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| AMED > SEC Filings for AMED > Form 10-Q on 27-Oct-2009 | All Recent SEC Filings |
27-Oct-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 and nine-month periods ended September 30, 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 88% of our revenue was derived from Medicare for the three and nine-month periods ended September 30, 2009 and 87% for the same periods in 2008. During the three and nine-month period ended September 30, 2009, our net service revenue increased 20.7% or $66.7 million and 30.8% or $260.7 million over the same periods in 2008; our diluted earnings per share increased 48.3% or by $0.42 per share and 57.8% or by $1.30 per share; and during the nine-month period our cash flow from operations more than doubled to $218.9 million compared to $86.8 million during the same period in 2008. The following details our owned Medicare-certified agencies, which are located in 38 states within the United States, the District of Columbia and Puerto Rico. The agencies closed were consolidated with agencies servicing the same areas. See below for a more detailed description of what caused our results for the three and nine-month periods ended September 30, 2009 to increase compared to the same periods in 2008.
Owned and Operated Agencies
Home health Hospice
At December 31, 2008 480 48
Acquisitions 7 12
Start-ups 28 3
Closed (7 ) (2 )
At September 30, 2009 508 61
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Recent Developments
The United States Congress is currently working on legislation as part of the 2010 fiscal budget that could impact the amounts that we are paid by Medicare for services provided to Medicare eligible patients. As of the date of this filing, the legislation has not been finalized and thus we cannot estimate the impact of such potential changes but we continue to monitor these actions closely.
On August 13, 2009, CMS issued a proposed rule to update and revise the Medicare home health rates for calendar year 2010. The proposed rule includes the following changes to the base rate: a 2.2% market basket increase, a 2.5% increase resulting from a modification to the current outlier policy and a negative 2.75% case mix adjustment. The proposed outlier policy includes a cap on outlier payments of 10% per provider and targets total aggregate outlier payments at 2.5% of total home health payments. Currently, there is not a per provider cap on outlier payments and the aggregate total for outlier payments is 5% of total home health payments. The proposed rule also includes an additional negative 1.8% case mix adjustment to be implemented in 2010 or 2011 and the possible acceleration of the 2011 2.71% case mix adjustment to 2010. CMS has not issued a final rule as of the date of this filing, and therefore we have not finalized our estimate these changes could have on our future results of operations or financial condition.
On August 14, 2009, CMS issued a final rule to update and revise the Medicare hospice wage index for fiscal year 2010. The final rule revises the phase out of the hospice budget neutrality adjustment to a 10% reduction in fiscal year 2010 and a 15% reduction annually for fiscal years 2011 through 2016. CMS also included a 2.1% market basket update which is offset by a negative 0.7% resulting from the 10% reduction in the hospice budget neutrality adjustment for fiscal year 2010. This rule is effective October 1, 2009. We do not expect this change to have a material impact on our future results of operations or financial condition.
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 September 30, 2009 Compared to the Three-Month Period
Ended September 30, 2008
Net Service Revenue
The following table summarizes our net service revenue growth (amounts in
millions):
For the three-month period ended September 30, 2009
For the three-month
period ended
Base/Start-ups (2) Acquisitions Total September 30, 2008
Home health revenue:
Medicare revenue $ 305.2 $ 8.7 $ 313.9 $ 261.3
Non-Medicare, episodic-based
revenue 28.9 0.1 29.0 22.5
Total episodic-based revenue 334.1 8.8 342.9 283.8
Non-Medicare revenue 15.9 0.6 16.5 18.9
350.0 9.4 359.4 302.7
Hospice revenue:
Medicare revenue 23.2 3.8 27.0 17.8
Non-Medicare revenue 1.6 0.3 1.9 1.1
24.8 4.1 28.9 18.9
Total revenue:
Medicare revenue 328.4 12.5 340.9 279.1
Non-Medicare revenue 46.4 1.0 47.4 42.5
$ 374.8 $ 13.5 $ 388.3 $ 321.6
Internal episodic-based revenue
growth (1) 18% 28%
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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.
(2) Our net service revenue for our base/start-up agencies of $374.8 million included $362.8 million from our base agencies and $12.0 million from our start-up agencies.
Our net service revenue increased $66.7 million from 2008 to 2009 and consisted of an increase of $53.2 million in our base/start-up agencies and $13.5 million from our acquisition agencies. The $53.2 million increase in our base/start-up agencies was primarily related to our internal episodic-based revenue, which increased by $50.3 million or 18% from 2008 to 2009, with 6% related to volume and 12% related to rate.
Our average episodic-based revenue per completed episode increased from $2,868 to $3,189 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, which are provided to our patients when medically necessary to achieve their desired outcomes.
Home Health Statistics
The following table summarizes our growth in total home health patient
admissions:
For the three-month period ended September 30, 2009
For the three-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Admissions:
Medicare 49,622 2,275 51,897 48,170
Non-Medicare, episodic-based 5,813 57 5,870 5,033
Total episodic-based 55,435 2,332 57,767 53,203
Non-Medicare 8,205 432 8,637 9,321
63,640 2,764 66,404 62,524
Internal episodic-based
admission growth (1) 4% 14%
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(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 September 30, 2009
For the three-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Recertifications:
Medicare 47,770 787 48,557 44,741
Non-Medicare, episodic-based 4,247 30 4,277 3,626
Total episodic-based 52,017 817 52,834 48,367
Non-Medicare 5,081 95 5,176 6,133
57,098 912 58,010 54,500
Internal episodic-based
recertification growth (1) 8% 23%
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(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 following table summarizes our home health completed episodes:
For the three-month period ended September 30, 2009
For the three-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Completed Episodes:
Medicare 93,079 2,805 95,884 87,334
Non-Medicare, episodic-based 9,143 80 9,223 7,652
102,222 2,885 105,107 94,986
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Cost of Service, Excluding Depreciation and Amortization
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 September 30, 2009
For the three-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Cost of service (amounts in
millions):
Home health $ 164.3 $ 4.4 $ 168.7 $ 140.9
Hospice 12.7 2.2 14.9 10.2
$ 177.0 $ 6.6 $ 183.6 $ 151.1
Home health:
Visits during the period:
Medicare 1,813,206 50,007 1,863,213 1,559,469
Non-Medicare, episodic-based 174,477 1,180 175,657 133,849
Total episodic-based 1,987,683 51,187 2,038,870 1,693,318
Non-Medicare 190,986 6,734 197,720 186,255
2,178,669 57,921 2,236,590 1,879,573
Home health cost per visit (1) $ 75.43 $ 76.03 $ 75.45 $ 74.91
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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 $32.5 million increase in cost of service, $25.9 million is related to increased costs in our base/start-up agencies and $6.6 million is related to acquisitions. The $25.9 million in base/start-up business expenses consisted primarily of $24.7 million related to salaries, taxes and benefits. The $24.7 million increase in salaries, taxes and benefits was primarily related to the increase in the number of visits performed by our base/start-up agencies, which increased by 15.9% or approximately 0.3 million visits from 2008. 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 September 30,
2009 2008
General and administrative expenses:
Salaries and benefits $ 87.3 $ 72.1
Non-cash compensation 0.8 1.9
Other 43.8 40.7
Provision for doubtful accounts 4.6 6.2
Depreciation and amortization 7.5 5.9
Other expense, net (1.7 ) (5.0 )
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Salaries and benefits increased $15.2 million, which consisted of an increase of $13.0 million in base/start-up agency and home office expenses and the inclusion of $2.2 million in acquisition agency expenses. The base/start-up agency and home office expenses increased by $10.1 million primarily due to increased personnel costs for our field administrative staff and corporate staff necessitated by our internal growth and acquisitions and by $2.9 million for net severance costs associated with the departure of our former President and Chief Operating Officer and our former Chief Information Officer who left the Company on September 3, 2009.
Non-cash compensation decreased $1.1 million primarily due to the forfeiture of restricted stock grants by our former President and Chief Operating Officer and our former Chief Information Officer, which totaled $1.8 million.
Our provision for doubtful accounts decreased $1.6 million as the result of an increase of $106.8 million in cash collections and a decrease of $23.1 million in our unbilled accounts receivable over the same period in 2008.
Other expense, net decreased $3.3 million primarily as a result of a decrease in interest expense of $2.4 million as we have reduced our outstanding debt by $136.5 million from September 30, 2008 to September 30, 2009 and our interest rate decreased.
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 September 30,
2009 2008
Income before income taxes $ 59.1 $ 38.6
Income tax (expense) (23.0 ) (15.1 )
Estimated income tax rate 39.0% 39.2%
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The increase in income tax expense of $7.9 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.
Nine-Month Period Ended September 30, 2009 Compared to the Nine-Month Period
Ended September 30, 2008
Net Service Revenue
The following table summarizes our net service revenue growth (amounts in
millions):
For the nine-month period ended September 30, 2009
For the nine-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Home health revenue:
Medicare revenue $ 818.3 $ 84.0 $ 902.3 $ 691.6
Non-Medicare, episodic-based
revenue 78.6 4.3 82.9 58.5
Total episodic-based revenue 896.9 88.3 985.2 750.1
Non-Medicare revenue 41.9 8.5 50.4 47.5
938.8 96.8 1,035.6 797.6
Hospice revenue:
Medicare revenue 58.0 10.1 68.1 46.4
Non-Medicare revenue 3.8 0.5 4.3 3.3
61.8 10.6 72.4 49.7
Total revenue:
Medicare revenue (1) 876.3 94.1 970.4 738.0
Non-Medicare revenue 124.3 13.3 137.6 109.3
$ 1,000.6 $ 107.4 $ 1,108.0 $ 847.3
Internal episodic-based revenue
growth (1) 20% 27%
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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.
(2) Our net service revenue for our base/start-up agencies of $1.0 billion included $971.6 million from our base agencies and $29.0 million from our start-up agencies.
Our net service revenue increased $260.7 million from 2008 to 2009 and consisted of an increase of $153.3 million in our base/start-up agencies and $107.4 million from our acquisition agencies. The $153.3 million increase in our base/start-up agencies was primarily related to our internal episodic-based revenue, which increased by $146.8 million or 20% from 2008 to 2009, with 8% related to volume and 12% related to rate.
Our average episodic-based revenue per completed episode increased from $2,808 to $3,132 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, which are provided to our patients when medically necessary to achieve their desired outcomes.
Home Health Statistics
The following table summarizes our growth in total home health patient
admissions:
For the nine-month period ended September 30, 2009
For the nine-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Admissions:
Medicare 136,959 17,922 154,881 131,795
Non-Medicare, episodic-based 16,155 1,052 17,207 13,828
Total episodic-based 153,114 18,974 172,088 145,623
Non-Medicare 23,281 3,790 27,071 25,333
176,395 22,764 199,159 170,956
Internal episodic-based
admission growth (1) 5% 11%
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(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 nine-month period ended September 30, 2009
For the nine-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Recertifications:
Medicare 130,615 10,357 140,972 120,015
Non-Medicare, episodic-based 11,570 563 12,133 9,052
Total episodic-based 142,185 10,920 153,105 129,067
Non-Medicare 13,994 2,477 16,471 16,072
156,179 13,397 169,576 145,139
Internal episodic-based
recertification growth (1) 10% 27%
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(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 following table summarizes our home health completed episodes:
For the nine-month period ended September 30, 2009
For the nine-month
period ended
Base/Start-ups Acquisitions Total September 30, 2008
Completed Episodes:
Medicare 250,625 26,701 277,326 234,728
Non-Medicare, episodic-based 24,827 1,462 26,289 19,756
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