UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, ~~2020~~2021


☐			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: 001-33989

LHC Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware						71-0918189
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

901 Hugh Wallis Road South

Lafayette, LA 70508

(Address of principal executive offices including zip code)

(337) 233-1307

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value of $0.01

LHCG

NASDAQ Global Select Market

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

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 in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Number of shares of common stock, par value $0.01, outstanding as of November ~~3, 2020~~2, 2021: ~~: 31,592,259~~31,671,200 shares.

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LHC GROUP, INC.

INDEX


Part I. Financial Information		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets — September 30, ~~2020~~2021 and December 31, ~~2019~~2020		4
Condensed Consolidated Statements of Income — Three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020		5
Condensed Consolidated Statements of Changes in Equity — Three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020		6
Condensed Consolidated Statements of Cash Flows — Nine months ended September 30, ~~2020~~2021 and ~~2019~~2020		8
Notes to Condensed Consolidated Financial Statements		910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2526
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	3940
Part II. Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	42
Signatures		43

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PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data) (Unaudited)


		September 30, 2020		December 31, 2019			September 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash	Cash	$	253,764	$	31,672	Cash	$	29,516	$	286,569
Receivables:	Receivables:					Receivables:
Patient accounts receivable	Patient accounts receivable	313,325		284,962		Patient accounts receivable	333,088		301,209
Other receivables	Other receivables	19,858		10,832		Other receivables	21,543		11,522

Total receivables	Total receivables	333,183		295,794		Total receivables	354,631		312,731
Prepaid taxes						Prepaid taxes	12,509		—
Prepaid income taxes	Prepaid income taxes	19,687		9,652		Prepaid income taxes	11,575		—
Prepaid expenses	Prepaid expenses	22,791		21,304		Prepaid expenses	22,048		22,058
Other current assets	Other current assets	26,231		21,852		Other current assets	21,320		25,664
Total current assets	Total current assets	655,656		380,274		Total current assets	451,599		647,022
Property, building and equipment, net of accumulated depreciation of $78,623 and $69,441, respectively		132,130		97,908
Property, building and equipment, net of accumulated depreciation of $94,344 and $82,721, respectively						Property, building and equipment, net of accumulated depreciation of $94,344 and $82,721, respectively	150,909		138,366
Goodwill	Goodwill	1,235,123		1,219,972		Goodwill	1,603,360		1,259,147
Intangible assets, net of accumulated amortization of $17,372 and $16,431, respectively		310,967		305,556
Intangible assets, net of accumulated amortization of $18,701 and $17,659, respectively						Intangible assets, net of accumulated amortization of $18,701 and $17,659, respectively	350,528		315,355
Assets held for sale	Assets held for sale	1,900		2,500		Assets held for sale	—		1,900
Operating lease right of use asset	Operating lease right of use asset	99,066		95,452		Operating lease right of use asset	111,550		100,046
Other assets	Other assets	21,494		38,633		Other assets	44,740		21,518
Total assets	Total assets	$	2,456,336	$	2,140,295	Total assets	$	2,712,686	$	2,483,354
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	$	73,508	$	83,572	Accounts payable and other accrued liabilities	$	83,159	$	64,864
Salaries, wages, and benefits payable	Salaries, wages, and benefits payable	111,108		85,631		Salaries, wages, and benefits payable	82,994		88,666
Self-insurance reserves	Self-insurance reserves	31,856		31,188		Self-insurance reserves	35,094		35,103

Income tax payable						Income tax payable	—		21,464
Government stimulus advance	Government stimulus advance	93,257		0		Government stimulus advance	—		93,257
Contract liabilities - deferred revenue	Contract liabilities - deferred revenue	317,938		0		Contract liabilities - deferred revenue	176,333		317,962
Current operating lease liabilities	Current operating lease liabilities	32,018		28,701		Current operating lease liabilities	35,964		32,676
Amounts due to governmental entities	Amounts due to governmental entities	2,435		1,880		Amounts due to governmental entities	785		1,516
Current liabilities - deferred employer payroll tax						Current liabilities - deferred employer payroll tax	26,774		25,928
Total current liabilities	Total current liabilities	662,120		230,972		Total current liabilities	441,103		681,436
Deferred income taxes	Deferred income taxes	75,536		60,498		Deferred income taxes	70,593		47,237
Income taxes payable	Income taxes payable	6,588		3,867		Income taxes payable	6,848		6,203
Revolving credit facility	Revolving credit facility	20,000		253,000		Revolving credit facility	355,000		20,000
Other long term liabilities	Other long term liabilities	33,632		0		Other long term liabilities	26,774		25,928
Operating lease payable		69,977		69,556
Long-term operating lease liabilities						Long-term operating lease liabilities	78,445		70,275
Total liabilities	Total liabilities	867,853		617,893		Total liabilities	978,763		851,079
Noncontrolling interest — redeemable	Noncontrolling interest — redeemable	16,897		15,151		Noncontrolling interest — redeemable	17,730		18,921
Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:	LHC Group, Inc. stockholders’ equity:					LHC Group, Inc. stockholders’ equity:
Preferred stock – $0.01 par value; 5,000,000 shares authorized; NaN issued or outstanding		0		0
Common stock — $0.01 par value; 60,000,000 shares authorized; 36,351,416 and 36,129,280 shares issued, and 31,136,522 and 30,992,390 shares outstanding, respectively		364		361
Treasury stock — 5,214,894 and 5,136,890 shares at cost, respectively		(68,845)		(60,060)
Preferred stock – $0.01 par value; 5,000,000 shares authorized; none issued or outstanding						Preferred stock – $0.01 par value; 5,000,000 shares authorized; none issued or outstanding	—		—
Common stock — $0.01 par value; 60,000,000 shares authorized; 36,540,219 and 36,355,497 shares issued, and 31,263,385 and 31,139,840 shares outstanding, respectively						Common stock — $0.01 par value; 60,000,000 shares authorized; 36,540,219 and 36,355,497 shares issued, and 31,263,385 and 31,139,840 shares outstanding, respectively	365		364
Treasury stock — 5,276,834 and 5,215,657 shares at cost, respectively						Treasury stock — 5,276,834 and 5,215,657 shares at cost, respectively	(80,605)		(69,011)
Additional paid-in capital	Additional paid-in capital	958,212		949,321		Additional paid-in capital	974,680		962,120
Retained earnings	Retained earnings	604,917		523,701		Retained earnings	735,333		635,297
Total LHC Group, Inc. stockholders’ equity	Total LHC Group, Inc. stockholders’ equity	1,494,648		1,413,323		Total LHC Group, Inc. stockholders’ equity	1,629,773		1,528,770
Noncontrolling interest — non-redeemable	Noncontrolling interest — non-redeemable	76,938		93,928		Noncontrolling interest — non-redeemable	86,420		84,584
Total stockholders' equity	Total stockholders' equity	1,571,586		1,507,251		Total stockholders' equity	1,716,193		1,613,354
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	2,456,336	$	2,140,295	Total liabilities and stockholders' equity	$	2,712,686	$	2,483,354

See accompanying Notes to Condensed Consolidated Financial Statements.

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LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30, 2021				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net service revenue	Net service revenue	$	530,684	$	528,499	$	1,530,875	$	1,548,926	Net service revenue	$	565,451	$	530,684	$	1,636,193	$	1,530,875
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	305,246		334,768		933,160		981,620		Cost of service revenue (excluding depreciation and amortization)	343,862		305,246		972,006		933,160
Gross margin	Gross margin	225,438		193,731		597,715		567,306		Gross margin	221,589		225,438		664,187		597,715
General and administrative expenses	General and administrative expenses	161,463		146,829		469,903		440,634		General and administrative expenses	176,444		161,463		506,754		469,903
Impairment of intangibles and other	Impairment of intangibles and other	22		197		622		7,534		Impairment of intangibles and other	—		22		937		622
Government stimulus (income) expense (Note 1)		44,435		0		0		0
Government stimulus (income) expense										Government stimulus (income) expense	—		44,435		—		—
Operating income	Operating income	19,518		46,705		127,190		119,138		Operating income	45,145		19,518		156,496		127,190
Interest expense	Interest expense	(431)		(2,596)		(4,040)		(8,533)		Interest expense	(1,135)		(431)		(1,541)		(4,040)

Income before income taxes and noncontrolling interest	Income before income taxes and noncontrolling interest	19,087		44,109		123,150		110,605		Income before income taxes and noncontrolling interest	44,010		19,087		154,955		123,150
Income tax expense	Income tax expense	4,595		9,508		23,181		22,665		Income tax expense	10,150		4,595		32,909		23,181
Net income	Net income	14,492		34,601		99,969		87,940		Net income	33,860		14,492		122,046		99,969
Less net income (loss) attributable to noncontrolling interests	Less net income (loss) attributable to noncontrolling interests	(8)		4,534		18,753		14,017		Less net income (loss) attributable to noncontrolling interests	6,126		(8)		22,010		18,753
Net income attributable to LHC Group, Inc.’s common stockholders	Net income attributable to LHC Group, Inc.’s common stockholders	$	14,500	$	30,067	$	81,216	$	73,923	Net income attributable to LHC Group, Inc.’s common stockholders	$	27,734	$	14,500	$	100,036	$	81,216

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	0.47	$	0.97	$	2.61	$	2.39	Basic	$	0.89	$	0.47	$	3.21	$	2.61
Diluted	Diluted	$	0.46	$	0.96	$	2.59	$	2.37	Diluted	$	0.88	$	0.46	$	3.18	$	2.59
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	31,121		30,971		31,080		30,919		Basic	31,238		31,121		31,205		31,080
Diluted	Diluted	31,411		31,247		31,334		31,203		Diluted	31,434		31,411		31,422		31,334

See accompanying Notes to the Condensed Consolidated Financial Statements.

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LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in thousands, except share data)

(Unaudited)

For the Nine Months Ended September 30, 2020
Common Stock Additional
Paid-In
Capital Retained
Earnings Noncontrolling
Interest Non
Redeemable Total
Equity
Issued Treasury
Amount Shares Amount Shares
Balance as of December 31, 2019 $ 361 36,129,280 $ (60,060) 5,136,890 $ 949,321 $ 523,701 $ 93,928 $ 1,507,251
Net income (1) — — — — — 22,024 2,099 24,123
Acquired noncontrolling interest — — — — — — 2,880 2,880
Noncontrolling interest distributions — — — — — — (2,093) (2,093)
Purchase of additional controlling interest — — — — (2,470) — (21,105) (23,575)
Nonvested stock compensation — — — — 3,680 — — 3,680
Issuance of vested stock 2 163,163 — — — — — 2
Treasury shares redeemed to pay income tax — — (7,122) 59,390 189 — — (6,933)
Issuance of common stock under Employee Stock Purchase Plan — 4,663 — — 610 — — 610
Balance as of March 31, 2020 $ 363 36,297,106 $ (67,182) 5,196,280 $ 951,330 $ 545,725 $ 75,709 $ 1,505,945
Net income (1) — — — — — 44,692 7,058 51,750
Noncontrolling interest distributions — — — — — — (1,909) (1,909)
Nonvested stock compensation — — — — 3,263 — — 3,263
Issuance of vested stock — 19,846 — — — — — —
Treasury shares redeemed to pay income tax — — (950) 6,256 (189) — — (1,139)
Exercise of options — 7,137 (522) 3,315 218 — — (304)
Issuance of common stock under Employee Stock Purchase Plan — 3,730 — — 497 — — 497
Balance as of June 30, 2020 $ 363 36,327,819 $ (68,654) 5,205,851 $ 955,119 $ 590,417 $ 80,858 $ 1,558,103
Net income (loss) (1) — — — — — 14,500 (770) 13,730
Acquired noncontrolling interest — — — — — — 608 608
Noncontrolling interest distributions — — — — — — (6,375) (6,375)
Sale of noncontrolling interest — — — — (293) — 2,617 2,324
Nonvested stock compensation — — — — 4,190 — — 4,190
Issuance of vested stock 1 10,994 — — — — — 1
Treasury shares redeemed to pay income tax — — (966) 5,030 — — — (966)
Exercise of options — 9,149 775 4,013 (1,376) — — (601)
Issuance of common stock under Employee Stock Purchase Plan — 3,454 — — 572 — — 572
Balance as of September 30, 2020 $ 364 36,351,416 $ (68,845) 5,214,894 $ 958,212 $ 604,917 $ 76,938 $ 1,571,586


	Nine Months Ended September 30, 2021
	Common Stock						Additional Paid-In Capital		Retained Earnings		Noncontrolling Interest Non Redeemable		Total Equity
	Issued			Treasury
	Amount		Shares	Amount		Shares
Balance as of December 31, 2020	$	364	36,355,497	$	(69,011)	5,215,657	$	962,120	$	635,297	$	84,584	$	1,613,354
Net income (1)	—		—	—		—	—		34,659		4,469		39,128
Noncontrolling interest distributions	—		—	—		—	—		—		(2,417)		(2,417)
Purchase of additional controlling interest	—		—	—		—	(81)		—		(61)		(142)
Sale of noncontrolling interest	—		—	—		—	—		—		138		138
Nonvested stock compensation	—		—	—		—	3,513		—		—		3,513
Issuance of vested stock	1		148,447	—		—	—		—		—		1
Treasury shares redeemed to pay income tax	—		—	(9,541)		51,221	—		—		—		(9,541)
Issuance of common stock under Employee Stock Purchase Plan	—		3,204	—		—	649		—		—		649
Balance as of March 31, 2021	$	365	36,507,148	$	(78,552)	5,266,878	$	966,201	$	669,956	$	86,713	$	1,644,683
Net income (1)	—		—	—		—	—		37,643		5,232		42,875

Noncontrolling interest distributions	—		—	—		—	—		—		(4,660)		(4,660)
Purchase of additional controlling interest	—		—	—		—	(870)		—		(728)		(1,598)
Nonvested stock compensation	—		—	—		—	3,993		—		—		3,993
Issuance of vested stock	—		15,531	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	—		—	(1,213)		6,024	—		—		—		(1,213)

Issuance of common stock under Employee Stock Purchase Plan	—		3,152	—		—	573		—		—		573
Balance as of June 30, 2021	$	365	36,525,831	$	(79,765)	5,272,902	$	969,897	$	707,599	$	86,557	$	1,684,653
Net income (1)	—		—	—		—	—		27,734		3,182		30,916

Noncontrolling interest distributions	—		—	—		—	—		—		(5,052)		(5,052)

Sale of noncontrolling interest	—		—	—		—	(83)		—		1,733		1,650
Nonvested stock compensation	—		—	—		—	4,211		—		—		4,211
Issuance of vested stock	—		10,943	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	—		—	(840)		3,932	—		—		—		(840)

Issuance of common stock under Employee Stock Purchase Plan	—		3,445	—		—	655		—		—		655
Balance as of September 30, 2021	$	365	36,540,219	$	(80,605)	5,276,834	$	974,680	$	735,333	$	86,420	$	1,716,193

(1) Net income excludes net income attributable to noncontrolling interest-redeemable of ~~$0.7~~$2.9 million and ~~$10.4~~$9.1 million during the th~~ree~~three and nine months ended September 30, ~~2020, respectively.~~2021. Noncontrolling interest-redeemable is reflected outside of permanent equity on the condensed consolidated balance sheets. See Note 8 of the Notes to Condensed Consolidated Financial Statements.

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		For the Nine Months Ended September 30, 2019															Nine Months Ended September 30, 2020
		Common Stock						Additional Paid-In Capital		Retained Earnings		Noncontrolling Interest Non Redeemable		Total Equity			Common Stock						Additional Paid-In Capital		Retained Earnings		Noncontrolling Interest Non Redeemable		Total Equity
		Issued			Treasury												Issued			Treasury
		Amount		Shares	Amount		Shares										Amount		Shares	Amount		Shares
Balance as of December 31, 2018		$	358	35,835,348	$	(49,373)	5,029,429	$	937,965	$	427,975	$	107,549	$	1,424,474
Balance as of December 31, 2019																Balance as of December 31, 2019	$	361	36,129,280	$	(60,060)	5,136,890	$	949,321	$	523,701	$	93,928	$	1,507,251
Net income (1)	Net income (1)	—		—	—		—	—		18,856		1,686		20,542		Net income (1)	—		—	—		—	—		22,024		2,099		24,123
Acquired noncontrolling interest	Acquired noncontrolling interest	—		—	—		—	—		—		820		820		Acquired noncontrolling interest	—		—	—		—	—		—		2,880		2,880
Noncontrolling interest distributions	Noncontrolling interest distributions	—		—	—		—	—		—		(6,799)		(6,799)		Noncontrolling interest distributions	—		—	—		—	—		—		(2,093)		(2,093)
Purchase of additional controlling interest	Purchase of additional controlling interest	—		—	—		—	—		—		(18,000)		(18,000)		Purchase of additional controlling interest	—		—	—		—	(2,470)		—		(21,105)		(23,575)

Nonvested stock compensation	Nonvested stock compensation	—		—	—		—	1,804		—		—		1,804		Nonvested stock compensation	—		—	—		—	3,680		—		—		3,680
Issuance of vested stock	Issuance of vested stock	2		174,562	—		—	—		—		—		2		Issuance of vested stock	2		163,163	—		—	—		—		—		2
Treasury shares redeemed to pay income tax	Treasury shares redeemed to pay income tax	—		—	(6,726)		61,465	(115)		—		—		(6,841)		Treasury shares redeemed to pay income tax	—		—	(7,122)		59,390	189		—		—		(6,933)
Exercise of options		1		44,387	(851)		24,044	—		—		—		(850)

Issuance of common stock under Employee Stock Purchase Plan	Issuance of common stock under Employee Stock Purchase Plan	—		5,357	—		—	478		—		—		478		Issuance of common stock under Employee Stock Purchase Plan	—		4,663	—		—	610		—		—		610
Balance as of March 31, 2019		$	361	36,059,654	$	(56,950)	5,114,938	$	940,132	$	446,831	$	85,256	$	1,415,630
Balance as of March 31, 2020																Balance as of March 31, 2020	$	363	36,297,106	$	(67,182)	5,196,280	$	951,330	$	545,725	$	75,709	$	1,505,945
Net income (1)	Net income (1)	—		—	—		—	—		25,000		1,897		26,897		Net income (1)	—		—	—		—	—		44,692		7,058		51,750
Acquired noncontrolling interest		—		—	—		—	—		—		6,170		6,170

Noncontrolling interest distributions	Noncontrolling interest distributions	—		—	—		—	—		—		(2,026)		(2,026)		Noncontrolling interest distributions	—		—	—		—	—		—		(1,909)		(1,909)
Noncontrolling interest purchased, net of sales		—		—	—		—	(1,283)		—		531		(752)

Nonvested stock compensation	Nonvested stock compensation	—		—	—		—	2,588		—		—		2,588		Nonvested stock compensation	—		—	—		—	3,263		—		—		3,263
Issuance of vested stock	Issuance of vested stock	—		17,145	—		—	—		—		—		—		Issuance of vested stock	—		19,846	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	Treasury shares redeemed to pay income tax	—		—	(730)		7,199	30		—		—		(700)		Treasury shares redeemed to pay income tax	—		—	(950)		6,256	(189)		—		—		(1,139)
Exercise of options	Exercise of options	—		3,293	(212)		1,866	—		—		—		(212)		Exercise of options	—		7,137	(522)		3,315	218		—		—		(304)
Issuance of common stock under Employee Stock Purchase Plan	Issuance of common stock under Employee Stock Purchase Plan	—		4,301	—		—	453		—		—		453		Issuance of common stock under Employee Stock Purchase Plan	—		3,730	—		—	497		—		—		497
Balance as of June 30, 2019		$	361	36,084,393	$	(57,892)	5,124,003	$	941,920	$	471,831	$	91,828	$	1,448,048
Balance as of June 30, 2020																Balance as of June 30, 2020	$	363	36,327,819	$	(68,654)	5,205,851	$	955,119	$	590,417	$	80,858	$	1,558,103
Net income (1)	Net income (1)	—		—	—		—	—		30,067		1,479		31,546		Net income (1)	—		—	—		—	—		14,500		(770)		13,730
Acquired noncontrolling interest	Acquired noncontrolling interest	—		—	—		—	—		—		1,868		1,868		Acquired noncontrolling interest	—		—	—		—	—		—		608		608
Noncontrolling interest distributions	Noncontrolling interest distributions	—		—	—		—	—		—		(2,162)		(2,162)		Noncontrolling interest distributions	—		—	—		—	—		—		(6,375)		(6,375)
Noncontrolling interest purchased, net of sales		—		—	—		—	819		—		(119)		700
Sale of noncontrolling interest																Sale of noncontrolling interest	—		—	—		—	(293)		—		2,617		2,324
Nonvested stock compensation	Nonvested stock compensation	—		—	—		—	1,990		—		—		1,990		Nonvested stock compensation	—		—	—		—	4,190		—		—		4,190
Issuance of vested stock	Issuance of vested stock	—		14,799	—		—	—		—		—		—		Issuance of vested stock	1		10,994	—		—	—		—		—		1
Treasury shares redeemed to pay income tax	Treasury shares redeemed to pay income tax	—		—	(374)		3,032	234		—		—		(140)		Treasury shares redeemed to pay income tax	—		—	(966)		5,030	—		—		—		(966)
Exercise of options	Exercise of options	—		9,058	(529)		4,307	—		—		—		(529)		Exercise of options	—		9,149	775		4,013	(1,376)		—		—		(601)
Issuance of common stock under Employee Stock Purchase Plan	Issuance of common stock under Employee Stock Purchase Plan	—		5,360	—		—	609		—		—		609		Issuance of common stock under Employee Stock Purchase Plan	—		3,454	—		—	572		—		—		572
Balance as of September 30, 2019		$	361	36,113,610	$	(58,795)	5,131,342	$	945,572	$	501,898	$	92,894	$	1,481,930
Balance as of September 30, 2020																Balance as of September 30, 2020	$	364	36,351,416	$	(68,845)	5,214,894	$	958,212	$	604,917	$	76,938	$	1,571,586

(1) Net income excludes net income attributable to noncontrolling interest-redeemable of ~~$3.1~~$0.7 million and ~~$9.0~~$10.4 millionduring the three and nine months ended September 30, ~~2019, respectively.~~2020. Noncontrolling interest-redeemable is reflected outside of permanent equity on the condensed consolidated balance sheets. See Note 8 of the Notes to Condensed Consolidated Financial Statements.

See accompanying Notes to Condensed Consolidated Financial Statements.

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands) (Unaudited)

Nine Months Ended
September 30,
2020 2019
Operating activities:
Net income $ 99,969 $ 87,940
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 15,601 12,812
Amortization of operating lease right of use asset 25,799 22,952
Stock-based compensation expense 11,133 6,382
Deferred income taxes 15,038 8,102
Loss on disposal of assets 291 337
Impairment of intangibles and other 622 7,534
Changes in operating assets and liabilities, net of acquisitions:
Receivables (36,194) (42,928)
Prepaid expenses (1,487) 4,828
Other assets (3,183) (2,810)
Prepaid income taxes (10,035) 8,258
Accounts payable and accrued expenses (17,085) (4,241)
Salaries, wages, and benefits payable 25,913 18,001
Contract liabilities - deferred revenue 317,938 —
Other long term liabilities 33,632 0
Operating lease liabilities (25,485) (18,428)
Income taxes payable 2,721 (715)
Net amounts due to/from governmental entities 555 (3,234)
Net cash provided by operating activities 455,743 104,790
Investing activities:
Purchases of property, building and equipment (51,241) (15,401)
Proceeds from sale of property, building and equipment 7,142 0
Cash received (paid) for acquisitions 2,326 (54,120)
Net cash used in investing activities (41,773) (69,521)
Financing activities:
Proceeds from line of credit 276,229 84,000
Payments on line of credit (509,229) (87,000)
Government stimulus advance 93,257 0
Proceeds from employee stock purchase plan 1,679 1,540
Payments on debt 0 (7,650)
Noncontrolling interest distributions (22,505) (18,944)
Withholding taxes paid on stock-based compensation (9,854) (9,422)
Purchase of additional controlling interest (23,575) (18,763)
Exercise of vested awards and stock options 0 153
Sale of noncontrolling interest 2,120 756
Net cash used in financing activities (191,878) (55,330)
Change in cash 222,092 (20,061)
Cash at beginning of period 31,672 49,363
Cash at end of period $ 253,764 $ 29,302


	Nine Months Ended September 30,
	2021		2020
Operating activities:
Net income	$	122,046	$	99,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	14,899		15,601
Amortization of operating lease right of use asset	27,526		25,799
Stock-based compensation expense	11,717		11,133
Deferred income taxes	23,356		15,038
(Gain) loss on disposal of assets	(1,190)		291
Impairment of intangibles and other	937		622
Changes in operating assets and liabilities, net of acquisitions:
Receivables	(27,038)		(36,194)
Prepaid expenses	397		(1,487)
Other assets	(6,368)		(3,183)
Prepaid income taxes	(11,575)		(10,035)
Prepaid taxes	(12,509)		—
Accounts payable and accrued expenses	6,626		(17,085)
Salaries, wages, and benefits payable	(9,687)		25,913

Contract liabilities - deferred revenue	(141,629)		317,938
Other long term liabilities	—		33,632
Operating lease liabilities	(27,472)		(25,485)
Income taxes payable	(20,819)		2,721
Net amounts due to/from governmental entities	(833)		555
Net cash (used in) provided by operating activities	(51,616)		455,743
Investing activities:
Purchases of property, building and equipment	(23,548)		(51,241)
Proceeds from sale of property, building and equipment	3,350		7,142
Cash received (paid) for acquisitions, net of cash acquired	(383,475)		2,326
Proceeds from sale of an entity	1,531		—
Minority interest investments	(10,100)		—
Net cash used in investing activities	(412,242)		(41,773)
Financing activities:
Proceeds from line of credit	544,056		276,229
Payments on line of credit	(209,056)		(509,229)
Government stimulus advance	(93,257)		93,257
Proceeds from employee stock purchase plan	1,877		1,679
Payments on deferred financing fees	(2,855)		—

Noncontrolling interest distributions	(22,187)		(22,505)
Withholding taxes paid on stock-based compensation	(11,594)		(9,854)
Purchase of additional controlling interest	(2,113)		(23,575)

Sale of noncontrolling interest	1,934		2,120
Net cash provided by (used in) financing activities	206,805		(191,878)
Change in cash	(257,053)		222,092
Cash at beginning of period	286,569		31,672
Cash at end of period	$	29,516	$	253,764

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Supplemental disclosures of cash flow information:
Interest paid	$	1,532	$	4,556
Income taxes paid	$	42,036	$	15,583
Non-Cash Operating Activity:
Operating right of use assets in exchange for lease obligations	$	41,776	$	25,633
Reduction to right of use assets and liabilities	$	2,746	$	—
Non-Cash Investing Activity:
Accrued capital expenditures	$	1,807	$	5,851

Supplemental disclosures of cash flow information:
Interest paid $ 4,556 $ 8,549
Income taxes paid $ 15,583 $ 8,015
Non-Cash Operating Activity:
Operating right of use assets in exchange for lease obligations $ 25,633 $ 115,161
Non-Cash Investing Activity:
Accrued capital expenditures $ 5,851 $ 1,514

See accompanying Notes to Condensed Consolidated Financial Statements.

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LHC GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Events

Organization

LHC Group, Inc. (the “Company”) is a health care provider specializing in the post-acute continuum of care. The Company provides services through 5 segments: home health, hospice, home and community-based services, facility-based services, the latter primarily through long-term acute care hospitals (“LTACHs”), and healthcare innovations services ("HCI").

As of September 30, ~~2020,~~2021, the Company, through its wholly- and majority-owned subsidiaries, equity joint ventures, controlled affiliates, and management agreements operated ~~823~~868 service locations in 35 states within the continental United States and the District of Columbia.

COVID-19 Update

~~The effects of the worldwide pandemic caused by the outbreak of~~ SARS-CoV-2 ~~(“COVID-19”~~("COVID-19") ~~have materially impacted our business.~~

~~In response~~continues to ~~the COVID-19 outbreak, we promptly convened a cross-functional COVID-19 task force comprised of the Company's leaders that continually communicates~~spread and various responses related to stay-at-home restrictions, travel restrictions, and other public health and safety measures continue to evolve. We communicate with our clinicians and other employees ~~concerning best practices and changes in Company~~all updated policies and ~~procedures. We also implemented contingency planning policies, whereby most employees~~procedures as we monitor changes related to the pandemic. Policies and procedures related to social distancing and cleaning procedures remain in our home offices located in Louisiana and Kentucky are continuing to work remotely in compliance with CDC recommendations. We continue to invest in technology and equipment that allows our remote work force to provide continued and seamless functionality to our clinicians who continue to care for patients on service.

~~We have undertaken numerous measures to promote~~place as the safety of our ~~clinicians~~patients and ~~other employees. For example, we have prepared~~employees are vital. The effects of COVID-19 continue to materially impact our business. As a result, operating results for the three and ~~distributed~~nine months ended September 30, 2021 may not be indicative of the results that may be expected for the year ending December 31, 2021, and operating results for the three and nine months ended September 30, 2021 may not be directly comparable to ~~our clinicians across~~operating results for the ~~country special kits of personal protective equipment~~three and other supplies needed to properly treat our patients during the COVID-19 outbreak, adopted social distancing guidelines for our agencies and our home offices located in Louisiana and Kentucky and posted reminder signs and markers throughout our work spaces, adopted additional cleaning procedures at all locations, installed plexiglass shields at work spaces that require a physical protective barrier, and instituted temperature check points in our agencies and home office campuses. These and other measures have altered numerous clinical, operational and business processes and significantly increases our supplies and services costs.

In addition, we have implemented a number of programs to support our employees, including a pandemic grant program that supports employees experiencing financial hardships, retirement plan amendments, special cash-in opportunities for accumulated paid time off, expanded offerings in our employee assistance program, a wage supplement program designed to restore lost wages for front line patient care employees that qualified, and a paid time off replenishment program designed to restore certain hours of paid time off for front line patient care employees that qualified and for any employees who previously donated their paid time off hours to these front line patient care employees.nine months ended September 30, 2020.

CARES Act

In response to COVID-19, the U.S. Government enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") on March 27, 2020. The CARES Act was passed to provide $100 billion of Provider Relief Funds for distribution to eligible providers who provided diagnoses, testing, or care for individuals with a possible or actual case of COVID-19, specifically to reimburse providers for health care related expenses related to the prevention of the spread of COVID-19, preparations for treating cases of COVID-19 positive patients, and for lost revenues attributable to COVID-19. The CARES Act also provided financial hardship relief to Medicare providers impacted by the COVID-19 pandemic in order to provide necessary funds when there is a disruption in Medicare claims submission and/or Medicare claims processing by distributing funds through the Accelerated and Advanced Payments Program ("~~AAPP"~~CAAP").

In addition, the CARES Act suspended the 2% sequestration payment adjustments on Medicare patient claims with dates of service from May 1 through December 31, 2020, suspended the application of site-neutral payment for LTACH admissions that were admitted during the Public Health Emergency ("PHE"), and delayed payment of the employer portion of social security tax.

~~Table~~ On April 14, 2021, Congress passed legislation to continue the suspension of ~~Contents~~

the 2% sequestration payment adjustments on Medicare patient claims with dates of service through December 31, 2021. On October 18, 2021, the U.S. Department of Health and Human Services extended the PHE until January 16, 2022.

Provider Relief Fund

During the ~~three and nine~~twelve months ended ~~September 30,~~December 31, 2020, the Company received ~~$4.6 million and~~ $93.3 million ~~respectively,~~ in payments from the Provider Relief ~~Fund. During~~Fund, which was recorded as a short-term liability in government stimulus advance in our condensed consolidated balance sheets. The Company recognized $44.4 million of these funds during the ~~three~~six months ended June 30, 2020, ~~the Company recognized $44.4 million related to these funds~~which was recorded in government stimulus income in our condensed consolidated statements of income. ~~This~~The amount recognized of $44.4 million was ~~recorded in accordance with~~ ~~IAS 20,~~ ~~Accounting for Government Grants and Disclosure~~subsequently reversed during the third quarter of ~~Government Assistance.~~ ~~During the three months ended September 30,~~ 2020, ~~the Company reversed $44.4 million,~~ such that the Company ~~has~~ recognized no ~~funds~~income from the Provider Relief ~~Fund as~~Fund. The Company returned all Provider Relief Funds received of $93.3 million to the government during the nine months ended September 30, ~~2020. Based on the Company's improved and projected financial results, the Company intends to return these funds to the government and has recorded a short-term liability~~2021.

CAAP

As of ~~$93.3 million in government stimulus advance in our condensed consolidated balance sheet.~~

~~AAPP~~

~~During the nine months ended September 30,~~December 31, 2020, the Company ~~received $317.9~~had $318.0 million of accelerated payments under the ~~AAPP,~~CAAP, which was recorded in contract liabilities - deferred revenue in our condensed consolidated balance ~~sheet~~sheets in accordance with Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("Topic 606"). When we received these AAPP funds in April 2020, the Centers for Medicare and Medicaid Services ("CMS") issued guidance that any AAPP funds that were not then repaid to CMS would be automatically recouped from Medicare amounts otherwise payable to us by CMS beginning 120 days after our receipt of such funds, until all AAPP funds have been completely repaid to or recouped by CMS. As of September 30, 2020, CMS had not recouped any of the advanced payments provided to the Company under AAPP.

On October 1, 2020, the repayment and

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recoupment terms for ~~AAPP~~CAAP funds were amended by the Continuing Appropriations Act, 2021 and Other Extensions Act, which provides that recoupment will begin one year from the date the ~~AAPP~~CAAP funds were received. Under these revised terms, recoupment of ~~AAPP~~CAAP will occur under a tiered approach. ~~Beginning in~~The repayment terms begin one year starting from the ~~second quarter of 2021~~date the CAAP funds were issued and ~~continuing for~~continues 11 months, with CMS ~~will recoup~~recouping the initial 25% of Medicare payments otherwise owed to the Company. During the nine months ended September 30, 2021, $141.6 million was recouped by CMS and $176.3 million of contract liabilities - deferred revenue remains on our condensed consolidated balance sheets as of September 30, 2021.

If any amount of ~~AAPP~~CAAP funds that we received from CMS remain unpaid after the initial 11 month period, CMS will recoup 50% of Medicare payments otherwise owed to the Company during the following six months. Interest will begin accruing on any amount of the ~~AAPP~~CAAP funds that we received from CMS that remain unpaid following those recoupment periods. CMS will issue a repayment letter to the Company for any such outstanding amounts, which must be paid in full within 30 days from the date of the letter. The Company intends to repay the full amount before any interest accrues.

Other

During the three ~~and nine~~ months ended September 30, 2021 and 2020, the Company recognized ~~$6.5~~$6.8 million and ~~$11.5~~$6.5 million of net service revenue, respectively, due to the suspension of the 2% sequestration payment adjustment.During the ~~three and~~ nine months ended September 30, 2021 and 2020, the Company recognized $19.7 million and $11.5 million of net service revenue, respectively, due to the suspension of the 2% sequestration payment adjustment.During the three months ended September 30, 2021, the Company recognized $5.7 million and $6.4 million of net service revenue, respectively, due to the suspension of LTACH site-neutral payments. During the nine months ended September 30, 2021 and 2020, the Company recognized $18.2 million and $11.1 million of net service revenue, respectively, due to the suspension of LTACH site-neutral payments.As of September 30, ~~2020,~~2021, the Company deferred ~~$33.6~~$51.8 million of employer social security taxes, $25.9 million of which was recorded in current liabilities - deferred employer payroll tax and $25.9 million of which was recorded in other long term liabilities on our condensed consolidated balance ~~sheet.~~sheets.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated balance sheets as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the related unaudited condensed consolidated statements of income for the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the unaudited condensed consolidated statements of changes in equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, and related notes (collectively, these financial statements are referred to as the "interim financial statements" and together with the related notes are referred to herein as the “interim financial information”) have been prepared by the Company. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been included. Operating results for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021.

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 the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~"2019~~"2020 Form 10-K"). The ~~2019~~2020 Form 10-K was filed with the Securities and Exchange Commission (the “SEC”) on February ~~27, 2020,~~26, 2021, and includes information and disclosures not included herein.

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~~Immaterial Correction of an Error~~

During the three and nine months ended September 30, 2019, the Company increased the reported number of common shares issued by 9,058 and 56,738, respectively, decreased the reported number of treasury shares by 368, and reclassified the reported number of treasury shares by 4,307 and 30,217 for the three and nine months ended September 30, 2019 due to the exclusion of reporting the number of common shares issued as a result of the exercise of certain outstanding stock options and the number of treasury shares redeemed to pay income tax associated with such stock option exercises. For further details of this noted item, see Note 2 of the Notes to Consolidated Financial Statements in the 2019 10K filed with the SEC on February 27, 2020.

The Company has evaluated the effects both qualitatively and quantitatively, and concluded that they did not have a material impact on previously issued financial statements for the three and nine months ended September 30, 2019.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenue and expenses during the reporting period. Actual results could differ from those estimates.

Critical Accounting Policies

The Company’s most critical accounting policies relate to revenue recognition.

Net Service Revenue

Net service revenue from contracts with customers is recognized in the period the performance obligations are satisfied under the Company's contracts by transferring the requested services to patients in amounts that reflect the consideration to which is

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expected to be received in exchange for providing patient care, which is the transaction price allocated to the services provided in accordance with Topic 606 and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (collectively, "ASC 606").

Net service revenue is recognized as performance obligations are satisfied, which can vary depending on the type of services provided. The performance obligation is the delivery of patient care in accordance with the requested services outlined in physicians' orders, which are based on specific goals for each patient.

The performance obligations are associated with contracts in duration of less than one year; therefore, the optional exemption provided by ASC 606 was elected resulting in the Company not being required to disclose the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. The Company's unsatisfied or partially unsatisfied performance obligations are primarily completed when the patients are discharged and typically occur within days or weeks of the end of the period.

The Company determines the transaction price based on gross charges for services provided, reduced by estimates for explicit and implicit price concessions. Explicit price concessions include contractual adjustments provided to patients and third-party payors. Implicit price concessions include discounts provided to self-pay, uninsured patients or other payors, adjustments resulting from regulatory reviews, audits, billing reviews and other matters. Subsequent changes to the estimate of the transaction price are recorded as adjustments to net service revenue in the period of change. Subsequent changes that are determined to be the result of an adverse change in the patient's ability to pay (i.e. change in credit risk) are recorded as a provision for doubtful accounts within general and administrative expenses.

Explicit price concessions are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third-party payors and others for services provided.

Implicit price concessions are recorded for self-pay, uninsured patients and other payors by major payor class based on historical collection experience and current economic conditions, representing the difference between amounts billed and amounts expected to be collected. The Company assesses the ability to collect for the healthcare services provided at the time of patient admission based on the verification of the patient's insurance coverage under Medicare, Medicaid, and other commercial or managed care insurance programs.

Amounts due from third-party payors, primarily commercial health insurers and government programs (Medicare and Medicaid), include variable consideration for retroactive revenue adjustments due to settlements of audits and reviews. The

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Company has determined estimates for price concessions related to regulatory reviews based on historical experience and success rates in the claim appeals and adjudication process. Revenue is recorded at amounts estimated to be realizable for services provided.

The following table sets forth the percentage of net service revenue earned by category of payor for the three and nine months ended September 30, ~~2020~~2021 and ~~2019:~~2020:

Three Months Ended
September 30, Nine Months Ended
September 30,
2020 2019 2020 2019
Home health:
Medicare 66.4 % 69.7 % 67.0 % 70.6 %
Managed Care, Commercial, and Other 33.6 30.3 33.0 29.4
100.0 % 100.0 % 100.0 % 100.0 %
Hospice:
Medicare 93.8 % 89.8 % 92.9 % 91.6 %
Managed Care, Commercial, and Other 6.2 10.2 7.1 8.4
100.0 % 100.0 % 100.0 % 100.0 %
Home and Community-Based Services:
Medicaid 21.5 % 21.8 % 21.0 % 23.7 %
Managed Care, Commercial, and Other 78.5 78.2 79.0 76.3
100.0 % 100.0 % 100.0 % 100.0 %
Facility-Based Services:
Medicare 54.2 % 59.3 % 55.2 % 56.6 %
Managed Care, Commercial, and Other 45.8 40.7 44.8 43.4
100.0 % 100.0 % 100.0 % 100.0 %
HCI:
Medicare 11.1 % 17.1 % 17.9 % 20.7 %
Managed Care, Commercial, and Other 88.9 82.9 82.1 79.3
100.0 % 100.0 % 100.0 % 100.0 %

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Home health:
Medicare	62.1	%	66.4	%	62.8	%	67.0	%
Managed Care, Commercial, and Other	37.9		33.6		37.2		33.0
	100.0	%	100.0	%	100.0	%	100.0	%
Hospice:
Medicare	94.6	%	93.8	%	94.3	%	92.9	%
Managed Care, Commercial, and Other	5.4		6.2		5.7		7.1
	100.0	%	100.0	%	100.0	%	100.0	%
Home and community-based services:
Medicaid	32.1	%	21.5	%	31.1	%	21.0	%
Managed Care, Commercial, and Other	67.9		78.5		68.9		79.0
	100.0	%	100.0	%	100.0	%	100.0	%
Facility-based services:
Medicare	45.8	%	54.2	%	49.5	%	55.2	%
Managed Care, Commercial, and Other	54.2		45.8		50.5		44.8
	100.0	%	100.0	%	100.0	%	100.0	%
HCI:
Medicare	6.0	%	11.1	%	11.4	%	17.9	%
Managed Care, Commercial, and Other	94.0		88.9		88.6		82.1
	100.0	%	100.0	%	100.0	%	100.0	%

Medicare

The following describes the payment models in effect during the nine months ended September 30, ~~2020.~~2021. Such payment models have been subject to temporary adjustments made by CMS in response to COVID-19 pandemic as described elsewhere in this Quarterly Report on Form 10-Q. The 2% sequestration reduction adjustment was suspended for patient claims with dates of service that began May 1, 2020 through December 31, 2021.

Home Health Services

~~Effective January 1, 2020,~~The Company records revenue as services are provided under the Patient Driven Groupings Model ("PDGM") became the new payment model for services provided to Medicare patients with dates of service on or after the effective date, including certain Medicare Advantage patients. PDGM was implemented by CMS. Under PDGM, the initial certification of Medicare patient eligibility, plan of care, and comprehensive assessment is for a 60-day episode of care; however, unlike the former Medicare prospective payment system ("PPS"), where each 60-day episode of care could not be final billed until the episode was completed, PDGM provides for each 30-day period within the episode of care to be final billed upon completion.

~~As a result of PDGM, the Company now completes its final billing after each 30-day period instead of the former 60-day period under PPS.~~. For each 30-day period, the patient is classified into one of 432 home health resource groups prior to receiving services. Each 30-day period is placed into a subgroup falling under the following categories: (i) timing being early or late, (ii) admission source being community or institutional, (iii) one of 12 clinical groupings based on the patient's principal diagnosis, (iv) functional impairment level of low, medium, or high, and (v) a co-morbidity adjustment of none, low, or high based on the patient's secondary diagnoses.

Each 30-day period payment from Medicare reflects base payment adjustments for case-mix and geographic wage differences. All Medicare patient claims with dates of service from January 1, 2020 through April 30, 2020 reflected a 2% sequestration reduction. The 2% sequestration reduction adjustment was suspended for patient claims with dates of service that began May 1, 2020 through December 31, 2020. In addition, payments may reflect one of three retroactive adjustments to the total reimbursement: (a) an outlier payment if the patient’s care was unusually costly; (b) a low utilization adjustment whereby the

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number of visits is dependent on the clinical grouping; and/or (c) a partial payment if the patient transferred to another provider or from another provider before completing the episode. The retroactive adjustments outlined above are recognized in net service revenue when the event causing the adjustment occurs and during the period in which the services are provided to the patient. The Company reviews these adjustments to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustments is subsequently resolved. Net service revenue and related patient accounts receivable are recorded at amounts estimated to be realized from Medicare for services rendered.

Hospice

The Company records revenue based upon the date of service at amounts equal to the estimated payment rates. The Company receives 1 of 4 predetermined daily rates based upon the level of care provided by the Company, which can be routine care, general inpatient care, continuous home care, and respite care. There are two separate payment rates for routine care: payment for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, the Company may also receive a service intensity add-on ("SIA"). The SIA is based on visits made in the last seven days of life by a registered nurse or medical social worker for patients in a routine level of care.

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The performance obligation is the delivery of hospice services to the patient, as determined by a physician, each day the patient is on hospice care.

Adjustments to Medicare revenue are made from regulatory reviews, audits, billing reviews and other matters. The Company estimates the impact of these adjustments based on our historical experience.

Hospice payments are subject to variable consideration through an inpatient cap and an overall Medicare payment cap. The inpatient cap relates to individual programs receiving more than 20% of their total Medicare reimbursement from inpatient care services, and the overall Medicare payment cap relates to individual programs receiving reimbursements in excess of a “cap amount,” determined by Medicare to be payment equal to 12 months of hospice care for the aggregate base of hospice patients, indexed for inflation. The determination for each cap is made annually based on the 12-month period ending on ~~October 31~~September 30 of each year. The Company monitors its limits on a provider-by-provider basis and records an estimate of its liability for reimbursements received in excess of the cap amount, if any, in the reporting period.

Facility-Based Services

Gross revenue is recorded as services are provided under the LTACH prospective payment system. Each patient is assigned a long-term care diagnosis-related group. The Company is paid a predetermined fixed amount intended to reflect the average cost of treating a Medicare LTACH patient classified in that particular long-term care diagnosis-related group. For selected LTACH patients, the amount may be further adjusted based on length-of-stay and facility-specific costs, as well as in instances where a patient is discharged and subsequently re-admitted, among other factors. The Company calculates the adjustment based on a historical average of these types of adjustments for LTACH claims paid. Similar to other Medicare prospective payment systems, the rate is also adjusted for geographic wage differences. Net service revenue adjustments resulting from reviews and audits of Medicare cost report settlements are considered implicit price concessions for LTACHs and are measured at expected value.

Non-Medicare Revenues

Other sources of net service revenue for all segments fall into Medicaid, managed care or other payors of the Company's services. Medicaid reimbursement is based on a predetermined fee schedule applied to each service provided. Therefore, revenue is recognized for Medicaid services as services are provided based on this fee schedule. The Company's managed care and other payors reimburse the Company based upon a predetermined fee schedule or an episodic basis, depending on the terms of the applicable contract. Accordingly, the Company recognizes revenue from managed care and other payors as services are provided, such costs are incurred, and estimates of expected payments are known for each different payor, thus the Company's revenue is recorded at the estimated transaction price.

Contingent Service Revenues

The HCI segment provides strategic health management services to Accountable Care Organizations ("ACOs") that have been approved to participate in the Medicare Shared Savings Program ("MSSP"). The HCI segment has service agreements with ACOs that provide for sharing of MSSP payments received by the ACO, if any. ACOs are legal entities that contract with CMS to provide services to the Medicare fee-for-service population for a specified annual period with the goal of providing better care for the individual, improving health for populations and lowering costs. ACOs share savings with CMS to the extent that the actual costs of serving assigned beneficiaries are below certain trended benchmarks of such beneficiaries and certain quality

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performance measures are achieved. The generation of shared savings is the performance obligation of each ACO, which only become certain upon the final issuance of unembargoed calculations by CMS, generally in the third quarter of each year. During the nine months ended September 30, 2021 and 2020, the Company recorded in its HCI segment $12.1 million and $9.6 million, respectively, related to 2020 and 2019 ACO respective service periods, as certain ACOs served by the HCI segment received a MSSP payment from CMS confirming the performance obligation has been met.

Patient Accounts Receivable

The Company reports patient accounts receivable from services rendered at their estimated transaction price, which includes price concessions based on the amounts expected ~~to be due~~ from payors. The Company's patient accounts receivable is uncollateralized and primarily consist of amounts due from Medicare, Medicaid, other third-party payors, and to a lesser degree patients. The credit risk from other payors is limited due to the significance of Medicare as the primary payor. The Company believes the credit risk associated with its Medicare accounts is limited due to (i) the historical collection rate from Medicare and (ii) the fact that Medicare is a U.S. government payor. The Company does not believe that there are any other significant concentrations from any particular payor that would subject it to any significant credit risk in the collection of patient accounts receivable.

A portion of the estimated Medicare PDGM system reimbursement from each submitted home nursing episode is received in the form of a request for anticipated payment (“RAP”). For a standard 60-day episode of care, the Company will submit two RAPs, one for the first 30-day period and a second for the next 30-day period. The Company submits a RAP for 20% of the estimated reimbursement for each of the 30-day periods at the start of care. A final bill is submitted at the end of each 30-day period. If a final bill is not submitted within the greater of 120 days from the start of the 30-day period, or 60 days from the date the RAP was paid, any RAP received for that 30-day period will be recouped by Medicare from any other Medicare claims in process for that particular provider. The RAP and final claim must then be resubmitted.

Earnings Per Share

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Basic per share information is computed by dividing the relevant amounts from the condensed consolidated statements of income by the weighted-average number of shares outstanding during the period, under the treasury stock method. Diluted per share information is also computed using the treasury stock method, by dividing the relevant amounts from the condensed consolidated statements of income by the weighted-average number of shares outstanding plus potentially dilutive shares.

The following table sets forth shares used in the computation of basic and diluted per share information and, with respect to the data provided for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (amounts in thousands):


		Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,		Nine Months Ended September 30,
		2020	2019	2020	2019		2021	2020	2021	2020
Weighted average number of shares outstanding for basic per share calculation	Weighted average number of shares outstanding for basic per share calculation	31,121	30,971	31,080	30,919	Weighted average number of shares outstanding for basic per share calculation	31,238	31,121	31,205	31,080
Effect of dilutive potential shares:	Effect of dilutive potential shares:					Effect of dilutive potential shares:
Nonvested stock	Nonvested stock	290	276	254	284	Nonvested stock	196	290	217	254
Adjusted weighted average shares for diluted per share calculation	Adjusted weighted average shares for diluted per share calculation	31,411	31,247	31,334	31,203	Adjusted weighted average shares for diluted per share calculation	31,434	31,411	31,422	31,334
Anti-dilutive shares	Anti-dilutive shares	0	4	5	141	Anti-dilutive shares	6	—	118	5

Assets Held for Sale

As of ~~September 30,~~December 31, 2020, the Company's assets held for sale was $1.9 million, which consisted ~~of property and fixed assets~~ of 1 hospice facility in Knoxville, Tennessee. The Company ~~has accepted a purchase offer from a buyer that indicated~~sold the ~~fair market value~~property during the third quarter of 2021 for $3.2 million. The gain on the sale of the property ~~was $1.9 million. The Company performed an impairment analysis and recorded an impairment charge~~ of ~~$0.6~~$1.2 million ~~during the nine months ended September 30, 2020, which~~ was recorded in ~~impairment of intangibles~~general and ~~other on~~administrative expenses in our condensed consolidated statements of income.

Investments

During the nine months ended September 30, 2021, the Company invested $10.0 million and became a minority owner in a healthcare analytics company and invested $0.1 million in an investment fund focused on minority-owned businesses, which were recorded in other assets in our condensed consolidated balance sheets. These investments were accounted for under the cost method of accounting as the Company does not have the ability to exercise significant influence in connection with its minority ownership positions.

Recently Adopted Accounting Pronouncements

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment~~, which requires an entity to no longer perform a hypothetical purchase price allocation to measure goodwill impairment. Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. This ASU was effective for annual and interim periods in fiscal years beginning after December 15, 2019, and did not have a significant impact to the Company.

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~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Measurement of Credit Losses on Financial Instruments~~ ~~which amends~~ ~~Financial Instruments - Credit Losses~~ ("Topic 326"). ASU 2016-13 provides guidance for measuring credit losses on financial instruments. Early adoption is permitted. The amendments in this ASU should be applied retrospectively. This ASU was effective for annual and interim periods in fiscal years beginning after December 15, 2019, and did not have a significant impact to the Company.

~~Recently Issued Accounting Pronouncements~~

In December 2019, the FASB issued ASU 2019-12, Simplifications to accounting for income taxes, which removes certain exceptions to the general principles of Topic 740 and adds guidance to reduce complexity in accounting for income taxes. The Company adopted the new guidance effective January 1, 2021. The adoption of the new guidance did not have a material impact to the Company.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. The pronouncement is effective ~~for annual~~immediately and ~~interim periods in fiscal years beginning~~may be applied prospectively to contract modifications made and hedging relationships entered into on or before December ~~15, 2020. Early~~31, 2022. The adoption ~~is permitted. The Company is currently evaluating the impact~~ of the ~~adoption of this standard~~new guidance did not have an effect on the Company's condensed consolidated financial statements.

3. Acquisitions, Divestiture and Joint Venture Activities

Acquisitions

~~The~~On July 1, 2021, the Company purchased Heart n' Home Hospice for $50.1 million, which included 7 wholly-owned hospice locations in Idaho and 2 wholly-owned hospice locations in Oregon. In addition, the Company purchased Casa de la Luz on July 1, 2021 for $48.0 million, which included 2 wholly-owned hospice and palliative care locations in Arizona.

On September 1, 2021, the Company purchased Heart of Hospice for $277.1 million, which included 24 wholly-owned hospice locations in Arkansas, Louisiana, Mississippi, Oklahoma, and South Carolina. In separate acquisitions, the Company acquired the majority-ownership of 82 home health agencies 3and 1 hospice ~~agencies, and 5 home and community-based agencies~~agency during the nine months ended September 30, ~~2020. The total~~2021

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for an aggregate purchase price ~~for these transactions was $14.9~~$10.3 million. The purchase prices were determined based on the ~~Company’s~~Company's analysis of comparable acquisitions and the target ~~market’s~~market's potential future cash flows.

The Company funded 3 of these acquisitions in 2019 by paying cash consideration of $16.4 million. During the nine months ended September 30, 2020, the Company received $3.1 million from an equity joint venture partnership for the partner's noncontrolling interest for one of the Company's acquired home health and hospice agencies. In addition, the Company received $1.3 million for consideration of an equity joint venture partnership, whereby the Company acquired home health and home and community-based agencies for $0.9 million and sold membership interests in 3 home health agencies for $2.1 million. The transaction for the sale of the membership interests was accounted for as an equity transaction. The total cash consideration includes adjustments for assets acquired and liabilities assumed.

Goodwill generated from the acquisitions was recognized based on the expected contributions of each acquisition to the overall corporate strategy. The Company expects its portion of goodwill to be fully tax deductible. The acquisitions were accounted for under the acquisition method of accounting. Accordingly, the accompanying interim financial information includes the results of operations of the acquired entities from the date of acquisition.

Transaction costs associated with acquisitions are expensed as incurred. During the nine months ended September 30, 2021, the Company incurred $6.1 million in acquisition-related transaction costs, which was recorded in the consolidated statements of income as general and administrative expenses.

The Company's preliminary valuation analysis of identifiable assets and liabilities assumed for Heart n' Home Hospice and Heart of Hospice is in accordance with the requirements of ASC Topic 805, Business Combinations. The final determination of the fair value of assets acquired and liabilities assumed will be completed in accordance with the applicable accounting guidance. The following table summarizes the preliminary amounts of the assets acquired and liabilities assumed at ~~the~~their acquisition dates, as well as their fair value at the acquisition dates and the noncontrolling interest acquired during the nine months ended September 30, ~~2020:~~

2021 (amounts in thousands):


Consideration
Cash	$	384,827
Fair value of total consideration transferred
Recognized amounts of identifiable assets acquired and liabilities assumed:
~~Trade names~~Cash	$	~~2,243~~1,352
Patient accounts receivable	14,657
Other receivables	205
Prepaid expenses	387
Other current assets	155
Property and equipment	1,976
Trade names	22,070
Certificates of need/licenses	~~3,824~~13,604
Non-compete agreements	1,821
Operating lease right of use asset	7,933
Other assets ~~and (liabilities), net~~	~~(508)~~84
Accounts payable and other accrued liabilities	(9,764)
Salaries, wages, and benefits payable	(4,045)
Current operating lease liabilities	(2,527)
Amounts due to government entities	(102)
Deferred employer payroll tax	(1,692)
Long-term operating lease liabilities	(5,407)
Total identifiable assets and liabilities	$	~~5,559~~40,707

Noncontrolling interest	$	~~6,996~~113
Goodwill, including noncontrolling interest of ~~$5,047~~$78	$	~~15,583~~344,233

Trade names and certificates of ~~need and~~ need/licenses are indefinite-lived assets and, therefore, not subject to amortization. Acquired trade names that are not being used actively are amortized over the estimated useful life on the straight line basis. Trade names are valued using the relief from royalty method, a form of the income approach. Certificates of need are valued using the replacement cost approach based on registration fees and opportunity costs. Licenses are valued based on the estimated direct costs associated with recreating the asset, including opportunity costs based on an income approach. In the case of states with a moratorium in place, the licenses are valued using the multi-period excess earnings method. Noncontrolling interest is recorded at fair value.

Divestiture

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During the nine months ended September 30, 2021, the Company sold its controlling membership interests in a home health agency previously operated as an equity joint venture and sold its pharmacy location which was wholly-owned. The total consideration for these controlling interest sales was $1.5 million and resulted in a loss of $0.1 million, which was accounted for as a loss on the sale of entities and recorded in general and administrative expenses.

Joint Venture Activities

During the nine months ended September 30, ~~2020,~~2021, the Company purchased ~~a portion of the noncontrolling~~additional controlling membership interest in ~~one~~4 of our equity joint venture partnerships, ~~which prior to~~whereby the ~~purchase~~agencies became wholly-owned subsidiaries of the Company. The total consideration for these additional controlling interest purchases was ~~classified~~$2.1 million. The transactions were accounted for as ~~a nonredeemable~~equity transactions.

During the nine months ended September 30, 2021, the Company sold noncontrolling membership interest in ~~permanent equity. As a result~~2 home health agencies. The total consideration of the ~~purchase, the Company retained its controlling financial interests in the joint venture partnership and the~~sales of noncontrolling membership interest ~~of our partner will continue to be classified~~was $1.9 million. The transactions were accounted for as ~~a nonredeemable noncontrolling interest in permanent equity. Total consideration for this noncontrolling interest purchase was $23.6 million.~~equity transactions.

4. Goodwill and Intangibles

The changes in recorded goodwill and intangible assets by reporting unit for the nine months ended September 30, ~~2020~~2021 were as follows (amounts in thousands):


		Home health reporting unit		Hospice reporting unit		Home and community-based services reporting unit		Facility-based reporting unit		HCI reporting unit		Total			Home health reporting unit		Hospice reporting unit		Home and community-based services reporting unit		Facility-based reporting unit		HCI reporting unit		Total
Goodwill:	Goodwill:													Goodwill:
Balance as of December 31, 2019		$	867,924	$	128,875	$	166,629	$	15,682	$	40,862	$	1,219,972
Balance as of December 31, 2020														Balance as of December 31, 2020	$	884,000	$	151,742	$	166,773	$	15,770	$	40,862	$	1,259,147
Acquisitions	Acquisitions	7,725		2,677		134		0		0		10,536		Acquisitions	7,057		336,844		254		—		—		344,155
Noncontrolling interests	Noncontrolling interests	3,259		1,778		10		0		0		5,047		Noncontrolling interests	78		—		—		—		—		78
Adjustments and disposals		(105)		(327)		0		0		0		(432)
Balance as of September 30, 2020		$	878,803	$	133,003	$	166,773	$	15,682	$	40,862	$	1,235,123
Disposals														Disposals	(20)		—		—		—		—		(20)
Balance as of September 30, 2021														Balance as of September 30, 2021	$	891,115	$	488,586	$	167,027	$	15,770	$	40,862	$	1,603,360
Intangible assets:	Intangible assets:													Intangible assets:
Balance as of December 31, 2019		$	219,872	$	40,590	$	24,096	$	5,317	$	15,681	$	305,556
Balance as of December 31, 2020														Balance as of December 31, 2020	$	226,004	$	44,732	$	24,208	$	5,311	$	15,100	$	315,355
Acquisitions	Acquisitions	5,112		930		127		0		0		6,169		Acquisitions	1,478		35,971		46		—		—		37,495

Amortization	Amortization	(427)		(60)		(13)		(4)		(436)		(940)		Amortization	(354)		(242)		(7)		(4)		(436)		(1,043)
Adjustments and disposals		182		0		0		0		0		182
Balance as of September 30, 2020		$	224,739	$	41,460	$	24,210	$	5,313	$	15,245	$	310,967
Disposals														Disposals	(1,279)		—		—		—		—		(1,279)
Balance as of September 30, 2021														Balance as of September 30, 2021	$	225,849	$	80,461	$	24,247	$	5,307	$	14,664	$	350,528

The ~~allocation~~Company did record impairments of goodwill ~~from acquisitions purchased~~and intangible assets related to the closure of underperforming locations. Goodwill impairment of $0.02 million and Medicare licenses impairment of $0.9 million was recorded during the nine months ended September 30, ~~2020~~2021. This was recorded in impairment of intangibles and other on the Company's condensed consolidated statements of income. The amount of disposal of goodwill was determined using prices of comparable businesses in the market. The amount of disposal of the Medicare licenses was its carrying value at the time of closure. In addition, the Company divested a certificate of need of $0.4 million, which was accounted for ~~each reporting unit is preliminary~~as a loss on the sale of an entity and ~~subject to change once the valuation analysis required by ASC 805, Business Combinations is finalized.~~recorded in general and administrative expenses.

The following tables summarize the changes in intangible assets during the nine months ended September 30, ~~2020~~2021 and December 31, ~~2019~~2020 (amounts in thousands):

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		2020		2019			2021		2020
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:					Indefinite-lived intangible assets:
Trade names	Trade names	$	165,920	$	163,499	Trade names	$	190,743	$	168,700
Certificates of Need/Licenses	Certificates of Need/Licenses	133,491		129,689		Certificates of Need/Licenses	147,338		135,013
Net total	Net total	$	299,411	$	293,188	Net total	$	338,081	$	303,713

Definite-lived intangible assets:	Definite-lived intangible assets:					Definite-lived intangible assets:
Trade names	Trade names					Trade names
Gross carrying amount	Gross carrying amount	$	10,209	$	10,182	Gross carrying amount	$	10,238	$	10,212
Accumulated amortization	Accumulated amortization	(9,437)		(9,229)		Accumulated amortization	(9,575)		(9,480)
Net total	Net total	$	772	$	953	Net total	$	663	$	732
Non-compete agreements	Non-compete agreements					Non-compete agreements
Gross carrying amount	Gross carrying amount	$	6,897	$	6,795	Gross carrying amount	$	9,088	$	7,267
Accumulated amortization	Accumulated amortization	(6,288)		(5,991)		Accumulated amortization	(6,899)		(6,387)
Net total	Net total	$	609	$	804	Net total	$	2,189	$	880
Customer relationships	Customer relationships					Customer relationships
Gross carrying amount	Gross carrying amount	$	11,822	$	11,822	Gross carrying amount	$	11,822	$	11,822
Accumulated amortization	Accumulated amortization	(1,647)		(1,211)		Accumulated amortization	(2,227)		(1,792)
Net total	Net total	$	10,175	$	10,611	Net total	$	9,595	$	10,030
Total definite-lived intangible assets	Total definite-lived intangible assets					Total definite-lived intangible assets
Gross carrying amount	Gross carrying amount	$	28,928	$	28,799	Gross carrying amount	$	31,148	$	29,301
Accumulated amortization	Accumulated amortization	(17,372)		(16,431)		Accumulated amortization	(18,701)		(17,659)
Net total	Net total	$	11,556	$	12,368	Net total	$	12,447	$	11,642

Total intangible assets:	Total intangible assets:					Total intangible assets:
Gross carrying amount	Gross carrying amount	$	328,339	$	321,987	Gross carrying amount	$	369,229	$	333,014
Accumulated amortization	Accumulated amortization	(17,372)		(16,431)		Accumulated amortization	(18,701)		(17,659)
Net total	Net total	$	310,967	$	305,556	Net total	$	350,528	$	315,355

Remaining useful lives for trade names, customer relationships, and non-compete agreements were ~~9.0, 17.5,~~8.1, 16.5, and ~~2.2~~2.8 years, respectively, at September 30, ~~2020.~~2021. Similar periods at December 31, ~~2019~~2020 were ~~9.8, 18.2,~~8.8, 17.3, and ~~2.8~~2.9 years for trade names, customer relationships, and non-compete agreements, respectively. Amortization expense was ~~$0.9~~$0.4 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively, and $1.0 million and $0.9 million during the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Amortization expense was recorded in general and administrative expenses.

5. Debt

Credit Facility

On March 30, 2018, the Company entered into a Credit Agreement with JPMorgan Chase Bank, N.A., which was effective on April 2, 2018 (the "Credit Agreement"). The Credit Agreement ~~provides~~provided a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of $500.0 million, which ~~includes~~included an additional $200.0 million accordion expansion feature, and a letter of credit sub-limit equal to $50.0 million. The expiration date of the Credit Agreement iswas March 30, 2023. On August 3, 2021, the Company entered into an Amended and Restated Senior Credit Facility (the "2021 Amended Credit Agreement"), which amends and restates in its entirety the Credit Agreement. The 2021 Amended Credit Agreement provides a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of $800.0 million, which includes an additional $500.0 million accordion expansion, and a letter of credit sub-limit equal to $75.0 million. The expiration date of the 2021 Amended Credit Agreement is August 3, 2026.

The Company’s obligations under the 2021 Amended Credit Agreement are secured by substantially all of the assets of the Company and its wholly-owned subsidiaries (subject to customary exclusions), which assets include the Company’s equity

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ownership of its wholly-owned subsidiaries and its equity ownership in joint venture entities. The Company’s wholly-owned subsidiaries also guarantee the obligations of the Company under the 2021 Amended Credit Agreement.

Revolving loans under the 2021 Amended Credit Agreement bear interest at, as selected by the Company, at either (i) the prevailing London Interbank Offered Rate ("LIBOR") (with interest periods of one, three or six months at the Company's option) plus a ~~(a) Base Rate, which is defined as a fluctuating rate per annum equal~~spread of 1.25% to 2.0% based on the ~~highest of (1)~~Company's quarterly consolidated Leverage Ratio or (ii) the ~~Federal Funds Rate in effect on such day plus 0.5% (2) the Prime Rate in effect on such day and (3) the Eurodollar Rate for a one month interest period on such day plus 1.5%, plus~~

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~~a margin ranging from 0.50% to 1.25% per annum~~prevailing prime or ~~(b) Eurodollar~~base rate plus a ~~margin ranging from 1.50%~~spread of 0.25% to ~~2.25% per annum, with pricing varying~~1.00% based on the Company's quarterly consolidated Leverage Ratio. Swing line loans bear interest at the Base Rate. The Company is limited to 15 Eurodollar borrowings outstanding at any time. The Company is required to pay a commitment fee for the unused commitments at rates ranging from ~~0.20%~~0.15% to ~~0.35%~~0.30% per annum depending upon the Company’s quarterly consolidated Leverage Ratio. The Base Rate as of September 30, ~~2020~~2021 was ~~4.00%~~3.75% and the LIBOR rate was ~~1.94%~~1.63%. As of September 30, ~~2020,~~2021, the effective interest rate on outstanding borrowings under the 2021 Amended Credit Agreement was ~~1.94%~~1.63%.

On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease the publication of LIBOR settings for 1-month, 3-month, 6-month, and 12-month LIBOR borrowings immediately on June 30, 2023. Effective October 25, 2021, JPMorgan Chase Bank, N.A transitioned our 2021 Amended Credit Agreement to an alternate rate to CME Term SOFR Reference Rate ("SOFR"), which is administered by CME Group Benchmark Administration Ltd ("CME"). Due to the differences observed between LIBOR rates and SOFR published rates, JPMorgan Chase Bank, N.A. will use a credit spread adjustment ("CSA") in order to minimize value transfer and leave the existing margin applicable to our 2021 Amended Credit Agreement. The CSA used by JPMorgan Chase Bank, N.A. is based on the average of the differences between LIBOR and SOFR over a 12-month period and will be added to SOFR.

As of September 30, ~~2020,~~2021, the Company had ~~$20.0~~$355.0 million drawn, letters of credit issued in the amount of ~~$24.8~~$25.4 million, and ~~$455.2~~$419.6 million of remaining borrowing capacity available under the 2021 Amended Credit Agreement. At December 31, ~~2019,~~2020, the Company had ~~$253.0~~$20.0 million drawn and letters of credit issued in the amount of ~~$28.4~~$25.4 million under the Credit Facility.

Under the terms of the 2021 Amended Credit Agreement, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The 2021 Amended Credit Agreement permits the Company to make certain restricted payments, such as purchasing shares of its stock, within certain parameters, provided the Company maintains compliance with those financial ratios and covenants after giving effect to such restricted payments. The Company was in compliance with its debt covenants under the 2021 Amended Credit Agreement at September 30, ~~2020.~~2021.

6. Stockholder’s Equity

Equity Based Awards

The 2018 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors. The total number of shares of the Company's common stock originally reserved were 2,210,544 shares and a total of ~~1,874,354~~1,747,099 shares are currently available for issuance. A variety of discretionary awards for employees, officers, directors, and consultants are authorized under the 2018 Incentive Plan, including incentive or non-qualified stock options and restricted stock, restricted stock units and performance-based awards. All awards must be evidenced by a written award certificate which will include the provisions specified by the Compensation Committee of the Board of Directors. The Compensation Committee determines the exercise price for stock options, which cannot be less than the fair market value of the Company’s common stock as of the date of grant.

Share Based Compensation

Nonvested Stock

~~During the nine months ended September 30, 2020, the Company~~Independent directors are granted 9,900 nonvested shares of common stock to independent directors under the Second Amended and Restated 2005 Non-Employee Directors Compensation Plan. The shares vest 100% on the one year anniversary date. During the nine months ended September 30, 2020, one retired director was granted 775 nonvested shares of common stock under the Second Amended and Restated 2005 Non-Employee Directors Compensation ~~Plan,~~Plan. During the nine months ended September 30, 2021, the Company granted 7,200 nonvested shares of common stock to independent directors, which shares will vest 100% aton the one year anniversary date. In addition, the Company granted 3,500 nonvested shares of common stock to the Company's Lead Director, which shares will vest one-third on the date of grant and one-third on each of the first two anniversaries of the grant date.

During the nine months ended September 30, ~~2020,~~2021, employees and a consultant were granted ~~113,525~~109,665 and ~~10,890~~5,735 shares, respectively, of nonvested shares of common stock pursuant to the 2018 Incentive Plan. The shares vest over a period of five years, conditioned on continued employment and in accordance with the consulting agreement. The fair value of nonvested shares of common stock is determined based on the closing trading price of the Company’s common stock on the grant date.

The following table represents the share grants activity for the nine months ended September 30, ~~2020:~~2021:

Restricted stock Options
Number of
shares Weighted
average grant
date fair value Number of shares Weighted
average grant
date fair value
Share grants outstanding as of December 31, 2019 534,331 $ 71.01 98,756 $ 40.71
Granted 135,090 123.10 0 0
Vested or exercised (199,330) 62.31 (16,286) 32.93
Share grants outstanding as of September 30, 2020 470,091 $ 89.32 82,470 $ 42.25

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	Restricted stock			Options
	Number of shares	Weighted average grant date fair value		Number of shares	Weighted average grant date fair value
Share grants outstanding as of December 31, 2020	469,631	$	89.69	74,235	$	42.07
Granted	126,100	186.15		—	—
Vested or exercised	(174,921)	188.48		—	—
Share grants outstanding as of September 30, 2021	420,810	$	122.25	74,235	$	42.07

As of September 30, ~~2020,~~2021, there was ~~$33.7~~$41.4 million of total unrecognized compensation cost related to nonvested shares of common stock granted. That cost is expected to be recognized over the weighted average period of ~~3.04~~3.03 years. The Company records compensation expense related to nonvested stock awards at the grant date for shares of common stock that are awarded fully vested, and over the vesting term on a straight-line basis for shares of common stock that vest over time. The Company estimates forfeitures at the time of grant and revises the estimate in subsequent periods if actual forfeitures differ to ensure that

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total compensation expense recognized is at least equal to the value of vested awards. The Company recorded ~~$11.1~~$11.7 million and ~~$6.4~~$11.1 million of compensation expense related to nonvested stock grants for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Employee Stock Purchase Plan

In 2006, the Company adopted the Employee Stock Purchase Plan whereby eligible employees may purchase the Company’s common stock at 95% of the market price on the last day of the calendar quarter. There were 250,000 shares of common stock initially reserved for the plan. In 2013, the Company adopted the Amended and Restated Employee Stock Purchase Plan, which reserved an additional 250,000 shares of common stock to the plan.

The table below details the shares of common stock issued during ~~2020:~~2021:

Number of
shares Per share
price
Shares available as of December 31, 2019 132,449
Shares issued during the three months ended March 31, 2020 4,663 $ 130.87
Shares issued during the three months ended June 30, 2020 3,730 $ 133.19
Shares issued during the three months ended September 30, 2020 3,454 $165.60
Shares available as of September 30, 2020 120,602


	Number of shares	Per share price
Shares available as of December 31, 2020	118,136
Shares issued during the three months ended March 31, 2021	3,204	$	202.66
Shares issued during the three months ended June 30, 2021	3,152	$	181.65
Shares issued during the three months ended September 30, 2021	3,445	$	190.25

Shares available as of September 30, 2021	108,335

Treasury Stock

In conjunction with the vesting of the nonvested shares of common stock or the exercise of stock options, recipients incur personal income tax obligations. The Company allows the recipients to turn in shares of common stock to satisfy minimum tax obligations. During the nine months ended September 30, ~~2020,~~2021, the Company redeemed ~~70,676~~61,177 shares of common stock valued at ~~$9.0~~$11.6 million, related to share vesting tax obligations. Such shares are held as treasury stock and are available for reissuance by the Company.

In addition, the Company redeemed 7,328 shares of common stock valued at $0.8 million, related to the exercise of options. During the nine months ended September 30, 2020, the Company reclassified $0.9 million between treasury and additional paid in capital for the exercise of options.

7. Commitments and Contingencies

Contingencies

The Company provides services in a highly regulated industry and is a party to various proceedings and regulatory and other governmental and internal audits and investigations in the ordinary course of business (including audits by Zone Program Integrity Contractors ("ZPICs"), Unified Program Integrity Contractors ("UPICs"), and Recovery Audit Contractors ("RACs") and investigations resulting from the Company's obligation to self-report suspected violations of law). Management cannot predict the ultimate outcome of any regulatory and other governmental and internal audits and investigations. While such audits and investigations are the subject of administrative appeals, the appeals process, even if successful, may take several years to resolve. The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company's businesses. These audits and investigations have caused and could potentially continue to cause delays in collections, recoupments from governmental payors. Currently, the Company has recorded $16.9 million in its condensed consolidated balance sheets in other assets as of September 30, 2021 and December 31, 2020, which are due from government payors related to the disputed finding of pending appeals of ZPIC audits. Additionally, these audits may subject the Company to sanctions, damages, extrapolation of damage findings, additional recoupments, fines,

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and other penalties (some of which may not be covered by insurance), which may, either individually or in the aggregate, have a material adverse effect on the Company's business and financial condition.

We are involved in various legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, we believe the outcome of pending litigation will not have a material adverse effect, after considering the effect of our insurance coverage, on our consolidated financial information.

Legal fees related to all legal matters are expensed as incurred.

Joint Venture Buy/Sell Provisions

Most of the Company’s joint ventures include a buy/sell option that grants to the Company and its joint venture partners the right to require the other joint venture party to either purchase all of the exercising member’s membership interests or sell to the

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exercising member all of the non-exercising member’s membership interest, at the non-exercising member’s option, within 30 days of the receipt of notice of the exercise of the buy/sell option. In some instances, the purchase price is based on a multiple of the historical or future earnings before income taxes and depreciation and amortization of the equity joint venture at the time the buy/sell option is exercised. In other instances, the buy/sell purchase price will be negotiated by the partners and subject to a fair market valuation process. The Company has not received notice from any joint venture partners of their intent to exercise the terms of the buy/sell agreement nor has the Company notified any joint venture partners of its intent to exercise the terms of the buy/sell agreement.

Compliance

The laws and regulations governing the Company’s operations, along with the terms of participation in various government programs, regulate how the Company does business, the services offered and its interactions with patients and the public. These laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws or regulations, or their interpretations, or the enactment of new laws or regulations could materially and adversely affect the Company’s operations and financial condition.

The Company is subject to various routine and non-routine governmental reviews, audits and investigations. In recent years, federal and state civil and criminal enforcement agencies have heightened and coordinated their oversight efforts related to the health care industry, including referral practices, cost reporting, billing practices, joint ventures and other financial relationships among health care providers. Violation of the laws governing the Company’s operations, or changes in the interpretation of those laws, could result in the imposition of fines, civil or criminal penalties and/or termination of the Company’s rights to participate in federal and state-sponsored programs and suspension or revocation of the Company’s licenses. The Company believes that it is in material compliance with all applicable laws and regulations.

8. Noncontrolling interests

The Company classifies noncontrolling interests of its joint venture parties based upon a review of the legal provisions governing the redemption of such interests. In each of the Company’s joint ventures, those provisions are embodied within the joint venture’s operating agreement. For joint ventures with operating agreement provisions that establish an obligation for the Company to purchase the third-party partners’ noncontrolling interests other than as a result of events that lead to a liquidation of the joint venture, such noncontrolling interests are classified as redeemable noncontrolling interests in temporary equity. For joint ventures with operating agreement provisions that establish an obligation that the Company purchase the third party partners’ noncontrolling interests, but which obligation is triggered by events that lead to a liquidation of the joint venture, such noncontrolling interests are classified as nonredeemable noncontrolling interests in permanent equity. Additionally, for joint ventures with operating agreement provisions that do not establish an obligation for the Company to purchase the third-party partners’ noncontrolling interests (e.g., where the Company has the option, but not the obligation, to purchase the third-party partners’ noncontrolling interests), such noncontrolling interests are classified as nonredeemable noncontrolling interests in permanent equity.

The Company’s equity joint ventures that are classified as redeemable noncontrolling interests are subject to operating agreement provisions that require the Company to purchase the noncontrolling partner’s interest upon the occurrence of certain triggering events, which are defined as the bankruptcy of the partner or the partner’s exclusion from the Medicare or Medicaid programs. These triggering events and the related repurchase provisions are specific to each redeemable equity joint venture, since the triggering of a repurchase obligation for any one redeemable noncontrolling interest in an equity joint venture does not necessarily impact any of the other redeemable noncontrolling interests in other equity joint ventures. Upon the occurrence of a triggering event requiring the purchase of a redeemable noncontrolling interest, the Company would be required to purchase the noncontrolling partner’s interest based upon a valuation methodology set forth in the applicable joint venture agreement.

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Redeemable noncontrolling interests and nonredeemable noncontrolling interests are initially recorded at their fair value as of the closing date of the transaction establishing the joint venture. Such fair values are determined using various accepted valuation methods, including the income approach, the market approach, the cost approach, and a combination of one or more of these approaches. A number of facts and circumstances concerning the operation of the joint venture are evaluated for each transaction, including (but not limited to) the ability to choose management, control over acquiring or liquidating assets, and controlling the joint venture’s strategy and direction, in order to determine the fair value of the noncontrolling interest.

Based upon the Company’s evaluation of the redemption provisions concerning redeemable noncontrolling interests as of September 30, ~~2020,~~2021, the Company determined in accordance with authoritative accounting guidance that it was not probable that an event otherwise requiring redemption of any redeemable noncontrolling interest would occur (i.e., the date for such event was not set or such event is not certain to occur). Therefore, none of the redeemable noncontrolling interests were identified as mandatorily redeemable interests at such times, and the Company did not record any values in respect of any mandatorily redeemable interests.

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Subsequent to the closing date of the transaction establishing the joint venture, the Company records adjustments to the carrying amounts of noncontrolling interests during each reporting period to reflect (a) comprehensive income (loss) attributed to each noncontrolling interest, which is calculated by multiplying the noncontrolling interest percentage by the comprehensive income (loss) of the joint venture’s operations, (b) dividends paid to the noncontrolling interest partner, and (c) any other transactions that increase or decrease the Company’s ownership interest in each joint venture, as a result of which the Company retains its controlling interest. If the Company determines that, based upon its analysis as of the end of each reporting period in accordance with authoritative accounting guidance, that it is not probable that an event would occur to otherwise require the redemption of a redeemable noncontrolling interest (i.e., the date for such event is not set or such event is not certain to occur), then the Company does not adjust the recorded amount of such redeemable noncontrolling interest.

The carrying amount of each redeemable equity instrument presented in temporary equity for the nine months ended September 30, ~~2020~~2021 is not less than the initial amount reported for each instrument.

The following table summarizes the activity of noncontrolling interest-redeemable for the nine months ended September 30, ~~2020~~2021 (amounts in thousands):


Balance as of December 31, ~~2019~~2020	$	~~15,151~~18,921
Net income attributable to noncontrolling interest-redeemable	~~10,366~~9,127
Noncontrolling interest-redeemable distributions	~~(12,128)~~(10,058)
Acquired noncontrolling interest-redeemable	~~3,508~~ 113
Purchase of controlling interest	(373)
Balance as of September 30, ~~2020~~2021	$	~~16,897~~17,730

9. Leases

The Company determines if a contract contains a lease at inception date. The Company's leases are operating leases, primarily for office and office equipment, that expire at various dates over the next ~~nine~~five years. The ~~office~~facility-based leases have renewal options for periods ranging from one to ~~five~~nine years. As it is not reasonably certain these renewal options will be exercised, the options were not considered in the lease term, and payments associated with the option years are excluded from lease payments.

Payments due under operating leases include fixed and variable payments. These variable payments for the Company's office leases can include operating expenses, utilities, property taxes, insurance, common area maintenance, and other facility-related expense. Additionally, any leases with terms less than one year were not recognized as operating lease right of use assets or payables for short term leases in accordance with the election of ‘package of practical expedient’ under ASU 2016-02.

The Company recognizes operating lease right of use assets and operating lease payable based on the present value of the future minimum lease payments at the lease commencement date. The Company's leases do not provide implicit rates. Therefore, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. As of September 30, ~~2020,~~2021, the weighted-average remaining lease term was ~~4.22~~3.97 years and weighted-average discount rate was ~~4.63%~~4.24%.

~~Information related to~~The following table summarizes the ~~Company's~~ operating lease right of use assets and related lease ~~liabilities for office~~payables in our condensed consolidated balance sheets as of September 30, 2021 and ~~equipment leases were as follows:~~December 31, 2020 (amounts in thousands):

September 30, 2020 December 31, 2019
Operating lease right of use asset 99,066 95,452
Current operating lease payable 32,018 28,701
Long-term operating lease payable 69,977 69,556

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	September 30, 2021		December 31, 2020
Operating lease right of use asset	$	111,550	$	100,046
Current operating lease liabilities	35,964		32,676
Long-term operating lease liabilities	78,445		70,275

The ~~Company incurred operating~~components of lease costs offor operating leases for the three and nine months ended September 30, 2021 and 2020 were as follows (amounts in thousands):

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Operating lease cost $ 12,716 $ 11,825 $ 37,153 $ 37,895


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Operating lease cost	$	12,791	$	11,973	$	37,096	$	34,921
Short-term lease cost	927		743		2,697		2,232
Variable lease cost	997		999		3,058		2,851
Total lease costs	$	14,715	$	13,715	$	42,851	$	40,004

Maturities of operating lease liabilities as of September 30, ~~2020~~2021 were as follows (amounts in thousands):

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Month ending September 30,	Month ending September 30,			Month ending September 30,
2020		$	9,466
2021	2021	34,247		2021	$	10,650
2022	2022	25,448		2022	37,918
2023	2023	16,943		2023	28,922
2024	2024	10,493		2024	20,080
Thereafter	Thereafter	15,522		Thereafter	26,578
Total future minimum lease payments	Total future minimum lease payments	112,119		Total future minimum lease payments	124,148
Less: Imputed interest	Less: Imputed interest	(10,124)		Less: Imputed interest	(9,739)
Total	Total	$	101,995	Total	$	114,409

10. Fair Value of Financial Instruments

The carrying amounts of the Company’s cash, receivables, accounts payable and accrued liabilities approximate their fair values because of their short maturity. The estimated fair value of intangible assets acquired was calculated using level 3 inputs based on the present value of anticipated future benefits. For the nine months ended September 30, 2020, the carrying value of the Company’s long-te~~rm debt approximates fair value, as the interest rates approximate current rates.~~

11. Segment Information

The Company's reporting segments include (1) home health services, (2) hospice services, (3) home and community-based services, (4) facility-based services, and (5) HCI. The accounting policies of the segments are the same as those described in the summary of significant accounting policies, as described in Note 2 of the Notes to Condensed Consolidated Financial Statements.

Reportable segments have been identified based upon how management has organized the business by services provided to customers and how the chief operating decision maker manages the business and allocates resources, consistent with the criteria in ASC 280, Segment Reporting.

The following tables summarize the Company’s segment information for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (amounts in thousands):

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Three Months Ended September 30, 2020
Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue $ 373,450 $ 59,801 $ 48,387 $ 33,344 $ 15,702 $ 530,684
Cost of service revenue (excluding depreciation and amortization) 205,523 37,180 36,664 22,213 3,666 305,246
General and administrative expenses 118,792 16,668 10,937 11,439 3,627 161,463
Impairment of intangibles and other 22 0 0 0 0 22
Government stimulus (income) expense 35,019 4,731 2,865 1,656 164 44,435
Operating income (loss) 14,094 1,222 (2,079) (1,964) 8,245 19,518
Interest expense (310) (51) (37) (22) (11) (431)
Income (loss) before income taxes and noncontrolling interest 13,784 1,171 (2,116) (1,986) 8,234 19,087
Income tax expense (benefit) 3,403 247 (440) (435) 1,820 4,595
Net income (loss) 10,381 924 (1,676) (1,551) 6,414 14,492
Less net income (loss) attributable to non controlling interests (157) 321 (153) (12) (7) (8)
Net income (loss) attributable to LHC Group, Inc.'s common stockholder $ 10,538 $ 603 $ (1,523) $ (1,539) $ 6,421 $ 14,500
Total assets $ 1,721,278 $ 277,358 $ 263,414 $ 108,118 $ 86,168 $ 2,456,336

Three Months Ended September 30, 2019
Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue $ 375,599 $ 62,028 $ 53,411 $ 28,715 $ 8,746 $ 528,499
Cost of service revenue (excluding depreciation and amortization) 237,414 35,819 39,694 18,508 3,333 334,768
General and administrative expenses 108,318 15,218 10,809 9,498 2,986 146,829
Impairment of intangibles and other 197 0 0 0 0 197
Operating income 29,670 10,991 2,908 709 2,427 46,705
Interest expense (1,758) (310) (272) (174) (82) (2,596)
Income before income taxes and noncontrolling interest 27,912 10,681 2,636 535 2,345 44,109
Income tax expense 5,900 1,689 1,299 144 476 9,508
Net income 22,012 8,992 1,337 391 1,869 34,601
Less net income (loss) attributable to noncontrolling interests 3,577 1,213 (180) (67) (9) 4,534
Net income attributable to LHC Group, Inc.'s common stockholders $ 18,435 $ 7,779 $ 1,517 $ 458 $ 1,878 $ 30,067
Total assets $ 1,458,991 $ 235,865 $ 243,779 $ 88,905 $ 70,324 $ 2,097,864

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		Nine Months Ended September 30, 2020													Three Months Ended September 30, 2021
		Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total			Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	Net service revenue	$	1,081,143	$	181,387	$	144,526	$	96,664	$	27,155	$	1,530,875	Net service revenue	$	386,699	$	82,653	$	45,800	$	32,415	$	17,884	$	565,451
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	631,109		112,485		113,864		64,340		11,362		933,160		Cost of service revenue (excluding depreciation and amortization)	230,839		51,631		34,386		23,725		3,281		343,862
General and administrative expenses	General and administrative expenses	345,024		49,560		33,520		31,984		9,815		469,903		General and administrative expenses	126,695		22,548		11,764		11,050		4,387		176,444
Impairment of intangibles and other		22		600		0		0		0		622
Government stimulus (income) expense		0		0		0		0		0		0

Operating income (loss)	Operating income (loss)	104,988		18,742		(2,858)		340		5,978		127,190		Operating income (loss)	29,165		8,474		(350)		(2,360)		10,216		45,145
Interest expense	Interest expense	(2,804)		(451)		(382)		(288)		(115)		(4,040)		Interest expense	(811)		(139)		(109)		(54)		(22)		(1,135)
Income (loss) before income taxes and noncontrolling interest	Income (loss) before income taxes and noncontrolling interest	102,184		18,291		(3,240)		52		5,863		123,150		Income (loss) before income taxes and noncontrolling interest	28,354		8,335		(459)		(2,414)		10,194		44,010
Income tax expense (benefit)	Income tax expense (benefit)	19,499		3,294		(658)		(261)		1,307		23,181		Income tax expense (benefit)	6,407		1,874		(99)		(554)		2,522		10,150
Net income (loss)	Net income (loss)	82,685		14,997		(2,582)		313		4,556		99,969		Net income (loss)	21,947		6,461		(360)		(1,860)		7,672		33,860
Less net income (loss) attributable to non controlling interests	Less net income (loss) attributable to non controlling interests	14,371		3,452		(275)		1,228		(23)		18,753		Less net income (loss) attributable to non controlling interests	5,157		1,085		77		(187)		(6)		6,126
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	68,314	$	11,545	$	(2,307)	$	(915)	$	4,579	$	81,216	Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	16,790	$	5,376	$	(437)	$	(1,673)	$	7,678	$	27,734

Total assets														Total assets	$	1,632,670	$	681,954	$	239,452	$	83,276	$	75,334	$	2,712,686


		Nine Months Ended September 30, 2019													Three Months Ended September 30, 2020
		Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total			Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	Net service revenue	$	1,113,887	$	168,821	$	157,610	$	84,391	$	24,217	$	1,548,926	Net service revenue	$	373,450	$	59,801	$	48,387	$	33,344	$	15,702	$	530,684
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	694,082		103,853		119,054		53,812		10,819		981,620		Cost of service revenue (excluding depreciation and amortization)	205,523		37,180		36,664		22,213		3,666		305,246
General and administrative expenses	General and administrative expenses	322,115		45,167		33,004		28,010		12,338		440,634		General and administrative expenses	118,792		16,668		10,937		11,439		3,627		161,463
Impairment of intangibles and other	Impairment of intangibles and other	7,263		271		0		0		0		7,534		Impairment of intangibles and other	22		—		—		—		—		22
Operating income		90,427		19,530		5,552		2,569		1,060		119,138
Government stimulus (income) expense														Government stimulus (income) expense	35,019		4,731		2,865		1,656		164		44,435
Operating income (loss)														Operating income (loss)	14,094		1,222		(2,079)		(1,964)		8,245		19,518
Interest expense	Interest expense	(5,919)		(976)		(857)		(524)		(257)		(8,533)		Interest expense	(310)		(51)		(37)		(22)		(11)		(431)
Income before income taxes and noncontrolling interest		84,508		18,554		4,695		2,045		803		110,605
Income tax expense		17,178		3,716		1,279		297		195		22,665
Net income		67,330		14,838		3,416		1,748		608		87,940
Income (loss) before income taxes and noncontrolling interest														Income (loss) before income taxes and noncontrolling interest	13,784		1,171		(2,116)		(1,986)		8,234		19,087
Income tax expense (benefit)														Income tax expense (benefit)	3,403		247		(440)		(435)		1,820		4,595
Net income (loss)														Net income (loss)	10,381		924		(1,676)		(1,551)		6,414		14,492
Less net income (loss) attributable to noncontrolling interests	Less net income (loss) attributable to noncontrolling interests	11,305		2,712		(757)		779		(22)		14,017		Less net income (loss) attributable to noncontrolling interests	(157)		321		(153)		(12)		(7)		(8)
Net income attributable to LHC Group, Inc.'s common stockholders		$	56,025	$	12,126	$	4,173	$	969	$	630	$	73,923

Net income (loss) attributable to LHC Group, Inc.'s common stockholders														Net income (loss) attributable to LHC Group, Inc.'s common stockholders	$	10,538	$	603	$	(1,523)	$	(1,539)	$	6,421	$	14,500
Total assets														Total assets	$	1,721,278	$	277,358	$	263,414	$	108,118	$	86,168	$	2,456,336

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	Nine Months Ended September 30, 2021
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	1,157,061	$	209,191	$	143,332	$	96,814	$	29,795	$	1,636,193
Cost of service revenue (excluding depreciation and amortization)	663,137		129,848		103,941		65,360		9,720		972,006
General and administrative expenses	369,337		58,789		35,216		33,213		10,199		506,754
Impairment of intangibles and other	937		—		—		—		—		937
Operating income (loss)	123,650		20,554		4,175		(1,759)		9,876		156,496
Interest expense	(1,099)		(195)		(143)		(73)		(31)		(1,541)
Income (loss) before income taxes and noncontrolling interest	122,551		20,359		4,032		(1,832)		9,845		154,955
Income tax expense (benefit)	26,003		4,221		889		(649)		2,445		32,909
Net income (loss)	96,548		16,138		3,143		(1,183)		7,400		122,046
Less net income (loss) attributable to non controlling interests	17,506		3,308		441		792		(37)		22,010
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	79,042	$	12,830	$	2,702	$	(1,975)	$	7,437	$	100,036


	Nine Months Ended September 30, 2020
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	1,081,143	$	181,387	$	144,526	$	96,664	$	27,155	$	1,530,875
Cost of service revenue (excluding depreciation and amortization)	631,109		112,485		113,864		64,340		11,362		933,160
General and administrative expenses	345,024		49,560		33,520		31,984		9,815		469,903
Impairment of intangibles and other	22		600		—		—		—		622
Government stimulus (income) expense	—		—		—		—		—		—
Operating income (loss)	104,988		18,742		(2,858)		340		5,978		127,190
Interest expense	(2,804)		(451)		(382)		(288)		(115)		(4,040)
Income (loss) before income taxes and noncontrolling interest	102,184		18,291		(3,240)		52		5,863		123,150
Income tax expense (benefit)	19,499		3,294		(658)		(261)		1,307		23,181
Net income (loss)	82,685		14,997		(2,582)		313		4,556		99,969
Less net income (loss) attributable to noncontrolling interests	14,371		3,452		(275)		1,228		(23)		18,753
Net income (loss) attributable to LHC Group, Inc.'s common stockholders	$	68,314	$	11,545	$	(2,307)	$	(915)	$	4,579	$	81,216

12. Income Taxes

The effective tax rate for each of the nine months ended September 30, 2021 and 2020 benefited from $2.4 million of excess tax benefits associated with stock-based compensation arrangements and $2.2 million ($4.3 million and $2.1 million, as further described below) associated with increased tax benefits associated with the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"). For the nine months ended September 30, 2019, the effective tax rate benefited from $3.0 million of excess tax benefits associated with stock-based compensation arrangements.

In response to the COVID-19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 ("2017 Tax Act"). Corporate taxpayers may carryback net operating losses ("NOLs") originating during 2018 through 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019, or 2020. Taxpayers may generally deduct

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interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for tax years beginning January 1, 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The effective tax rate for the nine months ended September 30, 2020 benefited from a $4.3 million impact from the enactment of the CARES Act. There was no material impact to our net deferred tax assets as of September 30, 2020.

U.S. GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires the Company to recognize in the financial statements each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than 50% likelihood of being realized. The Company’s unrecognized tax benefits would affect the tax rate, if recognized. The Company

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includes the full amount of unrecognized tax benefits in ~~other~~income taxes payable in noncurrent liabilities in the Company's ~~Condensed Consolidated Balance Sheets.~~condensed consolidated balance sheets. The Company anticipates it is reasonably possible an increase or decrease in the amount of unrecognized tax benefits could be made in the next twelve months. However, the Company does not presently anticipate that any increase or decrease in unrecognized tax benefits will be material to the consolidated financial statements. ~~The impact of the CARES Act increased unrecognized tax benefits by $2.1 million, which also had an impact on the Company's effective tax rate for the nine months ended September 30, 2020.~~ As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company recognized ~~$6.6~~$6.8 million and ~~$3.9~~$6.2 million, respectively, in unrecognized tax benefits.

13. Subsequent Events

On October 1, 2021, the Company purchased 1 wholly- owned home health agency and 3 wholly-owned hospice agencies for total consideration of $7.5 million.

On November 1, 2021, the Company purchased Brookdale Health Care Services' agencies from the recently formed home health, hospice, and outpatient therapy venture between HCA Healthcare and Brookdale Senior Living, Inc. The wholly-owned purchased agencies included 23 home health locations, 11 hospice locations, and 13 therapy agencies across 22 states. Total consideration for this acquisition was $197.0 million, which was funded on November 1, 2021.

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

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain statements, including the potential future impact of COVID-19 on our results of operations and liquidity, the potential impact of actions we have taken to mitigate the impact of COVID-19, the potential impact on supply chain disruptions and increased costs associated with obtaining personal protective equipment, the expected benefit of the CARES Act on our liquidity, and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to future plans and strategies, anticipated events or trends, future financial performance, and expectations and beliefs concerning matters that are not historical facts or that necessarily depend upon future events. The words “may,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions are intended to identify forward-looking statements. Specifically, this report contains, among others, forward-looking statements about:

•our expectations regarding financial condition or results of operations for periods after September 30, ~~2020;~~2021;

•our critical accounting policies;

•our business strategies and our ability to grow our business;

•our participation in the Medicare and Medicaid programs;

•the reimbursement levels of Medicare and other third-party payors, including changes in reimbursement resulting from regulatory changes;

•the prompt receipt of payments from Medicare and other third-party payors;

•our future sources of and needs for liquidity and capital resources;

•the effect of any regulatory changes or anticipated regulatory changes;

•the effect of any changes in market rates on our operations and cash flows;

•our ability to obtain financing;

•our ability to make payments as they become due;

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•the outcomes of various routine and non-routine governmental reviews, audits and investigations;

•our expansion strategy, the successful integration of recent acquisitions and, if necessary, the ability to relocate or restructure our current facilities;

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•the value of our proprietary technology;

•the impact of legal proceedings;

•our insurance coverage;

•our competitors and our competitive advantages;

•our ability to attract and retain valuable employees;

•the price of our stock;

•our compliance with environmental, health and safety laws and regulations;

•our compliance with health care laws and regulations;

•our compliance with Securities and Exchange Commission laws and regulations and Sarbanes-Oxley requirements;

•the impact of federal and state government regulation on our business; and

•the impact of changes in future interpretations of fraud, anti-kickback, or other laws.

The forward-looking statements included in this report reflect our current views about future events, are based on assumptions, and are subject to known and unknown risks and uncertainties. Many important factors could cause actual results or achievements to differ materially from any future results or achievements expressed in or implied by our forward-looking statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. Important factors that could cause actual results or achievements to differ materially from the results or achievements reflected in our forward-looking statements include, among other things, the factors discussed in the Part II, Item 1A. “Risk Factors,” included in this report and in our other filings with the SEC, including our ~~2019~~2020 Form 10-K, ~~our quarterly report on Form 10-Q for the quarter ended March 31, 2020, and our quarterly report on Form 10-Q for the quarter ended June 30, 2020,~~ as updated by our subsequent filings with the SEC. This report should be read in conjunction with the ~~2019~~2020 Form 10-K, and all of our other filings made with the SEC through the date of this report, including quarterly reports on Form 10-Q and current reports on Form 8-K.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is filed with the SEC. Except as required by law, we assume no responsibility for updating any forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

You should read this report, the information incorporated by reference into this report, and the documents filed as exhibits to this report completely and with the understanding that our actual future results or achievements may differ materially from what we expect or anticipate.

Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refer to LHC Group, Inc. and its consolidated subsidiaries.

OVERVIEW

General

We provide quality, cost-effective post-acute health care services to our patients. As of September 30, ~~2020,~~2021, we have ~~823~~868 service providers in 35 states within the continental United States and the District of Columbia. Our services are classified into five segments: (1) home health services, (2) hospice services, (3) home and community-based services, (4) facility-based services primarily offered through our long-term acute care hospitals (“LTACHs”), and (5) healthcare innovations services

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("HCI"). We intend to increase the number of service providers within each of our segments that we operate through continued acquisitions, joint ventures, and organic development.

Our home health service locations offer a wide range of services, including skilled nursing, medically-oriented social services, and physical, occupational, and speech therapy. As of September 30, ~~2020,~~2021, we operated ~~549~~532 home health services locations, of which ~~336~~320 are wholly-owned, ~~209~~208 are majority-owned through equity joint ventures, two are under license lease arrangements, and the operations of the remaining two locations are only managed by us.

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Our hospices provide end-of-life care to patients with terminal illnesses through interdisciplinary teams of physicians, nurses, home health aides, counselors, and volunteers. We offer a wide range of services, including pain and symptom management, emotional and spiritual support, inpatient and respite care, homemaker services, and counseling. As of September 30, ~~2020,~~2021, we operated ~~111~~155 hospice locations, of which 5292 are wholly-owned, 5761 are majority-owned through equity joint ventures, and two are under license lease arrangements.

Through our home and community-based services segment, services are performed by skilled nursing and paraprofessional personnel, and include assistance with activities of daily living to the elderly, chronically ill, and disabled patients. As of September 30, ~~2020,~~2021, we operated ~~122~~130 home and community-based services locations, of which ~~108~~117 are wholly-owned and 1413 are majority-owned through equity joint ventures.

We provide facility-based services principally through our LTACHs. As of September 30, ~~2020,~~2021, we operated 11 LTACHs with 12 locations, all but ~~two~~three of which are located within host hospitals. We also operate ~~one~~two skilled nursing ~~facility, one pharmacy,~~facilities, a family health center, a rural health clinic, two physician practices, and 1419 therapy clinics. Of these 3037 facility-based services locations, 2026 are wholly-owned, and 1011 are majority-owned through equity joint ventures.

Our HCI segment reports on our developmental activities outside its other business segments. The HCI segment includes (a) Imperium Health Management, LLC, an ACO enablement company, (b) Long Term Solutions, Inc., an in-home assessment company serving the long-term care insurance industry, and (c) certain assets operated by Advanced Care House Calls, which provides primary medical care for patients with chronic and acute illnesses who have difficulty traveling to a doctor’s office. These activities are intended ultimately, whether directly or indirectly, to benefit our patients and/or payors through the enhanced provision of services in our other segments. The activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. They include, but are not limited to, items such as: technology, information, population health management, risk-sharing, care-coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision and technology enabled in-home clinical assessments. We have 1114 HCI locations, of which 1013 are wholly-owned and one is majority-owned through an equity joint venture.

The Joint Commission is a nationwide commission that establishes standards relating to the physical plant, administration, quality of patient care, and operation of medical staffs of health care organizations. Currently, Joint Commission accreditation of home nursing and hospice agencies is voluntary. However, some managed care organizations use Joint Commission accreditation as a credentialing standard for regional and state contracts. As of September 30, ~~2020,~~2021, the Joint Commission had accredited ~~483~~522 of our ~~549~~532 home health services locations and 89110 of our ~~111~~155 hospice agencies. Those not yet accredited are working towards achieving this accreditation. As we acquire companies, we apply for accreditation 12 to 18 months after completing the acquisition.

The percentage of net service revenue contributed from each reporting segment for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 was as follows:

Three Months Ended September 30, Nine Months Ended
September 30,
Reporting segment 2020 2019 2020 2019
Home health services 70.4 % 71.1 % 70.6 % 71.9 %
Hospice services 11.2 11.7 11.8 10.9
Home and community-based services 9.1 10.1 9.5 10.2
Facility-based services 6.3 5.4 6.3 5.4
Healthcare innovations services 3.0 1.7 1.8 1.6
100.0 % 100.0 % 100.0 % 100.0 %

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	Three Months Ended September 30,				Nine Months Ended September 30,
Reporting segment	2021		2020		2021		2020
Home health services	68.4	%	70.4	%	70.7	%	70.6	%
Hospice services	14.6		11.2		12.8		11.8
Home and community-based services	8.1		9.1		8.8		9.5
Facility-based services	5.7		6.3		5.9		6.3
Healthcare innovations services	3.2		3.0		1.8		1.8
	100.0	%	100.0	%	100.0	%	100.0	%

Recent Developments

The reader is encouraged to review our detailed discussion of health care legislation and Medicare regulations in the similarly titled section in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” along with the discussions in Part I, Item 1, “Business; Government Regulation” and in Part I, Item 1A, “Risk Factors” in our ~~2019~~2020 Form 10-K.

Coronavirus and Coronavirus Aid, Relief, and Economic Security Act

The COVID-19 outbreak has adversely impacted economic activity and conditions worldwide, including workforces, liquidity, capital markets, consumer behavior, supply chains, and macroeconomic conditions. After the declaration of a national emergency in the United States on March 13, 2020, in compliance with stay-at-home and physical distancing orders and other restrictions on movement and economic activity intended to reduce the spread of COVID-19, we have altered numerous clinical, operational, and business processes. While each of the states deemed healthcare services an essential business, allowing us to continue to deliver healthcare services to our patients, the effects of the pandemic have been wide-reaching. We have implemented contingency planning policies; whereby most employees in our home offices located in Louisiana and Kentucky are working remotely in compliance with CDC recommendations and federal and state governmental orders. We have invested in technology and equipment that allows our remote workforce to provide continued and seamless functionality to our clinicians who continue to care for our patients on service.

We are taking precautions to protect the safety and well-being of our employees by purchasing and delivering additional supplies of personal protection equipment to our clinicians across the country. In response to the COVID-19 outbreak, we promptly convened a cross-functional COVID-19 task force comprised of our company's leaders that continually communicates with our clinicians and other employees concerning best practices and Company changes in policies and procedures.

We continually review and adjust to changes to adapt to the current environment associated with COVID-19. We remain fully functional and continue to provide our patients with critical services during the pandemic. In addition, we currently plan to continue to execute on our strategic business plans.

~~In response to COVID-19, the U.S. Government enacted the CARES Act on March 27, 2020.~~ The following portions of the CARES Act impacted us during the nine months ended September 30, ~~2020:~~2021:

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•Provider Relief ~~Fund:~~ Fund: During ~~the three and nine months ended September 30,~~ 2020, we received ~~$4.6 million and~~ $93.3 million ~~respectively,~~in payments from the Provider Relief Fund. ~~During~~We returned all funds to the ~~three months ended June 30, 2020, we recognized $44.4 million related to these funds as~~ government ~~stimulus income in our condensed consolidated statements of income. During the three months ended September 30, 2020, we reversed $44.4 million such that we recognized no funds for~~during the nine months ended September 30, ~~2020. The full amount~~2021.

•CAAP: During 2020, we received $318.0 million of ~~$93.3~~accelerated payments under the CAAP, of which $141.6 million ~~is recorded as a short-term liability in government stimulus advance in~~was recouped by CMS during the nine months ended September 30, 2021 and $176.3 million of contract liabilities - deferred revenue remains on our condensed consolidated balance ~~sheet. It is our intent to return the funds to the government.~~

•~~Accelerated and Advance Payments Program (AAPP):~~ AAPP extended financial hardship relief to Medicare providers impacted by the COVID-19 pandemic in order to provide necessary funds when there is a disruption in claims submission and/or claims processing. As of September 30, 2020, we received $317.9 million of accelerated and advance payments. The recoupment of AAP will occur under a tiered approach. CMS will recoup 25% of Medicare payments otherwise owed to us 11 months after our receipt of such funds. If any amount of AAPP funds that we received from CMS remain unpaid after the initial 11 month period, CMS will recoup 50% of Medicare payments otherwise owed to us during the following six months. Interest will be assessed on any amount of the AAPP funds that we received from CMS that remain unpaid following those recoupment periods. CMS will issue a repayment letter to the Company for any such outstanding amounts, which must be paid in full within 30 days from the date of the letter. We intend to repay the full amount outstanding before any interest accrues.sheets.

•Suspension of the 2% sequestration payment adjustment: CMS suspended the 2% sequestration payment adjustment for patient claims with dates of services from May 1, 2020 through December 31, ~~2020. As of~~2020, which was subsequently amended to continue through December 31, 2021. During the three months ended September 30, 2021 and 2020, we recognized ~~$6.5~~$6.8 million and ~~$11.5~~$6.5 million of net service revenue, respectively, due to the suspension of the 2% sequestration payment ~~adjustment during~~adjustment.During the ~~three and~~ nine months ended September 30, 2021 and 2020, ~~respectively.~~we recognized $19.7 million and $11.5 million of net service revenue, respectively, due to the suspension of the 2% sequestration payment adjustment.

•Waiver of the application of site-neutral payment: Under Section 1886(m)(6)(A)(i) of the Act, the claims processing systems ~~will be~~was updated to pay all LTACH cases admitted during the COVID-19 PHE period at the LTACH PPS standard federal rate, effective for claims with an admission date occurring on or after January 27, 2020 through the end of the PHE period. During the three months ended September 30, 2021, we recognized $5.7 million and $6.4 million of net service revenue, respectively, due to the suspension of LTACH site-neutral payments. During the nine months ended September 30, 2021 and 2020, ~~respectively,~~ we recognized ~~$6.4~~$18.2 million and $11.1 million of net service revenue, respectively, due to the suspension of LTACH site-neutral payments.

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•~~Delaying payment of the employer portion of social security tax:~~ The Company can defer payments of the employer portion of social security tax for 2020, which will be due in 50% increments, with the first due by December 31, 2021 and the second 50% due by December 31, 2022. As of September 30, 2020, we deferred $33.6 million of social security tax payments.

~~While during~~During the nine months ended September 30, ~~2020,~~2021, we did ~~not~~ experience ~~a material disruption~~higher costs related to higher contract labor utilization due to an increase in our ~~ability to continue to provide services to our patients, there~~clinicians being on quarantine from COVID-19 exposure or potential exposure. There is no guarantee that we won’t experience ~~such service disruption~~similar impacts in the future or experience a decrease in demand for our services as a result of COVID-19. The rapid development and fluidity of this situation makes it difficult to predict the ultimate impact of COVID-19 on our business and operations. Nevertheless, COVID-19 presents a material uncertainty which could materially impact our business and results of operations in the future.

Home Health

On ~~October 29, 2020,~~November 2, 2021, CMS released the final rule for ~~fiscal~~the calendar year ~~2021~~2022 to update base payment rates by ~~a net market basket index of 1.9%~~3.2%, which is ~~an annual inflation~~based on a payment update of ~~2.3%~~2.6%, ~~reduced by~~ a ~~0.3% productivity adjustment~~0.7% increase due to the reduction of the fixed-dollar loss ratio for outliers, and a 0.1% reduction indue to the rural add-on percentages mandated by the Bipartisan Budget Act of 2018. The base 30 day payment rate is increased from ~~$1,864.03~~$1,901.12 to ~~$1,901.12.~~$2,031.64. The ~~following lists additional fiscal~~final rule expanded the Home Health Value-Based Purchasing ("HHVBP") model nationally, with the first performance year ~~2021 reimbursement items:~~

•~~a reduction of payment (including LUPA) rates by 2% for~~beginning January 1, 2023. Starting in 2025, fee-for-service payments to home health agencies ~~that do not submit required~~will be adjusted based on the quality ~~data~~

•~~using wage indexes for the Office of Management and Budget's core-based statistical areas with a cap of 5% of wage index decreases and no cap on wage index increases~~

•~~continued phase-out of the rural add-on~~

•~~continued 2020 levels of PDGM case mix weights and LUPA thresholds~~

•~~finalization of plan~~ of care ~~requirements regarding telehealth visits.~~provided to beneficiaries during the calendar year 2023 performance year.

Hospice

On July ~~31, 2020,~~29, 2021, CMS released the final rule for fiscal year ~~2021~~2022 to update payment rates and the wage index. The final hospice payment update is a ~~2.4%~~2.0% increase to the payment rates. The final rule will apply a ~~5% cap on any decrease in~~2.7% market basket update and a ~~geographic area’s wage index value from fiscal year 2020. No such cap will be applied in fiscal year 2022.~~0.7 percentage point cut for productivity. In addition, the final rule increases the aggregate cap value of $31,297.61 for fiscal year 2022, as compared to $30,683.93 for fiscal year ~~2021, compared to $29,964.78 for~~2021.

The following are the final fiscal year ~~2020.~~

~~Based~~2022 base payment rates for various levels of care, which began on ~~these estimates, the following are the~~October 1, 2021 and will end September 30, 2022 and final fiscal year 2021 base payment rates for various levels of care, which began on October 1, 2020 and ~~will end~~ended September 30, 2021 ~~and fiscal year 2020 base payment rates for various levels of care, which began on October 1, 2019 and ended September 30, 2020~~ (payment rates for hospice providers not complying with the hospice quality reporting requirements will be 2% lower than the values referenced below):

Description Fiscal Year 2021
Rate per patient day Fiscal year 2020
Rate per patient day
Routine Home Care days 1-60 $ 199.25 $ 194.50
Routine Home Care days 60+ $ 157.49 $ 153.72
Continuous Home Care $ 1,432.41 $ 1,395.63
Full rate = 24 hours of care
$58.15 = hourly rate for 2020
$59.68 = hourly rate for 2021
Inpatient Respite Care $ 461.09 $ 450.10
General Inpatient Care $ 1,045.66 $ 1,021.25

~~Facility-Based~~

On September 2, 2020, CMS issued a final rule for the fiscal year 2021 Long-Term Care Hospital Prospective Payment System ("LTACH-PPS"). CMS expects LTACH-PPS payments to decrease by 1.1%, which reflects continued statutory implementation of the revised LTACH-PPS payment system. LTACH-PPS payments for fiscal year 2021 for discharges paid using the standard LTACH-PPS payment rate are expected to increase by 2.2% primarily due to the annual standard Federal rate update of 2.3%.

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Description	Final Fiscal Year 2022 Rate per patient day		Fiscal Year 2021 Rate per patient day
Routine Home Care days 1-60	$	203.40	$	199.25
Routine Home Care days 60+	$	160.74	$	157.49
Continuous Home Care	$	1,462.52	$	1,432.41
Full rate = 24 hours of care
$59.68 = hourly rate for 2021 $60.94 = hourly rate for 2022
Inpatient Respite Care	$	473.75	$	461.09
General Inpatient Care	$	1,068.28	$	1,045.66

Facility-based

On August 2, 2021, CMS issued a final rule for the fiscal year 2022 Long-Term Care Hospital Prospective Payment System ("LTACH-PPS"), which described that LTACH-PPS payments for ~~cases that~~fiscal year 2022 will ~~complete~~increase by 1.1%. LTACH-PPS payments for fiscal year 2022 for discharges paid using the ~~statutory transition~~standard LTACH payment rate will increase by 0.9% due primarily to the ~~lower payment rates under~~annual standard Federal rate update for fiscal year 2022 of 1.9% and 0.8% decrease in high cost outlier payments. LTACH-PPS payments for fiscal year 2022 for discharges paid using the ~~dual rate system are expected to decrease by 24%. This accounts for the LTACH~~ site neutral payment rate ~~cases that~~ will ~~no longer be paid a blended payment rate for LTACH discharges occurring in cost reporting periods beginning in fiscal year 2020.~~increase by 3%.

RESULTS OF OPERATIONS

Three months ended September 30, ~~2020~~2021 compared to three months ended September 30, ~~2019~~2020

Summary consolidated financial information

The following table summarizes our consolidated results of operations for the three months ended September 30, ~~2020~~2021 and ~~2019~~2020 (amounts in thousands, except percentages, which are percentages of consolidated net service revenue, unless indicated otherwise):


		2020					2019					Increase (Decrease)			2021					2020					Increase (Decrease)
Net service revenue	Net service revenue	$	530,684				$	528,499				$	2,185	Net service revenue	$	565,451				$	530,684				$	34,767
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	305,246		57.5	%		334,768		63.3	%		(29,522)		Cost of service revenue (excluding depreciation and amortization)	343,862		60.8	%		305,246		57.5	%		38,616
General and administrative expenses	General and administrative expenses	161,463		30.4			146,829		27.8			14,634		General and administrative expenses	176,444		31.2			161,463		30.4			14,981
Impairment of intangibles and other	Impairment of intangibles and other	22					197					(175)		Impairment of intangibles and other	—					22					(22)
Government stimulus (income) expense	Government stimulus (income) expense	44,435					—					(44,435)		Government stimulus (income) expense	—					44,435					44,435
Interest expense	Interest expense	(431)					(2,596)					(2,165)		Interest expense	(1,135)					(431)					704

Income tax expense	Income tax expense	4,595		27.7		(1)	9,508		27.9		(1)	(4,913)		Income tax expense	10,150		27.5		(1)	4,595		27.7		(1)	5,555
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(8)					4,534					(4,542)		Net income attributable to noncontrolling interests	6,126					(8)					6,134
Net income attributable to LHC Group, Inc.’s common stockholders	Net income attributable to LHC Group, Inc.’s common stockholders	$	14,500				$	30,067				$	(15,567)	Net income attributable to LHC Group, Inc.’s common stockholders	$	27,734				$	14,500				$	13,234

(1) Effective tax rate as a percentage of income from continuing operations attributable to our common stockholders, excluding the excess tax benefits realized of ~~$0.7~~$0.3 million and ~~$0.4~~$0.7 million during the three months ended September 30, 2021 and 2020, ~~and 2019,~~ respectively.

~~Consolidated net service revenue was negatively impacted due to COVID-19, which affected all percentages of revenue disclosed below.~~

Net service revenue

The following table sets forth each of our segment’s revenue growth or loss, admissions, census, episodes, patient days, and billable hours for the ~~nine~~three months ended September 30, ~~2020~~2021 and the related change from the same period in ~~2019~~2020 (amounts in thousands, except admissions, census, episode data, patient days and billable hours, which are actual amounts; net service revenue excludes implicit price concessions):

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The below data for the three months ended September 30, 2020 was impacted by the COVID-19 pandemic.
The below data for the three months ended September 30, 2021 was impacted by the COVID-19 pandemic.												The below data for the three months ended September 30, 2021 was impacted by the COVID-19 pandemic.
		Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %			Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %
Home health services	Home health services											Home health services
Revenue	Revenue	$	363,394	(4.1)	%	$	11,589	$	374,983	(1.7)	%	Revenue	$	389,670	4.5	%	$	3,014	$	392,684	4.7	%
Revenue Medicare	Revenue Medicare	$	238,500	(8.9)		$	7,994	$	246,494	(6.4)		Revenue Medicare	$	238,603	(2.6)		$	2,351	$	240,954	(2.2)
Admissions	Admissions	101,623		4.7		2,681		104,304		6.8		Admissions	107,442		3.6		1,050		108,492		4.0
Medicare Admissions	Medicare Admissions	54,653		(4.4)		1,254		55,907		(2.8)		Medicare Admissions	52,341		(5.7)		186		52,527		(6.0)
Average Census	Average Census	80,063		4.9		2,191		82,254		7.0		Average Census	83,777		2.5		481		84,258		2.4
Average Medicare Census	Average Medicare Census	45,836		(5.7)		1,284		47,120		(3.9)		Average Medicare Census	43,359		(7.4)		316		43,675		(7.3)
Home Health Episodes	Home Health Episodes	86,029		(3.5)		2,941		88,970		(3.2)		Home Health Episodes	83,635		(4.0)		915		84,550		(5.0)
Hospice services	Hospice services					—						Hospice services
Revenue	Revenue	$	59,731	4.6		$	3,228	$	62,959	7.8		Revenue	$	63,902	0.9		$	20,744	$	84,646	34.4
Revenue Medicare	Revenue Medicare	$	54,941	4.2		$	2,653	$	57,594	7.6		Revenue Medicare	$	59,326	2.4		$	19,146	$	78,472	36.2
Admissions	Admissions	4,863		12.8		214		5,077		12.3		Admissions	5,140		0.1		1,326		6,466		27.4
Medicare Admissions	Medicare Admissions	4,395		15.2		174		4,569		14.6		Medicare Admissions	4,606		0.1		1,146		5,752		25.9
Average Census	Average Census	4,220		3.5		173		4,393		4.9		Average Census	4,293		(2.5)		1,404		5,697		29.7
Average Medicare Census	Average Medicare Census	3,931		3.9		160		4,091		5.4		Average Medicare Census	4,057		(1.0)		1,277		5,334		30.4
Patient days	Patient days	388,465		1.7		15,749		404,214		4.9		Patient days	395,917		(2.2)		128,182		524,099		29.7
Home and community-based services	Home and community-based services											Home and community-based services
Revenue	Revenue	$	50,211	(7.6)		$	908	$	51,119	(6.3)		Revenue	$	46,278	(8.9)		$	79	$	46,357	(9.3)
Billable hours	Billable hours	1,913,079		(14.8)		29,627		1,942,706		(14.0)		Billable hours	1,813,284		(6.0)		4,427		1,817,711		(6.4)
Facility-based services	Facility-based services											Facility-based services
LTACHs	LTACHs											LTACHs
Revenue	Revenue	$	32,680	25.4		$	—	$	32,680	25.4		Revenue	$	31,241	(4.3)		$	245	$	31,486	(3.7)
Patient days	Patient days	24,275		28.3		—		24,275		28.3		Patient days	22,187		(8.4)		535		22,722		(6.4)
Other facility-based services	Other facility-based services											Other facility-based services
Revenue	Revenue	$	2,082	(33.6)		$	—	$	2,082	(33.6)		Revenue	$	1,303	(37.4)		$	—	$	1,303	(37.4)
HCI	HCI											HCI
Revenue	Revenue	$	16,178	—		$	—	$	16,178	—		Revenue	$	18,213	12.6		$	—	$	18,213	12.6
Consolidated	Consolidated											Consolidated
Revenue	Revenue	$	524,276	(1.9)		$	15,725	$	540,001	1.5		Revenue	$	550,607	2.7		$	24,082	$	574,689	6.4

(1) Organic - combination of same store, a location that has been in service with us for greater than 12 months, and de novo, an internally developed location that has been in service for 12 months or less.

(2) Acquired - purchased location that has been in service with us 12 months or less.

We had a decrease in our home health revenue per episode during 2020. COVID-19 caused our Medicare reimbursement to decline due to a decrease in patient acuity and a decrease in institutional admissions, which was a result of the temporary suspension of elective procedures. Patient volumes declined in our home and community-based segment due to the continued impact of COVID-19.

Our home health and hospice segment received the benefit of the suspension of the 2% sequestration payment adjustment for Medicare claims and the LTACHs received the benefit of the suspension of the 2% sequestration payment adjustment and the waiver of site-neutral payments for LTACH Medicare claims.

~~Table of Contents~~

~~HCI revenue increased in the third quarter of 2020 due to the recognition of $9.6 million of the Medicare Shared Services Program ("MSSP").~~

The following table sets forth the reconciliation of total revenue disclosed above, which excludes implicit price concession, to net service revenue recognized for the three months ended September 30, 2020 and 2019 (amounts in thousands, except percentages, which are percentages of consolidated revenue):

Three Months Ended September 30,
2020 % of Net Service Revenue 2019 % of Net Service Revenue
Revenue $ 540,001 $ 532,026
Less: Implicit price concession 9,317 1.7 % 3,527 0.7 %
Net service revenue $ 530,684 $ 528,499

Cost of service revenue

The following table summarizes cost of service revenue (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):

Three Months Ended September 30,
2020 2019
Home health services
Salaries, wages and benefits $ 184,644 49.4 % $ 217,510 57.9 %
Transportation 9,019 2.4 11,161 3.0
Supplies and services 11,860 3.2 8,743 2.3
Total $ 205,523 55.0 % $ 237,414 63.2 %
Hospice services
Salaries, wages and benefits $ 26,535 44.4 % $ 26,336 42.5 %
Transportation 1,865 3.1 2,023 3.3
Supplies and services 8,780 14.7 7,460 12.0
Total $ 37,180 62.2 % $ 35,819 57.8 %
Home and community-based services
Salaries, wages and benefits $ 36,020 74.4 % $ 38,943 72.9 %
Transportation 457 0.9 534 1.0
Supplies and services 187 0.4 217 0.4
Total $ 36,664 75.7 % $ 39,694 74.3 %
Facility-based services
Salaries, wages and benefits $ 16,271 48.8 % $ 13,302 46.3 %
Transportation 21 0.1 76 0.3
Supplies and services 5,921 17.8 5,130 17.9
Total $ 22,213 66.7 % $ 18,508 64.5 %
HCI
Salaries, wages and benefits $ 3,496 22.3 % $ 3,196 36.5 %
Transportation 57 0.4 99 1.1
Supplies and services 113 0.7 38 0.4
Total $ 3,666 23.4 % $ 3,333 38.0 %
Consolidated
Total $ 305,246 57.5 % $ 334,768 63.3 %

~~During 2020, our cost of service revenue was impacted by:~~

3231

Table of Contents


	Three Months Ended September 30,
	2021				2020
Home health services
Salaries, wages and benefits	$	209,972	54.3	%	$	184,644	49.4	%
Transportation	9,358		2.4		9,019		2.4
Supplies and services	11,509		3.0		11,860		3.2
Total	$	230,839	59.7	%	$	205,523	55.0	%
Hospice services
Salaries, wages and benefits	$	37,485	45.4	%	$	26,535	44.4	%
Transportation	2,354		2.8		1,865		3.1
Supplies and services	11,792		14.3		8,780		14.7
Total	$	51,631	62.5	%	$	37,180	62.2	%
Home and community-based services
Salaries, wages and benefits	$	33,632	73.4	%	$	36,020	74.4	%
Transportation	429		1.0		457		0.9
Supplies and services	325		0.7		187		0.4
Total	$	34,386	75.1	%	$	36,664	75.7	%
Facility-based services
Salaries, wages and benefits	$	17,499	54.0	%	$	16,271	48.8	%
Transportation	12		—		21		0.1
Supplies and services	6,214		19.2		5,921		17.8
Total	$	23,725	73.2	%	$	22,213	66.7	%
HCI
Salaries, wages and benefits	$	3,214	18.0	%	$	3,496	22.3	%
Transportation	50		0.3		57		0.4
Supplies and services	17		0.1		113		0.7
Total	$	3,281	18.4	%	$	3,666	23.4	%
Consolidated
Salaries, wages and benefits	$	301,802	53.4	%	$	266,966	50.3	%
Transportation	12,203		2.1		11,419		2.2
Supplies and services	29,857		5.3		26,861		5.0
Total	$	343,862	60.8	%	$	305,246	57.5	%

•

During 2021, cost ~~containment efforts within~~of service revenue in our home health segment was impacted by the use of nursing contract labor due to ~~streamlining~~the high number of ~~leadership within each respective~~our clinicians in quarantine for COVID-19. Cost of service revenue in our home and community-based segment ~~as we completed~~declined due to the ~~integration of Almost Family~~

•~~cost mitigation efforts~~lower patient volumes resulting in a decrease in billable hours and a decrease in total costs. Supplies associated with ~~PDGM within the home health segment during 2020~~

•~~increased costs within each of our segments associated with significantly increased supplies and services costs related to~~ COVID-19 ~~including additional PPE purchases~~

•~~prior year acquisition adjustments~~decreased in ~~our hospice segment, which resulted~~all same-store locations in ~~higher revenue in 2019~~2021 as compared to 2020

• as we incurred substantial costs in 2020 to acquire needed personal protective equipment to protect our clinicians during the ~~recognition~~start of ~~MSSP earnings, which resulted~~the global pandemic. We continue to purchase additional personal protective equipment; however, we are observing an overall decline in ~~higher revenue in our HCI segment during 2020.~~utilization and an overall price per unit decline for these supplies.

General and administrative expenses

The following table summarizes general and administrative expenses (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):

Three Months Ended September 30,
2020 2019
Home health services
General and administrative $ 115,749 31.0 % $ 105,761 28.2 %
Depreciation and amortization 3,043 0.8 2,557 0.7
Total $ 118,792 31.8 % $ 108,318 28.9 %
Hospice services
General and administrative $ 16,159 27.0 % $ 14,763 23.8 %
Depreciation and amortization 509 0.9 455 0.7
Total $ 16,668 27.9 % $ 15,218 24.5 %
Home and community-based services
General and administrative $ 10,519 21.7 % $ 10,471 19.6 %
Depreciation and amortization 418 0.9 338 0.6
Total $ 10,937 22.6 % $ 10,809 20.2 %
Facility-based services
General and administrative $ 10,494 31.5 % $ 8,713 30.3 %
Depreciation and amortization 945 2.8 785 2.7
Total $ 11,439 34.3 % $ 9,498 33.0 %
HCI
General and administrative $ 3,325 21.2 % $ 2,709 31.0 %
Depreciation and amortization 302 1.9 277 3.2
Total $ 3,627 23.1 % $ 2,986 34.2 %
Consolidated
Total $ 161,463 30.4 % $ 146,829 27.8 %

Table of Contents


	Three Months Ended September 30,
	2021				2020
Home health services
General and administrative	$	123,656	32.0	%	$	115,749	31.0	%
Depreciation and amortization	3,039		0.8		3,043		0.8
Total	$	126,695	32.8	%	$	118,792	31.8	%
Hospice services
General and administrative	$	21,710	26.3	%	$	16,159	27.0	%
Depreciation and amortization	838		1.0		509		0.9
Total	$	22,548	27.3	%	$	16,668	27.9	%
Home and community-based services
General and administrative	$	11,335	24.7	%	$	10,519	21.7	%
Depreciation and amortization	429		0.9		418		0.9
Total	$	11,764	25.6	%	$	10,937	22.6	%
Facility-based services
General and administrative	$	10,230	31.6	%	$	10,494	31.5	%
Depreciation and amortization	820		2.5		945		2.8
Total	$	11,050	34.1	%	$	11,439	34.3	%
HCI
General and administrative	$	4,155	23.2	%	$	3,325	21.2	%
Depreciation and amortization	232		1.3		302		1.9
Total	$	4,387	24.5	%	$	3,627	23.1	%
Consolidated
General and administrative	$	171,086	30.3	%	$	156,246	29.4	%
Depreciation and amortization	5,358		0.9		5,217		1.0
Total	$	176,444	31.2	%	$	161,463	30.4	%

~~Consolidated~~During 2021, consolidated general and administrative expenses increased as a percentage of ~~net service~~ revenue from ~~27.8% in 2019~~30.4% to ~~30.4% in 2020.~~ ~~The increase in~~31.2%. We incurred $5.2 million of acquisition transaction expenses during the third quarter of 2021. Our consolidated general and administrative expenses, ~~as a percentage~~excluding the acquisition transaction expenses, remained flat comparing third quarter of ~~net service revenue was a result~~2021 to third quarter of a decrease in our home health revenue per episode due to a decrease in patient acuity caused by the COVID-19 pandemic. In addition, heightened costs and the additional administrative costs of COVID-19 and investments in our technology infrastructure increased our expenses during this quarter. Finally, the increase from 2019 to 2020 related to costs associated with the completion of certain acquisitions during latter part of 2019 ~~and nine months ended~~ 2020.

Nine months ended September 30, ~~2020~~2021 compared to nine months ended September 30, ~~2019~~2020

Summary consolidated financial information

The following table summarizes our consolidated results of operations for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 (amounts in thousands, except percentages, which are percentages of consolidated net service revenue, unless indicated otherwise):

Table of Contents


		2020					2019					Increase (Decrease)			2021					2020					Increase (Decrease)
Net service revenue	Net service revenue	$	1,530,875				$	1,548,926				$	(18,051)	Net service revenue	$	1,636,193				$	1,530,875				$	105,318
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	933,160		61.0	%		981,620		63.4	%		(48,460)		Cost of service revenue (excluding depreciation and amortization)	972,006		59.4	%		933,160		61.0	%		38,846
General and administrative expenses	General and administrative expenses	469,903		30.7			440,634		28.4			29,269		General and administrative expenses	506,754		31.0			469,903		30.7			36,851
Impairment of intangibles and other	Impairment of intangibles and other	622					7,534					(6,912)		Impairment of intangibles and other	937					622					315
Government stimulus (income) expense	Government stimulus (income) expense	—					—					—		Government stimulus (income) expense	—					—					—
Interest expense	Interest expense	(4,040)					(8,533)					(4,493)		Interest expense	(1,541)					(4,040)					(2,499)

Income tax expense	Income tax expense	23,181		26.5		(1)	22,665		27.7		(1)	516		Income tax expense	32,909		26.6		(1)	23,181		26.5		(1)	9,728
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	18,753					14,017					4,736		Net income attributable to noncontrolling interests	22,010					18,753					3,257
Net income attributable to LHC Group, Inc.’s common stockholders	Net income attributable to LHC Group, Inc.’s common stockholders	$	81,216				$	73,923				$	7,293	Net income attributable to LHC Group, Inc.’s common stockholders	$	100,036				$	81,216				$	18,820

(1) Effective tax rate as a percentage of income from continuing operations attributable to our common stockholders, excluding the excess tax benefits realized of $2.4 million ~~and $3.0 million~~ during each of the nine months ended September 30, ~~2020~~2021 and ~~2019, respectively.~~ 2020. The effective tax rate for the nine months ended September 30, 2020 also benefited from a $2.2 million impact from the enactment of the CARES Act.

~~Consolidated net service revenue was negatively impacted due to COVID-19, which affected all percentages of revenue disclosed below.~~

Net service revenue

The following table sets forth each of our segment’s revenue growth or loss, admissions, census, episodes, patient days, and billable hours for the nine months ended September 30, ~~2020~~2021 and the related change from the same period in ~~2019~~2020 (amounts in thousands, except admissions, census, episode data, patient days and billable hours, which are actual amounts; net service revenue excludes implicit price concessions):

Table of Contents


The below data for the nine months ended September 30, 2020 was impacted by the COVID-19 pandemic.
The below data for the nine months ended September 30, 2021 was impacted by the COVID-19 pandemic.												The below data for the nine months ended September 30, 2021 was impacted by the COVID-19 pandemic.
		Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %			Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %
Home health services	Home health services											Home health services
Revenue	Revenue	$	1,044,990	(6.5)	%	$	47,256	$	1,092,246	(3.2)	%	Revenue	$	1,168,752	8.0	%	$	7,194	$	1,175,946	7.7	%
Revenue Medicare	Revenue Medicare	$	692,654	(11.3)		$	31,313	$	723,967	(8.3)		Revenue Medicare	$	725,516	1.2		$	5,915	$	731,431	1.0
Admissions	Admissions	290,309		2.4		15,659		305,968		6.8		Admissions	321,812		6.1		3,684		325,496		6.4
Medicare Admissions	Medicare Admissions	158,649		(7.0)		7,683		166,332		(3.5)		Medicare Admissions	160,598		(2.5)		1,332		161,930		(2.6)
Average Census	Average Census	75,900		0.4		3,020		78,920		3.1		Average Census	84,183		7.7		400		84,583		7.2
Average Medicare Census	Average Medicare Census	44,302		(9.2)		1,706		46,008		(6.9)		Average Medicare Census	44,381		(2.6)		301		44,682		(2.9)
Home Health Episodes	Home Health Episodes	249,635		(8.1)		10,780		260,415		(5.9)		Home Health Episodes	251,987		(0.5)		2,836		254,823		(2.1)
Hospice services	Hospice services											Hospice services
Revenue	Revenue	$	170,578	4.9		$	13,831	$	184,409	10.2		Revenue	$	187,073	1.5		$	26,098	$	213,171	15.6
Revenue Medicare	Revenue Medicare	$	157,532	4.7		$	11,946	$	169,478	10.2		Revenue Medicare	$	173,416	2.3		$	24,439	$	197,855	16.7
Admissions	Admissions	13,682		4.8		1,324		15,006		9.2		Admissions	15,411		2.9		1,599		17,010		13.4
Medicare Admissions	Medicare Admissions	12,227		5.2		1,139		13,366		9.4		Medicare Admissions	13,771		3.4		1,366		15,137		13.3
Average Census	Average Census	4,075		3.9		263		4,338		8.4		Average Census	4,270		(1.9)		600		4,870		11.9
Average Medicare Census	Average Medicare Census	3,792		4.6		245		4,037		9.2		Average Medicare Census	4,003		(1.2)		554		4,557		12.5
Patient days	Patient days	1,121,632		4.1		71,234		1,192,866		9.1		Patient days	1,166,618		(2.2)		163,939		1,330,557		11.5
Home and community-based services	Home and community-based services											Home and community-based services
Revenue	Revenue	$	149,075	(7.3)		$	2,250	$	151,325	(6.4)		Revenue	$	143,510	(3.4)		$	950	$	144,460	(4.5)
Billable hours	Billable hours	5,795,314		(14.2)		69,995		5,865,309		(13.7)		Billable hours	5,550,772		(3.1)		46,357		5,597,129		(4.3)
Facility-based services	Facility-based services											Facility-based services
LTACHs	LTACHs											LTACHs
Revenue	Revenue	$	92,762	21.0		$	—	$	92,762	21.0		Revenue	$	93,394	2.9		$	1,758	$	95,152	2.6
Patient days	Patient days	68,094		16.4		—		68,094		16.4		Patient days	60,849		(9.6)		3,232		64,081		(7.0)
Other facility-based services	Other facility-based services											Other facility-based services
Revenue	Revenue	$	7,052	(23.3)		$	—	$	7,052	(23.3)		Revenue	$	3,895	(44.8)		$	—	$	3,895	(44.8)
HCI	HCI											HCI
Revenue	Revenue	$	28,690	—		$	—	$	28,690	—		Revenue	$	30,436	6.1		$	—	$	30,436	6.1
Consolidated	Consolidated											Consolidated
Revenue	Revenue	$	1,493,147	(3.8)		$	63,337	$	1,556,484	(0.7)		Revenue	$	1,627,060	5.8		$	36,000	$	1,663,060	6.8

(2) Acquired - purchased location that has been in service with us 12 months or less.

We had a decrease in our home health revenue per episode due to the 4.3% behavioral adjustment associated with the implementation of PDGM during 2020. In addition, COVID-19 caused our Medicare reimbursement to decline due to several factors, such as increase in LUPAs, a decrease in patient acuity, and a decrease in institutional admissions, which was a result of the temporary suspension of elective procedures. Patient volumes declined in our home and community-based segment due to the continued impact of COVID-19.

~~Table of Contents~~

~~HCI revenue increased in the third quarter of 2020 due to the recognition of $9.6 million of the Medicare Shared Services Program ("MSSP").~~

The following table sets forth the reconciliation of total revenue disclosed above, which excludes implicit price concession, to net service revenue recognized for the nine months ended September 30, 2020 and 2019 (amounts in thousands, except percentages, which are percentages of consolidated revenue):

Nine Months Ended
September 30,
2020 % of Net Service Revenue 2019 % of Net Service Revenue
Revenue $ 1,556,484 $ 1,568,084
Less: Implicit price concession 25,609 1.6 % 19,158 1.2 %
Net service revenue $ 1,530,875 $ 1,548,926

Cost of service revenue

The following table summarizes cost of service revenue (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):

Nine Months Ended
September 30,
2020 2019
Home health services
Salaries, wages and benefits $ 561,783 52.0 % $ 635,966 57.1 %
Transportation 27,554 2.5 32,755 2.9
Supplies and services 41,772 3.9 25,361 2.3
Total $ 631,109 58.4 % $ 694,082 62.3 %
Hospice services
Salaries, wages and benefits $ 80,297 44.3 % $ 75,443 44.7 %
Transportation 5,604 3.1 5,691 3.4
Supplies and services 26,584 14.7 22,719 13.5
Total $ 112,485 62.1 % $ 103,853 61.6 %
Home and community-based services
Salaries, wages and benefits $ 109,594 75.8 % $ 116,674 74.0 %
Transportation 1,398 1.0 1,636 1.0
Supplies and services 2,872 2.0 744 0.5
Total $ 113,864 78.8 % $ 119,054 75.5 %
Facility-based services
Salaries, wages and benefits $ 46,575 48.2 % $ 37,696 44.7 %
Transportation 101 0.1 219 0.3
Supplies and services 17,664 18.3 15,897 18.8
Total $ 64,340 66.6 % $ 53,812 63.8 %
HCI
Salaries, wages and benefits $ 10,905 40.2 % $ 10,215 42.2 %
Transportation 205 0.8 330 1.4
Supplies and services 252 0.9 274 1.1
Total $ 11,362 41.9 % $ 10,819 44.7 %
Consolidated
Total $ 933,160 61.0 % $ 981,620 63.4 %

3635

Table of Contents

~~Consolidated~~


	Nine months ended September 30,
	2021				2020
Home health services
Salaries, wages and benefits	$	601,998	52.0	%	$	561,783	52.0	%
Transportation	27,408		2.4		27,554		2.5
Supplies and services	33,731		2.9		41,772		3.9
Total	$	663,137	57.3	%	$	631,109	58.4	%
Hospice services
Salaries, wages and benefits	$	93,950	44.9	%	$	80,297	44.3	%
Transportation	6,151		2.9		5,604		3.1
Supplies and services	29,747		14.2		26,584		14.7
Total	$	129,848	62.0	%	$	112,485	62.1	%
Home and community-based services
Salaries, wages and benefits	$	101,711	71.0	%	$	109,594	75.8	%
Transportation	1,259		0.9		1,398		1.0
Supplies and services	971		0.7		2,872		2.0
Total	$	103,941	72.6	%	$	113,864	78.8	%
Facility-based services
Salaries, wages and benefits	$	48,420	50.0	%	$	46,575	48.2	%
Transportation	29		—		101		0.1
Supplies and services	16,911		17.5		17,664		18.3
Total	$	65,360	67.5	%	$	64,340	66.6	%
HCI
Salaries, wages and benefits	$	9,527	32.0	%	$	10,905	40.2	%
Transportation	166		0.6		205		0.8
Supplies and services	27		0.1		252		0.9
Total	$	9,720	32.7	%	$	11,362	41.9	%
Consolidated
Salaries, wages and benefits	$	855,606	52.3	%	809,154		52.9	%
Transportation	35,013		2.1		34,862		2.3
Supplies and services	81,387		5.0		89,144		5.8
Total	$	972,006	59.4	%	$	933,160	61.0	%

During 2021, cost of service revenue ~~improved as a percentage~~in our home health segment was impacted by the effective cost mitigation strategies associated with the implementation of ~~net service revenue by 2.4% from 63.4% in 2019 to 61.0% in 2020. During 2020, our cost~~PDGM. Cost of service revenue ~~was impacted by:~~

•~~cost containment efforts within~~in our home ~~health~~ and ~~hospice segments~~community-based segment declined due to ~~streamlining of leadership within each respective segment as we completed~~ the ~~integration of Almost Family~~

•~~cost mitigation efforts associated with PDGM within the home health segment during 2020~~

•lower patient volumes resulting in a decrease in billable hours and a ~~decline of in-person visits at~~decrease in total costs. Supplies associated with COVID-19 decreased in all same-store locations in 2021 as compared to 2020 as we incurred substantial costs in 2020 to acquire needed personal protective equipment to protect our clinicians during the ~~beginning~~start of the ~~second quarter of 2020 due~~global pandemic. We continue to ~~COVID-19 policies implemented by public health~~purchase additional personal protective equipment; however, we are observing an overall decline in utilization and ~~governmental authorities, which patient volumes and in-person visits began to stabilize during the end of the quarter~~

•~~increased costs within each of our segments associated with significantly increased supplies and services costs related to COVID-19, including additional PPE purchases~~

•the sale of Ingenious Health at the beginning of 2019, which resulted in lower net service revenue during 2020 in our HCI segment offset by the recognition of MSSP earnings, which resulted in higher revenue in our HCI segment during 2020.an overall price per unit decline for these supplies.

General and administrative expenses

The following table summarizes general and administrative expenses (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):

Nine Months Ended
September 30,
2020 2019
Home health services
General and administrative $ 335,892 31.1 % $ 314,746 28.3 %
Depreciation and amortization 9,132 0.8 7,369 0.7
Total $ 345,024 31.9 % $ 322,115 29.0 %
Hospice services
General and administrative $ 48,015 26.5 % $ 43,856 26.0 %
Depreciation and amortization 1,545 0.9 1,311 0.8
Total $ 49,560 27.4 % $ 45,167 26.8 %
Home and community-based services
General and administrative $ 32,303 22.4 % $ 32,038 20.3 %
Depreciation and amortization 1,217 0.8 966 0.6
Total $ 33,520 23.2 % $ 33,004 20.9 %
Facility-based services
General and administrative $ 29,174 30.2 % $ 25,700 30.5 %
Depreciation and amortization 2,810 2.9 2,310 2.7
Total $ 31,984 33.1 % $ 28,010 33.2 %
HCI
General and administrative $ 8,918 32.8 % $ 11,482 47.4 %
Depreciation and amortization 897 3.3 856 3.5
Total $ 9,815 36.1 % $ 12,338 50.9 %
Consolidated
Total $ 469,903 30.7 % $ 440,634 28.4 %

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	Nine months ended September 30,
	2021				2020
Home health services
General and administrative	$	360,727	31.2	%	$	335,892	31.1	%
Depreciation and amortization	8,610		0.7		9,132		0.8
Total	$	369,337	31.9	%	$	345,024	31.9	%
Hospice services
General and administrative	$	56,874	27.2	%	$	48,015	26.5	%
Depreciation and amortization	1,915		0.9		1,545		0.9
Total	$	58,789	28.1	%	$	49,560	27.4	%
Home and community-based services
General and administrative	$	34,016	23.7	%	$	32,303	22.4	%
Depreciation and amortization	1,200		0.8		1,217		0.8
Total	$	35,216	24.5	%	$	33,520	23.2	%
Facility-based services
General and administrative	$	30,765	31.8	%	$	29,174	30.2	%
Depreciation and amortization	2,448		2.5		2,810		2.9
Total	$	33,213	34.3	%	$	31,984	33.1	%
HCI
General and administrative	$	9,473	31.8	%	$	8,918	32.8	%
Depreciation and amortization	726		2.4		897		3.3
Total	$	10,199	34.2	%	$	9,815	36.1	%
Consolidated
General and administrative	$	491,855	30.1	%	$	454,302	29.7	%
Depreciation and amortization	14,899		0.9		15,601		1.0
Total	$	506,754	31.0	%	$	469,903	30.7	%

~~Consolidated~~During 2021, consolidated general and administrative expenses increased as a percentage of ~~net service~~ revenue from ~~28.4% in 2019~~30.7% to ~~30.7% in 2020.~~ ~~The increase in~~31.0%. We incurred $6.1 million of acquisition transaction expenses during the nine months ended September 30, 2021. Our consolidated general and administrative expenses, ~~as a percentage of net service revenue was a result of a decrease in our home health revenue per episode due~~excluding acquisition transaction expenses, remained flat comparing 2021 to a decrease in our patient acuity caused by the COVID-19 pandemic. In addition, heightened costs and the additional administrative costs of COVID-19 and investments in our technology infrastructure increased our expenses during this year. Finally, the increase from 2019 to 2020 related to costs associated with the completion of certain acquisitions during latter part of 2019 and nine months ended 2020.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our cash balance at September 30, 2021 was $29.5 million and we have $243.3 million of available liquidity from cash and our revolving credit facility, net of $176.3 million liabilities associated with the CAAP. We have additional capacity in our revolving credit facility of $500.0 million per our accordion expansion. Based on our current plan of operations, including acquisitions, we believe this amount, when combined with expected cash flows from operations, will be sufficient to fund our growth strategy and to meet our anticipated operating expenses, capital expenditures, and debt service obligations for at least the next 12 months.

Our principal source of liquidity for operating activities is the collection of patient accounts receivable, most of which are collected from governmental and third-party commercial payors. We also have the ability to obtain additional liquidity, if necessary, through our credit facility, which provides for aggregate borrowings, including outstanding letters of credit.

The following table summarizes changes in cash (amounts in thousands):

Nine months ended September 30,
2020 2019
Net cash provided by (used in):
Operating activities $ 455,743 $ 104,790
Investing activities (41,773) (69,521)
Financing activities (191,878) (55,330)
Change in cash $ 222,092 $ (20,061)
Cash at beginning of period 31,672 49,363
Cash at end of period $ 253,764 $ 29,302

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	Nine months ended September 30,
	2021		2020
Net cash provided by (used in):
Operating activities	$	(51,616)	$	455,743
Investing activities	(412,242)		(41,773)
Financing activities	206,805		(191,878)
Change in cash	$	(257,053)	$	222,092
Cash at beginning of period	286,569		31,672
Cash at end of period	$	29,516	$	253,764

The CARES Act provided additional cash during the nine months ended September 30, 2020 and increased our net cash provided by operating activities by $317.9 million of Accelerated and Advance Payments and $33.6 million payment deferral of our portion of social security payroll tax. The initial impact of COVID-19 in 2020 also increased our prepaid medical supplies due to the need of obtaining personal protective equipment to our clinicians and increased our salaries, wages and benefits associated with the increased staffing demands associated with our response to COVID-19. ~~The~~

In 2021, CMS recouped $141.6 million of the Accelerated and Advance Payments and we returned $93.3 million of Provider Relief Funds back to the government. We paid $42.0 million in income taxes, of ~~$93.3~~which $17.3 million related to the CARES Act legislation. In addition, we acquired businesses of $383.5 million and utilized our credit agreement for funding of these acquisitions. These cash outflows were offset ~~our cash used~~by a reduction in our ~~financing activities.~~days sales outstanding and stabilized costs for needed personal protective equipment.

Indebtedness

On March 30, 2018, we entered into a Credit Agreement with JPMorgan Chase Bank, N.A., which was effective on April 2, 2018 (the "Credit Agreement"). The Credit Agreement ~~provides~~provided a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of $500.0 million, which ~~includes~~included an additional $200.0 million accordion expansion feature, and a letter of credit sub-limit equal to $50.0 million. The expiration date of the Credit Agreement iswas March 30, 2023. On August 3, 2021, we entered into an Amended and Restated Senior Credit Facility (the "2021 Amended Credit Agreement"), which amends and restates in its entirety the Credit Agreement. The 2021 Amended Credit Agreement provides a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of $800.0 million, which includes an additional $500.0 million accordion expansion, and a letter of credit sub-limit equal to $75.0 million. The expiration date of the 2021 Amended Credit Agreement is August 3, 2026.

Our obligations under the 2021 Amended Credit Agreement are secured by substantially all of ~~the~~our assets ~~of the Company~~ and ~~its~~our wholly-owned subsidiaries (subject to customary exclusions), which assets include ~~the Company’s~~our equity ownership of ~~its~~our wholly-owned subsidiaries and ~~its~~our equity ownership in joint venture entities. Our wholly-owned subsidiaries also guarantee the obligations of the Company under the 2021 Amended Credit Agreement.

Revolving loans under the 2021 Amended Credit Agreement bear interest at, as selected by us, at either ~~a (a) Base~~(i) the prevailing London Interbank Offered Rate ~~which is defined as a fluctuating rate per annum equal to the highest~~("LIBOR") (with interest periods of ~~(1) the Federal Funds Rate in effect on such day plus 0.5%, (2) the Prime Rate in effect on such day, and (3) the Eurodollar Rate for a~~ one, ~~month interest period on such day plus 1.5%,~~three or six months at our option) plus a ~~margin ranging from 0.50%~~spread of 1.25% to ~~1.25% per annum~~2.0% based on our quarterly consolidated Leverage Ratio or ~~(b) Eurodollar~~(ii) the prevailing prime or base rate plus a ~~margin ranging from 1.50%~~spread of 0.25% to ~~2.25% per annum.~~1.00% based on our quarterly consolidated Leverage Ratio. Swing line loans bear interest at the Base Rate. We are limited to 15 Eurodollar borrowings outstanding at ~~the same~~any time. We are required to pay a commitment fee for the unused commitments at rates ranging from ~~0.20%~~0.15% to ~~0.35%~~0.30% per annum depending upon our quarterly consolidated Leverage ~~Ratio, as defined in the Credit Agreement.~~Ratio. The Base Rate as of September 30, ~~2020~~2021 was ~~4.00%~~3.75% and the LIBOR rate was ~~1.94%~~1.63%. As of September 30, ~~2020,~~2021, the effective interest ~~rates~~rate on ~~our~~outstanding borrowings under the 2021 Amended Credit Agreement was ~~1.94%~~1.63%.

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As of September 30, 2021, we had $355.0 million drawn, letters of credit issued in the amount of $25.4 million, and $419.6 million of remaining borrowing capacity available under the 2021 Amended Credit Agreement. At December 31, 2020, we had $20.0 million drawn and letters of credit ~~outstanding~~issued in the amount of ~~$24.8~~$25.4 million under the Credit Agreement, and had approximately $455.2 million of remaining borrowing capacity available under the Credit Agreement. We were able to utilize cash on hand to pay $509.2 million on the Credit Agreement during the nine months ended September 30, 2020. At December 31, 2019, we had $253.0 million drawn and letters of credit outstanding in the amount of $28.4 million under the Credit Facility.

Under the 2021 Amended Credit Agreement with JPMorgan Chase Bank, N.A., a letter of credit fee shall be equal to the applicable Eurodollar rate on the average daily amount of the letter of credit exposure. The agent’s standard up-front fee and other customary administrative charges will also be due upon issuance of the letter of credit along with a renewal fee on each anniversary date of

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such issuance while the letter of credit is outstanding. Borrowings accrue interest under the 2021 Amended Credit Agreement at either the Base Rate or the Eurodollar rate, and are subject to the applicable margins set forth below:


Leverage Ratio	Leverage Ratio	Eurodollar Margin		Base Rate Margin		Commitment Fee Rate		Leverage Ratio	Eurodollar Margin		Base Rate Margin		Commitment Fee Rate
≤1.00:1.00	≤1.00:1.00	1.50	%	0.50	%	0.200	%	≤1.00:1.00	1.25	%	0.25	%	0.15	%
>1.00:1.00 ≤ 2.00:1.00	>1.00:1.00 ≤ 2.00:1.00	1.75	%	0.75	%	0.250	%	>1.00:1.00 ≤ 2.00:1.00	1.50	%	0.50	%	0.20	%
>2.00:1.00 ≤ 3.00:1.00	>2.00:1.00 ≤ 3.00:1.00	2.00	%	1.00	%	0.300	%	>2.00:1.00 ≤ 3.00:1.00	1.75	%	0.75	%	0.25	%
>3.00:1.00	>3.00:1.00	2.25	%	1.25	%	0.350	%	>3.00:1.00	2.00	%	1.00	%	0.30	%

Our 2021 Amended Credit Agreement contains customary affirmative, negative and financial covenants, which are subject to customary carve-outs, thresholds, and materiality qualifiers. The Credit Facility allows us to make certain restricted payments within certain parameters provided we maintain compliance with those financial ratios and covenants after giving effect to such restricted payments or, in the case of repurchasing shares of its stock, so long as such repurchases are within certain specified baskets.

Our 2021 Amended Credit Agreement also contains customary events of default, which are subject to customary carve-outs, thresholds, and materiality qualifiers. These include bankruptcy and other insolvency events, cross-defaults to other debt agreements, a change in control involving us or any subsidiary guarantor, and the failure to comply with certain covenants.

At September 30, ~~2020,~~2021, we were in compliance with all debt covenants.

Contingencies

For a discussion of contingencies, see Note 7 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies

For a discussion of critical accounting policies, see Note 2 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference. For a full description of the Company's other critical accounting policies, see Note 2 of the Notes to Consolidated Financial Statements in the ~~2019~~2020 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our exposure to market risk relates to changes in interest rates for borrowings under our credit facility. Our letter of credit fees and interest accrued on our debt borrowings are subject to the applicable Eurodollar or Base Rate. A hypothetical basis point increase in interest rates on the average daily amounts outstanding under the credit facility would have increased our interest expense by ~~$1.0~~$1.2 million for the nine months ended September 30, ~~2020.~~2021.

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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We 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 its 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 Form 10-Q, as of September 30, ~~2020,~~2021, under the supervision and with the participation of management, including the principal executive officer and principal financial officer, management

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conducted an evaluation of the effectiveness of the disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.

Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, ~~2020,~~2021, the end of the period covered by this Quarterly Report.

Changes in Internal Controls Over Financial Reporting

We, including the principal executive officer and principal financial officer, do 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 the controls and procedures, the principal executive officer and principal financial officer concluded the disclosure controls and procedures were effective at a reasonable assurance level as of September 30, ~~2020,~~2021, the end of the period covered by this Quarterly Report.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

For a discussion of legal proceedings, see Note 7 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS.

Important risk factors that could materially affect the Company’s business, financial condition or results of operations in future periods are described in Part I, Item 1A, “Risk Factors” of our 2019 Form 10-K and also in Part II, Item 1A, "Risk Factors" of our quarterly report on Form 10-Q for the six months ended June 30, 2020 (the "Q1 2020 Form 10-Q"). Those risk factors are supplemented by those discussed under “Management’s Discussion and Analysis Of Financial Condition And Results Of Operations” in Part I, Item 2 of this Quarterly Report. Please be aware that these risks may change over time and other risks may prove to be important in the future. In addition, these risks may be heightened by the disruption and uncertainty resulting from COVID-19.

There have been no material changes in the Company’s risk factors from those in Part I, Item 1A, “Risk Factors” of our ~~2019 Form 10-K, as updated in Part II, Item A, "Risk Factors" of our Q2~~ 2020 Form ~~10-Q.~~10-K.

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

None.

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ITEM 6. EXHIBITS.


3.1			Amended and Restated Certificate of Incorporation of LHC Group, Inc. (previously filed as an Exhibit 3.1 to LHC Group’s Form 8-K filed on April 2, 2018).

3.2			Bylaws of LHC Group, Inc. as amended on December 31, 2007 (previously filed as Exhibit 3.2 to LHC Group’s Form 10-Q filed on May 9, 2008).

4.1			Specimen Stock Certificate of LHC Group’s Common Stock, par value $0.01 per share (previously filed as Exhibit 4.1 to LHC Group’s Form S-1/ A (File No. 333-120792) filed on February 14, 2005).

31.1			Certification of Keith G. Myers, Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Dale G. Mackel,, Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*			Certification of Chief Executive Officer and Chief Financial Officer of LHC Group, Inc. 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 - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			XBRL Schema Document

101.CAL			XBRL Calculation Linkbase Document

101.DEF			XBRL Definition Linkbase Document

101.LAB			XBRL Label Linkbase Document

101.PRE			XBRL Presentation Linkbase Document

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). Users of this data are advised pursuant to Rule 406T of Regulation S-T that the interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise not subject to liability under these sections. The financial information contained in the XBRL-related documents is “unaudited” or “unreviewed.”

*This exhibit is furnished to the SEC as an accompanying document and is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, and the document will not be deemed incorporated by reference into any filing under the Securities Act of 1933.

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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.


						LHC GROUP, INC.
						(Registrant)

Date: November ~~5, 2020~~4, 2021						/s/ Dale G. Mackel
						Dale G. Mackel
						Chief Financial Officer (Principal financial officer)


	Number of shares	Per share price
Shares available as of December 31, 2019	132,449


Shares issued during the three months ended March 31, 2020	4,663	$	130.87
Shares issued during the three months ended June 30, 2020	3,730	$	133.19

Shares issued during the three months ended September 30, 2020	3,454	$165.60
Shares available as of September 30, 2020	120,602


	Three Months Ended September 30, 2019
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	375,599	$	62,028	$	53,411	$	28,715	$	8,746	$	528,499
Cost of service revenue (excluding depreciation and amortization)	237,414		35,819		39,694		18,508		3,333		334,768
General and administrative expenses	108,318		15,218		10,809		9,498		2,986		146,829
Impairment of intangibles and other	197		0		0		0		0		197
Operating income	29,670		10,991		2,908		709		2,427		46,705
Interest expense	(1,758)		(310)		(272)		(174)		(82)		(2,596)
Income before income taxes and noncontrolling interest	27,912		10,681		2,636		535		2,345		44,109
Income tax expense	5,900		1,689		1,299		144		476		9,508
Net income	22,012		8,992		1,337		391		1,869		34,601
Less net income (loss) attributable to noncontrolling interests	3,577		1,213		(180)		(67)		(9)		4,534
Net income attributable to LHC Group, Inc.'s common stockholders	$	18,435	$	7,779	$	1,517	$	458	$	1,878	$	30,067
Total assets	$	1,458,991	$	235,865	$	243,779	$	88,905	$	70,324	$	2,097,864


Description	Fiscal Year 2021 Rate per patient day		Fiscal year 2020 Rate per patient day
Routine Home Care days 1-60	$	199.25	$	194.50
Routine Home Care days 60+	$	157.49	$	153.72
Continuous Home Care	$	1,432.41	$	1,395.63
Full rate = 24 hours of care
$58.15 = hourly rate for 2020 $59.68 = hourly rate for 2021
Inpatient Respite Care	$	461.09	$	450.10
General Inpatient Care	$	1,045.66	$	1,021.25


	Three Months Ended September 30,
	2020		% of Net Service Revenue		2019		% of Net Service Revenue
Revenue	$	540,001			$	532,026
Less: Implicit price concession	9,317		1.7	%	3,527		0.7	%
Net service revenue	$	530,684			$	528,499