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| AMED > SEC Filings for AMED > Form 10-Q on 28-Apr-2009 | All Recent SEC Filings |
28-Apr-2009
Quarterly Report
The following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations and financial condition for the three-month period ended March 31, 2009. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included herein, the consolidated financial statements and notes and the related Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission ("SEC") on February 17, 2009 (the "Form 10-K"), which are incorporated herein by this reference.
Unless otherwise provided, "Amedisys," "we," "us," "our" and the "Company" refer to Amedisys, Inc. and our consolidated subsidiaries.
Overview
We are a leading provider of high-quality, low-cost home health services to the chronic, co-morbid, aging American population. Our services include home health and hospice services and approximately 87% and 88% of our revenue was derived from Medicare for the three-month periods ended March 31, 2009 and 2008, respectively. During the three-month period ended March 31, 2009, our net service revenue increased 60.4% or $128.7 million over the same period in 2008; our diluted earnings per share increased 59.7% or by $0.37 per share; and our cash flow from operations more than doubled to $54.5 million compared to $25.7 million during 2008. The following details our owned Medicare-certified agencies, which are located in 37 states within the United States, the District of Columbia and Puerto Rico. The agencies closed were consolidated with agencies servicing the same areas.
Owned and Operated Agencies
Home health Hospice
At December 31, 2008 480 48
Acquisitions 5 1
Start-ups 9 1
Closed (4 ) -
At March 31, 2009 490 50
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Recent Developments
Payment
On March 13, 2009, CMS announced that the rate cuts caused by the phase out of the Budget Neutrality Adjustment Factor ("BNAF") for Medicare hospice rates have been delayed by one year as a result of the economic stimulus bill, the American Recovery and Reinvestment Act of 2009. The delay was made retroactive to October 1, 2008 and did not did not change the hospice payment rates and hospice cap amounts for the fiscal period of October 1, 2008 through September 30, 2009. The change did not and is not expected to have a material impact on our business and consolidated financial condition, results of operations or cash flows.
Results of Operations
Our operating results may not be comparable for the periods presented, primarily as a result of our acquisition and start-up agencies.
When we refer to "base business", we mean home health and hospice agencies that we have operated for at least the last twelve months; when we refer to "acquisitions", we mean home health and hospice agencies that we acquired within the last twelve months; and when we refer to "start-ups", we mean any home health or hospice agency opened by us in the last twelve months. Once an agency has been in operation for a twelve month period, the results for that particular agency are included as part of our base business from that date forward. When we refer to episodic-based revenue, admissions, recertifications or completed episodes, we mean home health revenue, admissions, recertifications or completed episodes of care for those payors that pay on an episodic-basis, which includes Medicare and other insurance carriers, including Medicare Advantage programs.
Three-Month Period Ended March 31, 2009 Compared to the Three-Month Period Ended
March 31, 2008
Net Service Revenue
We are dependent on Medicare for a significant portion of our revenue.
Approximately 87% and 88% of our net service revenue was derived from Medicare
for the three-month periods ended March 31, 2009 and 2008, respectively. The
following table summarizes our net service revenue growth (amounts in millions):
For the three-month period ended March 31, 2009
For the
three-month
period ended
Base/Start-ups (2) Acquisitions Total March 31, 2008
Home health revenue:
Medicare revenue $ 213.8 $ 66.0 $ 279.8 $ 175.3
Non-Medicare, episodic-based revenue 21.0 3.8 24.8 14.9
Total episodic-based revenue 234.8 69.8 304.6 190.2
Non-Medicare revenue 9.6 7.3 16.9 10.0
244.4 77.1 321.5 200.2
Hospice revenue:
Medicare revenue 13.7 5.4 19.1 12.1
Non-Medicare revenue 1.0 0.2 1.2 0.8
14.7 5.6 20.3 12.9
Total revenue:
Medicare revenue 227.5 71.4 298.9 187.4
Non-Medicare revenue 31.6 11.3 42.9 25.7
$ 259.1 $ 82.7 $ 341.8 $ 213.1
Internal episodic-based revenue growth (1) 23 % 26 %
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(1) Internal episodic-based revenue growth is the percent increase in our base/start-up episodic-based revenue for the period as a percent of the total episodic-based revenue of the prior period. We expect this growth rate to be in the 15% range for the full year of 2009, primarily due to our TLC Health Care Services, Inc. ("TLC") agencies converting to base agencies beginning in the three-month period ended June 30, 2009. It is not unusual for acquired agencies to experience a slower revenue growth, even in the second year after converting to our operating systems and Point of Care network.
(2) Our net service revenue for our base/start-up agencies of $259.1 million included $252.0 million from our base agencies and $7.1 million from our start-up agencies.
Our net service revenue increased $128.7 million from 2008 to 2009 and consisted of an increase of $46.0 million in our base/start-up agencies and $82.7 million from our acquisition agencies. The $46.0 million increase in our base/start-up agencies was primarily related to our internal episodic-based revenue, which increased by $44.6 million or 23% from 2008 to 2009, with 10% related volume and 13% related to rate.
Our average episodic-based revenue per completed episode increased from $2,673 to $3,033 from 2008 to 2009 and was due primarily to the continued deployment of our therapy intensive specialty programs to more of our home health agencies and the inclusion of the TLC agencies, which have had historically higher average revenue per completed episode primarily due to their presence in higher wage index areas (i.e. the Western and Northeastern parts of the United States).
Home Health Statistics
The following table summarizes our growth in total home health patient
admissions:
For the three-month period ended March 31, 2009
For the
three-month
period ended
Base/Start-ups Acquisitions Total March 31, 2008
Admissions:
Medicare 37,390 13,053 50,443 34,880
Non-Medicare, episodic-based 4,746 923 5,669 3,979
Total episodic-based 42,136 13,976 56,112 38,859
Non-Medicare 6,546 2,945 9,491 6,147
48,682 16,921 65,603 45,006
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Internal episodic-based admission growth (1) 8 % 7 %
(1) Internal episodic-based admission growth is the percent increase in our base/start-up episodic-based admissions for the period as a percent of the total episodic-based admissions of the prior period.
The following table summarizes our growth in total home health patient recertifications:
For the three-month period ended March 31, 2009
For the
three-month
period ended
Base/Start-ups Acquisitions Total March 31, 2008
Recertifications:
Medicare 36,294 8,731 45,025 32,209
Non-Medicare, episodic-based 3,239 500 3,739 2,255
Total episodic-based 39,533 9,231 48,764 34,464
Non-Medicare 3,515 2,254 5,769 4,136
43,048 11,485 54,533 38,600
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Internal episodic-based recertification growth (1) 15 % 32 %
(1) Internal episodic-based recertification growth is the percent increase in our base/start-up episodic-based recertifications for the period as a percent of the total episodic-based recertifications of the prior period. The rate decreased from 32% to 15% from 2008 to 2009. This trend does not necessarily indicate that we anticipate our internal episodic-based recertifications to decrease in the future nor is it a metric that we regularly use to measure performance within our organization. This rate varies based on the clinical acuity of our patients. We focus our efforts on providing the medically necessary care for our patients to achieve their desired clinical outcomes. Prior to providing additional episodes of care, we require the approval of an agency level, multidisciplinary care conference and the approval of the patients' attending physician.
Our recertifications increased 15,933 from 2008 to 2009, with 4,448 from our base/start-up agencies and 11,485 from our acquisition agencies. The increase in our base/start-up agencies was primarily related to a 15% internal episodic-based recertification growth as a result of (a) the increasing acuity of our patients, (b) the impact of our acquisition agencies moving into our base agency classification after being owned for more than 12 months, (c) our opening of start-up agencies and (d) our admissions growth.
The following table summarizes our home health completed episodes:
For the three-month period ended March 31, 2009
For the
three-month
period ended
Base/Start-ups Acquisitions Total March 31, 2008
Completed Episodes:
Medicare 67,223 20,867 88,090 60,339
Non-Medicare, episodic-based 6,931 1,278 8,209 4,956
74,154 22,145 96,299 65,295
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Our cost of service consists of the following expenses incurred by our clinical and clerical personnel in our agencies:
• salaries and related benefits (including health care insurance and workers' compensation insurance);
• transportation expenses (primarily reimbursed mileage at a standard rate); and
• supplies and services expenses (including payments to contract therapists).
The following summarizes our cost of service, visit and cost per visit information:
For the three-month period ended March 31, 2009
For the
three-month
period ended
Base/Start-ups Acquisitions Total March 31, 2008
Cost of service (amounts in millions):
Home health $ 114.1 $ 39.4 $ 153.5 $ 92.6
Hospice 8.9 2.6 11.5 8.2
$ 123.0 $ 42.0 $ 165.0 $ 100.8
Home health:
Visits during the period:
Medicare 1,284,457 388,220 1,672,677 1,083,310
Non-Medicare, episodic-based 127,781 22,107 149,888 90,876
Total episodic-based 1,412,238 410,327 1,822,565 1,174,186
Non-Medicare 121,210 75,145 196,355 106,771
1,533,448 485,472 2,018,920 1,280,957
Home health cost per visit (1) $ 74.45 $ 81.11 $ 76.05 $ 72.24
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(1) We calculate home health cost per visit as home health cost of service divided by total home health visits during the period.
Of the $64.2 million increase in cost of service, $22.2 million is related to increased costs in our base/start-up agencies and $42.0 million is related to acquisitions. The $22.2 million in base/start-up business expenses consisted primarily of $21.0 million related to salaries, taxes and benefits and $0.9 million related to travel and training.
Our cost per visit increased from $72.24 in 2008 to $76.05 in 2009. The primary reason for the increase relates to our 2008 acquired agencies, which have higher wage indexes compared to our base agencies. Our 2008 acquired agencies are generally located in states that have higher labor costs and have higher numbers of visiting staff, who typically are paid on a salary basis compared to a per visit basis. We expect that our cost per visit associated with our base/start-up agencies will increase in the remaining quarters of 2009 as a majority of our 2008 acquired agencies will be categorized as base agencies beginning in the second quarter of 2009. As we transition the visiting staff to our pay per visit model, we expect for the cost per visit associated with our base/start-up agencies to be more consistent with our historical rates. Typically, acquired agencies take up to 18 to 24 months to reach the labor efficiencies of existing operations.
General and Administrative Expenses, Provision for Doubtful Accounts, Depreciation and Amortization and Other Expense, net
The following table summarizes our general and administrative expenses, provision for doubtful accounts, depreciation and amortization expense and other expense, net (amounts in millions):
For the three-month periods ended
March 31,
2009 2008
General and administrative expenses:
Salaries and benefits $ 73.0 $ 45.9
Non-cash compensation 2.1 1.1
Other 42.3 29.5
Provision for doubtful accounts 6.2 3.6
Depreciation and amortization 6.3 4.4
Other expense, net (2.6 ) (0.6 )
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Other general and administrative expenses increased $12.8 million, which consisted of an increase of $3.9 million in base agency expenses and the inclusion of $6.6 million in acquisition agency expenses and $2.3 million in start-up agency expenses. The $6.6 million in acquisition agency expenses and the $2.3 million in start-up agency expenses were expenses incurred for the supporting administration of these additional agencies. The $3.9 million increase in our base agency expenses primarily included an increase in our corporate office expenses, which were necessitated by our continued development of corporate infrastructure needed to support our growing number of agencies and included $0.3 million in acquisition related transaction costs as required by Statement of Financial Accounting Standards ("SFAS") No. 141 (Revised), Business Combinations, which we adopted on January 1, 2009. Prior to January 1, 2009, we accounted for acquisition related transaction costs in accordance with SFAS No. 141, Business Combinations, and as a result, we included $2.3 million in such costs as part of goodwill at March 31, 2008.
Income Tax Expense
The following table summarizes our income tax expense and estimated income tax
rate (amounts in millions, except for estimated income tax rate):
For the three-month periods ended March 31,
2009 2008
Income before income taxes $ 44.3 $ 27.2
Income tax (expense) (17.3 ) (10.8 )
Estimated income tax rate 39.0 % 39.6 %
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The increase in income tax expense of $6.5 million is attributable to an increase in income before income taxes which was offset by a decrease in the estimated income tax rate. The decrease in the estimated income tax rate was primarily attributable to the extension of Federal income tax credits created as a result of Hurricanes Katrina, Rita and Wilma by The Emergency Economic Stabilization Act of 2008.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows for Three-Month Period Ended March 31, 2009 Compared to the
Three-Month Period Ended March 31, 2008
The following table summarizes our cash flows for the periods indicated (amounts
in millions):
For the three-month periods
ended March 31,
2009 2008
Cash provided by operating activities $ 54.5 $ 25.7
Cash (used in) investing activities (15.1 ) (441.9 )
Cash (used in) provided by financing activities (16.6 ) 385.2
Net increase (decrease) in cash and cash equivalents 22.8 (31.0 )
Cash and cash equivalents at beginning of period 2.8 56.2
Cash and cash equivalents at end of period $ 25.6 $ 25.2
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Cash provided by operating activities increased $28.8 million during 2009 compared to 2008, primarily as a result of a changes in net income, patient accounts receivable, accounts payable and accrued expenses, with patient accounts receivable having the most significant impact during 2009 compared to 2008. See "Outstanding Patient Accounts Receivable" below for further details on our change in outstanding patient accounts receivable.
Cash used in investing activities decreased $426.8 million during 2009 compared to 2008. Our cash flow needs for our investing activities were greater during the three-month period ended March 31, 2008 primarily due to our acquisition of TLC and Family Home Health Care, Inc. & Comprehensive Home Healthcare Services, Inc.
Cash used in financing activities changed $401.8 million during 2009 compared to 2008, primarily due to a decrease of $380.0 million in proceeds from the issuance of long-term obligations as a result of the debt incurred in connection with the TLC acquisition during the three-month period ended March 31, 2008 and an increase of $31.1 million in principal payments of our long-term obligations during the three-month period ended March 31, 2009.
Typically, our principal source of liquidity is the collection of our patient accounts receivable, primarily through the Medicare program; however, from time to time, we can and do obtain additional sources of liquidity through sales of our equity or by incurrence of additional indebtedness. As of March 31, 2009, we had $25.6 million in cash and cash equivalents, $165.6 million in availability under our $250.0 million Revolving Credit Facility and the potential issuance of $250.0 million of any combination of preferred and common stock, under our effective shelf registration statement.
During 2009, we made $7.5 million in routine capital expenditures, which primarily included equipment and furniture and computer software. Based on our operating forecasts and our debt service requirements, we believe we will have sufficient liquidity to fund our operations, capital requirements and debt service requirements over the next twelve months and into the foreseeable future.
As we manage our liquidity needs to meet our operating forecasts, debt service requirements and our acquisition and start-up activities, we are monitoring the creditworthiness and solvency of our syndicate of banks that provide the availability of credit under our Revolving Credit Facility as well as the status of the overall equity and credit markets. This monitoring process has become more critical over the past several quarters as several financial institutions have either failed or have been acquired, there has been a severe lack of funds in the credit markets and the equity market has seen significant decreases in value and liquidity, as discussed in the risk factors incorporated herein by reference. As of the date of this filing, we do not believe the availability of funds under our Revolving Credit Facility is at risk; however, we continue to monitor our syndicate of banks in light of the credit market conditions. If the availability under our current Revolving Credit Facility decreases, we may need to consider adjusting our strategy to meet our operating forecasts, debt service requirements and acquisition and start-up activity needs.
Outstanding Patient Accounts Receivable
Our patient accounts receivable, net decreased $21.3 million from December 31, 2008 to March 31, 2009 primarily due to $361.5 million in cash collections, which was offset by $341.8 million in net service revenue.
Our days revenue outstanding, net at March 31, 2009 decreased 6.8 days to 40.4 from December 31, 2008. During the three month-period ended March 31, 2009 we were able to make significant progress on our outstanding accounts receivable associated with our 2008 acquisitions, which inherently are subject to regulatory and internal delays associated with the conversion process. Additionally, our days revenue outstanding, net improved during the three month-period ended March 31, 2009 due to a $19.8 million increase in cash collections during the quarter as compared to the cash collections during the three month-period ended December 31, 2008, which included $7.8 million in payment delays for 2008 claims that were received in 2009, as further explained in our Form 10-K.
Our patient accounts receivable includes unbilled receivables, which are aged based upon our initial service date. At March 31, 2009, the unbilled patient accounts receivable, as a percentage of gross patient accounts receivable, was 23.5%, or $44.9 million compared to 23.0% or $48.3 million at December 31, 2008. We monitor unbilled receivables on an agency by agency basis to ensure that all efforts are made to bill claims within timely filing deadlines. The timely filing deadlines vary by state for Medicaid and among insurance companies. As of March 31, 2009, unbilled patient accounts receivable from agencies acquired . . .
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