were associated with the purchase of PPE, bonuses paid to our clinicians, premiums paid to contract clinicians in COVID-19 high demand areas, clinician training, quarantine pay and COVID-19 testing. The COVID-19 costs incurred during the year ended December 31, 2021 totaling $13 million have been recorded to cost of service within our consolidated statements of operations. Of the $20 million of COVID-19 costs incurred in the prior year, $19 million was recorded to cost of service and $1 million was recorded to other operating expenses within our consolidated statements of operations.
Cost of Service, Excluding Depreciation and Amortization
Our cost of service consists of costs associated with direct clinician care in the homes of our patients as well as the cost of clinical managers who monitor the overall delivery of care. Our total cost of service increased 8% on an 8%4% primarily due to a 4% increase in our total cost per visit. Our total visits declined year over year despite a 5% increase in total visits. Our increasevolume primarily due to improvements in total visits was drivenclinician utilization, as evidenced by growth in volumes as well as an increase ina decline of 1.0 visits per completed episode which is the result of anyear over year. The 4% increase in the acuity level of our patients. Ourtotal cost per visit decreased 1% as an increase in clinician productivity offsetis due to planned wage increases.increases, higher costs associated with the utilization of contractors to supplement our staffing levels, increases in new hire pay, wage inflation, inclement weather pay and higher health insurance costs partially offset by a decrease in COVID-19 costs and higher severance incurred in prior year in connection with a reduction in staffing.
Other Operating Expenses
Other operating expenses decreasedincreased approximately $2$21 million on an 8% increase in net service revenue primarily due to a decrease in salaries and benefits expense as 2017 operating expenses included approximately $3 million inplanned wage increases, the addition of resources to support volume growth, higher health insurance costs, higher recruiting fees, investments related to our home health restructuring plan. Additionally, we experienced decreases in rent expense, professional feesPDGM and telecommunications expense which were offset by increases in information technology expenseincreased costs associated with insurance and travel and training expense.
Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
Operating Results
Overall, our operating income decreased $9 million on a $12 million increase in revenue. Our decrease in gross margin as a percentage of revenue was the result of the 2017 and 2018 changes in reimbursement which reduced revenue and gross margin by $17 million. Additionally, our results include a $7 million reduction in revenue and gross margin related to a reserve recorded as the result of a ZPIC audit in four care centers in Florida. Growth in episodic volumes and reductions in operating expenses helped to mitigate the impacts of the items noted above.
Net Service Revenue
Our Medicare revenue decreased approximately $29 million which includes a $7 million reduction in revenue related to the Florida ZPIC audit. Our total Medicare volumes (admissions plus recertifications) decreased by approximately 1,000 from 2016, and our revenue per episode decreased by 60 basis points which resulted in a reduction in revenue of approximately $5 million. The decrease in revenue per episode is the result of the combined impact of the 2017 and 2018 CMS rate cuts on our episodes in progress which reduced our revenue by approximately $17 million; this reduction was offset by a $12 million increase related to the acuity level of our patients.
Our non-Medicare revenue increased approximately $41 million. Admissions from episodic payors increased 27% while our per visit payors increased 2% as a result of our focus on contract payors with significant concentrations in our markets and those that add incremental margin to our operations.
Cost of Service, Excluding Depreciation and Amortization
Our cost of service increased 4% on a 3% increase in total visits. Our cost per visit increased 1% as the result of annual wage increases and increases in health insurance costs.legal settlements. These increases were partially mitigated by improvements in clinician productivity.
Other Operating Expenses
Other operating expenses decreased $8 million despite incurring approximately $3 million in costs related to our home health restructuring plan. These charges were offset by decreaseslower incentive compensation costs and lower costs directly attributable to COVID-19 in other care center related expenses, primarily salaries and benefits as the result of planned decreases post our Homecare Homebase ("HCHB") rollout. Other operating expenses included approximately $3 million related to acquisitions during 2017.current year.
Hospice DivisionSegment
The following table summarizes our hospice segment results of operations:
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
Financial Information (in millions): | | | | | |
| Medicare | $ | 750.1 | | | $ | 710.0 | | | $ | 586.6 | |
| Non-Medicare | 41.7 | | | 40.1 | | | 30.6 | |
| Net service revenue | 791.8 | | | 750.1 | | | 617.2 | |
| Other operating income | 6.0 | | | 13.1 | | | — | |
| Cost of service | 425.2 | | | 400.6 | | | 335.1 | |
| Gross margin | 372.6 | | | 362.6 | | | 282.1 | |
| Depreciation and amortization | 2.7 | | | 2.2 | | | 1.6 | |
| Asset impairment | — | | | 0.8 | | | — | |
| Other operating expenses | 198.4 | | | 175.4 | | | 137.5 | |
| Operating income | $ | 171.5 | | | $ | 184.2 | | | $ | 143.0 | |
| Same Store Growth (1): | | | | | |
| Medicare revenue | — | % | | 4 | % | | 7 | % |
| | | | | |
| Hospice admissions | 2 | % | | 6 | % | | 4 | % |
| Average daily census | (4 | %) | | 1 | % | | 7 | % |
| Key Statistical Data - Total (2): | | | | | |
| Hospice admissions | 53,507 | | | 49,694 | | | 40,194 | |
| Average daily census | 13,271 | | | 13,081 | | | 11,164 | |
| Revenue per day, net | $ | 163.47 | | | $ | 156.69 | | | $ | 151.47 | |
| Cost of service per day | $ | 87.77 | | | $ | 83.67 | | | $ | 82.24 | |
| Average discharge length of stay | 94 | | | 99 | | | 98 | |
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
Financial Information (in millions): | | | | | |
| Medicare | $ | 390.2 |
| | $ | 350.7 |
| | $ | 297.7 |
|
| Non-Medicare | 20.7 |
| | 17.1 |
| | 14.2 |
|
| Net service revenue | 410.9 |
| | 367.8 |
| | 311.9 |
|
| Cost of service | 212.0 |
| | 187.5 |
| | 164.5 |
|
| Gross margin | 198.9 |
| | 180.3 |
| | 147.4 |
|
| Other operating expenses | 85.7 |
| | 77.5 |
| | 71.5 |
|
| Operating income | $ | 113.2 |
| | $ | 102.8 |
| | $ | 75.9 |
|
| Same Store Growth (1): | | | | | |
| Medicare revenue | 11 | % | | 17 | % | | 15 | % |
| Non-Medicare revenue | 21 | % | | 20 | % | | (16 | %) |
| Hospice admissions | 8 | % | | 11 | % | | 17 | % |
| Average daily census | 11 | % | | 15 | % | | 16 | % |
| Key Statistical Data - Total (2): | | | | | |
| Hospice admissions | 27,596 |
| | 25,381 |
| | 22,526 |
|
| Average daily census | 7,588 |
| | 6,820 |
| | 5,912 |
|
| Revenue per day, net | $ | 148.36 |
| | $ | 147.75 |
| | $ | 144.11 |
|
| Cost of service per day | $ | 76.53 |
| | $ | 75.31 |
| | $ | 75.97 |
|
| Average discharge length of stay | 100 |
| | 93 |
| | 96 |
|
| |
(1) | Same store information represents the percent increase (decrease) in our Medicare and Non-Medicare revenue, Hospice admissions or average daily census for the period as a percent of the Medicare and Non-Medicare revenue, Hospice admissions or average daily census of the prior period. |
| |
(2) | Total includes acquisitions. |
(2)Total includes acquisitions and denovos.
Year Ended December 31, 20182021 Compared to the Year Ended December 31, 20172020
Operating Results
Overall, ourOur operating income increased $10 million on a $43 million increase in net service revenue. The 12% increase in net service revenue was partially offset by a lower gross margin as a percentage of revenue primarily related to planned wage increases that became effective during the three-month period ended September 30, 2018, an increase in revenue price concessions and amounts due back to Medicare for hospice caps and an increase in other operating expenses.
Net Service Revenue
Our hospice revenue increased $43 million on an 11% increase in our average daily census and a 1.0% and 1.6% increase in reimbursement effective for services provided from each October 1, 2017 and October 1, 2018, respectively. We experienced a $2 million increase in our revenue price concessions and cap which partially offset the revenue increaseresults for the year ended December 31, 2018.
Cost2021 include the acquisition of Service, Excluding Depreciation and Amortization
OurAseraCare on June 1, 2020 (44 hospice cost of service increased $25 million (13%) as the result of an 11% increase in average daily census. Our cost of service per day increased 2% primarily due to an increase in salary cost per day as a result of planned wage increases.
Other Operating Expenses
Other operating expenses increased $8 million on a 12% increase in net service revenue. The increase was related to other care center related expenses, primarily salaries and benefits expense, advertising expense, information technology expense, professional fees and travel and training expense as a result of the addition of resources to support census growth.
Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
Operating Results
Overall, our operating income increased $27 million on a $33 million increase in gross margin offset by a $6 million increase in other operating expenses. Our significant growth in volumes and decrease in cost of service per day resulted in a 22% increase in gross margin.
Net Service Revenue
Our hospice revenue increased approximately $56 million due to an increase in our average daily census as a result of an 11% increase in hospice admissions and an increase in reimbursement effective for services provided from each October 1, 2016 and 2017.
Cost of Service, Excluding Depreciation and Amortization
Our hospice cost of service increased $23 million as the result of a 15% increase in average daily census. Our cost of service per day decreased $0.66 primarily due to significant improvements in salary and pharmacy cost per day driven by cost controls and census growth.
Other Operating Expenses
Other operating expenses increased $6 million due to increases in other care center related expenses, primarily salaries and benefits, medical director fees and HCHB-related IT fees, driven by our census growth.
Personal Care Division
During 2018, management revised its measurement of the personal care segment's operating income (loss) to exclude certain expenses that were not directly attributable to the support of the segment, but rather a corporate support function. Prior periods have been restated to conform to the current presentation. The following table summarizes our personal care segment results of operations:
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
Financial Information (in millions): | | | | | |
| Medicare | $ | — |
| | $ | — |
| | $ | — |
|
| Non-Medicare | 77.2 |
| | 59.6 |
| | 35.7 |
|
| Net service revenue | 77.2 |
| | 59.6 |
| | 35.7 |
|
| Cost of service | 58.8 |
| | 45.0 |
| | 26.3 |
|
| Gross margin | 18.4 |
| | 14.6 |
| | 9.4 |
|
| Other operating expenses | 13.1 |
| | 9.7 |
| | 5.8 |
|
| Operating income | $ | 5.3 |
| | $ | 4.9 |
| | $ | 3.6 |
|
| Key Statistical Data: | | | | | |
| Billable hours | 3,248,304 |
| | 2,604,794 |
| | 1,539,093 |
|
| Clients served | 17,981 |
| | 16,774 |
| | 10,219 |
|
| Shifts | 1,468,541 |
| | 1,195,511 |
| | 696,956 |
|
| Revenue per hour | 23.75 |
| | 22.86 |
| | 23.22 |
|
| Revenue per shift | 52.54 |
| | 49.80 |
| | 51.29 |
|
| Hours per shift | 2.2 |
| | 2.2 |
| | 2.2 |
|
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Operating income related to our personal care segment remained flat on an $18 million increase in net service revenue. 2018 revenues were positively impacted by the following acquisitions: Intercity Home Care (October 2017), East Tennessee Personal Care Services (May 2018) and Bring Care Home (October 2018)centers). The segment experienced a decrease in gross margin as a percentage of revenue related to additional costs associated with these acquisitions and the Employer Medical Assistance Contribution program ("EMAC") that became effective in the state of Massachusetts on January 1, 2018. Other operating expenses increased $3 million on an $18 million increase in net service revenue. Acquisitions are included in our consolidated financial statements from their respective acquisition dates. As a result, our personal carehospice segment operating results for 20182021 and 20172020 are not fully comparable.
Overall, our operating income decreased $13 million on a $42 million increase in net service revenue. The year over year decrease in operating income is primarily due to a decline in our same store average daily census, an increase in our cost of service per day, a decrease in other operating income due to the expiration of the CARES Act PRF funds and an increase in our other operating expenses. These items were partially offset by changes in reimbursement, the suspension of sequestration effective May 1, 2020, the acquisition of AseraCare which resulted in increases to net service revenue and operating income totaling $38 million and $5 million, respectively, and the reversal of a $7 million accrual previously recorded in connection with settlement discussions with the DOJ; we received notice during the second quarter of 2021 that the DOJ has closed its investigation (see Item 8, Note 11 – Commitments and Contingencies to our consolidated financial statements for additional information).
Net Service Revenue
Our net service revenue increased $42 million. Our results include a full year of the acquired operations of AseraCare in the current year compared to seven months in the prior year which resulted in an increase to net service revenue of $38 million. Additionally, revenue was positively impacted by the 2.4% increase in reimbursement effective October 1, 2020 ($12 million), the 2.0% increase in reimbursement effective October 1, 2021 ($3 million), the suspension of sequestration effective May 1, 2020 ($4 million year over year increase) and the reversal of a $7 million accrual as mentioned above. These items were partially offset by a 4% decline in our same store average daily census, which is the main driver of hospice revenue. Our same store average daily census was down year over year primarily due to a decline in our length of stay resulting from a delay in the timing of patients coming onto service and an increase in the discharge rate of our patients.
Other Operating Income
Other operating income consists of the recognition of funds received from the CARES Act PRF which were available for use through June 30, 2021. For our wholly-owned subsidiaries, we utilized the funds to cover COVID-19 related costs only and recognized income related to these costs totaling $6 million and $13 million during the years ended December 31, 2021 and 2020, respectively. We incurred COVID-19 related costs totaling $2 million during the six-month period ended December 31, 2021; however, we were not able to recognize any income to offset these costs due to the expiration of the CARES Act PRF funds on June 30, 2021. The COVID-19 costs were associated with the purchase of PPE, bonuses paid to our clinicians, clinician training, quarantine pay and COVID-19 testing. The COVID-19 costs incurred during the year ended December 31, 2021 totaling $8 million have been recorded to cost of service within our consolidated statements of operations. Of the $13 million of COVID-19 costs incurred in the prior year, $12 million was recorded to cost of service and $1 million was recorded to other operating expenses within our consolidated statement of operations.
Cost of Service, Excluding Depreciation and Amortization
Our hospice cost of service increased 6%. Excluding our AseraCare acquisition, our cost of service increased 1% due to planned wage increases, higher costs associated with the utilization of contractors to supplement our staffing levels, increased costs to hire and retain employees, higher health insurance costs and an increase in visits performed by our hourly hospice aides and licensed practical nurses due to COVID-19 access restrictions being eased partially offset by a 4% decline in our same store average daily census and lower COVID-19 costs.
Other Operating Expenses
Other operating expenses increased $23 million, approximately $12 million of which is related to our AseraCare acquisition. The remaining increase is due to the addition of resources to support growth, planned wage increases, higher health insurance costs, increased costs associated with insurance and legal settlements, higher travel and training spend and higher recruiting fees partially offset by lower incentive compensation costs.
Personal Care Segment
The following table summarizes our personal care segment results of operations:
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
Financial Information (in millions): | | | | | |
| Medicare | $ | — | | | $ | — | | | $ | — | |
| Non-Medicare | 65.0 | | | 72.2 | | | 82.0 | |
| Net service revenue | 65.0 | | | 72.2 | | | 82.0 | |
| Other operating income | — | | | 1.1 | | | — | |
| Cost of service | 49.1 | | | 54.9 | | | 61.1 | |
| Gross margin | 15.9 | | | 18.4 | | | 20.9 | |
| Depreciation and amortization | 0.2 | | | 0.2 | | | 0.2 | |
| Other operating expenses | 11.2 | | | 12.4 | | | 12.3 | |
| Operating income | $ | 4.5 | | | $ | 5.8 | | | $ | 8.4 | |
| Key Statistical Data - Total: | | | | | |
| Billable hours | 2,275,511 | | | 2,730,121 | | | 3,308,338 | |
| Clients served | 12,074 | | | 15,019 | | | 17,364 | |
| Shifts | 974,409 | | | 1,177,586 | | | 1,488,175 | |
| Revenue per hour | $ | 28.54 | | | $ | 26.45 | | | $ | 24.80 | |
| Revenue per shift | $ | 66.66 | | | $ | 61.31 | | | $ | 55.13 | |
| Hours per shift | 2.3 | | | 2.3 | | | 2.2 | |
Year Ended December 31, 20172021 Compared to the Year Ended December 31, 20162020
Operating income related to our personal care division increased by approximatelysegment decreased $1 million on a $5$7 million increasedecrease in gross marginnet service revenue. The decrease in net service revenue is due to the impact of COVID-19 and staffing shortages partially offset by rate increases. The impact of COVID-19 has been partially mitigated by a $4 million increasereduction in other operating expenses. The increase in other operating expenses was driven by our acquisition activity.
On February 1, 2017, we acquired the assetscost of Home Staff LLC, which owned and operated three personal-care care centers, oneservice as most of which was subsequently consolidated with one of our existing personal-care care centers. On October 1, 2017, we acquired the assets of Intercity Home Care, which owned and operated four personal-care care centers, three of which were subsequently consolidated with our existing personal-care care centers. As a result of these acquisitions, our personal care employees are paid on an hourly basis and a reduction in our other operating expenses.
High Acuity Care Segment
The following table summarizes our high acuity care segment results of operations:
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
Financial Information (in millions): | | | | | |
| Medicare | $ | — | | | $ | — | | | $ | — | |
| Non-Medicare | 3.5 | | | — | | | — | |
| Net service revenue | 3.5 | | | — | | | — | |
| Other operating income | — | | | — | | | — | |
| Cost of service | 2.5 | | | — | | | — | |
| Gross margin | 1.0 | | | — | | | — | |
| Depreciation and amortization | 1.3 | | | — | | | — | |
| Other operating expenses | 10.0 | | | — | | | — | |
| Operating loss | $ | (10.3) | | | $ | — | | | $ | — | |
| Key Statistical Data - Total: | | | | | |
| Full risk admissions | 107 | | | — | | | — | |
| Limited risk admissions | 413 | | | — | | | — | |
| Total admissions | 520 | | | — | | | — | |
| Direct medical loss ratio | 54.0 | % | | — | | | — | |
| Number of joint ventures | 8 | | | — | | | — | |
| Market penetration | 31 | % | | — | | | — | |
| Patient satisfaction | 97 | % | | — | | | — | |
Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020
Operating Results
Overall, our high acuity care segment generated revenue totaling $4 million and an operating loss of $10 million. Although we expect our high acuity care segment to continue to generate operating losses over the next year, we also expect improvement in our operating income as we leverage our operating structure through growth in current and future joint ventures and expansion into new lines of business such as palliative care at home and primary care at home.
Net Service Revenue
Our high acuity care segment provides home recovery care services for 2017high acuity patients on either a full risk or limited risk basis, each with different reimbursement arrangements. Full risk admissions are admissions for which we assume the risk for all related healthcare services during a 30-day or 60-day episodic period in exchange for a contracted bundled rate based upon the assigned diagnosis related group ("DRG"). Limited risk admissions are admissions for which we assume the risk for certain healthcare services during a shorter acute phase period (equivalent to an inpatient hospital stay) in exchange for a contracted per diem payment.
Since August 1, 2021, we generated net service revenue of $4 million resulting from 107 full risk admissions and 2016 are not fully comparable.413 limited risk admissions across our joint ventures with health system partners. Revenue per episode was comprised of $10,457 for full risk episodes and $5,693 for limited risk episodes. The significant utilization of limited risk episodes was primarily due to the impact of heavy COVID-19 surges across certain of our joint venture markets and the resulting patient acuity which necessitated that a portion of our patients' inpatient stays occur within the inpatient hospital facilities rather than in the home.
Cost of Service, Excluding Depreciation and Amortization
Our cost of service consists primarily of medical costs associated with direct clinician care provided to our patients during the applicable episode period, whether such care was provided on the day of program admission, in the patients’ homes or via telehealth. Our cost of service was favorably impacted by the significant utilization of limited risk episodes, which exclude certain high-cost components of full risk episode spend such as emergency room costs and inpatient hospitalization costs.
Other Operating Expenses
Other operating expenses primarily consist of salaries and benefits. We have made significant investments to build the clinical, operational and technological infrastructure necessary to support the development and future growth of home recovery care programs on a national scale. We have employees at both the local market level and at our corporate offices, including a virtual care unit that enables us to provide monitoring services and virtual patient rounding visits via telehealth.
Corporate
During 2018, management revised its measurement of the personal care segment's operating income (loss) to exclude certain expenses that were not directly attributable to the support of the segment, but rather a corporate support function. Prior periods have been restated to conform to the current presentation. The following table summarizes our corporate results of operations:
| | | | For the Years Ended December 31, | | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
Financial Information (in millions): | | | | | | Financial Information (in millions): | | | | | |
| Other operating expenses | $ | 127.6 |
| | $ | 117.8 |
| | $ | 144.0 |
| Other operating expenses | $ | 163.1 | | | $ | 173.2 | | | $ | 160.9 | |
| Depreciation and amortization | 8.4 |
| | 12.5 |
| | 12.4 |
| Depreciation and amortization | 22.4 | | | 22.5 | | | 12.4 | |
| Total operating expenses before asset impairment charge and Securities Class Action Lawsuit settlement, net | $ | 136.0 |
| | $ | 130.3 |
| | $ | 156.4 |
| |
| Asset impairment charge | — |
| | — |
| | 4.4 |
| |
| Securities Class Action Lawsuit settlement, net | — |
| | 28.7 |
| | — |
| |
| Total operating expenses | $ | 136.0 |
| | $ | 159.0 |
| | $ | 160.8 |
| Total operating expenses | $ | 185.5 | | | $ | 195.7 | | | $ | 173.3 | |
Corporate expenses consist of costs relatingrelated to our executive management and corporate and administrative support functions, primarily information services, accounting, finance, billing and collections, legal, compliance, risk management, procurement, marketing, clinical administration, training, human resources and administration.
Year Ended December 31, 20182021 Compared to the Year Ended December 31, 20172020
Excluding the Securities Class Action Lawsuit settlementCorporate other operating expenses decreased approximately $10 million during the year ended December 31, 2017, corporate2021. Other operating expenses increased 4% on a 10% increaseassociated with our AseraCare acquisition declined $7 million year over year primarily due to higher acquisition and integration costs incurred in net service revenue. Approximately $2 million of the increase is related to a reduction in our indemnity receivable related to the Florence, South Carolina third party audit (see Item 8, Note 9 - Commitments and Contingencies to our consolidated financial statements for additional information). The remaining increase is related to increases in salaries and benefits expense and travel and training expense which were offset by a decrease in depreciation and amortization.
Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
prior year. Excluding the $30 million Securities Class Action Lawsuit settlement and related legal fees in 2017 and the asset impairment charge in 2016,AseraCare acquisition, corporate other operating expenses decreased approximately $26$3 million primarily as a resultyear over year due to lower incentive compensation costs, lower employer payroll taxes associated with employee stock option exercises and higher gains on the sale of an $8 million reduction in HCHB implementationfleet vehicles; these items were partially offset by planned wage increases, additional functional support, higher health insurance costs, increased information technology fees and an $11 million reduction inhigher acquisition activity (including acquired corporate support and otherintegration costs related to 2021 mergers and acquisition costs). We also experienced reductions in various other operating expenses including salaries and benefits, non-cash compensation and personnel costs. These reductions are a direct result of planned reductions post installation of HCHB and a restructure plan initiated in 2016.
activity.
Liquidity and Capital Resources
Cash Flows
The following table summarizes our cash flows for the periods indicated (amounts in millions):
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Cash provided by operating activities | $ | 223.5 |
| | $ | 105.7 |
| | $ | 62.2 |
|
| Cash used in investing activities | (22.2 | ) | | (44.0 | ) | | (52.0 | ) |
| Cash used in financing activities | (267.4 | ) | | (5.5 | ) | | (7.5 | ) |
| Net (decrease) increase in cash and cash equivalents | (66.1 | ) | | 56.2 |
| | 2.7 |
|
| Cash and cash equivalents at beginning of period | 86.4 |
| | 30.2 |
| | 27.5 |
|
| Cash and cash equivalents at end of period | $ | 20.2 |
| | $ | 86.4 |
| | $ | 30.2 |
|
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Cash provided by operating activities | $ | 188.9 | | | $ | 289.0 | | | $ | 202.0 | |
| Cash used in investing activities | (281.6) | | | (287.1) | | | (352.9) | |
| Cash provided by (used in) financing activities | 55.1 | | | (15.0) | | | 227.2 | |
| Net (decrease) increase in cash, cash equivalents and restricted cash | (37.6) | | | (13.1) | | | 76.3 | |
| Cash, cash equivalents and restricted cash at beginning of period | 83.4 | | | 96.5 | | | 20.2 | |
| Cash, cash equivalents and restricted cash at end of period | $ | 45.8 | | | $ | 83.4 | | | $ | 96.5 | |
Cash provided by operating activities totaled $223.5 million for 2018, $105.7 million for 20172021, 2020 and $62.2 million for 2016. During each year, we maintained2019 have provided sufficient liquidity to finance our capital expenditures, both routine and non-routine, and acquisitions.
Changes in our cash provided by operating activities during the past three years were primarily the result of fluctuations in our net income, the collections of our accounts receivable and the timing of payments of accrued expenses. During 2017,Cash provided by operating activities decreased $100.1 million during 2021 compared to 2020 primarily due to the deferral of payroll taxes and the receipts of CARES Act PRF funds in the prior year and an increase in days revenue outstanding in the current year partially offset by an increase in operating income.
Our cash used in investing activities primarily consists of the purchase of property and equipment, investments and acquisitions. Our 2020 cash flows were negatively impacted by approximately $30 million related tofrom investing activities included proceeds from the Securities Class Action Lawsuit settlementsale of our investment in the Heritage Healthcare Innovation Fund, LP (see Item 8, Note 91 – CommitmentsNature of Operations, Consolidation and ContingenciesPresentation of Financial
Statements to our consolidated financial statements)statements for additional information). During 2016, operatingExcluding these proceeds, cash flows were negatively impacted by approximately $20 million in fees related to the conversion to HCHB, severance costs related to a reorganization plan, acquisition costs and litigation.
Cash used in investing activities decreased $21.8$23.4 million during 2018 compared to 20172021 primarily due to decreasesreductions in cash paidacquisition spend.
Our financing activities primarily consist of borrowings under our term loan and/or revolving credit facility, repayments of borrowings, the remittance of taxes associated with shares withheld on non-cash compensation, proceeds related to the exercise of stock options and the purchase of stock under our employee stock purchase plan and the purchase of company stock under our stock repurchase programs. Additionally, during 2020, our financing activities included the receipt of PRF funds, which we did not expect to retain, totaling $60 million. We repaid all unutilized PRF funds during 2021 (see Item 8, Note 3 – Novel Coronavirus Pandemic ("COVID-19") to our consolidated financial statements for acquisitions ($24.5 million) and capital expenditures ($4.1 million) offset by an increase in investments ($6.7 million)additional information). Cash used in investingprovided by financing activities decreased $8.0totaled $55.1 million during 2017 compared to 20162021 primarily due to decreases in cash paid fornet borrowings under our Second Amended Credit Agreement to fund acquisitions ($1.8 million), capital expenditures ($5.0 million) and investments ($0.6 million).
Cash used in financing activities increased $261.9 million during 2018 compared to 2017 primarily due to ourpartially offset by the repurchase of company stock and the repayment of borrowings under our Term Loan and Revolving Credit Facility offset by borrowings under our new Credit Agreement.unutilized PRF funds. Cash used in financing activities decreased $2.0totaled $15.0 million during 2017 compared to 20162020 primarily due to a decrease innet repayments of borrowings and the remittance of tax benefits fromwithholding obligations related to non-cash compensation and stock compensation plansoption exercises (see Item 8, Note 10 – Capital Stock and repurchases of company stock pursuantShare-Based Compensation to our stock repurchase program,consolidated financial statements for additional information), partially offset by shares withheld upon stock vesting and proceeds from issuancethe receipt of stock upon exercise of stock options.PRF funds.
Liquidity
Typically, our principal source of liquidity is the collection of our patient accounts receivable, primarily through the Medicare program. In addition to our collection of patient accounts receivable, from time to time, we can and do obtain additional sources of liquidity by the incurrence of additional indebtedness.
During 2018,2021, we spent $6.6$6.3 million in capital expenditures compared to $10.7$5.3 million and $15.7$7.9 million during 20172020 and 2016,2019, respectively. Our capital expenditures for 20192022 are expected to be approximately $7.0 million to $9.0 million, excluding the impact of any future acquisitions.
Additionally, during 2021, pursuant to our authorized stock repurchase program, we repurchased 446,832 shares of our common stock at a weighted average price of $223.49 per share and a total cost of approximately $100 million. The repurchased shares are classified as treasury shares.
As of December 31, 2018,2021, we had $20.2$42.7 million in cash and cash equivalents and $508.4$522.5 million in availability under our $550.0 million Revolving Credit Facility.
During 2017, we settled the Securities Class Action Lawsuit for approximately $43.7 million, of which approximately $15.0 million was paid by the Company's insurance carriers; we used cash on hand to make the required remaining $28.7 million.
Based on our operating forecasts and our new debt service requirements, we believe we will have sufficient liquidity to fund our operations, capital requirements and debt service requirements.requirements for the next twelve months and beyond.
Outstanding Patient Accounts Receivable
Our patient accounts receivable decreased $12.2increased $19.8 million from December 31, 20172020 to December 31, 2018.2021 primarily due to the elimination of requests for anticipated payment ("RAPs") effective January 1, 2021. Our cash collection as a percentage of revenue was 104% and 101%106% for the twelve-month periods ended December 31, 20182021 and 2017,2020, respectively. Our days revenue outstanding, net at December 31, 20182021 was 38.043.2 days which is a decreasean increase of 6.03.0 days from December 31, 2017.
2020.
Our patient accounts receivable includes unbilled receivables and are aged based upon ourthe initial service date. We monitor unbilled receivables on a care center by care center basis to ensure that all efforts are made to bill claims within timely filing deadlines. Our unbilled patient accounts receivable can be impacted by acquisition activity, probe edits or regulatory changes which result in additional information or procedures needed prior to billing. The timely filing deadline for Medicare is one year from the date the episode was completed, varies by state for Medicaid-reimbursable services and varies among insurance companies and other private payors.
The following schedules detail our patient accounts receivable, by payor class, aged based upon initial date of service (amounts in millions, except days revenue outstanding, net)outstanding):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 0-90 | | 91-180 | | 181-365 | | Over 365 | | Total |
| At December 31, 2021: | | | | | | | | | |
| Medicare patient accounts receivable | $ | 176.7 | | | $ | 7.5 | | | $ | 1.1 | | | $ | 1.4 | | | $ | 186.7 | |
| Other patient accounts receivable: | | | | | | | | | |
| Medicaid | 16.0 | | | 1.5 | | | 0.7 | | | — | | | 18.2 | |
| Private | 59.7 | | | 8.7 | | | 1.7 | | | — | | | 70.1 | |
| Total | $ | 75.7 | | | $ | 10.2 | | | $ | 2.4 | | | $ | — | | | $ | 88.3 | |
| Total patient accounts receivable | | | | | | | | | $ | 275.0 | |
| Days revenue outstanding (1) | | | | | | | | | 43.2 | |
| | | | | | | | | | | | | | 0-90 | | 91-180 | | 181-365 | | Over 365 | | Total |
| | 0-90 | | 91-180 | | 181-365 | | Over 365 | | Total | |
| At December 31, 2018: | | | | | | | | | | |
| At December 31, 2020: | | At December 31, 2020: | | | | | | | | | |
| Medicare patient accounts receivable | $ | 95.5 |
| | $ | 8.1 |
| | $ | 1.0 |
| | $ | 1.8 |
| | $ | 106.4 |
| Medicare patient accounts receivable | $ | 156.2 | | | $ | 5.4 | | | $ | 2.1 | | | $ | 0.8 | | | $ | 164.5 | |
| Other patient accounts receivable: | | | | | | | | | | Other patient accounts receivable: | | | | | | | | | |
| Medicaid | 13.1 |
| | 2.7 |
| | 1.1 |
| | — |
| | 16.9 |
| Medicaid | 20.7 | | | 1.7 | | | 1.5 | | | — | | | 23.9 | |
| Private | 51.3 |
| | 6.7 |
| | 4.4 |
| | 3.3 |
| | 65.7 |
| Private | 58.4 | | | 6.4 | | | 1.9 | | | — | | | 66.7 | |
| Total | $ | 64.4 |
| | $ | 9.4 |
| | $ | 5.5 |
| | $ | 3.3 |
| | $ | 82.6 |
| Total | $ | 79.1 | | | $ | 8.1 | | | $ | 3.4 | | | $ | — | | | $ | 90.6 | |
| Total patient accounts receivable | | | | | | | | | $ | 189.0 |
| Total patient accounts receivable | | | | | | | | | $ | 255.1 | |
| Days revenue outstanding (1) | | | | | | | | | 38.0 |
| Days revenue outstanding (1) | | 40.2 | |
(1)Our calculation of days revenue outstanding is derived by dividing our ending patient accounts receivable at December 31, 2021 and 2020 by our average daily net service revenue for the three-month periods ended December 31, 2021 and 2020, respectively.
|
| | | | | | | | | | | | | | | | | | | |
| | 0-90 | | 91-180 | | 181-365 | | Over 365 | | Total |
| At December 31, 2017: | | | | | | | | | |
| Medicare patient accounts receivable | $ | 95.9 |
| | $ | 16.1 |
| | $ | 6.6 |
| | $ | 0.6 |
| | $ | 119.2 |
|
| Other patient accounts receivable: | | | | | | | | | |
| Medicaid | 13.8 |
| | 3.2 |
| | 1.3 |
| | (1.1 | ) | | 17.2 |
|
| Private | 51.0 |
| | 7.5 |
| | 4.1 |
| | 2.2 |
| | 64.8 |
|
| Total | $ | 64.8 |
| | $ | 10.7 |
| | $ | 5.4 |
| | $ | 1.1 |
| | $ | 82.0 |
|
| Total patient accounts receivable | | | | | | | | | $ | 201.2 |
|
| Days revenue outstanding (1) | | | | | | | | | 44.0 |
|
| |
(1) | Our calculation of days revenue outstanding, net is derived by dividing our ending net patient accounts receivable at December 31, 2018 and 2017 by our average daily net patient revenue for the three-month periods ended December 31, 2018 and 2017, respectively. |
Indebtedness
Second Amendment to the Credit Agreement
On June 29, 2018,July 30, 2021, we entered into the Second Amendment to our Amended and Restated Credit Agreement ("(as amended by the Second Amendment, the "Second Amended Credit Agreement") which. The Second Amended Credit Agreement provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $1.0 billion, which includes a $550.0 million Revolving Credit Facility and a term loan facility with a principal amount of up to $450.0 million (the "Revolving Credit"Amended Term Loan Facility"). The funds available under and collectively with the Revolving Credit Facility, the "Amended Credit Facility").
Net proceeds from the $450.0 million Amended Term Loan Facility were used to pay off our existing indebtedness under our prior credit agreement, dated as of August 28, 2015 (the "Prior Credit Agreement"), with a principal balance of $127.5 million.
The final maturity offund the Revolving Credit Facility is June 29, 2023 and there is no mandatory amortization on the outstanding principal balances which are payable in full upon maturity. The Revolving Credit Facility may be used to provide ongoing working capital and for general corporate purposes of the Company and our subsidiaries, including permitted acquisitions, as defined in the Credit Agreement.Contessa acquisition.
Our weighted average interest rate for borrowings under our $450.0 million Amended Term Loan Facility was 1.6% for the period ended December 31, 2021 and 2.2% for the period ended December 31, 2020. Our weighted average interest rate for borrowings under our $550.0 million Revolving Credit Facility was 3.8%1.9% for the period ended December 31, 2018. Our weighted average interest rate for our $100.0 million Term Loan, under our Prior Credit Agreement, was 3.1%2021 and 2.2% for the period ended December 31, 2017.2020.
As of December 31, 2018,2021, our consolidated leverage ratio was 0.1 and1.4, our consolidated interest coverage ratio was 59.927.8 and we are in compliance with our covenants under the Second Amended Credit Agreement.
As of December 31, 2018,2021, our availability under our $550.0 million Revolving Credit Facility was $508.4$522.5 million as we have $7.5 millionno outstanding in borrowings and $34.1$27.5 million outstanding in letters of credit.
See Item 8, Note 6 -8 – Long Term Obligations and Note 16 - Subsequent Events to our consolidated financial statements for additional details on our outstanding long-term obligations.
On June 4, 2018, we purchased 2,418,304 of our common shares from affiliates of KKR Credit Advisors (US) LLC ("KKR"), representing one-half of KKR's holdings in the Company and 7.1% of the aggregate outstanding shares of the Company's common stock for a total purchase price of $181.4 million including related direct costs. The Company repurchased the shares at $73.96 which represents 96% of the closing stock price of the Company's common stock on June 4, 2018. The repurchased shares are classified as treasury shares.
Stock Repurchase Program
2021 Stock Repurchase Program
On September 9, 2015,December 23, 2020, we announced that our Board of Directors authorized a stock repurchase program, allowing for theunder which we could repurchase of up to $75$100 million of our outstanding common stock on or before September 6, 2016, the date on which the stock repurchase program expired.through December 31, 2021 (the "2021 Share Repurchase Program").
Under the terms of the 2021 Share Repurchase program, we were allowed to repurchase shares from time to time inthrough open market purchases, unsolicited or solicited privately negotiated transactions, block purchases an accelerated stock repurchase program and/or a trading plan in private transactions in accordancecompliance with applicable federal securities laws and other legal requirements. We were allowed to enter intoExchange Act Rule 10b5-1 plans to effect some or all of the repurchases.10b5-1. The timing and the amount of the repurchases werewas determined by management based on a number of factors, including but not limited to share price, trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors.
Pursuant to this program, we repurchased 324,141446,832 shares of our common stock at a weighted average price of $37.96$223.49 per share and a total cost of approximately $12.3$100 million during 2016 and 116,859the year ended December 31, 2021. We did not repurchase any shares of our commonpursuant to this stock at a weighted average price of $39.20 per share and a total cost of approximately $4.6 millionrepurchase program during 2015.the year ended December 31, 2020. The repurchased shares are classified as treasury shares.
On August 2, 2021, our Board of Directors authorized a share repurchase program, under which we may repurchase up to $100 million of our outstanding common stock through December 31, 2022 to commence upon the completion of the Company's 2021 Share Repurchase Program (the "New Share Repurchase Program").
Under the terms of the New Share Repurchase Program, we are allowed to repurchase shares from time to time through open market purchases, unsolicited or solicited privately negotiated transactions, an accelerated stock repurchase program and/or a trading plan in compliance with Exchange Act Rule 10b5-1. The timing and the amount of the repurchases will be determined by management based on a number of factors, including but not limited to share price, trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors. We have not repurchased any shares under the New Share Repurchase Program as of December 31, 2021.
2019 Stock Repurchase Program
On February 25, 2019, we announced that our Board of Directors authorized a stock repurchase program, under which we could have repurchased up to $100 million of our outstanding common stock through March 1, 2020. We did not repurchase any shares pursuant to this stock purchase program during 2019 or 2020. This stock repurchase plan expired on March 1, 2020.
Contractual Obligations
Our future contractual obligations at December 31, 20182021 were as follows (amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Due by Period |
| Total | | Less than
1 Year | | 1-3
Years | | 4-5
Years | | After
5 Years |
| Long-term obligations | $ | 448.0 | | | $ | 12.0 | | | $ | 36.6 | | | $ | 399.4 | | | $ | — | |
| Interest on long-term obligations (1) | 30.3 | | | 7.1 | | | 13.5 | | | 9.7 | | | — | |
| Finance leases | 1.7 | | | 1.1 | | | 0.6 | | | — | | | — | |
| Operating leases | 105.8 | | | 33.4 | | | 48.5 | | | 20.3 | | | 3.6 | |
| Purchase obligations (2) | 11.6 | | | 9.2 | | | 2.0 | | | 0.4 | | | — | |
| Joint venture commitment | 9.3 | | | 9.3 | | | — | | | — | | | — | |
| Uncertain tax positions | 2.7 | | | 2.7 | | | — | | | — | | | — | |
| $ | 609.4 | | | $ | 74.8 | | | $ | 101.2 | | | $ | 429.8 | | | $ | 3.6 | |
(1)Interest on debt with variable rates was calculated using the current rate for that particular debt instrument at December 31, 2021.
(2)Purchase obligations are primarily related to information technology contracts and software licenses.
|
| | | | | | | | | | | | | | | | | | | |
| | Payments Due by Period |
| | Total | | Less than 1 Year | | 1-3 Years | | 4-5 Years | | After 5 Years |
| Long-term obligations | $ | 8.6 |
| | $ | 0.5 |
| | $ | 0.6 |
| | $ | 7.5 |
| | $ | — |
|
| Interest on long-term obligations (1) | 0.1 |
| | 0.1 |
| | — |
| | — |
| | — |
|
| Capital lease obligations | 2.3 |
| | 1.1 |
| | 1.2 |
| | — |
| | — |
|
| Operating leases | 78.7 |
| | 23.3 |
| | 31.9 |
| | 13.7 |
| | 9.8 |
|
| Capital commitments | 0.5 |
| | 0.5 |
| | — |
| | — |
| | — |
|
| Purchase obligations | 23.4 |
| | 10.2 |
| | 10.3 |
| | 2.9 |
| | — |
|
| Uncertain tax positions | 2.7 |
| | — |
| | 2.7 |
| | — |
| | — |
|
| | $ | 116.3 |
| | $ | 35.7 |
| | $ | 46.7 |
| | $ | 24.1 |
| | $ | 9.8 |
|
| |
(1) | Interest on debt with variable rates was calculated using the current rate of that particular debt instrument at December 31, 2018. |
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principlesGenerally Accepted Accounting Principles (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, collectability of accounts receivable, reserves related to insurance and litigation, business combinations, goodwill, intangible assets, income taxes and contingencies. We base these estimates on our historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results experienced may vary materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations may be affected.
We believe the following critical accounting policies represent our most significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition
We account for revenue from contracts with customers in accordance with Accounting Standards UpdateCodification ("ASU"ASC") 2014-09, 606, Revenue from Contracts with Customers (Topic 606) and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (collectively, "ASC 606"), and as such, we recognize revenue in the period in which we satisfy our performance obligations under our contracts by transferring our promised services to our customers in amounts that reflect the consideration to which we expect to be entitled in exchange for providing patient care, which are the transaction prices allocated to the distinct services. The Company'sOur cost of obtaining contracts is not material.
Revenues are recognized as performance obligations are satisfied, which varies based on the nature of the services provided. Our performance obligation is the delivery of patient care services in accordance with the nature and frequency of services outlined in physicians' orders, which are determined by a physician based on a patient's specific goals.
The Company'sOur performance obligations relate to contracts with a duration of less than one year; therefore, the Company haswe have elected to apply the optional exemption provided by ASC 606 and isare not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. The unsatisfied or partially unsatisfied performance obligations are generally completed when the patients are discharged, which generally occurs within days or weeks of the end of the reporting period.
We determine the transaction price based on gross charges for services provided, reduced by estimates for explicitcontractual and implicit price concessions. Explicit price concessions include contractualnon-contractual revenue adjustments. Contractual revenue adjustments providedare recorded for the difference between our standard rates and the contracted rates to be realized from patients, third-party payors and third-party payors. Implicit price concessionsothers for services provided. Non-contractual revenue adjustments include discounts provided to self-pay, uninsured patients or other payors, adjustments resulting from payment reviews and adjustments arising from our inability to obtain appropriate billing documentation, authorizations or face-to-face documentation. Subsequent changes to the estimate of the transaction price are recorded as adjustments to net service revenue in the period of change. Subsequent changes that are determined to be the result of an adverse change in the patient's ability to pay (i.e. change in credit risk) are recorded as a provision for doubtful accounts.
Explicit price concessions are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third party payors and others for services provided.
Implicit price concessionsNon-contractual revenue adjustments are recorded for self-pay, uninsured patients and other payors by major payor class based on our historical collection experience, aged accounts receivable by payor and current economic conditions. The implicit price concession representsnon-contractual revenue adjustments represent the difference between amounts billed and amounts we expect to collect based on our collection history with similar payors. The Company assesses itsWe assess our ability to collect for the healthcare services provided at the time of patient admission based on the Company'sour verification of the patient's insurance coverage under Medicare, Medicaid, and other commercial or managed care insurance programs. Medicare represents approximately 73%75% of the Company'sour consolidated net service revenue.
Amounts due from third-party payors, primarily commercial health insurers and government programs (Medicare and Medicaid), include variable consideration for retroactive revenue adjustments due to settlements of audits and payment reviews. We determine our estimates for price concessionsnon-contractual revenue adjustments related to audits and payment reviews based on our historical experience and success rates in the claim appeals and adjudication process. Revenue is recorded at amounts we estimate to be realizable for services provided.
We determine our estimates for price concessionsnon-contractual revenue adjustments related to our inability to obtain appropriate billing documentation, authorizations or face-to-face documentation based on our historical experience which primarily includes a historical collection rate of over 99% on Medicare claims. Revenue is recorded at amounts we estimate to be realizable for services provided.
Home Health Revenue Recognition
Medicare Revenue
Net service revenue is recorded underEffective January 1, 2020, the Centers for Medicare prospectiveand Medicaid Services ("CMS") implemented a revised case-mix adjustment methodology, the Patient-Driven Groupings Model ("PDGM"), to better align payment system (“PPS”) based on an established Federal Medicarewith patient care needs and to ensure that clinically complex and ill beneficiaries have adequate access to home health episodecare. PDGM uses 30-day periods of care rather than 60-day episodes of care as the unit of payment, rate, that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if a patient’s care was unusually costly (capped at 10%eliminates the use of total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of therapy visits was four or fewer than; (c) a partialprovided in determining payment if a patient transferred to another provider or we admitted a patient transferring from another provider before completing the episode; (d) a payment adjustment based upon the level of therapy services required (with various incremental adjustments made for additional visits, with larger payment increases associated with the sixth, fourteenth and twentieth visit thresholds); (e) the number of episodes of care provided to a patient, regardless of whether the same home health provider provided care for the entire series of episodes; (f) changes in the base episode payments established by the Medicare Program; and (g) adjustments to the base episode payments for case mix and geographic wages. Medicare rates are basedrelies more heavily on the severity of the patient's condition, service needs and goals,clinical characteristics and other factors relating to the cost of providing services and supplies, bundled into an episode of care, not to exceed 60 days. An episode starts the first day a billable visit is performed and ends 60 days later or upon discharge, if earlier, with multiple continuous episodes allowed.patient information.
The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave their home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services, and receive treatment under a plan of care established and periodically reviewed by a physician. All Medicare contracts are required to have a signed plan of care which represents a single performance obligation, comprisingcomprised of the delivery of a series of distinct services that are substantially similar and have a similar pattern of transfer to the customer. Accordingly, the Company accountswe account for the series of services ("episode") as a single performance obligation satisfied over time, as the customer simultaneously receives and consumes the benefits of the goods and services provided. Expected MedicareAn episode starts the first day a billable visit is performed and ends 60 days later or upon discharge, if earlier, with multiple continuous episodes allowed. Under PDGM, each 60-day episode includes two 30-day payment periods.
Net service revenue per episode is recognizedrecorded based on the established Federal Medicare home health payment rate for a pro-rated service output method, utilizing30-day period of care. ASC 606 notes that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice. We have elected to apply the "right to invoice" practical expedient and therefore, our revenue recognition is based on the reimbursement we are entitled to for each 30-day payment period. We utilize our historical average length of episode priorstay for each 30-day period of care as the measure of progress towards the satisfaction of our performance obligation.
PDGM uses timing, admission source, functional impairment levels and principal and other diagnoses to discharge.
case-mix adjust payments. The base episodecase-mix adjusted payment can be adjustedfor a 30-day period of care is subject to additional adjustments based on eachcertain variables, including, but not limited to (a) an outlier payment if our patient's health including clinical condition, functional abilities,care was unusually costly (capped at 10% of total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of visits provided was less than the established threshold, which ranges from two to six visits and service needs, as well asvaries for every case-mix group under PDGM; (c) a partial payment if a patient transferred to another provider or from another provider before completing the 30-day period of care; and (d) the applicable geographic wage index, low utilization, patient transfersindex. Payments for routine and other factors. The services covered bynon-routine supplies are included in the episode30-day payment include all disciplines of care in addition to medical supplies. rate.
Medicare can also make various adjustments to payments received if we are unable to produce appropriate billing documentation or acceptable authorizations. In addition, we make adjustments to Medicare revenue if we find we are unable to obtain appropriate billing documentation, authorizations or face-to-face documentation. We estimate the impact of such adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record this estimate during the period in which services are rendered as an estimated price concession andto revenue with a corresponding reduction to patient accounts receivable. A 0.1% change in our Medicare collection rate would impact our annual Medicare revenue by approximately $0.9 million.
A portionAmounts due from Medicare include variable consideration for retroactive revenue adjustments due to settlements of audits and payment reviews. We determine our estimates for non-contractual revenue adjustments related to audits and payment reviews based on our historical experience and success rates in the claim appeals and adjudication process.
The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave his/her home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services and receive treatment under a plan of care established and periodically reviewed by a physician. In order to provide greater flexibility during the novel coronavirus pandemic ("COVID-19"), CMS relaxed the definition of homebound status through the duration of the public health emergency. During the pandemic, a beneficiary is considered homebound if they have been instructed by a physician not to leave their home because of a confirmed or suspected COVID-19 diagnosis or if the patient has a condition that makes them more susceptible to contracting COVID-19. Therefore, if a beneficiary is homebound due to COVID-19 and requires skilled services, the services will be covered under the Medicare home health benefit.
During 2020, 20% of the reimbursement from each Medicare episode is30-day payment rate was billed near the start of each episode,30-day period of care, referred to as a request for anticipated payment ("RAP"), and cash iswas typically received before all services arewere rendered. The amount of revenue recognized for episodes of care which are incomplete at period end is based on the company's average percentage of days complete on episodes as of the end of the year. As of December 31, 2018 and 2017, the difference between theAny cash received from Medicare for a requestRAP for anticipated payment (“RAP”) on episodes in progress anda 30-day period of care that exceeded the associated estimated revenue earned was immaterial and, therefore, the resulting credits were recorded as a reduction to our outstanding patient accounts receivable inaccrued expenses within our consolidated balance sheets for such periods.sheets. CMS fully eliminated all upfront payments associated with RAPs effective January 1, 2021.
Non-Medicare Revenue
Episodic-based Revenue. We recognize revenue in a similar manner as we recognize Medicare revenue for episodic-based ratesamounts that are paid by other insurance carriers, including Medicare Advantage programs; however, these ratesamounts can vary based upon the negotiated terms which generally range from 90%95% to 100% of Medicare rates.
Non-episodic based Revenue. Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to our established or estimated per-visit rates. Explicit price concessionsContractual revenue adjustments are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third parties and others for services provided and are deducted from gross revenue to determine net service revenue. We also make non-contractual revenue adjustments to non-episodic revenue for any implicit price concessions, based on our historical experience to reflect the estimated transaction price.Weprice. We receive a minimal amount of our net service revenue from patients who are either self-insured or are obligated for an insurance co-payment.
Hospice Revenue Recognition
Hospice Medicare Revenue
Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated payment rates. The estimated payment rates are predetermined daily or hourly rates for each of the four levels of care we deliver. The four levels of
care are routine care, general inpatient care, continuous home care and respite care. Routine care accounted for 97% of our total net Medicare hospice service revenue for each of 2018, 20172021, 2020 and 2016,2019, respectively. There are two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, we may also receive a service intensity add-on (“SIA”). The SIA is based on visits made in the last seven days of life by a registered nurse (“RN”) or medical social worker (“MSW”) for patients in a routine level of care.
The performance obligation is the delivery of hospice services to the patient, as determined by a physician, each day the patient is on hospice care.
We make adjustments to Medicare revenue for non-contractual revenue adjustments, which include our inability to obtain appropriate billing documentation or acceptable authorizations and other reasons unrelated to credit risk. We estimate the impact of these non-contractual revenue adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record it during the period services are rendered as an estimated price concession and as a reduction torendered. A 0.1% change in our outstanding patient accounts receivable.Medicare collection rate would impact our annual Medicare revenue by approximately $0.8 million.
Additionally, our hospice service revenue is subject to certain limitations on payments from Medicare which are considered variable consideration. We are subject to an inpatient cap limit and an overall Medicare payment cap for each provider number. We monitor these caps on a provider-by-provider basis and estimate amounts due back to Medicare if we estimate a cap has been exceeded. We record these adjustments as a reduction to revenue and an increase in accrued expenses within our consolidated balance sheet. Beginning for the cap year ending October 31, 2017, providerssheets. Providers are required to self-report and pay their estimated cap liability by February 28th28th of the following year. As of December 31, 2018,2021, we have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2012.2015. As of December 31, 2018,2021, we have recorded $1.7$4.5 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 20132016 through September 30, 2019.2022. As of December 31, 2017,2020, we had recorded $0.9$9.3 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 20132014 through September 30, 2018.2021.
Hospice Non-Medicare Revenue
Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to our established rates or estimated per day rates, as applicable. Explicit price concessionsContractual revenue adjustments are recorded for the difference between our establishedstandard rates and the amounts estimatedcontractual rates to be realizablerealized from patients, third partiesthird-party payors and others for services provided and are deducted from gross revenue to determine our net service revenue. We also make non-contractual adjustments to non-Medicare revenue for any implicit price concessions, based on our historical experience to reflect the estimated transaction price.
Personal Care Revenue Recognition
Personal Care Revenue
We generate net service revenuesrevenue by providing our services directly to patients based on authorized hours, visits or units determined by the relevant agency, at a rate that is either contractual or fixed by legislation. Net service revenue is recognized at the time services are rendered based on gross charges for the services provided, reduced by estimates for price concessions.contractual and non-contractual revenue adjustments. We receive payment for providing such services from payors, including state and local governmental agencies, managed care organizations, commercial insurers and private consumers. Payors include the following elder service agencies: Aging Services Access Points (ASAPs)("ASAPs"), Senior Care Options (SCOs)("SCOs"), Program of All-Inclusive Care for the Elderly (PACE)("PACE") and the Veterans Administration (VA)("VA").
High Acuity Care Revenue Recognition
High Acuity Care Revenue
Our revenues are derived from contracts with (1) health insurance plans for the coordination and provision of home recovery care services to patients who are enrolled members in those insurance plans and (2) health system partners for the coordination and provision of home recovery care services to patients who are discharged early from a health system facility to complete their inpatient stay at home.
Under our health insurance plan contracts, we provide home recovery care services for high acuity care patients on a full risk basis whereby we assume the risk for the coordination and payment of all required medical services necessary to treat the medical condition for which the patient was diagnosed in a home-based setting for a 30-day or 60-day episode of care in exchange for a fixed contracted bundled rate based upon the assigned diagnosis related group ("DRG"). Our performance obligation is the coordination and provision of patient care in accordance with physicians’ orders over either a 30-day or 60-day episode of care. The majority of our care coordination services and direct patient care is provided in the first five to seven days of the episode period (the "acute phase"). Monitoring services and follow-up direct patient care, as deemed necessary by the treating physician, is provided throughout the remainder of the episode. Since the majority of our services are provided during the acute phase, we recognize net service revenues over the acute phase based on gross charges for the services provided per the applicable managed care contract rates, reduced by estimates for revenue adjustments.
Under our contracts with health system partners, we provide home recovery care services for high acuity patients on a limited risk basis whereby we assume the risk for certain healthcare services during the remainder of an inpatient acute stay serviced at the patient's home in exchange for a contracted per diem rate. The performance obligation is the coordination and provision of required medical services, as determined by the treating physician, for each day the patient receives inpatient-equivalent care at home. As such, revenues are recognized as services are administered and as our performance obligations are satisfied on a per diem basis, reduced by estimates for revenue adjustments.
We recognize adjustments to revenue during the period in which changes to estimates of assigned patient diagnoses or episode terminations become known, in accordance with the applicable managed care contracts. For certain health insurance plans, revenue is reduced by amounts owed by enrollees to healthcare providers under deductible, coinsurance or copay provisions of health insurance plan policies, since those amounts are repaid to the health insurance plans by us as part of a retrospective reconciliation process.
Business Combinations
We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates. Assets acquired, liabilities assumed and noncontrolling interests, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets. In determining the fair value of identifiable intangible assets and any noncontrolling interests, we use various valuation techniques including the income approach, the cost approach and the market approach. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, growth rates and discount rates.
Goodwill and Other Intangible Assets
As of December 31, 2021, we had a goodwill balance of $1,196.1 million. Goodwill represents the amount of the purchase price in excess of the fair values assigned to the underlying identifiable net assets of acquired businesses. Goodwill is not amortized, but is subject to an annual impairment test. Tests are performed more frequently if events occur or circumstances
change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. These events or circumstances include, but are not limited to, a significant adverse change in the business environment, regulatory environment or legal factors, or a substantial decline in the market capitalization of our stock.
Generally Accepted Accounting Principles ("GAAP")U.S. GAAP allows for impairment testing to be done on either a quantitative or qualitative basis. During 2018,2021, we utilizedperformed a qualitative analysis for our annual impairment test and determined that there were no triggering events that would indicate thatassessment to determine if it is "moremore likely than not"not that the carrying valuesfair value of our reporting units are higherless than their respective fair values. As a result,carrying values by evaluating relevant events and circumstances including financial performance, market conditions and share price. Based on this assessment, we did not record any goodwill impairment charges and none ofconcluded that the goodwill associated with our varioushome health, hospice and high acuity care reporting units was not considered at risk of impairment as of October 31, 2018.2021. In addition to the qualitative assessment, we also performed a quantitative analysis for our personal care reporting unit due to the decline in revenues resulting from the impact of COVID-19 and staffing shortages using an income and market approach. Based on this analysis, we concluded that the goodwill associated with our personal care reporting unit was not considered at risk of impairment as of October 31, 2021. Since the date of our last annual goodwill impairment test, there have been no material developments, events, changes in operating performance or other circumstances that would cause management to believe it is more likely than not that the fair value of any of our reporting units would be less than their carrying amounts.
As of December 31, 2021, we had an other intangible assets balance of $111.2 million. Intangible assets consist of Certificatescertificates of Need,need, licenses, acquired names, non-compete agreements and non-compete agreements.technology. We amortize non-compete agreements and acquired names that we do not intend to use in the futureindefinitely on a straight-line basis over their estimated useful lives, which isare generally two to three years for non-compete agreements and up to fivethree years for acquired names. We amortize technology over its estimated useful service life, which is generally up to seven years. Our indefinite-lived intangible assets are reviewed for impairment annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. During 2018, weWe performed a qualitative assessment to determine thatof our indefinite-lived intangible assets were not impaired. Thereduring 2021 and determined that there have been no material developments, events, changes in operating performance or other circumstances that would cause management to believe it is more likely than not that the fair value of any of our indefinite-lived intangible assets would be less than their carrying amounts. During 2020, we also performed a qualitative assessment of our indefinite-lived intangible assets; as a result of this analysis, we wrote off approximately $4.2 million of acquired names that were no longer in use.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from fluctuations in interest rates. Our Term Loan and Revolving Credit Facility carriescarry a floating interest rate which is tied to the Eurodollar rate (i.e. LIBOR) and the Prime Rate and therefore, our consolidated statements of operations and our consolidated statements of cash flows are exposed to changes in interest rates. As of December 31, 2018,2021, the total amount of outstanding debt subject to interest rate fluctuations was $7.5$447.2 million. A 1.0% interest rate change would cause interest expense to change by approximately $0.1$4.5 million annually.annually, assuming the Company makes no principal repayments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Amedisys, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Amedisys, Inc. and subsidiaries (the Company) as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018,2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2018,2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 201924, 2022 expressed an unqualified opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue recognition in 2018, 2017 and 2016 due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisition of Contessa Health, Inc. – Evaluation of the fair value of noncontrolling interest and of certain intangible assets
As discussed in Notes 2 and 4 to the consolidated financial statements, the Company accounts for business combinations using the acquisition method of accounting. The Company acquired Contessa Health, Inc. (Contessa) on August 1, 2021. Intangible assets acquired in connection with this transaction included acquired names, technology and non-compete agreements. In addition, the Company recorded noncontrolling interest related to the acquisition.
We identified the evaluation of the fair value of the noncontrolling interest and of certain intangible assets, which consisted of acquired names and technology, acquired in the Contessa transaction as a critical audit matter. Subjective auditor judgment was required to evaluate the identification of intangible assets acquired and significant assumptions used in the valuation of noncontrolling interest and of certain intangible assets. Specifically, the significant assumptions included projected revenue growth rates, projected earnings before interest, taxes, depreciation and amortization (EBITDA), and the weighted average cost of capital (WACC). Changes to these assumptions could have had a significant effect on the Company’s estimate of fair value of noncontrolling interest and intangible assets.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition accounting process, including controls over the identification of intangible assets acquired and the development of the significant assumptions used in the valuation of the noncontrolling interest and of the intangible assets. We read the purchase agreement to identify the significant terms, conditions, and intangible assets acquired and compared them to the Company’s analysis of intangible assets acquired. We evaluated the Company’s projected revenue growth rates by comparing such assumptions to those of Contessa’s peers and to industry reports. We evaluated the Company’s projected EBITDA by comparing such assumptions to those of Contessa’s peers. Additionally, we compared the Company’s projected revenue growth rates and projected EBITDA to Contessa’s and the Company’s historical actual results. We involved valuation professionals with specialized skills and knowledge, who assisted in:
•evaluating the Company’s identification of intangible assets acquired
•evaluating the WACC, which was used by the Company to determine the discount rate, by comparing the Company's inputs to the WACC to publicly available data for comparable entities and assessing the resulting WACC.
Evaluation of the non-contractual revenue adjustment estimates for Home Health and Hospice
As discussed in Note 2 to the consolidated financial statements, the Company determines the transaction price for revenue contracts based on gross charges for services provided, reduced by contractual revenue adjustments and an estimate for non-contractual revenue adjustments. Non-contractual revenue adjustments are recorded for self-pay, uninsured patients, and other payors by major payor class based on historical collection experience, evaluated for current economic conditions. Adjustments resulting from payment reviews and adjustments arising from the inability to obtain appropriate billing documentation, authorizations, or face-to-face documentation are factors that are relevant to the estimate of ultimate collection. The non-contractual revenue adjustments represent the difference between amounts billed and amounts the Company expects to collect based on its collection history with similar payors.
We identified the evaluation of the non-contractual revenue adjustment estimates noted above for the Home Health and Hospice segments as a critical audit matter. Subjective and complex auditor judgment was required to evaluate the method and historical collection experience used by the Company when developing the non-contractual revenue adjustment estimate. Specifically, the significant judgments related to evaluating the relevance of historical collection experience to the determination of the estimate, which included evaluation of current conditions, trends, historical adjustment experience, and other factors.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s revenue process, including controls over the method and significant judgments for estimating non-contractual revenue adjustments noted above. We assessed the outcome of the estimation of non-contractual revenue adjustments in the prior period to identify circumstances or conditions that are relevant to the determination of the current year estimate. To assess the current year method and the relevance of the historical collection experience, we also evaluated current conditions, trends, historical adjustment experience, and other factors relevant to the estimation of non-contractual revenue adjustments.
/s/ KPMG LLP
We have served as the Company's auditor since 2002.
Baton Rouge, Louisiana
February 28, 2019
24, 2022
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
| | | | As of December 31, | | As of December 31, |
| | 2018 | | 2017 | | 2021 | | 2020 |
| ASSETS | | | | ASSETS | | | |
| Current assets: | | | | Current assets: | |
| Cash and cash equivalents | $ | 20,229 |
| | $ | 86,363 |
| Cash and cash equivalents | $ | 42,694 | | | $ | 81,808 | |
| Restricted cash | | Restricted cash | 3,075 | | | 1,549 | |
| Patient accounts receivable | 188,972 |
| | 201,196 |
| Patient accounts receivable | 274,961 | | | 255,145 | |
| Prepaid expenses | 7,568 |
| | 7,329 |
| Prepaid expenses | 10,356 | | | 10,217 | |
| Other current assets | 7,349 |
| | 16,268 |
| Other current assets | 25,598 | | | 13,265 | |
| Total current assets | 224,118 |
| | 311,156 |
| Total current assets | 356,684 | | | 361,984 | |
| Property and equipment, net of accumulated depreciation of $95,472 and $146,814 | 29,449 |
| | 31,122 |
| |
| Property and equipment, net of accumulated depreciation of $96,937 and $95,024 | | Property and equipment, net of accumulated depreciation of $96,937 and $95,024 | 18,435 | | | 23,719 | |
| Operating lease right of use assets | | Operating lease right of use assets | 101,257 | | | 93,440 | |
| Goodwill | 329,480 |
| | 319,949 |
| Goodwill | 1,196,090 | | | 932,685 | |
| Intangible assets, net of accumulated amortization of $33,050 and $30,610 | 44,132 |
| | 46,061 |
| |
| Intangible assets, net of accumulated amortization of $19,900 and $22,973 | | Intangible assets, net of accumulated amortization of $19,900 and $22,973 | 111,190 | | | 74,183 | |
| Deferred income taxes | 35,794 |
| | 56,064 |
| Deferred income taxes | 289 | | | 47,987 | |
| Other assets | 54,145 |
| | 49,130 |
| Other assets | 73,023 | | | 33,200 | |
| Total assets | $ | 717,118 |
| | $ | 813,482 |
| Total assets | $ | 1,856,968 | | | $ | 1,567,198 | |
| LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
| Current liabilities: | | | | Current liabilities: | |
| Accounts payable | $ | 28,531 |
| | $ | 25,384 |
| Accounts payable | $ | 38,217 | | | $ | 42,674 | |
| Payroll and employee benefits | 92,858 |
| | 89,936 |
| Payroll and employee benefits | 141,001 | | | 146,929 | |
| Accrued expenses | 99,475 |
| | 89,104 |
| Accrued expenses | 150,836 | | | 166,192 | |
| Provider relief fund advance | | Provider relief fund advance | — | | | 60,000 | |
| Current portion of long-term obligations | 1,612 |
| | 10,638 |
| Current portion of long-term obligations | 12,995 | | | 10,496 | |
| Current portion of operating lease liabilities | | Current portion of operating lease liabilities | 31,233 | | | 30,046 | |
| Total current liabilities | 222,476 |
| | 215,062 |
| Total current liabilities | 374,282 | | | 456,337 | |
| Long-term obligations, less current portion | 5,775 |
| | 78,203 |
| Long-term obligations, less current portion | 432,075 | | | 204,511 | |
| Operating lease liabilities, less current portion | | Operating lease liabilities, less current portion | 69,309 | | | 61,987 | |
| Other long-term obligations | 6,234 |
| | 3,791 |
| Other long-term obligations | 4,979 | | | 33,622 | |
| Total liabilities | 234,485 |
| | 297,056 |
| Total liabilities | 880,645 | | | 756,457 | |
| Commitments and Contingencies – Note 9 | | | | |
| Commitments and Contingencies – Note 11 | | Commitments and Contingencies – Note 11 | 0 | | 0 |
| Equity: | | | | Equity: | |
| Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued or outstanding | — |
| | — |
| Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued or outstanding | — | | | — | |
| Common stock, $0.001 par value, 60,000,000 shares authorized; 36,252,280 and 35,747,134 shares issued; and 31,973,505 and 33,964,767 shares outstanding | 36 |
| | 35 |
| |
| Common stock, $0.001 par value, 60,000,000 shares authorized; 37,674,868 and 37,470,212 shares issued; and 32,509,969 and 32,814,278 shares outstanding | | Common stock, $0.001 par value, 60,000,000 shares authorized; 37,674,868 and 37,470,212 shares issued; and 32,509,969 and 32,814,278 shares outstanding | 38 | | | 38 | |
| Additional paid-in capital | 603,666 |
| | 568,780 |
| Additional paid-in capital | 728,118 | | | 698,287 | |
| Treasury stock at cost 4,278,775 and 1,782,367 shares of common stock | (241,685 | ) | | (53,713 | ) | |
| Accumulated other comprehensive income | 15 |
| | 15 |
| |
| Treasury stock at cost, 5,164,899 and 4,655,934 shares of common stock | | Treasury stock at cost, 5,164,899 and 4,655,934 shares of common stock | (435,868) | | | (319,092) | |
| Retained earnings | 119,550 |
| | 204 |
| Retained earnings | 639,063 | | | 429,991 | |
| Total Amedisys, Inc. stockholders’ equity | 481,582 |
| | 515,321 |
| Total Amedisys, Inc. stockholders’ equity | 931,351 | | | 809,224 | |
| Noncontrolling interests | 1,051 |
| | 1,105 |
| Noncontrolling interests | 44,972 | | | 1,517 | |
| Total equity | 482,633 |
| | 516,426 |
| Total equity | 976,323 | | | 810,741 | |
| Total liabilities and equity | $ | 717,118 |
| | $ | 813,482 |
| Total liabilities and equity | $ | 1,856,968 | | | $ | 1,567,198 | |
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
| | | | For the Years Ended December 31, | | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
| Net service revenue | $ | 1,662,578 |
| | $ | 1,511,272 |
| | $ | 1,419,261 |
| Net service revenue | $ | 2,214,112 | | | $ | 2,071,519 | | | $ | 1,955,633 | |
| Other operating income | | Other operating income | 13,300 | | | 34,372 | | | — | |
| Cost of service, excluding depreciation and amortization | 992,863 |
| | 903,377 |
| | 834,381 |
| Cost of service, excluding depreciation and amortization | 1,233,356 | | | 1,185,369 | | | 1,150,337 | |
| General and administrative expenses: | | | | | | General and administrative expenses: | |
| Salaries and benefits | 316,522 |
| | 305,938 |
| | 306,981 |
| Salaries and benefits | 474,718 | | | 449,448 | | | 394,452 | |
| Non-cash compensation | 17,887 |
| | 16,295 |
| | 16,401 |
| Non-cash compensation | 23,809 | | | 26,730 | | | 25,040 | |
| Other | 166,897 |
| | 159,980 |
| | 180,048 |
| Other | 212,713 | | | 192,122 | | | 188,434 | |
| Depreciation and amortization | 13,261 |
| | 17,123 |
| | 19,678 |
| Depreciation and amortization | 30,901 | | | 28,802 | | | 18,428 | |
| Asset impairment charge | — |
| | 1,323 |
| | 4,432 |
| Asset impairment charge | — | | | 4,152 | | | 1,470 | |
| Securities Class Action Lawsuit settlement, net | — |
| | 28,712 |
| | — |
| |
| Operating expenses | 1,507,430 |
| | 1,432,748 |
| | 1,361,921 |
| Operating expenses | 1,975,497 | | | 1,886,623 | | | 1,778,161 | |
| Operating income | 155,148 |
| | 78,524 |
| | 57,340 |
| Operating income | 251,915 | | | 219,268 | | | 177,472 | |
| Other income (expense): | | | | | | Other income (expense): | |
| Interest income | 278 |
| | 158 |
| | 75 |
| Interest income | 49 | | | 292 | | | 78 | |
| Interest expense | (7,370 | ) | | (5,031 | ) | | (5,164 | ) | Interest expense | (9,525) | | | (11,038) | | | (14,515) | |
| Equity in earnings from equity method investments | 7,692 |
| | 3,381 |
| | 5,588 |
| Equity in earnings from equity method investments | 4,949 | | | 3,966 | | | 5,338 | |
| Gain (loss) on equity method investments | | Gain (loss) on equity method investments | 31,098 | | | (2,980) | | | — | |
| Miscellaneous, net | 3,240 |
| | 3,769 |
| | 3,727 |
| Miscellaneous, net | 1,745 | | | 1,311 | | | 2,037 | |
| Total other income, net | 3,840 |
| | 2,277 |
| | 4,226 |
| |
| Total other income (expense), net | | Total other income (expense), net | 28,316 | | | (8,449) | | | (7,062) | |
| Income before income taxes | 158,988 |
| | 80,801 |
| | 61,566 |
| Income before income taxes | 280,231 | | | 210,819 | | | 170,410 | |
| Income tax expense | (38,859 | ) | | (50,118 | ) | | (23,935 | ) | Income tax expense | (70,065) | | | (25,635) | | | (42,503) | |
| Net income | 120,129 |
| | 30,683 |
| | 37,631 |
| Net income | 210,166 | | | 185,184 | | | 127,907 | |
| Net income attributable to noncontrolling interests | (783 | ) | | (382 | ) | | (370 | ) | Net income attributable to noncontrolling interests | (1,094) | | | (1,576) | | | (1,074) | |
| Net income attributable to Amedisys, Inc. | $ | 119,346 |
| | $ | 30,301 |
| | $ | 37,261 |
| Net income attributable to Amedisys, Inc. | $ | 209,072 | | | $ | 183,608 | | | $ | 126,833 | |
| Basic earnings per common share: | | | | | | Basic earnings per common share: | | | | | |
| Net income attributable to Amedisys, Inc. common stockholders | $ | 3.64 |
| | $ | 0.90 |
| | $ | 1.12 |
| Net income attributable to Amedisys, Inc. common stockholders | $ | 6.41 | | | $ | 5.64 | | | $ | 3.95 | |
| Weighted average shares outstanding | 32,791 |
| | 33,704 |
| | 33,198 |
| Weighted average shares outstanding | 32,642 | | | 32,559 | | | 32,142 | |
| Diluted earnings per common share: | | | | | | Diluted earnings per common share: | |
| Net income attributable to Amedisys, Inc. common stockholders | $ | 3.55 |
| | $ | 0.88 |
| | $ | 1.10 |
| Net income attributable to Amedisys, Inc. common stockholders | $ | 6.34 | | | $ | 5.52 | | | $ | 3.84 | |
| Weighted average shares outstanding | 33,609 |
| | 34,304 |
| | 33,741 |
| Weighted average shares outstanding | 32,972 | | | 33,268 | | | 32,990 | |
|
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
| | | | For the Years Ended December 31, | | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
| Net income | $ | 120,129 |
| | $ | 30,683 |
| | $ | 37,631 |
| Net income | $ | 210,166 | | | $ | 185,184 | | | $ | 127,907 | |
| Other comprehensive income | — |
| | — |
| | — |
| Other comprehensive income | — | | | — | | | — | |
| Comprehensive income | 120,129 |
| | 30,683 |
| | 37,631 |
| Comprehensive income | 210,166 | | | 185,184 | | | 127,907 | |
| Comprehensive income attributable to non-controlling interests | (783 | ) | | (382 | ) | | (370 | ) | Comprehensive income attributable to non-controlling interests | (1,094) | | | (1,576) | | | (1,074) | |
| Comprehensive income attributable to Amedisys, Inc. | $ | 119,346 |
| | $ | 30,301 |
| | $ | 37,261 |
| Comprehensive income attributable to Amedisys, Inc. | $ | 209,072 | | | $ | 183,608 | | | $ | 126,833 | |
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except common stock shares)
| | | | | | | | | | | | | | | | | | | | Total | | Common Stock | | Additional
Paid-in
Capital | | Treasury
Stock | | Accumulated
Other
Comprehensive
Income | | Retained
Earnings | | Noncontrolling
Interests |
| | Total | | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Accumulated Other Comprehensive Loss (Income) | | Retained Earnings (Deficit) | | Noncontrolling Interests | Shares | | Amount | |
| Shares | | Amount | | |
| Balance, December 31, 2015 | $ | 410,436 |
| | 34,786,966 |
| | $ | 35 |
| | $ | 504,290 |
| | $ | (26,966 | ) | | $ | 15 |
| | $ | (67,806 | ) | | $ | 868 |
| |
| Issuance of stock – employee stock purchase plan | 2,483 |
| | 63,688 |
| | — |
| | 2,483 |
| | — |
| | — |
| | — |
| | — |
| |
| Issuance of stock – 401(k) plan | 6,682 |
| | 145,660 |
| | — |
| | 6,682 |
| | — |
| | — |
| | — |
| | — |
| |
| Issuance/(cancellation) of non-vested stock | — |
| | 257,263 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
| Non-cash compensation | 16,401 |
| | — |
| | — |
| | 16,401 |
| | — |
| | — |
| | — |
| | — |
| |
| Tax benefit from stock options exercised and restricted stock vesting | 7,241 |
| | — |
| | — |
| | 7,241 |
| | — |
| | — |
| | — |
| | — |
| |
| Surrendered shares | (7,493 | ) | | — |
| | — |
| | — |
| | (7,493 | ) | | — |
| | — |
| | — |
| |
| Shares repurchased | (12,315 | ) | | — |
| | — |
| | — |
| | (12,315 | ) | | — |
| | — |
| | — |
| |
| Noncontrolling interest distribution | (329 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (329 | ) | |
| Assets contributed to equity investment | 405 |
| | — |
| | — |
| | 375 |
| | — |
| | — |
| | — |
| | 30 |
| |
| Net income | 37,631 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 37,261 |
| | 370 |
| |
| Balance, December 31, 2016 | 461,142 |
| | 35,253,577 |
| | 35 |
| | 537,472 |
| | (46,774 | ) | | 15 |
| | (30,545 | ) | | 939 |
| |
| Issuance of stock – employee stock purchase plan | 2,382 |
| | 53,848 |
| | — |
| | 2,382 |
| | — |
| | — |
| | — |
| | — |
| |
| Issuance of stock – 401(k) plan | 8,223 |
| | 156,487 |
| | — |
| | 8,223 |
| | — |
| | — |
| | — |
| | — |
| |
| Issuance/(cancellation) of non-vested stock | — |
| | 139,016 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
| Exercise of stock options | 4,554 |
| | 144,206 |
| | — |
| | 4,554 |
| | — |
| | — |
| | — |
| | — |
| |
| Non-cash compensation | 16,295 |
| | — |
| | — |
| | 16,295 |
| | — |
| | — |
| | — |
| | — |
| |
| Tax benefit from stock options exercised and restricted stock vesting | 448 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 448 |
| | — |
| |
| Surrendered shares | (6,939 | ) | | — |
| | — |
| | — |
| | (6,939 | ) | | — |
| | — |
| | — |
| |
| Noncontrolling interest distribution | (216 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (216 | ) | |
| Assets contributed to equity investment | (146 | ) | | — |
| | — |
| | (146 | ) | | — |
| | — |
| | — |
| | — |
| |
| Net income | 30,683 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 30,301 |
| | 382 |
| |
| Balance, December 31, 2017 | 516,426 |
| | 35,747,134 |
| | 35 |
| | 568,780 |
| | (53,713 | ) | | 15 |
| | 204 |
| | 1,105 |
| |
| Balance, December 31, 2018 | | Balance, December 31, 2018 | $ | 482,633 | | | 36,252,280 | | | $ | 36 | | | $ | 603,666 | | | $ | (241,685) | | | $ | 15 | | | $ | 119,550 | | | $ | 1,051 | |
| Issuance of stock – employee stock purchase plan | 2,429 |
| | 38,961 |
| | — |
| | 2,429 |
| | — |
| | — |
| | — |
| | — |
| Issuance of stock – employee stock purchase plan | 3,187 | | | 30,483 | | | — | | | 3,187 | | | — | | | — | | | — | | | — | |
| Issuance of stock – 401(k) plan | 9,232 |
| | 129,451 |
| | — |
| | 9,232 |
| | — |
| | — |
| | — |
| | — |
| Issuance of stock – 401(k) plan | 9,753 | | | 79,056 | | | — | | | 9,753 | | | — | | | — | | | — | | | — | |
| Issuance/(cancellation) of non-vested stock | — |
| | 174,044 |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
| | — |
| Issuance/(cancellation) of non-vested stock | — | | | 189,134 | | | 1 | | | (1) | | | — | | | — | | | — | | | — | |
| Exercise of stock options | 5,953 |
| | 162,690 |
| | — |
| | 5,953 |
| | — |
| | — |
| | — |
| | — |
| Exercise of stock options | 3,611 | | | 87,068 | | | — | | | 3,611 | | | — | | | — | | | — | | | — | |
| Non-cash compensation | 17,887 |
| | — |
| | — |
| | 17,887 |
| | — |
| | — |
| | — |
| | — |
| Non-cash compensation | 25,040 | | | — | | | — | | | 25,040 | | | — | | | — | | | — | | | — | |
| Surrendered shares | (6,570 | ) | | — |
| | — |
| | — |
| | (6,570 | ) | | — |
| | — |
| | — |
| Surrendered shares | (9,556) | | | — | | | — | | | — | | | (9,556) | | | — | | | — | | | — | |
| Noncontrolling interest distributions | | Noncontrolling interest distributions | (1,062) | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,062) | |
| Net income | | Net income | 127,907 | | | — | | | — | | | — | | | — | | | — | | | 126,833 | | | 1,074 | |
| Balance, December 31, 2019 | | Balance, December 31, 2019 | 641,513 | | | 36,638,021 | | | 37 | | | 645,256 | | | (251,241) | | | 15 | | | 246,383 | | | 1,063 | |
| Issuance of stock – employee stock purchase plan | | Issuance of stock – employee stock purchase plan | 3,562 | | | 21,561 | | | — | | | 3,562 | | | — | | | — | | | — | | | — | |
| Issuance of stock – 401(k) plan | | Issuance of stock – 401(k) plan | 3,057 | | | 18,312 | | | — | | | 3,057 | | | — | | | — | | | — | | | — | |
| Issuance/(cancellation) of non-vested stock | | Issuance/(cancellation) of non-vested stock | — | | | 169,489 | | | — | | | — | | | — | | | — | | | — | | | — | |
| Exercise of stock options | | Exercise of stock options | 6,325 | | | 622,829 | | | 1 | | | 6,324 | | | — | | | — | | | — | | | — | |
| Non-cash compensation | | Non-cash compensation | 26,730 | | | — | | | — | | | 26,730 | | | — | | | — | | | — | | | — | |
| Surrendered shares | | Surrendered shares | (54,493) | | | — | | | — | | | 13,358 | | | (67,851) | | | — | | | — | | | — | |
| Noncontrolling interest distributions | | Noncontrolling interest distributions | (1,122) | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,122) | |
| Write-off of other comprehensive income | | Write-off of other comprehensive income | (15) | | | — | | | — | | | — | | | — | | | (15) | | | — | | | — | |
| Net income | | Net income | 185,184 | | | — | | | — | | | — | | | — | | | — | | | 183,608 | | | 1,576 | |
| Balance, December 31, 2020 | | Balance, December 31, 2020 | 810,741 | | | 37,470,212 | | | 38 | | | 698,287 | | | (319,092) | | | — | | | 429,991 | | | 1,517 | |
| Issuance of stock – employee stock purchase plan | | Issuance of stock – employee stock purchase plan | 3,968 | | | 20,823 | | | — | | | 3,968 | | | — | | | — | | | — | | | — | |
| Issuance/(cancellation) of non-vested stock | | Issuance/(cancellation) of non-vested stock | — | | | 151,365 | | | — | | | — | | | — | | | — | | | — | | | — | |
| Exercise of stock options | | Exercise of stock options | 2,054 | | | 32,468 | | | — | | | 2,054 | | | — | | | — | | | — | | | — | |
| Non-cash compensation | | Non-cash compensation | 23,809 | | | — | | | — | | | 23,809 | | | — | | | — | | | — | | | — | |
| Surrendered shares | | Surrendered shares | (16,898) | | | — | | | — | | | — | | | (16,898) | | | — | | | — | | | — | |
| Shares repurchased | (181,402 | ) | | — |
| | — |
| | — |
| | (181,402 | ) | | — |
| | — |
| | — |
| Shares repurchased | (99,878) | | | — | | | — | | | — | | | (99,878) | | | — | | | — | | | — | |
| Noncontrolling interest distribution | (1,090 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1,090 | ) | |
| Repurchase of noncontrolling interest | (361 | ) | | — |
| | — |
| | (614 | ) | | — |
| | — |
| | — |
| | 253 |
| |
| Noncontrolling interest contributions | | Noncontrolling interest contributions | 250 | | | — | | | — | | | — | | | — | | | — | | | — | | | 250 | |
| Noncontrolling interest distributions | | Noncontrolling interest distributions | (1,747) | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,747) | |
| Acquired noncontrolling interest | | Acquired noncontrolling interest | 43,858 | | | — | | | — | | | — | | | — | | | — | | | — | | | 43,858 | |
| Net income | 120,129 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 119,346 |
| | 783 |
| Net income | 210,166 | | | — | | | — | | | — | | | — | | | — | | | 209,072 | | | 1,094 | |
| Balance, December 31, 2018 | $ | 482,633 |
| | 36,252,280 |
| | $ | 36 |
| | $ | 603,666 |
| | $ | (241,685 | ) | | $ | 15 |
| | $ | 119,550 |
| | $ | 1,051 |
| |
| Balance, December 31, 2021 | | Balance, December 31, 2021 | $ | 976,323 | | | 37,674,868 | | | $ | 38 | | | $ | 728,118 | | | $ | (435,868) | | | $ | — | | | $ | 639,063 | | | $ | 44,972 | |
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| | | | For the Years Ended December 31, | | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
| Cash Flows from Operating Activities: | | | | | | Cash Flows from Operating Activities: | | | | | |
| Net income | $ | 120,129 |
| | $ | 30,683 |
| | $ | 37,631 |
| Net income | $ | 210,166 | | | $ | 185,184 | | | $ | 127,907 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | |
| Depreciation and amortization | 13,261 |
| | 17,123 |
| | 19,678 |
| Depreciation and amortization | 30,901 | | | 28,802 | | | 18,428 | |
| Non-cash compensation | 17,887 |
| | 16,295 |
| | 16,401 |
| Non-cash compensation | 23,809 | | | 26,730 | | | 25,040 | |
| 401(k) employer match | 8,976 |
| | 8,754 |
| | 6,875 |
| |
| Write-off of investment | — |
| | — |
| | 196 |
| |
| Loss on disposal of property and equipment | 714 |
| | — |
| | 582 |
| |
| Non-cash 401(k) employer match | | Non-cash 401(k) employer match | — | | | — | | | 10,509 | |
| Amortization and impairment of operating lease right of use assets | | Amortization and impairment of operating lease right of use assets | 40,364 | | | 39,140 | | | 35,905 | |
| (Gain) loss on disposal of property and equipment | | (Gain) loss on disposal of property and equipment | (124) | | | (30) | | | 141 | |
| (Gain) loss on equity method investments | | (Gain) loss on equity method investments | (31,098) | | | 2,980 | | | — | |
| Write-off of other comprehensive income | | Write-off of other comprehensive income | — | | | (15) | | | — | |
| Deferred income taxes | 20,271 |
| | 52,178 |
| | 24,547 |
| Deferred income taxes | 44,582 | | | (26,560) | | | 13,466 | |
| Equity in earnings from equity method investments | (7,692 | ) | | (3,381 | ) | | (5,588 | ) | Equity in earnings from equity method investments | (4,949) | | | (3,966) | | | (5,338) | |
| Amortization of deferred debt issuance costs/debt discount | 797 |
| | 735 |
| | 740 |
| Amortization of deferred debt issuance costs/debt discount | 917 | | | 869 | | | 873 | |
| Return on equity investment | 6,158 |
| | 5,321 |
| | 4,323 |
| |
| Return on equity method investments | | Return on equity method investments | 5,343 | | | 5,444 | | | 4,955 | |
| Asset impairment charge | — |
| | 1,323 |
| | 4,432 |
| Asset impairment charge | — | | | 4,152 | | | 1,470 | |
| Changes in operating assets and liabilities, net of impact of acquisitions: | | | | | | Changes in operating assets and liabilities, net of impact of acquisitions: | |
| Patient accounts receivable | 12,224 |
| | (34,672 | ) | | (36,000 | ) | Patient accounts receivable | (18,030) | | | 2,114 | | | (24,146) | |
| Other current assets | 8,679 |
| | (4,940 | ) | | 4,231 |
| Other current assets | (12,202) | | | (7,181) | | | (2,682) | |
| Other assets | 2,947 |
| | (12,749 | ) | | (11,415 | ) | Other assets | (1,017) | | | 31 | | | 832 | |
| Accounts payable | 3,165 |
| | (2,843 | ) | | 3,970 |
| Accounts payable | (4,353) | | | 1,941 | | | (11,329) | |
| Accrued expenses | 13,524 |
| | 31,843 |
| | (7,618 | ) | Accrued expenses | (26,915) | | | 39,839 | | | 42,096 | |
| Other long-term obligations | 2,443 |
| | 61 |
| | (726 | ) | Other long-term obligations | (28,796) | | | 27,717 | | | (329) | |
| Operating lease liabilities | | Operating lease liabilities | (36,645) | | | (34,695) | | | (32,295) | |
| Operating lease right of use assets | | Operating lease right of use assets | (3,060) | | | (3,544) | | | (3,503) | |
| Net cash provided by operating activities | 223,483 |
| | 105,731 |
| | 62,259 |
| Net cash provided by operating activities | 188,893 | | | 288,952 | | | 202,000 | |
| Cash Flows from Investing Activities: | | | | | | Cash Flows from Investing Activities: | | | | | |
| Proceeds from sale of deferred compensation plan assets | 715 |
| | 622 |
| | 230 |
| |
| Proceeds from the sale of deferred compensation plan assets | | Proceeds from the sale of deferred compensation plan assets | 135 | | | 101 | | | 448 | |
| Proceeds from the sale of property and equipment | 54 |
| | 249 |
| | — |
| Proceeds from the sale of property and equipment | 144 | | | 80 | | | 162 | |
| Purchases of property and equipment | (6,558 | ) | | (10,707 | ) | | (15,717 | ) | Purchases of property and equipment | (6,302) | | | (5,332) | | | (7,888) | |
| Investments in equity method investees | (7,144 | ) | | (476 | ) | | (1,040 | ) | |
| Investments in technology assets | | Investments in technology assets | (419) | | | — | | | — | |
| Purchase of investment | | Purchase of investment | (5,200) | | | (875) | | | (210) | |
| Proceeds from sale of equity method investment | | Proceeds from sale of equity method investment | — | | | 17,876 | | | — | |
| Acquisitions of businesses, net of cash acquired | (9,260 | ) | | (33,715 | ) | | (35,522 | ) | Acquisitions of businesses, net of cash acquired | (269,965) | | | (298,958) | | | (345,460) | |
| Net cash used in investing activities | (22,193 | ) | | (44,027 | ) | | (52,049 | ) | Net cash used in investing activities | (281,607) | | | (287,108) | | | (352,948) | |
| Cash Flows from Financing Activities: | | | | | | Cash Flows from Financing Activities: | | | | | |
| Proceeds from issuance of stock upon exercise of stock options | 5,953 |
| | 4,554 |
| | — |
| Proceeds from issuance of stock upon exercise of stock options | 2,054 | | | 6,325 | | | 3,611 | |
| Proceeds from issuance of stock to employee stock purchase plan | 2,429 |
| | 2,382 |
| | 2,483 |
| Proceeds from issuance of stock to employee stock purchase plan | 3,968 | | | 3,562 | | | 3,187 | |
| Shares withheld upon stock vesting | (6,570 | ) | | (6,939 | ) | | — |
| |
| Tax benefit from stock options exercised and restricted stock vesting | — |
| | — |
| | 7,241 |
| |
| Non-controlling interest distribution | (1,090 | ) | | (216 | ) | | (329 | ) | |
| Shares withheld to pay taxes on non-cash compensation | | Shares withheld to pay taxes on non-cash compensation | (16,898) | | | (54,493) | | | (9,556) | |
| Noncontrolling interest contributions | | Noncontrolling interest contributions | 250 | | | — | | | — | |
| Noncontrolling interest distributions | | Noncontrolling interest distributions | (1,747) | | | (1,122) | | | (1,062) | |
| Proceeds from borrowings under term loan | | Proceeds from borrowings under term loan | 290,312 | | | — | | | 175,000 | |
| Proceeds from borrowings under revolving line of credit | 138,000 |
| | — |
| | 134,500 |
| Proceeds from borrowings under revolving line of credit | 500,700 | | | 684,200 | | | 262,500 | |
| Repayments of borrowings under revolving line of credit | (130,500 | ) | | — |
| | (134,500 | ) | Repayments of borrowings under revolving line of credit | (551,700) | | | (703,200) | | | (200,000) | |
| Principal payments of long-term obligations | (91,450 | ) | | (5,319 | ) | | (5,000 | ) | Principal payments of long-term obligations | (9,143) | | | (10,249) | | | (5,624) | |
| Debt issuance costs | (2,433 | ) | | — |
| | — |
| Debt issuance costs | (2,792) | | | — | | | (847) | |
| Provider relief fund advance | | Provider relief fund advance | (60,000) | | | 60,000 | | | — | |
| Purchase of company stock | (181,402 | ) | | — |
| | (12,315 | ) | Purchase of company stock | (99,878) | | | — | | | — | |
| Assets contributed to equity investment | — |
| | — |
| | 405 |
| |
| Repurchase of noncontrolling interest | (361 | ) | | — |
| | — |
| |
| Net cash used in financing activities | (267,424 | ) | | (5,538 | ) | | (7,515 | ) | |
| Net (decrease) increase in cash and cash equivalents | (66,134 | ) | | 56,166 |
| | 2,695 |
| |
| Cash and cash equivalents at beginning of period | 86,363 |
| | 30,197 |
| | 27,502 |
| |
| Cash and cash equivalents at end of period | $ | 20,229 |
| | $ | 86,363 |
| | $ | 30,197 |
| |
| Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | 55,126 | | | (14,977) | | | 227,209 | |
| Net (decrease) increase in cash, cash equivalents and restricted cash | | Net (decrease) increase in cash, cash equivalents and restricted cash | (37,588) | | | (13,133) | | | 76,261 | |
| Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | 83,357 | | | 96,490 | | | 20,229 | |
| Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | $ | 45,769 | | | $ | 83,357 | | | $ | 96,490 | |
| Supplemental Disclosures of Cash Flow Information: | | | | | | Supplemental Disclosures of Cash Flow Information: | | | | | |
| Cash paid for interest | $ | 3,522 |
| | $ | 2,697 |
| | $ | 2,897 |
| Cash paid for interest | $ | 5,291 | | | $ | 6,207 | | | $ | 9,628 | |
| Cash paid for income taxes, net of refunds received | $ | 14,278 |
| | $ | 315 |
| | $ | 755 |
| Cash paid for income taxes, net of refunds received | $ | 34,097 | | | $ | 50,721 | | | $ | 29,522 | |
| Supplemental Disclosures of Non-Cash Financing Activities: | | | | | | |
| Note payable issued for software licenses | $ | 418 |
| | $ | — |
| | $ | — |
| |
| Capital leases | $ | 2,936 |
| | $ | — |
| | $ | — |
| |
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
1. NATURE OF OPERATIONS, CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS
Amedisys, Inc., a Delaware corporation (together with its consolidated subsidiaries, referred to herein as “Amedisys,” “we,” “us,” or “our”), is a multi-state provider of home health, hospice, personal care and personalhigh acuity care services with approximately 73%75%, 76%75% and 79%74% of our revenue derived from Medicare for 2018, 20172021, 2020 and 2016,2019, respectively. As of December 31, 2018,2021, we owned and operated 323331 Medicare-certified home health care centers, 84175 Medicare-certified hospice care centers, and 1214 personal-care care centers and 8 high acuity care joint ventures in 3438 states within the United States and the District of Columbia.
Recently Adopted Accounting Pronouncements
On January 1, 2018,2021, the Company adopted Accounting Standards Update (“ASU”("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) 2020-10, Codification Improvements, which included minor technical corrections and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferralclarifications to improve consistency and clarify the application of various provisions of the Effective Date (collectively, "ASC 606")codification by amending the codification to include all disclosure guidance in the appropriate disclosure sections and by amending and adding new headings, cross referencing to other guidance and refining or correcting terminology. Our adoption of this standard did not have a material effect on our consolidated financial statements.
During the fourth quarter of 2021, the Company adopted ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which was intended to increase transparency around financial reporting regarding government assistance by requiring disclosure of information about (1) the new accounting standards issued by the Financial Accounting Standards Board ("FASB") on revenue recognition, using the full retrospective method. ASC 606 outlines a single comprehensive model to use intypes of government assistance received, (2) an entity's accounting for revenue arising from contracts with customers. The standards supersede existing revenue recognition requirementsthe government assistance received and eliminate most industry-specific guidance from U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). The core principle(3) the effect of the revenue recognition standard is to requireassistance on an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. As a result of the Company's adoption of ASC 606, the revenue and related estimated uncollectible amounts owed to us by non-Medicare payors that were historically classified as provision for doubtful accounts are now considered a price concession in determining net service revenue. Accordingly, the Company reports uncollectible balances due from third-party payors and uncollectible balances associated with patient responsibility as a reduction of the transaction price and therefore, as a reduction in net service revenue (or as it relates to Hospice room and board, an increase in cost of service, excluding depreciation and amortization) when historically these amounts were classified as provision for doubtful accounts within operating expenses within our consolidated statements of operations. In addition, the adoption of ASC 606 resulted in increased disclosure, including qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance to assist entities with evaluating whether transactions should be accounted for as an acquisition (or disposal) of assets or a business.entity's financial statements. The ASU is effective for annual and interim periods beginning after December 15, 2017. We adopted2021, with early adoption permitted. See Note 3 – Novel Coronavirus Pandemic ("COVID-19") for the disclosures associated with this ASU effectivestandard.
On January 1, 2018,2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which provided guidance for measuring credit losses on financial instruments. Our adoption of this standard did not have a prospective basis. The impactmaterial effect on our consolidated financial statements and related disclosures will depend onstatements.
During the facts and circumstancesfourth quarter of any specific future transactions as evaluated under2020, the new framework.
In January 2017, the FASB issuedCompany adopted ASU 2017-04, Intangibles - Goodwill and Other2019-12, Income Taxes (Topic 350)740) - Simplifying the TestAccounting for Goodwill ImpairmentIncome Taxes, which eliminateseliminated certain exceptions related to the requirement to calculateapproach for intraperiod tax allocation, the implied fair valuemethodology for calculating taxes during the interim periods and the recognition of goodwill to measure a goodwill impairment charge (Step 2deferred tax liabilities for outside basis differences. This guidance also simplified aspects of the goodwill impairment test). Instead, impairment will be measured usingaccounting for franchise taxes, enacted changes in tax laws or rates and clarified the difference betweenaccounting for transactions that result in a step-up in the carrying amount and the fair valuetax basis of the reporting unit.goodwill. The ASU isguidance was effective for annualinterim and interimannual periods beginning after December 15, 2019. Early2020, with early adoption is permitted. We adopted this ASU effective January 1, 2018, on a prospective basis and will apply this guidance to our future tests of goodwill impairment.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides specific guidance on eight cash flow classification issues not specifically addressed by U.S. GAAP. The ASU is effective for annual and interim periods beginning after December 15, 2017. The standard should be applied using a retrospective transition method unless it is impractical to do so for some of the issues. In such case, the amendments for those issues would be applied prospectively as of the earliest date practicable. Our adoption of this standard on January 1, 2018, using a retrospective transition method for each period presented, didprospective basis was not have an effect on ourmaterial to the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting, which simplified the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liability, and classification within the statement of cash flows. The ASU was effective for annual and interim periods beginning after December 15, 2016. We adopted this ASU effectiveOn January 1, 2017, and as2019, the Company adopted Accounting Standards Codification ("ASC") 842, Leases, using a result, we recorded a $0.4 million increase to our non-current deferred tax asset and retained earnings for tax benefits that were not previously recognized under the prior rules. Additionally, on a prospective basis, we recorded excess tax benefits as a discrete item in our income tax provision within our consolidated statements of operations. We recorded excess tax benefits of $3.2 million within our consolidated statements of operations for the year ended December 31, 2017. Historically, these amounts were recorded as additional paid-in capital in our consolidated balance sheet. We also elected to prospectively apply the change to the presentation of cash payments made to taxing authorities on the employees' behalf for shares withheld upon stock vesting within our consolidated statements of cash flows for the year ended December 31, 2017. We have also elected to continue
our current policy of estimating forfeitures of stock-based compensation awards at grant date and revising in subsequent periods to reflect actual forfeitures.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), modified retrospective transition approach, which requires the new standard to be applied to all leases existing at the date of initial application. Under ASC 842, lessees are required to recognize a lease liability and right-of-use asset ("ROU asset") for all leases with a term greater than twelve months and to disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements (collectively, "Topic 842"). Under Topic 842,Additionally, leases will beare classified as either financing or operating. Theoperating; the classification will determinedetermines the pattern of expense recognition and classification within the income statement.
Topic 842 is effective for us on January 1, 2019, with early adoption permitted.statement of operations. We expect to adoptused the new standard on the effective date using a modified retrospective transition approach, which requires the new standard to be applied to all leases existing at the date of initial application. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application. We will use thestandard's effective date as our date of initial application. Consequently, our financial information willwas not be updated and the disclosures required under the new standard willwere not be provided for dates and periods beforeprior to January 1, 2019.
The new standard providesprovided several optional practical expedients that cancould be adopted at transition. We expect to electelected the "package of practical expedients," which allowsallowed us to not reassess our prior conclusions regarding lease identification, lease classification and initial direct costs. We dodid not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us.
We expect adoption of this standard to have a material effect on our financial statements. We are still evaluating the overall impact of adoption; however, we currently believe the The most significant effects relaterelated to this adoption pertained to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our real estate and fleet operating leases; and (2) significant new disclosures about our leasing activities. We do not expect a significant change in our leasing activities between now and adoption.
OnUpon adoption, we are expecting to recognize additional operating liabilities ofrecognized approximately $80 million in operating leases liabilities with corresponding ROU assets of approximately the same amount, based on the present value of the remaining minimum rental payments under current leasing arrangements for our existing operating leases.
amount. The new standard also providesprovided practical expedients for an entity’s ongoing accounting. We are planning to electhave elected the practical expedient that allows us to not separate lease and non-lease components for all of our leases. We are also planning
On January 1, 2019, the Company adopted ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to applyNonemployees Share-Based Payment Accounting, which expanded the short-term lease recognition exemptionscope of Topic 718 to include share-based payments issued to nonemployees for goods or services. Our adoption of this standard did not have an effect on our consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. Generally Accepted Accounting Principles ("U.S. GAAP") to contract modifications and hedging relationships that reference the London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued, subject to meeting certain information technology leases; therefore, wecriteria. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which adds implementation guidance to ASU 2020-04 to clarify certain optional expedients in Topic 848. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and may generally be applied prospectively through December 31, 2022. This standard will not recognize ROU assets and lease liabilities for these leases.have an effect on our consolidated financial statements.
Use of Estimates
Our accounting and reporting policies conform with U.S. GAAP. In preparing the consolidated financial statements, we are required to make estimates and assumptions that impact the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.
Reclassifications and Comparability
Certain reclassifications have been made to prior periods’ financial statements in order to conform to the current period’s presentation. Effective January 1, 2018, we adopted ASC 606 on a full retrospective basis which required the reclassification of certain previously reported results. See Note 2 - Summary of Significant Accounting Policies for further details on the impact of the adoption of ASC 606.
Principles of Consolidation
These consolidated financial statements include the accounts of Amedisys, Inc., and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in our accompanying consolidated financial statements, and business combinations accounted for as purchases have been included in our consolidated financial statements from their respective dates of acquisition. In addition to our wholly owned subsidiaries, we also have certain equity investments that are accounted for as set forth below.
Investments
We consolidate investments when the entity is a variable interest entity ("VIE") and we are the primary beneficiary or if we have controlling interests in the entity, which is generally ownership in excess of 50%. Third party equity interests in our consolidated joint ventures are reflected as noncontrolling interests in our consolidated financial statements. During 2016, we sold a 30% interest in one of our care centers while maintaining a controlling interest in the newly formed joint venture; we repurchased the 30% interest during 2018.
We account for investments in entities in which we have the ability to exercise significant influence under the equity method if we hold 50% or less of the voting stock and the entity is not a variable interest entityVIE in which we are the primary beneficiary. During 2018, we made a $7.0 million investment in a healthcare analytics company; this investment will be accounted for under the equity method. The book value of investments that we account for under the equity method of accounting is $35.1totaled $53.1 million and $26.4$14.2 million as of December 31, 20182021 and 2017,2020, respectively, and is reflected in other assets within our consolidated balance sheets.
We account for investments in entities in which we have less than a 20% ownership interest under the cost method of accounting if we do not have the ability to exercise significant influence over the investee. During 2021, we made a $5.0 million investment in ConnectRN, a workforce optimization company; this investment is accounted for under the cost method.
In connection with the acquisition of Contessa Health ("Contessa") on August 1, 2021, we obtained interests in several joint ventures with health system partners and a professional corporation that employs clinicians. Each of these entities meets the criteria to be classified as a VIE. As of December 31, 2021, we are consolidating 7 of our 8 joint ventures with health system partners as well as the professional corporation as we have concluded that we are the primary beneficiary of these VIEs. We have management agreements in place with each of these entities whereby we manage the entities and run the day-to-day operations. As such, we possess the power to direct the activities that most significantly impact the economic performance of the VIEs. The significant activities include, but are not limited to, negotiating provider and payor contracts, establishing patient care policies and protocols, making employment and compensation decisions, developing the operating and capital budgets, performing marketing activities and providing accounting support. We also have the obligation to absorb any expected losses and the right to receive benefits. Additionally, from time to time we may be required to provide joint venture funding. We account for one of our joint ventures with a health system partner under the equity method of accounting as we are not considered to be the primary beneficiary of this VIE.
65
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Our adoption of ASC 606 on January 1, 2018, on a full retrospective basis, impacted the Company's previously reported results as follows (amounts in thousands):
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
The terms of the agreements with each VIE prohibit us from using the assets of the VIE to satisfy the obligations of other entities. The carrying amount of the VIEs’ assets and liabilities included in our consolidated balance sheets are as follows (amounts in millions):
| | | | | |
| As of December 31, 2021 |
| ASSETS | |
| Current assets: | |
| Cash and cash equivalents | $ | 3.1 | |
| Patient accounts receivable | 2.4 | |
| Other current assets | 0.1 | |
| Total current assets | 5.6 | |
| Property and equipment | 0.1 | |
| Total assets | $ | 5.7 | |
| LIABILITIES | |
| Current liabilities: | |
| Payroll and employee benefits | $ | 0.3 | |
| Accrued expenses | 3.4 | |
| Current portion of long-term obligations | 0.8 | |
| Total current liabilities | 4.5 | |
| Other long-term obligations | — | |
| Total liabilities | $ | 4.5 | |
During 2021, a third-party acquired a majority of the issued and outstanding membership interests of one of our equity method investments, Medalogix, for cash, with the remaining membership interests rolling over into a newly formed entity that includes Medalogix as well as another healthcare predictive data and analytics company. We rolled over 100% of our ownership interest in Medalogix to the newly formed entity, and in connection with this transaction, we recognized a $31.1 million gain based on the purchase price of Medalogix which is reflected in gain (loss) on equity method investments within our consolidated statement of operations for the year ended December 31, 2021.
During 2020, we sold our investment in the Heritage Healthcare Innovation Fund, LP via a secondary transaction for $17.9 million which resulted in a $3.0 million loss which is reflected in gain (loss) on equity method investments within our consolidated statement of operations for the year ended December 31, 2020. The Company's original investment was made in 2010 and no longer fit within our strategic areas of focus. Proceeds from the sale were used to pay down debt and fund capital needs.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
| | | | | | | | | |
| | As Previously Reported | Adjustment for the Adoption of ASC 606 | As Adjusted |
| | As of December 31, 2017 |
| Consolidated Balance Sheets | | | |
| Patient accounts receivable | $ | 201,196 |
| $ | — |
| $ | 201,196 |
|
| Allowance for doubtful accounts | $ | 20,866 |
| $ | (20,866 | ) | $ | — |
|
| | | | |
| | For the year ended December 31, 2017 |
| Consolidated Statements of Operations | |
| Net service revenue | $ | 1,533,680 |
| $ | (22,408 | ) | $ | 1,511,272 |
|
| Cost of service, excluding depreciation and amortization | $ | 900,726 |
| $ | 2,651 |
| $ | 903,377 |
|
| Provision for doubtful accounts | $ | 25,059 |
| $ | (25,059 | ) | $ | — |
|
| Net income attributable to Amedisys, Inc. | $ | 30,301 |
| $ | — |
| $ | 30,301 |
|
| | | | |
| Consolidated Statements of Cash Flows | | | |
| Provision for doubtful accounts | $ | 25,059 |
| $ | (25,059 | ) | $ | — |
|
| Changes in operating assets and liabilities, net of impact of acquisitions: | | | |
| Patient accounts receivable | $ | (59,731 | ) | $ | 25,059 |
| $ | (34,672 | ) |
| | | | |
| | For the year ended December 31, 2016 |
| Consolidated Statements of Operations | | | |
| Net service revenue | $ | 1,437,454 |
| $ | (18,193 | ) | $ | 1,419,261 |
|
| Cost of service, excluding depreciation and amortization | $ | 833,055 |
| $ | 1,326 |
| $ | 834,381 |
|
| Provision for doubtful accounts | $ | 19,519 |
| $ | (19,519 | ) | $ | — |
|
| Net income attributable to Amedisys, Inc. | $ | 37,261 |
| $ | — |
| $ | 37,261 |
|
| | | | |
| Consolidated Statements of Cash Flows | | | |
| Provision for doubtful accounts | $ | 19,519 |
| $ | (19,519 | ) | $ | — |
|
| Changes in operating assets and liabilities, net of impact of acquisitions: | | | |
| Patient accounts receivable | $ | (55,519 | ) | $ | 19,519 |
| $ | (36,000 | ) |
We account for revenue from contracts with customers in accordance with ASC 606,Revenue from Contracts with Customers, and as such, we recognize revenue in the period in which we satisfy our performance obligations under our contracts by transferring our promised services to our customers in amounts that reflect the consideration to which we expect to be entitled in exchange for providing patient care, which are the transaction prices allocated to the distinct services. The Company'sOur cost of obtaining contracts is not material.
Revenues are recognized as performance obligations are satisfied, which varies based on the nature of the services provided. Our performance obligation is the delivery of patient care services in accordance with the nature and frequency of services outlined in physicians' orders, which are determined by a physician based on a patient's specific goals.
The Company'sOur performance obligations relate to contracts with a duration of less than one year; therefore, the Company haswe have elected to apply the optional exemption provided by ASC 606 and isare not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. The unsatisfied or partially unsatisfied performance obligations are generally completed when the patients are discharged, which generally occurs within days or weeks of the end of the reporting period.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
We determine the transaction price based on gross charges for services provided, reduced by estimates for explicitcontractual and implicit price concessions. Explicit price concessions include contractualnon-contractual revenue adjustments. Contractual revenue adjustments providedare recorded for the difference between our standard rates and the contracted rates to be realized from patients, third-party payors and third-party payors. Implicit
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
price concessionsothers for services provided. Non-contractual revenue adjustments include discounts provided to self-pay, uninsured patients or other payors, adjustments resulting from payment reviews and adjustments arising from our inability to obtain appropriate billing documentation, authorizations or face-to-face documentation. Subsequent changes to the estimate of the transaction price are recorded as adjustments to net service revenue in the period of change. Subsequent changes that are determined to be the result of an adverse change in the patient's ability to pay (i.e. change in credit risk) are recorded as a provision for doubtful accounts.
Explicit price concessions are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third party payors and others for services provided.
Implicit price concessionsNon-contractual revenue adjustments are recorded for self-pay, uninsured patients and other payors by major payor class based on our historical collection experience, aged accounts receivable by payor and current economic conditions. The implicit price concession representsnon-contractual revenue adjustments represent the difference between amounts billed and amounts we expect to collect based on our collection history with similar payors. The Company assesses itsWe assess our ability to collect for the healthcare services provided at the time of patient admission based on the Company'sour verification of the patient's insurance coverage under Medicare, Medicaid, and other commercial or managed care insurance programs. Medicare represents approximately 73%75% of the Company'sour consolidated net service revenue.
Amounts due from third-party payors, primarily commercial health insurers and government programs (Medicare and Medicaid), include variable consideration for retroactive revenue adjustments due to settlements of audits and payment reviews. We determine our estimates for price concessionsnon-contractual revenue adjustments related to audits and payment reviews based on our historical experience and success rates in the claim appeals and adjudication process. Revenue is recorded at amounts we estimate to be realizable for services provided.
We determine our estimates for price concessionsnon-contractual revenue adjustments related to our inability to obtain appropriate billing documentation, authorizations or face-to-face documentation based on our historical experience which primarily includes a historical collection rate of over 99% on Medicare claims. Revenue is recorded at amounts we estimate to be realizable for services provided.
Revenue by payor class as a percentage of total net service revenue is as follows:
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 | | 2019 |
| Home Health: | | | | | |
| Medicare | 41 | % | | 41 | % | | 44 | % |
| Non-Medicare - Episodic-based | 8 | % | | 7 | % | | 9 | % |
| Non-Medicare - Non-episodic based | 12 | % | | 13 | % | | 12 | % |
| Hospice (1): | | | | | |
| Medicare | 34 | % | | 34 | % | | 30 | % |
| Non-Medicare | 2 | % | | 2 | % | | 1 | % |
| Personal Care | 3 | % | | 3 | % | | 4 | % |
| High Acuity Care (2) | — | % | | — | % | | — | % |
| 100 | % | | 100 | % | | 100 | % |
|
| | | | | | | | |
| | As of December 31, |
| | 2018 | | 2017 | | 2016 |
| Home Health Medicare | 50 | % | | 53 | % | | 58 | % |
| Home Health Non-Medicare - Episodic-based | 9 | % | | 8 | % | | 6 | % |
| Home Health Non-Medicare - Non-episodic based | 12 | % | | 11 | % | | 11 | % |
| Hospice Medicare | 23 | % | | 23 | % | | 21 | % |
| Hospice Non-Medicare | 1 | % | | 1 | % | | 1 | % |
| Personal Care | 5 | % | | 4 | % | | 3 | % |
| | 100 | % | | 100 | % | | 100 | % |
(2) Acquired Contessa Health on August 1, 2021.
Home Health Revenue Recognition
Medicare Revenue
Net service revenue is recorded underEffective January 1, 2020, the Centers for Medicare prospectiveand Medicaid Services ("CMS") implemented a revised case-mix adjustment methodology, the Patient-Driven Groupings Model ("PDGM"), to better align payment system (“PPS”) based on an established Federal Medicarewith patient care needs and to ensure that clinically complex and ill beneficiaries have adequate access to home health episodecare. PDGM uses 30-day periods of care rather than 60-day episodes of care as the unit of payment, rate, that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if a patient’s care was unusually costly (capped at 10%eliminates the use of total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of therapy visits was four or fewer; (c) a partialprovided in determining payment if a patient transferred to another provider or we admitted a patient transferring from another provider before completing the episode; (d) a payment adjustment based upon the level of therapy services required (with various incremental adjustments made for additional visits, with larger payment increases associated with the sixth, fourteenth and twentieth visit thresholds); (e) the number of episodes of care provided to a patient, regardless of whether the same home health provider provided care for the entire series of episodes; (f) changes in the base episode payments established by the Medicare Program; and (g) adjustments to the base episode payments for case mix and geographic wages. Medicare rates are basedrelies more heavily on the severity of the patient's condition, service needs and goals,clinical characteristics and other factors relating to the cost of providing services and supplies, bundled into an episode of care, not to exceed 60 days. An episode starts the first day a billable visit is performed and ends 60 days later or upon discharge, if earlier, with multiple continuous episodes allowed.patient information.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave their home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services, and receive treatment under a plan of care established and periodically reviewed by a physician. All Medicare contracts are required to have a signed plan of care which represents a single performance obligation, comprisingcomprised of the delivery of a series of distinct services that are substantially similar and have a similar pattern of transfer to the customer. Accordingly, the Company accountswe account for the series of services ("episode") as a single performance obligation satisfied over time, as the customer simultaneously receives and consumes the benefits of the goods and services provided. Expected MedicareAn episode starts the first day a billable visit is performed and ends 60 days later or upon discharge, if earlier, with multiple continuous episodes allowed. Under PDGM, each 60-day episode includes two 30-day payment periods.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Net service revenue per episode is recognizedrecorded based on the established Federal Medicare home health payment rate for a pro-rated service output method, utilizing30-day period of care. ASC 606 notes that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice. We have elected to apply the "right to invoice" practical expedient and therefore, our revenue recognition is based on the reimbursement we are entitled to for each 30-day payment period. We utilize our historical average length of episode priorstay for each 30-day period of care as the measure of progress towards the satisfaction of our performance obligation.
PDGM uses timing, admission source, functional impairment levels and principal and other diagnoses to discharge.
case-mix adjust payments. The base episodecase-mix adjusted payment can be adjustedfor a 30-day period of care is subject to additional adjustments based on eachcertain variables, including, but not limited to (a) an outlier payment if our patient's health including clinical condition, functional abilities,care was unusually costly (capped at 10% of total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of visits provided was less than the established threshold, which ranges from 2 to 6 visits and service needs, as well asvaries for every case-mix group under PDGM; (c) a partial payment if a patient transferred to another provider or from another provider before completing the 30-day period of care; and (d) the applicable geographic wage index, low utilization, patient transfersindex. Payments for routine and other factors. The services covered bynon-routine supplies are included in the episode30-day payment include all disciplines of care in addition to medical supplies. rate.
Medicare can also make various adjustments to payments received if we are unable to produce appropriate billing documentation or acceptable authorizations. In addition, we make adjustments to Medicare revenue if we find we are unable to obtain appropriate billing documentation, authorizations or face-to-face documentation. We estimate the impact of such adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record this estimate during the period in which services are rendered as an estimated price concession andto revenue with a corresponding reduction to patient accounts receivable.
A portionAmounts due from Medicare include variable consideration for retroactive revenue adjustments due to settlements of audits and payment reviews. We determine our estimates for non-contractual revenue adjustments related to audits and payment reviews based on our historical experience and success rates in the claim appeals and adjudication process.
The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave his/her home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services and receive treatment under a plan of care established and periodically reviewed by a physician. In order to provide greater flexibility during the novel coronavirus pandemic ("COVID-19"), CMS relaxed the definition of homebound status through the duration of the public health emergency. During the pandemic, a beneficiary is considered homebound if they have been instructed by a physician not to leave their home because of a confirmed or suspected COVID-19 diagnosis or if the patient has a condition that makes them more susceptible to contracting COVID-19. Therefore, if a beneficiary is homebound due to COVID-19 and requires skilled services, the services will be covered under the Medicare home health benefit.
During 2020, 20% of the reimbursement from each Medicare episode is30-day payment period was billed near the start of each episode,30-day period of care, referred to as a request for anticipated payment ("RAP"), and cash iswas typically received before all services arewere rendered. The amount of revenue recognized for episodes of care which are incomplete at period end is based on the company's average percentage of days complete on episodes as of the end of the year. As of December 31, 2018 and 2017, the difference between theAny cash received from Medicare for a requestRAP for anticipated payment (“RAP”) on episodes in progress anda 30-day period of care that exceeded the associated estimated revenue earned was immaterial and, therefore, the resulting credits were recorded as a reduction to our outstanding patient accounts receivable inaccrued expenses within our consolidated balance sheets for such periods.sheets. CMS fully eliminated all upfront payments associated with RAPs effective January 1, 2021.
Non-Medicare Revenue
Episodic-based Revenue. We recognize revenue in a similar manner as we recognize Medicare revenue for episodic-based ratesamounts that are paid by other insurance carriers, including Medicare Advantage programs; however, these ratesamounts can vary based upon the negotiated terms, the majority of which generally range from 90%95% to 100% of Medicare rates.
Non-episodic based Revenue. Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to our established or estimated per-visit rates. Explicit price concessionsContractual revenue adjustments are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third parties and others for services provided and are deducted from gross revenue to determine net service revenue. We also make non-contractual revenue adjustments to non-episodic revenue for any implicit price concessions, based on our historical experience to reflect the estimated transaction price. We receive a minimal amount of our net service revenue from patients who are either self-insured or are obligated for an insurance co-payment.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Hospice Revenue Recognition
Hospice Medicare Revenue
Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated payment rates. The estimated payment rates are predetermined daily or hourly rates for each of the four levels of care we deliver. The four levels of care are routine care, general inpatient care, continuous home care and respite care. Routine care accounted for 97% of our total net Medicare hospice service revenue for each of 2018, 20172021, 2020 and 2016,2019, respectively. There are two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, we may also receive a service intensity add-on (“SIA”). The SIA is based on visits made in the last seven days of life by a registered nurse (“RN”) or medical social worker (“MSW”) for patients in a routine level of care.
The performance obligation is the delivery of hospice services to the patient, as determined by a physician, each day the patient is on hospice care.
We make adjustments to Medicare revenue for non-contractual revenue adjustments, which include our inability to obtain appropriate billing documentation or acceptable authorizations and other reasons unrelated to credit risk. We estimate the impact of these non-contractual revenue adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record it during the period services are rendered as an estimated price concession and as a reduction to our outstanding patient accounts receivable.rendered.
Additionally, our hospice service revenue is subject to certain limitations on payments from Medicare which are considered variable consideration. We are subject to an inpatient cap limit and an overall Medicare payment cap for each provider number. We monitor
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
these caps on a provider-by-provider basis and estimate amounts due back to Medicare if we estimate a cap has been exceeded. We record these adjustments as a reduction to revenue and an increase in accrued expenses within our consolidated balance sheet. Beginning for the cap year ending October 31, 2017, providerssheets. Providers are required to self-report and pay their estimated cap liability by February 28th28th of the following year. As of December 31, 2018,2021, we have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2012.2015. As of December 31, 2018,2021, we have recorded $1.7$4.5 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 20132016 through September 30, 2019.2022. As of December 31, 2017,2020, we had recorded $0.9$9.3 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 20132014 through September 30, 2018.2021.
Hospice Non-Medicare Revenue
Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to our established rates or estimated per day rates, as applicable. Explicit price concessionsContractual revenue adjustments are recorded for the difference between our establishedstandard rates and the amounts estimatedcontractual rates to be realizablerealized from patients, third partiesthird-party payors and others for services provided and are deducted from gross revenue to determine our net service revenue. We also make non-contractual adjustments to non-Medicare revenue for any implicit price concessions, based on our historical experience to reflect the estimated transaction price.
Personal Care Revenue Recognition
Personal Care Revenue
We generate net service revenues by providing our services directly to patients based on authorized hours, visits or units determined by the relevant agency, at a rate that is either contractual or fixed by legislation. Net service revenue is recognized at the time services are rendered based on gross charges for the services provided, reduced by estimates for price concessions.contractual and non-contractual revenue adjustments. We receive payment for providing such services from payors, including state and local governmental agencies, managed care organizations, commercial insurers and private consumers. Payors include the following elder service agencies: Aging Services Access Points (ASAPs)("ASAPs"), Senior Care Options (SCOs)("SCOs"), Program of All-Inclusive Care for the Elderly (PACE)("PACE") and the Veterans Administration (VA)("VA").
High Acuity Care Revenue Recognition
High Acuity Care Revenue
Our revenues are derived from contracts with (1) health insurance plans for the coordination and provision of home recovery care services to patients who are enrolled members in those insurance plans and (2) health system partners for the coordination and provision of home recovery care services to patients who are discharged early from a health system facility to complete their inpatient stay at home.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Under our health insurance plan contracts, we provide home recovery care services for high acuity care patients on a full risk basis whereby we assume the risk for the coordination and payment of all required medical services necessary to treat the medical condition for which the patient was diagnosed in a home-based setting for a 30-day or 60-day episode of care in exchange for a fixed contracted bundled rate based upon the assigned diagnosis related group ("DRG"). Our performance obligation is the coordination and provision of patient care in accordance with physicians’ orders over either a 30-day or 60-day episode of care. The majority of our care coordination services and direct patient care is provided in the first five to seven days of the episode period (the "acute phase"). Monitoring services and follow-up direct patient care, as deemed necessary by the treating physician, is provided throughout the remainder of the episode. Since the majority of our services are provided during the acute phase, we recognize net service revenues over the acute phase based on gross charges for the services provided per the applicable managed care contract rates, reduced by estimates for revenue adjustments.
Under our contracts with health system partners, we provide home recovery care services for high acuity patients on a limited risk basis whereby we assume the risk for certain healthcare services during the remainder of an inpatient acute stay serviced at the patient's home in exchange for a contracted per diem rate. The performance obligation is the coordination and provision of required medical services, as determined by the treating physician, for each day the patient receives inpatient-equivalent care at home. As such, revenues are recognized as services are administered and as our performance obligations are satisfied on a per diem basis, reduced by estimates for revenue adjustments.
We recognize adjustments to revenue during the period in which changes to estimates of assigned patient diagnoses or episode terminations become known, in accordance with the applicable managed care contracts. For certain health insurance plans, revenue is reduced by amounts owed by enrollees to healthcare providers under deductible, coinsurance or copay provisions of health insurance plan policies, since those amounts are repaid to the health insurance plans by us as part of a retrospective reconciliation process.
Government Grants
We account for government grants in accordance with ASU 2021-10, Government Assistance (Topic 832) by applying the grant model in accordance with International Accounting Standard ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance, and as such, we recognize grant income on a systematic basis in line with the recognition of expenses or the loss of revenues for which the grants are intended to compensate. We recognize grants once both of the following conditions are met: (1) we are able to comply with the relevant conditions of the grant and (2) the grant will be received. See Note 3 – Novel Coronavirus Pandemic ("COVID-19") for additional information on our accounting for government funds received under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and the Mass Home Care ASAP COVID-19 Provider Sustainability Program.
Cash, and Cash Equivalents and Restricted Cash
Cash and cash equivalents include certificates of deposit and all highly liquid debt instruments with maturities of three months or less when purchased. Our cash balance as of December 31, 2020 included CARES Act Provider Relief Fund ("PRF") funds totaling approximately $58 million, which were repaid in October 2021. Restricted cash includes cash that is not available for ordinary business use. As of December 31, 2021, we had $3.1 million of restricted cash that was placed into an escrow account related to the indemnity and closing payment adjustment provisions within the purchase agreements for various acquisitions. As of December 31, 2020, we had $1.5 million of restricted cash that was placed into an escrow account related to the indemnity provisions within the Asana Hospice purchase agreement.
The following table summarizes the balances related to our cash, cash equivalents and restricted cash (amounts in millions):
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
| Cash and cash equivalents | $ | 42.7 | | | $ | 81.8 | |
| Restricted cash | 3.1 | | | 1.5 | |
| Cash, cash equivalents and restricted cash | $ | 45.8 | | | $ | 83.3 | |
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Patient Accounts Receivable
We report accounts receivable from services rendered at their estimated transaction price, which includes price concessionscontractual and non-contractual revenue adjustments based on the amounts expected to be due from payors. Our patient accounts receivable are uncollateralized and consist of amounts due from Medicare, Medicaid, other third-party payors and patients. Our non-Medicare third-party payor base is comprised of a diverse group of payors that are geographically dispersed across the country. As of December 31, 2018,2021, there is no single payor, other than Medicare, that accounts for more than 10% of our total outstanding patient receivables. Thus, we believe there are no other significant concentrations of receivables that would subject us to any significant credit risk in the collection of our patient accounts receivable. We write off accounts on a monthly basis once we have exhausted our collection efforts and deem an account to be uncollectible. We believe the collectibilitycollectability risk associated with our Medicare accounts, which represent 56%68% and 59%64% of our net patient accounts receivable at December 31, 20182021 and December 31, 2017,2020, respectively, is limited due to our historical collection rate of over 99% from Medicare and the fact that Medicare is a U.S. government payor.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
We do not believe there are any significant concentrations of revenues from any payor that would subject us to any significant credit risk in the collection of our accounts receivable.
Medicare Home Health
For our home health patients, our pre-billing process includes verifying that we are eligible for payment from Medicare for the services that we provide to our patients. Our Medicare billing begins with a process to ensure that our billings are accurate through the utilization of an electronic Medicare claim review. We submitPrior to January 1, 2021, we submitted a RAP for 60%20% of our estimated payment for the initial episode at the starteach 30-day period of care or 50% of the estimated payment for any subsequent episodes of care contiguous with the first episode for a particular patient. The full amount of the episode is billed after the episode has been completed (“final billed”).care. The RAP received for that particular episode iswas then deducted from our final payment. If a final bill is not submitted within the greater of 120 days from the start of the episode, or 60 days from the date the RAP was paid, any RAPs received for that episode will be recouped by Medicare from any other claims in process for that particular provider number. The RAP and final claim must then be resubmitted.Effective January 1, 2021, CMS eliminated all upfront payments associated with RAPs.
Medicare Hospice
For our hospice patients, our pre-billing process includes verifying that we are eligible for payment from Medicare for the services that we provide to our patients. Our Medicare billing begins with a process to ensure that our billings are accurate through the utilization of an electronic Medicare claim review. We bill Medicare on a monthly basis for the services provided to the patient.
Non-Medicare Home Health, Hospice, Personal Care and PersonalHigh Acuity Care
For our non-Medicare patients, our pre-billing process primarily begins with verifying a patient’s eligibility for services with the applicable payor. Once the patient has been confirmed for eligibility, we will provide services to the patient and bill the applicable payor. Our review and evaluation of non-Medicare accounts receivable includes a detailed review of outstanding balances and special consideration to concentrations of receivables from particular payors or groups of payors with similar characteristics that would subject us to any significant credit risk.
Property and Equipment
Property and equipment is stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets or life of the lease, if shorter. Additionally, we have internally developed computer software for our own use. Additions and improvements (including interest costs for construction of qualifying long-lived assets) are capitalized. Maintenance and repair expenses are charged to expense as incurred. The cost of property and equipment sold or disposed of and the related accumulated depreciation are eliminated from the property and related accumulated depreciation accounts, and any gain or loss is credited or charged to other general and administrative expenses.
We assess the impairment of a long-lived asset group whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include but are not limited to the following:
•A significant change in the extent or manner in which the long-lived asset group is being used.
•A significant change in the business climate that could affect the value of the long-lived asset group.
•A significant change in the market value of the assets included in the asset group.
If we determine that the carrying value of long-lived assets may not be recoverable, we compare the carrying value of the asset group to the undiscounted cash flows expected to be generated by the asset group. If the carrying value exceeds the
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
undiscounted cash flows, an impairment charge is indicated. An impairment charge is recognized to the extent that the carrying value of the asset group exceeds its fair value.
We generally provide for depreciation over the following estimated useful service lives.
| | | | | |
| Years |
| Building | Years39 |
Building | 39 |
| Leasehold improvements | Lesser of lease term or expected useful life |
| Equipment and furniture | 3 to 7 |
| Vehicles | 5 |
| Computer software | 32 to 57 |
CapitalFinance leases | 3 |
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
During 2015, we began the transition of all our care centers from our proprietary operating system to Homecare Homebase (“HCHB”), a leading home health and hospice platform, with all of our care centers operating on HCHB as of December 31, 2016. As part of our conversion process, we determined that a number of assets (primarily laptops) were not compatible with HCHB and had no other alternative or secondary use. As a result, we recorded a non-cash asset impairment charge of $4.4 million to write-off these assets during the year ended December 31, 2016.
During 2018, we reviewed the balances of our property and equipment and as a result, eliminated those asset balances and related accumulated depreciation for which the asset was no longer in service.
The following table summarizes the balances related to our property and equipment for 20182021 and 20172020 (amounts in millions):
| | | | As of December 31, | | As of December 31, |
| | 2018 | | 2017 | | 2021 | | 2020 |
| Building and leasehold improvements | 8.7 |
| | 7.8 |
| Building and leasehold improvements | $ | 9.1 | | | $ | 9.0 | |
| Equipment and furniture | 53.4 |
| | 72.9 |
| Equipment and furniture | 54.7 | | | 53.1 | |
| Capital leases | 2.9 |
| | — |
| |
| Finance leases | | Finance leases | 4.5 | | | 5.9 | |
| Computer software | 59.9 |
| | 97.2 |
| Computer software | 47.0 | | | 50.7 | |
| | 124.9 |
| | 177.9 |
| | 115.3 | | | 118.7 | |
| Less: accumulated depreciation | (95.5 | ) | | (146.8 | ) | Less: accumulated depreciation | (96.9) | | | (95.0) | |
| | $ | 29.4 |
| | $ | 31.1 |
| | $ | 18.4 | | | $ | 23.7 | |
Depreciation expense for 2018, 20172021, 2020 and 20162019 was $10.8$12.1 million, $14.4$12.1 million and $17.2$11.6 million, respectively.
Business Combinations
We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates. Assets acquired, liabilities assumed and noncontrolling interests, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets. In determining the fair value of identifiable intangible assets and any noncontrolling interests, we use various valuation techniques including the income approach, the cost approach and the market approach. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, growth rates and discount rates.
Goodwill and Other Intangible Assets
As of December 31, 2021, we had a goodwill balance of $1,196.1 million. Goodwill represents the amount of the purchase price in excess of the fair values assigned to the underlying identifiable net assets of acquired businesses. Goodwill is not amortized, but is subject to an annual impairment test. Tests are performed more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. These events or circumstances include, but are not limited to, a significant adverse change in the business environment, regulatory environment or legal factors, or a substantial decline in the market capitalization of our stock.
Each of our operating segments described in Note 1314 – Segment Information is considered to represent an individual reporting unit for goodwill impairment testing purposes. We consider each of our home health care centers to constitute an individual business for which discrete financial information is available. However, since these care centers have substantially similar operating and economic characteristics and resource allocationallocations and since significant investment decisions concerning these businesses are centralized and the benefits broadly distributed, we have aggregated these care centers and deemed them to constitute a single reporting unit. We have applied this same aggregation principle to our hospice and personal-care care centers and high acuity care joint ventures and have also deemed each of them to be a single reporting unit.
During 2018,2021, we performed a qualitative assessment to determine if it is more likely than not that the fair value of theour reporting units are less than their carrying values by evaluating relevant events and circumstances including financial performance,
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
market conditions and share price. Based on this assessment, we did not record any goodwill impairment charges and none ofconcluded that the goodwill associated with our varioushome health, hospice and high acuity care reporting units was not considered at risk of impairment as of October 31, 2018.2021. In addition to the qualitative assessment, we also performed a quantitative analysis for our personal care reporting unit due to the decline in revenues resulting from the impact of COVID-19 and staffing shortages using an income and market approach. Based on this analysis, we concluded that the goodwill associated with our personal care reporting unit was not considered at risk of impairment as of October 31, 2021. Since the date of our last annual goodwill impairment test,analysis, there have been no material developments, events, changes in operating performance or other circumstances that would cause management to believe it is more likely than not that the fair value of any of our reporting units would be less than their carrying amounts.
As of December 31, 2021, we had an other intangibles assets balance of $111.2 million. Intangible assets consist of Certificatescertificates of Need,need, licenses, acquired names, non-compete agreements and non-compete agreements.technology. We amortize non-compete agreements and acquired names that we do not intend to use in the futureindefinitely on a straight-line basis over their estimated useful lives, which isare generallytwo to three years for non-compete agreements and up to fivethree years for acquired names. We amortize technology over its estimated useful service life, which is generally up to seven years. Our indefinite-lived intangible assets are reviewed for impairment annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. During 2018, weWe performed a qualitative assessment to determine thatof our indefinite-lived intangible assets were not impaired. Thereduring 2021 and determined that there have been no material developments, events, changes in operating performance or other circumstances that would cause management to believe it is more likely than not that the fair value of any of our indefinite-lived intangible assets would be less than their carrying amounts. During 2020, we also performed a qualitative assessment of our indefinite-lived intangible assets; as a result of this analysis, we wrote off approximately $4.2 million of acquired names that were no longer in use.
Debt Issuance Costs
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
During 2018,2021, we recorded an additional $2.4$2.8 million in deferred debt issuance costs as a reduction to long-term obligations, less current portion in our consolidated balance sheet in connection with our newentry into the Second Amended Credit Agreement (See Note 68 - Long-Term Obligations). As of December 31, 20182021 and 2017,2020, we had unamortized debt issuance costs of $3.5$4.5 million and $1.9$2.7 million, respectively, recorded as a reduction to long-term obligations, less current portion in our accompanying consolidated balance sheets. We amortize deferred debt issuance costs related to our long-term obligations over the term of the obligation through interest expense, unless the debt is extinguished, in which case unamortized balances are immediately expensed. We amortized $0.8 million, $0.7 million and $0.7 million in deferred debt issuance costs in 2018, 2017 and 2016, respectively. The unamortized debt issuance costs of $3.5$4.5 million at December 31, 2018,2021 will be amortized over a weighted-average amortization period of 4.54.6 years.
Fair Value of Financial Instruments
The following details our financial instruments where the carrying value and the fair value differ (amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | Fair Value at Reporting Date Using |
| Financial Instrument | Carrying Value as of
December 31, 2021 | | Quoted Prices in Active
Markets for Identical
Items
(Level 1) | | Significant Other
Observable Inputs
(Level 2) | | Significant
Unobservable Inputs
(Level 3) |
| Long-term obligations | $ | 448.0 | | | $ | — | | | $ | 474.9 | | | $ | — | |
The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The three levels of inputs are as follows:
•Level 1 – Quoted prices in active markets for identical assets and liabilities.
•Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;liabilities, quoted prices in markets that are not active;active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 – Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
Our deferred compensation plan assets are recorded at fair value and are considered a level 2 measurement. For our other financial instruments, including our cash and cash equivalents, patient accounts receivable, accounts payable, payroll and employee benefits and accrued expenses, we estimate the carrying amounts approximate fair value. As of
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018, the carrying amount of our long-term debt approximates fair value.2021
Income Taxes
We use the asset and liability approach for measuring deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates. Our deferred tax calculation requires us to make certain estimates about future operations. Deferred tax assets are reduced by a valuation allowance when we believe it is more likely than not that some portion or all of the deferred tax assets will not be realized. The effect of a change in tax rate is recognized as income or expense in the period that includes the enactment date. As of December 31, 20182021 and 2017,2020, our net deferred tax assets were $35.8$0.3 million and $56.1$48.0 million, respectively. Our net deferred tax asset at December 31, 2017 was reduced $21.4 million as a result of the remeasurement of deferred taxes using the reduced U.S. corporate tax rates included in H.R. 1 (Tax Cuts and Jobs Act) enacted on December 22, 2017.
Management regularly assesses the ability to realize deferred tax assets recorded in the Company’s entities based upon the weight of available evidence, including such factors as the recent earnings history and expected future taxable income. In the event future taxable income is below management’s estimates or is generated in tax jurisdictions different than projected, we could be required to increase the valuation allowance for deferred tax assets. This would result in an increase in our effective tax rate.
Share-Based Compensation
We record all share-based compensation as expense in the financial statements measured at the fair value of the award. We recognize compensation cost on a straight-line basis over the requisite service period for each separately vesting portion of the award. Upon adoption of ASU 2016-09 in 2017, we started recording the excess tax benefits related to stock option exercises as operating cash flows; these amounts were previously classified as financing cash flows. Share-based compensation expense for 2018, 20172021, 2020 and 20162019 was $17.9$23.8 million, $16.3$26.7 million and $16.4$25.0 million, respectively, and the total income tax benefit recognized for these expenses was $4.3$6.0 million, $6.4$4.7 million and $6.4$4.6 million, respectively.
Weighted-Average Shares Outstanding
Net income per share attributable to Amedisys, Inc. common stockholders, calculated on the treasury stock method, is based on the weighted average number of shares outstanding during the period. The following table sets forth, for the periods indicated, shares used in our computation of weighted-average shares outstanding, which are used to calculate our basic and diluted net income attributable to Amedisys, Inc. common stockholders (amounts in thousands):
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Weighted average number of shares outstanding – basic | 32,642 | | | 32,559 | | | 32,142 | |
| Effect of dilutive securities: | | | | | |
| Stock options | 122 | | | 420 | | | 545 | |
| Non-vested stock and stock units | 208 | | | 289 | | | 303 | |
| Weighted average number of shares outstanding – diluted | 32,972 | | | 33,268 | | | 32,990 | |
| Anti-dilutive securities | 114 | | | 25 | | | 117 | |
Advertising Costs
We expense advertising costs as incurred. Advertising expense for 2021, 2020 and 2019 was $7.4 million, $6.5 million and $7.0 million, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
3. NOVEL CORONAVIRUS PANDEMIC ("COVID-19")
In March 2020, the World Health Organization declared COVID-19 a pandemic. As a healthcare at home company, we have been and will continue to be impacted by the effects of COVID-19; however, we remain committed to carrying out our mission of caring for our patients. We will continue to closely monitor the impact of COVID-19 on all aspects of our business, including the impacts to our employees, patients and suppliers; however, at this time, we are unable to estimate the ultimate impact the pandemic will have on our consolidated financial condition, results of operations or cash flows. |
| | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Weighted average number of shares outstanding – basic | 32,791 |
| | 33,704 |
| | 33,198 |
|
| Effect of dilutive securities: | | | | | |
| Stock options | 502 |
| | 281 |
| | 162 |
|
| Non-vested stock and stock units | 316 |
| | 319 |
| | 381 |
|
| Weighted average number of shares outstanding – diluted | 33,609 |
| | 34,304 |
| | 33,741 |
|
| Anti-dilutive securities | 50 |
| | 271 |
| | 221 |
|
Advertising CostsFor our wholly-owned subsidiaries, we utilized PRF funds to the extent we had qualifying COVID-19 expenses; we did not use PRF funds to cover lost revenues resulting from COVID-19. The grant income associated with the COVID-19 expenses incurred through June 30, 2021 is reflected in other operating income within our consolidated statements of operations.
We expense advertisingdid not fully utilize the funds received; all unutilized funds were repaid in October 2021. In summary, the total funds that we received from the CARES Act PRF were accounted for as follows as of December 31, 2021 (amounts in millions):
| | | | | |
| Amount |
| Funds utilized through June 30, 2021 by consolidated entities | $ | 46.6 | |
| Funds repaid to the government by consolidated entities (excludes $0.2 million of interest) | 58.3 | |
| Funds utilized through June 30, 2021 by unconsolidated joint ventures | 1.3 | |
| Funds repaid to the government by unconsolidated joint ventures | 0.6 | |
| $ | 106.8 | |
The CARES Act also provided for the temporary suspension of the automatic 2% reduction of Medicare claim reimbursements ("sequestration") for the period May 1, 2020 through December 31, 2020. The suspension of sequestration increased our 2020 net service revenue by $23 million. In December 2020, Congress passed additional COVID-19 relief legislation as part of the Consolidated Appropriations Act, 2021. This legislation extended the suspension of sequestration through March 31, 2021. In April 2021, Congress passed H.R. 1868, which among other items, provided for an additional extension of the temporary suspension of sequestration through December 31, 2021. The suspension of sequestration increased our 2021 net service revenue by $36 million. In December 2021, Congress passed the Protecting Medicare and American Farmers from Sequester Cuts Act. This legislation extended the 2% suspension of sequestration through March 31, 2022; sequestration will be reinstated as a 1% reduction to Medicare claim reimbursements for the period April 1, 2022 through June 30, 2022 and 2% thereafter.
Additionally, the CARES Act provided for the deferral of the employer share of social security tax (6.2%), effective for payments due after the enactment date through December 31, 2020. During 2020, we deferred approximately $55 million of social security taxes. Approximately $27 million was paid during December 2021; the remaining balance is due on December 31, 2022 and is reflected in payroll and employee benefits within our consolidated balance sheet.
Our personal care segment did not receive funds under the CARES Act; however, it did receive funds totaling $1 million from the Mass Home Care ASAP COVID-19 Provider Sustainability Program, which were used during 2020 to cover costs as incurred. Advertising expense for 2018, 2017 and 2016 was $7.0 million, $6.5 million and $7.8 million, respectively.related to COVID-19. The grant income associated with the funds received is reflected in other operating income within our consolidated statements of operations.
3.4. ACQUISITIONS
We complete acquisitions from time to time in order to pursue our strategy of increasing our market presence by expanding our service base and enhancing our position in certain geographic areas as a leading provider of home health, hospice, personal care
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
and personalhigh acuity care services. The purchase price paid for acquisitions is negotiated through arm’s length transactions, with consideration based on our analysis of, among other things, comparable acquisitions and expected cash flows. Acquisitions are accounted for as purchases and are included in our consolidated financial statements from their respective acquisition dates. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets because of the expected contributions of the acquisitions to our overall corporate strategy. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets and noncontrolling interests, if any, for significant acquisitions. The preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date if management obtains more information regarding asset valuation and liabilities assumed.
20182021 Acquisitions
Home Health Division
On MarchMay 1, 2018,2021, we acquired the regulatory assets of Christian Care at Home which provideda home health services to the state of Kentuckyprovider in Randolph County, North Carolina for a total purchase price of $2.3$2.5 million. The purchase price was paid with cash on hand on the date of the transaction. Based on ourthe Company's preliminary purchase price allocation,valuation, we recorded goodwill ($2.3 million)of $2.4 million and other intangibles (certificate of need) of $0.1 million in connection with the acquisition duringacquisition.
On July 1, 2021, we acquired Visiting Nurse Association ("VNA"), a home health and hospice provider with locations in Nebraska and Iowa for a purchase price of $20.1 million. The purchase price was paid with cash on hand on the three-month period ended March 31, 2018. Duringdate of the three-month period ended December 31, 2018,transaction. Based on the Company's preliminary valuation, we reduced our preliminaryrecorded goodwill by $0.2of $19.7 million and recorded a corresponding increase in other intangibles - certificate(licenses) of need.$0.4 million in connection with the acquisition. We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
Personal Care Division
On May 1, 2018,July 12, 2021, we acquired the regulatory assets of East Tennessee Personal Care Services which owned and operated one personal-care care center servicing the state of Tennesseea home health provider in New York for a total purchase price of $2.0 million (subject to certain adjustments, of which $0.2 million was placed in a promissory note to be paid over 24 months, subject to any offsets or withholds for indemnification purposes).$1.5 million. The purchase price was paid with cash on hand on the date of the transaction. DuringBased on the Company's preliminary valuation, we recorded goodwill of $1.4 million and other intangibles (certificate of need) of $0.1 million in connection with the acquisition.
On August 1, 2021, we acquired Contessa, a leader in hospital-at-home and skilled nursing facility ("SNF") at-home services for an estimated purchase price of $240.7 million, net of cash acquired. The Contessa purchase price included estimates for cash, working capital and other items. Under the purchase agreement, the purchase price was subject to a closing payment adjustment for any differences between estimated amounts included in the closing payment and actual amounts at close. The closing payment adjustment, which was finalized during the three-month period ended December 31, 2021, increased the purchase price by $0.6 million from $240.7 million to $241.3 million. With the addition of Contessa’s risk-based model and claims analytics capabilities, we will be able to bring the essential elements of inpatient hospital and SNF care to patients’ homes, allowing us to become a risk-bearing, home-based care delivery organization, expanding well beyond traditional home health and hospice. Contessa operates as a wholly-owned division of Amedisys and is reported as a separate operating segment.
The Company is in the process of reviewing the fair value of the assets acquired, liabilities assumed and noncontrolling interests. Based on the Company's preliminary valuation, the total consideration of $241.3 million has been allocated to assets acquired, liabilities assumed and noncontrolling interests as of the acquisition date as follows (amounts in millions):
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
| | | | | |
| Amount |
| ASSETS | |
| Patient accounts receivable | $ | 1.5 | |
| Prepaid expenses | 0.3 | |
| Other current assets | 0.1 | |
| Property and equipment | 0.3 | |
| Operating lease right of use assets | 0.8 | |
| Intangible assets | 54.3 | |
| Other assets | 3.1 | |
| Total assets acquired | $ | 60.4 | |
| LIABILITIES AND EQUITY | |
| Accounts payable | $ | (0.1) | |
| Payroll and employee benefits | (0.6) | |
| Accrued expenses | (3.4) | |
| Operating lease liabilities | (0.8) | |
| Deferred tax liability | (3.1) | |
| Current portion of long-term obligations | (0.9) | |
| Other long-term obligations | (0.2) | |
| Total liabilities assumed | (9.1) | |
| Noncontrolling interests | (43.9) | |
| Total equity assumed | (43.9) | |
| Total liabilities and equity assumed | $ | (53.0) | |
| Net identifiable assets acquired | $ | 7.4 | |
| Goodwill | 233.9 | |
| Total consideration | $ | 241.3 | |
Intangible assets acquired include acquired names ($28.3 million), technology ($19.8 million) and non-compete agreements ($6.2 million). The non-compete agreements will be amortized over a weighted-average period of 2.0 years and the technology will be amortized over a weighted-average period of 7.0 years. The preliminary fair value of noncontrolling interests ($43.9 million) was determined using an income approach.
Contessa contributed $3.5 million in net service revenue and an operating loss of $10.3 million (inclusive of technology intangibles amortization totaling $1.2 million) during the year ended December 31, 2021.
We do not expect any of the goodwill recorded for this acquisition to be deductible for income tax purposes.
On October 18, 2021, we acquired the regulatory assets of a home health provider in North Carolina for a purchase price of $4.5 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $4.3 million and other intangibles (certificate of need) of $0.2 million in connection with the acquisition.
2020 Acquisitions
Home Health Division
On March 1, 2020, we acquired the regulatory assets of a home health provider in Washington for a purchase price of $3.0 million. The purchase price was paid with cash on hand on the date of the transaction. We recorded goodwill of $2.8 million and other intangibles (certificate of need) of $0.2 million in connection with the acquisition.
On April 18, 2020, we acquired the regulatory assets of a home health provider in Kentucky for a purchase price of $0.7 million. The purchase price was paid with cash on hand on the date of the transaction. We recorded goodwill of $0.5 million and other intangibles (certificate of need) of $0.2 million in connection with the acquisition.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Hospice Division
On January 1, 2020, we acquired Asana Hospice ("Asana"), a hospice provider with 8 locations in Pennsylvania, Ohio, Texas, Missouri and Kansas for an estimated purchase price of $66.3 million, net of cash acquired of $0.7 million. Under the purchase agreement, the purchase price was subject to a net working capital adjustment, whereby the purchase price would be adjusted to the extent the actual net working capital of Asana as of the closing differed from the required net working capital under the purchase agreement. The net working capital adjustment, which was finalized during the three-month period ended June 30, 2018, we recorded goodwill2020, reduced the purchase price by $0.7 million, from $66.3 million to $65.6 million.
The Company has finalized its valuation of the assets acquired and liabilities assumed. The total consideration of $65.6 million has been allocated to assets acquired and liabilities assumed as of the acquisition date as follows (amounts in millions):
| | | | | |
| Amount |
| ASSETS | |
| Patient accounts receivable | $ | 4.6 | |
| Property and equipment | 0.2 | |
| Operating lease right of use assets | 0.9 | |
| Intangible assets | 5.6 | |
| Total assets acquired | 11.3 | |
| LIABILITIES | |
| Accounts payable | (3.2) | |
| Payroll and employee benefits | (1.5) | |
| Accrued expenses | (0.5) | |
| Operating lease liabilities | (0.9) | |
| Total liabilities assumed | (6.1) | |
| Net identifiable assets acquired | 5.2 | |
| Goodwill | 60.4 | |
| Total consideration | $ | 65.6 | |
Intangible assets acquired include licenses ($1.92.0 million), acquired names ($1.3 million) and other intangibles - non-compete agreements ($0.12.3 million). The acquired names and non-compete agreements will be amortized over a weighted-average period of 2.0 years.
Asana contributed approximately $23.4 million in connection withnet service revenue and an operating loss of $3.3 million (inclusive of acquisition and integration costs totaling $2.0 million and intangibles amortization totaling $2.6 million) during the acquisition. year ended December 31, 2020.
We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
On OctoberJune 1, 2018,2020, we acquired the assets of Bring Care Home which serviced the state of MassachusettsHomecare Preferred Choice, Inc., doing business as AseraCare Hospice ("AseraCare"), a national hospice care provider with 44 locations, for a totalan estimated purchase price of $5.7$230.4 million, (subject to certain adjustments,net of which $0.6cash acquired and inclusive of a $32 million was placed in a promissory note to be paid over 24 months, subject to any offsets or withholdstax asset. The closing payment for indemnification purposes). Thethe purchase price included estimates for cash, working capital and various other items. Under the purchase agreement, the purchase price was paid with cash on hand onsubject to a closing payment adjustment for any differences between estimated amounts included in the dateclosing payment and actual amounts at close, not to exceed $1.0 million. The closing payment adjustment, which was finalized in October 2020, reduced the purchase price by $0.8 million, from $230.4 million to $229.6 million.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The Company has finalized its valuation of the transaction. Duringassets acquired and liabilities assumed. The total consideration of $229.6 million has been allocated to assets acquired and liabilities assumed as of the three-monthacquisition date as follows (amounts in millions):
| | | | | |
| Amount |
| ASSETS | |
| Patient accounts receivable | $ | 15.3 | |
| Prepaid expenses | 0.7 | |
| Property and equipment | 0.6 | |
| Operating lease right of use assets | 5.9 | |
| Intangible assets | 24.3 | |
| Other assets | 0.1 | |
| Total assets acquired | 46.9 | |
| LIABILITIES | |
| Accounts payable | (6.3) | |
| Payroll and employee benefits | (5.9) | |
| Accrued expenses | (11.9) | |
| Operating lease liabilities | (5.4) | |
| Total liabilities assumed | (29.5) | |
| Net identifiable assets acquired | 17.4 | |
| Goodwill | 212.2 | |
| Total consideration | $ | 229.6 | |
Intangible assets acquired include licenses ($8.7 million), certificates of need ($0.7 million), acquired names ($5.7 million) and non-compete agreements ($9.2 million). The acquired names will be amortized over a weighted-average period of 2.0 years and the non-compete agreements will be amortized over a weighted-average period of 1.7 years.
AseraCare contributed approximately $64.5 million in net service revenue and an operating loss of $8.2 million (inclusive of acquisition and integration costs totaling $7.6 million and intangibles amortization totaling $6.0 million) during the year ended December 31, 2018, we recorded goodwill ($5.5 million) and other intangibles - non-compete agreements ($0.2 million) in connection with the acquisition. 2020.
We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
2017 AcquisitionsThe following table contains unaudited pro forma condensed consolidated statement of operations information for the years ended December 31, 2020 and 2019 assuming that the AseraCare acquisition closed on January 1, 2019 (amounts in millions, except per share data).
Home Health | | | | | | | | | | | |
| For the Years Ended
December 31, |
| 2020 | | 2019 |
| Net service revenue | $ | 2,120.1 | | | $ | 2,077.0 | |
| Operating income | 218.0 | | | 167.5 | |
| Net income attributable to Amedisys Inc. | 180.6 | | | 112.3 | |
| Basic earnings per share | 5.55 | | | 3.49 | |
| Diluted earnings per share | 5.43 | | | 3.40 | |
The pro forma information presented above includes adjustments for (i) amortization of identifiable intangible assets, (ii) interest on additional debt required to fund the AseraCare acquisition, (iii) non-recurring transaction costs and Hospice Divisions(iv) income taxes based on the Company's statutory tax rate. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred. In addition, future results may vary significantly from the results reflected in the pro forma information.
On May 1, 2017, we acquired three home health care centers (one in each Illinois, Massachusetts, and Texas) and two hospice care centers (one in each Arizona and Massachusetts) from Tenet Healthcare for a total purchase price of $20.5 million, (subject
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
to certain adjustments). The purchase price was paid with cash on hand on the date of the transaction. Based on our preliminary purchase price allocation, we recorded goodwill ($20.9 million) and other assets and liabilities, net ($0.8 million) in connection with this acquisition during the three-month period ended June 30, 2017. During the three-month period ended December 31, 2017, we received the final report from our outside appraisal firm. As a result, we reduced our preliminary goodwill by $2.8 million and recorded corresponding increases in other intangibles - Medicare licenses ($0.1 million) and other intangibles - acquired names of business ($2.7 million). We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
Personal Care Division
On February 1, 2017, we acquired the assets of Home Staff, L.L.C. which owned and operated three personal-care care centers servicing the state of Massachusetts for a total purchase price of $4.0 million (subject to certain adjustments), of which $0.4 million was placed in a promissory note to be paid over 24 months, subject to any offsets or withholds for indemnification purposes. The purchase price was paid with cash on hand on the date of the transaction. We recorded goodwill ($3.8 million), other intangibles - non-compete agreements ($0.2 million) and other assets and liabilities, net ($0.5 million) in connection with the acquisition. We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
On October 1, 2017, we acquired the assets of Intercity Home Care which owned and operated four personal-care care centers servicing the state of Massachusetts for a total purchase price of $9.6 million (subject to certain adjustments), of which $1.0 million was placed in escrow for indemnification purposes and working capital price adjustments. The purchase price was paid with cash on hand on the date of the transaction. We recorded goodwill ($9.1 million), other intangibles - non-compete agreements ($0.4 million) and other assets and liabilities, net ($0.1 million) in connection with the acquisition. We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
4.5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
During 2018, 20172021, 2020 and 2016,2019, we did not record any goodwill impairment charges as a result of our annual impairment test and none of the goodwill associated with our various reporting units was considered at risk of impairmentimpaired as of October 31st of each respective year (the date of our annual goodwill impairment test). Since the date of our last annual goodwill impairment test, there have been no material developments, events, changes in operating performance or other circumstances that would cause management to believe it is more likely than not that the fair value of any of our reporting units would be less than their carrying amounts.
During 2017, we recorded a non-cash other intangible assets impairment charge of $1.3 million related to those care centers that were closed or consolidated during 2017 as discussed in Note 12 - Exit and Restructuring Activities.
The following table summarizes the activity related to our goodwill for 2018, 20172021 and 20162020 (amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goodwill |
| Home Health | | Hospice | | Personal Care | | High Acuity Care | | Total |
| Balances at December 31, 2019 (1) | $ | 87.1 | | | $ | 528.3 | | | $ | 43.1 | | | $ | — | | | $ | 658.5 | |
| Additions | 3.3 | | | 270.9 | | | — | | | — | | | 274.2 | |
| Balances at December 31, 2020 | 90.4 | | | 799.2 | | | 43.1 | | | — | | | 932.7 | |
| Additions | 27.8 | | | 1.7 | | | — | | | 233.9 | | | 263.4 | |
| Balances at December 31, 2021 | $ | 118.2 | | | $ | 800.9 | | | $ | 43.1 | | | $ | 233.9 | | | $ | 1,196.1 | |
|
| | | | | | | | | | | | | | | |
| | Goodwill |
| | Home Health | | Hospice | | Personal Care | | Total |
| Balances at December 31, 2015 (1) | $ | 67.1 |
| | $ | 194.6 |
| | $ | — |
| | $ | 261.7 |
|
| Additions | 4.4 |
| | — |
| | 22.7 |
| | 27.1 |
|
| Adjustments related to acquisitions (2) | 0.1 |
| | — |
| | — |
| | 0.1 |
|
| Balances at December 31, 2016 | 71.6 |
| | 194.6 |
| | 22.7 |
| | 288.9 |
|
| Additions | 13.4 |
| | 4.7 |
| | 12.9 |
| | 31.0 |
|
| Balances at December 31, 2017 | 85.0 |
| | 199.3 |
| | 35.6 |
| | 319.9 |
|
| Additions | 2.1 |
| | — |
| | 7.5 |
| | 9.6 |
|
| Balances at December 31, 2018 (1) | $ | 87.1 |
| | $ | 199.3 |
| | $ | 43.1 |
| | $ | 329.5 |
|
| |
(1) | Net of prior years' accumulated impairment losses of $733.7 million, which is inclusive of write-offs related to the sale and closure of care centers. |
| |
(2) | During 2016, we adjusted goodwill by $0.1 million as a result of our completion of the purchase price accounting for our 2015 acquisition of Infinity HomeCare. |
AMEDISYS, INC. AND SUBSIDIARIES(1)Net of prior years' accumulated impairment losses of $733.7 million, which is inclusive of write-offs related to the sale and closure of care centers.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
During 2021, we did not record any impairment charges related to our other intangible assets. During 2020, we recorded a non-cash other intangible assets impairment charge of $4.2 million related to acquired names which were no longer in use.
The following table summarizes the activity related to our other intangible assets, net for 2018, 20172021 and 20162020 (amounts in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Other Intangible Assets, Net |
| Certificates of Need and Licenses | | Acquired
Names -Unamortizable | | Acquired
Names -Amortizable (4) | | Non-Compete
Agreements (4) | | Technology (4) | | Total |
| Balances at December 31, 2019 (1) | $ | 37.6 | | | $ | 18.1 | | | $ | 5.6 | | | $ | 3.4 | | | $ | — | | | $ | 64.7 | |
| Additions | 11.8 | | | — | | | 7.0 | | | 11.5 | | | — | | | 30.3 | |
| Write-off (2) | — | | | (4.2) | | | — | | | — | | | — | | | (4.2) | |
| Amortization (3) | (2.4) | | | — | | | (7.1) | | | (7.1) | | | — | | | (16.6) | |
| Balances at December 31, 2020 | 47.0 | | | 13.9 | | | 5.5 | | | 7.8 | | | — | | | 74.2 | |
| Additions | 0.8 | | | 28.3 | | | — | | | 6.2 | | | 20.2 | | | 55.5 | |
| Reclass to amortizable intangible | — | | | (6.6) | | | 6.6 | | | — | | | — | | | — | |
| Amortization (3) | (0.7) | | | — | | | (9.0) | | | (7.6) | | | (1.2) | | | (18.5) | |
| Balances at December 31, 2021 | $ | 47.1 | | | $ | 35.6 | | | $ | 3.1 | | | $ | 6.4 | | | $ | 19.0 | | | $ | 111.2 | |
(1)Net of prior years' accumulated amortization of $4.4 million for acquired names and $2.7 million for non-compete agreements. |
| | | | | | | | | | | | | | | |
| | Other Intangible Assets, Net |
| | Certificates of Need and Licenses | | Acquired Names of Business | | Non-Compete Agreements (3) | | Total |
| Balances at December 31, 2015 | $ | 23.9 |
| | $ | 14.2 |
| | $ | 5.9 |
| | $ | 44.0 |
|
| Additions | 0.2 |
| | 3.5 |
| | 1.5 |
| | 5.2 |
|
| Amortization | — |
| | — |
| | (2.5 | ) | | (2.5 | ) |
| Balances at December 31, 2016 | 24.1 |
| | 17.7 |
| | 4.9 |
| | 46.7 |
|
| Additions | 0.1 |
| | 2.7 |
| | 0.6 |
| | 3.4 |
|
| Write-off (1) | (0.5 | ) | | (0.8 | ) | | — |
| | (1.3 | ) |
| Amortization | — |
| | — |
| | (2.7 | ) | | (2.7 | ) |
| Balances at December 31, 2017 | 23.7 |
| | 19.6 |
| | 2.8 |
| | 46.1 |
|
| Additions | 0.2 |
| | — |
| | 0.3 |
| | 0.5 |
|
| Amortization | — |
| | — |
| | (2.5 | ) | | (2.5 | ) |
| Balances at December 31, 2018 (2) | $ | 23.9 |
| | $ | 19.6 |
| | $ | 0.6 |
| | $ | 44.1 |
|
(3)Amortization of certificates of need and licenses is related to care centers that were closed during 2020 and 2021.
| |
(1) | Write-off of intangible assets related to the closure and consolidation of care centers as discussed in Note 12 - Exit and Restructuring Activities. |
| |
(2) | Net of prior years' accumulated amortization of $0.5 million for acquired names of business and $21.7 million for non-compete agreements. |
| |
(3) | The weighted average amortization period of our non-compete agreements is 1.7 years. |
(4)The weighted average remaining amortization period of our amortizable acquired names, non-compete agreements and technology is 0.3 years, 1.3 years and 6.6 years, respectively.
See Note 34 – Acquisitions for further details on additions to goodwill and other intangible assets, net.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The estimated aggregate amortization expense related to intangible assets for each of the five succeeding years is as follows (amounts in millions):
| | | | | |
| Intangible Asset Amortization |
| 2022 | $ | 10.5 | |
| 2023 | 4.7 | |
| 2024 | 2.9 | |
| 2025 | 2.9 | |
| 2026 | 2.9 | |
| $ | 23.9 | |
|
| | | |
| | |
| 2019 | $ | 0.4 |
|
| 2020 | 0.2 |
|
| 2021 | — |
|
| 2022 | — |
|
| 2023 | — |
|
| | $ | 0.6 |
|
5.6. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts is presented below (amounts in millions):
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
| Other current assets: | | | |
| Payroll tax escrow | $ | 7.9 | | | $ | 6.3 | |
| Income tax receivable | 8.2 | | | 0.2 | |
| Due from joint ventures | 3.9 | | | 2.3 | |
| Other | 5.6 | | | 4.5 | |
| $ | 25.6 | | | $ | 13.3 | |
| Other assets: | | | |
| Workers’ compensation deposits | $ | 0.3 | | | $ | 0.3 | |
| Health insurance deposits | 0.9 | | | 0.5 | |
| Other miscellaneous deposits | 1.1 | | | 1.2 | |
| Indemnity receivable | 13.6 | | | 13.6 | |
| Equity method investments | 53.1 | | | 14.2 | |
| Other | 4.0 | | | 3.4 | |
| $ | 73.0 | | | $ | 33.2 | |
| Accrued expenses: | | | |
| Health insurance | $ | 17.5 | | | $ | 15.1 | |
| Workers’ compensation | 40.3 | | | 35.8 | |
| Florida ZPIC audit, gross liability | 17.4 | | | 17.4 | |
| Legal settlements and other audits | 27.5 | | | 24.4 | |
| Charity care | 1.4 | | | 3.6 | |
| Estimated Medicare cap liability | 4.5 | | | 9.3 | |
| Hospice accruals (room and board, general in-patient and other) | 23.6 | | | 29.2 | |
| | | |
| Patient liability | 4.6 | | | 8.4 | |
| Deferred operating income (CARES Act) | — | | | 11.6 | |
| Other | 14.0 | | | 11.4 | |
| $ | 150.8 | | | $ | 166.2 | |
| Other long-term obligations: | | | |
| Reserve for uncertain tax positions | $ | 3.4 | | | $ | 3.3 | |
| Deferred compensation plan liability | 1.0 | | | 1.0 | |
| Non-current social security taxes (deferred under CARES Act) | — | | | 27.7 | |
| Other | 0.6 | | | 1.6 | |
| $ | 5.0 | | | $ | 33.6 | |
|
| | | | | | | |
| | As of December 31, |
| | 2018 | | 2017 |
| Other current assets: | | | |
| Payroll tax escrow | $ | 1.5 |
| | $ | 7.2 |
|
| Income tax receivable | 1.6 |
| | 3.4 |
|
| Due from joint ventures | 1.9 |
| | 2.0 |
|
| Other | 2.3 |
| | 3.7 |
|
| | $ | 7.3 |
| | $ | 16.3 |
|
| Other assets: | | | |
| Workers’ compensation deposits | $ | 0.4 |
| | $ | 0.4 |
|
| Health insurance deposits | 0.5 |
| | 0.5 |
|
| Other miscellaneous deposits | 0.8 |
| | 0.9 |
|
| Indemnity receivable | 14.2 |
| | 17.0 |
|
| Equity method investments | 35.1 |
| | 26.4 |
|
| Other | 3.1 |
| | 3.9 |
|
| | $ | 54.1 |
| | $ | 49.1 |
|
| Accrued expenses: | | | |
| Health insurance | $ | 12.4 |
| | $ | 14.1 |
|
| Workers’ compensation | 30.9 |
| | 29.3 |
|
| Florida ZPIC audit, gross liability | 17.4 |
| | 17.4 |
|
| Legal settlements and other audits | 13.0 |
| | 6.4 |
|
| Lease liability | 0.3 |
| | 0.9 |
|
| Charity care | 1.7 |
| | 1.5 |
|
| Estimated Medicare cap liability | 1.7 |
| | 0.9 |
|
| Hospice cost of revenue | 9.9 |
| | 9.1 |
|
| Patient liability | 6.3 |
| | 5.3 |
|
| Other | 5.9 |
| | 4.2 |
|
| | $ | 99.5 |
| | $ | 89.1 |
|
| Other long-term obligations: | | | |
| Reserve for uncertain tax positions | $ | 2.9 |
| | $ | — |
|
| Deferred compensation plan liability | 1.3 |
| | 1.9 |
|
| Other | 2.0 |
| | 1.9 |
|
| | $ | 6.2 |
| | $ | 3.8 |
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.7. LEASES
We determine whether an arrangement is a lease at inception. We have operating leases, primarily for offices and fleet, that expire at various dates over the next eight years. We also have finance leases covering certain office equipment that expire at various dates over the next three years. Our leases do not contain any restrictive covenants.
Our office leases generally contain renewal options for periods ranging from one to five years. Because we are not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term, and payments associated with the option years are excluded from lease payments. Our office leases also generally include termination options, which allow for early termination of the lease after the first one to three years. Because we are not reasonably certain to exercise these termination options, the options are not considered in determining the lease term; payments for the full lease term are included in lease payments. Our office leases do not contain any material residual value guarantees.
Our fleet leases include a term of 367 days with monthly renewal options thereafter. Our fleet leases also include terminal rental adjustment clauses (“TRAC”), which provide for a final rental payment adjustment at the end of the lease, typically based on the amount realized from the sale of the vehicle. The TRAC is structured such that it will almost always result in a significant payment by us to the lessor if the renewal option is not exercised. Based on the significance of the TRAC adjustment at the initial lease expiration, we believe that it is reasonably certain that we will exercise the monthly renewal options; therefore, the renewal options are considered in determining the lease term, and payments associated with the renewal options are included in lease payments.
For our fleet and office equipment leases, we use the implicit rate in the lease as the discount rate. For our office leases, the implicit rate is typically not available, so we use our incremental borrowing rate as the discount rate. Our lease agreements include both lease and non-lease components. We have elected the practical expedient that allows us to not separate lease and non-lease components for all of our leases.
Payments due under our operating and finance leases include fixed payments as well as variable payments. For our office leases, variable payments include amounts for our proportionate share of operating expenses, utilities, property taxes, insurance, common area maintenance and other facility-related expenses. For our vehicle and equipment leases, variable payments consist of sales tax.
The components of lease cost for the years ended December 31, 2021 and 2020 are as follows (amounts in millions):
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 |
| Operating lease cost: | | | |
| Operating lease cost | $ | 40.3 | | | $ | 38.6 | |
| Impairment of operating lease ROU assets | 0.1 | | | 0.5 | |
| Total operating lease cost | 40.4 | | | 39.1 | |
| | | |
| Finance lease cost: | | | |
| Amortization of ROU assets | 2.0 | | | 2.0 | |
| Interest on lease liabilities | 0.1 | | | 0.2 | |
| Total finance lease cost | 2.1 | | | 2.2 | |
| | | |
| Variable lease cost | 3.3 | | | 3.0 | |
| Short-term lease cost | — | | | — | |
| Total lease cost | $ | 45.8 | | | $ | 44.3 | |
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Amounts reported in the consolidated balance sheets as of December 31, 2021 and 2020 for our operating leases are as follows (amounts in millions):
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
| Operating lease ROU assets | $ | 101.3 | | | $ | 93.4 | |
| | | |
| Current portion of operating lease liabilities | 31.2 | | | 30.0 | |
| Operating lease liabilities, less current portion | 69.3 | | | 62.0 | |
| Total operating lease liabilities | $ | 100.5 | | | $ | 92.0 | |
Amounts reported in the consolidated balance sheets as of December 31, 2021 and 2020 for finance leases are included in the table below. The finance lease ROU assets are recorded within property and equipment, net of accumulated depreciation within our consolidated balance sheets. The finance lease liabilities are recorded within current portion of long-term obligations and long-term obligations, less current portion within our consolidated balance sheets.
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
| Finance lease ROU assets | $ | 4.5 | | | $ | 5.9 | |
| Accumulated amortization | (2.8) | | | (3.3) | |
| Finance lease ROU assets, net | $ | 1.7 | | | $ | 2.6 | |
| | | |
| Current installments of obligations under finance leases | $ | 0.9 | | | $ | 1.7 | |
| Long-term portion of obligations under finance leases | 0.7 | | | 0.9 | |
| Total finance lease liabilities | $ | 1.6 | | | $ | 2.6 | |
Supplemental cash flow information and non-cash activity related to our leases are as follows (amounts in millions):
| | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 |
| Cash paid for amounts included in the measurement of lease liabilities and ROU assets: | | | |
| Operating cash flow from operating leases | $ | (39.7) | | | $ | (38.2) | |
| Financing cash flow from finance leases | (2.0) | | | (2.0) | |
| | | |
| ROU assets obtained in exchange for lease obligations: | | | |
| Operating leases | $ | 46.1 | | | $ | 38.5 | |
| Finance leases | 0.9 | | | 1.2 | |
| | | |
| Reductions to ROU assets resulting from reductions to lease obligations: | | | |
| Operating leases | $ | (1.7) | | | $ | (1.1) | |
| Finance leases | — | | | — | |
Amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Weighted average remaining lease terms and discount rates for our leases as of December 31, 2021 and 2020 are as follows:
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
| Weighted average remaining lease term (years): | | | |
| Operating leases | 3.7 | | 3.7 |
| Finance leases | 1.7 | | 1.7 |
| | | |
| Weighted average discount rate: | | | |
| Operating leases | 2.7 | % | | 3.1 | % |
| Finance leases | 5.2 | % | | 5.3 | % |
Maturities of lease liabilities as of December 31, 2021 are as follows (amounts in millions):
| | | | | | | | | | | |
| Operating
Leases | | Finance
Leases |
| 2022 | $ | 33.4 | | | $ | 1.1 | |
| 2023 | 28.1 | | | 0.5 | |
| 2024 | 20.4 | | | 0.1 | |
| 2025 | 13.3 | | | — | |
| 2026 | 7.0 | | | — | |
| Thereafter | 3.6 | | | — | |
| Total undiscounted lease payments | 105.8 | | | 1.7 | |
| Less: Imputed interest | (5.3) | | | (0.1) | |
| Total lease liabilities | $ | 100.5 | | | $ | 1.6 | |
8. LONG-TERM OBLIGATIONS
Long-term debt consists of the following for the periods indicated (amounts in millions):
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
| $450.0 million Term Loan; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus Applicable Rate (1.6% at December 31, 2021); due July 30, 2026 | $ | 447.2 | | | $ | 164.1 | |
| $550.0 million Revolving Credit Facility; interest only payments; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus Applicable Rate; due July 30, 2026 | — | | | 51.0 | |
| Promissory notes | 0.8 | | | — | |
| Finance leases | 1.6 | | | 2.6 | |
| Principal amount of long-term obligations | 449.6 | | | 217.7 | |
| Deferred debt issuance costs | (4.5) | | | (2.7) | |
| 445.1 | | | 215.0 | |
| Current portion of long-term obligations | (13.0) | | | (10.5) | |
| Total | $ | 432.1 | | | $ | 204.5 | |
|
| | | | | | | |
| | As of December 31, |
| | 2018 | | 2017 |
| $100.0 million Term Loan; principal payments plus accrued interest payable quarterly; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus the Applicable Rate (3.57% at December 31, 2017); due August 28, 2020 | $ | — |
| | $ | 90.0 |
|
| $550.0 million Revolving Credit Facility; interest only payments; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus the Applicable Rate (3.85% at December 31, 2018); due June 29, 2023 | 7.5 |
| | — |
|
| Promissory notes | 1.1 |
| | 0.7 |
|
| Capital leases | 2.3 |
| | — |
|
| Principal amount of long-term obligations | 10.9 |
| | 90.7 |
|
| Deferred debt issuance costs | (3.5 | ) | | (1.9 | ) |
| | 7.4 |
| | 88.8 |
|
| Current portion of long-term obligations | (1.6 | ) | | (10.6 | ) |
| Total | $ | 5.8 |
| | $ | 78.2 |
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
Maturities of debt as of December 31, 20182021 are as follows (amounts in millions):
|
| | | |
| | |
| | Long-term obligations |
| 2019 | $ | 1.6 |
|
| 2020 | 1.4 |
|
| 2021 | 0.4 |
|
| 2022 | — |
|
| 2023 | 7.5 |
|
| | $ | 10.9 |
|
| | | | | |
| |
| Long-term
obligations |
| 2022 | $ | 13.0 | |
| 2023 | 14.6 | |
| 2024 | 22.6 | |
| 2025 | 22.5 | |
| 2026 | 376.9 | |
| $ | 449.6 | |
Credit Agreement
On June 29, 2018, we entered into our Amended and Restated Credit Agreement ("Credit(the "Credit Agreement") that provideswhich provided for a senior secured revolving credit facility in an initial aggregate principal amount of up to $550.0 million (the "Revolving Credit Facility"). The Revolving Credit Facility providesprovided for and includesincluded within its $550.0 million limit a $25.0 million swingline facility and commitments for up to $60.0 million in letters of credit. Upon lender approval, we maycould increase the aggregate loan amount under the Revolving Credit Facility by either i) $125.0 million or ii)plus an unlimited amount subject to a leverage limit of 0.5x under the maximum allowable consolidated leverage ratio which is currentlywas 3.0x per the Credit Agreement.
The funds available under the Revolving Credit Facility were used to pay off our existing indebtedness under our prior credit agreement, dated as of August 28, 2015 (the "Prior Credit Agreement"), with a principal balance of $127.5 million. The final maturity of the Revolving Credit Facility iswas June 29, 2023, and there iswas no mandatory amortization on the outstanding principal balances which arewere payable in full upon maturity. The Revolving Credit Facility may bewas used to provide ongoing working capital needs and for general corporate purposes of the Company and our subsidiaries, including permitted acquisitions, as defined in the Credit Agreement.
First Amendment to the Credit Agreement
On February 4, 2019, we entered into the First Amendment to the Credit Agreement (as amended by the First Amendment, the “Amended Credit Agreement”). The interest rate on borrowingsAmended Credit Agreement provided for a senior secured credit facility in an initial aggregate principal amount of up to $725.0 million, which included the $550.0 million Revolving Credit Facility under the Credit Agreement, and a term loan facility with a principal amount of up to $175.0 million (the “Term Loan Facility” and collectively with the Revolving Credit Facility, shall be selectedthe “Credit Facility”), which was added by the First Amendment.
We borrowed the entire principal amount of the Term Loan Facility on February 4, 2019 in order to fund a portion of the purchase price of the Compassionate Care Hospice ("CCH") acquisition, with the remainder of the purchase price and associated transactional fees and expenses funded by proceeds from the following:Revolving Credit Facility.
Second Amendment to the Credit Agreement
On July 30, 2021, we entered into the Second Amendment to our Credit Agreement (as amended by the Second Amendment, the "Second Amended Credit Agreement"). The Second Amended Credit Agreement provides for a senior secured credit facility in an initial aggregate principal amount of up to $1.0 billion, which includes the $550.0 million Revolving Credit Facility and a term loan facility with a principal amount of up to $450.0 million (the "Amended Term Loan Facility" and collectively with the Revolving Credit Facility, the "Amended Credit Facility").
Net proceeds from the $450.0 million Amended Term Loan Facility were used to fund the Contessa acquisition.
The loans issued under the Amended Credit Facility bear interest on a per annum basis, at our election, at either: (i) the Base Rate plus the Applicable Rate or (ii) the Eurodollar Rate plus the Applicable Rate. The “Base Rate” means a fluctuating rate per annum equal to the highest of (a) the federal funds rate plus 0.50% per annum, (b) the prime rate of interest established by the Administrative Agent, and (c) the Eurodollar Rate plus 1% per annum. The “Eurodollar Rate” means the quoted rate per annum equal to the London Interbank Offered Rate ("LIBOR") or a comparable successor rate approved by the Administrative Agent for an interest period of one, two, three or six months (as selected by us). The “Applicable Rate” is based on the consolidated leverage ratio and is presented in the table below. As of December 31, 2018,2021, the Applicable Rate is 0.50% per annum for Base Rate Loans and 1.50% per annum for Eurodollar Rate Loans. We are also subject to a commitment fee and letter of credit fee under the terms of the Second Amended Credit Facilities,Agreement, as presented in the table below.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
|
| | | | | | | | | | | | |
| Consolidated Leverage Ratio | | Base Rate Loans | | Eurodollar Rate Loans | | Commitment Fee | | Letter of Credit Fee |
| > 3.00 to 1.0 | | 1.25 | % | | 2.25 | % | | 0.35 | % | | 2.00 | % |
| ≤ 3.00 to 1.0 but > 2.00 to 1.0 | | 1.00 | % | | 2.00 | % | | 0.30 | % | | 1.75 | % |
| ≤ 2.00 to 1.0 but > 1.00 to 1.0 | | 0.75 | % | | 1.75 | % | | 0.25 | % | | 1.50 | % |
| ≤ 1.00 to 1.0 | | 0.50 | % | | 1.50 | % | | 0.20 | % | | 1.25 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Pricing Tier | Consolidated Leverage Ratio | | Base Rate Loans | | Eurodollar Rate Loans and Daily Floating LIBOR Rate Loans | | Commitment
Fee | | Letter of
Credit Fee |
| I | > 3.00 to 1.0 | | 1.00 | % | | 2.00 | % | | 0.30 | % | | 1.75 | % |
| II | < 3.00 to 1.0 but > 2.00 to 1.0 | | 0.75 | % | | 1.75 | % | | 0.25 | % | | 1.50 | % |
| III | < 2.00 to 1.0 but > 0.75 to 1.0 | | 0.50 | % | | 1.50 | % | | 0.20 | % | | 1.25 | % |
| IV | < 0.75 to 1.0 | | 0.25 | % | | 1.25 | % | | 0.15 | % | | 1.00 | % |
The final maturity date of the Amended Credit Facility is July 30, 2026. The Revolving Credit Facility will terminate and be due and payable as of the final maturity date. The Amended Term Loan Facility, however, is subject to quarterly amortization of principal in the amount of (i) 0.625% for the period commencing on July 30, 2021 and ending on September 30, 2023, and (ii) 1.250% for the period commencing on October 1, 2023 and ending on July 30, 2026. The remaining balance of the Amended Term Loan Facility must be paid upon the final maturity date. In addition to the scheduled amortization of the Amended Term Loan Facility, and subject to customary exceptions and reinvestment rights, we are required to prepay the Amended Term Loan Facility first and the Revolving Credit Facility second with 100% of all net cash proceeds received by any loan party or any subsidiary thereof in connection with (a) any asset sale or disposition where such loan party receives net cash proceeds in excess of $5 million or (b) any debt issuance that is not permitted under the Second Amended Credit Agreement.
The Second Amended Credit Agreement requires maintenance of two financial covenants: (i) a consolidated leverage ratio of funded indebtedness to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined in the Second Amended Credit Agreement, and (ii) a consolidated interest coverage ratio of EBITDA to cash interest charges, as defined in the Second Amended Credit Agreement. Each of these covenants is calculated over rolling four-quarter periods and also is subject to certain exceptions and baskets. The Second Amended Credit Agreement also contains customary covenants, including, but not limited to, restrictions on: incurrence of liens;liens, incurrence of additional debt;debt, sales of assets and other fundamental corporate changes; investments;changes, investments and declarations of dividends. These covenants contain customary exclusions and baskets as detailed in the Second Amended Credit Agreement. In connection with our entry into the Second Amended Credit Agreement, we recorded $2.8 million in deferred debt issuance costs as long-term obligations, less current portion within our consolidated balance sheet during the year ended December 31, 2021.
The Revolving Credit Facility is guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries. The Second Amended Credit Agreement requires at all times that we (i) provide guarantees from wholly-owned subsidiaries that in the aggregate represent not less than 95% of our consolidated net revenues and adjusted EBITDA from all wholly-owned subsidiaries and (ii) provide guarantees from subsidiaries that in the aggregate represent not less than 70% of consolidated adjusted EBITDA, subject to certain exceptions.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
In connection with entering into the Credit Agreement, we entered into (i) a Security Agreement with the Administrative Agent dated June 29, 2018 and (ii) a Pledge Agreement with the Administrative Agent dated June 29, 2018 for the purpose of securing the payment of our obligations under the Credit Agreement. Pursuant to the Security Agreement and the Pledge Agreement, as of the effective date of the Credit Agreement, our obligations under the Credit Agreement are secured by (i) the grant of a first lien security interest in the non-real estate assets of substantially all of our direct and indirect, wholly-owned subsidiaries (subject to exceptions) and (ii) the pledge of the equity interests in (a) substantially all of our direct and indirect, wholly-owned corporate, limited liability company and limited partnership subsidiaries and (b) those joint ventures which constitute subsidiaries under the Credit Agreement (subject, in the case of the Pledge Agreement, to exceptions). In connection with our entry into the Credit Agreement, we recorded $2.4 million in deferred debt issuance costs as a reduction to long-term obligations, less current portion within our consolidated balance sheet during 2018.
Our weighted average interest rate for borrowings under our $100.0$450.0 million Amended Term Loan under our Prior Credit Agreement,Facility was 3.1%1.6% for the periodyear ended December 31, 2017.2021 and 2.2% for the year ended December 31, 2020. Our weighted average interest rate for borrowings under our $550.0 million Revolving Credit Facility was 3.8%1.9% for the periodyear ended December 31, 2018.2021 and 2.2% for the year ended December 31, 2020.
As of December 31, 2018,2021, our consolidated leverage ratio was 0.1,1.4, our consolidated interest coverage ratio was 59.927.8 and we are in compliance with our covenants under the Second Amended Credit Agreement. In the event we are not in compliance with our debt covenants in the future, we would pursue various alternatives in an attempt to successfully resolve the non-compliance, which might include, among other things, seeking debt covenant waivers or amendments.
As of December 31, 2018,2021, our availability under our $550.0 million Revolving Credit Facility was $508.4$522.5 million as we have $7.5 millionno outstanding in borrowings and $34.1$27.5 million outstanding in letters of credit.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Joinder Agreements
In connection with the CCH acquisition, we entered into a first amendmentJoinder Agreement, dated as of February 4, 2019 (the “CCH Joinder”), pursuant to which CCH and its subsidiaries were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement (now the Second Amended Credit Agreement), the Amended and Restated Security Agreement, dated as of June 29, 2018 (the "First Amendment"“Amended and Restated Security Agreement”), and the Amended and Restated Pledge Agreement, dated as of June 29, 2018 (the “Amended and Restated Pledge Agreement”). See Note 16 - Subsequent Events for additional informationIn connection with the AseraCare acquisition, we entered into a Joinder Agreement, dated as of June 12, 2020, pursuant to which the AseraCare entities were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement (now the Second Amended Credit Agreement), the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement (the “AseraCare Joinder"). In connection with the Contessa acquisition and the Second Amendment, we entered into a Joinder Agreement, dated as of September 3, 2021, pursuant to which Contessa and its subsidiaries and Asana, which we acquired on January 1, 2020, and its subsidiaries were made parties to, and became subject to the First Amendment.terms and conditions of, the Second Amended Credit Agreement, the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement (the “Contessa and Asana Joinder,” and together with the CCH Joinder and the AseraCare Joinder, the “Joinders”).
Pursuant to the Joinders, the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement, CCH and its subsidiaries, the AseraCare entities, Contessa and its subsidiaries and Asana and its subsidiaries granted in favor of the Administrative Agent a first lien security interest in substantially all of their personal property assets and pledged to the Administrative Agent each of their respective subsidiaries' issued and outstanding equity interests. CCH and its subsidiaries, the AseraCare entities, Contessa and its subsidiaries and Asana and its subsidiaries also guaranteed our obligations, whether now existing or arising after the respective effective dates of the Joinders, under the Second Amended Credit Agreement pursuant to the terms of the Joinders and the Second Amended Credit Agreement.
Promissory Notes
Our outstanding promissory notes outstanding of $1.1$0.8 million, issued in conjunction with acquisitions and software licenses,obtained through the acquisition of Contessa on August 1, 2021, bear interest rates ranging from 2.9%4.0% to 7.0%6.5%.
CapitalFinance Leases
Our capitaloutstanding finance leases outstanding of $2.3$1.6 million relate to leased equipment and bear interest rates ranging from 5.2%2.1% to 14.3%5.8%.
7.9. INCOME TAXES
Income taxes attributable to continuing operations consist of the following (amounts in millions):
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Current income tax expense/(benefit): | | | | | |
| Federal | $ | 20.3 | | | $ | 41.6 | | | $ | 24.2 | |
| State and local | 5.2 | | | 10.6 | | | 4.8 | |
| 25.5 | | | 52.2 | | | 29.0 | |
| Deferred income tax expense/(benefit): | | | | | |
| Federal | 35.9 | | | (22.5) | | | 9.5 | |
| State and local | 8.7 | | | (4.1) | | | 4.0 | |
| 44.6 | | | (26.6) | | | 13.5 | |
| Income tax expense | $ | 70.1 | | | $ | 25.6 | | | $ | 42.5 | |
Total income tax expense for the years ended December 31, 2021, 2020 and 2019 was allocated as follows (amounts in millions):
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Income from continuing operations | $ | 70.1 | | | $ | 25.6 | | | $ | 42.5 | |
| Interest expense | 0.1 | | | 0.2 | | | 0.3 | |
| Goodwill | 3.1 | | | — | | | 0.9 | |
| Total | $ | 73.3 | | | $ | 25.8 | | | $ | 43.7 | |
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Current income tax expense/(benefit): | | | | | |
| Federal | $ | 16.4 |
| | $ | (2.0 | ) | | $ | (0.5 | ) |
| State and local | 2.1 |
| | (0.1 | ) | | (0.1 | ) |
| | 18.5 |
| | (2.1 | ) | | (0.6 | ) |
| Deferred income tax expense/(benefit): | | | | | |
| Federal | 14.5 |
| | 51.2 |
| | 22.1 |
|
| State and local | 5.8 |
| | 1.0 |
| | 2.4 |
|
| | 20.3 |
| | 52.2 |
| | 24.5 |
|
| Income tax expense | $ | 38.8 |
| | $ | 50.1 |
| | $ | 23.9 |
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
Total income tax expense for the years ended December 31, 2018, 2017 and 2016 was allocated as follows (amounts in millions):
|
| | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Income from continuing operations | $ | 38.8 |
| | $ | 50.1 |
| | $ | 23.9 |
|
| Interest expense | 0.1 |
| | — |
| | (0.1 | ) |
| Stockholders’ equity | — |
| | (0.3 | ) | | (7.2 | ) |
| | $ | 38.9 |
| | $ | 49.8 |
| | $ | 16.6 |
|
A reconciliation of significant differences between the reported amount of income tax expense and the expected amount of income tax expense that would result from applying the U.S. federal statutory income tax rate of 21 percent in 2018 and 35 percent in 2017 and 201621% to income before income taxes is as follows:
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Income tax expense at U.S. federal statutory rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State and local income taxes, net of federal income tax benefit (1) | 5.0 | | | 2.4 | | | 4.8 | |
| Excess tax benefits from share-based compensation (1) | (2.1) | | | (12.7) | | | (2.2) | |
| Non-deductible executive compensation | 1.2 | | | 2.1 | | | 1.6 | |
| Other items, net (2) | (0.1) | | | (0.6) | | | (0.3) | |
| Income tax expense | 25.0 | % | | 12.2 | % | | 24.9 | % |
|
| | | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 |
| Income tax expense at U.S. federal statutory rate (1) | 21.0 | % | | 35.0 | % | | 35.0 | % |
| State and local income taxes, net of federal income tax benefit | 4.8 |
| | 3.8 |
| | 4.8 |
|
| Excess tax benefits from share-based compensation (2) | (1.6 | ) | | (3.5 | ) | | — |
|
| Tax rate change (3) | — |
| | 26.5 |
| | — |
|
| Other items, net (4) | 0.2 |
| | 0.2 |
| | (0.9 | ) |
| Income tax expense/(benefit) | 24.4 | % | | 62.0 | % | | 38.9 | % |
| |
(1) | On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act was enacted, which eliminated the progressive U.S. federal corporate tax rate structure with a maximum corporate tax rate of 35% and replaced it with a flat tax rate of 21%, effective January 1, 2018. |
| |
(2) | In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplified the accounting for share-based payment award transactions, including income tax consequences. The new guidelines required excess tax benefits and tax deficiencies to be recorded in the income statement when stock awards vest or are settled. As a result, the Company recognized a $2.5 million and $2.9 million federal income tax benefit in the consolidated statement of operations (rather than additional paid-in capital) for the years ended December 31, 2018 and December 31, 2017, respectively, from share-based compensation excess tax benefits.(2)Includes various items such as non-deductible expenses, non-taxable income, tax credits, valuation allowance, uncertain tax positions and return-to-accrual adjustments. |
| |
(3) | According to Accounting Standard Codification ("ASC") 740, Income Taxes, deferred tax assets and liabilities are remeasured to reflect the effects of enacted changes in tax rates at the date of enactment, even though the tax rate changes are not effective until a future period. The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate, pursuant to the Tax Cuts and Jobs Act, resulted in a $21.4 million deferred income tax expense during the three-month period ended December 31, 2017.
|
| |
(4) | Includes various items such as, non-deductible expenses, non-taxable income, tax credits, valuation allowance, uncertain tax positions and return-to-accrual adjustments. |
As of December 31, 20182021 and 2017,2020, the Company had income taxes receivable of $1.6$8.2 million and $3.4$0.2 million, respectively, included in other current assets. The income tax receivable at December 31, 2017 includes a $2.3 million Alternative Minimum Tax ("AMT") credit carryforward. The Tax Cuts and Jobs Act repealed the AMT for corporations and made it refundable in years 2018 through 2020. As a result, the company utilized its AMT credit carryforward to reduce taxable income in 2018. The AMT credit carryforward was reclassified from deferred income taxes to other current assets as of December 31, 2017.within our consolidated balance sheets.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
Deferred tax assets (liabilities) consist of the following components (amounts in millions):
| | | | | | | | | | | |
| As of December 31, |
| 2021 | | 2020 |
| Deferred tax assets: | | | |
| Accrued payroll & employee benefits | $ | 13.2 | | | $ | 15.9 | |
| Workers’ compensation | 10.5 | | | 9.6 | |
| Share-based compensation | 6.2 | | | 5.1 | |
| Legal & compliance matters | 6.2 | | | 7.0 | |
| Lease liability | 27.3 | | | 25.2 | |
| Provider relief fund advance (1) | — | | | 15.6 | |
| Deferred social security taxes (2) | 6.9 | | | 14.3 | |
| Net operating loss carryforwards | 13.6 | | | 2.4 | |
| Tax credit carryforwards | 2.5 | | | 2.9 | |
| Other assets | 0.5 | | | 0.6 | |
| Gross deferred tax assets | 86.9 | | | 98.6 | |
| Less: valuation allowance | (3.3) | | | (0.1) | |
| Net deferred tax assets | 83.6 | | | 98.5 | |
| Deferred tax liabilities: | | | |
| Property and equipment | (8.1) | | | (3.8) | |
| Amortization of intangible assets | (32.3) | | | (11.8) | |
| Deferred revenue | (4.5) | | | (9.0) | |
| Investment in partnerships | (10.8) | | | — | |
| Right-of-use asset | (26.7) | | | (24.9) | |
| Other liabilities | (0.9) | | | (1.0) | |
| Gross deferred tax liabilities | (83.3) | | | (50.5) | |
| Deferred income taxes | $ | 0.3 | | | $ | 48.0 | |
|
| | | | | | | |
| | As of December 31, |
| | 2018 | | 2017 (1) |
| Deferred tax assets: | | | |
| Allowance for doubtful accounts | $ | 5.6 |
| | $ | 5.3 |
|
| Accrued payroll & employee benefits | 11.2 |
| | 9.0 |
|
| Workers’ compensation | 8.3 |
| | 7.9 |
|
| Amortization of intangible assets | 14.7 |
| | 26.0 |
|
| Share-based compensation | 6.9 |
| | 6.1 |
|
| Net operating loss carryforwards (2) | 5.9 |
| | 20.1 |
|
| Tax credit carryforwards (3) | 2.8 |
| | 4.6 |
|
| Other | 2.9 |
| | 2.4 |
|
| Gross deferred tax assets | 58.3 |
| | 81.4 |
|
| Less: valuation allowance | (0.7 | ) | | (0.7 | ) |
| Net deferred tax assets | 57.6 |
| | 80.7 |
|
| Deferred tax (liabilities): | | | |
| Property and equipment | (4.4 | ) | | (4.0 | ) |
| Deferred revenue | (13.5 | ) | | (18.0 | ) |
| Investment in partnerships | (3.1 | ) | | (2.1 | ) |
| Other liabilities | (0.8 | ) | | (0.5 | ) |
| Gross deferred tax liabilities | (21.8 | ) | | (24.6 | ) |
| Net deferred tax assets (liabilities) | $ | 35.8 |
| | $ | 56.1 |
|
| |
(1) | According to ASC 740, Income Taxes, deferred tax assets and liabilities are remeasured to reflect the effects of enacted changes in tax rates at the date of enactment, even though the tax rate changes are not effective until a future period. The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate, pursuant to the Tax Cuts and Jobs Act, resulted in a $21.4 million deferred income tax expense during the three-month period ended December 31, 2017.
|
| |
(2) | According to ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, an unrecognized tax benefit is presented in the financial statements as a reduction to a deferred tax asset when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is available to settle taxes that would result from the disallowance of the tax position. Otherwise, to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional incomes taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is presented in the financial statements as a liability and is not combined with deferred tax assets. As of December 31, 2017, the net operating loss (“NOL”) carryforwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax positions. Accordingly, the deferred tax assets recognized for the NOL carryforwards, as of December 31, 2017, were presented net of unrecognized tax benefits of $2.1 million. As of December 31, 2018, however, the unrecognized tax benefits of $2.1 million were reclassified to other long-term obligations, since the Company utilized its remaining federal NOL carryforward and much of its remaining state NOL carryforwards in 2018.
|
| |
(3) | According to ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, an unrecognized tax benefit is presented in the financial statements as a reduction to a deferred tax asset when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is available to settle taxes that would result from the disallowance of the tax position. Otherwise, to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional incomes taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is presented in the financial statements as a liability and is not combined with deferred tax assets. As of December 31, 2017, the tax credit carryforwards in the income tax returns include unrecognized tax benefits resulting from uncertain tax positions. Accordingly, the deferred tax assets recognized for the tax credit carryforwards, as of December 31, 2017, were presented net of unrecognized tax benefits of $0.7 million. As of December 31, 2018, however, the unrecognized tax benefits of $0.7 million were reclassified to other long-term obligations, since the Company utilized its remaining federal tax credit carryforwards in 2018.
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
The Company utilized its remaining U.S. NOL carryforwards, research and development tax credits and employment tax credits and(1)In April 2020, we received approximately half of its remaining state NOL carryforwards and tax credits in 2018.$100 million from the Provider Relief Fund established under the CARES Act. As of December 31, 2018,2020, we recorded a liability related to the funds that we did not expect to utilize totaling $60 million, which was reflected in the Provider Relief Fund Advance account in current liabilities within our consolidated balance sheet. For income tax purposes, the Company recognized the $60 million as income upon receipt, resulting in a deferred tax asset as of December 31, 2020. During 2021, we repaid the unutilized funds, resulting in an income tax deduction, and reduced the related deferred tax asset to zero as of December 31, 2021.
(2)The CARES Act provided for the deferral of the employer share of social security tax (6.2%), effective for payments due after the enactment date through December 31, 2020. Fifty percent of the deferred payroll taxes were due on December 31, 2021 with the remaining amounts due on December 31, 2022. As of December 31, 2020 and December 31, 2021, the Company had deferred social security taxes of $55 million and $27 million, respectively, reflected within our consolidated balance sheets. For income tax purposes, the deferred social security taxes are deductible when paid on December 31, 2021 and December, 31, 2022, resulting in a deferred tax asset at December 31, 2020 and December 31, 2021 for the unpaid social security taxes.
As of December 31, 2021, we have U.S. net operating loss (“NOL”) carryforwards of $38.8 million that are available to reduce future taxable income. If unused, $0.8 million of the NOL carryforwards begin to expire in 2037. The remaining balance of the NOL carryforwards may be carried forward indefinitely. The NOL carryforwards were acquired as part of the stock purchase of Contessa on August 1, 2021. Under Section 382 of the Internal Revenue Code of 1986, as amended, substantial changes in a Company’s ownership may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income. As a result of the ownership change, the Company determined that there will be an annual limitation, pursuant to Section 382, on the amount of NOL carryforwards that may be utilized to offset future taxable income. However, the annual limitation will not limit our ability to utilize the entirety of the NOL carryforwards prior to expiration.
As of December 31, 2021, we have state NOLnet operating loss ("NOL") carryforwards of $118.8$109.3 million that are available to reduce future taxable income and $3.6$3.2 million of various state tax credits available to reduce future state income taxes. The state NOL and tax credit carryforwards begin to expire at various times.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
As of December 31, 2021 and 2020, the valuation allowance for deferred tax assets, which is primarily related to certain state NOLs, was $3.3 million and state tax credit carryforwards was $0.7$0.1 million, as of December 31, 2018, unchanged from the year ended December 31, 2017.respectively. The net change in the total valuation allowance for the years ended December 31, 2021 and 2020 was an increase of $3.2 million and a decrease of $0.3 million, respectively. The $3.2 million increase in the valuation allowance, for the year ended December 31, 2017 was an increase2021, is due to the acquisition of $0.3 million.state NOL carryforwards in jurisdictions that require separate company reporting and where the Company does not expect to have sufficient separate company future taxable income available to offset the state NOL carryforwards.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those jurisdictions during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income before the expiration of the carryforwards governed by the tax code. Based on the current level of pretax earnings, the Company will generate the minimum amount of future taxable income needed to support the realization of the deferred tax assets. As a result, as of December 31, 2018,2021, management believes that it is more likely than not that we will realize the benefits of these deferred tax assets, net of the existing valuation allowances. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
Uncertain Tax Positions
We account for uncertain tax positions in accordance with the authoritative guidance for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in millions):
| | | | | | | | | | | | | | | | | |
| For the Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
| Balance at beginning of period | $ | 2.7 | | | $ | 2.7 | | | $ | 2.7 | |
| Additions for tax positions related to current year | — | | | — | | | — | |
| Additions for tax positions related to prior year | — | | | — | | | — | |
| Reductions for tax positions related to prior years | — | | | — | | | — | |
| Lapse of statute of limitations | — | | | — | | | — | |
| Settlements | — | | | — | | | — | |
| Balance at end of period | $ | 2.7 | | | $ | 2.7 | | | $ | 2.7 | |
|
| | | | | | | |
| | For the Years Ended December 31, |
| | 2018 | | 2017 |
| Balance at beginning of period | $ | 2.7 |
| | $ | 4.1 |
|
| Additions for tax positions related to current year | — |
| | — |
|
| Additions for tax positions related to prior year | — |
| | — |
|
| Reductions for tax positions related to prior years | — |
| | — |
|
| Lapse of statute of limitations | — |
| | (0.3 | ) |
| Change in statutory tax rate (1) | — |
| | (1.1 | ) |
| Settlements | — |
| | — |
|
| Balance at end of period | $ | 2.7 |
| | $ | 2.7 |
|
(1) The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate as a result of the recent tax reform resulted in a $1.1 million reduction in its uncertain tax positions recorded in net deferred tax assets at December 31, 2017.
According to ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, an unrecognized tax benefit is presented in the financial statements as a reduction to a deferred tax asset when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is available to settle taxes that would result from the disallowance of the tax position. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional incomes taxes that would result from the disallowance of a tax position, the unrecognized tax benefit is presented in the financial statements as a liability and is not combined with deferred tax assets. As of December 31, 2018, the Company no longer has a federal net operating loss nor tax credit carryforwards available to settle taxes that would result from the disallowance2021 and 2020, there is $2.7 million of its uncertain tax positions; therefore, the Company reclassified the unrecognized tax benefits of $2.7 million from deferred income taxes torecorded in other long-term obligations as of December 31, 2018,within the consolidated balance sheets that, if recognized in future periods, would impact our effective tax rate.
We recognized $0.1 million, $0.2 million and $0.3 million of interest as components of interest expense in connection with our reserve for uncertain tax positions during the years ended December 31, 2021, 2020 and 2019, respectively. Interest related to uncertain tax positions included in the consolidated balance sheets at December 31, 2021 and 2020 was $0.7 million and $0.6 million, respectively.
We believe it is reasonably possible that $2.7 million of unrecognized tax benefits may be recognized by December 31, 2022 as a result of a lapse of the statute of limitations.
We are subject to income taxes in the U.S. and in many of the 50 individual states, with significant operations in Louisiana, South Carolina, Alabama, Georgia, Massachusetts and Tennessee. We are open to examination in the U.S. and in various individual states for tax years ended December 31, 2014 through December 31, 2018.2021. We are also open to examination in various states for the years ended 2004 – 20182007 through 2021 resulting from net operating lossesNOLs generated and available for carryforward from those years.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
8.10. CAPITAL STOCK AND SHARE-BASED COMPENSATION
We are authorized by our Certificate of Incorporation to issue 60,000,000 shares of common stock, $0.001 par value and 5,000,000 shares of preferred stock, $0.001 par value. As of December 31, 2018,2021, there were 36,252,28037,674,868 and 31,973,50532,509,969 shares of common stock issued and outstanding, respectively, and no shares of preferred stock issued or outstanding. Our Board of Directors is authorized to fix the dividend rights and terms, conversion and voting rights, redemption rights and other privileges and restrictions applicable to our preferred stock.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Share-Based Awards
On March 29, 2018, our Board of Directors and the Compensation Committee approved, subject to stockholder approval, the Amedisys, Inc. 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”). On June 6, 2018, our stockholders approved the 2018 Plan at the Company's annual meeting of stockholders. The 2018 Plan replaces our 2008 Omnibus Incentive Compensation Plan (the “2008 Plan”), which terminated on June 6, 2018 when the stockholders approved the 2018 Plan. The 2018 Plan, as amended to date, authorizes the grant of various types of equity-based awards, such as stock awards, restricted stock units, stock appreciation rights and stock options to eligible participants, which include all of our employees and all employees of our 50% or more owned subsidiaries, our non-employee directors and certain consultants. The vesting terms of the awards may be tied to continued employment (or, for our non-employee directors, continued service on the Board of Directors) and/or achievement of certain pre-determined performance goals. We refer to stock awards subject to service-based vesting conditions as “non-vested stock” and restricted stock units subject to service-based or a combination of service-based and performance-based vesting conditions as “non-vested stock units.” The 2018 Plan is administered by the Compensation Committee of our Board of Directors, which determines, within the provisions of the 2018 Plan, those eligible participants to whom, and the times at which, awards shall be granted. The Compensation Committee, in its discretion, may delegate its authority and duties under the 2018 Plan to specified officers; however, only the Compensation Committee may approve the terms of awards to our executive officers.
Equity-based awards may be granted for a number of shares not to exceed, in the aggregate, approximately 2.5 million shares of common stock. We had approximately 2.41.8 million shares available at December 31, 2018.2021. The price per share for stock options shall be no less than the greater of (a) 100% of the fair value of a share of common stock on the date the option is granted or (b) the aggregate par value of the shares of our common stock on the date the option is granted. If a stock option is granted to any owner of 10% or more of the total combined voting power of us and our subsidiaries, the price is to be at least 110% of the fair value of a share of our common stock on the date the award is granted. Each equity-based award vests ratably over a 12 monthone year to fivefour year period, with the exception of those issued under contractual arrangements that specify otherwise, and may be exercised during a period as determined by our Compensation Committee or as otherwise approved by our Compensation Committee. The contractual terms of stock options exercised shall not exceed ten years from the date such option is granted. The Company analyzes historical data of forfeited awards to develop an estimated forfeiture rate that is applied to the Company's non-cash compensation expense; however, all non-cash compensation expense is adjusted to reflect actual vestings and forfeitures.
Employee Stock Purchase Plan (“ESPP”)
We have a plan whereby our eligible employees may purchase our common stock at 85% of the market price at the time of purchase. On June 7, 2012, our stockholders ratified an amendment adopted by our Board of Directors to increase the total number of shares of our common stock authorized for the issuance under our ESPP from 2,500,000 shares to 4,500,000 shares, and as of December 31, 2018,2021, there were 1,377,0171,304,845 shares available for future issuance. The following is a detail of the purchases that were made or pending Board of Director approval under the plan:
|
| | | | | | |
| Employee Stock Purchase Plan Period | Shares Issued | | Price |
| 2016 and Prior | 3,039,200 |
| | $ | 14.72 |
|
| January 1, 2017 to March 31, 2017 | 13,244 |
| | 43.43 |
|
| April 1, 2017 to June 30, 2017 | 11,446 |
| | 53.39 |
|
| July 1, 2017 to September 30, 2017 | 12,276 |
| | 47.57 |
|
| October 1, 2017 to December 31, 2017 | 13,323 |
| | 44.80 |
|
| January 1, 2018 to March 31, 2018 | 10,913 |
| | 51.29 |
|
| April 1, 2018 to June 30, 2018 | 8,673 |
| | 72.64 |
|
| July 1, 2018 to September 30, 2018 | 6,052 |
| | 106.22 |
|
| October 1, 2018 to December 31, 2018 | 7,856 |
| | 99.54 |
|
| | 3,122,983 |
| | |
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
| | | | | | | | | | | |
| Employee Stock Purchase Plan Period | Shares Issued | | Price |
| 2019 and Prior | 3,151,673 | | | $ | 16.81 | |
| January 1, 2020 to March 31, 2020 | 5,295 | | | 156.01 | |
| April 1, 2020 to June 30, 2020 | 5,414 | | | 168.76 | |
| July 1, 2020 to September 30, 2020 | 4,789 | | | 200.97 | |
| October 1, 2020 to December 31, 2020 | 4,202 | | | 249.33 | |
| January 1, 2021 to March 31, 2021 | 4,060 | | | 225.07 | |
| April 1, 2021 to June 30, 2021 | 5,095 | | | 208.19 | |
| July 1, 2021 to September 30, 2021 | 7,466 | | | 126.74 | |
| October 1, 2021 to December 31, 2021 | 7,161 | | | 137.60 | |
| 3,195,155 | | | |
ESPP expense included in general and administrative expense in our accompanying consolidated statements of operations was $0.5$0.7 million, $0.6 million and $0.6 million for 20182021, 2020 and $0.42019, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Stock Options
On August 10, 2020, Paul B. Kusserow, Chief Executive Officer and Chairman of the Board of Amedisys, exercised 500,000 stock options previously awarded to him under the 2008 Plan. In connection with the exercise, Mr. Kusserow surrendered 231,683 shares of common stock to us to satisfy tax withholding and strike price obligations and elected to hold the net 268,317 shares issued to him. The surrendered shares are classified as treasury shares. This transaction resulted in a cash outflow of $40.4 million, reflected within financing activities in our consolidated statement of cash flows, related to the remittance of tax withholding obligations. In addition, Mr. Kusserow's stock option exercise resulted in a $24.0 million income tax benefit that was recorded in our consolidated statement of operations during the year ended December 31, 2020. We recognize compensation expense for stock option awards on a straight-line basis over the requisite service period for each separately vesting portion of 2017 and 2016, respectively.
the award in accordance with ASC 718, Compensation: Stock OptionsCompensation; however, the income tax deduction related to stock options is not recognized until the stock option exercise date. As a result, for awards that are expected to result in a tax deduction, a deferred tax asset is created as the entity recognizes compensation expense for U.S. GAAP purposes. If the tax deduction exceeds the cumulative U.S. GAAP compensation expense for the award, the tax benefit associated with any excess deduction is recognized as an income tax benefit in the statement of operations.
We use the Black-Scholes option pricing model to estimate the fair value of our stock options. There were 163,666, 308,29240,788, 43,249 and 268,538142,122 options granted during 2018, 20172021, 2020 and 2016,2019, respectively. Stock option compensation expense included in general and administrative expense in our accompanying consolidated statements of operations was $5.7$3.6 million, $5.6$4.3 million and $6.3$6.2 million for 2018, 20172021, 2020 and 2016,2019, respectively.
The fair values of the awards were estimated using the following assumptions for each 2018, 20172021, 2020 and 2016:2019:
| | | | For the Years Ended December 31, | | For the Years Ended December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
| Risk Free Rate | 2.56% - 3.04% | | 1.99% - 2.16% | | 1.19% - 1.58% | Risk Free Rate | 0.80% - 1.35% | | 0.38% - 1.51% | | 1.44% - 2.53% |
| Expected Volatility | 42.00% - 45.32% | | 50.18% - 51.81% | | 53.44% - 54.89% | Expected Volatility | 39.84% - 41.40% | | 40.15% - 42.80% | | 42.46% - 43.83% |
| Expected Term | 4.12 - 6.25 years | | 5.78 - 6.25 years | | 5.86 - 6.25 years | Expected Term | 6.25 years | | 6.25 years | | 6.00 - 6.25 years |
| Weighted Average Fair Value | $42.48 | | $28.02 | | $25.99 | Weighted Average Fair Value | $107.45 | | $86.72 | | $54.42 |
| Dividend Yield | —% | | —% | | —% | Dividend Yield | —% | | —% | | —% |
We used the simplified method to estimate the expected term for the stock options granted during 20182021, 2020 and 2019 as adequate historical experience is not available to provide a reasonable estimate.
The following table presents our stock option activity for 2018:2021:
| | | | | | | | Number of
Shares | | Weighted
Average Exercise
Price | | Weighted
Average Contractual
Life (Years) |
| | Number of Shares | | Weighted Average Exercise Price | | Weighted Average Contractual Life (Years) | |
| Outstanding options at January 1, 2018 | 909,730 |
| | $ | 33.25 |
| | 7.62 | |
| Outstanding options at January 1, 2021 | | Outstanding options at January 1, 2021 | 278,041 | | | $ | 111.27 | | | 7.68 |
| Granted | 163,666 |
| | 55.87 |
| | Granted | 40,788 | | | 268.32 | | |
| Exercised | (162,690 | ) | | 36.59 |
| | Exercised | (32,468) | | | 63.28 | | |
| Canceled, forfeited or expired | (77,391 | ) | | 35.95 |
| | Canceled, forfeited or expired | (12,388) | | | 173.16 | | |
| Outstanding options at December 31, 2018 | 833,315 |
| | $ | 36.79 |
| | 6.76 | |
| Exercisable options at December 31, 2018 | 462,845 |
| | $ | 27.97 |
| | 6.17 | |
| Outstanding options at December 31, 2021 | | Outstanding options at December 31, 2021 | 273,973 | | | $ | 137.54 | | | 7.21 |
| Exercisable options at December 31, 2021 | | Exercisable options at December 31, 2021 | 144,534 | | | $ | 97.33 | | | 6.44 |
The aggregate intrinsic value of our outstanding options and exercisable options at December 31, 20182021 was $66.9$12.6 million and $41.3$9.8 million, respectively. Total intrinsic value of options exercised was $9.7$5.1 million, $121.1 million and $3.9$7.3 million for 20182021, 2020 and 2017, respectively; there were no options exercised during 2016.2019, respectively. The tax benefit from stock options exercised during the period amounted to $1.6$1.0 million, $27.9 million and $0.3$1.3 million for 20182021, 2020 and 2017, respectively; there were no options exercised during 2016.2019, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
The following table presents our non-vested stock option activity for 2018:2021:
| | | | | | | Number of
Shares | | Weighted Average
Grant Date Fair Value |
| | Number of Shares | | Weighted Average Grant Date Fair Value | |
| Non-vested stock options at January 1, 2018 | 527,798 |
| | $ | 23.00 |
| |
| Non-vested stock options at January 1, 2021 | | Non-vested stock options at January 1, 2021 | 188,612 | | | $ | 56.55 | |
| Granted | 163,666 |
| | 42.48 |
| Granted | 40,788 | | | 268.32 | |
| Vested | (246,442 | ) | | 23.11 |
| Vested | (88,116) | | | 106.75 | |
| Forfeited | (74,552 | ) | | 25.78 |
| Forfeited | (11,845) | | | 171.25 | |
| Non-vested stock options at December 31, 2018 | 370,470 |
| | $ | 30.97 |
| |
| Non-vested stock options at December 31, 2021 | | Non-vested stock options at December 31, 2021 | 129,439 | | | $ | 182.45 | |
At December 31, 2018,2021, there was $5.1$4.7 million of unrecognized compensation cost related to stock options that we expect to be recognized over a weighted-average period of 1.7 years.
Non-Vested Stock
We issue shares of non-vested stock with vesting terms ranging from one to five years. The compensation expense is determined based on the market price of our common stock at the date of grant applied to the total number of shares that are anticipated to
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
fully vest. Non-vested stock compensation expense included in general and administrative expenses in our accompanying consolidated statements of operations was $1.4 million, $1.7 million and $2.3 million for 2018, 2017 and 2016, respectively.
The following table presents our non-vested stock activity for 2018:
|
| | | | | | |
| | Number of Shares | | Weighted Average Grant Date Fair Value |
| Non-vested stock at January 1, 2018 | 46,998 |
| | $ | 41.48 |
|
| Granted | 14,904 |
| | 80.54 |
|
| Vested | (46,998 | ) | | 41.48 |
|
| Canceled, forfeited or expired | — |
| | — |
|
| Non-vested stock at December 31, 2018 | 14,904 |
| | $ | 80.54 |
|
The weighted average grant date fair value of non-vested stock granted was $80.54, $62.67 and $50.55 in 2018, 2017 and 2016, respectively.
At December 31, 2018, there was $0.5 million of unrecognized compensation cost related to non-vested stock award payments that we expect to be recognized over a weighted average period of 0.42.0 years.
Non-Vested Stock Units
We issue non-vested stock unit awards that are service-based, performance-based or a combination of both with vesting terms ranging from one to fivefour years. Based on the terms and conditions of these awards, we determine if the awards should be recorded as either equity or liability instruments. The compensation expense is determined based on the market price of our common stock at the date of grant, applied to the total number of units that are anticipated to vest, unless the award specifies differently. We account for such awards similar to our non-vested stock awards; however, no sharesShares of stock are not issued to the recipient until the stock unit awards have vested and after the pre-determined delivery date has occurred.
Non-Vested Stock Units – Service-Based ("Service-Based Non-Vested Stock Units")
Service-based non-vested stock unit compensation expense included in general and administrative expenses in our accompanying consolidated statements of operations was $4.5$9.4 million, $3.6$7.5 million and $3.6$8.7 million for 2018, 20172021, 2020 and 2016,2019, respectively.
The following table presents our service-based non-vested stock units activity for 2018:2021:
| | | | | | | Number of
Shares | | Weighted Average
Grant Date Fair
Value |
| | Number of Shares | | Weighted Average Grant Date Fair Value | |
| Non-vested stock units at January 1, 2018 | 234,842 |
| | $ | 47.58 |
| |
| Non-vested stock units at January 1, 2021 | | Non-vested stock units at January 1, 2021 | 157,546 | | | $ | 123.92 | |
| Granted | 107,051 |
| | 95.14 |
| Granted | 110,076 | | | 234.42 | |
| Vested | (71,658 | ) | | 46.55 |
| Vested | (75,446) | | | 110.31 | |
| Canceled, forfeited or expired | (29,835 | ) | | 44.20 |
| Canceled, forfeited or expired | (11,353) | | | 149.60 | |
| Non-vested stock units at December 31, 2018 | 240,400 |
| | $ | 69.49 |
| |
| Non-vested stock units at December 31, 2021 | | Non-vested stock units at December 31, 2021 | 180,823 | | | $ | 195.25 | |
The weighted average grant date fair value of service-based non-vested stock units granted was $95.14, $53.79$234.42, $206.10 and $45.60$123.70 in 2018, 20172021, 2020 and 2016,2019, respectively.
At December 31, 2018,2021, there was $11.0$23.9 million of unrecognized compensation cost related to our service-based non-vested stock units that we expect to be recognized over a weighted average period of 2.32.5 years.
Non-Vested Stock Units – Service-Based and Performance-Based Awards ("Performance-Based Non-Vested Stock Units")
During 2018,2021, we awarded performance-based awards to certain employees. The target level established by the award, which is based on the Company’s 20182021 adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), provided for the recipients to receive 115,338an aggregate of 81,983 non-vested stock units if the target was achieved. For a select group of employees, if the target objective was surpassed to the point of achieving the projected maximum payout, the recipients would receive an additional aggregate of 10,250 non-vested stock units during the three-month period ending March 31, 2022. The target number of shares to be potentially awarded has been reduced by forfeitures as indicated in the table below. Performance-based non-vested stock units compensation expense included in general and administrative expenses in our consolidated statements of operations was $5.8$10.2 million, $5.0$13.5 million and $3.7$8.4 million for 2018, 20172021, 2020 and 2016,2019, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 20182021
The following table presents our performance-based non-vested stock units activity for 2018:2021:
| | | | | | | Number of
Shares | | Weighted Average
Grant Date Fair
Value |
| | Number of Shares | | Weighted Average Grant Date Fair Value | |
| Non-vested stock units at January 1, 2018 | 252,948 |
| | $ | 51.15 |
| |
| Non-vested stock units at January 1, 2021 | | Non-vested stock units at January 1, 2021 | 196,287 | | | $ | 148.16 | |
| Granted | 115,338 |
| | 79.59 |
| Granted | 81,983 | | | 262.67 | |
| Vested | (87,482 | ) | | 49.91 |
| Vested | (79,736) | | | 125.61 | |
| Canceled, forfeited or expired | (54,127 | ) | | 52.60 |
| Canceled, forfeited or expired | (11,583) | | | 174.41 | |
| Non-vested stock units at December 31, 2018 | 226,677 |
| | $ | 65.76 |
| |
| Non-vested stock units at December 31, 2021 | | Non-vested stock units at December 31, 2021 | 186,951 | | | $ | 206.36 | |
The weighted average grant date fair value of performance-based non-vested stock units granted was $79.59, $52.99$262.67, $201.90 and $46.29$128.89 in 2018, 20172021, 2020 and 2016,2019, respectively.
At December 31, 2018,2021, there was $8.3$5.4 million in unrecognized compensation costs related to our performance-based non-vested stock units that we expect to be recognized over a weighted average period of 1.91.4 years.
9.11. COMMITMENTS AND CONTINGENCIES
Legal Proceedings – Ongoing
We are involved in legal actions in the followingnormal course of business, some of which seek monetary damages, including claims for punitive damages. Based on information available to us as of the date of this filing, we do not believe that these normal course actions, when finally concluded and determined, will have a material impact on our consolidated financial condition, results of operations or cash flows.
Legal fees related to all legal actions:matters are expensed as incurred.
Legal Proceedings - Completed
Subpoena Duces Tecum and Civil Investigative Demands Issued by the U.S. Department of Justice
On May 7, 2021, the U.S. Department of Justice notified the Company that they were closing their investigation into the below-referenced Subpoena Duces Tecum ("Subpoena") and civil investigative demands ("CIDs"). At the time, we had $6.5 million recorded to accrued expenses in our consolidated balance sheets related to these matters. We reversed this accrual during the three-month period ended June 30, 2021.
On May 21, 2015, we received a Subpoena Duces Tecum (“Subpoena”) issued by the U.S. Department of Justice. The Subpoena requestsrequested the delivery of information regarding 53 identified hospice patients to the United States Attorney’s Office for the District of Massachusetts. It also requestsrequested the delivery of documents relating to our hospice clinical and business operations and related compliance activities. The Subpoena generally coverscovered the period from January 1, 2011 through May 21, 2015. We are fully cooperating with the U.S. Department of Justice with respect to this investigation. Based on the information currently available to us, we cannot predict the timing or outcome of this investigation or reasonably estimate the amount or range of potential losses, if any, which may arise from this matter.
Civil Investigative Demand Issued by the U.S. Department of Justice
On November 3, 2015, we received a civil investigative demand (“CID”)CID issued by the U.S. Department of Justice pursuant to the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through designated facilities in the Morgantown, West Virginia area. The CID requestsrequested the delivery of information to the United States Attorney’s Office for the Northern District of West Virginia regarding 66 identified hospice patients, as well as documents relating to our hospice clinical and business operations in the Morgantown area. The CID generally coverscovered the period from January 1, 2009 through August 31, 2015. We are fully cooperating with the U.S. Department of Justice with respect to this investigation. Based on the information currently available to us, we cannot predict the timing or outcome of this investigation or reasonably estimate the amount or range of potential losses, if any, which may arise from this matter.
On June 27, 2016, we received a CID issued by the U.S. Department of Justice pursuant to the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through designated facilities in the Parkersburg, West Virginia area. The CID requestsrequested the delivery of information to the United States Attorney’s Office for the Southern District of West Virginia regarding 68 identified hospice patients, as well as documents relating to our hospice clinical and business operations in the Parkersburg area. The CID generally coverscovered the period from January 1, 2011 through June 20, 2016. We are fully cooperating with the U.S. Department of Justice with respect to this investigation. Based on the information currently available to us, we cannot predict the timing or outcome of this investigation or reasonably estimate the amount or range of potential losses, if any, which may arise from this matter.
In addition to the matters referenced in this note, we are involved in legal actions in the normal course of business, some of which seek monetary damages, including claims for punitive damages. We do not believe that these normal course actions, when finally concluded and determined, will have a material impact on our consolidated financial condition, results of operations or cash flows.
Legal fees related to all legal matters are expensed as incurred.
Legal Proceedings – Settled
Wage and Hour Litigation
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
On July 25, 2012, a putative collective and class action complaint was filed in the United States District Court for the District of Connecticut against us in which three former employees allege wage and hour law violations. The former employees claim that they were not paid overtime for all hours worked over 40 hours in violation of the Federal Fair Labor Standards Act (“FLSA”), as well as the Pennsylvania Minimum Wage Act. More specifically, they allege they were paid on both a per-visit and an hourly basis, and that such a pay scheme resulted in their misclassification as exempt employees, thereby denying them overtime pay.
On June 10, 2015, the Company and plaintiffs participated in a mediation whereby they agreed to fully resolve all of plaintiffs’ claims in the lawsuit for $8.0 million, subject to approval by the Court. As of September 30, 2015, we had an accrual of $8.0 million for this matter. On January 29, 2016, the Court approved the final settlement of this case. The settlement became effective on February 26, 2016. As a result of the final amount calculated by the settlement administrator based on claims timely submitted, we reduced our accrual to $5.3 million as of December 31, 2015; this amount was paid during the three-month period ended March 31, 2016.
On September 13, 2012, a putative collective and class action complaint was filed in the United States District Court for the Northern District of Illinois against us in which a former employee alleges wage and hour law violations. The former employee claims she was paid on both a per-visit and an hourly basis, and that such a pay scheme resulted in her misclassification as an exempt employee, thereby denying her overtime. The plaintiff alleges violations of federal and state law and seeks damages under the FLSA and the Illinois Minimum Wage Law. On December 23, 2015, the parties agreed to explore the possibility of a mediated settlement of the Illinois case, and a mediation occurred on April 18, 2016. The parties agreed to settle the case for $0.8 million, subject to court approval, which the Company had accrued as of September 30, 2016. On August 4, 2016, the Court approved the final settlement of this case. The final payment of $0.6 million was paid on November 21, 2016.
Frontier Litigation
On April 2, 2015, Frontier Home Health and Hospice, L.L.C. (“Frontier”) filed a complaint against the Company in the United States District Court for the District of Connecticut alleging breach of contract, negligent misrepresentation and unfair and deceptive trade practices under Conn. Gen. Stat. §42-110b. Frontier acquired our interest in five home health and four hospice care centers in Wyoming and Idaho in April 2014. The complaint alleges that certain of the hospice patients on service at the time of the acquisition did not meet Medicare eligibility requirements and that we breached certain of the representations and warranties under the purchase agreement and therefore, the businesses were worth less than the purchase price. Under the complaint, Frontier seeks declaratory judgment from the District Court that, under the terms of the purchase agreement with Frontier, we are obligated to determine the amount of the alleged Medicare overpayments and reimburse the government for the same in a timely manner, as well as unspecified compensatory and punitive damages, attorneys’ fees and pre- and post-judgment interest. The Company resolved the Frontier litigation for $2.9 million during the three-month period ended December 31, 2016.
Securities Class Action Lawsuits
As previously disclosed, between June 10 and July 28, 2010, several putative securities class action complaints were filed in the United States District Court for the Middle District of Louisiana (the “District Court”) against the Company and certain of our former senior executives. The cases were consolidated into the first-filed action Bach, et al. v. Amedisys, Inc., et al. Case No. 3:10-cv-00395, and the District Court appointed as co-lead plaintiffs the Public Employees’ Retirement System of Mississippi and the Puerto Rico Teachers’ Retirement System (the “Co-Lead Plaintiffs”).
The Plaintiffs were granted leave to file a First Amended Consolidated Complaint (the “First Amended Securities Complaint”) on behalf of all purchasers or acquirers of Amedisys’ securities between August 2, 2005 and September 30, 2011. The First Amended Securities Complaint alleges that the Company and seven individual defendants violated Section 10(b), Section 20(a), and Rule 10b-5 of the Securities Exchange Act of 1934 by materially misrepresenting the Company’s financial results and concealing a scheme to obtain higher Medicare reimbursements and additional patient referrals by (1) providing medically unnecessary care to patients, including certifying and re-certifying patients for medically unnecessary 60-day treatment episodes; (2) implementing clinical tracks such as “Balanced for Life” and wound care programs that provided a pre-set number of therapy visits irrespective of medical need; (3) “upcoding” patients’ Medicare forms to attribute a “primary diagnosis” to a medical condition associated with higher billing rates; and (4) providing improper and illegal remuneration to physicians to obtain patient certifications or re-certifications. The First Amended Securities Complaint sought certification of the case as a class action and an unspecified amount of damages, as well as interest and an award of attorneys’ fees.
On June 12, 2017, the Company reached an agreement-in-principle to settle this matter. All parties to the action executed a binding term sheet that, subject to final documentation and court approval, provided in part for a settlement payment of approximately $43.7 million, and the dismissal with prejudice of the litigation. Approximately $15.0 million of the settlement amount was paid by the Company’s insurance carriers. The net of these two amounts, $28.7 million, was recorded as a charge in our consolidated
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
statements of operations and paid with cash on hand during 2017. On December 19, 2017, the Court entered the final order and judgment on the case.
Other Investigative Matters – OngoingCompleted
Corporate Integrity Agreement
On May 5, 2020, the Company received notice from the Office of Inspector General-HHS ("OIG") that the Company's five-year corporate integrity agreement ("CIA") with the OIG was completed. On April 23, 2014, with no admissions of liability on our part, we entered into a settlement agreement with the U.S. Department of Justice relating to certain of our clinical and business operations. Concurrently with our entry into this agreement, we entered into a corporate integrity agreement (“CIA”)CIA with the Office of Inspector General-HHS (“OIG”).OIG. The CIA formalizesformalized various
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
aspects of our already existing ethics and compliance programs and containscontained other requirements designed to help ensure our ongoing compliance with federal health care program requirements. Among other things, the CIA requiresrequired us to maintain our existing compliance program, executive compliance committee and compliance committee of the Board of Directors; provide certain compliance training; continue screening new and current employees to ensure they are eligible to participate in federal health care programs; engage an independent review organization ("IRO") to perform certain audits and reviews and prepare certain reports regarding our compliance with federal health care programs, our billing submissions to federal health care programs and our compliance and risk mitigation programs; and provide certain reports and management certifications to the OIG. Additionally, the CIA specifically requiresrequired that we report substantial overpayments that we discoverdiscovered we havehad received from federal health care programs, as well as probable violations of federal health care laws. The corporate integrity agreement had a term of five years that ended on April 21, 2019. We filed our final annual report on July 19, 2019.
Compassionate Care Hospice Corporate Integrity Agreement
On January 8, 2021, the Company received notice from the OIG that the Company's five-year CIA with the OIG was completed. On January 30, 2015, CCH entered into a CIA with the OIG. The CIA required that CCH provide annual on-site compliance training; develop and implement policies to ensure compliance with federal health care program requirements; screen new and current employees to ensure that they are eligible to participate in federal health care programs; establish a compliance committee that contains both a Compliance Officer and a Chief Quality Officer; retain a Governing Authority expert who will periodically complete a compliance program review; and retain an IRO to complete claims review for hospice services rendered in New York. The OIG waived the claims review for the final year of the CCH CIA based on the closure of the New York operations. Additionally, the CIA required that CCH report substantial overpayments that CCH discovered it received from federal health care programs, as well as probable violations of federal criminal, civil or administrative health care laws. Upon breach of the CIA, weCCH could have become liable for payment of certain stipulated penalties, or could behave been excluded from participation in federal health care programs. The corporate integrity agreement hasCIA had a term of five years.
Idaho and Wyoming Self-Report
During 2016, the Company engaged an independent auditing firm to perform a clinical audit of the hospice care centers acquired by Frontier Home Health and Hospice in April 2014. As of December 31, 2018, we have recorded $1.3 million to accrued expenses inyears that ended on January 30, 2020. We filed our consolidated balance sheet related to this matter.
Other Investigative Matters – Settled
Corporate Integrity Agreement
During the course of our compliance with the CIA, the Company identified several reportable events and notified the OIG as required. As of December 31, 2015, the Company had an accrual of $4.7 million for these matters. On May 5, 2016, the company entered into a settlement agreement with the OIG and the matters were fully resolved for $4.7 million; this amount was paid during the three-month period ended June 30, 2016.final annual report on March 25, 2020.
Third Party Audits – Ongoing
From time to time, in the ordinary course of business, we are subject to audits under various governmental programs in which third party firms engaged by CMS, including Recovery Audit Contractors (“RACs”), Zone Program Integrity Contractors (“ZPICs”), Uniform Program Integrity Contractors (“UPICs”), Program Safeguard Contractors (“PSCs”), Medicaid Integrity Contractors (“MICs”), Supplemental Medical Review Contractors (“SMRCs”), and the Centers for Medicare and Medicaid Services (“CMS”Office of the Inspector General ("OIG"), conduct extensive reviewreviews of claims data to identify potential improper payments. We cannot predict the ultimate outcome of any regulatory reviews or other governmental audits and investigations.
In July 2010, our subsidiary that provides hospice services in Florence, South Carolina received from a Zone Program Integrity Contractor (“ZPIC”)ZPIC a request for records regarding a sample of 30 beneficiaries who received services from the subsidiary during the period of January 1, 2008 through March 31, 2010 (the “Review Period”) to determine whether the underlying services met pertinent Medicare payment requirements. We acquired the hospice operations subject to this review on August 1, 2009; the Review Period covers time periods both before and after our ownership of these hospice operations. Based on the ZPIC’s findings for 16 beneficiaries, which were extrapolated to all claims for hospice services provided by the Florence subsidiary billed during the Review Period, on June 6, 2011, the Medicare Administrative Contractor ("MAC") for the subsidiary issued a notice of overpayment seeking recovery from our subsidiary of an alleged overpayment. We dispute these findings, and our Florence subsidiary has filed appeals through the Original Medicare Standard Appeals Process, in which we are seeking to have those findings overturned. An administrative law judge ("ALJ") hearing was held in early January 2015. On January 18, 2016, we received a letter dated January 6, 2016 referencing the ALJ hearing decision for the overpayment issued on June 6, 2011. The decision was partially favorable with a new overpayment amount of $3.7 million with a balance owed of $5.6 million including interest based on 9 disputed claims (originally 16). We filed an appeal to the Medicare Appeals Council on the remaining 9 disputed claims and also argued that the statistical method used to select the sample was not valid. No assurances can be given as to the timing or outcome of the Medicare Appeals Council decision. As of December 31, 2018,2021, Medicare has withheld payments of $5.7 million (including additional interest) as part of their standard procedures once this level of the appeal process has been reached. In the event we are not able to recoup this alleged overpayment, we are entitled to be indemnified by the prior owners of the hospice operations for amounts relating to
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
the period prior to August 1, 2009. On January 10, 2019, an arbitration panel from the American Health Lawyers Association determined that the prior owners' liability for their indemnification obligation was $2.8 million. Accordingly, the Company reduced its indemnity receivable from $4.9 million to $2.8 million. The $2.1 million impact wasThis amount is recorded to general and administrative expenses, other within our consolidated statements of operations. As of December 31, 2018, we haveas an indemnity receivable of approximately $2.8 million for the amount withheld related to the period prior to August 1, 2009.within other assets in our consolidated balance sheets.
In July 2016, the Company received a request for medical records from SafeGuard Services, L.L.C (“SafeGuard”), a ZPIC, related to services provided by some of the care centers that the Company acquired from Infinity Home Care, L.L.C. The review period covers time periods both before and after our ownership of the care centers, which were acquired on
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
December 31, 2015. In August 2017, the Company received Requests for Repayment from Palmetto GBA, LLC (“Palmetto”) regarding Infinity Home Care of Lakeland, LLC, (“Lakeland Care Centers”) and Infinity Home Care of Pinellas, LLC, (“Clearwater Care Center”). The Palmetto letters are based on a statistical extrapolation performed by SafeGuard which alleged an overpayment of $34.0 million for the Lakeland Care Centers on a universe of 72 Medicare claims totaling $0.2 million in actual claims payments using a 100% error rate and an overpayment of $4.8 million for the Clearwater Care Center on a universe of 70 Medicare claims totaling $0.2 million in actual claims payments using a 100% error rate.
The Lakeland Request for Repayment covers claims between January 2, 2014 and September 13, 2016. The Clearwater Request for Repayment covers claims between January 2, 2015 and December 9, 2016. As a result of partially successful Level I and Level II Administrative Appeals, the alleged overpayment for the Lakeland Care Centers has been reduced to $26.0 million and the alleged overpayment for the Clearwater Care Center has been reduced to $3.3 million. The Company has now filed Level III Administrative Appeals, and will continue to vigorously pursue its appeal rights, which include contesting the methodology used by the ZPIC contractor to perform statistical extrapolation. The Company is contractually entitled to indemnification by the prior owners for all claims prior to December 31, 2015, for up to $12.6 million.
At this stage of the review, based on the information currently available to the Company, the Company cannot predict the timing or outcome of this review. The Company estimates a low-end potential range of loss related to this review of $6.5 million (assuming the Company is successful in seeking indemnity from the prior owners and unsuccessful in demonstrating that the extrapolation method used by SafeGuard was erroneous). The Company has reduced its high-end potential range of loss from $38.8 million (the maximum amount Palmetto claims has been overpaid for both the Lakeland Care Centers and the Clearwater Care Center, of which amount $12.6 million is subject to indemnification by the prior owners) to $29.3 million based on the partial success achieved by the Company in prosecuting its Level I and II Administrative Appeals.
As of December 31, 2018,2021, we have an accrued liability of approximately $17.4 million related to this matter. We expect to be indemnified by the prior owners for approximately $10.9 million of the total $12.6 million available indemnification related to this matter and have recorded this amount within other assets in our consolidated balance sheet as of December 31, 2018.sheets. The net of these two amounts, $6.5 million, was recorded as a reduction in revenue in our consolidated statements of operations during 2017. As of December 31, 2018,2021, $1.5 million of net receivables have been impacted by this payment suspension.
Compliance
From time to time, the Company performs internal reviews of claims data to identify potential improper payments. Any overpayments are recorded as a reduction in revenue in our consolidated statements of operations. As of December 31, 2018, we have recorded $5.6 million to accrued expenses in our consolidated balance sheet as a result of these reviews.
Operating Leases
We have leased office space at various locations under non-cancelable agreements that expire between 2019 and 2028, and require various minimum annual rentals. Our operating leases are for lease terms of one to ten years and may include, in addition to base rental amounts, certain landlord pass-through costs for our pro-rata share of the lessor’s real estate taxes, utilities and common area maintenance costs. Some of our operating leases contain escalation clauses, in which annual minimum base rentals increase over the term of the lease.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Total minimum rental commitments for leased office space as of December 31, 2018 are as follows (amounts in millions):
|
| | | |
| | |
| 2019 | $ | 23.3 |
|
| 2020 | 18.7 |
|
| 2021 | 13.2 |
|
| 2022 | 8.5 |
|
| 2023 | 5.2 |
|
| Future years | 9.8 |
|
| Total | $ | 78.7 |
|
Rent expense for non-cancelable operating leases was $27.8 million, $28.6 million and $27.5 million for 2018, 2017 and 2016, respectively.
Insurance
We are obligated for certain costs associated with our insurance programs, including employee health, workers’ compensation and professional liability. While we maintain various insurance programs to cover these risks, we are self-insured for a substantial portion of our potential claims. We recognize our obligations associated with these costs, up to specified deductible limits in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported. These costs have generally been estimated based on historical data of our claims experience. Such estimates, and the resulting reserves, are reviewed and updated by us on a quarterly basis.
The following table presents details of our insurance programs, including amounts accrued for the periods indicated (amounts in millions) inwithin accrued expenses in our accompanyingconsolidated balance sheets. The amounts accrued below represent our total estimated liability for individual claims that are less than our noted insurance coverage amounts, which can include outstanding claims and claims incurred but not reported.
| | | | As of December 31, | | As of December 31, |
| Type of Insurance | 2018 | | 2017 | Type of Insurance | 2021 | | 2020 |
| Health insurance | $ | 12.4 |
| | $ | 14.1 |
| Health insurance | $ | 17.5 | | | $ | 15.1 | |
| Workers’ compensation | 30.9 |
| | 29.3 |
| Workers’ compensation | 40.3 | | | 35.8 | |
| Professional liability | 4.3 |
| | 4.3 |
| Professional liability | 5.2 | | | 4.9 | |
| | 47.6 |
| | 47.7 |
| | 63.0 | | | 55.8 | |
| Less: long-term portion | (1.1 | ) | | (1.2 | ) | Less: long-term portion | (0.2) | | | (1.2) | |
| | $ | 46.5 |
| | $ | 46.5 |
| | $ | 62.8 | | | $ | 54.6 | |
Our health insurance has an exposure limit of $1.0$1.3 million for any individual covered life. Our workers compensation insurance has a retention limit of $0.5$1.0 million per incident and our professional liability insurance has a retention limit of $0.3 million per incident. Effective January 1, 2019, our workers compensation insurance retention limit will increase to $1.0 million per incident.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
Severance
We have commitments related to our Key Executive Severance Planseverance plans applicable to a number of our senior executives as well as the employment agreement entered into with our Chief Executive Officer, each ofand senior management, which generally commit us to pay severance benefits under certain circumstances.
Other
We are subject to various other types of claims and disputes arising in the ordinary course of our business. While the resolution of such issues is not presently determinable, we believe that the ultimate resolution of such matters will not have a significant effect on our consolidated financial condition, results of operations andor cash flows.
10.12. EMPLOYEE BENEFIT PLANS
401(k) Benefit Plan
We maintain a plan qualified under Section 401(k) of the Internal Revenue Code for all employees who have reached 21 years of age, effective the first month after their hire date. Under the plan, eligible employees may elect to defer a portion of their compensation, subject to Internal Revenue Service limits.
Effective January 1, 2017, ourOur match of contributions to be made to each eligible employee contribution is $0.44 for every $1.00 contributed up to the first 6% of their salary. During 2016, our match of contributions to be made to each eligible employee contribution was $0.375 for every $1.00 contributed up to the first 6% of their salary. The match is discretionary and thus is subject to change at the discretion of management. TheseEffective January 1, 2020, our match of contributions areis made in the form of cash. During 2019, matching contributions were made in the form of our common stock, valued based upon the fair value of the stock as of the end of each calendar quarter end. We expensed approximately $9.0$17.0 million, $8.8$12.9 million and $6.9$10.5 million related to our 401(k) benefit plan for 2018, 20172021, 2020 and 2016,2019, respectively.
Deferred Compensation Plan
We had a Deferred Compensation Plan for additional tax-deferred savings for a select group of management or highly compensated employees. Amounts credited under the Deferred Compensation Plan were funded into a rabbi trust, which is managed by a trustee. The trustee has the discretion to manage the assets of the Deferred Compensation Plan as deemed fit, thus, the assets are not necessarily reflective of the same investment choices that would have been made by the participants.
Effective January 1, 2015, all prospective salary deferrals ceased. Participants will beare allowed to make transactions with any remaining account balances as they wish per plan guidelines.
11.13. SHARE REPURCHASEREPURCHASES
2018 Share Repurchase
On June 4, 2018, we purchased 2,418,304 of our common shares from affiliates of KKR Credit Advisors (US) LLC ("KKR"), representing one-half of KKR's holdings in the Company and 7.1% of the aggregate outstanding shares of the Company's common stock for a total purchase price of $181.4 million including related direct costs. The Company repurchased the shares at $73.96 which represents 96% of the closing stock price of the Company's common stock on June 4, 2018. The repurchased shares are classified as treasury shares.
2021 Stock Repurchase Program
On September 9, 2015,December 23, 2020, we announced that our Board of Directors authorized a stock repurchase program, allowing for theunder which we could repurchase of up to $75$100 million of our outstanding common stock on or before September 6, 2016, the date on which the stock repurchase program expired.through December 31, 2021 (the "2021 Share Repurchase Program").
Under the terms of the 2021 Share Repurchase program, we were allowed to repurchase shares from time to time inthrough open market purchases, unsolicited or solicited privately negotiated transactions, block purchases an accelerated stock repurchase program, and/or a trading plan in private transactions in accordancecompliance with applicable federal securities laws and other legal requirements. We were allowed to enter intoExchange Act Rule 10b5-1 plans to effect some or all of the repurchases.10b5-1. The timing and the amount of the repurchases werewas determined by management based on a number of factors, including but not limited to share price, trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors.
Pursuant to this program, we repurchased 324,141446,832 shares of our common stock at a weighted average price of $37.96$223.49 per share and a total cost of approximately $12.3$100 million during 2016 and 116,859the year ended December 31, 2021. We did not repurchase any shares of our commonpursuant to this stock at a weighted average price of $39.20 per share and a total cost of approximately $4.6 millionrepurchase program during 2015.the year ended December 31, 2020. The repurchased shares are classified as treasury shares.
On August 2, 2021, our Board of Directors authorized a share repurchase program, under which we may repurchase up to $100 million of our outstanding common stock through December 31, 2022 to commence upon the completion of the Company's 2021 Share Repurchase Program (the "New Share Repurchase Program").
12. EXIT AND RESTRUCTURING ACTIVITIES
During 2017,Under the terms of the New Share Repurchase Program, we closed four Florida home health care centers, consolidated another three Florida home health care centersare allowed to repurchase shares from time to time through open market purchases, unsolicited or solicited privately negotiated transactions, an accelerated stock repurchase program, and/or a trading plan in compliance with care centers servicingExchange Act Rule 10b5-1. The timing and the same marketsamount of the repurchases will be determined by management based on a number of factors, including but not limited to share price, trading volume and implemented a plan to restructure our home health division. As a result of these actions, we recorded non-cash charges of $1.3 million in asset impairment expense related to the write-off of intangible assets, $0.6 million in other general and administrative expenses related to lease termination costs and $3.0 million in salaries and benefits related to severance costs which was offset by a reduction in non-cash compensation of approximately $1.0 million within our consolidated statements of operations for 2017.
Our reserve activity for our 2017 exit and restructuring activity is as follows (amounts in millions):market
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
|
| | | | | | | |
| | 2017 Exit Activity
|
| | Lease Termination | | Severance |
| Balances at December 31, 2016 | $ | — |
| | $ | — |
|
| Charge in 2017 | 0.6 |
| | 3.0 |
|
| Cash expenditures in 2017 | — |
| | (0.7 | ) |
| Balances at December 31, 2017 | 0.6 |
| | 2.3 |
|
| Charge in 2018 | — |
| | — |
|
| Cash expenditures in 2018 | (0.5 | ) | | (2.3 | ) |
| Balances at December 31, 2018 | $ | 0.1 |
| | $ | — |
|
2019 Stock Repurchase Program
On February 25, 2019, we announced that our Board of Directors authorized a stock repurchase program, under which we could have repurchased up to $100 million of our outstanding common stock through March 1, 2020. We did not repurchase any shares pursuant to this stock repurchase program during 2019 or 2020. The stock repurchase program expired on March 1, 2020. l3.
14. SEGMENT INFORMATION
Our operations involve servicing patients through our three4 reportable business segments: home health, hospice, personal care and personalhigh acuity care. Our home health segment delivers a wide range of services in the homes of individuals who may be recovering from surgery, have a chronic disability or terminal illness or need assistance with the essential activities of daily living.completing important tasks. Our hospice segment provides palliative care and comfort to terminally ill patients and their families. Our personal care segment which was established with the acquisition of Associated Home Care during the three-month period ended March 31, 2016, provides patients with assistance with the essential activities of daily living. Our high acuity care segment, which was established with the acquisition of Contessa on August 1, 2021, delivers the essential elements of inpatient hospital and SNF care to patients in their homes. The “other” column in the following tables consists of costs relating to executive management and administrative support functions, primarily information services, accounting, finance, billing and collections, legal, compliance, risk management, procurement, marketing, clinical administration, training, human resources and administration.
During 2018, management revised its measurement of the personal care segment's operating income (loss) to exclude certain expenses that were not directly attributable to the support of the segment, but rather a corporate support function. Prior periods have been restated to conform to the current presentation.
Management evaluates performance and allocates resources based on the operating income of the reportable segments, which includes an allocation of corporate expenses directly attributable to the specific segment and includes revenues and all other costs directly attributable to the specific segment. Segment assets are not reviewed by the company’s chief operating decision maker and therefore are not disclosed below (amounts in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2021 |
| Home Health | | Hospice | | Personal Care | | High Acuity Care | | Other | | Total |
| Net service revenue | $ | 1,353.8 | | | $ | 791.8 | | | $ | 65.0 | | | $ | 3.5 | | | $ | — | | | $ | 2,214.1 | |
| Other operating income | 7.3 | | | 6.0 | | | — | | | — | | | — | | | 13.3 | |
| Cost of service, excluding depreciation and amortization | 756.6 | | | 425.2 | | | 49.1 | | | 2.5 | | | — | | | 1,233.4 | |
| General and administrative expenses | 328.5 | | | 198.4 | | | 11.2 | | | 10.0 | | | 163.1 | | | 711.2 | |
| Depreciation and amortization | 4.3 | | | 2.7 | | | 0.2 | | | 1.3 | | | 22.4 | | | 30.9 | |
| Operating expenses | 1,089.4 | | | 626.3 | | | 60.5 | | | 13.8 | | | 185.5 | | | 1,975.5 | |
| Operating income (loss) | $ | 271.7 | | | $ | 171.5 | | | $ | 4.5 | | | $ | (10.3) | | | $ | (185.5) | | | $ | 251.9 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended December 31, 2020 |
| Home Health | | Hospice | | Personal Care | | High Acuity Care | | Other | | Total |
| Net service revenue | $ | 1,249.2 | | | $ | 750.1 | | | $ | 72.2 | | | $ | — | | | $ | — | | | $ | 2,071.5 | |
| Other operating income | 20.2 | | | 13.1 | | | 1.1 | | | — | | | — | | | 34.4 | |
| Cost of service, excluding depreciation and amortization | 729.9 | | | 400.6 | | | 54.9 | | | — | | | — | | | 1,185.4 | |
| General and administrative expenses | 307.2 | | | 175.4 | | | 12.4 | | | — | | | 173.2 | | | 668.2 | |
| Depreciation and amortization | 3.9 | | | 2.2 | | | 0.2 | | | — | | | 22.5 | | | 28.8 | |
| Asset impairment charge | 3.4 | | | 0.8 | | | — | | | — | | | — | | | 4.2 | |
| Operating expenses | 1,044.4 | | | 579.0 | | | 67.5 | | | — | | | 195.7 | | | 1,886.6 | |
| Operating income (loss) | $ | 225.0 | | | $ | 184.2 | | | $ | 5.8 | | | $ | — | | | $ | (195.7) | | | $ | 219.3 | |
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
| | | | For the Year Ended December 31, 2018 | | For the Year Ended December 31, 2019 |
| | Home Health | | Hospice | | Personal Care | | Other | | Total | | Home Health | | Hospice | | Personal Care | | High Acuity Care | | Other | | Total |
| Net service revenue | $ | 1,174.5 |
| | $ | 410.9 |
| | $ | 77.2 |
| | $ | — |
| | $ | 1,662.6 |
| Net service revenue | $ | 1,256.4 | | | $ | 617.2 | | | $ | 82.0 | | | $ | — | | | $ | — | | | $ | 1,955.6 | |
| Cost of service, excluding depreciation and amortization | 722.1 |
| | 212.0 |
| | 58.8 |
| | — |
| | 992.9 |
| Cost of service, excluding depreciation and amortization | 754.1 | | | 335.1 | | | 61.1 | | | — | | | — | | | 1,150.3 | |
| General and administrative expenses | 276.3 |
| | 84.6 |
| | 12.8 |
| | 127.6 |
| | 501.3 |
| General and administrative expenses | 297.2 | | | 137.5 | | | 12.3 | | | — | | | 160.9 | | | 607.9 | |
| Depreciation and amortization | 3.5 |
| | 1.1 |
| | 0.3 |
| | 8.4 |
| | 13.3 |
| Depreciation and amortization | 4.2 | | | 1.6 | | | 0.2 | | | — | | | 12.4 | | | 18.4 | |
| Asset impairment charge | | Asset impairment charge | 1.5 | | | — | | | — | | | — | | | — | | | 1.5 | |
| Operating expenses | 1,001.9 |
| | 297.7 |
| | 71.9 |
| | 136.0 |
| | 1,507.5 |
| Operating expenses | 1,057.0 | | | 474.2 | | | 73.6 | | | — | | | 173.3 | | | 1,778.1 | |
| Operating income (loss) | $ | 172.6 |
| | $ | 113.2 |
| | $ | 5.3 |
| | $ | (136.0 | ) | | $ | 155.1 |
| Operating income (loss) | $ | 199.4 | | | $ | 143.0 | | | $ | 8.4 | | | $ | — | | | $ | (173.3) | | | $ | 177.5 | |
|
| | | | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, 2017 |
| | Home Health | | Hospice | | Personal Care | | Other | | Total |
| Net service revenue | $ | 1,083.9 |
| | $ | 367.8 |
| | $ | 59.6 |
| | $ | — |
| | $ | 1,511.3 |
|
| Cost of service, excluding depreciation and amortization | 670.9 |
| | 187.5 |
| | 45.0 |
| | — |
| | 903.4 |
|
| General and administrative expenses | 278.4 |
| | 76.6 |
| | 9.5 |
| | 117.8 |
| | 482.3 |
|
| Depreciation and amortization | 3.5 |
| | 0.9 |
| | 0.2 |
| | 12.5 |
| | 17.1 |
|
| Securities Class Action Lawsuit settlement, net | — |
| | — |
| | — |
| | 28.7 |
| | 28.7 |
|
| Asset impairment charge | 1.3 |
| | — |
| | — |
| | — |
| | 1.3 |
|
| Operating expenses | 954.1 |
| | 265.0 |
| | 54.7 |
| | 159.0 |
| | 1,432.8 |
|
| Operating income (loss) | $ | 129.8 |
| | $ | 102.8 |
| | $ | 4.9 |
| | $ | (159.0 | ) | | $ | 78.5 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | For the Year Ended December 31, 2016 |
| | Home Health | | Hospice | | Personal Care | | Other | | Total |
| Net service revenue | $ | 1,071.7 |
| | $ | 311.9 |
| | $ | 35.7 |
| | $ | — |
| | $ | 1,419.3 |
|
| Cost of service, excluding depreciation and amortization | 643.7 |
| | 164.5 |
| | 26.3 |
| | — |
| | 834.5 |
|
| General and administrative expenses | 283.4 |
| | 70.2 |
| | 5.8 |
| | 144.0 |
| | 503.4 |
|
| Depreciation and amortization | 6.0 |
| | 1.3 |
| | — |
| | 12.4 |
| | 19.7 |
|
| Asset impairment charge | — |
| | — |
| | — |
| | 4.4 |
| | 4.4 |
|
| Operating expenses | 933.1 |
| | 236.0 |
| | 32.1 |
| | 160.8 |
| | 1,362.0 |
|
| Operating income (loss) | $ | 138.6 |
| | $ | 75.9 |
| | $ | 3.6 |
| | $ | (160.8 | ) | | $ | 57.3 |
|
14. UNAUDITED SUMMARIZED QUARTERLY FINANCIAL INFORMATION
|
| | | | | | | | | | | | | | | |
| | | | | | Net Income (Loss) Attributable to Amedisys, Inc. Common Stockholders (1) |
| | Revenue | | Net Income (Loss) Attributable to Amedisys, Inc. | | Basic | | Diluted |
| 2018 | | | | | | | |
| 1st Quarter | $ | 399.3 |
| | $ | 27.2 |
| | $ | 0.80 |
| | $ | 0.79 |
|
| 2nd Quarter | 411.6 |
| | 33.3 |
| | 1.00 |
| | 0.98 |
|
| 3rd Quarter | 417.3 |
| | 31.4 |
| | 0.99 |
| | 0.96 |
|
| 4th Quarter | 434.4 |
| | 27.5 |
| | 0.86 |
| | 0.84 |
|
| | $ | 1,662.6 |
| | $ | 119.3 |
| | $ | 3.64 |
| | $ | 3.55 |
|
| 2017 | | | | | | | |
| 1st Quarter | $ | 364.7 |
| | $ | 15.1 |
| | $ | 0.45 |
| | $ | 0.44 |
|
| 2nd Quarter (2) | 374.9 |
| | 4.5 |
| | 0.13 |
| | 0.13 |
|
| 3rd Quarter | 373.7 |
| | 14.6 |
| | 0.43 |
| | 0.42 |
|
| 4th Quarter (3) | 398.0 |
| | (3.8 | ) | | (0.11 | ) | | (0.11 | ) |
| | $ | 1,511.3 |
| | $ | 30.3 |
| | $ | 0.90 |
| | $ | 0.88 |
|
| |
(1) | Because of the method used in calculating per share data, the quarterly per share data may not necessarily total to the per share data as computed for the entire year. |
| |
(2) | During the second quarter of 2017, we incurred certain costs associated with the Securities Class Action Lawsuit settlement. Net of income taxes, the costs amounted to $18.0 million for the three-month period ended June 30, 2017.
|
| |
(3) | During the fourth quarter of 2017, we recorded a charge of $21.4 million, net of income taxes as the result of the enactment of H.R. 1 (Tax Cuts and Jobs Act). |
15. RELATED PARTY TRANSACTIONS
On June 4, 2018, we purchased 2,418,304 of our common shares from affiliates of KKR Credit Advisors (US) LLC ("KKR"), representing one-half of KKR's holdingsWe have an investment in the CompanyMedalogix, a healthcare predictive data and 7.1% of the aggregate outstanding shares of the Company's common stock for a total purchase price of $181.4 million including related direct costs. The Company repurchased the shares at $73.96 which represents 96% of the closing stock price of the Company's common stock on June 4, 2018. At the time of the transaction, KKR held approximately 14.2% of the Company's outstanding shares of common stock.
On November 20, 2015, we engaged KKR Consulting, LLC (“KKR Capstone”), a consultinganalytics company, of operational professionals that works exclusively with portfolio companies of Kohlberg Kravis Roberts & Co. Nathaniel M. Zilkha, a member of our Board of Directors, is a member of KKR Management, LLC, which is an affiliate of KKR Asset Management LLC (“KAM”), a substantial stockholder of our Company,accounted for under the equity method. During the years ended December 31, 2021, 2020 and an affiliate of Kohlberg Kravis Roberts & Co. During 2016,2019, we incurred costs of approximately $1.6$5.7 million, related to consulting services provided to the Company$3.9 million and $0.5 million, respectively, in the ordinary course of business. Mr. Zilkha did not receive any direct compensation or direct financial benefit from the engagement of KKR Capstone.
Effective October 22, 2015, we entered into a contract for telemonitoring services with Care Innovations, LLC (“Care Innovations”). At that time, Paul Kusserow, our President and Chief Executive Officer, was a member of the Advisory Board to Care Innovations. In connection with our contract for telemonitoring services forusage of Medalogix's analytics platforms. We believe that the Company, Care Innovations was to receive an annual feeterms of these transactions are consistent with those negotiated at arm’s length.
approximately $1.8 million. During 2016, we incurred costs of approximately $1.5 million related to this related party engagement. We did not incur any additional costs related to this engagement during 2017 or 2018. Mr. Kusserow did not receive any direct compensation or direct financial benefit from the engagement of Care Innovations as our telemonitoring partner and no longer serves as a member of Care Innovations' Advisory Board.
16. SUBSEQUENT EVENTS
Acquisitions
On February 1, 2019, we acquired Compassionate Care Hospice ("CCH"), a national hospice care provider headquartered in New Jersey, for a purchase price of $340 million, which is inclusive of approximately $50 million in payments related to a tax asset and working capital.
On February 14, 2019,2022, we signed a definitive agreement to acquire the assetsEvolution Health, LLC, a division of RoseRockEnvision Healthcare, an Oklahoma based hospice providerdoing business as Guardian Healthcare, Gem City, and Care Connection of Cincinnati for a purchase price of $17.5$70.0 million.
First Amendment to Amended and Restated Credit Agreement
On February 4, 2019,21, 2022, we entered into the First Amendmentsigned a definitive agreement to the Credit Agreement (as amended by the First Amendment, the “Amended Credit Agreement”). The Amended Credit Agreement provides for a senior secured credit facility in an initial aggregate principal amount of up to $725 million, which includes the $550 million Revolving Credit Facility under the Credit Agreement,acquire certain home health assets from AssistedCare Home Health, Inc., and a term loan facility in the principal amount of up to $175 million (the “Term Loan Facility”RH Homecare Services, LLC, doing business as AssistedCare Home Health and collectively with the Revolving Credit Facility, the “Credit Facility”), which was added by the First Amendment.
We borrowed the entire principal amountAssistedCare of the Term Loan Facility on February 4, 2019 in order to fundCarolinas, respectively, for a portion of the purchase price of the CCH acquisition, with the remainder of the purchase price and associated transactional fees and expenses funded by proceeds from the Revolving Credit Facility.
The loans issued under the Credit Facility bear interest on a per annum basis, at our election, at either (i) the Base Rate plus an Applicable Rate or (ii) the Eurodollar Rate plus an Applicable Rate. The Amended Credit Agreement provides for an Applicable Rate that is 0.25% lower than the rate provided in the Credit Agreement. As a result, the current Applicable Rate for Base Rate loans and Eurodollar Rate loans is equal to 0.50% per annum and 1.50% per annum, respectively. We are also subject to a commitment fee and letter of credit fee under the terms of the Amended Credit Agreement, as presented in the table below.$25.0 million.
|
| | | | | | | | | | | | |
| Consolidated Leverage Ratio | | Base Rate Loans | | Eurodollar Rate Loans | | Commitment Fee | | Letter of Credit Fee |
| ≥ 3.00 to 1.0 | | 1.00 | % | | 2.00 | % | | 0.35 | % | | 1.75 | % |
| < 3.00 to 1.0 but ≥ 2.00 to 1.0 | | 0.75 | % | | 1.75 | % | | 0.30 | % | | 1.50 | % |
| < 2.00 to 1.0 but ≥ 0.75 to 1.0 | | 0.50 | % | | 1.50 | % | | 0.25 | % | | 1.25 | % |
| < 0.75 to 1.0 | | 0.25 | % | | 1.25 | % | | 0.20 | % | | 1.00 | % |
The final maturity date of the Credit Facility is February 4, 2024. The Revolving Facility will terminate and be due and payable as of the final maturity date. The Term Loan Facility, however, is subject to quarterly amortization of principal in the amount of (i) 0.625% for the period commencing on February 4, 2019 and ending on March 31, 2020, (ii) 1.250% for the period commencing on April 1, 2020 and ending on March 31, 2023, and (iii) 1.875% for the period commencing on April 1, 2023 and ending on February 4, 2024. The remaining balance of the Term Loan Facility must be paid upon the final maturity date. In addition to the scheduled amortization of the Term Loan Facility, and subject to customary exceptions and reinvestment rights, we are required to prepay the Term Loan Facility, first, and the Revolving Credit Facility, second, with 100% of all net cash proceeds received by any loan party or any subsidiary thereof in connection with (a) any asset sale or disposition where such loan party receives net cash proceeds in excess of $5 million or (b) any debt issuance that is not permitted under the Amended Credit Agreement.
Joinder Agreement
In connection with the CCH acquisition, we entered into a Joinder Agreement, dated as of February 4, 2019, pursuant to which CCH and its subsidiaries were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement, the Amended and Restated Security Agreement, dated as of June 29, 2018, and the Amended and Restated Pledge Agreement, dated as of June 29, 2018. Pursuant to the Joinder, the Amended and Restated Security Agreement, and the Amended and Restated Pledge Agreement, CCH and its subsidiaries granted in favor of the Administrative Agent a first lien security interest in substantially all of their personal property assets and pledged to the Administrative Agent each of their respective subsidiaries’ issued and outstanding equity interests. CCH and its subsidiaries also guaranteed our obligations,
whether now existing or arising after the effective date of the Joinder, under the Amended Credit Agreement pursuant to the terms of the Joinder and the Amended Credit Agreement.
Stock Repurchase Program
On February 25, 2019, we announced that our Board of Directors authorized a stock repurchase program, under which we may repurchase up to $100 million of our outstanding common stock through March 1, 2020.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures which are designed to provide reasonable assurance of achieving their objectives and to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, disclosed and reported within the time periods specified in the SEC’s rules and forms. This information is also accumulated and communicated to our management, including our principal executive officer and principal financial officer, and Board of Directors to allow timely decisions regarding required disclosure.
In connection with the preparation of this Annual Report on Form 10-K, as of December 31, 2018,2021, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, weour management conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.
Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2018,2021, the end of the period covered by this Annual Report on Form 10-K.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, weour management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on ourthis evaluation under the framework in Internal Control – Integrated Framework (2013), our management concluded our internal control over financial reporting was effective as of December 31, 2018.2021.
OurUnder guidelines established by the SEC, companies are allowed to exclude acquisitions from their assessment of internal control system is designed to provide reasonable assuranceover financial reporting during the first year of an acquisition while integrating the acquired company. Accordingly, our assessment of internal controls excluded our acquisition of Contessa Health ("Contessa"), completed on August 1, 2021. See Item 8, Note 4 - Acquisitions to our managementconsolidated financial statements for additional information on our acquisition of Contessa. Operations from this acquisition represented approximately 3% of total assets and Boardless than 1% of Directors regardingtotal revenue as of and for the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.year ended December 31, 2021.
KPMG LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Form 10-K, has issued a report on our internal control over financial reporting, which is included herein.
Changes in Internal Controls
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that have occurred during the quarter ended December 31, 20182021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal controls over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls’ effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and, based on an evaluation of our controls and procedures, our principal executive officer and our principal financial officer concluded our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2018,2021, the end of the period covered by this Annual Report.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Amedisys, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Amedisys, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2018,2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 201924, 2022 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired Contessa Health, Inc. during 2021, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, Contessa Health, Inc.’s internal control over financial reporting associated with 3% of total assets and less than 1% of total revenues included in the consolidated financial statements of the Company as of and for the year ended December 31, 2021. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Contessa Health, Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Baton Rouge, Louisiana
February 28, 2019
24, 2022
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to the 20192022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2018.2021.
Code of Conduct and Ethics
We have adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. This code of ethics, which is entitled Code of Ethical Business Conduct, is posted at our internet website, http://www.amedisys.com. Any amendments to, or waivers of, the code of ethics will be disclosed on our website promptly following the date of such amendment or waiver.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the 20192022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2018.2021.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the 20192022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2018.2021.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to the 20192022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2018.2021.
ITEM 14. PRINCIPAL ACCOUNTINGACCOUNTANT FEES AND SERVICES
Our independent registered public accounting firm is KPMG LLP, Baton Rouge, Louisiana, Auditor Firm ID: 185
The information required by this item is incorporated by reference to the 20192022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2018.
2021.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
| | | | | | | | | | | | | |
| (a) | | 1. | | Financial Statements |
| | | | All financial statements are set forth under Part II, Item 8 of this report. |
| | | | |
| | 2. | | Financial Statement Schedules |
| | | | There are no financial statement schedules included in this report as they are either not applicable or included in the financial statements. |
| | | | |
| | 3. | | Exhibits |
| | | | The Exhibits are listed in the Exhibit Index required by Item 601 of Regulation S-K preceding the signature page of this report. |
ITEM 16. FORM 10-K SUMMARY
None.
EXHIBIT INDEX
The exhibits marked with the cross symbol (†) are filed and the exhibits marked with a double cross (††) are furnished with this Form 10-K. Any exhibits marked with the asterisk symbol (*) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K. The registrant agrees to furnish to the Commission supplementally upon request a copy of any schedules or exhibits omitted pursuant to Item 601(b)(2)601(a)(5) of Regulation S-K of any material plan of acquisition, disposition or reorganizationexhibit set forth below.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit
Number | | Document Description | | Report or Registration Statement | | SEC File or
Registration
Number | | Exhibit
or Other
Reference |
| 2.1 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 | | 0-24260 | | 2.1 |
| | | | | | | | |
| 2.2 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 2.3 | | | | The Company's current Report on Form 8-K filed on June 4, 2018 | | 0-24260 | | 2.1 |
| | | | | | | | |
| 2.4 | | Stock Purchase Agreement, dated as of October 9, 2018, by and among Milton Heching, the Heching 2012 Exempt Irrevocable Trust, Amedisys Hospice, L.L.C., Compassionate Care Hospice Group, Inc., and solely for purposes of Sections 3.4, 4.3(a), 4.15 and Article VIII thereof, Amedisys, Inc. | | The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 | | 0-24260 | | 2.1 |
| | | | | | | | |
| 2.5 | | | | The Company's Current Report on Form 8-K filed on April 27, 2020 | | 0-24260 | | 2.1 |
| | | | | | | | |
| 2.6 | | Agreement and Plan of Merger, dated as of June 27, 2021, by and among Amedisys Holding, L.L.C., Amedisys Commodore, L.L.C., Contessa Health, Inc., Shareholder Representative Services LLC, and, solely for purposes of Section 10.17, Amedisys, Inc. (Immaterial schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission upon request)
| | The Company’s Current Report on Form 8-K filed on August 4, 2021 | | 0-24260 | | 2.1 |
| | | | | | | | |
| 3.1 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 | | 0-24260 | | 3.1 |
| | | | | | | | |
| 3.2 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 | | 0-24260 | | 3.2 |
| | | | | | | | |
| 4.1 | | | | The Company’s Registration Statement on Form S-3 filed August 20, 2007 | | 333-145582 | | 4.8 |
| | | | | | | | |
| †4.2 | | | | | | | | |
|
| | | | | | | | |
Exhibit Number | | Document Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit or Other Reference |
| 2.1 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 | | 0-24260 | | 2.1 |
| | | | | | | | | |
| 2.2 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | | |
| 2.3 | | | | The Company's current Report on Form 8-K filed on June 4, 2018 | | 0-24260 | | 2.1 |
| | | | | | | | | |
| 2.4 | | Stock Purchase Agreement, dated as of October 9, 2018, by and among Milton Heching, the Heching 2012 Exempt Irrevocable Trust, Amedisys Hospice, L.L.C., Compassionate Care Hospice Group, Inc., and solely for purposes of Sections 3.4, 4.3(a), 4.15 and Article VIII thereof, Amedisys, Inc. | | The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 | | 0-24260 | | 2.1 |
| | | | | | | | | |
| 3.1 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 | | 0-24260 | | 3.1 |
| | | | | | | | | |
| 3.2 | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 | | 0-24260 | | 3.2 |
| | | | | | | | | |
| 4.1 | | | | The Company’s Registration Statement on Form S-3 filed August 20, 2007 | | 333-145582 | | 4.8 |
| | | | | | | | | |
| 10.1 | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2008 | | 0-24260 | | 10.1 |
| | | | | | | | | |
| 10.2* | | | | The Company’s Current Report on Form 8-K filed June 8, 2012 | | 0-24260 | | 10.1 |
| | | | | | | | | |
| 10.3* | | Composite Amedisys, Inc. 2008 Omnibus Incentive Compensation Plan (inclusive of Plan amendments dated June 7, 2012, October 25, 2012, April 23, 2015 and June 4, 2015, January 20, 2017 and February 22, 2017 and the full text of the Amedisys, Inc. 2008 Omnibus Incentive Compensation Plan) | | The Company's Annual Report on Form 10-K for the year ended December 31, 2016 | | 0-24260 | | 10.3 |
| | | | | | | | | |
| 10.4* | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 | | 0-24260 | | 10.3 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit
Number | | Document Description | | Report or Registration Statement | | SEC File or
Registration
Number | | Exhibit
or Other
Reference |
| 10.1 | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2008 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.2* | | | | The Company’s Current Report on Form 8-K filed June 8, 2012 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.3* | | Composite Amedisys, Inc. 2008 Omnibus Incentive Compensation Plan (inclusive of Plan amendments dated June 7, 2012, October 25, 2012, April 23, 2015 and June 4, 2015, January 20, 2017, February 22, 2017 and September 25, 2018 and the full text of the Amedisys, Inc. 2008 Omnibus Incentive Compensation Plan) | | The Company's Annual Report on Form 10-K for the year ended December 31, 2019 | | 0-24260 | | 10.3 |
| | | | | | | | |
| 10.4* | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 | | 0-24260 | | 10.3 |
| | | | | | | | |
| 10.5* | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 | | 0-24260 | | 10.4 |
| | | | | | | | |
| 10.6* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.6 |
| | | | | | | | |
| 10.7* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.7 |
| | | | | | | | |
| 10.8* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.8 |
| | | | | | | | |
| 10.9* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.9 |
| | | | | | | | |
| 10.10* | | | | The Company's Annual Report on Form 10-K for the year ended December 31, 2018 | | 0-24260 | | 10.10 |
| | | | | | | | |
| 10.11* | | | | The Company's Annual Report on Form 10-K for the year ended December 31, 2018 | | 0-24260 | | 10.11 |
| | | | | | | | |
| 10.12* | | | | The Company's Annual Report on Form 10-K for the year ended December 31, 2018 | | 0-24260 | | 10.12 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit
Number | | Document Description | | Report or Registration Statement | | SEC File or
Registration
Number | | Exhibit
or Other
Reference |
| | | | | | | | |
| 10.13* | | | | The Company’s Current Report on Form 8-K filed on October 3, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.14* | | | | The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.15* | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.16* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2020 | | 0-24260 | | 10.16 |
| | | | | | | | |
| 10.17 | | Amended and Restated Credit Agreement dated as of June 29, 2018, among the Company and Amedisys Holding, L.L.C., as borrowers, certain subsidiaries of the Company party thereto as guarantors, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, JPMorgan Chase Bank, N.A., as Syndication Agent, Capital One Bank National Association, Citizens Bank, N.A., Compass Bank, Fifth Third Bank, Hancock Whitney Bank, Regions Bank, and Wells Fargo Bank, National Association, as Co-Documentation Agents, the lenders party thereto, Merrill Lynch, Pierce Fenner & Smith Incorporated, Citizens Bank N.A., Fifth Third Bank and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and JPMorgan Chase Bank, N.A., as Joint Bookrunners | | The Company’s current Report on Form 8-K filed on July 2, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.18 | | | | The Company’s current Report on Form 8-K filed on July 2, 2018 | | 0-24260 | | 10.2 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Exhibit
Number | | Document Description | | Report or Registration Statement | | SEC File or
Registration
Number | | Exhibit
or Other
Reference |
| | | | | | | | |
| 10.19 | | | | The Company’s current Report on Form 8-K filed on July 2, 2018 | | 0-24260 | | 10.3 |
| | | | | | | | |
| 10.20 | | Agreement and Plan of Merger dated October 31, 2015 by and among Amedisys Health Care West, L.L.C., IHC Acquisitions, L.L.C., Infinity Home Care, L.L.C., Axiom HealthEquity Holdings Management, LLC, Infinity Healthcare Holdings, LLC, and Amedisys, Inc.
| | The Company’s Annual Report on Form 10-K for the year ended December 31, 2015 | | 0-24260 | | 10.27 |
| | | | | | | | |
| 10.21 | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2015 | | 0-24260 | | 10.28 |
| | | | | | | | |
| 10.22 | | First Amendment to Amended and Restated Credit Agreement, dated as of February 4, 2019, by and among the Amedisys, Inc. and Amedisys Holding, L.L.C., as the borrowers, certain subsidiaries of the Company party thereto as guarantors, Bank of America, N.A., as the administrative agent, swingline lender and letter of credit issuer, JPMorganChase Bank, N.A., as syndication agent, Capital One Bank, National Association, Citizens Bank, N.A., Compass Bank, Fifth Third Bank, Hancock Whitney Bank, Regions Bank, and Wells Fargo Bank, National Association, as co-documentation agents, the lenders party thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citizens Bank, N.A., Fifth Third Bank and JPMorgan Chase Bank, N.A., as joint lead arrangers, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and JPMorgan Chase Bank, N.A., as joint bookrunners
| | The Company’s Current Report on Form 8-K filed on February 4, 2019 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.23 | | Joinder Agreement, dated as of February 4, 2019, by and among Amedisys, Inc. and Amedisys Holding, L.L.C., as the borrowers, each of the new subsidiary guarantors party thereto, and Bank of America, N.A., as the administrative agent | | The Company’s Current Report on Form 8-K filed on February 4, 2019 | | 0-24260 | | 10.2 |
| | | | | | | | |
| 10.24 | | | | The Company’s Current Report on Form 8-K filed on February 19, 2019 | | 0-24260 | | 10.1 |
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Exhibit
Number | | Document Description | | Report or Registration Statement | | SEC File or
Registration
Number | | Exhibit
or Other
Reference |
| | | | | | | | |
| 10.25 | | Joinder Agreement, dated as of June 12, 2020, by and among Amedisys, Inc. and Amedisys Holding, L.L.C., as the borrowers, each of the new subsidiary guarantors party thereto, and Bank of America, N.A., as the administrative agent (The schedules to the Joinder have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish copies of the omitted schedules to the Securities and Exchange Commission upon request.) | | The Company's Current Report on Form 8-K filed on June 15, 2020 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.26* | | | | The Company's Annual Report on Form 10-K for the year ended December 31, 2020 | | 0-24260 | | 10.26 |
| | | | | | | | |
| 10.27* | | | | The Company’s Current Report on Form 8-K filed on February 24, 2021 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.28 | | Second Amendment to Amended and Restated Credit Agreement, dated as of July 30, 2021, by and among Amedisys, Inc. and Amedisys Holding, L.L.C., as the borrowers, the Guarantors party thereto, the Lenders party thereto, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, and the other L/C Issuers party thereto (Immaterial schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission upon request.) | | The Company’s Current Report on Form 8-K filed on August 4, 2021 | | 0-24260 | | 10.1 |
| | | | | | | | |
| 10.29* | | | | The Company’s Current Report on Form 8-K filed on January 10, 2022 | | 0-24260 | | 10.1 |
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| †21.1 | | | | | | | | |
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| †23.1 | | | | | | | | |
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| †31.1 | | | | | | | | |
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| †31.2 | | | | | | | | |
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| ††32.1 | | | | | | | | |
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| ††32.2 | | | | | | | | |
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Exhibit
Number | | Document Description | | Report or Registration Statement | | SEC File or
Registration
Number | | Exhibit
or Other
Reference |
| †101.INS | | Inline XBRL Instance - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | | | | |
| | | | | | | | |
Exhibit
Number
†101.SCH | | Inline XBRL Taxonomy Extension Schema Document Description | | Report or Registration Statement | | SEC File or
Registration
Number
| | Exhibit
or Other
Reference
|
10.5* | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 | | 0-24260 | | 10.4 |
| | | | | | | | |
10.6* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.6 |
| | | | | | | | |
10.7* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.7 |
| | | | | | | | |
10.8* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.8 |
| | | | | | | | |
10.9* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2014 | | 0-24260 | | 10.9 |
| | | | | | | | |
†10.10* | | | | | | | | |
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†10.11* | | | | | | | | |
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†10.12* | | | | | | | | |
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10.13* | | | | The Company’s Registration Statement on Form S-8 filed June 22, 2007 | | 333-143967 | | 4.2 |
| | | | | | | | |
10.14* | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2005 | | 0-24260 | | 10.4 |
|
| | | | | | | | |
Exhibit
Number
†101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document Description | | Report or Registration Statement | | SEC File or
Registration
Number
| | Exhibit
or Other
Reference
|
| | | | | | | | |
10.15* | | | | The Company’s Current Report on Form 8-K filed on October 3, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | |
10.16* | | | | The Company's Annual Report on Form 10-K for the year ended December 31, 2016 | | 0-24260 | | 10.15 |
| | | | | | | | |
10.17* | | | | The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 | | 0-24260 | | 10.1 |
| | | | | | | | |
10.18* | | | | The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 | | 0-24260 | | 10.2 |
| | | | | | | | |
10.19* | | | | The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | |
10.20* | | | | The Company's Definitive Proxy Statement filed on April 25, 2018 | | 0-24260 | | Appendix A |
| | | | | | | | |
10.21* | | | | The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | |
10.22* | | | | The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 | | 0-24260 | | 10.2 |
|
| | | | | | | | |
Exhibit Number | | Document Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit or Other Reference |
| 10.23 | | Amended and Restated Credit Agreement dated as of June 29, 2018, among the Company and Amedisys Holding, L.L.C., as borrowers, certain subsidiaries of the Company party thereto as guarantors, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, JPMorgan Chase Bank, N.A., as Syndication Agent, Capital One Bank National Association, Citizens Bank, N.A., Compass Bank, Fifth Third Bank, Hancock Whitney Bank, Regions Bank, and Wells Fargo Bank, National Association, as Co-Documentation Agents, the lenders party thereto, Merrill Lynch, Pierce Fenner & Smith Incorporated, Citizens Bank N.A., Fifth Third Bank and JPMorgan Chase Bank, N.A., as Joint Lead Arrangers, and Merrill Lynch, Pierce, Fenner & Smith Incorporated and JPMorgan Chase Bank, N.A., as Joint Bookrunners | | The Company’s current Report on Form 8-K filed on July 2, 2018 | | 0-24260 | | 10.1 |
| | | | | | | | | |
| 10.24 | | | | The Company’s current Report on Form 8-K filed on July 2, 2018 | | 0-24260 | | 10.2 |
| | | | | | | | | |
| 10.25 | | | | The Company’s current Report on Form 8-K filed on July 2, 2018 | | 0-24260 | | 10.3 |
| | | | | | | | | |
| 10.26 | | | | The Company’s Current Report on Form 8-K filed on April 24, 2014 | | 0-24260 | | 10.1 |
| | | | | | | | | |
| 10.27 | | | | The Company’s Current Report on Form 8-K filed on April 24, 2014 | | 0-24260 | | 10.2 |
|
| | | | | | | | |
Exhibit Number | | Document Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit or Other Reference |
| 10.28 | | Agreement and Plan of Merger dated October 31, 2015 by and among Amedisys Health Care West, L.L.C., IHC Acquisitions, L.L.C., Infinity Home Care, L.L.C., Axiom HealthEquity Holdings Management, LLC, Infinity Healthcare Holdings, LLC, and Amedisys, Inc. | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2015 | | 0-24260 | | 10.27 |
| | | | | | | | | |
| 10.29 | | | | The Company’s Annual Report on Form 10-K for the year ended December 31, 2015 | | 0-24260 | | 10.28 |
| | | | | | | | | |
| †21.1 | | | | | | | | |
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| †23.1 | | | | | | | | |
| | | | | | | | | |
| †31.1 | | | | | | | | |
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| †31.2 | | | | | | | | |
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| ††32.1 | | | | | | | | |
| | | | | | | | | |
| ††32.2 | | | | | | | | |
| | | | | | | | | |
| †101.INS | | XBRL Instance | | | | | | |
| | | | | | | | | |
| †101.SCH | | XBRL Taxonomy Extension Schema Document | | | | | | |
| | | | | | | | | |
| †101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | |
|
| | | | | | | | |
Exhibit
Number
†101.DEF | | Document Description | | Report or Registration Statement | | SEC File or
Registration
Number
| | Exhibit
or Other
Reference
|
†101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase | | | | | | |
| | | | | | | | |
| †101.LAB | | Inline XBRL Taxonomy Extension Labels Linkbase Document | | | | | | |
| | | | | | | | |
| †101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | |
| | | | | | | | |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | | | | | |
AMEDISYS, INC. |
|
| By: | | /S/ PAUL B. KUSSEROW |
| | Paul B. Kusserow, |
| | President, Chief Executive Officer and |
| | MemberChairman of the Board |
Date: February 28, 201924, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | |
/S/ PAUL B. KUSSEROW | | Chief Executive Officer
and Chairman of the Board (Principal
Executive Officer) | | February 24, 2022 |
| Paul B. Kusserow | | | |
| | | | |
Signature | | Title | | Date |
| | | | |
/S/S/ PAUL B. KUSSEROWCOTT G. GINN | | Executive Vice President Chief Executive Officer and Member of the Board (Principal Executive Officer)
| | February 28, 2019 |
Paul B. Kusserow | | | |
| | | | |
/S/ SCOTT G. GINN | | Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer)
| | February 28, 201924, 2022 |
| Scott G. Ginn | | | |
| | | | |
/S/ S/ VICKIE LINDA J. HALL. CAPPS | | Director | | February 28, 201924, 2022 |
Linda J. HallVickie L. Capps | | | |
| | | | |
/S/ JULIE D. KLAPSTEINS/ MOLLY COYE, MD | | Director | | February 28, 201924, 2022 |
| Molly Coye, MD | | | |
| | | | |
/S/ JULIE D. KLAPSTEIN | | Director | | February 24, 2022 |
| Julie D. Klapstein | | | |
| | | | |
/S/ RICHARD A. S/ TERESA LECHLEITER. KLINE | | Director | | February 28, 201924, 2022 |
| Teresa L. Kline | | | |
| | | | |
/S/ RICHARD A. LECHLEITER | | Lead Independent Director | | February 24, 2022 |
| Richard A. Lechleiter | | | |
| | | | |
/S/ JAKE L. NETTERVILLEBRUCE D. PERKINS | | Director | | February 28, 201924, 2022 |
Jake L. NettervilleBruce D. Perkins | | | |
| | | | |
/S/ BRUCE D. PERKINSJEFFREY A. RIDEOUT, MD | | Director | | February 28, 201924, 2022 |
Bruce D. PerkinsJeffrey A. Rideout, MD | | | |
| | | | |
/S/ JEFFREY A. RIDEOUT IVANETTA D. SAMUELS | | Director | | February 28, 201924, 2022 |
Jeffrey A. RideoutIvanetta D. Samuels | | | |
| | | | |
/S/ DONALD A. WASHBURN
| | Non-Executive Chairman of the
Board
| | February 28, 2019 |
Donald A. Washburn | | | |
| | | | |
/S/ NATHANIEL M. ZILKHA
| | Director | | February 28, 2019 |
Nathaniel M. Zilkha | | | |
