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RISK FACTORS

Investing in our common stock involves a degree of risk.risk, including the risks we describe below. You should consider carefully the following risks, as well as other information in this prospectus and the incorporated documents, before investing in our common stock. If any of the following risks occurs, our results of operations, financial condition and business could be harmed materially and the trading price of our common stock could decline.

Risks Related to Our Industry

Our revenue is substantially derived from Medicare. Reductions in Medicare rates, rate increases that do not cover cost increases and/or significant changes to the current Medicare reimbursement methodology may adversely affect our business.

We generally receive fixed payments from Medicare for our home health services based on the level of care that we provide patients. Consequently,Reductions to Medicare rates and/or changes in Medicare reimbursement methodology could have an adverse impact on our profitability largely depends upon our abilityrevenues and profitability. Medicare payments could be reduced as a result of:

Although current Medicare currentlylegislation provides for an annual adjustment of the various payment rates based on the increase or decrease of the medical care expenditure category of the Consumer Price Index, these Medicare payment rate increasesthis adjustment may be less than actual inflation in any given year or could be eliminatedreduced or reducedeliminated in any given year. Alternatively,In February 2006, Congress passed a bill freezing home care reimbursement rates for 2006. The freeze is effective through December 31, 2006. While a 3.1% rate increase for home health services is scheduled to go into effect on January 1, 2007, there is no assurance that Congress will allow the increase. In fact, MedPAC has recommended that Congress not increase home health reimbursement rates in 2007. We cannot assure you that we will be able to operate profitably in the event there are significant changes in Medicare rates or changes in the methodology used to determine those rates.

Additionally, MedPAC has recently recommended implementation of a pay-for-performance initiative in home health care. If implemented, Medicare will begin to differentiate reimbursement rates for Medicare home health service providers based on quality measures. Of the 3.1% increase to Medicare home health rates scheduled to go into effect on January 1, 2007, 2.0% of the proposed 3.1% increase would be contingent upon home health providers reporting ten clinical quality measures through the Outcome and Assessment Information Set, or OASIS. Under such a system, a modest portion of total payments would be redistributed, or increased slightly for providers with above-average outcomes scores and decreased slightly for providers with below-average scores in their respective service areas or regions. We cannot assure you that a pay-for-performance reimbursement system will not adversely affect our Medicare reimbursement rates and, consequently, our results of operations.

Overall payments made by Medicare to us for hospice services are subject to two payment limitations, known as hospice caps, calculated by the Medicare fiscal intermediary on an annual basis. Under the first limitation, total Medicare payments to us per provider number are compared to a hospice cap amount that is calculated by multiplying the number of Medicare beneficiaries under that provider number electing hospice care for the first time during the cap period by a statutory amount that is indexed for inflation. The cap amount per Medicare beneficiary for the twelve-month period ending October 31, 2006 is $20,585. We must return any payments in excess of the cap amount to Medicare. The second hospice cap, which is also calculated on a per provider number basis, provides that reimbursement for any in-patient days that exceed 20% of the total in-service days for the particular provider number shall be reimbursed at a lower rate. Our ability to avoid these limitations depends on a number of factors, each determined on a provider-number basis, including the average length of stay and mix in level of care. Our revenue and profitability associated with our hospice operations may be materially reduced if we are unable to avoid triggering these and other Medicare payment limitations. As we expand our cost of providing services, which consists primarily of labor costs, increases more thanhospice operations, we cannot be certain that we will not exceed the annual Medicare price adjustment,cap amounts in the future. Thus, we cannot assure you that these limitations will not negatively affect our profitability on a company-wide basis in the future.

Further, for our hospice patients receiving nursing home care under certain state Medicaid programs who elect hospice care under Medicare or Medicaid, the state must pay us, in addition to the applicable Medicare or Medicaid hospice per diem rate, an amount equal to at least 95% of the Medicaid per diem nursing home rate for “room and board” furnished to the patient by the nursing home. We contract with various nursing homes for the nursing homes’ provision of certain “room and board” services that the nursing homes would otherwise provide Medicaid nursing home patients. We bill and must collect from the applicable state Medicaid program an amount equal to at least 95% of the amount that would otherwise have been paid directly to the nursing home under the state’s Medicaid plan. Under our standard nursing home contracts, we generally pay the nursing home for these “room and board” services in advance of reimbursement from Medicaid at 100% of the Medicaid per diem nursing home rate. Approximately 40% of our hospice patients reside in nursing homes. Consequently, the reduction or elimination of Medicare payments for hospice patients residing in nursing homes, our ability to collect for these services or any change in our ability to provide service to such patients would significantly reduce the net patient service revenue and profitability related to our hospice operations or may have an adverse effect on our bad debt expense.

If any of our agencies fail to comply with the conditions of participation in the Medicare program, that agency could be impacted negatively.terminated from the Medicare program, which would adversely affect our net patient service revenue and profitability.

Each of our home carehealth and hospice agencies must comply with the extensive conditions required of participation in the Medicare program. If any of our agencies fails to meet any of the Medicare conditions of participation, that agency may receive a notice of deficiency from the applicable state surveyor. If that agency then fails to institute a plan of correction to correctremediate the deficiency within the correction period provided by the state surveyor, that agency could be terminated from the Medicare program. Any termination of one or more of our home carehealth agencies from the Medicare program for failure to satisfy the program’s conditions of participation could adversely affect adversely our net service revenue and profitability.

     Our industry CMS has recently announced that it is regulated extensively bycurrently revising the federal government andMedicare conditions of participation for home health, with publication expected no earlier than the states in which we operate. The laws and regulations governingsecond half of 2007. We do not know at this time what effect the revisions will have on our operations, along withand there can be no assurances that the terms of participation in various government programs, regulate how we do business, the services we offer, and our 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 reduce our profitability by:

	•	increasing our liability;
	•	increasing our administrative and other costs;
	•	increasing or decreasing mandated services;
	•	forcing us to restructure our relationships with referral sources and providers; or
	•	requiring us to implement additional or different programs and systems.

     For example, Congress enacted the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which mandates that provider organizations enhance privacy protections for patient health information. This requires companies like us to add new administrative, information, and security systems to prevent inappropriate release of protected health information. Compliance with this law has added, andrevisions will continue to add, costs thatnot negatively affect our profitability.

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In addition, we are subject to various routine and non-routine governmental reviews, audits and investigations.investigations by the Medicare and Medicaid programs and other federal and state governmental agencies. Violation of the laws governing our operations, or changes in interpretations of those laws, could result in the imposition of fines, civil or criminal penalties, the termination of our rights to participate in federal and state-sponsored programs andand/or the suspension or revocation of our licenses. If we become subject to material fines or if other sanctions or other corrective actions are imposed on us, we might suffer a substantial reduction in profitability.

We are subject to extensive government regulation. Any changes to the laws and regulations governing our business, or the interpretation and enforcement of those laws or regulations, could cause us to modify our operations and could negatively impact our operating results.

The federal government and the states in which we operate regulate our industry extensively. The laws and regulations governing our operations, along with the terms of participation in various government programs, regulate how we do business, the services we offer and our interactions with patients and the public and impose certain requirements on us relating to, among other things:

These laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws and regulations, or their interpretations, or the enactment of new laws or regulations could reduce our profitability by:

For example, Congress enacted the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which mandates that provider organizations enhance privacy protections for patient health information. This requires companies like us to develop, maintain and monitor administrative, information and security systems to prevent inappropriate release of protected health information. Compliance with this law has added, and will continue to add, costs that affect our profitability. Failure to comply with HIPAA’s privacy and security requirements could result in substantial fines and penalties.

If we are unable to maintain relationships with existing patient referral sources or to establish new referral sources, our growth and profitability could be adversely affected.

Our success depends significantly on referrals from physicians, hospitals and other patient referral sources in the communities that our home care agencies serve, as well as on our ability to maintain good relationships with these referral sources. Our referral sources are not contractually obligated to refer home carehealth or hospice patients to us and may refer their patients to other home care providers. Our growth and profitability depend on our ability to establish and maintain close working relationships with these patient referral sources and to increase awareness and acceptance of the benefits of home health and hospice care benefit by our referral sources and their patients. We cannot assure you that we willmay not be able to maintain our existing referral source relationships or that we will be able to develop and maintain new relationships in existing or new markets. Our loss of, or failure to maintain, existing relationships or our failure to develop new referral relationships could adversely affect adversely our ability to expand our operations and operate profitably.

We are subject to federal and state laws that govern our financial relationships with physicians and other health care providers, including potential or current referral sources.

We are required to comply with federal and state laws, generally referred to as “anti-kickback laws,” that prohibit certain direct and indirect payments or other financial arrangements between health care providers that are designed to encourage the referral of patients to a particular provider for medical services. In addition to these anti-kickback laws, the Federal government has enacted specific regulations, commonly known as the “Stark law”, that prohibit certain financial relationships, specifically including ownership interests and compensation arrangements, between physicians and providers of designated health services, such as home health agencies, to whom said physicians refer patients. Some of these same financial relationships are subject to regulation by the individual states as well. Under both the anti-kickback law and Stark law, there are a number of safe harbors that permit certain, carefully constrained relationships. Amedisys avails itself of these safe harbors in several instances. For example, we currently have contractual relationships with certain physicians who provide consulting services to our company. Many of these physicians are current or potential referral sources. In addition, in some of our local markets, we lease office space from physicians who may also be referral sources. We cannot assure you that courts or regulatory agencies will not interpret state and federal anti-kickback laws and state laws regulating relationships between health care providers in ways that will implicate our practices. Violations of these laws could lead to fines or sanctions that may have a material adverse effect on our results of operations.

We may be subject to substantial malpractice or other similar claims.

The services we offer involve an inherent risk of professional liability and related substantial damage awards. As of September 30, 2006, we had over 4,000 direct care employees working for our home health agencies and over 250 direct care employees working for our hospice agencies. In addition, we have had up to as many as 500 direct care workers on contract. On any given day, we have several hundredthe majority of these nurses, therapists and other direct care personnel are driving to and from patients’ homes where they deliver medical and other care. Due to the nature of our business, we and the nursescaregivers who provide services on our behalf may be the subject of medical malpractice claims. These nursescaregivers could be considered our agents, in the practice of nursing and, as a result, we could be held liable for their medical negligence. We cannot predict the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business or reputation or on our ability to attract and retain patients and employees. We maintain malpractice liability insurance and are responsible for amounts in excess of the limits of our coverage.

Our business is characterizedAn economic downturn, continued deficit spending by delaysthe federal government and state budget pressures in states in which we operate could result in a reduction in reimbursement fromand covered services.

The existing federal deficit, as well as deficit spending by the timegovernment as the result of adverse developments in the economy or other reasons, could lead to increased pressure to reduce government expenditures for other purposes, including governmentally funded programs in which we provide services to the time we receive reimbursement or payment for these services. If we have information system problems or issues that arise withparticipate, such as Medicare we may encounter delaysand Medicaid. Such actions in our payment cycle. Such a timing delay may cause working capital shortages. As a result, working capital management, including prompt and diligent billing and collection, is an important factor inturn could adversely affect our results of operations and liquidity. We cannot assure youoperations.

An economic downturn could have a detrimental effect on our revenues. Historically, state budget pressures have translated into reductions in state spending. Given that Medicaid outlays are a significant component of state budgets, we can expect continuing cost containment pressures on Medicaid outlays for our services in the states in which we operate. In addition, an economic downturn may also affect the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates.

Our industry trends will not extend our collection period, adversely impact our working capital, or that our working capital management procedures will successfully negate this risk.is highly competitive, with relatively few barriers to entry in some markets.

     WeOur home health agencies compete with local and regional home health care companies, hospitals, nursing homes and other businesses that provide home nursinghealth services, some of which are large established companies that have significantly greater resources than we do. In addition, there are relatively few barriers to entry in some

of the home health services markets in which we operate. Our primary competition comes from local companies in each of our markets and these privately-ownedprivately owned or hospital-owned health care providers vary by region and market. We compete based on the availability of personnel; the quality, expertise and value of our services; and in select instances, on the price of our services. Increased competition in the future from existing competitors or new entrants may limit our ability to maintain or increase our market share. We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse impact on our business, financial condition, or results of operations.

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Some of our existing and potential new competitors may enjoy greater name recognition and greater financial, technical and marketing resources than we do. This may permit our competitors to devote greater resources than we can to the development and promotion of services. These competitors may undertake more far-reaching and effective marketing campaigns and may offer more attractive opportunities to existing and potential employees and services to referral sources.

We expect our competitors to develop new strategic relationships with providers, referral sources and payors, which could result in increased competition. The introduction of new and enhanced service offerings, in combination with industry consolidation and the development of strategic relationships by our competitors, could cause a decline in revenue or loss of market acceptance of our services or make our services less attractive. Additionally, we compete with a number of non-profit organizations that can finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to us.

Managed care organizations and other third-party payors have continued to consolidate in order to enhance their ability to influence the delivery of health care services. Consequently, the health care needs of a large percentage of the United States population are increasingly served by a smaller number of managed care organizations. These organizations generally enter into service agreements with a limited number of providers for needed services. To the extent that such organizations terminate us as a provider and/or engage our competitors as a preferred or exclusive provider, our business could be adversely affected. In addition, private payors, including managed care payors, could seek to negotiate additional discounted fee structures or the assumption by health care providers of all or a portion of the financial risk through prepaid capitation arrangements, thereby potentially reducing our profitability.

We expect that industry forces will continue to have an impact on our business and that of our competitors. In recent years, the health care industry has undergone significant changes driven by efforts to reduce costs. For example, the Medicare Modernization Act of December 2003 (“MMA”) allocated significant additional fundscosts and we expect these cost containment measures to Medicare managed care providers in order to promote greater participation in those plans by Medicare beneficiaries. If these increased funding levels have the intended result, the rate of growthcontinue in the Medicare fee-for-service market, where we have generated the majority of our historical revenue, could decline. The frequentfuture. Frequent regulatory changes in our industry, including reductions in reimbursement rates and changes in services covered, have increased competition among home health care providers. If we are unable to react competitively to new developments, our operating results may suffer. We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse impact on our business, financial condition, or results of operations.

State efforts to regulate the establishment or expansion of health care providers could impair our ability to expand our operations.

Some states require health care providers (including skilled nursing facilities, hospices, home health agencies and assisted living facilities) to obtain prior approval, known as a certificate of need, or CON, or as it is referred to in some states, a permit of approval, or POA, for:

To the extent that we require a CON, POA or other similar approvals to expand our operations, either by acquiring facilities or expanding or providing new services or other changes, our expansion could be adversely affected by the failure or inability to obtain the necessary approvals, changes in the standards applicable to those approvals and possible delays and expenses associated with obtaining those approvals. We cannot assure you that we will be able to obtain a CON or POA for all future projects requiring that approval.

Additionally, our ability to expand operations in a state will depend on our ability to obtain a state license to operate. States may have a limit on the number of licenses they issue. For example, as of September 30, 2006, we operated 11 home health agencies and one hospice agency in Louisiana. Louisiana currently has a moratorium on the issuance of new home health agency licenses through July 1, 2008. We cannot predict whether this moratorium will be extended beyond this date or whether any other states in which we currently operate, or may wish to operate in the future, may adopt a similar moratorium. Our failure to obtain any license, CON or POA could impair our ability to operate or expand our business.

A shortage of qualified registered nursing staff and other caregivers could adversely affect our ability to attract, train and retain qualified personnel and could increase operating costs.

We rely significantly on our ability to attract and retain caregivers who possess the skills, experience and licenses necessary to meet the requirements of our patients. We compete for home health care personnel with other providers of home nursinghealth and hospice services. Our ability to attract and retain caregivers depends on several factors, including our ability to provide these caregivers with attractive assignments and competitive benefits and salaries. We cannot assure you that we will succeed in any of these areas. The costIn addition, there are occasional shortages of qualified health care personnel in some of the markets in which we operate. As a result, we may face higher costs of attracting caregivers and providing them with attractive benefit packages may be higher than we originally anticipated, and, if that occurs, our profitability could decline. IfFinally, although this is currently not a significant factor in our existing markets, if we expand our operations into geographic areas where health care providers historically have unionized, we cannot assure you that negotiating collective bargaining agreements will not have a negative effect on our ability to timely and successfully recruit qualified personnel. Generally, if we are unable to attract and retain caregivers, the quality of our services may decline and we could lose patients and referral sources.

Risks Related to Our Business

Our revenue is substantially derived from Medicare. Reductions in Medicare rates, rate increases that do not cover cost increases and/or significant changes to the current Medicare reimbursement methodology may adversely affect our business.

For the years ended December 31, 2001, 20022003, 2004 and 2003, and for the six-month period ended June 30, 2004,2005, we received 88%91%, 88%, 91%93% and 92%93%, respectively, of our revenue from Medicare. Reductions inFor each of the nine-month periods ended September 30, 2005 and September 30, 2006, we received approximately 93% of our revenue from Medicare. We generally receive fixed payments from Medicare reimbursement would have an adverse impactfor our home health services based on the level of care that we provide patients. Consequently, our profitability. Such reductions in paymentsprofitability largely depends upon our ability to us could be caused by:manage the cost of providing those services.

	•	administrative or legislative changes to the base episode rate;
	•	the elimination or reduction of annual rate increases based on medical inflation;
	•	the imposition by Medicare of co-payments or other mechanisms shifting responsibility for a portion of payment to beneficiaries;
	•	adjustments to the relative components of the wage index;
	•	changes to our case mix or therapy thresholds; or
	•	other adverse changes to the way we are paid for delivering our services.

Future cost containment initiatives undertaken by private third-party payors may limit our future revenues and profitability.

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Our non-Medicare revenues and profitability also are affected by the continuing efforts of third-party payors to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services, increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these third-party payor sources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. There is no guarantee that third-party payors will provide us with timely payments for our services. We can provide no assurance that we will continue to maintain theour current payor or revenue mix.

     In 1999Migration of our Medicare beneficiary patients to Medicare managed care providers could negatively impact our operating results.

Historically, we uncovered certain improprieties stemminghave generated the majority of our revenue from the unauthorized conductMedicare fee-for-service market. Under the Medicare Prescription Drug Improvement and Modernization Act of December 2003, however,

Congress allocated significant additional funds and other incentives to Medicare managed care providers in order to promote greater participation in those plans by Medicare beneficiaries. If these increased funding levels have the intended result, the size of the potential Medicare fee-for-service market could decline, thereby reducing the size of our potential patient population, which could cause our operating results to suffer.

Our allowance for doubtful accounts may not be sufficient to cover uncollectible accounts.

On an agency directorongoing basis, we estimate the amount of Medicare, Medicaid and private insurance receivables that we will not be able to collect. This allows us to calculate the expected loss on our receivables for the period we are reporting. Our allowance for doubtful accounts may underestimate actual unpaid receivables for various reasons, including:

If our allowance for doubtful accounts is insufficient to cover losses on our receivables, our business, financial position or results of operations could be materially adversely affected.

Delays in reimbursement may cause liquidity problems.

Our business is characterized by delays in reimbursement from the time we had acquired previously. We disclosed these improprietiesprovide services to the Officetime we receive reimbursement or payment for these services. If we have difficulty in obtaining documentation, such as physician orders, information system problems or issues that arise with Medicare or other providers, we may encounter additional delays in our payment cycle. Timing delays may cause working capital shortages. Working capital management, including prompt and diligent billing and collection, is an important factor in achieving our financial results and maintaining liquidity. It is possible that documentation support, system problems, Medicare or other provider issues or industry trends may extend our collection period, adversely impact our working capital, and that our working capital management procedures may not successfully negate this risk.

A provision in the Deficit Reduction Act of 2005, which was passed by Congress earlier this year, caused a brief delay in reimbursement to our home health agencies by Medicare. The provision stipulated that CMS make no payments on Medicare home health claims during the last nine days of the Inspector General (“OIG”). Following an extensive seriesfederal fiscal year, which ended September 30, 2006. No interest was accrued or paid by CMS; and no late penalties were paid to providers for delays in payment due to this hold. As a result of audits,the hold, the timing of our cash flows was negatively impacted and $13.6 million of payments we and the OIG reached a settlement in August 2003, whereby we agreed to repay approximately $1.2 million to the government in three annual payments,would have received over the last nine days of which we will makeSeptember were delayed until October 2, 2006. We may experience delays in 2005. As part ofreimbursement in the settlement, wefuture that may cause us liquidity problems.

Our hospice operations may also executed a three-year Corporate Integrity Agreement (“CIA”) which requires that we:

	•	maintain our current compliance program;
	•	specify additional training requirements;
	•	conduct annual, independent audits of the agency; and
	•	make timely disclosure of, and repay, overpayments resulting from any potential fraud or abuse of which we become aware.

     There are stipulated penaltiesexperience reimbursement delays. Our hospice operations bill various state Medicaid programs for violations of the CIA. Egregious violations of the CIA could result“room and board” associated with hospice patients residing in our exclusion from further participation in government-funded health programs. We have designated a Chief Compliance Officer to ensure ongoing compliance with the terms and conditions of the CIA as well as compliance with all other applicable laws, rules, and regulations. Any acquired businesses will be subject to the provisions of the CIA.

     We believenursing homes that we areroutinely pay in compliance with alladvance of receipt of payment from the provider. In addition, we have experienced timing delays when attempting to collect funds from state and federal fraud and abuse provisions and all other applicable government laws and regulations. Medicaid programs in certain instances. Delays in receiving reimbursement or payments from these programs may adversely impact our working capital.

Our compliance with these laws and regulations may be subject to future government review and interpretation and possible regulatory actions currently unknown or unasserted. If we are found to be in violation of any of these provisions, it could have a material adverse effectgrowth strategy depends on our business.ability to manage growing and changing operations.

We operate our agencies under licenses issued and regulated by the respective states in which they are located. Each agency is subject to periodic surveys and complaint-based surveys. If a survey identifies violations of state standards, the agency typically is afforded a grace period in which to comply or otherwise lose its license to operate. We use a Clinical Operations Department, staffed by regional personnel, to prepare each agency for these surveys and respond when those surveys identify potential problems or when plans-of-correction are required to bring the agency back into compliance. If we are found to be in violation of any of these state standards, it could have a material adverse effect on our business.

Our business has grown significantly in size and complexity in recent years. Our internal growth rate for Medicare patient admissions was approximately 8% for 2003, 28% for the first six months of 2004 and 8%18% for calendar year 2003.2005, 14% and 11% for the three-month periods ended June 30, 2006 and September 30, 2006, respectively. This growth has placed, and

will continue to place, significant demands on our management systems, internal controls and financial and professional resources. In addition, we will need to further develop further our financial controls and reporting systems to accommodate future growth. This could require us to incur expenses for hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems and expanding our information technology infrastructure. Our inability to manage growth effectively could have a material adverse effect on our financial results.

7Our growth strategy depends on our ability to open agencies, acquire additional agencies on favorable terms and integrate and operate these agencies effectively. If our growth strategy is unsuccessful or we are not able to successfully integrate newly acquired or opened agencies into our existing operations, our future results could be adversely impacted.

Developments.We expect to continue to open agencies in our existing and new markets. Our new agency growth, however, will depend on several factors, including our ability to:

	•	obtain desirable locations for agencies in suitable markets;
	•	identify and hire a sufficient number of appropriately trained home care and other health care professionals;
	•	obtain adequate financing to fund growth; and
	•	operate successfully under applicable government regulations.

 Acquisitions.

We are focusing moresignificant time and resources on the acquisition of small to medium-sized home health providers,and hospice agencies, or of certain of their assets, in targeted markets. WeNot only do we face competition for acquisition candidates, which may limit the number of acquisition opportunities available to us and may lead to higher acquisition prices, but we may also be unable to identify, negotiate and complete suitable acquisition opportunities on reasonable terms. Additionally, acquisitions involve significant risks and uncertainties, including difficulties in recouping partial episode payments and other types of misdirected payments for services from the previous owners, difficulties integrating acquired personnel and business practices into our business, the potential loss of key employees or patients of acquired agencies, and the assumption of liabilities and exposure to unforeseen liabilities of acquired agencies. We may incur future liabilities relatednot be able to acquisitions. Shouldfully integrate the operations of the acquired businesses with our current business structure in an efficient and cost-effective manner. The failure to effectively integrate any of the following problems, or others, occur asthese businesses could have a result ofmaterial adverse effect on our acquisition strategy, the impact could be material:operations.

Our acquisitions may impose strains on our existing resources.

	•	difficulties integrating acquired personnel and other corporate cultures into our business;
	•	difficulties integrating information systems;
	•	the potential loss of key employees or referral sources of acquired companies or a reduction in patient referrals by hospitals from which we have acquired home health care agencies;
	•	the assumption of liabilities and exposure to undisclosed liabilities of acquired companies;
	•	the acquisition of an agency with undisclosed compliance problems;
	•	the diversion of management attention from existing operations; or
	•	an unsuccessful claim for indemnification rights from previous owners for acts or omissions arising prior to the date of acquisition.

As a result of our past and current acquisition strategy, we have grown significantly over the last two years. As we continue to add acquisition-related revenue and expand our markets, our growth could strain our resources, including management, information systems, regulatory compliance, logistics and other controls. We cannot assure you that our resources will keep pace with our anticipated growth. If we do not manage our expected growth effectively, our future prospectsresults could be affected adversely.

We consolidate the net liabilities of Alliance Home Health, Inc., or Alliance, a bankrupt subsidiary that is no longer in operation, in our consolidated financial statements. Alliance was acquired in 1998 and ceased operations in 1999. Alliance filed for Chapter 7 federal bankruptcy protection with the United States Bankruptcy Court in the Northern District of Oklahoma on September 29, 2000. A trustee was appointed for Alliance in 2001. We are still awaiting a final ruling by the federal bankruptcy judge and until such time, our consolidated financial statements will continue to consolidate the Alliance contingencies that net to a $4.2 million liability. It is possible that we could be held responsible for some or all of this amount, and, depending upon the outcome of the bankruptcy proceedings, potentially a potentially larger amount.

     Arthur Andersen LLP audited our financial statements for the five years ended December 31, 2001. On June 15, 2002, Arthur Andersen was convicted of obstruction of justice by a federal jury in Houston, Texas in connection with Arthur Andersen’s work for Enron Corp. On September 15, 2002, a federal judge upheld this conviction. Arthur Andersen ceased its audit practice before the SEC on August 31, 2002. Because of the circumstances currently affecting Arthur Andersen LLP, as a practical matter it may not be able to satisfy any claims arising from the provision of auditing services to us, including claims that you may have under applicable securities laws.

Risks Related to This Offering and Ownership of Our Common Stock

The price of our common stock may be volatile and this may adversely affect our stockholders.

The price at which our common stock trades may be volatile. The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities, particularly securities of health care companies. The market price of our common stock may be influenced by many factors, including:

	•	our operating and financial performance;
	•	variances in our quarterly financial results compared to research analyst expectations;
	•	the depth and liquidity of the market for our common stock;
	•	future sales of common stock or the perception that sales could occur;
	•	investor perception of our business and our prospects;
	•	developments relating to litigation or governmental investigations;
	•	changes or proposed changes in health care laws or regulations or enforcement of these laws and regulations, or announcements relating to these matters; or
	•	general economic and stock market conditions.

In addition, the stock market in general, and the Nasdaq NationalNASDAQ Global Select Market in particular, has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of health care provider companies. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In the past, securities class-action litigation has often been brought against companies following periods of volatility in the market price of their respective securities. We may become involved in this type of litigation in the future. Litigation of this type is often expensive to defend and may divert our management team’s attention as well as resources from the operation of our business.

12Sales of substantial amounts of our common stock, or the availability of those shares for future sale, could adversely affect our stock price and limit our ability to raise capital.

As of October 22, 2004 there were 15,237,601At September 30, 2006, 16,252,039 shares of our common stock were outstanding. Also on that date, up to 182,110There are 71,063 shares of our common stock that may be issued under our 1998 employee stock purchase plan. As of October 22, 2004, 382,689September 30, 2006, 866,189 shares of our common stock were issuable upon the exercise of stock options which were

outstanding but not exercisable, 485,129714,551 shares of our common stock were issuable upon the exercise of stock options which were outstanding and exercisable, and 92,50038,000 shares of our common stock were issuable upon the exercise of outstanding warrants. The market price of our common stock could decline as a result of sales of substantial amounts of our common stock in the public market after this offering or the perception that substantial sales could occur. These sales also may make it more difficult for us to sell common stock in the future to raise capital.

In the past we have had to defend class action lawsuits, and there is no assurance that we will not face similar suits in the future that could require us to pay substantial damage awards.

We do not pay dividends and intend to retain all future earnings to finance our existing business and the continued growth and development of our business. In addition, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future payment of cash dividends will depend uponbe at the discretion of our Board of Directors after taking into account various factors, including our financial condition, earnings, capital requirements, earnings,current and anticipated cash needs, outstanding indebtedness, plans for expansion, restrictions imposed by our lenders, if any, and other factors deemed relevant by our board of directors. Under the terms of our Senior Credit Facility,senior credit facility, we are restricted from paying cash dividends and making other cash distributions to our stockholders.

Our Board of Directors may use anti-takeover provisions or issue stock to discourage control contests.

Our Certificate of Incorporation authorizes us to issue up to 30,000,00030.0 million shares of common stock and 5,000,0005.0 million shares of undesignated Preferred Stock.preferred stock. Our Board of Directors may cause us to issue additional stock to discourage an attempt to obtain control of the Company. For example, shares of stock could be sold to purchasers who might support the Board of Directors in a control contest or to dilute the voting or other rights of a person seeking to obtain control. In addition, the Board of Directors could cause us to issue Preferred Stock entitling holders to:

	•	vote separately on any proposed transaction;
	•	convert preferred stock into common stock;
	•	demand redemption at a specified price in connection with a change in control; or
	•	exercise other rights designed to impede a takeover.

 In addition, the

The issuance of additional shares may, among other things, dilute the earnings and equity per share of our common stock and the voting rights of common stockholders.

We have implemented other anti-takeover provisions or provisions that could have an anti-takeover effect, includingincluding: (1) advance notice requirements for director nominations and stockholder proposals and (2) a stockholder rights plan, also known as a “poison pill.” These provisions, and others that the Board of Directors may adopt hereafter, may discourage offers to acquire us and may permit our Board of Directors to choose not to entertain offers to purchase us, even if such offers include a substantial premium to the market price of our stock. Therefore, our stockholders may be deprived of opportunities to profit from a sale of control.

SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This prospectus, including the documents that we incorporate by reference, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements about our expectations, beliefs, plans, objectives, assumptions, or future events or performance are not historical facts and may be forward-looking.forward-looking These

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     Accordingly, theseThese statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this prospectus.

Because the Therisk factors referred to above, beginning on page 7 of this prospectus, as well as the riskother factors beginning on page 4 ofdiscussed in this prospectus, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf and you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $122.3 million (based on the last reported sales price for our common stock on October 26, 2006) from the sale of 3,000,000 shares of our common stock in this offering, after deducting our estimated underwriting discounts and commissions and our estimated offering expenses. If the underwriters’ over-allotment option is exercised in full, we estimate that we will receive approximately $140.7 million. We plan to use approximately $43.1 million of the proceeds to pay down and extinguish the term loan portion of our senior secured credit facility with Wachovia Bank, N.A. that expires in June 2010. As of September 30, 2006, we owe approximately $43.1 million under the term loan, which bears interest at a rate of LIBOR plus 1.75% based upon our current leverage. We intend to use the remaining proceeds of this offering for general corporate purposes, including working capital and possible acquisitions.

PRICE RANGE OF COMMON STOCK

Our common stock is traded on the NASDAQ Global Select Market under the symbol “AMED.” The following table summarizes the high and low intra-day sales prices for our common stock for the periods indicated through October 26, 2006: