UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM10-Q

 

 

(Mark One)

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

For the quarterly period ended JuneSeptember 30, 2017

or

 

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

 

 

 

LOGOLOGO

AMEDISYS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware 11-3131700

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

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)

 

 

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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. (Check one):

 

Large accelerated filer   Accelerated filer 
Non-accelerated filer ☐  (Do not check if a smaller reporting company)  Smaller reporting company 
Emerging growth company    

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.  ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, is as follows: Common stock, $0.001 par value, 33,862,09633,936,706 shares outstanding as of July 21,November 3, 2017.

 

 

 


TABLE OF CONTENTS

 

SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

  1

PART I. FINANCIAL INFORMATION

ITEM 1.

  

ITEM 1.FINANCIAL STATEMENTS:

 

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNESEPTEMBER 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016

  2
 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE ANDSIX-MONTH NINE-MONTH PERIODS ENDED JUNESEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

  3
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THESIX-MONTH NINE-MONTH PERIODS ENDED JUNESEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

  4
 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  5

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  16

ITEM 3.

3
 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  2729

ITEM 4.

 

CONTROLS AND PROCEDURES

  2729

PART II. OTHER INFORMATION

  

ITEM 1.

 

LEGAL PROCEEDINGS

  2830

ITEM 1A.

 

RISK FACTORS

  2830

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

  2830

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

  2830

ITEM 4.

 

MINE SAFETY DISCLOSURES

28

ITEM 5.

OTHER INFORMATION

28

ITEM 6.

EXHIBITS

29

SIGNATURES

  30
ITEM 5. OTHER INFORMATION30

INDEX TO EXHIBITS

ITEM 6.
 EXHIBITS  31
SIGNATURES  32


SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

When included in this Quarterly Report on Form10-Q, 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,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “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: changes in Medicare and other medical payment levels, our ability to open care centers, acquire additional care centers and integrate and operate these care centers effectively, 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, competition in the healthcare industry, our ability to integrate our personal care segment into our business, changes in the case mix of patients and payment methodologies, changes in estimates and judgments associated with critical accounting policies, our ability to maintain or establish new patient referral sources, our ability to attract and retain qualified personnel, changes in payments and covered services by federal and state governments, future cost containment initiatives undertaken by third-party payors, our access to financing, our ability to meet debt service requirements and comply with covenants in debt agreements, business disruptions due to natural disasters or acts of terrorism, our ability to integrate, manage and keep our information systems secure, our ability to comply with requirements stipulated in our corporate integrity agreement and changes in law or developments with respect to any litigation relating to the Company, including various other matters, many of which are beyond our control.

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 required by law. For a discussion of some of the factors discussed above as well as additional factors, see our Annual Report on Form10-K for the year ended December 31, 2016, filed with the SEC on March 1, 2017, particularly, Part I, Item 1A - 1A—Risk Factors therein, which are incorporated herein by reference and Part II, Item 1A. Risk Factors of this Quarterly Report on Form10-Q. Additional risk factors may also be described in reports that we file from time to time with the SEC.

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, investor 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 automatice-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 Form10-K, quarterly reports on Form10-Q, current reports on Form8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as practicable after we electronically file 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 “Corporate Governance”).

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.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMEDISYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

 

  June 30, 2017   
  (Unaudited) December 31, 2016   September 30, 2017
(Unaudited)
 December 31,
2016
 
ASSETS      

Current assets:

      

Cash and cash equivalents

  $59,164  $30,197   $66,114  $30,197 

Patient accounts receivable, net of allowance for doubtful accounts of $17,865 and 17,716

   173,388  166,056 

Patient accounts receivable, net of allowance for doubtful accounts of $19,933 and 17,716

   177,402  166,056 

Prepaid expenses

   8,800  7,397    9,770  7,397 

Other current assets

   31,789  11,260    14,904  11,260 
  

 

  

 

   

 

  

 

 

Total current assets

   273,141  214,910    268,190  214,910 

Property and equipment, net of accumulated depreciation of $144,708 and $138,650

   34,420  36,999 

Property and equipment, net of accumulated depreciation of $148,301 and $138,650

   32,695  36,999 

Goodwill

   313,663  288,957    313,663  288,957 

Intangible assets, net of accumulated amortization of $29,254 and $27,864

   45,523  46,755 

Intangible assets, net of accumulated amortization of $29,932 and $27,864

   44,845  46,755 

Deferred income taxes

   100,806  107,940    91,160  107,940 

Other assets, net

   38,320  38,468    48,976  38,468 
  

 

  

 

   

 

  

 

 

Total assets

  $805,873  $734,029   $799,529  $734,029 
  

 

  

 

   

 

  

 

 
LIABILITIES AND EQUITY      

Current liabilities:

      

Accounts payable

  $29,119  $30,358   $22,815  $30,358 

Payroll and employee benefits

   81,331  82,480    86,139  82,480 

Accrued charge related to Securities Class Action Lawsuit settlement

   43,750   —   

Accrued expenses

   62,981  63,290    83,516  63,290 

Current portion of long-term obligations

   8,137  5,220    9,387  5,220 
  

 

  

 

   

 

  

 

 

Total current liabilities

   225,318  181,348    201,857  181,348 

Long-term obligations, less current portion

   83,157  87,809    80,523  87,809 

Other long-term obligations

   4,337  3,730    3,930  3,730 
  

 

  

 

   

 

  

 

 

Total liabilities

   312,812  272,887    286,310  272,887 
  

 

  

 

   

 

  

 

 

Commitments and Contingencies - Note 5

   

Commitments and Contingencies—Note 5

   

Equity:

      

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; 35,609,934 and 35,253,577 shares issued; and 33,850,633 and 33,597,215 shares outstanding

   36  35 

Common stock, $0.001 par value, 60,000,000 shares authorized; 35,687,068 and 35,253,577 shares issued; and 33,913,558 and 33,597,215 shares outstanding

   36 35

Additionalpaid-in capital

   555,029  537,472    561,380  537,472 

Treasury stock at cost, 1,759,301 and 1,656,362 shares of common stock

   (52,500 (46,774

Treasury stock at cost, 1,773,510 and 1,656,362 shares of common stock

   (53,228 (46,774

Accumulated other comprehensive income

   15  15    15 15

Retained deficit

   (10,505 (30,545

Retained earnings (deficit)

   4,053  (30,545
  

 

  

 

   

 

  

 

 

Total Amedisys, Inc. stockholders’ equity

   492,075  460,203    512,256  460,203 

Noncontrolling interests

   986  939    963 939
  

 

  

 

   

 

  

 

 

Total equity

   493,061  461,142    513,219  461,142 
  

 

  

 

   

 

  

 

 

Total liabilities and equity

  $805,873  $734,029   $799,529  $734,029 
  

 

  

 

   

 

  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMEDISYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)

 

  For the Three-Month Periods
Ended June 30,
 For the Six-Month Periods
Ended June 30,
   For the Three-Month Periods
Ended September 30,
 For the Nine-Month Periods
Ended September 30,
 
  2017 2016 2017 2016   2017 2016 2017 2016 

Net service revenue

  $378,821  $360,746  $749,279  $709,563   $380,163  $361,595  $1,129,442  $1,071,158 

Cost of service, excluding depreciation and amortization

   219,765  206,505  435,550  408,342    226,642  212,124  662,192  620,466 

General and administrative expenses:

          

Salaries and benefits

   74,943  77,343  149,402  154,060    77,130  77,019  226,532  231,079 

Non-cash compensation

   4,356  3,736  8,230  7,806    3,558  4,750  11,788  12,556 

Other

   41,617  45,576  82,034  92,293    38,189  42,658  120,223  134,951 

Provision for doubtful accounts

   4,651  4,253  10,992  8,193    7,086  5,471  18,078  13,664 

Depreciation and amortization

   4,537  4,975  8,954  9,448    4,185  5,214  13,139  14,662 

Securities Class Action Lawsuit settlement, net

   28,712   —    28,712   —      —     —    28,712   —   
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Operating expenses

   378,581  342,388  723,874  680,142    356,790  347,236  1,080,664  1,027,378 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Operating income

   240  18,358  25,405  29,421    23,373  14,359  48,778  43,780 

Other income (expense):

          

Interest income

   41  9  60  31    44 14 104 45

Interest expense

   (1,197 (1,303 (2,265 (2,415   (1,335 (1,136 (3,600 (3,551

Equity in earnings from equity method investments

   2,355  363  2,249  358    900 3,244  3,149  3,602 

Miscellaneous, net

   1,127  658  2,239  1,393    1,043  1,713  3,282  3,106 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Total other income (expense), net

   2,326  (273 2,283  (633

Total other income, net

   652 3,835  2,935  3,202 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Income before income taxes

   2,566  18,085  27,688  28,788    24,025  18,194  51,713  46,982 

Income tax benefit (expense)

   1,963  (7,242 (7,960 (11,630

Income tax expense

   (9,364 (6,693 (17,324 (18,323
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net income

   4,529  10,843  19,728  17,158    14,661  11,501  34,389  28,659 

Net income attributable to noncontrolling interests

   (68 (147 (137 (249   (103 (66 (240 (315
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Net income attributable to Amedisys, Inc.

  $4,461  $10,696  $19,591  $16,909   $14,558  $11,435  $34,149  $28,344 
  

 

  

 

  

 

  

 

   

 

  

 

  

 

  

 

 

Basic earnings per common share:

Basic earnings per common share:

 

Basic earnings per common share:

 

Net income attributable to Amedisys, Inc. common stockholders

  $0.13  $0.32  $0.58  $0.51   $0.43  $0.34  $1.02  $0.86 

Weighted average shares outstanding

   33,637  33,197  33,540  33,059    33,838  33,309  33,640  33,142 

Diluted earnings per common share:

Diluted earnings per common share:

 

Diluted earnings per common share:

 

Net income attributable to Amedisys, Inc. common stockholders

  $0.13  $0.32  $0.57  $0.50   $0.42  $0.34  $1.00  $0.84 

Weighted average shares outstanding

   34,329  33,708  34,203  33,641    34,363  33,823  34,255  33,699 

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMEDISYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

  For the Six-Month Periods Ended June 30,   For the Nine-Month Periods
Ended September 30,
 
  2017 2016   2017 2016 

Cash Flows from Operating Activities:

      

Net income

  $19,728  $17,158   $34,389  $28,659 

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation and amortization

   8,954  9,448    13,139  14,662 

Provision for doubtful accounts

   10,992  8,193    18,078  13,664 

Non-cash compensation

   8,230  7,806    11,788  12,556 

401(k) employer match

   4,367  3,440    6,547  5,134 

Loss on disposal of property and equipment

   147  522 

(Gain) loss on disposal of property and equipment

   (22 556

Deferred income taxes

   7,582  11,362    17,228  18,689 

Equity in earnings from equity method investments

   (2,249 (358   (3,149 (3,602

Amortization of deferred debt issuance costs

   370  370    555 555

Return on equity investment

   3,416  362    4,656  1,913 

Changes in operating assets and liabilities, net of impact of acquisitions:

      

Patient accounts receivable

   (17,825 (30,349   (28,924 (46,107

Other current assets

   (6,892 5,551    (5,896 870

Other assets

   (1,148 (11,943   (12,202 (11,909

Accounts payable

   1,093  8,608    (5,430 7,308 

Securities Class Action Lawsuit settlement accrual, net

   28,712   —   

Accrued expenses

   (2,743 (2,811   22,584  (9,100

Other long-term obligations

   607  (464   201 (150
  

 

  

 

   

 

  

 

 

Net cash provided by operating activities

   63,341  26,895    73,542  33,698 
  

 

  

 

   

 

  

 

 

Cash Flows from Investing Activities:

      

Proceeds from sale of deferred compensation plan assets

   565  230    622 230

Purchase of investment

   (436 (432   (436 (750

Purchases of property and equipment

   (7,449 (9,915   (9,074 (13,502

Proceeds from the sale of property and equipment

   118  —   

Acquisitions of businesses, net of cash acquired

   (24,128 (27,634   (24,128 (31,378
  

 

  

 

   

 

  

 

 

Net cash used in investing activities

   (31,448 (37,751   (32,898 (45,400
  

 

  

 

   

 

  

 

 

Cash Flows from Financing Activities:

      

Proceeds from issuance of stock upon exercise of stock options and warrants

   4,203   —      4,214   —   

Proceeds from issuance of stock to employee stock purchase plan

   1,187  1,207    1,798  1,818 

Shares withheld upon stock vesting

   (5,726  —      (6,454  —   

Tax benefit from stock options exercised and restricted stock vesting

   —    7,130    —    7,241 

Non-controlling interest distribution

   (90 (200   (216 (284

Sale ofnon-controlling interest

   —    405

Proceeds from revolving line of credit

   —    84,000    —    128,500 

Repayments of revolving line of credit

   —    (84,000   —    (128,500

Principal payments of long-term obligations

   (2,500 (2,500   (4,069 (3,750

Purchase of company stock

   —    (12,315   —    (12,315
  

 

  

 

   

 

  

 

 

Net cash used in financing activities

   (2,926 (6,678   (4,727 (6,885
  

 

  

 

   

 

  

 

 

Net increase (decrease) in cash and cash equivalents

   28,967  (17,534   35,917  (18,587

Cash and cash equivalents at beginning of period

   30,197  27,502    30,197  27,502 
  

 

  

 

   

 

  

 

 

Cash and cash equivalents at end of period

  $59,164  $9,968   $66,114  $8,915 
  

 

  

 

   

 

  

 

 

Supplemental Disclosures of Cash Flow Information:

      

Cash paid for interest

  $1,172  $1,359   $2,188  $2,276 
  

 

  

 

   

 

  

 

 

Cash paid for income taxes, net of refunds received

  $284  $825   $315  $758 
  

 

  

 

   

 

  

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. NATURE OF OPERATIONS, CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS

Amedisys, Inc., a Delaware corporation, and its consolidated subsidiaries (“Amedisys,” “we,” “us,” or “our”) are a multi-state provider of home health, hospice and personal care services with approximately 74% and 75% of our revenue derived from Medicare for the three andsix-month nine-month periods ended JuneSeptember 30, 2017 and approximately 78% of our revenue derived from Medicare for the three andsix-month nine-month periods ended JuneSeptember 30, 2016. As of JuneSeptember 30, 2017, we owned and operated 329328 Medicare-certified home health care centers, 81 Medicare-certified hospice care centers and 16 personal-care care centers in 34 states within the United States and the District of Columbia.

Basis of Presentation

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly our financial position, our results of operations and our cash flows in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). Our results of operations for the interim periods presented are not necessarily indicative of results of our operations for the entire year and have not been audited by our independent auditors.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from the interim financial information presented. This report should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017 (the “Form10-K”), which includes information and disclosures not included herein.

Use of Estimates

Our accounting and reporting policies conform with U.S. GAAP. In preparing the unaudited condensed consolidated financial statements, we are required to make estimates and assumptions that impact the amounts reported in the condensed 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.

Principles of Consolidation

These unaudited condensed 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 unaudited condensed consolidated financial statements, and business combinations accounted for as purchases have been included in our unaudited condensed 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.

Equity Investments

We consolidate investments when the entity is a variable interest entity 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 condensed consolidated financial statements.

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 entity in which we are the primary beneficiary. The book value of investments that we accounted for under the equity method of accounting was $27.1$26.8 million as of JuneSeptember 30, 2017, and $27.8 million as of December 31, 2016. 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

We earn net service revenue through our home health, hospice and personal-care care centers by providing a variety of services almost exclusively in the homes of our patients. This net service revenue is earned and billed either on an episode of care basis, on a per visit basis or on a daily basis depending upon the payment terms and conditions established with each payor for services provided. We refer to home health revenue earned and billed on a60-day episode of care as episodic-based revenue.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

When we record our service revenue, we record it net of estimated revenue adjustments and contractual adjustments to reflect amounts we estimate to be realizable for services provided, as discussed below. We believe, based on information currently available to us and based on our judgment, that changes to one or more factors that impact the accounting estimates (such as our estimates related to revenue adjustments, contractual adjustments and episodes in progress) we make in determining net service revenue, which changes are likely to occur from period to period, will not materially impact our reported consolidated financial condition, results of operations, cash flows or our future financial results.

Home Health Revenue Recognition

Medicare Revenue

Net service revenue is recorded under the Medicare prospective payment system (“PPS”) based on a60-day episode payment rate that is subject to adjustment 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 was fewer than five; (c) a partial payment if our patient transferred to another provider or we received a patient 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) adjustments to payments if we are unable to perform periodic therapy assessments; (f) 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; (g) changes in the base episode payments established by the Medicare Program; (h) adjustments to the base episode payments for case mix and geographic wages; and (i) recoveries of overpayments. In addition, we make adjustments to Medicare revenue if we find that we are unable to produce appropriate documentation of a face to face encounter between the patient and physician.

We make adjustments to Medicare revenue to reflect differences between estimated and actual payment amounts, our discovered inability to obtain appropriate billing documentation or authorizations and other reasons unrelated to credit risk. 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 revenue adjustment and a corresponding reduction to patient accounts receivable. Therefore, we believe that our reported net service revenue and patient accounts receivable will be the net amounts to be realized from Medicare for services rendered.

In addition to revenue recognized on completed episodes, we also recognize a portion of revenue associated with episodes in progress. Episodes in progress are60-day episodes of care that begin during the reporting period, but were not completed as of the end of the period. We estimate this revenue on a monthly basis based upon historical trends. The primary factors underlying this estimate are the number of episodes in progress at the end of the reporting period, expected Medicare revenue per episode and our estimate of the average percentage complete based on the number of days elapsed during an episode of care. As of JuneSeptember 30, 2017 and 2016, the difference between the cash received from Medicare for a request for anticipated payment (“RAP”) on episodes in progress and the associated estimated revenue was immaterial and, therefore, the resulting credits were recorded as a reduction to our outstanding patient accounts receivable in our condensed consolidated balance sheets for such periods.

Non-Medicare Revenue

Episodic-based Revenue.We recognize revenue in a similar manner as we recognize Medicare revenue for episodic-based rates that are paid by other insurance carriers, including Medicare Advantage programs; however, these rates can vary based upon the negotiated terms.

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 estimatedper-visit rates, as applicable. Contractual 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 and are also recorded as a reduction to our outstanding patient accounts receivable. In addition, we receive a minimal amount of our net service revenue from patients who are either self-insured or are obligated for an insuranceco-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 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 accounts for 99%98% of our total net Medicare hospice service revenue for each of the three-monththree and nine-month periods ended JuneSeptember 30, 2017, and 2016, respectively, and 98%99% of our total net Medicare hospice service

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

service revenue for each of thesix-month three and nine-month periods ended JuneSeptember 30, 2017, and 2016, respectively.2016. Beginning January 1, 2016, the Centers for Medicare and Medicaid Services (“CMS”) has 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, beginning January 1, 2016, Medicare is also reimbursing for a service intensityadd-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.

We make adjustments to Medicare revenue for an inability to obtain appropriate billing documentation or acceptable authorizations and other reasons unrelated to credit risk. We estimate the impact of these adjustments based on our historical experience, which primarily includes our historical collection rate of over 99% on Medicare claims, and record it during the period services are rendered as an estimated revenue adjustment and as a reduction to our outstanding patient accounts receivable.

Additionally, as Medicare hospice revenue is subject to an inpatient cap limit and an overall payment cap for each provider number, we monitor these caps 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 other accrued liabilities. Beginning for the cap year ending October 31, 2014, providers are required to self-report and pay their estimated cap liability by March 31st of the following year. As of JuneSeptember 30, 2017, we have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2012. As of JuneSeptember 30, 2017 we have recorded $1.3$1.0 million for estimated amounts due back to Medicare in other accrued liabilities for the Federal cap years ended October 31, 2013 through October 31, 2017. As of December 31, 2016, we had recorded $0.8 million for estimated amounts due back to Medicare in other accrued liabilities for the Federal cap years ended October 31, 2013 through October 31, 2016.

HospiceNon-Medicare Revenue

We record gross revenue on an accrual basis based upon the date of service at amounts equal to our established rates or estimated per day rates, as applicable. Contractual adjustments are recorded for the difference between our established rates and the amounts estimated to be realizable from patients, third parties and others for services provided and are deducted from gross revenue to determine our net service revenue and patient accounts receivable.

Personal Care Revenue Recognition

Personal CareNon-Medicare Revenue

We generate net service revenues by providing our services directly to patients primarily on a per hour, visit or unit basis. We receive payment for providing such services from our customers, including state and local governmental agencies, managed care organizations, commercial insurers and private consumers. Net service revenues are principally provided based on authorized hours, visits or units determined by the relevant agency, at a rate that is either contractual or fixed by legislation, which are recognized as net service revenue at the time services are rendered.

Patient Accounts Receivable

Our patient accounts receivable are uncollateralized and consist of amounts due from Medicare, Medicaid, other third-party payors and patients. As of JuneSeptember 30, 2017 there is only oneno single payor, other than Medicare, that accounts for more than 10% of our total outstanding patient receivables (approximately 12.3%).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 fully reserve for accounts which are aged at 365 days or greater. 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 credit risk associated with our Medicare accounts, which represent 58%60% and 61% of our net patient accounts receivable at JuneSeptember 30, 2017 and December 31, 2016, 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. Accordingly, we do not record an allowance for doubtful accounts for our Medicare patient accounts receivable, which are recorded at their net realizable value after recording estimated revenue adjustments as discussed above. During the three andsix-month nine-month periods ended JuneSeptember 30, 2017, we recorded $5.0$3.5 million and $8.4$11.9 million, respectively, in estimated revenue adjustments to Medicare revenue as compared to $2.6$1.6 million and $4.3$5.9 million during the three andsix-month nine-month periods ended JuneSeptember 30, 2016, respectively.

We believe there is a certain level of credit risk associated withnon-Medicare payors. To provide for ournon-Medicare patient accounts receivable that could become uncollectible in the future, we establish an allowance for doubtful accounts to reduce the carrying amount to its estimated net realizable value.

Medicare Home Health

For our home health patients, ourpre-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 submit a RAP for 60% of our estimated payment for the initial episode at

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

the start 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”). The RAP received for that particular episode is 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 bere-submitted.

Medicare Hospice

For our hospice patients, ourpre-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 and Personal Care

For ournon-Medicare patients, ourpre-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 ofnon-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. We estimate an allowance for doubtful accounts based upon our assessment of historical and expected net collections, business and economic conditions, trends in payment and an evaluation of collectability based upon the date that the service was provided. Based upon our best judgment, we believe the allowance for doubtful accounts adequately provides for accounts that will not be collected due to credit risk.

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   Fair Value at Reporting Date Using 

Financial Instrument

 Carrying Value as
of
June 30, 2017
 Quoted Prices in Active
Markets for Identical
Items
(Level 1)
 Significant Other
Observable Inputs
(Level 2)
 Significant
Unobservable Inputs
(Level 3)
   Carrying Value
as of
September 30, 2017
   Quoted Prices in Active
Markets for Identical
Items

(Level 1)
   Significant Other
Observable Inputs
(Level 2)
   Significant
Unobservable Inputs
(Level 3)
 

Long-term obligations

 $93.6  $—    $94.3  $—     $92.0   $—     $92.8   $—   

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; quoted prices in markets that are not 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.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 the weighted-average shares outstanding, which are used to calculate our basic and diluted net income attributable to Amedisys, Inc. common stockholders (amounts in thousands):

AMEDISYS, INC. AND SUBSIDIARIES

   For the Three-Month Periods
Ended June 30,
   For the Six-Month Periods
Ended June 30,
 
   2017   2016   2017   2016 

Weighted average number of shares outstanding - basic

   33,637    33,197    33,540    33,059 

Effect of dilutive securities:

        

Stock options

   329    181    285    134 

Non-vested stock and stock units

   363    330    378    448 
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares outstanding - diluted

   34,329    33,708    34,203    33,641 
  

 

 

   

 

 

   

 

 

   

 

 

 

Anti-dilutive securities

   169    199    248    240 
  

 

 

   

 

 

   

 

 

   

 

 

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

   For the Three-Month Periods
Ended September 30,
   For the Nine-Month Periods
Ended September 30,
 
   2017   2016   2017   2016 

Weighted average number of shares outstanding—basic

   33,838    33,309    33,640    33,142 

Effect of dilutive securities:

        

Stock options

   271   207   279   156

Non-vested stock and stock units

   254   307   336   401
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares outstanding—diluted

   34,363    33,823    34,255    33,699 
  

 

 

   

 

 

   

 

 

   

 

 

 

Anti-dilutive securities

   337   204   279   254
  

 

 

   

 

 

   

 

 

   

 

 

 

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2014-09,Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue for which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP. In August 2015, the FASB issued ASU2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of the standard from January 1, 2017 to January 1, 2018, with an option that permits companies to adopt the standard as early as the original effective date. The new ASU reflects the decisions reached by the FASB at its meeting in July 2015. Early application prior to the original effective date is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has substantially completed its evaluation of the standard and does not expect ana material impact on its consolidated financial statements upon implementation of ASU2014-09 and ASU2015-14 on January 1, 2018, but is still evaluating the effect the standard will have on its related disclosures.2018.

In February 2016, the FASB issued ASU2016-02,Leases (Topic 842), which will require lessees to recognize a lease liability andright-of-use asset for all leases (with the exception of short-term leases) at the commencement date. The ASU is effective for annual and interim periods beginning on or after December 15, 2018. Early adoption is permitted. The standard requires a modified retrospective transition method which requires application of the new guidance for all periods presented. While the Company expects adoption of this standard to lead to a material increase in the assets and liabilities recorded on our balance sheet, we are still evaluating the overall impact on our consolidated financial statements and related disclosures and the effect of the standard on our ongoing financial reporting.

In March 2016, the FASB issued ASU2016-09,Compensation – Stock Compensation (Topic 718):Improvements to Employee Share-Based Payment Accounting, which will simplify the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liability and classification on the statement of cash flows. The ASU is effective for annual and interim periods beginning after December 15, 2016. We adopted this ASU effective January 1, 2017, and as a result, we recorded a $0.4 million increase to ournon-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 condensed consolidated statements of operations. We recorded tax expense of less than $0.1 million and excess tax benefits of $2.9 million and $3.1$3.0 million within our consolidated statements of operations for the three andsix-month nine-month periods ended JuneSeptember 30, 2017, respectively. Historically these amounts were recorded as additionalpaid-in capital in our condensed 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 on our condensed consolidated statements of cash flows for thesix-month nine-month period ended JuneSeptember 30, 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.

In August 2016, the FASB issued ASU2016-15,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. Early adoption is permitted. 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. The Company is evaluating the effect that ASU2016-15 will havedoes not expect an impact on its consolidated financial statements and related disclosures and the effectupon implementation of the standardASU2016-15 on its ongoing financial reporting.January 1, 2018.

In January 2017, the FASB issued ASU2017-01,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 acquisitions or disposals of assets or businesses. The ASU is effective for annual and interim periods beginning after December 15, 2017. The impact on our consolidated financial statements and related disclosures will depend on the facts and circumstances of any specific future transactions.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In January 2017, the FASB issued ASU2017-04,Intangibles - Intangibles—Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the goodwill impairment test). Instead, impairment will be measured using the difference of the carrying amount to the fair

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

value of the reporting unit. The ASU is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. The Company is evaluating the effect that ASU2017-04 will have on its consolidated financial statements and related disclosures and the effect of the standard on its ongoing financial reporting.

3. 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 and personal 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. 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.

On February 1, 2017, we acquired the assets of Home Staff, L.L.C. which owns and operates 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. During the three-month period ended March 31, 2017, 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. Thenon-compete agreements will be amortized over a weighted-average period of 2.8 years.

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 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. We will finalize the purchase price allocation for this acquisition once we receive the final valuation report from our outside appraisal firm. Our consolidated results include revenue of approximately $3.3 million and operating loss of approximately $0.4 million related to this acquisition for each of the three andsix-month periods ended June 30, 2017.

4. LONG-TERM OBLIGATIONS

Long-term debt consisted of the following for the periods indicated (amounts in millions):

 

 June 30, 2017 December 31, 2016   September 30, 2017   December 31, 2016 

$100.0 million Term Loan; principal payments plus accrued interest payable quarterly; interest rate at ABR Rate plus applicable percentage or Eurodollar Rate plus the applicable percentage (3.23% at June 30, 2017); due August 28, 2020

 $92.5  $95.0 

$100.0 million Term Loan; principal payments plus accrued interest payable quarterly; interest rate at ABR Rate plus applicable percentage or Eurodollar Rate plus the applicable percentage (3.24% at September 30, 2017); due August 28, 2020

  $91.3   $95.0 

$200.0 million Revolving Credit Facility; interest only payments; interest rate at ABR Rate plus applicable percentage or Eurodollar Rate plus the applicable percentage; due August 28, 2020

  —     —      —      —   

Promissory notes

 1.1  0.7    0.7    0.7 

Deferred debt issuance costs

 (2.3 (2.7   (2.1   (2.7
 

 

  

 

 
 91.3  93.0   

 

   

 

 
   89.9    93.0 

Current portion of long-term obligations

 (8.1 (5.2   (9.4   (5.2
 

 

  

 

   

 

   

 

 

Total

 $83.2  $87.8   $80.5   $87.8 
 

 

  

 

   

 

   

 

 

Our weighted average interest rate for our $100.0 million Term Loan, under our Credit Agreement, was 3.0%3.2% and 2.9%3.0% for the three andsix-month nine-month periods ended JuneSeptember 30, 2017, respectively, and 2.4%2.5% for the three andsix-month nine-month periods ended JuneSeptember 30, 2016, respectively. Our weighted average interest rate for our $200.0 million Revolving Credit Facility was 3.3%4.5% and 3.2%3.5% for the three andsix-month nine-month periods ended JuneSeptember 30, 2016, respectively.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

As of JuneSeptember 30, 2017, our consolidated leverage ratio, as defined by our Credit Agreement, was 1.0,0.9, our consolidated fixed charge coverage ratio, as defined by our Credit Agreement, was 3.94.1 and we are in compliance with our 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 thenon-compliance, which might include, among other things, seeking debt covenant waivers or amendments.

As of JuneSeptember 30, 2017, our availability under our $200.0 million Revolving Credit Facility was $170.4$167.3 million as we had $29.6$32.7 million outstanding in letters of credit.

5. COMMITMENTS AND CONTINGENCIES

Legal Proceedings - Proceedings—Ongoing

We are involved in the following legal actions:

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 actionBach, et al. v. Amedisys, Inc., et al. Case No.3:10-cv-00395, and the District Court appointed asco-lead plaintiffs the Public Employees’ Retirement System of Mississippi and the Puerto Rico Teachers’ Retirement System (the“Co-Lead Plaintiffs”). They filed a consolidated, amended complaint which all defendants moved to dismiss. The District Court granted the defendants’ motions to dismiss on June 28, 2012, and theCo-Lead Plaintiffs appealed that ruling to the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”). On October 2, 2014, a three-judge panel of the Fifth Circuit reversed the District Court’s dismissal and remanded the case to the District Court for further proceedings. The defendants request for anen banc review was denied on December 29, 2014 and their Petition for a Writ of Certiorari from the United States Supreme Court was denied on June 29, 2015.

After remand to the District Court, 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 Rule10b-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 andre-certifying patients for medically unnecessary60-day treatment episodes; (2) implementing clinical tracks such as “Balanced for Life” and wound care programs that provided apre-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 orre-certifications. The First Amended Securities Complaint seeks certification of the case as a class action and an unspecified amount of damages, as well as interest and an award of attorneys’ fees.

All defendants moved to dismiss the First Amended Securities Complaint on December 15, 2015. While that motion was pending the parties agreed to mediate the case. This mediation was not successful. On August 19, 2016, the District Court issued its ruling on the defendants’ motions to dismiss, dismissing with prejudice all claims against two former officers, dismissing all except Section 20(a) claims against three former officers, and denying all other relief. The Company and four individual defendants then filed their answers to the First Amended Securities Complaint on October 20, 2016. The independent executrix of the estate of William F. Borne, who was substituted as a defendant in the case after Mr. Borne’s death, filed her answer on February 6, 2017.

On June 12, 2017, the Company reached anagreement-in-principle to settle this matter. All parties to the action executed a binding term sheet that, subject to final documentation and court approval, providesprovided in part for a settlement payment of approximately $43.7 million, which we have accrued as of June 30, 2017, and the dismissal with prejudice of the litigation. Approximately $15.0 million of the settlement amount will be paid by the Company’s insurance carriers and has beenduring the three-month period ended September 30, 2017, was previously recorded with other current assets in our condensed consolidated balance sheet as of June 30, 2017. The net of these two amounts, $28.7 million, was recorded as a charge in our condensed consolidated statements of operations during the three-month period ended June 30, 2017 and paid with cash on hand during the three-month period ended September 30, 2017.

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. The Subpoena generally covers 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.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Civil Investigative Demand 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. The CID requests 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 covers 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 requests 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 covers 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.

Other Investigative Matters - Matters—Ongoing

Corporate Integrity Agreement

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 InspectorGeneral-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 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 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 corporate integrity agreement has 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. No assurances can be given as to the timing or outcome of the audit on the Company, its consolidated financial condition, results of operations or cash flows, which could be material, individually or in the aggregate.

Other Investigative Matters—Closed

Computer Inventory and Data Security Reporting

On March 1 and March 2, 2015, we provided official notice under federal and state data privacy laws concerning the outcome of an extensive risk management process to locate and verify our large computer inventory. The process identified approximately 142 encrypted computers and laptops for which reports were required under federal and state data privacy laws. The devices at issue were originally assigned to Company clinicians and other team members who left the Company between 2011 and 2014. We reported these devices to the U.S. Department of Health and Human Services, state agencies, and individuals whose information may be involved, as required under applicable law because we could not rule out unauthorized access to patient data on the devices. The Office of Civil Rights, U.S. Department of Health and Human Services (“OCR”) is reviewing our compliance with applicable laws, as is typical for any data breach involving more than 500 individuals. We are cooperating with OCR in its review and if any other regulatory reviews are formally commenced, will cooperate with applicable regulatory authorities. In accordance with our CIA, we have notified the OIG of this matter.

Idaho As of September 30, 2017, this matter has been resolved, 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. No assurances can be given as to the timingincurred no penalties or outcome of the audit on the Company, its consolidated financial condition, results of operations or cash flows, which could be material, individually or in the aggregate.fees.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Third Party Audits - 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 the Centers for Medicare and Medicaid Services (“CMS”) conduct extensive review of claims data to identify potential improper payments under the Medicare program.

In July 2010, our subsidiary that provides hospice services in Florence, South Carolina received from a Zone Program Integrity Contractor (“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 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 JuneSeptember 30, 2016,2017, 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 indemnified by the prior owners of the hospice operations for amounts relating to the period prior to August 1, 2009. As of JuneSeptember 30, 2017, we have an indemnity receivable of approximately $4.9 million for the amount withheld related to the period prior to August 1, 2009.

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 December 31, 2015. Subsequent to the initial ZPIC letter,In August 2017, the Company received additional requestsRequests for informationRepayment 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 groupstatistical extrapolation performed by SafeGuard which alleged an overpayment of its care centers$34.0 million for the Lakeland Care Centers on a universe of 72 Medicare claims totaling $0.2 million in Florida including post paymentactual claims reviews, letters notifyingpayments 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. 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.

As these matters continue to develop, the Company is working with the appropriate stakeholders to favorably resolve these matters. 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 estimated potential range of loss related to this review is between $6.5 million (assuming the Company is successful in seeking indemnity from the prior owners and unsuccessful in demonstrating that various care centers havethe extrapolation method used by SafeGuard was erroneous) and $38.8 million (the maximum amount Palmetto claims has been placed on prepayment review or payment suspensionoverpaid for both the Lakeland Care Centers and requeststhe Clearwater Care Center of which amount is subject to indemnification by the prior owners for repayment. up to $12.6 million as disclosed above).

As of JuneSeptember 30, 2017, $7.6we 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 and have recorded this amount with other assets, net in our condensed consolidated balance sheet as of September 30, 2017. The net of these two amounts, $6.5 million, was recorded as a reduction in revenue in our condensed consolidated statements of operations during the three-month period ended September 30, 2017. As of September 30, 2017, $7.8 million of net receivables have been impacted by this payment suspension. As these matters continue to develop, the Company is cooperating with SafeGuard, responding to all requests for information, and working to resolve these matters. We are also taking administrative appeals of many of the claims identified by the ZPIC. Based on the information currently available to the Company and the uncertainty regarding the scope of this audit and the outcome of the administrative appeals, the Company cannot predict the timing or outcome of this audit or reasonably estimate the amount or range of potential losses, which may arise from this matter.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

Our health insurance has an exposure limit of $0.9 million for any individual covered life. Our workers’ compensation insurance has a retention limit of $0.5 million per incident and our professional liability insurance has a retention limit of $0.3 million per incident.

6. SEGMENT INFORMATION

Our operations involve servicing patients through our three reportable business segments: home health, hospice and personal 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 completing important personal 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

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

essential activities of daily living. 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.

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 Three-Month Period Ended June 30, 2017 
  Home Health   Hospice   Personal
Care
   Other Total 

Net service revenue

  $273.7   $90.7   $14.4   $—    $378.8 

Cost of service, excluding depreciation and amortization

   164.8    44.7    10.3    —    219.8 

General and administrative expenses

   68.9    19.0    3.0    30.0  120.9 

Provision for doubtful accounts

   3.4    1.2    0.1    —    4.7 

Depreciation and amortization

   1.0    0.2    —      3.3  4.5 

Securities Class Action Lawsuit settlement, net

   —      —      —      28.7  28.7 
  

 

   

 

   

 

   

 

  

 

 

Operating expenses

   238.1    65.1    13.4    62.0  378.6 
  

 

   

 

   

 

   

 

  

 

 

Operating income (loss)

  $35.6   $25.6   $1.0   $(62.0 $0.2 
  

 

   

 

   

 

   

 

  

 

 
  For the Three-Month Period Ended June 30, 2016   For the Three-Month Period Ended September 30, 2017 
  Home Health   Hospice   Personal
Care
   Other Total   Home Health   Hospice   Personal
Care
   Other Total 

Net service revenue

  $275.5   $75.8   $9.4   $—    $360.7   $269.5   $96.5   $14.2   $—    $380.2 

Cost of service, excluding depreciation and amortization

   160.3    39.4    6.8    —    206.5    168.2    47.8    10.6    —    226.6 

General and administrative expenses

   72.3    17.4    2.3    34.7  126.7    70.9    19.0    3.1    25.9  118.9 

Provision for doubtful accounts

   3.5    0.7    —      —    4.2    5.4    1.2    0.5    —    7.1 

Depreciation and amortization

   1.6    0.3    —      3.1  5.0    0.9    0.2    —      3.1  4.2 
  

 

   

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Operating expenses

   237.7    57.8    9.1    37.8  342.4    245.4    68.2    14.2    29.0  356.8 
  

 

   

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Operating income (loss)

  $37.8   $18.0   $0.3   $(37.8 $18.3   $24.1   $28.3   $—     $(29.0 $23.4 
  

 

   

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

  

 

 

   For the Three-Month Period Ended September 30, 2016 
   Home Health   Hospice   Personal
Care
   Other  Total 

Net service revenue

  $268.9   $82.0   $10.7   $—    $361.6 

Cost of service, excluding depreciation and amortization

��  162.4    41.9    7.8    —     212.1 

General and administrative expenses

   71.8    17.6    2.3    32.7   124.4 

Provision for doubtful accounts

   4.0    1.4    0.1    —     5.5 

Depreciation and amortization

   1.6    0.3    —      3.3   5.2 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Operating expenses

   239.8    61.2    10.2    36.0   347.2 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Operating income (loss)

  $29.1   $20.8   $0.5   $(36.0 $14.4 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

  For theSix-Month Period Ended June 30, 2017   For the Nine-Month Period Ended September 30, 2017 
  Home Health   Hospice   Personal
Care
   Other Total   Home Health   Hospice   Personal
Care
   Other Total 

Net service revenue

  $545.0   $176.3   $28.0   $—    $749.3   $814.5   $272.8   $42.1   $—    $1,129.4 

Cost of service, excluding depreciation and amortization

   327.8    87.1    20.7    —    435.6    496.1    134.9    31.2    —    662.2 

General and administrative expenses

   136.9    37.0    6.2    59.5  239.6    207.7    56.2    9.2    85.4  358.5 

Provision for doubtful accounts

   7.1    3.7    0.2    —    11.0    12.6    4.8    0.7    —    18.1 

Depreciation and amortization

   1.9    0.5    0.1    6.5  9.0    2.7    0.7    0.1    9.6  13.1 

Securities Class Action Lawsuit settlement, net

   —      —      —      28.7  28.7    —      —      —      28.7  28.7 
  

 

   

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Operating expenses

   473.7    128.3    27.2    94.7  723.9    719.1    196.6    41.2    123.7  1,080.6 
  

 

   

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

  

 

 

Operating income (loss)

  $71.3   $48.0   $0.8   $(94.7 $25.4   $95.4   $76.2   $0.9   $(123.7 $48.8 
  

 

   

 

   

 

   

 

  

 

   

 

   

 

   

 

   

 

  

 

 
  For theSix-Month Period Ended June 30, 2016 
  Home Health   Hospice   Personal
Care
   Other Total 

Net service revenue

  $548.2   $148.8   $12.5   $—    $709.5 

Cost of service, excluding depreciation and amortization

   321.1    78.2    9.0    —    408.3 

General and administrative expenses

   143.5    34.3    2.7    73.7  254.2 

Provision for doubtful accounts

   6.8    1.4    —      —    8.2 

Depreciation and amortization

   2.8    0.6    —      6.0  9.4 
  

 

   

 

   

 

   

 

  

 

 

Operating expenses

   474.2    114.5    11.7    79.7  680.1 
  

 

   

 

   

 

   

 

  

 

 

Operating income (loss)

  $74.0   $34.3   $0.8   $(79.7 $29.4 
  

 

   

 

   

 

   

 

  

 

 

   For the Nine-Month Period Ended September 30, 2016 
   Home Health   Hospice   Personal
Care
   Other  Total 

Net service revenue

  $817.2   $230.8   $23.2   $—    $1,071.2 

Cost of service, excluding depreciation and amortization

   483.6    120.1    16.8    —     620.5 

General and administrative expenses

   215.3    51.8    5.0    106.4   378.5 

Provision for doubtful accounts

   10.8    2.8    0.1    —     13.7 

Depreciation and amortization

   4.4    1.0    —      9.3   14.7 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Operating expenses

   714.1    175.7    21.9    115.7   1,027.4 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

Operating income (loss)

  $103.1   $55.1   $1.3   $(115.7 $43.8 
  

 

 

   

 

 

   

 

 

   

 

 

  

 

 

 

9. SUBSEQUENT EVENT

On October 2, 2017, we acquired Intercity Home Care, a personal care provider in Massachusetts with three care centers for a purchase price of $9.6 million.

ITEM 2.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 the three andsix-month nine-month periods ended JuneSeptember 30, 2017. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included herein, and the consolidated financial statements and notes and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017 (the “Form10-K”), which are incorporated herein by this reference.

Unless otherwise provided, “Amedisys,” “we,” “our,” and the “Company” refer to Amedisys, Inc. and our consolidated subsidiaries.

Overview

We are a provider of high-qualityin-home healthcare and related services to the chronic,co-morbid, aging American population, with approximately 74% and 75% of our revenue derived from Medicare for the three andsix-month nine-month periods ended JuneSeptember 30, 2017, and approximately 78% of our revenue derived from Medicare for the three andsix-month nine-month periods ended JuneSeptember 30, 2016.

Our operations involve servicing patients through our three reportable business segments: home health, hospice and personal 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. As of JuneSeptember 30, 2017, we owned and operated 329328 Medicare-certified home health care centers, 81 Medicare-certified hospice care centers and 16 personal-care care centers in 34 states within the United States and the District of Columbia.

Owned and Operated Care Centers

 

  Home Health   Hospice   Personal Care   Home Health   Hospice   Personal Care 

At December 31, 2016

   327    79    14    327   79   14

Acquisitions

   3    2    3    3   2   3

Closed/Consolidated

   (1   —      (1   (2   —      (1
  

 

   

 

   

 

   

 

   

 

   

 

 

At June 30, 2017

   329    81    16 

At September 30, 2017

   328   81   16
  

 

   

 

   

 

   

 

   

 

   

 

 

Recent Developments

Governmental Inquiries and Investigations and Other Litigation

We haveDuring the three-month period ended June 30, 2017, we reached anagreement-in-principle to resolve the Securities Class Action Lawsuit. All parties to the action executed a binding term sheet that, subject to final documentation and court approval, provides in partprovided for a settlement payment of approximately $43.7 million, which we have accrued as of June 30, 2017, and the dismissal with prejudice of the litigation. Approximately $15.0 million of the settlement amount will be paid by the Company’s insurance carriers and has beenwas recorded with other current assets in our condensed consolidated balance sheet as of June 30, 2017, and subsequently paid by the Company’s insurance carriers during the three-month period ended September 30, 2017. The net of these two amounts, $28.7 million, was recorded as a charge in our condensed consolidated statements of operations during the three-month period ended June 30, 2017 and paid with cash on hand during the three-month period ended September 30, 2017. See Note 5 – Commitments and Contingencies to our condensed consolidated financial statements for additional information regarding this matter.

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 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, LLC (“Palmetto”) regarding two of these care centers. As a result, we recorded a $6.5 million reduction in revenue in our condensed consolidated statement of operations related to this matter during the three-month period ended September 30, 2017. See Note 5 – Commitments and Contingencies to our condensed consolidated financial statements for additional information regarding this matter.

In addition, see Note 5 – Commitments and Contingencies to our condensed consolidated financial statements for additional information regarding our corporate integrity agreement and for a discussion of and updates regarding other legal proceeding and investigations we are involved in. No assurances can be given as to the timing or outcome of these items.

Payment

In AprilOn August 1, 2017, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposedfinal rule to update hospice payment rates and the wage index for fiscal year 2018. CMS estimates hospices serving Medicare beneficiaries would see an estimated 1.0% increase in payments. CMS notes that minuspayments, consistent with the required market basket set in fiscal year 2018 by statute in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA),(“MACRA”). Absent the statutory cap on payment increases included in MACRA, CMS notes that the rate increase would have been a 2.9% market basket adjustment, less the 0.4% productivity adjustment, less 0.3% as required under the ACA (or +2.2% net).2.2% net increase. CMS also proposes increasingincreased the aggregate cap amount by 1.0% to $28,689.04. We expect our impact of the 2018 proposedfinal rule to be in line with that of the hospice industry.

On July 25,November 1, 2017, CMS issued proposed payment changesits final rule for Medicare home health providers for 2018 and 2019.providers. CMS estimates that the net impact of the payment provisions of the proposed changesfinal rule will result in a decrease of 0.4% in reimbursement to home health providers in 2018. This decrease is the result of a 1.0% home health payment update, a 0.9% adjustment to the national, standardized 60-day episode payment rate to account for nominal case-mix growth and the sunset of the rural add-on provision. Additionally,As of September 30, 2017, we estimate our impact of the proposed2018 final rule includes changes to be approximately 1.4% which is inclusive of the sunset of the rural add-on provision.

Home Health Division Restructure Plan

On October 2, 2017, the Company announced that it will close four Florida home health prospective payment system (HH PPS) case-mix adjustment methodology referredcare centers, consolidate another three Florida home health care centers with care centers servicing the same market and implement a plan to asrestructure the Home Health Groupings Model (HHGM). The HHGM includesCompany’s home health division. These actions are expected to be completed during the three-month period ended December 31, 2017. As a changeresult of these actions, we recorded approximately $2 million in salaries and benefits related to severance costs during the three-month period ended September 30, 2017. We expect to incur additional charges in the unitrange of payment from 60-day episodes$2 million to $3 million during the three-month period ended December 31, 2017 related to our restructure plan.

Executive Leadership

On October 5, 2017, Gary D. Willis resigned as Chief Financial Officer. As a result of care to 30-day periodshis departure, the Board of care. This change is proposed to be implemented January 1, 2019 and would result in an estimated 2.2% - 4.3% decrease in reimbursement to home health providers in 2019. We are currently evaluating the proposed rule’s impact on our home health operations.Directors appointed Scott G. Ginn as Chief Financial Officer, effective October 5, 2017.

Results of Operations

Three-Month Period Ended JuneSeptember 30, 2017 Compared to the Three-Month Period Ended JuneSeptember 30, 2016

Consolidated

The following table summarizes our results (amounts in millions):

 

  For the Three-Month Periods
Ended June 30,
   For the Three-Month Periods
Ended September 30,
 
  2017 2016   2017 2016 

Net service revenue

  $378.8  $360.7   $380.2  $361.6 

Gross margin, excluding depreciation and amortization

   159.0  154.2    153.5  149.5 

% of revenue

   42.0%  42.8%    40.4  41.3

Other operating expenses

   130.1  135.9    130.1  135.1 

% of revenue

   34.3%  37.7%    34.2  37.4

Securities Class Action Lawsuit settlement, net

   28.7   —   
  

 

  

 

   

 

  

 

 

Operating income

   0.2  18.3    23.4  14.4 
  

 

  

 

   

 

  

 

 

Total other income (expense), net

   2.3  (0.3

Income tax benefit (expense)

   2.0  (7.2

Total other income, net

   0.7  3.8 

Income tax expense

   (9.4 (6.7

Effective income tax rate

   (76.5%)  40.0%    39.0  36.8
  

 

  

 

   

 

  

 

 

Net income

   4.5  10.8    14.7  11.5 
  

 

  

 

   

 

  

 

 

Net income attributable to noncontrolling interests

   (0.1 (0.1   (0.1 (0.1
  

 

  

 

   

 

  

 

 

Net income attributable to Amedisys, Inc.

  $4.5  $10.7   $14.6  $11.4 
  

 

  

 

   

 

  

 

 

Overall, our operating income decreased $18increased $9 million on a revenue increase of $18$19 million and a $5 million decrease in other operating expenses which was offset by a $13$15 million increase in cost of service and a $23 millionservice. The increase in other operating expenses, primarily related to the Securities Class Action Lawsuit settlement accrual. Excluding approximately $30 million for the Securities Class Action Lawsuit settlement accrual (see Note 5 – Commitments and Contingencies to our condensed consolidated financial statements) and related legal fees, our operating income increased $12 millionwas driven by the performance of our hospice division and reductions in corporate operating expenses as the result of Homecare Homebase (“HCHB”) implementation costs incurred during the three-month period ended June 30, 2016.expenses. Additionally, our results for the three-month period Juneended September 30, 2017 include the results of our acquisition of three home health and two hospice care centers on May 1, 2017, which added approximately $1$2 million in other operating expenses related to care center costs.

Our results for the three-month periods ended September 30, 2017 and 2016 were impacted by additional expenses incurred during the quarters. Our 2016 operating results were negatively impacted by $4 million as a result of costs associated with Homecare Homebase (“HCHB”) implementation and restructuring activity charges (primarily severance costs).

Our 2017 operating results were negatively impacted $9 million; these impacts include a $7 million reduction in revenue as a result of the Florida ZPIC audit (see Note 5 – Commitments and Contingencies to our condensed consolidated financial statements for additional information regarding this matter) and approximately $1$2 million in severance costs related to integration costs.our home health closures and restructuring plan. In addition, during the three-month period ended September 30, 2017, we experienced a decline in admissions and incurred additional costs as a result of Hurricane Irma which impacted operating income by approximately $1 million.

Total other income (expense), net for the three-month period ended JuneSeptember 30, 20172016 includes a gain from an equity method investment of approximately $2$3 million.

Home Health Division

The following table summarizes our home health segment results from continuing operations:

 

  For the Three-Month Periods Ended June 30,   For the Three-Month Periods Ended September 30, 
  2017 2016   2017 2016 

Financial Information(in millions):

      

Medicare

  $198.3  $208.4   $191.4  $203.9 

Non-Medicare

   75.4  67.1    78.1  65.0 
  

 

  

 

   

 

  

 

 

Net service revenue

   273.7  275.5    269.5  268.9 

Cost of service

   164.8  160.3    168.2  162.4 
  

 

  

 

   

 

  

 

 

Gross margin

   108.9  115.2    101.3  106.5 

Other operating expenses

   73.3  77.4    77.2  77.4 
  

 

  

 

   

 

  

 

 

Operating income

  $35.6  $37.8   $24.1  $29.1 
  

 

  

 

   

 

  

 

 

Same Store Growth (1):

      

Medicare revenue

   (5%)  4   (7%)  1

Non-Medicare revenue

   12 13   19 4

Medicare admissions

   (4%)  4   (3%)  1

Total Episodic admissions

   (1%)  5   1 3

Total admissions

   —   3   1 -

Key Statistical Data - Total (2):

   

Key Statistical Data—Total (2):

   

Medicare:

      

Admissions

   47,260  48,982    46,823  47,625 

Recertifications

   26,839  26,020    26,996  25,522 
  

 

  

 

 

Total volume

   73,819  73,147 

Completed episodes

   73,872  74,027    71,454  71,948 

Visits

   1,271,747  1,315,417    1,259,156  1,266,780 

Average revenue per completed episode (3)

  $2,829  $2,850   $2,820  $2,841 

Visits per completed episode (4)

   17.5  17.7    17.4  17.5 

Non-Medicare:

      

Admissions

   26,225  24,237    26,686  24,335 

Recertifications

   11,462  9,640    12,263  9,479 

Visits

   579,328  515,062    592,742  506,729 

Visiting Clinician Cost per Visit

  $80.61  $79.44   $82.53  $82.86 

Clinical Manager Cost per Visit

  $8.44  $8.12   $8.30  $8.72 
  

 

  

 

   

 

  

 

 

Total Cost per Visit

  $89.05  $87.56   $90.83  $91.58 
  

 

  

 

   

 

  

 

 

Visits

   1,851,075  1,830,479    1,851,898  1,773,509 

 

(1)Same store information represents the percent increase (decrease) in our Medicare andNon-Medicare revenue or admissions for the period as a percent of the Medicare andNon-Medicare revenue or admissions of the prior period.
(2)Total includes acquisitions.
(3)Average Medicare revenue per completed episode is the average Medicare revenue earned for each Medicare completed episode of care.
(4)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.

Operating Results

Overall, our operating income decreased $2$5 million on a $6$5 million decrease in gross margin, offset by a $4margin; other operating expenses remained flat compared to prior year. The $5 million decrease is net of the $7 million reduction in other operating expenses.revenue related to the Florida ZPIC audit (see Note 5 – Commitments and Contingencies to our condensed consolidated financial statements for additional information regarding this matter).

Net Service Revenue

Our Medicare revenue decreased approximately $10 million. Approximately $8$13 million ofwhich includes a $7 million reduction in revenue related to the decrease is due to lowerFlorida ZPIC audit. Our total Medicare volumes and increases in contractual reserves. Additionally, we experienced(admissions plus recertifications) increased during the three-month period ended September 30, 2017. The volume increase was offset by a $4$2 million decrease in revenue per episode in addition to a $3 million reduction as a result of an increase in our provision for revenue adjustments primarily related to the aging of Medicare receivables for our Florida care centers included in the ZPIC audit. The decrease in revenue per episode is the result of the 2017 CMS rate cut which reduced our revenue by approximately $4 million which was offset by a $2 million increase related to the acuity level of our patients.

Ournon-Medicare revenue increased $8$13 million with same store revenues increasing 12%19%. Admissions from episodic payors increased 25%24% while our per visit payors increased 2%3%. We continue to focus on contract payors with significant concentrations in our markets and those that add incremental margin to our operations as we continue to evaluate our portfolio of managed care contracts.

Cost of Service, Excluding Depreciation and Amortization

Our cost per visit 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 cost of service increased $4 million due to an increase in cost per visit and a 1%4% which is consistent with our increase in total visits. Excluding the impact of increases in health insurance, ourOur cost per visit increased onlydecreased approximately 1% from prior year despite planneddisruptions related to Hurricane Irma and annual wage increases in July 2016. We continue to focus on improving this metric, and we have seen sequential improvement fromeffective during the three-month period ended March 31, 2017 and a $3.42 improvement from the three-month period ended December 31, 2016.current quarter.

Other Operating Expenses

Other operating expenses decreased $4remained flat despite incurring approximately $2 million duein severance costs related to our home health restructuring plan and an increase in our provision for doubtful accounts as we experienced decreases in other care center related expenses, primarily salaries and benefits as the result of planned decreases duringpost our HCHB rollout. Other operating expenses include approximately $1 million related to acquisitions during the three-month period ended JuneSeptember 30, 2017.

Hospice Division

The following table summarizes our hospice segment results from continuing operations:

Hospice Division

The following table summarizes our hospice segment results from continuing operations:

Hospice Division

The following table summarizes our hospice segment results from continuing operations:

 

 

  For the Three-Month Periods Ended June 30,   For the Three-Month Periods Ended September 30, 
  2017 2016   2017 2016 

Financial Information (in millions):

      

Medicare

  $85.8  $71.3   $91.4  $77.0 

Non-Medicare

   4.9  4.5    5.1  5.0 
  

 

  

 

   

 

  

 

 

Net service revenue

   90.7  75.8    96.5  82.0 

Cost of service

   44.7  39.4    47.8  41.9 
  

 

  

 

   

 

  

 

 

Gross margin

   46.0  36.4    48.7  40.1 

Other operating expenses

   20.4  18.4    20.4  19.3 
  

 

  

 

   

 

  

 

 

Operating income

  $25.6  $18.0   $28.3  $20.8 
  

 

  

 

   

 

  

 

 

Same Store Growth (1):

      

Medicare revenue

   19 14   17 12

Non-Medicare revenue

   8 15   (2%)  14

Hospice admissions

   11 18   7 16

Average daily census

   16 16   14 14

Key Statistical Data - Total (2):

      

Hospice admissions

   6,248  5,576    6,257  5,751 

Average daily census

   6,717  5,730    7,026  6,087 

Revenue per day, net

  $148.39  $145.40   $149.25  $146.49 

Cost of service per day

  $73.08  $75.69   $73.99  $74.77 

Average discharge length of stay

   89  94    95 92

 

1)(1)Same store information represents the percent increase (decrease) in our Medicare andNon-Medicare revenue, Hospice admissions or average daily census for the period as a percent of the Medicare andNon-Medicare revenue, Hospice admissions or average daily census of the prior period.
(2)Total includes acquisitions.

Operating Results

Overall, our operating income increased $8 million on a $10$9 million increase in gross margin offset by a $2$1 million increase in other operating expenses.

Net Service Revenue

Our hospice revenue increased $15 million, primarily due to an increase in our average daily census as a result of an 11%a 7% increase in hospice admissions and a 2% increase in reimbursement effective October 1, 2016. The 14% increase in average daily census is driven by our 13% admissions growth for the nine-month period ended September 30, 2017.

Cost of Service, Excluding Depreciation and Amortization

Our hospice cost of service increased $5$6 million as the result of a 16%14% increase in average daily census. Our cost of service per day decreased $2.61by approximately $1.00 primarily due to significantan improvement in salary and pharmacy cost per day.

Other Operating Expenses

Other operating expenses increased $2$1 million primarily due to increases in other care center related expenses, primarily salariescensus growth and benefits expense and provision for doubtful accounts. The increase in provision for doubtful accounts is due to continued aging ofnon-Medicare receivables post our HCHB implementation. We have experienced a $1 million sequential decrease in our provision for doubtful accounts as our collection patterns have begun to normalize. Other operating expenses include less than $1 million related to acquisitionsan acquisition that occurred during the three-month period ended June 30, 2017.

Personal Care Division

The following table summarizes our personal care segment results from continuing operations:

 

  For the Three-Month Periods Ended September 30, 
  For the Three-Month Periods Ended June 30,    2017    2016 
  2017   2016   

 

   

 

 

Financial Information (in millions):

        

Medicare

  $—     $—     $—     $—   

Non-Medicare

   14.4    9.4    14.2    10.7 
  

 

   

 

   

 

   

 

 

Net service revenue

   14.4    9.4    14.2    10.7 

Cost of service

   10.3    6.8    10.6    7.8 
  

 

   

 

   

 

   

 

 

Gross margin

   4.1    2.6    3.6    2.9 

Other operating expenses

   3.1    2.3    3.6    2.4 
  

 

   

 

   

 

   

 

 

Operating income

  $1.0   $0.3   $—     $0.5 
  

 

   

 

   

 

   

 

 

Key Statistical Data:

        

Billable hours

   618,401    404,374    616,036    448,133 

Clients served

   8,470    5,940    8,145    7,132 

Shifts

   281,904    203,465 

Revenue per hour

  $23.00   $23.70 

Revenue per shift

  $50.26   $52.19 

Hours per shift

   2.2    2.2 

On March 1, 2016, we acquired Associated Home Care, a personal care home health care company with nine care centers. On September 1, 2016, we acquired the assets of Professional Profiles, Inc. which owned and operated four personal-care care centers. In addition during the three-month period ended September 30, 2016, we opened astart-up personal-care care center. On February 1, 2017, we acquired the assets of Home Staff LLC, which owned and operated three personal-care care centers, one of which was subsequently consolidated with one of our existing personal-care care centers. Acquisitions are included in our consolidated financial statements from their respective acquisition dates. As a result, our personal care operating results for the three-month periods ended JuneSeptember 30, 2017 and 2016 are not fully comparable.

Corporate

The following table summarizes our corporate results from continuing operations:

 

  For the Three-Month Periods Ended June 30,   For the Three-Month Periods Ended September 30, 
  2017   2016   2017   2016 

Financial Information (in millions):

        

Other operating expenses

  $30.0   $34.7   $25.9   $32.7 

Depreciation and amortization

   3.3    3.1    3.1    3.3 
  

 

   

 

   

 

   

 

 

Total operating expenses before Securities Class Action Lawsuit settlement, net

   33.3    37.8 

Securities Class Action Lawsuit settlement, net

   28.7    —   
  

 

   

 

 

Total operating expenses

  $62.0   $37.8   $29.0   $36.0 
  

 

   

 

   

 

   

 

 

Corporate expenses consist of costs relating 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. Excluding the Securities Class Action Lawsuit settlement accrual and related legal fees in 2017, corporateCorporate other operating expenses have decreased approximately $5 million,$7 million. This decrease is driven by a $3 million of which isdecrease related to HCHB implementation costs incurred during the three-month period ended June 30, 2016. Additionally, the three-month period ended June 30, 2017 includes approximately $1 millionand fees and reductions in acquisition integration costs.costs and various other operating expenses including professional fees, salaries and benefits, personnel costs and IT related services.

Six-MonthNine-Month Period Ended JuneSeptember 30, 2017 Compared to theSix-Month Nine-Month Period Ended JuneSeptember 30, 2016

Consolidated

The following table summarizes our results from continuing operations (amounts in millions):

 

  For the Six-Month Periods
Ended June 30,
   For the Nine-Month Periods
Ended September 30,
 
  2017 2016   2017 2016 

Net service revenue

  $749.3  $709.5   $1,129.4  $1,071.2 

Gross margin, excluding depreciation and amortization

   313.7  301.2    467.2  450.7 

% of revenue

   41.9%  42.5%    41.4  42.1

Other operating expenses

   259.6  271.8    389.8  406.9 

% of revenue

   34.6%  38.3%    34.5  38.0

Securities Class Action Lawsuit settlement, net

   28.7   —      28.7   —   
  

 

  

 

   

 

  

 

 

Operating income

   25.4  29.4    48.8  43.8 
  

 

  

 

   

 

  

 

 

Total other income (expense), net

   2.3  (0.6

Total other income, net

   2.9  3.2 

Income tax expense

   (8.0 (11.6   (17.3 (18.3

Effective income tax rate

   28.7%  40.4%    33.5  39.0
  

 

  

 

   

 

  

 

 

Net income

   19.7  17.2    34.4  28.7 
  

 

  

 

   

 

  

 

 

Net income attributable to noncontrolling interests

   (0.1 (0.2   (0.2 (0.3
  

 

  

 

   

 

  

 

 

Net income attributable to Amedisys, Inc.

  $19.6  $16.9   $34.1  $28.3 
  

 

  

 

   

 

  

 

 

Overall, our operating income decreased $4increased $5 million on a revenue increase of $40$58 million which was offset by a $27$42 million increase in cost of service and a $17an $11 million increase in other operating expenses primarily related towhich is inclusive of the $30 million charge for the Securities Class Action Lawsuit settlement accrual and related legal fees incurred during the three-month period ended June 30, 2017. Excluding these amounts, our operating income increased $26$34 million driven by the performance of our hospice division and reductions in corporate operating expenses as the result of approximately $17 million related to HCHB implementation costs and acquisition activity incurred during thesix-month nine-month period ended JuneSeptember 30, 2016. Additionally our results for thesix-month nine-month period ended JuneSeptember 30, 2017 include the results of our acquisition of three home health and two hospice care centers on May 1, 2017, which added approximately $1$3 million in other operating expenses related to care center costs and approximately $1 million related to integration costs.

Total other income (expense), net for the three-month period ended June 30, 2017 includes a gain from an equity method investment of approximately $1 million.

Home Health Division

The following table summarizes our home health segment results from continuing operations:

 

  For the Six-Month Periods Ended June 30,   For the Nine-Month Periods Ended September 30, 
  2017 2016   2017 2016 

Financial Information(in millions):

      

Medicare

  $397.0  $415.2   $588.4  $619.2 

Non-Medicare

   148.0  133.0    226.1  198.0 
  

 

  

 

   

 

  

 

 

Net service revenue

   545.0  548.2    814.5  817.2 

Cost of service

   327.8  321.1    496.1  483.6 
  

 

  

 

   

 

  

 

 

Gross margin

   217.2  227.1    318.4  333.6 

Other operating expenses

   145.9  153.1    223.0  230.5 
  

 

  

 

   

 

  

 

 

Operating income

  $71.3  $74.0   $95.4  $103.1 
  

 

  

 

   

 

  

 

 

Same Store Growth (1):

      

Medicare revenue

   (4%)  4   (5%)  3

Non-Medicare revenue

   12 17   14 12

Medicare admissions

   (2%)  4   (3%)  3

Total Episodic admissions

   1 5   1 4

Total admissions

   1 5   1 3

Key Statistical Data - Total (2):

   

Key Statistical Data—Total (2):

   

Medicare:

      

Admissions

   96,888  99,400    143,711  147,025 

Recertifications

   51,882  52,043    78,878  77,565 
  

 

  

 

 

Total volume

   222,589  224,590 

Completed episodes

   145,736  146,059    217,190  218,007 

Visits

   2,534,845  2,626,788    3,794,001  3,893,568 

Average revenue per completed episode (3)

  $2,750  $2,831   $2,811  $2,835 

Visits per completed episode (4)

   17.2  17.6    17.3  17.5 

Non-Medicare:

      

Admissions

   53,558  49,804    80,244  74,139 

Recertifications

   21,686  19,466    33,949  28,945 

Visits

   1,134,876  1,043,031    1,727,618  1,549,760 

Visiting Clinician Cost per Visit

  $80.84  $79.29   $81.41  $80.52 

Clinical Manager Cost per Visit

  $8.49  $8.22   $8.42  $8.31 
  

 

  

 

   

 

  

 

 

Total Cost per Visit

  $89.33  $87.51   $89.83  $88.83 
  

 

  

 

   

 

  

 

 

Visits

   3,669,721  3,669,819    5,521,619  5,443,328 

 

(1)Same store information represents the percent increase (decrease) in our Medicare andNon-Medicare revenue or admissions for the period as a percent of the Medicare andNon-Medicare revenue or admissions of the prior period.
(2)Total includes acquisitions.
(3)Average Medicare revenue per completed episode is the average Medicare revenue earned for each Medicare completed episode of care.
(4)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.

Operating Results

OperatingResults

Overall, our operating income declined $3$8 million on a $10$15 million decrease in gross margin offset by a $7 million decrease in other operating expenses.

Net Service Revenue

Our Medicare revenue decreased approximately $18 million.$31 million which includes a $7 million reduction in revenue related to the Florida ZPIC audit. Approximately $14$13 million of the remaining $24 million decrease is due to lower volumes and increases in contractual reserves.our provision for revenue adjustments. Additionally, we experienced an $8a $12 million decrease in revenue per episode as a result of the 2017 CMS rate cut which was partially offset by a $4 millionan increase related toin the acuity level of our patients.

Ournon-Medicare revenue increased approximately $15$28 million. Admissions from episodic payors increased 30%28% while our per visit payors remained flat.increased 1%. We continue to focus on contract payors with significant concentrations in our markets and those that add incremental margin to our operations as we continue to evaluate our portfolio of managed care contracts.

Cost of Service, Excluding Depreciation and Amortization

Our cost of service increased $7$12 million due to an increase in cost per visit as our total visits remained flat. Excluding the impact of increases in health insurance,both our cost per visit increasedand our total visits. Our cost per visit is up approximately 1% from prior year despite plannedas the result of an increase in health insurance costs and annual wage increases effective July 2016.during the three-month period ended September 30, 2017. We have seen continued improvement in this metric driven by increases in clinician productivity.

Other Operating Expenses

Other operating expensesexpense decreased $7 million duedespite incurring approximately $2 million in severance costs related to our home health restructuring plan and an increase in our provision for doubtful accounts during the nine-month period ended September 30, 2017. These charges were offset by decreases in other care center related expenses, primarily salaries and benefits as the result of planned decreases duringpost our HCHB rollout. Other operating expenses include approximately $2 million related to acquisitions during the nine-month period ended September 30, 2017.

Hospice Division

The following table summarizes our hospice segment results from continuing operations:

 

  For the Six-Month Periods Ended June 30,   For the Nine-Month Periods Ended September 30, 
  2017 2016   2017 2016 

Financial Information (in millions):

      

Medicare

  $166.5  $140.0   $257.9  $217.0 

Non-Medicare

   9.8  8.8    14.9  13.8 
  

 

  

 

   

 

  

 

 

Net service revenue

   176.3  148.8    272.8  230.8 

Cost of service

   87.1  78.2    134.9  120.1 
  

 

  

 

   

 

  

 

 

Gross margin

   89.2  70.6    137.9  110.7 

Other operating expenses

   41.2  36.3    61.7  55.6 
  

 

  

 

   

 

  

 

 

Operating income

  $48.0  $34.3   $76.2  $55.1 
  

 

  

 

   

 

  

 

 

Same Store Growth (1):

      

Medicare revenue

   18 18   18 16

Non-Medicare revenue

   11 15   7 15

Hospice admissions

   15 19   13 18

Average daily census

   16 19   15 17

Key Statistical Data - Total (2):

   

Key Statistical Data—Total (2):

   

Hospice admissions

   12,753  11,006    19,010  16,757 

Average daily census

   6,542  5,618    6,705  5,776 

Revenue per day, net

  $148.88  $145.52   $149.01  $145.86 

Cost of service per day

  $73.56  $76.51   $73.72  $75.89 

Average discharge length of stay

   90  95    92 94

 

(1)Same store information represents the percent increase (decrease) in our Medicare andNon-Medicare revenue, Hospice admissions or average daily census for the period as a percent of the Medicare andNon-Medicare revenue, Hospice admissions or average daily census of the prior period.
(2)Total includes acquisitions.

Operating Results

Overall, our operating income increased $14$21 million on a $19$27 million increase in gross margin offset by a $5$6 million increase in other operating expenses. The increase in our hospice volumes has attributed to an 18% increase in revenue. Combined with a decrease in cost of service per day, we have seen a 25% increase in our hospice gross margin compared to the nine-month period ended September 30, 2016.

Net Service Revenue

Our hospice revenue increased $28$42 million primarily due to ana 15% increase in our average daily census as a result of a 15%13% increase in hospice admissions.

Cost of Service, Excluding Depreciation and Amortization

Our hospice cost of service increased $9$15 million as the result of a 16%15% increase in average daily census. Our cost of service per day decreased $2.95$2.17 primarily due to significant improvement in salary and pharmacy cost per day.day driven by cost controls and census growth.

Other Operating Expenses

Other operating expenses increased $5$6 million due to increases in other care center related expenses, primarily salaries and benefits expense and provision for doubtful accounts. The $2 million increase in provision for doubtful accounts is due to continued aging ofan increase in room and board revenue andnon-Medicare receivables post our HCHB implementation. As previously mentioned, we are beginningrevenue. We continue to see sequential improvement as our collection patterns normalize.

Personal Care Division

The following table summarizes our personal care segment results from continuing operations:

 

  For the Six-Month Periods Ended June 30,   For the Nine-Month Periods Ended September 30, 
  2017   2016   2017   2016 

Financial Information (in millions):

        

Medicare

  $—     $—     $—     $—   

Non-Medicare

   28.0    12.5    42.1    23.2 
  

 

   

 

   

 

   

 

 

Net service revenue

   28.0    12.5    42.1    23.2 

Cost of service

   20.7    9.0    31.2    16.8 
  

 

   

 

   

 

   

 

 

Gross margin

   7.3    3.5    10.9    6.4 

Other operating expenses

   6.5    2.7    10.0    5.1 
  

 

   

 

   

 

   

 

 

Operating income

  $0.8   $0.8   $0.9   $1.3 
  

 

   

 

   

 

   

 

 

Key Statistical Data:

        

Billable hours

   1,206,618    542,257    1,822,653    990,389 

Clients served

   10,169    6,866    11,372    8,969 

Shifts

   830,151    451,421 

Revenue per hour

  $23.13   $23.41 

Revenue per shift

  $50.77   $51.36 

Hours per shift

   2.2    2.2 

Operating income related to our personal care division remained flat on a $4$5 million increase in gross margin offset by $4$5 million increase in other operating expenses. As previously mentioned, due to the acquisition activity of this division, our personal care operating results for thesix-month nine-month periods ended JuneSeptember 30, 2017 and 2016 are not fully comparable. Revenue from acquisitions that have closed since September 1, 2016 was approximately $13 million for the nine-month period ended September 30, 2017.

Corporate

The following table summarizes our corporate results from continuing operations:

 

  For the Six-Month Periods Ended June 30,   For the Nine-Month Periods Ended September 30, 
  2017   2016   2017   2016 

Financial Information (in millions):

        

Other operating expenses

  $59.5   $73.7   $85.4   $106.4 

Depreciation and amortization

   6.5    6.0    9.6    9.3 
  

 

   

 

   

 

   

 

 

Total operating expenses before Securities Class Action Lawsuit settlement, net

   66.0    79.7    95.0    115.7 

Securities Class Action Lawsuit settlement, net

   28.7    —      28.7    —   
  

 

   

 

   

 

   

 

 

Total operating expenses

  $94.7   $79.7   $123.7   $115.7 
  

 

   

 

   

 

   

 

 

Excluding the $30 million Securities Class Action Lawsuit settlement accrual and related legal fees in 2017, corporate expenses decreased approximately $15$21 million primarily as a result of reductionsa $7 million reduction in HCHB implementation costs and a $9 million reduction in acquisition activity costs (including acquired corporate support and other acquisition costs). Additionally, theWe also experienced reductions in various other operating expenses including salaries and benefits,six-monthnon-cash period ended June 30, 2017 includescompensation, personnel costs and IT related services which is inclusive of approximately $1 million in acquisition integration costs.costs incurred during the nine-month period ended September 30, 2017.

Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows for the periods indicated (amounts in millions):

 

   For the Six-Month Periods
Ended June 30,
 
   2017   2016 

Cash provided by operating activities

  $63.3   $26.9 

Cash used in investing activities

   (31.4   (37.7

Cash used in financing activities

   (2.9   (6.7
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   29.0    (17.5

Cash and cash equivalents at beginning of period

   30.2    27.5 
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $59.2   $10.0 
  

 

 

   

 

 

 

   For the Nine-Month Periods
Ended September 30,
 
   2017   2016 

Cash provided by operating activities

  $73.5   $33.7 

Cash used in investing activities

   (32.9   (45.4

Cash used in financing activities

   (4.7   (6.9
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   35.9    (18.6

Cash and cash equivalents at beginning of period

   30.2    27.5 
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $66.1   $8.9 
  

 

 

   

 

 

 

Cash provided by operating activities increased $36.4$39.8 million during thesix-month nine-month period ended JuneSeptember 30, 2017 compared to thesix-month nine-month period ended JuneSeptember 30, 2016 primarily due to an increase in our cash collections as compared to 2016. For additional information regarding our operating performance, see “Results of Operations” and “Outstanding Patient Accounts Receivable”.

Cash used in investing activities decreased $6.3$12.5 million during thesix-month nine-month period ended JuneSeptember 30, 2017 compared to thesix-month nine-month period ended JuneSeptember 30, 2016 primarily due to a decrease in our acquisition activity ($3.57.3 million) and a decrease in capital expenditures ($2.54.4 million).

Cash used in financing activities decreased $3.8$2.2 million during thesix-month nine-month period ended JuneSeptember 30, 2017 compared to thesix-month nine-month period ended JuneSeptember 30, 2016 primarily due to a decrease in repurchases of company stock pursuant to our stock repurchase program during thesix-month nine-month period ended JuneSeptember 30, 2016 offset by employee stock activity.

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 or through sales of equity.

During thesix-month nine-month period ended JuneSeptember 30, 2017, we spent $7.4$9.1 million in capital expenditures as compared to $9.9$13.5 million during thesix-month nine-month period ended JuneSeptember 30, 2016. Our capital expenditures for 2017 are expected to be approximately $10.0 - $12.0million—$12.0 million.

As of JuneSeptember 30, 2017, we had $59.2$66.1 million in cash and cash equivalents and $170.4$167.3 million in availability under our $200.0 million Revolving Credit Facility.

Theagreement-in-principle to settleDuring the three-month period ended September 30, 2017, we settled the Securities Class Action Lawsuit calls for a settlement payment of approximately $43.7 million, of which approximately $15.0 million will bewas paid by the Company’s insurance carriers. We plan to useused cash on hand to make the required remaining $28.7 million payment during the three-month period ended September 30, 2017.

Based on our operating forecasts and our debt service requirements, we believe we will have sufficient liquidity to fund our operations, capital requirements and debt service requirements.

Outstanding Patient Accounts Receivable

Our net patient accounts receivable increased $7.3$11.3 million from December 31, 2016 to JuneSeptember 30, 2017. Our cash collection as a percentage of revenue was 100%101% and 98% for thesix-month nine-month periods ended JuneSeptember 30, 2017 and 2016, respectively. Our days revenue outstanding, net at JuneSeptember 30, 2017 was 40.240.7 days which is flatan increase of 0.5 days from December 31, 2016 and a decrease of 0.3 days from March 31,June 30, 2017. We experienced a slowdown in collections primarily as the result of our shift from our legacy platforms (AMS2 and AMS3) to HCHB, but have begun experiencing improvements in our collection patterns and agings post HCHB implementation. However, theThe Florida ZPIC issueaudit (see Note 5 – Commitments and Contingencies to our condensed consolidated financial statements) which resulted in $7.6$7.8 million of net receivables being placed on payment suspension as of JuneSeptember 30, 2017, has added 1.51.7 days to our days revenue outstanding, net. Additionally, collections of receivables of the three home health and two hospice care centers acquired on May 1, 2017, has added 1.0 day to our days revenue outstanding, net. As is typical with newly acquired care centers, we experienced an increase in our aging of receivables due to regulatory delays related to the change of ownership process.

Our patient accounts receivable includes unbilled receivables and are aged based upon our 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.

Our provision for estimated revenue adjustments (which is deducted from our service revenue to determine net service revenue) and provision for doubtful accounts were as follows for the periods indicated (amounts in millions). We fully reserve for both our Medicare and other patient accounts receivable that are aged over 365 days. For those patient accounts that are not aged over 365 days, we make adjustments to Medicare revenue or our provision for doubtful accounts based on our aging of accounts and historical collection experience. We have experienced a $7$10 million increase in our provision for doubtful accounts and contractual reserves during the six-monthnine-month period ended JuneSeptember 30, 2017 compared to the six-monthnine-month period ended JuneSeptember 30, 2016 due to increased write-offs and accounts receivable aging as a result of our conversion to HCHB as well as the Florida ZPIC issue.

audit.

 

   For the Three-Month Periods
Ended June 30,
  For the Six-Month Periods Ended
June 30,
 
   2017  2016  2017  2016 

Provision for estimated revenue adjustments

  $5.0  $2.6  $8.4  $4.3 

Provision for doubtful accounts

   4.7   4.2   11.0   8.2 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $9.7  $6.8  $19.4  $12.5 
  

 

 

  

 

 

  

 

 

  

 

 

 

As a percent of revenue

   2.6  1.9  2.6  1.8
  

 

 

  

 

 

  

 

 

  

 

 

 

      For the Three-Month Periods
Ended September 30,
   For the Nine-Month Periods
Ended September 30,
 
      2017   2016   2017   2016 

Provision for estimated revenue adjustments

  $3.5   $1.6   $11.9   $5.9 

Provision for doubtful accounts

   7.1    5.5    18.1    13.7 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $10.6   $7.1   $30.0   $19.6 
  

 

 

   

 

 

   

 

 

   

 

 

 

As a percent of revenue

   2.8%    1.9%    2.7%    1.8% 
  

 

 

   

 

 

   

 

 

   

 

 

 

The following schedules detail our patient accounts receivable, net of estimated revenue adjustments, by payor class, aged based upon initial date of service (amounts in millions, except days revenue outstanding, net):

 

  0-90   91-180   181-365   Over 365   Total 

At June 30, 2017:

          
  0-90   91-180   181-365   Over 365   Total 

At September 30, 2017:

          

Medicare patient accounts receivable, net (1)

  $84.2   $14.0   $3.4   $—     $101.6   $90.4   $13.9   $2.9   $—     $107.2 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Other patient accounts receivable:

                    

Medicaid

   12.8    3.5    2.8    0.4    19.5    13.3    3.0    2.2    0.5    19.0 

Private

   44.8    11.8    9.4    4.2    70.2    44.0    10.2    10.9    6.0    71.1 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  $57.6   $15.3   $12.2   $4.6   $89.7   $57.3   $13.2   $13.1   $6.5   $90.1 
  

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

Allowance for doubtful accounts (2)

           (17.9           (19.9
          

 

           

 

 

Non-Medicare patient accounts receivable, net

          $71.8           $70.2 
          

 

           

 

 

Total patient accounts receivable, net

          $173.4           $177.4 
          

 

           

 

 

Days revenue outstanding, net (3)

           40.2            40.7 
          

 

           

 

 
  0-90   91-180   181-365   Over 365   Total   0-90   91-180   181-365   Over 365   Total 

At December 31, 2016:

                    

Medicare patient accounts receivable, net (1)

  $82.7   $17.1   $1.4   $—     $101.2   $82.7   $17.1   $1.4   $—     $101.2 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Other patient accounts receivable:

                    

Medicaid

   13.6    3.6    3.6    0.2    21.0    13.6    3.6    3.6    0.2    21.0 

Private

   39.8    10.4    7.6    3.8    61.6    39.8    10.4    7.6    3.8    61.6 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total

  $53.4   $14.0   $11.2   $4.0   $82.6   $53.4   $14.0   $11.2   $4.0   $82.6 
  

 

   

 

   

 

   

 

     

 

   

 

   

 

   

 

   

Allowance for doubtful accounts (2)

           (17.7           (17.7
          

 

           

 

 

Non-Medicare patient accounts receivable, net

          $64.9           $64.9 
          

 

           

 

 

Total patient accounts receivable, net

          $166.1           $166.1 
          

 

           

 

 

Days revenue outstanding, net (3)

           40.2            40.2 
          

 

           

 

 

(1)The following table summarizes the activity and ending balances in our estimated revenue adjustments (amounts in millions), which is recorded to reduce our Medicare outstanding patient accounts receivable to their estimated net realizable value, as we do not estimate an allowance for doubtful accounts for our Medicare claims.

 

  For the Three-Month
Period Ended
June 30, 2017
   For the Three-Month
Period Ended

December 31, 2016
   For the Six-Month
Period Ended

June 30, 2017
   For the Six-Month
Period Ended
December 31, 2016
   For the
Three-Month
Period Ended

September 30, 2017
   For the
Three-Month
Period Ended

December 31,
2016
   For the
Nine-Month
Period Ended
September 30, 2017
   For the
Nine-Month
Period Ended
December 31, 2016
 

Balance at beginning of period

  $4.9   $3.8   $4.1   $4.0   $6.9   $3.8   $4.1   $3.4 

Provision for estimated revenue adjustments

   5.0    2.0    8.4    3.6    3.5    2.0    11.9    6.2 

Write offs

   (3.0   (1.7   (5.6   (3.5   (3.8   (1.7   (9.4   (5.5
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Balance at end of period

  $6.9   $4.1   $6.9   $4.1   $6.6   $4.1   $6.6   $4.1 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Our estimated revenue adjustments were 6.3%5.8% and 3.9% of our outstanding Medicare patient accounts receivable at JuneSeptember 30, 2017 and December 31, 2016, respectively.

 

(2)The following table summarizes the activity and ending balances in our allowance for doubtful accounts (amounts in millions), which is recorded to reduce only our Medicaid and private payer outstanding patient accounts receivable to their estimated net realizable value.

 

  For the Three-Month
Period Ended
June 30, 2017
   For the Three-Month
Period Ended
December 31, 2016
   For the Six-Month
Period Ended
June 30, 2017
   For the Six-Month
Period Ended
December 31, 2016
   For the
Three-Month
Period Ended
September 30,
2017
   For the
Three-Month
Period Ended
December 31, 2016
   For the
Nine-Month
Period Ended
September 30,
2017
   For the
Nine-Month
Period
Ended
December 31,
2016
 

Balance at beginning of period

  $19.2   $16.7   $17.7    15.9   $17.9   $16.7   $17.7    16.7 

Provision for doubtful accounts

   4.7    5.9    11.0    11.4    7.1    5.9    18.1    15.6 

Write offs

   (6.0   (4.9   (10.8   (9.6   (5.1   (4.9   (15.9   (14.6
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Balance at end of period

  $17.9   $17.7   $17.9   $17.7   $19.9   $17.7   $19.9   $17.7 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Our allowance for doubtful accounts was 20%22% and 21% of our outstanding Medicaid and private patient accounts receivable at JuneSeptember 30, 2017 and December 31, 2016, respectively.

(3)Our calculation of days revenue outstanding, net is derived by dividing our ending net patient accounts receivable (i.e., net of estimated revenue adjustments and allowance for doubtful accounts ) at JuneSeptember 30, 2017 and December 31, 2016 by our average daily net patient revenue for the three-month periods ended JuneSeptember 30, 2017 and December 31, 2016, respectively.

Indebtedness

Our weighted average interest rate for our $100.0 million Term Loan, under our Credit Agreement, was 3.0%3.2% and 2.9%3.0% for the three andsix-month nine-month periods ended JuneSeptember 30, 2017, respectively, and 2.4%2.5% for the three andsix-month nine-month periods ended JuneSeptember 30, 2016, respectively. Our weighted average interest rate for our $200.0 million Revolving Credit Facility was 3.3%4.5% and 3.2%3.5% for the three andsix-month nine-month periods ended JuneSeptember 30, 2016, respectively.

As of JuneSeptember 30, 2017, our consolidated leverage ratio, as defined by our Credit Agreement, was 1.0,0.9, our consolidated fixed charge coverage ratio, as defined by our Credit Agreement, was 3.94.1 and we are in compliance with our Credit Agreement.

As of JuneSeptember 30, 2017, our availability under our $200.0 million Revolving Credit Facility was $170.4$167.3 million as we had $29.6$32.7 million outstanding in letters of credit.

See Note 4 to our condensed consolidated financial statements and Note 7 of the financial statements included in our Form10-K for additional details on our outstanding long-term obligations.

Inflation

We do not believe inflation has significantly impacted our results of operations.

Critical Accounting Estimates

See Part II, Item 7 – Critical Accounting Estimates and our consolidated financial statements and related notes in Part II, Item 8 of our 2016 Annual Report on Form10-K, for accounting policies and related estimates we believe are the most critical to understanding our condensed consolidated financial statements, financial condition and results of operations and which require complex management judgment and assumptions, or involve uncertainties. These critical accounting estimates include: revenue recognition, patient accounts receivable, insurance, goodwill and other intangible assets and income taxes. There have not been any changes to our significant accounting policies or their application since we filed our 2016 Annual Report on Form10-K.

ITEM 3.ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from fluctuations in interest rates. Our Revolving Credit Facility and Term Loan carry a floating interest rate which is tied to the Eurodollar rate (i.e. LIBOR) and the Prime Rate, and therefore, our condensed consolidated statements of operations and our condensed consolidated statements of cash flows will be exposed to changes in interest rates. As of JuneSeptember 30, 2017, the total amount of outstanding debt subject to interest rate fluctuations was $92.5$91.3 million. A 1.0% interest rate change would cause interest expense to change by approximately $0.9 million annually.

 

ITEM 4.ITEM 4.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 Securities Exchange Act of 1934 as amended (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 and Board of Directors to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form10-Q, as of JuneSeptember 30, 2017, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rules13a-15(e) and15d-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 JuneSeptember 30, 2017, the end of the period covered by this Quarterly Report.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule13a-15(f)) that have occurred during the quarter ended JuneSeptember 30, 2017 that have materially impacted, or are reasonably likely to materially impact, 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 JuneSeptember 30, 2017, the end of the period covered by this Quarterly Report.

PART II. OTHER INFORMATION

PART II.OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

See Note 5 to the condensed consolidated financial statements for information concerning our legal proceedings.

 

ITEM 1A.RISK FACTORS

In addition to other information set forth in this Quarterly Report on Form10-Q, you should carefully consider the risk factors included in Part I, Item 1A. – Risk Factors of our Annual Report on Form10-K. These risk factors could materially impact our business, financial condition and/or operating results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely impact our business, financial condition and/or operating results.

 

ITEM 2.ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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 JuneSeptember 30, 2017:

 

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
 

April 1, 2017 to April 30, 2017

  19,503  $51.09   —    $—   

May 1, 2017 to May 31, 2017

  41,437   56.09   —     —   

June 1, 2017 to June 30, 2017

  26,636   61.88   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

 
  87,576(1)  $56.74   —    $—   
 

 

 

  

 

 

  

 

 

  

 

 

 
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
 

July 1, 2017 to July 31, 2017

   12,515  $50.81    —     $—   

August 1, 2017 to August 31, 2017

   —     —      —      —   

September 1, 2017 to September 30, 2017

   1,694   54.66    —      —   
  

 

 

  

 

 

   

 

 

   

 

 

 
   14,209(1)  $51.27    —     $—   
  

 

 

  

 

 

   

 

 

   

 

 

 

 

(1)Includes shares of common stock surrendered to us by certain employees to satisfy tax withholding obligations in connection with the vesting ofnon-vested stock previously awarded to such employees under our 2008 Omnibus Incentive Compensation Plan.

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

 

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

 

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

The exhibits marked with the cross symbol (†) are filed and the exhibits marked with a double cross (††) are furnished with this Form10-Q. Any exhibits marked with the asterisk symbol (*) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of RegulationS-K.

 

Exhibit

Number

 

Document Description

  

Report or Registration

Statement

  

SEC File or

Registration

Number

   

Exhibit

or Other

Reference

 
      3.1 Composite of Certificate of Incorporation of the Company inclusive of all amendments through June 14, 2007  The Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2007   0-24260    3.1 
      3.2 Composite ofBy-Laws of the Company inclusive of all amendments through April 20, 2016  The Company’s Quarterly Report on Form10-Q for the quarter ended March 31, 2016   0-24260    3.2 
  *10.1 Composite Amedisys, Inc. 2008 Omnibus Incentive Compensation Plan (inclusive of Plan amendments dated June 7, 2012 and 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 Form10-K for the year ended December 31, 2016   0-24260    10.3 
  †31.1 Certification of Paul B. Kusserow, President and Chief Executive Officer (principal executive officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002      
  †31.2 Certification of Gary D. Willis, Chief Financial Officer (principal financial officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002      
††32.1 Certification of Paul B. Kusserow, President and Chief Executive Officer (principal executive officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      
††32.2 Certification of Gary D. Willis, Chief Financial Officer (principal financial officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      
†101.INS XBRL Instance      
†101.SCH XBRL Taxonomy Extension Schema Document      
†101.CAL XBRL Taxonomy Extension Calculation Linkbase Document      
†101.DEF XBRL Taxonomy Extension Definition Linkbase      
†101.LAB XBRL Taxonomy Extension Labels Linkbase Document      
†101.PRE XBRL Taxonomy Extension Presentation Linkbase      

Exhibit

Number

Document Description

      3.1Composite of Certificate of Incorporation of the Company inclusive of all amendments through June 14, 2007
      3.2Composite ofBy-Laws of the Company inclusive of all amendments through April 20, 2016
†*10.1Transition Agreement and General Release of Lawrence Pernosky
†*10.2Agreement to Terminate Transition Agreement and General Release of Lawrence Pernosky
  †31.1Certification of Paul B. Kusserow, President and Chief Executive Officer (principal executive officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  †31.2Certification of Scott G. Ginn, Chief Financial Officer (principal financial officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
††32.1Certification of Paul B. Kusserow, President and Chief Executive Officer (principal executive officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section  906 of the Sarbanes-Oxley Act of 2002
††32.2Certification of Scott G. Ginn, Chief Financial Officer (principal financial officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section  906 of the Sarbanes-Oxley Act of 2002
†101.INSXBRL Instance
†101.SCHXBRL Taxonomy Extension Schema Document
†101.CALXBRL Taxonomy Extension Calculation Linkbase Document
†101.DEFXBRL Taxonomy Extension Definition Linkbase
†101.LABXBRL Taxonomy Extension Labels Linkbase Document
†101.PREXBRL Taxonomy Extension Presentation Linkbase Document

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.

(Registrant)

By:

 

/s/ SCOTT G. GINN

 Scott G. Ginn,
 Principal Accounting Officer and
 Duly Authorized Officer

Date: July 27,November 8, 2017

EXHIBIT INDEX

The exhibits marked with the cross symbol (†) are filed and the exhibits marked with a double cross (††) are furnished with this Form10-Q. Any exhibits marked with the asterisk symbol (*) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of RegulationS-K.

 

Exhibit

Number

 

Document Description

  

Report or Registration Statement

  

SEC File or

Registration

Number

   

Exhibit

or Other

Reference

 
      3.1 Composite of Certificate of Incorporation of the Company inclusive of all amendments through June 14, 2007  The Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2007   0-24260    3.1 
      3.2 Composite ofBy-Laws of the Company inclusive of all amendments through April 20, 2016  The Company’s Quarterly Report on Form10-Q for the quarter ended March 31, 2016   0-24260    3.2 
  *10.1 Composite Amedisys, Inc. 2008 Omnibus Incentive Compensation Plan (inclusive of Plan amendments dated June 7, 2012 and 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 Form10-K for the year ended December 31, 2016   0-24260    10.3 
  †31.1 Certification of Paul B. Kusserow, President and Chief Executive Officer (principal executive officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002      
  †31.2 Certification of Gary D. Willis, Chief Financial Officer (principal financial officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002      
††32.1 Certification of Paul B. Kusserow, President and Chief Executive Officer (principal executive officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      
††32.2 Certification of Gary D. Willis, Chief Financial Officer (principal financial officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      
†101.INS XBRL Instance      
†101.SCH XBRL Taxonomy Extension Schema Document      
†101.CAL XBRL Taxonomy Extension Calculation Linkbase Document      
†101.DEF XBRL Taxonomy Extension Definition Linkbase      
†101.LAB XBRL Taxonomy Extension Labels Linkbase Document      
†101.PRE XBRL Taxonomy Extension Presentation Linkbase Document      

 

3132