Dear Shareholders,
The past year has been one of change and uncertainty throughout all corners of
the health care industry, and Amedisys has not been immune to the volatility and
challenges in the marketplace. However, one certainty exists: We must improve our
financial performance over the negative results experienced in 2013.
To that end, several significant milestones have occurred over the past year. In
2013, we closed 76 financially underperforming care centers that we had been
monitoring closely. Additionally, we substantially completed the development of
and investment in our new clinical operating system, AMS3, marking the close of
that capital expenditure. Lastly, an agreement was reached with the United States
Department of Justice associated with their investigation, which commenced in
2010. Our credit facility was amended to accommodate the settlement agreement.
The size of the facility remains the same, but covenants were adjusted to allow us to
draw on the revolver, and the facility is now secured by our assets. We are pleased to
put this matter behind us so we can focus on the future.
That focus always includes delivering the highest level of quality care to the more
than 360,000 elderly, chronically ill patients and their families who are supported
by Amedisys caregivers every year. In 2013, 155 of our care centers were named to
the 2013 HomeCare Elite™, an award honoring the top-performing home health
agencies in the United States – with 28 of our care centers named to the top 500
agencies and 5 named to the top 100 agencies overall.
Turning to leadership, our Founder, CEO and Chairman William F. ‘Bill’ Borne recently
departed the company. Additionally, our Board of Directors welcomed two new
members, Linda J. Hall in March 2013 and Nathaniel M. Zilkha earlier this year.
While we have experienced many challenges over the past several years, Amedisys is
evolving our business model to succeed in today’s changing health care landscape.
To that end, we have initiated an operational transformation program to enhance
our care delivery capabilities, set a path for long-term growth, and build sustained
value for shareholders. We are confident this will reinvigorate the core business,
establish new capabilities, and support our clinical delivery model.
A key element to our transformation program is our employees. Their dedication and
tireless efforts are the driving force behind our mission. I sincerely thank them all and
am humbled by their passion and resolve.
Lastly, I want to recognize our shareholders who have remained loyal and steadfast in
support of Amedisys. Our mission is clear; our path is paved with opportunity; and our
destination is nothing short of successfully transforming our company into the one
we all know it can be. To be sure, we have a lot of work in front of us to achieve these
goals, but our team is up to the challenge.
Respectfully,
Ronald A. LaBorde, President and Interim Chief Executive Officer
FINANCIAL HIGHLIGHTS - AMEDISYS, INC. 2013
YEAR ENDED DECEMBER 31,
Net service revenue
Operating loss
Net loss from continuing operations attributable to
Amedisys, Inc.
Adjusted net income from continuing operations
attributable to Amedisys, Inc. per diluted share*
Weighted average common shares outstanding - diluted
2013
$1,249,344
2012
$1,440,836
2011
$1,418,464
$(154,971)
$(108,855)
$(469,190)
$(93,105)
$(80,262)
$(374,430)
$0.27
31,247
$1.15
29,896
$2.03
28,693
Amedisys, Inc. stockholders' equity
$372,201
$452,340
$518,868
*Adjusted net income from continuing operations attributable to Amedisys, Inc. per diluted share is a non-GAAP measure that excludes certain
items described below:
Adjusted Net Income from Continuing Operations Attributable to Amedisys, Inc. Per Diluted Share Reconciliation:
YEAR ENDED DECEMBER 31,
Net loss from continuing operations attributable to
Amedisys, Inc. per diluted share
U. S. Department of Justice settlement
Goodwill and other intangibles impairment charge
Non-controlling interests portion of impairment charges
Legal fees
Exit activity costs
Debt costs/lawsuit settlement/tax credits/valuation
allowance adjustment/certain costs
D&O proceeds
OIG self-disclosure
CMS bonus
Adjusted net income from continuing operations
attributable to Amedisys, Inc. per diluted share
2013
2012
2011
$(2.98)
$(2.68)
$(13.05)
3.00
0.18
-
0.11
0.08
(0.03)
(0.11)
0.02
-
$0.27
-
4.17
(0.50)
0.16
0.05
(0.05)
-
-
-
$1.15
-
15.25
-
0.15
0.14
(0.08)
-
-
(0.10)
$2.31
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2013
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 0-24260
AMEDISYS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
11-3131700
(I.R.S. Employer
Identification No.)
5959 S. Sherwood Forest Blvd., Baton Rouge, LA 70816
(Address of principal executive offices, including zip code)
(225) 292-2031 or (800) 467-2662
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $0.001 per share
(Title of each class)
Name of Each Exchange on Which Registered
The NASDAQ Global Select Market
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the issuer is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ‘ No È
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 È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes È No ‘
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer ‘
Non-accelerated filer ‘
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based on the last sale price as
quoted by the NASDAQ Global Select Market on June 30, 2013 (the last business day of the registrant’s most recently completed second fiscal
quarter) was $310,682,672. For purposes of this determination shares beneficially owned by executive officers, directors and ten percent
stockholders have been excluded, which does not constitute a determination that such persons are affiliates.
As of March 10, 2014, the registrant had 32,717,125 shares of Common Stock outstanding.
Smaller reporting company ‘
Accelerated filer È
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2014 Annual Meeting of Stockholders (the “2014 Proxy Statement”) to be filed
pursuant to the Securities Exchange Act of 1934 with the Securities and Exchange Commission within 120 days of December 31, 2013 are
incorporated herein by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS . . . . . . . . .
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK . . . . . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . .
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART I.
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
2
13
31
31
32
32
33
35
37
56
56
56
56
59
59
59
59
59
59
60
61
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT INDEX
EX-21.1 LIST OF SUBSIDIAIRES
EX-23.1 CONSENT OF KPMG LLP
EX-31.1 SECTION 302 CERTIFICATION
EX-32.1 SECTION 906 CERTIFICATION
EX-101 INTERACTIVE DATA FILE
SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
When included in this Annual Report on Form 10-K, or in other documents that we file with the Securities and
Exchange Commission (“SEC”) or in statements made by or on behalf of the Company, words like “believes,”
“belief,” “expects,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “would,”
“should” and similar expressions are intended to identify forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and
uncertainties that could cause actual results to differ materially from those described therein. These risks and
uncertainties include, but are not limited to the following: changes in Medicare and other medical payment
levels, our ability to open care centers, acquire additional care centers and integrate and operate these care
centers effectively, our ability to divest care centers currently held for sale, changes in or our failure to comply
with existing Federal and state laws or regulations or the inability to comply with new government regulations
on a timely basis, competition in the home health industry, changes in the case mix of patients and payment
methodologies, changes in estimates and judgments associated with critical accounting policies, our ability to
maintain or establish new patient referral sources, our ability to attract and retain qualified personnel, changes
in payments and covered services due to the economic downturn and deficit spending by Federal and state
governments, future cost containment initiatives undertaken by third-party payors, our access to financing due to
the volatility and disruption of the capital and credit markets, our ability to meet debt service requirements and
comply with covenants in debt agreements, business disruptions due to natural disasters or acts of terrorism, our
ability to integrate and manage our information systems, our ability to agree on the terms of a settlement to
resolve both the U.S. Department of Justice investigation and the Stark Law Self-Referral matter or fund
required settlement payments in the manner currently contemplated and changes in law or developments with
respect to any litigation or investigations relating to the Company, including the SEC investigation, the OIG Self-
Disclosure issues and various other matters, many of which are beyond our control.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be
predicted or quantified, you should not rely on any forward-looking statement as a prediction of future
events. We expressly disclaim any obligation or undertaking and we do not intend to release publicly any updates
or changes in our expectations concerning the forward-looking statements or any changes in events, conditions
or circumstances upon which any forward-looking statement may be based, except as required by law. For a
discussion of some of the factors discussed above as well as additional factors, see Part I, Item 1A. – “Risk
Factors” and Part II, Item 7– “Critical Accounting Policies” within “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
Unless otherwise provided, “Amedisys,” “we,” “us,” “our,” and the “Company” refer to Amedisys, Inc. and
our consolidated subsidiaries and when we refer to 2013, 2012 and 2011, we mean the twelve month period then
ended December 31, unless otherwise provided.
A copy of this Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the SEC,
including all exhibits, is available on our internet website at http://www.amedisys.com on the “Investors” page
under the “SEC Filings” link.
1
ITEM 1. BUSINESS
Overview
PART I
Amedisys, Inc. (NASDAQ: AMED) is a “health care at home” company delivering personalized home health and
hospice care to more than 360,000 patients each year. Amedisys is focused on delivering patient-centered care,
whether that is home-based recovery and rehabilitation after an operation or injury, care focused on empowering
them to manage a chronic disease, palliative care for those with a terminal illness, or hospice care at the end of
life.
We have used the power of technology to enable our clinicians to provide better care for our patients. We have
made and continue to make significant investments in technologies and programs to establish a continuum of
care that connects each member of a patient’s care team to faster communication, manage care plans and
efficiently document patient progress. As a recognized innovator in our industry, we were one of the first to
equip clinicians with point-of-care laptop technology and referring physicians with an internet portal that enables
seamless, real-time coordination of patient care. Our advanced chronic care management programs and leading-
edge technology enable us to deliver care in accordance with the latest evidence-based practices. Our nationwide
Care Transitions program is designed to reduce unnecessary hospital readmissions through patient and caregiver
health coaching and care coordination, which starts in the hospital and continues through completion of the
patient’s home health plan of care.
We have a strong care network across 37 states and the technological capability to help improve patient
outcomes, reduce costs and keep our loved ones where they want to be, at home, enjoying life. As of
December 31, 2013, we owned and operated 367 Medicare-certified home health care centers, 92 Medicare-
certified hospice care centers and one hospice inpatient unit.
Our services are primarily paid for by Medicare due to the age demographics of our patient base (average age
81). Medicare represented approximately 84%, 82%, and 85% of our net service revenue in 2013, 2012 and
2011, respectively. We are working to diversify our sources of payment by contracting with an increasing
number of managed care providers. We remain focused on developing and maintaining a profitable and
strategically important managed care contract portfolio.
Amedisys was originally incorporated in Louisiana in 1982, transferred our operations to a Delaware corporation,
which was incorporated in 1994, and became a publicly traded company in August of that year. Our common
stock is currently traded on the NASDAQ Global Select Market under the trading symbol “AMED”.
Home Health Care:
There is no place like home to provide a healing environment when recovering from a surgery or illness, or living
with a chronic disease. It is the place where family, friends and familiar surroundings make patients feel most
comfortable and enables faster recovery. The Medicare home health benefit is available to homebound patients
who require ongoing intermittent skilled care. Our services are provided by dedicated, highly trained and skilled
home health care professionals, working closely with physicians to coordinate all aspects of care and comfort to
our patients.
Our Care Team of professionals includes:
•
Skilled Nurses
• Nurse Practitioners
• Home Health Aides
•
Physical Therapists
2
• Occupational Therapists
•
Speech Therapists
• Medical Social Workers
Our chronic care clinical programs incorporate evidence-based best practices for patients with chronic diseases.
These programs incorporate national clinical standards and use patient education to empower patients and their
caregivers with self-care management skills. Our chronic care programs include programs for cardiovascular,
respiratory, diabetes, behavioral health, rehabilitative and medical surgical conditions. Our care team also utilizes
a Care Transitions program that helps patients move safely from the hospital to their homes with the appropriate
post-acute care. Our hospital and health system partners want to ensure their patients have a smooth transition
home as well as prevent avoidable readmissions.
Hospice Care:
Hospice is a special form of care that is designed to provide comfort and support for those who are facing a
terminal illness. It is a compassionate form of care that promotes dignity and affirms quality of life for the
patient, family members and other loved ones.
Individuals with a terminal illness such as heart disease, pulmonary disease, dementia, Alzheimer’s, HIV/AIDS
or cancer may be eligible for hospice care, if they have a life expectancy of six months or less.
Amedisys’ specialized team of hospice professionals works with the patient, family members and attending
physician to develop a plan of care that will best meet the patient’s and family’s needs.
Our Team is a dedicated support network for the patient and includes:
• The Patient and Family
• Attending Physician
• Hospice Physician
• Nurses
•
Social Workers
• Home Health Aides
• Volunteers
• Bereavement Counselors
•
Spiritual Counselors
New Opportunities:
Effective October 2012, Medicare began to impose a financial penalty upon hospitals that have excessive rates of
patient readmissions within 30 days after hospital discharge. We believe this new regulation provides significant
opportunities for providers of post-acute care who can demonstrate the ability to maintain or reduce patient acute
care hospital readmission rates at or below an acceptable level. We are working to take advantage of this
opportunity by striving to further improve the quality of care we provide, as well as implementing disease
management programs designed to be responsive to the needs of patients served by the hospitals we call upon, so
as to expand our business by garnering more referrals from hospitals.
The passage of the Patient Protection and Affordable Care Act (“PPACA”) has resulted in several programs
being introduced by the Centers for Medicare and Medicaid Services (“CMS”) that offer providers the
3
opportunity to participate in initiatives that align with our long-term strategic plan, improve our capabilities and
develop our relationship with hospitals, physicians, managed care payors and other referral sources. One such
program is the CMS Bundled Payments for Care Improvement Initiative (“BPCI”). We are participating in a
“Model 3 – 90-Day Post-Acute” BPCI bundle across two regions, which commenced on January 1, 2014. The
bundle involves 29 of our home health care centers. This is an at-risk model in which CMS sets a bundle target
price based on historical costs. We will receive the savings and be “at-risk” for costs greater than the price target.
We have agreed to terms with 11 hospital partners in three states, with whom we have agreed to share any
savings we receive, and are in the process of negotiating with additional potential partners.
In addition to the BPCI program, PPACA also introduced ACO programs. An ACO is a group of doctors,
hospitals and other health care providers who come together voluntarily to give coordinated high-quality care to
Medicare patients. The goal of coordinated care is to ensure that patients, especially the chronically ill, get the
right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. We
are participating in three ACOs.
Financial Information:
Financial information for our home health and hospice segments can be found in our consolidated financial
statements included in this Annual Report on Form 10-K.
Our Employees
At March 10, 2014, we employed approximately 14,300 employees, consisting of approximately 10,900 home
health care employees, 2,400 hospice care employees and 1,000 corporate and divisional support employees.
Payment for Our Services
Home Health Medicare
The Medicare home health benefit is available both for patients who need care following discharge from a
hospital and patients who suffer from chronic conditions that require ongoing but intermittent care. As a
condition of participation under Medicare, beneficiaries must be homebound (meaning that the beneficiary is
unable to leave his/her home without a considerable and taxing effort), require intermittent skilled nursing,
physical
therapy or speech therapy services, and receive treatment under a plan of care established and
periodically reviewed by a physician. Medicare rates are based on the severity of the patient’s condition, his or
her service needs and other factors relating to the cost of providing services and supplies, bundled into 60-day
episodes of care. An episode starts with the first day a billable visit is performed and ends 60 days later or upon
discharge, if earlier. If a patient is still in treatment on the 60th day, a recertification assessment is undertaken to
determine whether the patient needs additional care. If the patient’s physician determines that further care is
necessary, another episode begins on the 61st day (regardless of whether a billable visit is rendered on that day)
and ends 60 days later. The first day of a consecutive episode, therefore, is not necessarily the new episode’s first
billable visit.
Annually, the Medicare program base episodic rates are set through Federal legislation, as follows:
Period
Base episode
payment
January 1, 2011 through December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2012 through December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2013 through December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2014 through December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,192
2,139
2,138
2,869
Payments can be adjusted for: (a) an outlier payment if our patient’s care was unusually costly (capped at 10% of
total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of
4
visits during the episode was fewer than five; (c) a partial payment if our patient transferred to another provider
or we received a patient from another provider before completing the episode; (d) a payment adjustment based
upon the level of therapy services required (with various incremental adjustments made for additional visits, with
larger payment increases associated with the sixth, fourteenth and twentieth visit thresholds); (e) a payment
adjustment if we are unable to perform periodic therapy assessments; (f) the number of episodes of care provided
to a patient, regardless of whether the same home health provider provided care for the entire series of episodes;
(g) changes in the base episode payments established by the Medicare program; (h) adjustments to the base
episode payments for case mix and geographic wages; and (i) recoveries of overpayments. Medicare can also
make various adjustments to payments received if we are unable to produce appropriate billing documentation or
acceptable authorizations. In addition, we make adjustments to Medicare revenue if we find that we are unable to
obtain appropriate billing documentation, authorizations or face to face documentation.
Home Health Non-Medicare
Payments from Medicaid and private insurance carriers are based on episodic-based rates (60-day episode of
care) or per visit rates depending upon the terms and conditions established with such payors. Episodic-based
rates paid by our non-Medicare payors are paid in a similar manner and subject to the same adjustments as
discussed above for Medicare; however, these rates can vary based upon negotiated terms.
Hospice Medicare
The Medicare hospice benefit is also available to Medicare-eligible patients with terminal illnesses, certified by a
physician, where life expectancy is six months or less. Medicare rates are based on standard prospective rates for
delivering care over a base 90-day or 60-day period (90-day episodes of care for the first two episodes and
60-day episodes of care for any subsequent episodes). Payments are based on daily rates for each day a
beneficiary is enrolled in the hospice benefit. Rates are set based on specific levels of care, are adjusted by a
wage index to reflect health care labor costs across the country and are established annually through Federal
legislation. We make adjustments to Medicare revenue when we find we are unable to obtain appropriate billing
documentation, authorizations or face to face documentation and other reasons unrelated to credit risk. The levels
of care are routine care, general inpatient care, continuous home care and respite care.
We bill Medicare for hospice services on a monthly basis and our payments are subject to two fixed annual caps,
which are assessed on a provider number basis. Generally, each hospice care center has its own provider number.
However, where we have created branch care centers to help our parent care centers serve a geographic location,
the parent and branch may have the same provider number. The annual caps per patient, known as hospice caps,
are calculated and published by the Medicare fiscal intermediary on an annual basis and cover the twelve month
period from November 1 through October 31. The caps can be subject to annual and retroactive adjustments,
which can cause providers to owe money back to Medicare if such caps are exceeded.
The two caps are detailed below:
•
Inpatient Cap. This cap limits the number of days of inpatient care (both respite and general) under a
provider number to 20% of the total number of days of hospice care (both inpatient and in-home)
furnished to all patients served. The daily payment rate for any inpatient days of service in excess of
the cap amount is calculated at the routine home care rate, with excess amounts due back to Medicare;
and
• Overall Payment Cap. This cap is calculated by the Medicare fiscal intermediary at the end of each
hospice cap period to determine the maximum allowable payments per provider number. We estimate
our potential cap exposure using information available for both inpatient day limits as well as per
beneficiary cap amounts. The total cap amount for each provider is calculated by multiplying the
number of beneficiaries electing hospice care during the period by a statutory amount that is indexed
for inflation.
5
Our ability to stay within 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.
Hospice Non-Medicare
Non-Medicare payors pay at rates different from established Medicare rates for hospice services, which are based
on separate, negotiated agreements. We bill and are paid based on these agreements.
Controls over Our Business System Infrastructure
We establish and maintain processes and controls over coding, clinical operations, billing, patient recertifications
and compliance to help monitor and promote compliance with Medicare requirements.
• Coding – Specified diagnosis codes are assigned to each of our patients based on their particular health
condition and ailment (such as diabetes, coronary artery disease or congestive heart failure). Because
coding regulations are complex and are subject to frequent change, we maintain controls surrounding
our coding process. In order to reduce associated risk, we provide coding training and annual update
training for new care center directors and clinical managers; provide coding training during orientation
for new employees; provide monthly specialized coding education; obtain outside expert coding
instruction; utilize coding software in our POC system; and have automated coding edits based on pre-
defined compliance metrics in our POC system.
• Clinical Operations – Regulatory requirements allow patients to be admitted to home health care if
they are considered homebound and require certain clinical services. These clinical services include:
educating the patient about their disease; assessment and observation of disease status; delivery of
clinical skills such as wound care; administration of injections or intravenous fluids; and management
and evaluation of a patient’s plan of care. In order to help monitor and promote compliance with
regulatory requirements, we complete audits of patient charts; administer survey guideline education;
hold recurrent homecare regulatory education; utilize outside expert regulatory services; and have a
toll-free hotline to offer additional assistance.
• Billing – We maintain controls over our billing processes to help promote accurate and complete
billing. In order to promote the accuracy and completeness of our billing, we have annual billing
compliance testing; use formalized billing attestations; limit access to billing systems; hold weekly
operational meetings; use automated daily billing operational indicators; and take prompt corrective
action with employees who knowingly fail to follow our billing policies and procedures in accordance
with a well-publicized “Zero Tolerance Policy”.
• Patient Recertification – In order to be recertified for an additional episode of care, a patient must
continue to meet qualifying criteria and have a continuing medical need. This could be caused by
changes in the patient’s condition requiring changes to the patient’s medical regimen or by modified
care protocols within the episode of care. The patient’s progress towards goals is evaluated prior to
recertification. As with the initial episode of care, a recertification requires orders from the patient’s
physician. Before any employee recommends recertification to a physician, we conduct a care center
level, multidisciplinary care team conference. We also monitor centralized automated compliance
recertification metrics to identify, monitor, and, where we deem appropriate, audit care centers that
have relatively high recertification levels.
• Compliance – The quality and reputation of our personnel and operations are critical to our success.
We develop, implement and maintain ethics, compliance and quality improvement programs as a
component of the centralized corporate services provided to our home health and hospice care
centers. Our ethics and compliance program includes a Code of Ethical Business Conduct for our
employees, officers, directors and affiliates and a process for reporting regulatory or ethical concerns to
our Chief Compliance Officer through a confidential hotline, which is augmented by exit interviews of
departing employees and monthly interviews with randomly-selected, current employees. We promote
a culture of compliance within our company through persistent messages from our senior leadership
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concerning the necessity of strict compliance with legal requirements and company policies and
procedures. We also employ a comprehensive compliance training program that includes mandatory
compliance training and testing for all new employees upon hire and annually for all staff thereafter. In
addition to our compliance training, we also conduct numerous proactive, compliance audits based on
key risk metrics, which are conducted by clinical auditors who work for our Compliance Department.
Our Regulatory Environment
We are highly regulated by Federal, state and local authorities. Regulations and policies frequently change, and
we monitor changes through trade and governmental publications and associations. Our home health and hospice
subsidiaries are certified by CMS and therefore are eligible to receive payment for services through the Medicare
system.
We are also subject to Federal, state and local laws and regulations dealing with issues such as occupational
safety, employment, medical leave, insurance, civil rights, discrimination, building codes, environmental issues
and adverse event reporting and recordkeeping. Federal, state and local governments are expanding the number
of regulatory requirements on businesses.
We have set forth below a discussion of the regulations that we believe most significantly affect our home health
and hospice businesses.
Licensure, Certificates of Need (CON) and Permits of Approval (POA)
Home health and hospice care centers operate under licenses granted by the health authorities of their respective
states. Additionally, certain states, including a number in which we operate, carefully restrict new entrants into
the market based on demographic and/or competitive changes. In such states, expansion by existing providers or
entry into the market by new providers is permitted only where a given amount of unmet need exists, resulting
either from population increases or a reduction in competing providers. These states ration the availability of
markets through a CON process, which is periodically evaluated. Currently, state health authorities in 17 states
and the District of Columbia and Puerto Rico require a CON or, in the State of Arkansas, a POA, in order to
establish and operate a home health care center, and state health authorities in 12 states and the District of
Columbia and Puerto Rico require a CON to operate a hospice care center.
We operate home health care centers in the following CON states: Alabama, Arkansas (POA), Georgia,
Kentucky, Maryland, Mississippi, New Jersey, New York, North Carolina, South Carolina, Tennessee and West
Virginia, as well as the District of Columbia and Puerto Rico. We provide hospice related services in the
following CON states: Alabama, Maryland, North Carolina, Tennessee and West Virginia.
In every state where required, our locations possess a license and/or CON or POA issued by the state health
authority that determines the local service areas for the home health or hospice care center. In general, the
process for opening a home health or hospice care center begins by a provider submitting an application for
licensure and certification to the state and Federal regulatory bodies, which is followed by a testing period of
transmitting data from the applicant to CMS. Once this process is complete, the care center receives a provider
agreement and corresponding number and can begin billing for services that it provides. For those states that
require a CON or POA, the provider must also complete a separate application process before billing can
commence. In addition, states with CON and POA laws place limits on the construction and acquisition of health
care facilities and operations and the expansion of existing facilities and services. In these states, approvals are
required for capital expenditures exceeding amounts above the prescribed thresholds.
State CON and POA laws generally provide that, prior to the addition of new capacity, the construction of new
facilities or the introduction of new services, a designated state health planning agency must determine that a
need exists for those beds, facilities or services. The process is intended to promote comprehensive health care
7
in providing high-quality health care at
planning, assist
the lowest possible cost and avoid unnecessary
duplication by ensuring that only those health care facilities and operations that are needed will be built and
opened.
Professional Licensure, Certification, Accreditation and Related Laws and Guidelines
We have invested in new business lines that are complementary to our existing home health and hospice
businesses, but require compliance with additional regulatory requirements. These new business lines consist of
(i) palliative care, which is designed to relieve pain and suffering for patients who do not qualify for, or have not
elected, the hospice benefit, and (ii) house calls medical practices. These new practices are billed pursuant to
Medicare Part B, rather than Medicare Part A which governs both home health and hospice, and utilize house
calls nurse practitioners (“NPs”), physician assistants (“PAs”) and physicians (collectively with NPs and PAs,
“Clinical Professionals”). Our Clinical Professionals are subject to numerous federal, state and local licensing
laws and regulations, relating to, among other things, professional credentialing and professional ethics. Clinical
Professionals are also subject to state and Federal regulation regarding prescribing medication and controlled
substances. Each state defines the scope of practice of Clinical Professionals through legislation and through the
respective Boards of Medicine and Nursing, and many states require that NPs and PAs work in collaboration
with or under the supervision of a physician. These requirements may vary significantly from state to state. There
are penalties for non-compliance with these laws and standards, including loss of professional license, civil or
criminal fines and penalties, federal health care program disenrollment, loss of billing privileges, and exclusion
from participation in various governmental and other third-party healthcare programs.
Reimbursement for palliative care and house calls services is generally conditioned on our Clinical Professionals
providing the correct procedure and diagnosis codes and properly documenting both the service itself and the
medical necessity for the service. Incorrect or incomplete documentation and billing information, or the incorrect
selection of codes for the level and type of service provided, could result in non-payment for services rendered or
lead to allegations of billing fraud.
Medicare Participation
Our care centers must comply with regulations promulgated by the United States Department of Health and
Human Services in order to participate in the Medicare program and receive Medicare payments. Among other
things, these regulations, known as “conditions of participation,” relate to the type of facility, its personnel and
its standards of medical care, as well as its compliance with state and local laws and regulations. CMS has
indicated that it will be revising the current home health conditions of participation but has not yet announced the
publication date of such revisions. In 2012, CMS adopted alternative sanction enforcement options which allow
CMS (i) effective July 1, 2013, to impose temporary management, direct plans of correction, or direct training,
and (ii) effective July 1, 2014, to impose payment suspensions and civil monetary penalties in each case on
providers out of compliance with the conditions of participation.
CMS has engaged a number of third party firms, including Recovery Audit Contractors (“RACs”), Program
Safeguard Contractors (“PSCs”), Zone Program Integrity Contractors (“ZPICs”) and Medicaid Integrity
Contributors (“MICs”), to conduct extensive reviews of claims data and state and Federal government health care
program laws and regulations applicable to healthcare providers. These audits evaluate the appropriateness of
billings submitted for payment. In addition to identifying overpayments, audit contractors can refer suspected
violations of law to government enforcement authorities.
Federal and State Anti-Fraud and Anti-Kickback Laws
As a provider under the Medicare and Medicaid systems, we are subject to various anti-fraud and abuse laws,
including the Federal health care programs’ anti-kickback statute and, where applicable,
its state law
counterparts. Subject to certain exceptions, these laws prohibit any offer, payment, solicitation or receipt of any
8
form of remuneration to induce or reward the referral of business payable under a government health care
program or in return for the purchase, lease, order, arranging for, or recommendation of items or services covered
under a government health care program. Affected government health care programs include any health care
plans or programs that are funded by the United States government (other than certain Federal employee health
insurance benefits/programs), including certain state health care programs that receive Federal funds, such as
Medicaid. A related law forbids the offer or transfer of anything of value, including certain waivers of co-
payment obligations and deductible amounts, to a beneficiary of Medicare or Medicaid that is likely to influence
the beneficiary’s selection of health care providers, again subject to certain exceptions. Violations of the anti-
fraud and abuse laws can result in the imposition of substantial civil and criminal penalties and, potentially,
exclusion from furnishing services under any government health care program. In addition, the states in which
we operate generally have laws that prohibit certain direct or indirect payments or fee-splitting arrangements
between health care providers where they are designed to obtain the referral of patients from a particular
provider.
Stark Laws
Congress adopted legislation in 1989, known as the “Stark Law,” that generally prohibited a physician from
ordering clinical laboratory services for a Medicare beneficiary where the entity providing that service has a
financial relationship (including direct or indirect ownership or compensation relationships) with the physician
(or a member of his/her immediate family), and further prohibits such entity from billing for or receiving
payment for such services, unless a specified exception is available. The Stark Law was amended through
additional legislation, known as “Stark II,” which became effective January 1, 1993. That legislation extended
the Stark Law prohibitions beyond clinical laboratory services to a more extensive list of statutorily defined
“designated health services,” which includes, among other things, home health services, durable medical
equipment and outpatient prescription drugs. Violations of the Stark Law result in payment denials and may also
trigger civil monetary penalties and program exclusion. Several of the states in which we conduct business have
also enacted statutes similar in scope and purpose to the Federal fraud and abuse laws and the Stark Laws. These
state laws may mirror the Federal Stark Laws or may be different in scope. The available guidance and
enforcement activity associated with such state laws varies considerably.
Federal and State Privacy and Security Laws
The Administrative Simplification provisions of the Health Insurance Portability and Accountability Act of 1996,
as amended (“HIPAA”), directed that the Secretary of the U.S. Department of Health and Human Services
(“HHS”) promulgate regulations prescribing standard requirements for electronic health care transactions and
establishing protections for the privacy and security of individually identifiable health information, known as
“protected health information.” The HIPAA transactions regulations establish form, format and data content
requirements for most electronic health care transactions, such as health care claims that are submitted
electronically. The HIPAA privacy regulations establish comprehensive requirements relating to the use and
disclosure of protected health information. The HIPAA security regulations establish minimum standards for the
protection of protected health information that is stored or transmitted electronically. Violations of the privacy
and security regulations are punishable by civil and criminal penalties.
The American Recovery and Economic Reinvestment Act of 2009 (“ARRA”), signed into law by President
Obama on February 17, 2009, contained significant changes to the privacy and security provisions of HIPAA,
including major changes to the enforcement provisions. Among other things, ARRA significantly increased the
amount of civil monetary penalties that can be imposed for violations of HIPAA. ARRA also authorized state
attorneys general to bring civil enforcement actions under HIPAA. These enhanced penalties and enforcement
provisions went into effect immediately upon enactment of ARRA. ARRA also required that HHS promulgate
regulations requiring that certain notifications be made to individuals, to HHS and potentially to the media in the
event of breaches of the privacy of protected health information. These breach notification regulations went into
effect on September 23, 2009, and HHS began to enforce violations on February 22, 2010. Violations of the
breach notification provisions of HIPAA can trigger the increased civil monetary penalties described above.
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ARRA’s numerous other changes to HIPAA have delayed effective dates and require the issuance of
implementing regulations by HHS. On July 14, 2010, the HHS Office for Civil Rights (“OCR”) published
proposed regulations designed to implement a number of changes called for by ARRA, but the proposed
regulations have not yet been finalized. The changes to HIPAA enacted as part of ARRA reflect a Congressional
intent that HIPAA’s privacy and security provisions be more strictly enforced. It is likely that these changes will
stimulate increased enforcement activity and enhance the potential that health care providers will be subject to
financial penalties for violations of HIPAA.
In addition to the Federal HIPAA regulations, most states also have laws that protect the confidentiality of health
information. Also, in response to concerns about identity theft, many states have adopted so-called “security
breach” notification laws that may impose requirements regarding the safeguarding of personal information, such
as social security numbers and bank and credit card account numbers, and that impose an obligation to notify
persons when their personal information has or may have been accessed by an unauthorized person. Some state
security breach notification laws may also impose physical and electronic security requirements. Violation of
state security breach notification laws can trigger significant monetary penalties.
The False Claims Act
The Federal False Claims Act gives the Federal government an additional way to police false bills or requests for
payment for health care services. Under the False Claims Act, the government may fine any person who
knowingly submits, or participates in submitting, claims for payment to the Federal government which are false
or fraudulent, or which contain false or misleading information. Any person who knowingly makes or uses a
false record or statement to avoid paying the Federal government, or knowingly conceals or avoids an obligation
to pay money to the Federal government, may also be subject to fines under the False Claims Act. Under the
False Claims Act, the term “person” means an individual, company, or corporation. The Federal government has
widely used the False Claims Act to prosecute Medicare and other governmental program fraud in areas such as
violations of the Federal anti-kickback statute or the Stark Laws, coding errors, billing for services not provided,
and submitting false cost reports. The False Claims Act has also been used to prosecute people or entities that bill
services at a higher reimbursement rate than is allowed and that bill for care that is not medically necessary. In
addition to government enforcement, the False Claims Act authorizes private citizens to bring qui tam or
“whistleblower” lawsuits, greatly extending the practical reach of the False Claims Act. The penalty for violation
of the False Claims Act is a minimum of $5,500 for each fraudulent claim plus three times the amount of
damages caused to the government as a result of each fraudulent claim.
The Fraud Enforcement and Recovery Act of 2009 (“FERA”) amended the False Claims Act with the intent of
enhancing the powers of government enforcement authorities and whistleblowers to bring False Claims Act
cases. In particular, FERA attempts to clarify that liability may be established not only for false claims submitted
directly to the government, but also for claims submitted to government contractors and grantees. FERA also
seeks to clarify that liability exists for attempts to avoid repayment of overpayments, including improper
retention of Federal funds. FERA also included amendments to False Claims Act procedures, expanding the
government’s ability to use the Civil Investigative Demand process to investigate defendants, and permitting
government complaints in intervention to relate back to the filing of the whistleblower’s original complaint.
FERA is likely to increase both the volume and liability exposure of False Claims Act cases brought against
health care providers.
In addition to the False Claims Act, the Federal government may use several criminal statutes to prosecute the
submission of false or fraudulent claims for payment to the Federal government. Many states have similar false
claims statutes that impose liability for the types of acts prohibited by the False Claims Act. As part of the Deficit
Reduction Act of 2005 (the “DRA”), Congress provided states an incentive to adopt state false claims acts
consistent with the Federal False Claims Act. Additionally, the DRA required providers who receive $5 million
or more annually from Medicaid to include information on Federal and state false claims acts, whistleblower
protections and the providers’ own policies on detecting and preventing fraud in their written employee policies.
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Civil Monetary Penalties
The United States Department of Health and Human Services may impose civil monetary penalties upon any
person or entity who presents, or causes to be presented, certain ineligible claims for medical items or services.
The amount of penalties varies, depending on the offense, from $2,000 to $50,000 per violation. In addition,
persons who have been excluded from the Medicare or Medicaid program and still retain ownership in a
participating entity, or who contract with excluded persons, may be penalized. Penalties also are applicable in
certain other cases, including violations of the Federal anti-kickback statute, payments to limit certain patient
services and improper execution of statements of medical necessity.
FDA Regulation
The U.S. Food and Drug Administration (“FDA”) regulates medical device user facilities, which include home
health care providers. FDA regulations require user facilities to report patient deaths and serious injuries to FDA
and/or the manufacturer of a device used by the facility if the device may have caused or contributed to the death
or serious injury of any patient. FDA regulations also require user facilities to maintain files related to adverse
events and to establish and implement appropriate procedures to ensure compliance with the above reporting and
recordkeeping requirements. User facilities are subject to FDA inspection, and noncompliance with applicable
requirements may result in warning letters or sanctions including civil monetary penalties, injunction, product
seizure, criminal fines and/or imprisonment.
Patient Protection and Affordable Care Act
In March 2010, comprehensive health care reform legislation was signed into law in the United States through
the passage of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation
Act (collectively, “PPACA”). However, it is difficult to predict the full impact of PPACA due to the law’s
complexity and current lack of full implementing regulations or interpretive guidance, as well our inability to
foresee how CMS and other participants in the health care industry will respond to the choices available to them
under the law. Many provisions in PPACA are scheduled to become effective over the next several years, but
many of the implementing regulations for these statutory provisions have not yet been published. PPACA calls
for a number of changes to be made over time that will likely have a significant impact upon the health care
delivery system. For example, PPACA mandates decreases in home health reimbursement rates, including a
rebasing of the home health payment system beginning in 2014 that will be phased in over a four-year period.
These reimbursement changes are described in detail in Part II, Item 7, “Management’s Discussion and Analysis
of Financial Condition an Results of Operations: Overview – Economic and Industry Factors.” PPACA has
established a number of new requirements impacting our business operations, and promises to give rise to other
changes that could significantly impact our businesses in the future. For example, PPACA also mandates the
creation of a home health value-based purchasing program, the development of quality measures, and the testing
of alternative payment and delivery models, including ACOs and the Bundled Payments for Care Improvement
initiative. See Part 1, Item IA, “Risk Factors,” “Risks Related to Laws and Government Regulations” for a more
complete discussion of PPACA and the risks it presents to our businesses.
Our Competitors
There are few barriers to entry in the home health and hospice jurisdictions that do not require certificates of
need or permits of approval. Our primary competition in these jurisdictions comes from local privately and
publicly-owned and hospital-owned health care providers. We compete based on the availability of personnel, the
quality of services, expertise of visiting staff, and, in certain instances, on the price of our services. In addition,
we compete with a number of non-profit organizations that finance acquisitions and capital expenditures on a
tax-exempt basis or receive charitable contributions that are unavailable to us.
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Available Information
Our company website address is www.amedisys.com. We use our website as a channel of distribution for
important company information. Important information, including press releases, analyst presentations and
financial information regarding our company, is routinely posted on and accessible on the Investor Relations
subpage of our website, which is accessible by clicking on the tab labeled “Investors” on our website home page.
We also use our website to expedite public access to time-critical information regarding our company in advance
of or in lieu of distributing a press release or a filing with the SEC disclosing the same information. Therefore,
investors should look to the “Investors” subpage of our web site for important and time-critical information.
Visitors to our website can also register to receive automatic e-mail and other notifications alerting them when
new information is made available on the “Investors” subpage of our website. In addition, we make available on
the Investors subpage of our website (under the link “SEC Filings”), free of charge, our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and
any amendments to those reports as soon as practicable after we electronically file such reports with the SEC.
Further, copies of our Certificate of Incorporation and Bylaws, our Code of Ethical Business Conduct, our
Corporate Governance Guidelines and the charters for the Audit, Compensation, Nominating and Corporate
Governance and Quality of Care Committees of our Board are also available on the Investors subpage of our
website (under the link “Corporate Governance”).
Additionally, the public may read and copy any of the materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the operation of the
Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. Our electronically filed reports
can also be obtained on the SEC’s internet site at http://www.sec.gov.
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ITEM 1A. RISK FACTORS
The risks described below, and risks described elsewhere in this Form 10-K, could have a material adverse effect
on our business and consolidated financial condition, results of operations and cash flows and the actual
outcome of matters as to which forward-looking statements are made in this Form 10-K. The risk factors
described below and elsewhere in this Form 10-K are not the only risks faced by Amedisys. Our business and
consolidated financial condition, results of operations and cash flows may also be materially adversely affected
by factors that are not currently known to us, by factors that we currently consider immaterial or by factors that
are not specific to us, such as general economic conditions.
If any of the following risks are actually realized, our business and consolidated financial condition, results of
operations and cash flows could be materially adversely affected. In that case, the trading price of our common
stock could decline.
You should refer to the explanation of the qualifications and limitations on forward-looking statements under
“Special Caution Concerning Forward-Looking Statements.” All forward-looking statements made by us are
qualified by the risk factors described below.
Risks Related to Reimbursement
Because a high percentage of our revenue is derived from Medicare, reductions in Medicare rates, rate
increases that do not cover cost increases and/or significant changes to the Medicare payment methodology or
eligibility requirements could have a material adverse effect on our business and consolidated financial
condition, results of operations and cash flows.
Our net service revenue is primarily derived from Medicare, which accounted for 84%, 82% and 85% of our
revenue during 2013, 2012 and 2011, respectively. Payments received from Medicare are subject to changes
made through Federal legislation. These changes, as further detailed in Item 1, “Payment for Our Services,” can
include changes to base episode payments and adjustments for home health services, changes to cap limits and
per diem rates for hospice services and changes to Medicare eligibility and documentation requirements or
changes designed to restrict utilization. When such changes are implemented, we must also modify our internal
billing processes and procedures accordingly, which can require significant time and expense. Any similar
changes, including retroactive adjustments, adopted in the future by CMS could have a material adverse effect on
our business and consolidated financial condition, results of operations and cash flows.
There are continuing efforts to reform governmental health care programs that could result in major changes in
the health care delivery and reimbursement system on a national and state level, including changes directly
impacting the reimbursement systems for our home health and hospice care centers. Though we cannot predict
what, if any, reform proposals will be adopted, health care reform and legislation may have a material adverse
effect on our business and our financial condition, results of operations and cash flows through decreasing
payments made for our services. We could be affected adversely by the continuing efforts of governmental and
private third party payors to contain health care costs. We cannot assure you that reimbursement payments under
governmental and private third party payor programs, including Medicare supplemental insurance policies, will
remain at levels comparable to present levels or will be sufficient to cover the costs allocable to patients eligible
for reimbursement pursuant to these programs. These changes could have a material adverse effect on our
business and consolidated financial condition, results of operations and cash flows.
Our hospice operations are subject to two annual Medicare caps. If such caps were to be exceeded by any of
our hospice providers, our business and consolidated financial condition, results of operations and cash flows
could be materially adversely affected.
With respect to our hospice operations, overall payments made by Medicare to each provider number (generally
corresponding to a hospice care center) are subject to an inpatient cap amount and an overall payment cap, which
13
are calculated and published by the Medicare fiscal intermediary on an annual basis covering the period from
November 1 through October 31. If payments received by any one of our hospice provider numbers exceeds
either of these caps, we may be required to reimburse Medicare for payments received in excess of the caps,
which could have a material adverse effect on our business and consolidated financial condition, results of
operations and cash flows.
The economic downturn, any deepening of the economic downturn, continued deficit spending by the Federal
government or state budget pressures may result in a reduction in payments and covered services.
Adverse developments in the United States could lead to a reduction in Federal government expenditures,
including governmentally funded programs in which we participate, such as Medicare and Medicaid. In addition,
if at any time the Federal government is not able to meet its debt payments unless the Federal debt ceiling is
raised, and legislation increasing the debt ceiling is not enacted, the Federal government may stop or delay
making payments on its obligations, including funding for government programs in which we participate, such as
Medicare and Medicaid. Failure of the government to make payments under these programs could have a
material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Further, any failure by the United States Congress to complete the Federal budget process and fund government
operations may result in a Federal government shutdown, potentially causing us to incur substantial costs without
reimbursement under the Medicare program, which could have a material adverse effect on our business and
consolidated financial condition, results of operations and cash flows. As an example, the failure of the 2011
Joint Select Committee to meet its Deficit Reduction goal resulted in an automatic reduction in Medicare home
and hospice payments of 2% beginning April 1, 2013.
Historically, state budget pressures have resulted in 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 addition, continued unfavorable economic conditions may affect the number of
patients enrolled in managed care programs and the profitability of managed care companies, which could result
in reduced payment rates and could have a material adverse effect on our business and consolidated financial
condition, results of operations and cash flows.
Future cost containment initiatives undertaken by private third party payors may limit our future revenue and
profitability.
Our non-Medicare revenue and profitability are affected by continuing efforts of third party payors to maintain or
reduce costs of health care by lowering payment rates, narrowing the scope of covered services, increasing case
management review of services and negotiating pricing. There can be no assurance that third party payors will
make timely payments for our services, and there is no assurance that we will continue to maintain our current
payor or revenue mix. We are continuing our efforts to develop our non-Medicare sources of revenue and any
changes in payment levels from current or future third party payors could have a material adverse effect on our
business and consolidated financial condition, results of operations and cash flows.
Risks Related to Laws and Government Regulations
We are the subject of a number of inquiries by the Federal government, any of which could result in
substantial penalties against us.
We are the subject of a number of inquiries by the Federal government, and we have made voluntary disclosures
to the Federal government concerning several matters, as described below in this paragraph and as described in
further detail in Part IV, Item 15, “Note 10, Commitments and Contingencies.” During the 111th and 112th United
States Congresses, the Senate Finance Committee conducted an inquiry focused on the major publicly traded
home health corporations, relating to our policies and practices regarding home therapy visits and therapy
utilization trends. On October 3, 2011, the Senate Finance Committee publicly issued a report titled “Staff Report
on Home Health and the Medicare Therapy Threshold,” which recommended that CMS “must move toward
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taking therapy out of the payment model.” Following the initiation in May 2010 of the Senate Finance
Committee inquiry, we, as well as the other major publicly traded home health care companies, received a notice
of formal investigation from the SEC accompanied by a subpoena for documents relating to the matters under
review by the Senate Finance Committee and other matters involving our operations. We also received Civil
Investigative Demands (“CIDs”) issued by the U.S. Department of Justice (“DOJ”) pursuant to the Federal False
Claims Act, requiring the delivery of a wide range of documents and information relating to our clinical and
business operations, including reimbursement and billing claims submitted to Medicare for home health services,
and related compliance activities. Subsequently, the Company and certain current and former employees have
received additional CIDs from DOJ for information and/or testimony. In May 2012, we made a disclosure to
CMS under that agency’s Stark Law Self-Referral Disclosure Protocol relating to certain services agreements
between a subsidiary of ours and a large physician group. In addition, we made disclosures to various
governmental agencies, including, in October 2012 and 2013, to the Office of Counsel to the Inspector General
of the United States Department of Health and Human Services (the “OIG”) pursuant to the OIG Provider Self-
Disclosure Protocol regarding certain clinical documentation issues and eligibility requirements at two hospice
care centers and one home health care center.
We have reached an agreement in principle to resolve both the U.S. Department of Justice investigation and the
Stark Law Self-Referral matter. We have agreed to this tentative settlement without any admission of
wrongdoing to resolve these matters and to avoid the uncertainty and expense of protracted litigation. In
connection with the settlement, we expect to enter into a corporate integrity agreement with the Office of the
Inspector General – HHS. The agreement in principle covers the period from 2008 through 2010 (with respect to
the DOJ investigation) and the period from 2008 through 2012 (with respect to the Stark Law Self-Referral
Disclosure Protocol) and calls for payment of the aggregate sum of $150 million plus interest thereon at a rate of
2.25 percent per annum, as follows: (a) $115 million plus interest thereon to be payable upon execution of the
settlement documents, and (b) $35 million plus interest thereon to be payable six months thereafter. In addition,
we may incur additional expenses which are not currently estimable related to the settlement agreement and in
connection with compliance measures that may be mandated by the corporate integrity agreement.
The settlement is subject to a number of contingencies, including agreement upon the scope of the matters
released and other material terms, the negotiation and execution of acceptable settlement documents including a
corporate integrity agreement, and approval of our board of directors, the DOJ and the Office of Inspector
General-HHS. We have recorded an accrual of $150 million during the third quarter of 2013 with respect to these
matters. We can provide no assurances as to whether we will be able to successfully consummate the settlement.
Until the settlement actually becomes final, there can be no guarantee that these matters will be resolved on the
basis described above, the outcome of these matters will remain uncertain, and the amount required to resolve
them could differ materially from the amount accrued.
Finally, if these matters continue over a long period of time, they could divert the attention of management from
the day-to-day operations of our business and impose significant administrative burdens on us. These potential
consequences, as well as any adverse outcome from these investigations or other investigations initiated by the
government at any time, could have a material adverse effect on our business and consolidated financial
condition, results of operations and cash flows.
If we reach a final settlement of the U.S. Department of Justice investigation and the Stark Law Self-Referral
matter, we expect to operate under a Corporate Integrity Agreement. Violations of that agreement could result
in substantial penalties or exclusion from participation in the Medicare program.
As explained immediately above, one of the conditions of the agreement in principle to resolve both the U.S.
Department of Justice investigation and the Stark Law Self-Referral matter is the entry into a corporate integrity
agreement (“CIA”) with the Office of Inspector General-HHS. Although the CIA has not yet been finalized, it is
expected that the term of the CIA will be five years, and that the CIA will require the Company to perform a
broad array of compliance-related activities, including the regular auditing of its Medicare claims on a random
15
basis by a third party Independent Review Organization (“IRO”). The claims reviews undertaken by the IRO
could reveal the existence of overpayments made to the Company by the Medicare program which the Company
would be required to repay to Medicare, including potentially on an extrapolated basis. It is expected that the
CIA will also contain language that would impose substantial stipulated penalties for violations of the agreement,
including the possibility of exclusion from the Medicare program. These potential consequences could have a
material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Pending civil litigation could have a material adverse effect on the Company.
We and certain of our current and former directors, senior executives and other employees are defendants in a
Federal securities class action and an ERISA class action. We are also a defendant in several wage and hour law
putative collective and class action lawsuits. See Part IV, Item 15, “Note 10, Commitments and Contingencies”
for a more detailed description of these proceedings. These actions remain in preliminary stages and it is not yet
possible to assess their probable outcome or our potential liability, if any. We cannot provide any assurances that
the legal and other costs associated with the defense of these actions, the amount of time required to be spent by
management on these matters and the ultimate outcome of these actions will not have a material adverse effect on
our business and consolidated financial condition, results of operations and cash flows.
Our insurance may not cover all of the costs associated with defending the pending Federal securities and
ERISA class actions and the ongoing Federal government investigations, and any potential liability costs
associated with such matters, and we maintain no insurance that covers any portion of the pending wage and
hour putative collective and class action lawsuits.
With respect
to the pending securities and ERISA class actions and the ongoing Federal government
investigations, we maintain directors’ and officers’ liability insurance that we believe should cover a portion of
the legal costs and potential liability costs associated with certain of these matters. However, such insurance
coverage does not extend to all of these expenditures, and the insurance limits may be insufficient even with
respect to expenditures that would otherwise be covered. In addition, we may be obligated to indemnify (and
advance legal expenses to) both current and former officers, employees and directors in connection with these
matters. Furthermore, our insurance carriers may seek to deny coverage in some or all of these matters, in which
case we may have to fund the indemnification amounts owed to such directors and officers ourselves. If our
insurance coverage for any or some of these matters is denied or is not adequate, it may have a material adverse
effect on our business and consolidated financial condition, results of operations and cash flows. We do not
maintain any insurance that will cover any part of the wage and hour putative collective and class action lawsuits
in which we are defendants.
We are subject to extensive government regulation. Any changes to the laws and regulations governing our
business, or to the interpretation and enforcement of those laws or regulations, could have a material adverse
effect on our business and consolidated financial condition, results of operations and cash flows.
Our industry is subject to extensive Federal and state laws and regulations. See Part I, Item 1, “Our Regulatory
Environment” for additional information on such laws and regulations. Federal and state laws and regulations
impact how we conduct our business, the services we offer and our interactions with patients, our employees and
the public and impose certain requirements on us such as:
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licensure and certification;
adequacy and quality of health care services;
qualifications of health care and support personnel;
quality and safety of medical equipment;
confidentiality, maintenance and security issues associated with medical records and claims processing;
relationships with physicians and other referral sources;
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operating policies and procedures;
policies and procedures regarding employee relations;
addition of facilities and services;
billing for services;
requirements for utilization of services;
documentation required for billing and patient care; and
reporting and maintaining records regarding adverse events.
These laws and regulations, and their interpretations, are subject to change. Changes in existing laws and
regulations, or their interpretations, or the enactment of new laws or regulations could have a material adverse
effect on our business and consolidated financial condition, results of operations and cash flows by:
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increasing our administrative and other costs;
increasing or decreasing mandated services;
causing us to abandon business opportunities we might have otherwise pursued;
decreasing utilization of services;
forcing us to restructure our relationships with referral sources and providers; or
requiring us to implement additional or different programs and systems.
Additionally, we are subject to various routine and non-routine reviews, audits and investigations by the
Medicare and Medicaid programs and other Federal and state governmental agencies, which have various rights
and remedies against us if they assert that we have overcharged the programs or failed to comply with program
requirements. 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, and the termination of our rights to participate in
Federal and state-sponsored programs and/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, our business and
consolidated financial condition, results of operations and cash flows could be materially adversely affected.
Our developing palliative care and house call business lines are subject to rules, prohibitions, regulations and
reimbursement requirements that differ from those that govern our primary home health and hospice
operations.
Two lines of business that we continue to develop are (i) palliative care, a type of care focused upon relieving
pain and suffering in patients who do not quality for, or who have not yet elected, the hospice benefit, and
(ii) medical house calls. The continued development of these businesses exposes us to additional risks, in part
because these business lines require us to comply with additional Federal and state laws and regulations that
differ from those that govern our home health and hospice businesses. These lines of business require compliance
with different Federal and state requirements governing licensure, enrollment, documentation, prescribing,
coding, billing and collection of coinsurance and deductibles, among other requirements. For example, these
practices are billed to Medicare Part B, rather than Medicare Part A, which covers home health and hospice, and
utilize nurse practitioners (“NPs”), physician assistants (“PAs”) and physicians (collectively, with NPs and PAs,
“Clinical Professionals”). Part B differs in many respects from Part A, including by requiring the payment and
collection of patient deductibles and co-insurance. Additionally, some states have prohibitions on the corporate
practice of medicine and fee-splitting, which generally prohibit business entities from owning or controlling
medical practices or may limit the ability of Clinical Professionals to share professional service income with non-
professional or business interests. These requirements may vary significantly from state to state. Reimbursement
for palliative care and house calls services is generally conditioned on our Clinical Professionals providing the
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correct procedure and diagnosis codes and properly documenting both the service itself and the medical necessity
for the service. Incorrect or incomplete documentation and billing information, or the incorrect selection of codes
for the level and type of service provided, could result in non-payment for services rendered or lead to allegations
of billing fraud. Further, compliance with applicable regulations may cause us to incur expenses that we have not
anticipated, and if we are unable to comply with these additional legal requirements, we may incur liability,
which could have a material adverse effect on our business and consolidated financial condition, results of
operations and cash flows.
We face periodic and routine reviews, audits and investigations under our contracts with Federal and state
government agencies and private payors, and these audits could have adverse findings that may negatively
impact our business.
As a result of our participation in the Medicare and Medicaid programs, we are subject to various governmental
reviews, audits and investigations to verify our compliance with these programs and applicable laws and
regulations. We also are subject to audits under various government programs, including the RAC, ZPIC, PSC
and MIC programs, in which third party firms engaged by CMS conduct extensive reviews of claims data and
medical and other records to identify potential improper payments under the Medicare program. Private pay
sources also reserve the right to conduct audits. If billing errors are identified in the sample of reviewed claims,
the billing error can be extrapolated to all claims filed which could result in a larger overpayment than originally
identified in the sample of reviewed claims. Our costs to respond to and defend reviews, audits and investigations
may be significant and could have a material adverse effect on our business and consolidated financial condition,
results of operations and cash flows. Moreover, an adverse review, audit or investigation could result in:
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required refunding or retroactive adjustment of amounts we have been paid pursuant to the Federal or
state programs or from private payors;
state or Federal agencies imposing fines, penalties and other sanctions on us;
loss of our right to participate in the Medicare program, state programs, or one or more private payor
networks; or
damage to our business and reputation in various markets.
These results could have a material adverse effect on our business and consolidated financial condition, results of
operations and cash flows.
If a care center fails to comply with the conditions of participation in the Medicare program, that care center
could be subjected to sanctions or terminated from the Medicare program.
Each of our care centers must comply with required conditions of participation in the Medicare program. If we
fail to meet the conditions of participation at a care center, we may receive a notice of deficiency from the
applicable state surveyor. If that care center then fails to institute an acceptable plan of correction to remediate
the deficiency within the correction period provided by the state surveyor, that care center could be terminated
from the Medicare program or subjected to alternative sanctions. CMS outlined its alternative sanction
enforcement options through a regulation published in 2012; under the regulation, CMS may (i) effective July 1,
2013, impose temporary management, direct a plan of correction, or direct training and (ii) effective July 1, 2014,
impose payment suspensions and civil monetary penalties, in each case, upon providers who fail to comply with
the conditions of participation. Termination of one or more of our care centers from the Medicare program for
failure to satisfy the program’s conditions of participation, or the imposition of alternative sanctions, could
disrupt operations, require significant attention by management, or have a material adverse effect on our business
and reputation and consolidated financial condition, results of operations and cash flows. CMS has announced
that it is currently revising the Medicare conditions of participation for home health care centers across the
industry, with an unknown effective date. We do not know at this time what effect the revisions will have on our
operations, and there can be no assurances that the revisions will not have a material adverse effect on our
business and consolidated financial condition, results of operations and cash flows.
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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 legislation, commonly known as the “Stark
Law,” that prohibits certain financial relationships, specifically including ownership interests and compensation
arrangements, between physicians (and the immediate family members of physicians) and providers of
designated health services, such as home health care centers, to whom the physicians refer patients. Some of
these same financial relationships are also subject to additional regulation by states. Although we believe we
have structured our relationships with physicians and other potential referral sources to comply with these laws
where applicable, we cannot assure you that courts or regulatory agencies will not interpret state and Federal
anti-kickback laws and/or the Stark Law and similar state laws regulating relationships between health care
providers and physicians in ways that will adversely implicate our practices or that isolated instances of
noncompliance will not occur. For example, in May 2012, we made a disclosure to CMS under that agency’s
Stark Law Self-Referral Disclosure Protocol relating to certain services agreements between a subsidiary of ours
and a large physician group. Violations of Federal or state Stark or “anti-kickback” laws could lead to criminal or
civil fines or other sanctions, including denials of government program reimbursement or even exclusion from
participation in governmental health care programs, that could have a material adverse effect on our business and
consolidated financial condition, results of operations and cash flows.
We may face significant uncertainty in the industry due to government health care reform.
The health care industry in the United States is subject to fundamental changes due to ongoing health care reform
efforts and related political, economic and regulatory influences. In March 2010, comprehensive health care
reform legislation was signed into law in the United States through the passage of the Patient Protection and
Affordable Health Care Act and the Health Care and Education Reconciliation Act (collectively, “PPACA”).
However, it is difficult to predict the full impact of PPACA due to the law’s complexity and current lack of
implementing regulations or interpretive guidance, as well our inability to foresee how CMS and other
participants in the health care industry will respond to the choices available to them under the law. Many
provisions in PPACA are scheduled to become effective over the next several years, but not all the implementing
regulations for these statutory provisions have been published.
PPACA makes a number of changes to Medicare payment rates and also calls for a rebasing of the home health
payment system beginning in 2014 that will be phased in over a four-year period. These reimbursement changes
are described in detail in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and
Results of Operations: Overview – Economic and Industry Factors.”
CMS added two regulations that became effective April 1, 2011: (1) a face-to-face encounter requirement for
home health and hospice services and (2) changes to the home health therapy assessment schedule, which
requires additional patient evaluations and certifications. These and other regulations implementing the
provisions of the PPACA may similarly increase our costs, decrease our revenues, expose us to expanded
liability or require us to revise the ways in which we conduct our business.
PPACA also calls for a number of other changes to be made over time that will likely have a significant impact
upon the health care delivery system. For example, PPACA mandates creation of a home health value-based
purchasing program, the development of quality measures, and decreases in home health reimbursement rates,
including rebasing, as further described in Part II, Item 7 “Management’s Discussion and Analysis of Financial
Condition and Results of Operations: Overview – Economic and Industry Factors.” In addition, PPACA requires
the Secretary of Health and Human Services to test different models for delivery of care, some of which will
involve home health services. It also requires the Secretary to establish a national pilot program for integrated
care for patients with certain conditions, bundling payment for acute hospital care, physician services, outpatient
19
hospital services (including emergency department services) and post-acute care services, which would include
home health. In advance of the national pilot program, the newly created CMS Innovation Center is launching the
Bundled Payments for Care Improvement initiative designed to encourage doctors, hospitals and other health
care providers, including home health providers, to work together to better coordinate care for patients both when
they are in the hospital and after they are discharged. In October 2011 CMS published final Medicare Shared
Savings Program regulations, which use accountable care organizations (“ACOs”) to facilitate coordination and
cooperation among providers to improve the quality of care for Medicare fee-for-service beneficiaries and reduce
unnecessary costs. PPACA further directs the Secretary to conduct a study to evaluate cost and quality of care
among efficient home health care centers and specifically focusing on access to care and treating Medicare
beneficiaries with varying severity levels of illness, and provide a report to Congress no later than March 1,
2014. At this time, it is not possible to predict with any certainty how these initiatives will be implemented and
what impact they may have on our business.
In addition, various health care reform proposals similar to the Federal reforms described above have also emerged
at the state level, including in several states which we operate. Moreover, in January 2011, the Medicare Payment
Advisory Commission voted to recommend to Congress that it make additional changes to the home health payment
system, noting that such recommendations may include further payment reductions and/or a beneficiary copayment
obligation. We cannot predict with certainty what health care initiatives, if any, will be implemented at the state
level, or what the ultimate effect of Federal health care reform or any future legislation or regulation may have on us
or on our business and consolidated financial condition, results of operations and cash flows.
Finally, in addition to impacting our Medicare businesses, PPACA may also significantly affect our non-
Medicare businesses. PPACA makes many changes to the underwriting and marketing practices of private
payors. The resulting economic pressures could prompt
rates of
reimbursement for the services we provide. At this time, it is not possible to estimate what impact PPACA may
have on our non-Medicare businesses.
these payors to seek to lower their
Risks Related to our Growth Strategies
We may not succeed in our efforts to evolve from a traditional home health and hospice care company to a
company focused on bringing home a continuum of care whereby we play a key role in managing our
patients’ age-related disease processes from onset through the end of life. If this strategy is not successful, our
financial performance could be adversely affected.
Our long-term strategy is to evolve from a traditional home health and hospice care company to a company focused
on bringing home a continuum of care to better serve the needs of our nation’s seniors and diversify our sources of
payment so as to become less reliant upon Medicare. To this end, we are developing and acquiring new business
lines that will complement our existing home care and hospice business and help seniors manage their health more
effectively and stay in their homes longer. We are also working to develop or acquire new business lines that are
focused on managing our patients’ age-related disease processes from onset through the end of life. These new
business lines focus on expanding the range of health care services provided within patients’ homes, including
through utilization of house calls physicians, nurse practitioners (“NPs”) and physician assistants (“PAs”), and
developing technology that assists with coordinating patient care, developing new care transition processes and
promoting patient education. Developing or acquiring new lines of business can be time consuming and expensive,
and there can be no assurance that our efforts in these areas will ultimately be successful. Further, the development
or acquisition of new lines of business requires significant attention from our management team, and if events occur
that distract our management’s attention and resources, our business performance could be negatively impacted. In
addition, we may expend significant resources to acquire or develop and introduce new business lines that are
ultimately not accepted by patients, payors or referral sources for multiple reasons, including, but not limited to, a
failure to successfully market the new business lines to patients, payors and referral sources, competition from
existing and new competitors and a failure to introduce new business lines in a timely manner. The risks associated
with new lines of business could have a material adverse effect on our business and consolidated financial
condition, results of operations and cash flows.
20
Our internal growth strategies depend on our ability to maintain and build upon our market positions in
geographic areas where we currently have a significant market presence. If our internal growth strategies are
unsuccessful, or if we are not able to maintain and build upon our market presence in our leading markets,
our business and consolidated financial condition, results of operations and cash flows could be materially
adversely affected.
We have made a decision to emphasize internal growth by maintaining and building upon our market positions in
geographic areas where we currently have a significant market presence. This will likely involve sharing
resources among geographically proximate care centers, the continued development and deployment of our
specialty programs, continued enhancement of communications with referral sources, opening targeted start-up
care centers in existing leading markets and entering into collaborative relationships or joint ventures with health
systems and hospitals. If these strategies are unsuccessful it could have a material adverse effect on our business
and consolidated financial condition, results of operations and cash flows. We face competition for potential
collaborative relationships and joint venture candidates, which may limit the number of opportunities available to
us. Further, we may not be able to identify suitable relationship or joint venture opportunities in the future or any
such opportunities, if identified, may not be consummated on favorable terms, if at all. Without successful
collaborations or joint ventures in markets where we already have a significant market presence, our future
growth rates could decline. In addition, any future collaborations or joint ventures, if consummated, may not be
successful in achieving further growth and market penetration.
We have entered into risk-bearing partnerships with payors and other providers and may enter into additional
risk-bearing partnerships in the future. If this strategy is not successful, our financial performance could be
adversely affected.
The PPACA provides multiple voluntary opportunities for health care providers, including home health providers,
to enter into risk-based partnerships designed to encourage participants to assume financial accountability for
outcomes and to work together to better coordinate care for patients, both when they are in the hospital and after
they are discharged. We view these initiatives as important means to progress toward our long-term strategic plan,
improve our clinical capabilities, develop our relationships with hospitals, physicians, managed care payors and
other referral sources, and prepare for the possibility that Medicare may in the future require us to participate in a
capitated or value- based payment system. These initiatives include the CMS Bundled Payments for Care
Improvement initiative (“BPCI”), the CMS Innovation Advisors Program, the Medicare Shared Savings Program
(“ACOs”), the CMS Innovation Center Pioneer Accountable Care Organization program (“Pioneer ACOs”), the
CMS Community-Based Care Transitions Program and the Independence at Home Demonstration. We are currently
participating in two BPCI initiatives and three ACOs. Under these programs, we have the ability to receive
additional payments if we are able to deliver quality care at a cost that is lower than established benchmarks, but
also have the risk of incurring financial penalties if we are not successful in doing so.
Advancing these initiatives and pursuing additional risk-based partnerships with other health care providers can
be time consuming and expensive, and there can be no assurance that our efforts in these areas will ultimately be
successful. Further, these initiatives require significant attention from our management team, and if events occur
that distract our management’s attention and resources, our business performance could be negatively impacted.
In addition, if we fail to deliver quality care at a cost consistent with our expectations in connection with these
risk-based initiatives, we would be subject to significant financial penalties. These initiatives could have a
material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
In connection with our participation in the BPCI initiatives, we have entered into various BPCI Model 3 Awardee
Agreements (“BPCI Agreements”) with CMS, which set forth requirements we must follow with regard to our
BPCI participation, as well as a Program Integrity Review Agreement (“PIRA”) with CMS, which provides,
among other things, for an IRO review of our services relating to the BPCI initiatives. Should we fail to perform
as required under the BPCI Agreements or the PIRA, CMS may, among other remedies, terminate our right to
participate in the BPCI program in whole or in part, which could have a material adverse effect on our business
and consolidated financial condition, results of operations and cash flows.
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Historically, our external growth strategies have depended on our ability to pursue targeted acquisition
opportunities. We may be unable to pursue future acquisition opportunities on favorable terms or at all, which
could affect our business and consolidated financial condition, results of operations and cash flows.
Historically, our revenue growth has been significantly driven by our acquisition of care centers, or assets of care
centers, in targeted markets. We cannot guarantee that we will be able to identify, negotiate and complete
suitable acquisition opportunities on favorable terms or at all, based upon such factors as purchase price, the
restrictive covenants under the agreements governing our indebtedness and our own willingness to take on new
operations. We also face competition for acquisition candidates. Further, pursuing acquisitions could strain our
resources, including management, information systems, regulatory compliance, logistics and other controls. 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. The failure
to pursue future acquisition activities on favorable terms or at all could affect our business and consolidated
financial condition, results of operations and cash flows.
If we are not able to successfully integrate newly-acquired care centers into our existing operations or if we do
not achieve expected benefits from our previous acquisitions, our business and consolidated financial
condition, results of operations and cash flows could be materially adversely affected.
We may not be able to fully integrate the operations of our acquired businesses with our current business
structure in an efficient and cost-effective manner. 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, referral sources or patients of acquired care centers; the delay in payments
associated with change in ownership, control and the internal process of the Medicare fiscal intermediary; and
the assumption of liabilities and exposure to unforeseen liabilities of acquired care centers. Further, the financial
benefits we expect to realize from many of our acquisitions are largely dependent upon our ability to improve
clinical performance, overcome regulatory deficiencies, improve the reputation of the acquired business in the
community and control costs. The failure to accomplish any of these objectives or to effectively integrate any of
these businesses could have a material adverse effect on our business and consolidated financial condition,
results of operations and cash flows.
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, hospice care centers, home health
care centers and assisted living facilities) to obtain prior approval, known as a CON or POA, in order to
commence operations. See Part I, Item 1, “Our Regulatory Environment” for additional information on CONs
and POAs. If we are not able to obtain such approvals, our ability to expand our operations could be impaired,
which could have a material adverse effect on our business and consolidated financial condition, results of
operations and cash flows.
Federal regulation may impair our ability to consummate acquisitions or open new care centers.
Changes in Federal laws or regulations may materially adversely impact our ability to acquire care centers or
open new start-up care centers. For example, PPACA authorized CMS to impose temporary moratoria on the
enrollment of new Medicare providers, if deemed necessary to combat fraud, waste or abuse under government
programs. The moratoria on new enrollments may be applied to categories of providers or to specific geographic
regions. If a moratorium is imposed on the enrollment of new home health or hospice providers in a geographic
area we desire to service, it could have a material impact on our ability to open new care centers. Additionally, in
2010, CMS implemented and amended a regulation known as the “36 Month Rule” that is applicable to home
health care center acquisitions. Subject to certain exceptions, the 36 Month Rule prohibits buyers of certain home
22
health care centers – those that either enrolled in Medicare or underwent a change in majority ownership fewer
than 36 months prior to the acquisition – from assuming the Medicare billing privileges of the acquired care
center. These changes in Federal laws and regulations, and similar future changes, may further increase
competition for acquisition targets and could have a material detrimental impact on our acquisition strategy.
Risks Related to our Operations
Because we are limited in our ability to control rates received for our services, our business and consolidated
financial condition, results of operations and cash flows could be materially adversely affected if we are not
able to maintain or reduce our costs to provide such services.
As Medicare is our primary payor and rates are established through Federal legislation, we have to manage our
costs of providing care to achieve a desired level of profitability. Additionally, non-Medicare rates are difficult
for us to negotiate as such payors are under pressure to reduce their own costs. As a result, we manage our costs
in order to achieve a desired level of profitability including, but not limited to, centralization of various
processes, the use of technology and management of the number of employees utilized. If we are not able to
continue to streamline our processes and reduce our costs, our business and consolidated financial condition,
results of operations and cash flows could be materially adversely affected.
Our industry is highly competitive, with few barriers to entry.
There are few barriers to entry in home health markets that do not require a CON or POA. Our primary
competition comes from local privately-owned and hospital-owned health care providers. We compete based on
the availability of personnel; the quality of services, expertise of visiting staff; and in certain instances, on the
price of our services. Increased competition in the future may limit our ability to maintain or increase our market
share.
Further, the introduction of new and enhanced service offerings by others, 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 continue to consolidate, which enhances their ability to
influence the delivery of health care services. Consequently, the health care needs of patients in the United States
are increasingly served by a smaller number of managed care organizations. These organizations generally enter
into service agreements with a limited number of providers. Our business and consolidated financial condition,
results of operations and cash flows could be materially adversely affected if these organizations terminate us as
a provider and/or engage our competitors as a preferred or exclusive provider. In addition, should private payors,
including managed care payors, 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, our business and
consolidated financial condition, results of operations and cash flows could be materially adversely affected.
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, which could have a
material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
If we are unable to maintain relationships with existing patient referral sources or to establish new referral
sources, our business and consolidated financial condition, results of operations and cash flows could be
materially adversely affected.
Our success depends on referrals from physicians, hospitals and other sources in the communities we serve and
on our ability to maintain good relationships with existing referral sources. Our referral sources are not
contractually obligated to refer patients to us and may refer their patients to other providers. Our growth and
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profitability depends, in part, 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
by our referral sources and their patients. Our loss of, or failure to maintain, existing relationships or our failure
to develop new referral relationships could have a material adverse effect on our business and consolidated
financial condition, results of operations and cash flows.
If we are unable to provide consistently high quality of care, our business will be adversely impacted.
Providing quality patient care is the cornerstone of our business. Hospitals, physicians and other referral sources
refer patients to us in large part because of the quality of care we provide. Clinical quality is becoming
increasingly important within our industry. Effective October 2012, Medicare began to impose a financial
penalty upon hospitals that have excessive rates of patient readmissions within 30 days from hospital discharge.
We believe this new regulation provides a competitive advantage to home health providers who can differentiate
themselves based upon quality, particularly by achieving low patient acute care hospitalization readmission rates
and by implementing disease management programs designed to be responsive to the needs of patients served by
referring hospitals. We are focused intently upon improving our patient outcomes, particularly our patient acute
care hospitalization readmission rates. If we should fail to attain our goals regarding acute care hospitalization
readmission rates and other quality metrics, we expect our ability to generate referrals would be adversely
impacted, which could have a material adverse effect upon our business and consolidated financial condition,
results of operations and cash flows.
We may close additional underperforming care centers in the future.
During 2011, 2012 and 2013, we reviewed the performance of our portfolio of care centers. Our review
considered the current financial performance, market penetration, forecasted market growth and current and
future CMS payment revisions. We incurred exit activity costs of approximately $14 million in connection with
these closures, including lease termination payments, relocation costs, severance costs and intangible assets
write-offs.
We will continue to monitor the performance of our existing care centers on an ongoing basis and anticipate that
additional closures may from time to time occur in the future. We will incur costs and expenses with any
additional closures, which may require us to book significant charges in future periods. While any such closures
would be part of our efforts to improve our profitability, they would have a negative impact on our revenue and
possibly our operating results over the short-term.
Our business depends on our information systems. Our inability to effectively integrate, manage and keep our
information systems secure and operational could disrupt our operations.
Our business depends on effective, secure and operational information systems which include software that is
developed in-house and systems provided by external contractors and other service providers. We have
developed and use a proprietary Windows™-based clinical software system with our POC system to collect
assessment data, schedule and log patient visits, communicate with patients’ physicians regarding their plan of
care and monitor treatments and outcomes in accordance with established medical standards. Our clinical
software system integrates several of the key processes critical
to our business: billing and collections
functionality; accounting; human resources; payroll; and employee benefits programs provided by third parties.
We are currently preparing to implement a major multi-year rollout of a new proprietary clinical software
system. Problems with, or the failure of, our technology and systems or any system upgrades or programming
changes associated with such technology and systems, including any problems we may experience with the
implementation of the new proprietary clinical software system, could have a material adverse effect on data
capture, medical documentation, billing, collections, assessment of internal controls and management and
reporting capabilities. Any such problems or failures and the costs incurred in correcting any such problems or
failures, could have a material adverse effect on our business and consolidated financial condition, results of
24
operations and cash flows. Further, to the extent our external information technology contractors or other service
providers become insolvent or fail to support the software or systems we have licensed from them, our operations
could be materially adversely affected.
Our care centers also depend upon our information systems for accounting, billing, collections, risk management,
quality assurance, human resources, payroll and other information. If we experience a reduction in the
performance, reliability, or availability of our information systems, our operations and ability to produce timely
and accurate reports could be materially adversely affected.
Our information systems and applications require continual maintenance, upgrading and enhancement to meet
our operational needs. Our acquisition activity requires transitions and integration of various information
systems. We regularly upgrade and expand our information systems’ capabilities. If we experience difficulties
with the transition and integration of information systems or are unable to implement, maintain, or expand our
systems properly, we could suffer from, among other things, operational disruptions, regulatory problems and
increases in administrative expenses.
We may be required to expend significant capital and other resources to protect against the threat of security
breaches or to alleviate problems caused by breaches,
including unauthorized access to patient data and
personally identifiable information stored in our information systems, and the introduction of computer viruses to
our systems. Our security measures may be inadequate to prevent security breaches and our business operations
could be materially adversely affected by Federal and state fines and penalties, cancellation of contracts and loss
of patients if security breaches are not prevented.
We have installed privacy protection systems and devices on our network and POC laptops in an attempt to
prevent unauthorized access to information in our database. However, our technology may fail to adequately
secure the confidential health information and personally identifiable information we maintain in our databases.
In such circumstances, we may be held liable to our patients and regulators, which could result in fines, litigation
or adverse publicity that could have a material adverse effect on our business and consolidated financial
condition, results of operations and cash flows. Even if we are not held liable, any resulting negative publicity
could harm our business and distract the attention of management.
Further, our information systems are vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins and similar events. A failure to restore our information systems after the
occurrence of any of these events could have a material adverse effect on our business and consolidated financial
condition, results of operations and cash flows. Because of the confidential health information we store and
transmit, loss of electronically stored information for any reason could expose us to a risk of regulatory action
and litigation and possible liability and loss.
We believe we have all the necessary licenses from third parties to use technology and software that we do not
own. A third party could, however, allege that we are infringing its rights and we may not be able to obtain
licenses on commercially reasonable terms from the third party, if at all, or the third party may commence
litigation against us. In addition, we may find it necessary to initiate litigation to protect our trade secrets, to
enforce our intellectual property rights and to determine the scope and validity of any proprietary rights of others.
Any such litigation, or the failure to obtain any necessary licenses or other rights, could materially and adversely
affect our business.
Our inability to effectively and timely transition to the new ICD-10 coding system could disrupt our
operations.
CMS has mandated that all providers implement the use of new patient codes for medical coding, referred to as
ICD-10 codes, on or before October 1, 2014. This mandate substantially increases the number of medical billing
increasing the complexity of submitting claims for
codes by which providers will seek reimbursement,
25
reimbursement. Claims submitted after October 1, 2014 must use ICD-10 codes or they will not be paid.
Transition to the new ICD-10 system requires changes to our clinical software system as well as the training of
staff involved in the coding and billing processes. In addition to these upfront costs of transition to ICD-10, it is
possible that we could experience disruption or delays in payment due to implementation issues, including
software errors, coding errors or a decrease in the productivity of our staff involved in the coding and billing
processes. Any such delays in payment could disrupt our operations and materially and adversely affect our
business.
Possible changes in the case mix of patients, as well as payor mix and payment methodologies, could have a
material adverse effect on our business and consolidated financial condition, results of operations and cash
flows.
Our revenue is determined by a number of factors, including our mix of patients and the rates of payment among
payors. Changes in the case mix of our patients, payment methodologies or the payor mix among Medicare,
Medicaid and private payors could have a material adverse effect on our business and consolidated financial
condition, results of operations and cash flows.
Our failure to negotiate favorable managed care contracts, or our loss of existing favorable managed care
contracts, could have a material adverse effect on our business and consolidated financial condition, results of
operations and cash flows.
One of our strategies is to diversify our payor sources by increasing the business we do with managed care
companies, and we strive to put in place favorable contracts with managed care payors. However, we may not be
successful in these efforts. Additionally, there is a risk that the favorable managed care contracts that we put in
place may be terminated, and managed care contracts typically permit the payor to terminate the contract without
cause, on very short notice, typically 60 days, which can provide payors leverage to reduce volume or obtain
favorable pricing. For example, in August, 2012, Humana, Inc. (“Humana”) provided a notice of termination to
us, which resulted in our renegotiating a new contract with Humana in October 2012 that will generate lower
revenues for us. Our failure to negotiate and put in place favorable managed care contracts, or our failure to
maintain in place favorable managed care contracts, could have a material adverse effect on our business and
consolidated financial condition, results of operations and cash flows.
A write off of a significant amount of intangible assets or long-lived assets could have a material adverse
effect on our consolidated financial condition and results of operations.
During 2012 and 2011, we determined that goodwill and other intangible assets related primarily to our home
health reporting unit were impaired and we recorded non-cash goodwill and other intangible assets impairment
charges of $162.1 million and $579.9 million, respectively. In addition, a further significant and sustained decline
in our stock price and market capitalization, a significant decline in our expected future cash flows, a significant
adverse change in the business climate or slower growth rates could result in the need to perform an impairment
analysis under Accounting Standard Codification (“ASC”) Topic 350 “Intangibles – Goodwill and Other” in
future periods in addition to our annual impairment test. If we were to conclude that a future write down of
goodwill is necessary, then we would record the appropriate charge, which could result in material charges that
are adverse to our consolidated financial condition and results of operations. See Note 5 – “Goodwill and Other
Intangible Assets, Net” to our consolidated financial statements for additional information on the impairment.
Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a
substantial portion of our assets. Goodwill was approximately $208.9 million as of December 31, 2013 and if we
make additional acquisitions, it is likely that we will record additional intangible assets in our consolidated
financial statements. We also have long-lived assets consisting of property and equipment and other identifiable
intangible assets of $195.7 million as of December 31, 2013, which we review both on a periodic basis for
indefinite lived intangible assets as well as when events or circumstances indicate that the carrying amount of an
26
asset may not be recoverable. If a determination that a significant impairment in value of our unamortized
intangible assets or long-lived assets occurs, such determination could require us to write off a substantial portion
of our assets. A write off of these assets could have a material adverse effect on our consolidated financial
condition and results of operations.
A shortage of qualified registered nursing staff and other clinicians, such as therapists and nurse
practitioners, could materially impact our ability to attract, train and retain qualified personnel and could
increase operating costs.
We compete for qualified personnel with other healthcare providers. Our ability to attract and retain clinicians
depends on several factors, including our ability to provide these personnel with attractive assignments and
competitive salaries and benefits. We cannot be assured we will succeed in any of these areas. In addition, there are
shortages of qualified health care personnel in some of our markets. As a result, we may face higher costs of
attracting clinicians and providing them with attractive benefit packages than we originally anticipated which could
have a material adverse effect on our business and consolidated financial condition, results of operations and cash
flows. In addition, if we expand our operations into geographic areas where health care providers historically have
been unionized, or if any of our care center employees become unionized, being subject to a collective bargaining
agreement may have a negative impact on our ability to timely and successfully recruit qualified personnel and may
increase our operating costs. Generally, if we are unable to attract and retain clinicians, the quality of our services
may decline and we could lose patients and referral sources, which could have a material adverse effect on our
business and consolidated financial condition, results of operations and cash flows.
Our insurance liability coverage may not be sufficient for our business needs.
As a result of operating in the home health industry, our business entails an inherent risk of claims, losses and
potential lawsuits alleging incidents involving our employees that are likely to occur in a patient’s home. We
maintain professional liability insurance to provide coverage to us and our subsidiaries against these risks.
However, we cannot assure you claims will not be made in the future in excess of the limits of our insurance, nor
can we assure you that any such claims, if successful and in excess of such limits, will not have a material
adverse effect on our business and consolidated financial condition, results of operations and cash flows. Our
insurance coverage also includes fire, property damage and general liability with varying limits. We cannot
assure you that the insurance we maintain will satisfy claims made against us or that insurance coverage will
continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms.
Any claims made against us, regardless of their merit or eventual outcome, could damage our reputation and
business.
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 March 10, 2014, we had approximately 14,300 employees (10,900 home health, 2,400 hospice and 1,000
corporate employees). In addition, we employ direct care workers on a contractual basis to support our existing
workforce. Due to the nature of our business, we, through our employees and caregivers who provide services on
our behalf, may be the subject of medical malpractice claims. A court could find these individuals should be
considered our agents, and, as a result, we could be held liable for their acts or omissions. 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. While we maintain malpractice liability
coverage that we believe is appropriate given the nature and breadth of our operations, any claims against us in
excess of insurance limits, or multiple claims requiring us to pay deductibles could have a material adverse effect
on our business and consolidated financial condition, results of operations and cash flows.
If we are unable to maintain our corporate reputation, our business may suffer.
Our success depends on our ability to maintain our corporate reputation, including our reputation for providing
quality patient care and for compliance with Medicare requirements and the other laws to which we are subject.
27
Adverse publicity surrounding any aspect of our business, including the death or disability of any of our patients
due to our failure to provide proper care, or due to any failure on our part to comply with Medicare requirements
or other laws to which we are subject, could negatively affect our Company’s overall reputation and the
willingness of referral sources to refer patients to us.
We depend on the services of our executive officers and other key employees.
Our success depends upon the continued employment of members of our senior management team, including our
President and Interim Chief Executive Officer, Ronald A. LaBorde, our Executive Vice President of Home
Health and Hospice Operations, G. Patrick Thompson, Jr, our Chief Medical Officer, Dr. Michael O. Fleming,
our Chief Compliance Officer, Jeffrey D. Jeter, and our General Counsel and Secretary, David R. Bucey. The
loss or departure of any one of these executives or other key employees could have a material adverse effect on
our business and consolidated financial condition, results of operations and cash flows.
Our operations could be impacted by natural disasters.
The occurrence of natural disasters in the markets in which we operate could not only impact the day-to-day
operations of our care centers, but could also disrupt our relationships with patients, employees and referral
sources located in the affected areas and, in the case of our corporate office, our ability to provide administrative
support services, including billing and collection services. In addition, any episode of care that is not completed
due to the impact of a natural disaster will generally result in lower revenue for the episode. For example, our
corporate office and a number of our care centers are located in the southeastern United States and the Gulf Coast
Region, increasing our exposure to hurricanes. Future hurricanes or other natural disasters may have a material
adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Risks Related to Liquidity
Delays in payment may cause liquidity problems.
Our business is characterized by delays from the time we provide services to the time we receive payment for
these services. If we have difficulty in obtaining documentation, such as physician orders, experience
information system problems or experience other issues that arise with Medicare or other payors, we may
encounter additional delays in our payment cycle.
In addition, 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, which may materially adversely affect our working capital, and
our working capital management procedures may not successfully mitigate this risk.
Additionally, our hospice operations may experience payment delays. We have experienced payment delays
when attempting to collect funds from state Medicaid programs in certain instances. Delays in receiving
payments from these programs may also materially adversely affect our working capital.
The volatility and disruption of the capital and credit markets and adverse changes in the United States and
global economies could impact our ability to access both available and affordable financing, and without such
financing, we may be unable to achieve our objectives for strategic acquisitions and internal growth.
The United States and global capital and credit markets have recently experienced extreme volatility and
disruption at unprecedented levels. Many financial institutions have recorded significant write-downs of asset
values and these write-downs have caused many financial institutions to seek additional capital, to merge with
larger and stronger institutions and, in some cases, to fail. Many lenders and institutional investors have reduced,
and in some cases, ceased to provide funding to borrowers, including other financial institutions, or have
increased their rates significantly.
28
While we intend to finance strategic acquisitions and internal growth with cash flows from operations and
borrowings under our revolving credit facility, we may require sources of capital in addition to those presently
available to us. Uncertainty in the capital and credit markets may impact our ability to access capital on terms
acceptable to us (i.e. at attractive/affordable rates) or at all, and this may result in our inability to achieve present
objectives for strategic acquisitions and internal growth. Further, in the event we need additional funds, and we
are unable to raise the necessary funds on acceptable terms, our business and consolidated financial condition,
results of operations and cash flows could be materially adversely affected.
Our indebtedness could impact our financial condition and impair our ability to fulfill other obligations.
As of December 31, 2013, we had total outstanding indebtedness of approximately $46.9 million, comprised
mainly of indebtedness incurred for acquisitions. Our level of indebtedness could have a material adverse effect
on our business and consolidated financial position, results of operations and cash flows and impair our ability to
fulfill other obligations in several ways, including:
•
•
•
•
•
it could require us to dedicate a portion of our cash flow from operations to payments on our
indebtedness, which could reduce the availability of cash flow to fund acquisitions, start-ups, working
capital, capital expenditures and other general corporate purposes;
it could limit our ability to borrow money or sell stock for working capital, capital expenditures, debt
service requirements and other purposes;
it could limit our flexibility in planning for, and reacting to, changes in our industry or business;
it could make us more vulnerable to unfavorable economic or business conditions; and
it could limit our ability to make acquisitions or take advantage of other business opportunities.
In the event we incur additional indebtedness, the risks described above could increase.
The agreements governing our indebtedness contain various covenants that limit our discretion in the
operation of our business and our failure to satisfy requirements in these agreements could have a material
adverse effect on our business and consolidated financial condition, results of operations and cash flows.
The agreements governing our indebtedness (the “Debt Agreements”) contain certain obligations, including
restrictive covenants that require us to comply with or maintain certain financial covenants and ratios and restrict
our ability to:
•
•
incur additional debt;
redeem or repurchase stock, pay dividends or make other distributions;
• make certain investments;
•
•
create liens;
enter into transactions with affiliates;
• make acquisitions;
•
enter into joint ventures;
• merge or consolidate;
•
•
•
invest in foreign subsidiaries;
amend acquisition documents;
enter into certain swap agreements;
• make certain restricted payments;
•
transfer, sell or leaseback assets; and
• make fundamental changes in our corporate existence and principal business.
29
In addition, events beyond our control could affect our ability to comply with the Debt Agreements. Any failure
by us to comply with or maintain all applicable financial covenants and ratios and to comply with all other
applicable covenants could result in an event of default with respect to the Debt Agreements. If we are unable to
obtain a waiver from our lenders in the event of any non-compliance, our lenders could accelerate the maturity of
any outstanding indebtedness and terminate the commitments to make further extensions of credit (including our
ability to borrow under our revolving credit facility). Any failure to comply with these covenants could have a
material adverse effect on our business and consolidated financial condition, results of operations and cash flows.
Risks Related to Ownership of Our Common Stock
The price of our common stock may be volatile.
The price at which our common stock trades may be volatile. The stock market from time to time experiences
significant price and volume fluctuations that impact the market prices of securities, particularly those 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 by the Company or large stockholders or the perception that such sales
could occur;
investor, analyst and media 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;
departure of key personnel;
changes in the Medicare, Medicaid and private insurance payment rates for home health and hospice;
announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships,
joint ventures or capital commitments; or
general economic and stock market conditions.
In addition, the stock market in general, and the NASDAQ Global Select Market (“NASDAQ”) in particular, has
experienced price and volume fluctuations that we believe 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. Securities
class-action cases have often been brought against companies following periods of volatility in the market price
of their securities.
The activities of short sellers could reduce the price or prevent increases in the price of our common stock.
“Short sale” is defined as the sale of stock by an investor that the investor does not own. Typically, investors who
sell short believe the price of the stock will fall, and anticipate selling shares at a higher price than the purchase
price at which they will buy the stock. As of December 31, 2013, investors held a short position of approximately
4.5 million shares of our common stock which represented 14.0% of our outstanding common stock. The
anticipated downward pressure on our stock price due to actual or anticipated sales of our stock by some
institutions or individuals who engage in short sales of our common stock could cause our stock price to decline.
30
Sales of substantial amounts of our common stock or preferred stock, or the availability of those shares for
future sale, could materially impact our stock price and limit our ability to raise capital.
The following table presents information about our outstanding common and preferred stock and our outstanding
securities exercisable for or convertible into shares of common stock:
Common stock outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock available under 2008 Omnibus Incentive Compensation Plan . . . . .
Stock options outstanding and exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested stock outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested stock units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,538,971
—
1,689,456
194,493
773,491
389,816
As of December 31,
2013
If we were to sell substantial amounts of our common stock in the public market or if there was a public
perception that substantial sales could occur, the market price of our common stock could decline. These sales or
the perception of substantial future sales may also make it difficult for us to sell common stock in the future to
raise capital.
Our Board of Directors may use anti-takeover provisions or issue stock to discourage a change of control.
Our certificate of incorporation currently authorizes us to issue up to 60,000,000 shares of common stock and
5,000,000 shares of undesignated preferred stock. Our Board of Directors may cause us to issue additional stock
to discourage an attempt to obtain control of our company. For example, shares of stock could be sold to
purchasers who might support our Board of Directors in a control contest or to dilute the voting or other rights of
a person seeking to obtain control. In addition, our 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.
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,
including advance notice requirements for director nominations and stockholder proposals. These provisions, and
others that our 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters are located in Baton Rouge, Louisiana in an 110,000 square feet building that we
own. As of December 31, 2013, we believe we have adequate space to accommodate our corporate staff located
in the Baton Rouge area for the foreseeable future.
In addition to our corporate headquarters, we also lease facilities for our home health and hospice care centers
and own one hospice inpatient unit. Generally, these leases have an initial term of five years with a three year
early termination option, but range from one to seven years. Most of these leases also contain an option to extend
31
the lease period. The following table shows the location of our 367 Medicare-certified home health care centers,
including three care centers held for sale, 92 hospice care centers and one hospice inpatient unit at December 31,
2013:
State
Home Health Hospice
State
Home Health Hospice
Alabama . . . . . . . . . . . . . . . . . . .
Arkansas . . . . . . . . . . . . . . . . . . .
Arizona . . . . . . . . . . . . . . . . . . . .
California . . . . . . . . . . . . . . . . . .
Colorado . . . . . . . . . . . . . . . . . . .
Connecticut . . . . . . . . . . . . . . . . .
Delaware . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . .
Idaho . . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . . . .
Indiana . . . . . . . . . . . . . . . . . . . .
Kansas . . . . . . . . . . . . . . . . . . . . .
Kentucky . . . . . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . . . . . . . .
Massachusetts . . . . . . . . . . . . . . .
Maine . . . . . . . . . . . . . . . . . . . . .
Maryland . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Mississippi
30
5
6
7
2
4
2
28
62
2
4
8
2
19
12
8
2
9
10
* Includes one hospice inpatient unit
ITEM 3. LEGAL PROCEEDINGS
2
6
1
7 Missouri
. . . . . . . . . . . . . . . . .
— New Jersey . . . . . . . . . . . . . . .
— New York . . . . . . . . . . . . . . . .
— New Hampshire . . . . . . . . . . .
— North Carolina . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . .
— Oklahoma . . . . . . . . . . . . . . . .
— Oregon . . . . . . . . . . . . . . . . . .
Pennsylvania . . . . . . . . . . . . . .
Rhode Island . . . . . . . . . . . . . .
— South Carolina . . . . . . . . . . . .
Tennessee . . . . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . .
— Virginia . . . . . . . . . . . . . . . . . .
6 West Virginia . . . . . . . . . . . . .
9 Wisconsin . . . . . . . . . . . . . . . .
4 Wyoming . . . . . . . . . . . . . . . .
2 Washington, D.C. . . . . . . . . . .
— Carolina, Puerto Rico . . . . . . .
1
1
Total
6
2
5
2
8
—
7
4
9
1
19
44
1
19
11
1
4
1
1
367
—
—
1
4*
8
1
—
2
6
2
9
10
1
1
6
—
3
—
—
93
See Part IV, Item 15, “Note 10, Commitments and Contingencies” for information concerning our legal proceedings.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
32
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our common stock trades on the NASDAQ under the trading symbol “AMED.” The following table presents the
range of high and low sales prices for our common stock for the periods indicated as reported on NASDAQ:
Year Ended December 31, 2013:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended December 31, 2012:
First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Price Range of
Common Stock
High
Low
$13.36
14.89
18.70
18.50
$14.73
15.51
15.95
13.99
$10.42
8.81
10.49
12.60
$ 9.35
9.51
11.15
9.52
As of March 10, 2014, there were approximately 549 holders of record of our common stock.
Dividend Policy
We have not declared or paid any cash dividends on our common stock or any other of our securities and do not
expect to pay cash dividends for the foreseeable future. We currently intend to retain our future earnings, if any,
to fund the development and growth of our business. Future decisions concerning the payment of dividends will
depend upon our results of operations, financial condition, capital expenditure plans and debt service
requirements, as well as such other factors as our Board of Directors, in its sole discretion, may consider relevant.
In addition, our outstanding indebtedness restricts, and we anticipate any additional future indebtedness may
restrict, our ability to pay cash dividends.
Purchases of Equity Securities
The following table provides the information with respect to purchases made by us of shares of our common
stock during each of the months during the three-month period ended December 31, 2013:
Period
October 1, 2013 to October 31, 2013 . . . . . . . .
November 1, 2013 to November 30, 2013 . . . .
December 1, 2013 to December 31, 2013 . . . .
(a)
Total Number of
Share (or Units)
Purchased
(b)
Average Price
Paid per Share (or Unit)
(c)
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) That May Yet Be
Purchased Under the
Plans or Programs
56
3,148
2,872
6,076(1)
$17.85
16.56
15.01
$15.84
—
—
—
—
$—
—
—
$—
(1)
Includes shares of common stock surrendered to us by certain employees to satisfy tax withholding obligations in connection with the
vesting of stock previously awarded to such employees under our 2008 Omnibus Incentive Compensation Plan.
33
Stock Performance Graph
The Performance Graph below compares the cumulative total stockholder return on our common stock, $0.001
par value per share, for the five-year period ended December 31, 2013, with the cumulative total return on the
NASDAQ composite index and an industry peer group over the same period (assuming the investment of $100 in
our common stock, the NASDAQ composite index and the industry peer group) on December 31, 2008 and the
reinvestment of dividends. The peer group we selected is comprised of: Gentiva Health, Inc. (“GTIV”), LHC
Group, Inc. (“LHCG”) and Almost Family, Inc. (“AFAM”). The cumulative total stockholder return on the
following graph is historical and is not necessarily indicative of future stock price performance. No cash
dividends have been paid on our common stock.
Cumulative Total Return as of December 31
$300
$250
$200
$150
$100
$50
$0
31-Dec-2008
31-Dec-2009
31-Dec-2010
31-Dec-2011
31-Dec-2012
31-Dec-2013
Amedisys, Inc.
NASDAQ Composite
Peer Group
Amedisys, Inc. . . . . . . . . . . . . . . . . . . . . . . .
NASDAQ Composite . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . .
$100.00
$100.00
$100.00
$117.56
$144.88
$ 91.81
$ 81.04
$170.58
$ 87.21
$ 26.39
$171.30
$ 30.32
$ 27.35
$199.99
$ 46.08
$ 35.39
$283.39
$ 58.41
12/31/2008
12/31/2009
12/31/2010
12/31/2011
12/31/2012
12/31/2013
This stock performance information is “furnished” and shall not be deemed to be “soliciting material” or
subject to Regulation 14A under the Securities Exchange Act of 1934 (the “Exchange Act”), shall not be deemed
“filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and
shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the
Exchange Act, whether made before or after the date of this report and irrespective of any general incorporation
by reference language in any such filing, except to the extent we specifically incorporate the information by
reference.
34
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below is derived from our audited consolidated financial
statements for the five-year period ended December 31, 2013, based on our continuing operations. The financial
data for the years ended December 31, 2013, 2012 and 2011 should be read together with our consolidated
financial statements and related notes included in Part IV, Item 15 “Exhibits and Financial Statement Schedules”
and the information included in Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” herein.
Income Statement Data:
Net service revenue . . . . . . . . . . . . .
Operating (loss) income from
2013 (1)(2)(3)(4) 2012 (5)(6)(7)(8) 2011 (8)(9)(10)(11) 2010 (9)(10)(11)(12)
2009
(Amounts in thousands, except per share data)
$1,249,344
$1,440,836
$1,418,464
$1,540,974
$1,427,967
continuing operations . . . . . . . . .
$ (154,971)
$ (108,855)
$ (469,190)
$ 204,079
$ 227,919
Net (loss) income from continuing
operations attributable to
Amedisys, Inc.
. . . . . . . . . . . . . .
Net (loss) income from continuing
operations attributable to
Amedisys, Inc. per basic share . .
Net (loss) income from continuing
operations attributable to
Amedisys, Inc. per diluted
share . . . . . . . . . . . . . . . . . . . . . .
$ (93,105)
$ (80,262)
$ (374,430)
$ 118,984
$ 133,852
$
$
(2.98)
$
(2.68)
$
(13.05)
(2.98)
$
(2.68)
$
(13.05)
$
$
4.24
4.18
$
$
4.92
4.82
(1) During 2013, we recorded a charge for the accrual for the U.S. Department of Justice settlement, which
amounted to $150.0 million ($93.9 million, net of tax).
(2) During 2013, we recognized non-cash goodwill and other intangibles impairment charges of $9.5 million
($5.8 million, net of tax).
(3) During 2013, we received proceeds from our Directors’ & Officers’ insurance in the amount of $5.5 million
($3.4 million, net of tax).
(4) During 2013, we incurred legal expenses related to the U.S. Department of Justice Civil Investigative
Demand and various other matters. These costs amounted to $5.4 million ($3.3 million, net of tax).
(5) During 2012, we incurred costs associated with the prepayment of the term loan and a portion of our
existing senior notes associated with our March 26, 2008 Senior Credit Facility, which amounted to $4.7
million ($2.8 million, net of tax).
(6) During 2012, we received $3.6 million ($2.1 million, net of tax) as the result of a lawsuit settlement.
(7) During 2012, we incurred legal expenses related to the U.S. Department of Justice Civil Investigative
Demand and SEC investigation. These costs amount to $8.5 million (5.0 million, net of tax).
(8) During 2012 and 2011, we recorded a $162.1 million ($110.2 million, net of tax and non-controlling
interests) and a $579.9 million ($438.4 million, net of tax) charge for the impairment of goodwill and other
intangibles. During 2011, we also released a valuation allowance related to specific deferred tax assets
which amount to $1.9 million.
(9) During 2011 and 2010, we received CMS bonus payments as the result of a pay for performance
demonstration which amounted to $4.7 million ($2.9 million, net of tax) and $3.6 million ($2.2 million, net
of tax), respectively.
(10) During 2011 and 2010, we incurred certain costs associated with the realignment of our operations and legal
expenses related to the United States Senate Committee on Finance inquiry and SEC and DOJ
investigations. These costs amounted to $10.1 million ($6.1 million, net of tax) and $9.6 million ($5.8
million, net of tax), respectively.
(11) During 2011 and 2010, we incurred certain costs associated with our exit activities of $3.4 million ($2.0
million, net of tax) and $11.4 million ($7.0 million, net of tax), respectively.
(12) During 2010, we settled our Georgia indigent care liability for the years 2007 through 2009 for $3.7 million
($2.2 million, net of tax).
35
2013
2012
2011
2010
2009
(Amounts in thousands)
Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt, including current portion . . . . . . . . . . .
Total Amedisys, Inc. stockholders’ equity . . . . . . .
Cash dividends declared per common share . . . . .
$726,406
$ 46,904
$372,201
$ — $ — $ — $
$730,595
$102,711
$452,340
$858,285
$145,439
$518,868
$1,299,863
$ 181,866
$ 877,857
— $
$1,172,386
$ 215,153
$ 735,166
—
36
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis provides information we believe is relevant to an assessment and
understanding of our results of operations and financial condition for 2013, 2012 and 2011. This discussion
should be read in conjunction with our audited financial statements included in Part IV, Item 15, “Exhibits and
Financial Statement Schedules” and Part I, Item 1, “Business” of this Annual Report on Form 10-K. The
following analysis contains forward-looking statements about our future revenues, operating results and
expectations. See “Special Caution Concerning Forward-Looking Statements” for a discussion of the risks,
assumptions and uncertainties affecting these statements as well as Part I, Item 1A, “Risk Factors.”
Overview
We are a leading provider of high-quality, low-cost home health services to the chronic, co-morbid, aging
American population, with approximately 84%, 82% and 85% of our revenue derived from Medicare for 2013,
2012 and 2011, respectively.
Our operations involve servicing patients through our two reportable business segments: home health and
hospice. Our home health segment delivers a wide range of services in the homes of individuals who may be
recovering from an illness, injury or surgery. Our hospice segment provides care that is designed to provide
comfort and support for those who are facing a terminal illness. As of December 31, 2013, we owned and
including three care centers held for sale, 92
operated 367 Medicare-certified home health care centers,
Medicare-certified hospice care centers and one hospice inpatient unit, in 37 states within the United States, the
District of Columbia and Puerto Rico.
2013 Developments
• Amended our credit agreement.
• Reached tentative agreement in principle with the U.S. Department of Justice.
• Closed 76 care centers (20 sold).
• Net service revenue negatively impacted by $18 million due to 2% sequestration.
2014 Outlook
•
29 care centers participating in the BPCI program (bundles).
• Anticipate continued impact of sequestration ($22 million).
• Estimated 1.05% reduction in home health reimbursement.
• Estimated 1.04% increase in hospice reimbursement.
• Reduction in capital expenditures of approximately $25 million.
•
Increased interest expense as a result of U.S. Department of Justice agreement in principle.
• Continued assessment of care center portfolio.
Care Center Closures/Consolidations
As part of our ongoing management of our portfolio of care centers, we review each care center’s current
financial performance, market penetration, forecasted market growth and the impact of proposed CMS payment
revisions. As a result of our review, we consolidated 41 home health care centers and five hospice care centers
with care centers servicing the same markets, sold 19 home health care centers and one hospice care center and
closed 10 home health care centers during 2013. We had previously classified 28 of these care centers as held for
sale during 2013 and we have three care centers remaining classified as held for sale at December 31, 2013.
37
In connection with the care centers we exited in 2013, we recorded charges of $3.6 million in goodwill and other
intangibles impairment expense related to the write-off of intangible assets, $2.0 million in other general and
administrative expenses related to lease termination costs and $1.8 million in salaries and benefits related to
severance costs during 2013, of these costs $0.6 million is included in discontinued operations with respect to the
locations closed, sold or available for sale.
Owned and Operated Care Centers
Home Health
Hospice
At December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/Startups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/Startups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated/Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
At December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
486
8
(55)
439
4
(8)
435
2
(70)
367
67
27
(7)
87
14
(4)
97
1
(6)
92
When we refer to “same store business,” we mean home health and hospice care centers that we have operated
for at least the last twelve months; when we refer to “acquisitions,” we mean home health and hospice care
centers that we acquired within the last twelve months; and when we refer to “start-ups,” we mean home health
or hospice care centers opened by us in the last twelve months. Once a care center has been in operation for a
twelve month period, the results for that particular care center are included as part of our same store business
from that date forward. Non-Medicare revenue, admissions, recertifications or completed episodes, includes
home health revenue, admissions, recertifications or completed episodes of care for those payors that pay on an
episodic or per visit basis, which includes Medicare Advantage programs and private payors.
Economic and Industry Factors
Home health and hospice services are a highly fragmented, highly competitive industry. The degree of
competiveness varies depending upon whether our care centers operate in states that require a certificate of need
(CON) or permit of approval (POA). In such states, expansion by existing providers or entry into the market by new
providers is permitted only where determination is made by state health authorities that a given amount of unmet
need exists. Currently, 62% and 36% of our home health and hospice care centers, respectively operate in CON/
POA states.
As the Federal government continues to debate a reduction in expenditures and a reform of the Medicare system,
our industry continues to face reimbursement pressures. Specifically, the industry has been impacted by a 2%
sequestration payment reduction beginning April 1, 2013. Additionally, the following payment adjustments are
effective for 2014:
Market Basket Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rebasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ICD-9 Coding Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PPACA Adjustment
Productivity Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Budget Neutrality Adjustment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home Health(1)
Hospice(2)
2.30%
(2.73%)
(0.62%)
—
—
—
(1.05%)
2.50%
—
—
(0.30%)
(0.50%)
(0.66%)
1.04%
(1) Our impact could differ depending on differences in the wage index and coding changes.
(2) Effective for services provided from October 1, 2013 to September 30, 2014.
38
In addition to the calendar year 2014 home health rebasing cut, CMS proposed to reduce reimbursement rates by
2.7% for rebasing in each year from calendar year 2015 to calendar year 2017, however we do expect some offset
from a market basket update.
Governmental Inquiries and Investigations and Other Litigation
We have reached an agreement in principle to resolve both the U.S. Department of Justice investigation and the
Stark Law Self-Referral matter (“U.S. Department of Justice settlement”). We have agreed to this tentative
settlement without any admission of wrongdoing in order to resolve these matters and to avoid the uncertainty
and expense of protracted litigation. Although the parties have not executed a formal settlement agreement,
which remains under negotiation, we have recorded an accrual of $150 million during the third quarter of 2013
with respect to these matters. In connection with the tentative settlement, we expect to enter into a corporate
integrity agreement with the Office of the Inspector General – HHS. See Note 10 – Commitments and
Contingencies to our consolidated financial statements for additional information regarding the U.S. Department
of Justice settlement.
In addition, see Note 10 – Commitments and Contingencies to our consolidated financials for a discussion of and
updates regarding the self-disclosure matters and class action litigation we are involved in. No assurances can be
given as to the timing or outcome of these items.
Goodwill Impairment
We completed our annual impairment test of goodwill and intangible assets as of October 31, 2013, and
determined that no goodwill impairment existed as of October 31, 2013. Our home health and hospice reporting
units’ fair value exceeded the book value by 16% and 33%, respectively. Our home health reporting unit
goodwill was $16.6 million and our hospice reporting unit goodwill was $192.3 million as of December 31,
2013. A significant and sustained decline in our stock price and market capitalization, a significant decline in our
expected future cash flows, a significant adverse change in the business climate or slower growth rates could
result in the need to perform an impairment analysis under Accounting Standard Codification (“ASC”) Topic 350
“Intangibles – Goodwill and Other” in future periods. See Note 5 – Goodwill and Other Intangible Assets, Net to
our consolidated financial statements for additional information.
39
Results of Operations
Consolidated
The following table summarizes our results from continuing operations (amounts in millions):
For the Years Ended December 31,
2013
2012
2011
Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin, excluding depreciation and amortization . . . . . . . . .
% of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
% of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
U.S. Department of Justice settlement
Goodwill and other intangibles impairment charge . . . . . . . . . . . .
$1,249.3
531.3
42.5%
526.8
42.2%
150.0
9.5
$1,440.8
630.1
43.7%
576.9
40.0%
—
162.1
$1,418.4
668.0
47.1%
557.3
39.3%
—
579.9
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(155.0)
(108.9)
(469.2)
Total other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . .
Net loss (income) attributable to noncontrolling interests . . . . . . .
1.5
58.8
(38.3%)
(94.7)
(3.1)
1.6
(6.4)
20.0
(17.4%)
(7.8)
102.7
(21.5%)
(95.3)
(374.3)
(3.3)
15.0
(8.0)
(0.1)
Net loss attributable to Amedisys, Inc. . . . . . . . . . . . . . . . . . . . . . .
$ (96.2)
$ (83.6)
$ (382.4)
Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012
Our 2013 results are impacted by an accrual of $150 million and recognition of a deferred tax benefit of $56
million for the tentative settlement to resolve both the U.S. Department of Justice investigation and the Stark
Law Self-Referral matter recorded during the third quarter. See Note 10 – Commitments and Contingencies to
our consolidated financial statements for additional information.
During 2012, we recorded a $162 million impairment charge of goodwill and other intangibles as a result of the
decline in our market capitalization and forecasts. We recognized a deferred tax benefit of $37 million as a result
of the impairment charges during 2012.
Our operating income, excluding the $150 million U.S. Department of Justice settlement and the goodwill and
other intangibles impairment charges in 2013 and 2012, declined $48 million which is inclusive of an $18 million
impact due to sequestration. Excluding the impact of sequestration, our home health operating income decreased
$31 million, hospice operating income decreased $8 million and corporate expenses decreased $9 million. Our
home health and hospice operating income declined primarily as a result of lower volumes with our home health
operations experiencing an additional impact related to lower revenue per episode. Our corporate expense
decrease is comprised of a $9 million decrease in professional and legal fees and travel and training expenses. In
addition, other income increased $8 million primarily as a result of insurance proceeds for the reimbursement of
legal expenses related to our litigation activities and a decrease in interest expense.
Income tax expense includes a favorable adjustment of approximately $2 million related to a net increase in the
statutory tax rate from 39.0% to 39.5% for 2013. This statutory tax rate is the rate applied to the deferred tax
asset and liability balances. In addition to the $37 million deferred tax benefit discussed above, tax expense for
2012 includes a favorable adjustment of $2 million related to various credits for state employment and training
and state and federal research and development.
40
Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011
During 2012 and 2011, we recorded a $162 million and $580 million impairment charges of goodwill and other
intangibles as a result of the decline in our market capitalization and forecasts. We recognized a deferred tax
benefit of $37 million and $141 million as a result of the impairment charges during 2012 and 2011, respectively.
Our operating income, excluding $162 million and $580 million goodwill and other intangibles impairment
charges in 2012 and 2011, declined $58 million primarily as the result of the 2012 CMS rate cut of
approximately $41 million. Additionally, we had lower home health Medicare volumes, offset by an increase in
non-Medicare volumes which generate a lower gross margin. Our hospice operations benefitted from a full year
impact of our Beacon hospice acquisition which closed in June 2011. Other operating expenses increased $20
million, with $10 million the result of increases in our provision for doubtful accounts related to the increase in
our non-Medicare revenue and depreciation expense. The remainder is from increased workers’ compensation
expenses, severance costs, and information technology costs associated with the rollout of our Point-of-Care
(“POC”) technology to our hospice division.
During the fourth quarter of 2012, we entered into a new unsecured bank credit facility and amended our senior
note agreement and as result we incurred debt prepayment fees of $3.6 million and wrote-off unamortized debt
issuance costs of $1.1 million. In addition, we received $3.6 million from a bankruptcy settlement.
In addition to the $37 million and $141 million deferred tax benefits discussed above, tax expense for 2012
includes a favorable adjustment of $2 million related to various credits for state employment and training and
state and federal research and development and tax expense for 2011 included a favorable adjustment of $2
million related to the release of a valuation allowance on specific deferred tax assets related to the utilization of
state net operating losses during the third quarter of 2011.
41
Home Health Division
The following table summarizes our home health segment results from continuing operations:
For the Years Ended December 31,
2013
2012
2011
Financial Information (in millions):
Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income before impairment(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
803.8
183.9
987.7
578.9
408.8
325.3
83.5
$
$
915.3
236.8
1,152.1
661.4
490.7
361.9
128.8
$
$
996.4
205.4
1,201.8
634.5
567.3
346.4
220.9
Key Statistical Data:
Medicare:
Same Store Volume(2):
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recertifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (3):
Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recertifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Completed episodes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average revenue per completed episode(4) . . . . . . . . . . . . . . . . . . . . . . .
Visits per completed episode(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare(3):
Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recertifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total(3):
Cost per Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10%)
0%
(18%)
(7%)
0%
(8%)
(15%)
(4%)
(7%)
188,566
107,908
290,780
5,177,976
2,817
17.5
$
192,375
134,515
317,346
6,076,170
2,867
18.8
$
194,133
147,012
329,456
6,319,020
3,020
18.7
$
76,551
30,304
1,531,781
90,017
41,268
2,011,684
71,211
37,326
1,699,364
$
86.27
6,709,757
$
81.78
8,087,854
$
79.14
8,018,384
(1) Operating income of $75.0 million and operating loss of $32.8 million and $359.0 million on a GAAP basis
for the years ended December 31, 2013, 2012 and 2011, respectively.
(2) Medicare revenue, admissions or recertifications growth is the percent increase (decrease) in our Medicare
revenue, admissions or recertifications for the period as a percent of the Medicare revenue, admissions or
recertifications of the prior period.
(3) Based on continuing operations for all periods presented.
(4) Average Medicare revenue per completed episode is the average Medicare revenue earned for each
Medicare completed episode of care which excludes the impact of sequestration.
(5) Medicare visits per completed episode are the home health Medicare visits on completed episodes divided
by the home health Medicare episodes completed during the period.
Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012
Overall, our operating income excluding the goodwill and other intangibles impairment charge declined $45
million on a $164 million decline in revenue. Sequestration impacted revenue and operating income by $14
million. Both Medicare and non-Medicare gross margin were impacted by lower volumes offset by a $37 million
decrease in other operating expenses.
42
Net Service Revenue
Our Medicare revenue decline of approximately $111 million consisted of $82 million due to lower volumes, $15
million due to lower revenue per episode and $14 million due to sequestration. The volume decline is primarily
due to a 20% decline in recertifications, as admissions only declined 2%. Our revenue per episode declined 2%;
however, this was offset by a 7% decrease in our visits per episode.
Our non-Medicare revenue decreased $53 million which is primarily due to a decline in admission volumes and
the number of visits performed. A key driver in the volume decline is changes effective October 2012 in the
terms of our Humana contract (episodic to per-visit reimbursement and reduction in market coverage).
Cost of Service, Excluding Depreciation and Amortization
Our cost of service decreased $82 million primarily as a result of our decrease in admission and recertification
volumes and visits per episode offset by an increase in cost per visit. The increase in cost per visit is the result of
wage inflation, increase in health and other benefits and the impact of lower visits due to the fixed nature of some
of our care delivery costs.
Other Operating Expenses
Other operating expenses, excluding the goodwill and other intangibles impairment charge, decreased $37
million with $30 million attributed primarily to salary and wages and other care center related expenses. Our
strategy to consolidate care centers within overlapping markets is a major factor in this decrease. The remaining
$7 million is primarily the result of a reduction in our provision for doubtful accounts, which is reflective of our
decrease in non-Medicare revenue and our higher percentage of contracted payors.
Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011
Our operating income, excluding the goodwill and other intangibles impairment charge, declined $92 million
from 2011. The significant factors impacting our performance were the $41 million reduction in reimbursement
and a $27 million increase in our cost of service.
Net Service Revenue
Revenue declined $50 million as a result of an $81 million decrease in our Medicare revenue and a $31 million
increase in our non-Medicare revenue.
Our Medicare revenue decline consisted of approximately a $49 million rate impact ($41 million from 4.2%
2012 CMS rate cut) with the remainder the result of lower recertifications and admissions. The decline in
recertifications is the result of a lower census at the beginning of the year and an overall reduction in the number
of episodes that our patients required in 2012.
Our non-Medicare revenue increased $31 million on growth in private contracts signed in 2012. As previously
described, our fourth quarter was impacted by a change in the terms of our Humana contract, as it moved from an
episodic to per-visit payment. This change adversely impacted revenue in the fourth quarter of 2012; however,
the full revenue impact was not reflected in our results until the first quarter of 2013.
Cost of Service, excluding Depreciation and Amortization
Our cost of service increased $27 million primarily as a result of our increase in cost per visit. The increase in
cost per visit was the result of wage inflation and additional clinical support resources. The remainder of the
increase in cost of service is due to the increase in the volume of non-Medicare visits.
43
Other Operating Expenses
Other operating expenses, excluding the goodwill and other
increased
approximately $15 million resulting from increases in salaries and wages and an increase in our provision for
doubtful accounts, which is reflective of our increase in non-Medicare revenue.
intangibles impairment charge,
Hospice Division
The following table summarizes our hospice segment results from continuing operations:
For the Years Ended
December 31,
2013
2012
2011
Financial Information (in millions):
Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income before impairment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 246.4
15.2
261.6
139.1
122.5
72.5
50.0
$
$ 272.7
16.0
288.7
149.3
139.4
77.2
62.2
$
$ 203.4
13.2
216.6
115.9
100.7
51.5
49.2
$
Key Statistical Data:
Same store Medicare revenue growth(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hospice admits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average daily census . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue per day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service per day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average length of stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9%)
13%
19%
18,335
4,964
$144.43
$ 76.45
100
18,999
5,406
$145.89
$ 75.34
99
15,741
4,176
$142.12
$ 75.76
89
(1) Operating income of $49.0 and $61.7 million on a GAAP basis for the years ended December 31, 2013 and
2012, respectively.
(2) Same store Medicare revenue growth is the percent increase in our Medicare revenue for the period as a
percent of the Medicare revenue of the prior period.
Year Ended December 31, 2013 Compared to the Year Ended December 31, 2012
Our operating income, excluding the goodwill and other intangibles impairment charge, decreased $12 million
primarily due to a decrease in admissions which resulted in a lower average daily census.
Net Service Revenue
Our hospice revenue decreased $27 million, primarily as the result of a decrease in our average daily census and
$4 million due to sequestration. We benefitted from a 0.9% hospice rate increase effective October 1, 2012 and
beginning October 1, 2013, the fiscal year 2014 hospice base rate increased approximately 1%.
Cost of Service, Excluding Depreciation and Amortization
Our hospice cost of service decreased $10 million, or 7%, which corresponds to our 8% decrease in average daily
census. Our hospice clinicians are generally paid on a salaried basis, and our care centers are staffed based on
their average census.
Other Operating Expenses
Other operating expenses, excluding the goodwill and other intangibles impairment charge, decreased $5 million
due to a $7 million decrease in salaries and wages and other care center related expenses, offset by a $2 million
increase in our provision for doubtful accounts due to an increase in non-Medicare write-offs during 2013.
44
Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011
Our operating income, excluding the goodwill and other intangibles impairment charge, increased $13 million
primarily as the result of our growth in our average daily census and our ability to maintain our cost per day at
2011 levels.
Net Service Revenue
Our hospice revenue increased $72 million, primarily as the result of $36 million from a full year impact of our
Beacon acquisition (which closed in June 2011) and $32 million from an increase in admissions and average
daily census at our existing care centers. Our revenue also benefitted from a 2.5% hospice rate increase effective
October 1, 2011 offset by a $1 million increase in our hospice cap adjustment.
Cost of Service, excluding Depreciation and Amortization
Our hospice cost of service increased $33 million which corresponds to our 29% increase in average daily
census.
Other Operating Expenses
Our other operating expenses, excluding the other intangibles impairment charge, increased $26 million as the
result of a full year of Beacon operations and an increase in salaries and wages related to wage inflation and
census growth.
Liquidity and Capital Resources
Cash Flows
The following table summarizes our cash flows for the periods indicated (amounts in millions):
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . .
For the Years Ended
December 31,
2013
2012
2011
$102.3
(46.5)
(53.0)
2.8
14.5
$ 69.5
(60.0)
(43.0)
(33.5)
48.0
$ 141.2
(180.7)
(32.8)
(72.3)
120.3
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . .
$ 17.3
$ 14.5
$ 48.0
Cash provided by operating activities increased $32.8 million during 2013 compared to 2012 primarily due to a
9.4 day decrease in our days revenue outstanding which increased our cash flow from operations by $32.5
million. Cash provided by operating activities decreased $71.7 million during 2012 compared to 2011 primarily
due to the $41 million reduction in operating income that resulted from the 2012 CMS rate cut. In addition, we
had an increase in our days revenue outstanding in 2012 which reduced our cash flow from operations by $25.3
million. For additional information regarding our operating performance and our days revenue outstanding, see
“Results of Operations” and “Outstanding Patient Accounts Receivable”, respectively. The recognition of the
goodwill and intangible asset impairment charge of $162.1 million and $579.9 million, which resulted in the net
loss for 2012 and 2011 is a non-cash item and therefore had no impact on our cash flow from operations.
Cash used in investing activities decreased $13.5 million during 2013 compared to 2012 primarily due to a
decrease in acquisition activities, purchases of property and equipment and proceeds from the sale of care centers
of $22.5 million offset by the purchase of investments of $10.1 million. Cash used in investing activities
decreased $120.7 million during 2012 compared to 2011 primarily due to a decrease in acquisition activities of
$119.7 million.
45
Cash used in financing activities increased $10.0 million during 2013 compared to 2012 and $10.2 million during
2012 compared to 2011 due to an $11.4 million and $7.0 million increase in our principal payments of long-term
obligations, net of borrowings, respectively. We decreased our outstanding long-term obligations net of
borrowings by $55.8 million from December 31, 2012.
Liquidity
Typically, our principal source of liquidity is the collection of our patient accounts receivable, primarily through
the Medicare program. During 2013 and 2012, we have experienced reimbursement reductions due to
sequestration and the 2012 CMS rate cut, as well as lower volumes which have impacted our business and
consolidated financial condition, results of operation and cash flows. We also expect that the approximate 1%
reduction to the 2014 home health reimbursement rate will adversely impact our 2014 revenues. In addition,
CMS proposed to reduce reimbursement rates by 2.7% for rebasing in each year from calendar year 2015 to
calendar year 2017; however, we do expect some offset from a market basket update. We believe our admissions
and rate of recertifications have stabilized; however, we have continued to see a decline in the number of
recertifications due to lower census. Recertifications will vary based on the clinical needs of our patients. For
additional information regarding our reimbursement changes see “Overview – Economic and Industry Factors”.
In addition to our collection of patient accounts receivable, from time to time, we can and do obtain additional
sources of liquidity by the incurrence of additional indebtedness or through sales of equity. As of December 31,
2013, we had $17.3 million in cash and cash equivalents and $142.8 million in availability under our $165.0
million Revolving Credit Facility.
During 2013, we spent $6.5 million in routine capital expenditures compared to $21.1 million and $19.1 million
during 2012 and 2011, respectively. Routine capital expenditures primarily include equipment and computer
software and hardware. In addition, we spent $35.2 million in non-routine capital expenditures related to
enhancements to our point of care software compared to $27.2 million and $25.3 million during 2012 and 2011.
Our routine and non-routine capital expenditures for 2014 are expected to be approximately $11.1 million and
$6.9 million, respectively.
Due to an agreement in principle being reached with respect to a settlement with the U.S. Department of Justice, on
November 11, 2013, we entered into the second amendment to our Credit Agreement, which amends our existing
Credit Agreement dated as of October 26, 2012, to add certain covenants, representations and other provisions in the
Credit Agreement to, among other things, allow for the settlement of both the U.S Department of Justice
investigation and the Stark Law Self-Referral matter (and related expenses). This amendment also (i) amends
certain covenants, representations and other provisions in the Credit Agreement, (ii) revises the exclusions and
baskets associated with certain of the representations and covenants in the Credit Agreement relating to the
incurrence of liens, the incurrence of additional debt, sales of assets and other fundamental corporate changes,
acquisitions, investments, and capital expenditures, (iii) revises the exceptions and baskets associated with the
financial covenants that we are required to maintain under the Credit Agreement and (iv) required us to grant a
security interest in substantially all our and our wholly-owned subsidiaries non-real estate assets.
The agreement in principle with the U.S. Department of Justice calls for payment of the aggregate sum of $150
million, plus interest thereon at a rate of 2.25 percent per annum, as follows: (a) $115 million plus interest
thereon to be payable upon execution of the settlement documents, and (b) $35 million plus interest thereon to be
payable six months thereafter. We plan to use cash on hand and our availability under our Revolving Credit
Facility to make the required payments once a settlement has been finalized. See Note 10 – Commitments and
Contingencies to our consolidated financial statements for additional information regarding the U.S. Department
of Justice settlement.
Also as consideration for entering into the Second Amendment, prior to the effective date thereof, we repaid the
$20 million outstanding principal amount of our Series B Senior Notes due March 25, 2014 (the “Series B
Notes”). A prepayment fee of $0.4 million was made in connection with the repayment of the Series B Notes
prior to their stated date of maturity.
46
Based on our operating forecasts, our new debt service requirements and upcoming settlement payment, we
believe we will have sufficient
liquidity to fund our operations, capital requirements and debt service
requirements; however, our ongoing ability to comply with the debt covenants under our credit agreement
depends largely on the achievement of adequate levels of operating performance and cash flow. We currently
anticipate we will be in compliance with the covenants associated with our long-term obligations over the next
12 months. If our future operating performance and/or cash flows are less than expected, it could cause us to
default on our financial covenants in the future. In the event we are not in compliance with our debt covenants in
the future, we would pursue various alternatives in an attempt to successfully resolve the non-compliance, which
might include, among other things, seeking debt covenant waivers or amendments. There can be no assurance
that debt covenant waivers or amendments would be obtained, if needed.
Outstanding Patient Accounts Receivable
Our patient accounts receivable, net decreased $58.1 million from December 31, 2012 to December 31, 2013.
Our cash collection as a percentage of revenue was 107.2% and 100.6% for December 31, 2013 and 2012,
respectively. Our days revenue outstanding, net at December 31, 2013 decreased 9.4 days from 41.5 days at
December 31, 2012.
Our patient accounts receivable includes unbilled receivables and are aged based upon our initial service date. At
December 31, 2013, our unbilled patient accounts receivable, as a percentage of gross patient accounts
receivable, was 34.7%, or $44.8 million, compared to 32.2%, or $63.4 million, at December 31, 2012. We
monitor unbilled receivables on a care center by care center basis to ensure that all efforts are made to bill claims
within timely filing deadlines. The timely filing deadline for Medicare is one year from the date the episode was
completed and varies by state for Medicaid-reimbursable services and among insurance companies and other
private payors.
Our provision for estimated revenue adjustments (which is deducted from our service revenue to determine net
service revenue) and provision for doubtful accounts were as follows for the periods indicated (amounts in
millions). We fully reserve for both our Medicare and other patient accounts receivable that are aged over 365 days.
Provision for estimated revenue adjustments(1) . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts(2)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Years Ended
December 31,
2013
$ 9.4
16.4
$25.8
2012
$10.6
21.7
$32.3
As a percent of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.0%
2.2%
(1)
(2)
Includes $0.4 million and $0.7 million from discontinued operations for the years ended December 31, 2013
and 2012, respectively.
Includes $0.6 million and $0.7 million from discontinued operations for the years ended December 31, 2013
and 2012, respectively.
47
The following schedules detail our patient accounts receivable, net of estimated revenue adjustments, by payor
class, aged based upon initial date of service (amounts in millions, except days revenue outstanding, net):
0-90
91-180
181-365 Over 365
Total
At December 31, 2013:
Medicare patient accounts receivable, net(1) . . . . . . . . . . . . . . . . . . .
$66.7
$ 8.7
$—
$—
$ 75.4
Other patient accounts receivable:
Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.4
19.8
2.6
8.0
1.3
3.9
0.3
2.6
15.6
34.3
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$31.2
$10.6
$ 5.2
$ 2.9
$ 49.9
Allowance for doubtful accounts(2) . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare patient accounts receivable, net
. . . . . . . . . . . . . . . . .
Total patient accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . .
Days revenue outstanding, net(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14.2)
$ 35.7
$111.1
32.1
0-90
91-180
181-365 Over 365
Total
At December 31, 2012:
Medicare patient accounts receivable, net(1) . . . . . . . . . . . . . . . . . . .
$96.2
$17.1
$2.1
$—
$115.4
Other patient accounts receivable:
Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14.9
30.4
4.4
12.9
2.0
7.8
0.3
2.1
21.6
53.2
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45.3
$17.3
$9.8
$ 2.4
$ 74.8
Allowance for doubtful accounts(2) . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare patient accounts receivable, net
. . . . . . . . . . . . . . . . .
Total patient accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . .
Days revenue outstanding, net(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(21.0)
$ 53.8
$169.2
41.5
(1) The following table summarizes the activity and ending balances in our estimated revenue adjustments
(amounts in millions), which is recorded to reduce our Medicare outstanding patient accounts receivable to
their estimated net realizable value, as we do not estimate an allowance for doubtful accounts for our
Medicare claims.
For the Years Ended
December 31,
2013
2012
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . .
Provision for estimated revenue adjustments(a) . . . . . . . . .
Write offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6.4
9.4
(11.9)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3.9
$ 6.8
10.6
(11.0)
$ 6.4
(a)
Includes $0.4 million and $0.7 million from discontinued operations for the years ended December 31, 2013
and 2012, respectively.
Our estimated revenue adjustments were 4.9% and 5.3% of our outstanding Medicare patient accounts
receivable at December 31, 2013 and December 31, 2012, respectively.
48
(2) The following table summarizes the activity and ending balances in our allowance for doubtful accounts
(amounts in millions), which is recorded to reduce only our Medicaid and private payer outstanding patient
accounts receivable to their estimated net realizable value.
For the Years Ended
December 31,
2013
2012
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts(a)
Write offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 21.0
16.4
(23.2)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14.2
$ 17.4
21.7
(18.1)
$ 21.0
(a)
Includes $0.6 million and $0.7 million from discontinued operations for the years ended December 31, 2013
and 2012 respectively.
Our allowance for doubtful accounts was 28.5% and 28.1% of our outstanding Medicaid and private patient
accounts receivable at December 31, 2013 and 2012, respectively.
(3) Our calculation of days revenue outstanding, net is derived by dividing our ending net patient accounts
receivable (i.e., net of estimated revenue adjustments and allowance for doubtful accounts ) at December 31,
2013 and 2012 by our average daily net patient revenue for the three-month periods ended December 31,
2013 and 2012, respectively.
Indebtedness
Credit Agreement
On October 26, 2012, we entered into a Credit Agreement that provides for senior unsecured facilities in an
initial aggregate principal amount of up to $225 million (the “Credit Facilities”). The Credit Facilities are
comprised of (a) a term loan facility in an initial aggregate principal amount of $60 million (the “Term Loan”);
and (b) a revolving credit facility in an initial aggregate principal amount of up to $165 million (the “Revolving
Credit Facility”). The Credit Facilities are guaranteed by all of our material wholly-owned subsidiaries. We may
increase the aggregate loan amount under the Credit Facilities by a maximum amount of $100 million subject to
receipt from the lenders, at their sole discretion, of commitments totaling the requested amount and the
satisfaction of other terms and conditions.
The Revolving Credit Facility provides for and includes within its $165 million limit a $15 million swingline
facility and commitments for up to $50 million in letters of credit. The Revolving Credit Facility may be used to
provide ongoing working capital and for other general corporate purposes. The final maturity of the Revolving
Credit Facility is October 26, 2017.
The proceeds of the Term Loan and existing cash were used to pay off our existing term loan under our $250
million Revolving Credit Facility dated March 26, 2008 with a principal balance of $15 million and a portion of
our existing senior notes with a principal balance of $60 million. The final maturity of the Term Loan is
October 26, 2017. The Term Loan amortizes beginning December 31, 2012 in 20 equal quarterly installments of
$3.0 million (subject to adjustment for prepayments), with the remaining balance due upon maturity. As of
December 31, 2013, the principal balance of the Term Loan was $45.0 million and is due on October 26, 2017.
On November 11, 2013, we entered into the second amendment to our Credit Agreement which amends our
existing Credit Agreement dated as of October 26, 2012, to add certain covenants, representations and other
provisions in the Credit Agreement to, among other things, allow for the settlement of both the U.S. Department
of Justice investigation and Stark Law Self-Referral matter (and related expenses). This amendment also
(i) amends certain covenants, representations and other provisions in the Credit Agreement, (ii) revises the
49
exclusions and baskets associated with certain of the representations and covenants in the Credit Agreement
relating to the incurrence of liens, the incurrence of additional debt, sales of assets and other fundamental
corporate changes, acquisitions, investments, and capital expenditures, (iii) revises the exceptions and baskets
associated with the two financial covenants that we are required to maintain under the Credit Agreement and the
ability to make restricted payments, and (iv) required us to grant a security interest in substantially all our and our
wholly-owned subsidiaries non-real estate assets pursuant to the Security Agreement (as hereafter defined).
The interest rate in connection with the Credit Facilities as amended on November 11, 2013, shall be selected
from the following by us: (i) the ABR Rate plus the Applicable Margin (the “Base Rate Advance”) or (ii) the
Eurodollar Rate plus the Applicable Margin (the “Eurodollar Rate Advance”). The ABR Rate means the greatest
of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% per annum and (c) the Eurodollar Rate for an
interest period of one month plus 1% per annum. The “Eurodollar Rate” means the rate at which Eurodollar
deposits in the London interbank market for an interest period of one, two, three or six months (as selected by us)
are quoted. The “Applicable Margin” means 1.50% per annum for Base Rate Advances and 2.50% per annum for
Eurodollar Rate Advances, subject to adjustment depending on our leverage ratio at the end of each quarter as
presented in the table below. We are also subject to a commitment fee under the terms of the Credit Facilities, as
presented in the table below.
Total Leverage Ratio
≥ 2.50
< 2.50 and ≥ 2.00
< 2.00 and ≥ 1.50
< 1.50
Margin for
ABR Loans
Margin for
Eurodollar Loans
Commitment
Fee
2.25%
2.00%
1.75%
1.50%
3.25%
3.00%
2.75%
2.50%
0.50%
0.50%
0.50%
0.45%
Our weighted average interest rate for our five year $60.0 million Term Loan was 2.8% for 2013 and 1.7% for
2012.
Our Credit Agreement, as amended on November 11, 2013, requires us to meet two financial covenants. One is a
leverage ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) and the
second is a fixed charge coverage ratio of adjusted EBITDA plus rent expense (“EBITDAR”) (less capital
expenditures less cash taxes) to scheduled debt repayments plus interest expense plus rent expense. These
thresholds vary over the term of the credit facility. As of December 31, 2013, our total leverage ratio was 2.9 and
our fixed charge coverage ratio was 1.4 and we are in compliance with the Credit Agreement. We currently
anticipate we will be in compliance with the covenants associated with our long-term obligations over the next
12 months. In the event we are not in compliance with our debt covenants in the future, we would pursue various
alternatives in an attempt to successfully resolve the non-compliance, which might include, among other things,
seeking debt covenant waivers or amendments.
As of December 31, 2013, our availability under our $165.0 million Revolving Credit Facility was $142.8
million as we had $22.2 million outstanding in letters of credit.
Pursuant to the Security Agreement, as of the effective date of the Second Amendment, the Credit Agreement is
secured by substantially all of our and our wholly-owned subsidiaries’ non-real estate assets (subject
to
exceptions for certain immaterial subsidiaries), including all of the stock of our wholly-owned subsidiaries that
are corporations, equity interests in our wholly-owned subsidiaries that are not corporations, our equity interests
in our joint ventures and our investments. If an event of default occurs under the Credit Agreement, the Agent
may, upon the request of a specified percentage of the Lenders, exercise remedies with respect to the collateral,
including, in some instances, taking possession of or selling personal property assets, collecting accounts
receivables, or exercising proxies to take control of the pledged stock and other equity interests.
50
Amendment and Waiver to Note Purchase Agreement
In addition, on October 26, 2012, we entered into an Amendment (the “Amendment”) and a Waiver (the
“Waiver”) to our Note Purchase Agreement dated March 25, 2008 (the “Note Purchase Agreement”).
Pursuant to the Note Purchase Agreement, we issued and sold on March 26, 2008, three series of senior notes.
The Amendment and the Waiver collectively permit us to repay $15 million of our Series A Senior Notes, $10
Million of our Series B Senior Notes and $35 million of our Series C Senior Notes, in each case prior to their
stated date of maturity. A prepayment fee of $3.6 million was made in connection with the repayment of the
senior notes. The Amendment also generally conforms the Note Purchase Agreement covenants (including
exclusions and baskets) to the covenants included in our new Credit Agreement. In addition, as amended by the
Amendment, the Note Purchase Agreement financial covenants are identical to those described above with
respect to the Credit Agreement.
The Notes are guaranteed by all of our material wholly-owned subsidiaries. As amended by the Amendment, the
Note Purchase Agreement requires at all times that we (i) provide guaranties from wholly-owned subsidiaries
that in the aggregate represent not less than 95% of our consolidated net revenues and adjusted EBITDA from all
wholly-owned subsidiaries, (ii) provide guarantees from subsidiaries that in the aggregate represent not less than
70% of consolidated adjusted EBITDA, subject to certain exceptions and (iii) provide guarantees from any other
subsidiary that is a guarantor under the Credit Agreement.
Termination of $250 Million Revolving Credit Facility
In connection with the execution of the new Credit Agreement and the amendment and waiver to the Note
Purchase Agreement, our $250 million Revolving Credit Facility dated as of March 26, 2008 was terminated on
October 26, 2012. The remaining unamortized deferred debt issuance costs related to the $250 million Revolving
Credit Facility were written off in proportion to the reduction in our borrowing capacity. The balance of the
unamortized deferred debt issuance costs related to the $250 million Revolving Credit Facility shall be deferred
and amortized over the term of the new Credit Agreement.
Repayment of Series B Senior Notes
As consideration for entering into the Second Amendment to our Credit Agreement, prior to the effective date
thereof, we repaid the $20 million outstanding principal amount of our Series B Senior Notes due March 25,
2014 (the “Series B Notes”). A prepayment fee of $0.4 million was made in connection with the repayment of the
Series B Notes prior to their stated date of maturity.
Promissory Notes
Our promissory notes outstanding of $1.9 million as of December 31, 2013 were generally issued in amounts
between $2.5 million and $10.8 million and bear interest in a range of 1.0% to 1.97%. These promissory notes
are primarily promissory notes issued for software licenses.
51
Contractual Obligations and Medicare Liabilities
Our future contractual obligations and Medicare liabilities at December 31, 2013 were as follows (amounts in
millions):
Long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on long-term obligations(1) . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Department of Justice settlement(2) . . . . . . . . . . . . . . . . . . . . . .
Operating leases(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medicare liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments Due by Period
Less than
1 Year
1-3
Years
4-5
Years
After 5
Years
$ 13.9
1.4
151.3
24.3
12.1
7.4
1.1
3.9
$24.0
1.5
—
25.6
—
7.9
—
—
$ 9.0
$—
0.2 —
—
—
0.3
7.1
—
—
0.7 —
—
—
—
—
Total
$ 46.9
3.1
151.3
57.3
12.1
16.0
1.1
3.9
$291.7
$215.4
$59.0
$17.0
$ 0.3
(1)
Interest on debt with variable rates was calculated using the current rate of that particular debt instrument at
December 31, 2013.
Includes interest accrued at the rate of 2.25% from the date of settlement.
(2)
(3) Operating lease obligations for our discontinued operation locations amounted to $2.7 million at
December 31, 2013.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based upon our consolidated
financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles
(“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent
assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to revenue
recognition, collectability of accounts receivable, reserves related to insurance and litigation, goodwill, intangible
assets, income taxes and contingencies. We base these estimates on our historical experience and various other
assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results experienced may vary materially and adversely from our estimates. To the extent there are
material differences between our estimates and the actual results, our future results of operations may be affected.
We believe the following critical accounting policies represent our most significant judgments and estimates used
in the preparation of our consolidated financial statements.
Revenue Recognition
We earn net service revenue through our home health and hospice care centers by providing a variety of services
almost exclusively in the homes of our patients. This net service revenue is earned and billed either on an episode
of care basis, on a per visit basis or on a daily basis depending upon the payment terms and conditions
established with each payor for services provided. We refer to home health revenue earned and billed on a 60-day
episode of care as episodic-based revenue.
When we record our service revenue, we record it net of estimated revenue adjustments and contractual
adjustments to reflect amounts we estimate to be realizable for services provided, as discussed below. We
believe, based on information currently available to us and based on our judgment, that changes to one or more
factors that impact the accounting estimates (such as our estimates related to revenue adjustments, contractual
52
adjustments and episodes in progress) we make in determining net service revenue, which changes are likely to
occur from period to period, will not materially impact our reported consolidated financial condition, results of
operations, cash flows or our future financial results.
Home Health Revenue Recognition
Medicare Revenue
Net service revenue is recorded under the Medicare prospective payment system (“PPS”) based on a 60-day
episode payment rate that is subject to adjustment based on certain variables. We make adjustments to Medicare
revenue on completed episodes to reflect differences between estimated and actual payment amounts, and our
discovered inability to obtain appropriate billing documentation or authorizations and other reasons unrelated to
credit risk. We estimate the impact of such adjustments based on our historical experience, which primarily
includes a historical collection rate of over 99% on Medicare claims, and record this estimate during the period in
which services are rendered as an estimated revenue adjustment and a corresponding reduction to patient
accounts receivable. In addition, management evaluates the potential for revenue adjustments and, when
appropriate, provides allowances based upon the best available information.
In addition to revenue recognized on completed episodes, we also recognize a portion of revenue associated with
episodes in progress. Episodes in progress are 60-day episodes of care that begin during the reporting period, but
were not completed as of the end of the period. We estimate this revenue on a monthly basis based upon
historical trends. The primary factors underlying this estimate are the number of episodes in progress at the end
of the reporting period, expected Medicare revenue per episode and our estimate of the average percentage
complete based on visits performed.
Non-Medicare Revenue
Episodic-based Revenue. We recognize revenue in a similar manner as we recognize Medicare revenue for
episodic-based rates that are paid by other insurance carriers, including Medicare Advantage programs; however,
these rates can vary based upon the negotiated terms.
Non-episodic Based Revenue. Gross revenue is recorded on an accrual basis based upon the date of service at
amounts equal to our established or estimated per-visit rates, as applicable. Contractual adjustments are recorded
for the difference between our standard rates and the contracted rates to be realized from patients, third parties
and others for services provided and are deducted from gross revenue to determine net service revenue and are
also recorded as a reduction to our outstanding patient accounts receivable.
Hospice Revenue Recognition
Hospice Medicare Revenue
Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated
payment rates. The estimated payment rates are daily or hourly rates for each of the four levels of care we
deliver. We make adjustments to Medicare revenue for our discovered inability to obtain appropriate billing
documentation or authorizations and other reasons unrelated to credit risk. We estimate the impact of these
adjustments based on our historical experience, which primarily includes our historical collection rate on
Medicare claims, and record it during the period services are rendered as an estimated revenue adjustment and as
a reduction to our outstanding patient accounts receivable.
Additionally, as Medicare hospice revenue is subject to an inpatient cap limit and an overall payment cap for
each provider number, we monitor these caps and estimate amounts due back to Medicare if a cap has been
exceeded. We record these adjustments as a reduction to revenue and an increase in other accrued liabilities. We
have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2011 as of
December 31, 2013. As of December 31, 2013, we have recorded $4.0 million for estimated amounts due back to
Medicare in other accrued liabilities for the Federal cap years ended October 31, 2012 through October 31, 2014.
53
As of December 31, 2012, we have recorded $4.8 million for estimated amounts due back to Medicare in other
accrued liabilities for the Federal cap years ended October 31, 2010 through October 31, 2013.
Hospice Non-Medicare Revenue
We record gross revenue on an accrual basis based upon the date of service at amounts equal to our established
rates or estimated per visit rates, as applicable. Contractual adjustments are recorded for the difference between
our established rates and the amounts estimated to be realizable from patients, third parties and others for
services provided and are deducted from gross revenue to determine our net service revenue and patient accounts
receivable.
Patient Accounts Receivable – Allowance for Doubtful Accounts
Our patient accounts receivable are uncollateralized and consist of amounts due from Medicare, Medicaid, other
third-party payors and patients. We fully reserve for accounts which are aged at 365 days or greater. We write off
accounts on a monthly basis once we have exhausted our collection efforts and deem an account to be
uncollectible. We do not record an allowance for doubtful accounts for our Medicare patient accounts receivable,
which are recorded at their net realizable value after recording estimated revenue adjustments as discussed above.
We believe there is a certain level of credit risk associated with non-Medicare payors. To provide for our non-
Medicare patient accounts receivable that could become uncollectible in the future, we establish an allowance for
doubtful accounts to reduce the carrying amount to its estimated net realizable value. We estimate an allowance
for doubtful accounts based upon our assessment of historical and expected net collections, business and
economic conditions, trends in payment and an evaluation of collectibility based upon the date that the service
was provided. Based upon our best judgment, we believe the allowance for doubtful accounts adequately
provides for accounts that will not be collected due to credit risk.
Insurance
We are obligated for certain costs associated with our insurance programs, including employee health, workers’
compensation and professional liability. While we maintain various insurance programs to cover these risks, we
are self-insured for a substantial portion of our potential claims. We recognize our obligations associated with
these costs in the period in which a claim is incurred, including with respect to both reported claims and claims
incurred but not reported, up to specified deductible limits. These costs have generally been estimated based on
historical data of our claims experience. Such estimates, and the resulting reserves, are reviewed and updated by
us on a quarterly basis.
Goodwill and Other Intangible Assets
Goodwill represents the amount of the purchase price in excess of the fair values assigned to the underlying
identifiable net assets of acquired businesses. Goodwill is not amortized, but is subject to an annual impairment
test. Tests are performed more frequently if events occur or circumstances change that would more likely than
not reduce the fair value of the reporting unit below its carrying amount. These events or circumstances include
but are not limited to, a significant adverse change in the business environment; regulatory environment or legal
factors; or a substantial decline in market capitalization of our stock. To determine whether goodwill is impaired,
we perform a two-step impairment test. In the first step of the test, the fair values of the reporting units are
compared to their aggregate carrying values, including goodwill. If the fair value of the reporting unit is greater
than its carrying amount, goodwill is not considered impaired and no further testing is required. If the fair value
of the reporting unit is less than its carrying amount, we would proceed to step two of the test. In step two of the
test, the implied fair value of the goodwill of the reporting unit is determined by a hypothetical allocation of the
fair value calculated in step one to all of the assets and liabilities of that reporting unit (including any recognized
54
and unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the
fair value was reflective of the price paid to acquire the reporting unit. The implied fair value of goodwill is the
excess, if any, of the calculated fair value after hypothetical allocation to the reporting unit’s assets and
liabilities. If the implied fair value of the goodwill is greater than the carrying amount of the goodwill at the
analysis date, goodwill is not impaired and the analysis is complete. If the implied fair value of the goodwill is
less than the carrying value of goodwill at the analysis date, goodwill is deemed impaired by the amount of that
variance.
We calculate the estimated fair value of our reporting units using discounted cash flows as well as a market
approach that compares our reporting units’ earnings and revenue multiples to those of comparable public
companies. To determine fair value we must make assumptions about a wide variety of internal and external
factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow
(including significant assumptions about operations, in particular expected organic growth rates, future Medicare
reimbursement rates, capital requirements and income taxes), long-term growth rates for determining terminal
value, and discount rates. Our estimates of discounted cash flows may differ from actual cash flows due to,
among other things, economic conditions, changes to our business model or changes in operating performance.
These factors increase the risk of differences between projected and actual performance that could impact future
estimates of fair value of all reporting units. Significant differences between these estimates and actual cash
flows could result in additional impairment in future periods.
Each of our operating segments described in the notes to our financial statements is considered to represent an
individual reporting unit for goodwill impairment testing purposes. We consider each of our home health care
centers to constitute an individual business for which discrete financial information is available. However, since
these care centers have substantially similar operating and economic characteristics and resource allocation and
significant investment decisions concerning these businesses are centralized and the benefits broadly distributed,
we have aggregated these care centers and deemed them to constitute a single reporting unit. We have applied
this same aggregation principle to our hospice care centers and have also deemed them to be a single reporting
unit.
During 2013, we did not record any goodwill impairment charges and none of the goodwill associated with our
various reporting units were considered at risk of impairment as of October 31, 2013. Since the date of our last
annual goodwill impairment test, there have been no material developments, events, changes in operating
performance or other circumstances that would cause management to believe it is more likely than not that the
fair value of any of our reporting units would be less than its carrying amount.
Intangible assets consist of Certificates of Need,
licenses, acquired names, non-compete agreements and
reacquired franchise rights. We amortize non-compete agreements, acquired names that we do not intend to use
in the future and reacquired franchise rights on a straight-line basis over their estimated useful lives, which is
generally three years for non-compete agreements and up to five years for reacquired franchise rights and
acquired names. During step one of our annual goodwill impairment test, we determined that the fair value of
certain intangible assets was less than the carrying value and as a result recognized a non-cash other intangibles
impairment charge of $4.6 million during the fourth quarter of 2013. These impairments did not have any impact
on our compliance with our debt covenants or on our cash flows.
Income Taxes
We use the asset and liability approach for measuring deferred tax assets and liabilities based on temporary
differences existing at each balance sheet date using currently enacted tax rates. Our deferred tax calculation
requires us to make certain estimates about future operations. Deferred tax assets are reduced by a valuation
allowance when we believe it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The effect of a change in tax rate is recognized as income or expense in the period that includes the
enactment date.
55
Management regularly assesses the ability to realize deferred tax assets recorded in the Company’s entities based
upon the weight of available evidence, including such factors as the recent earnings history and expected future
taxable income. During 2012, we released a valuation allowance on specific deferred tax assets as a result of the
implementation of a tax planning strategy. In the event future taxable income is below management’s estimates
or is generated in tax jurisdictions different than projected, we could be required to increase the valuation
allowance for deferred tax assets. This would result in an increase in our effective tax rate.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from fluctuations in interest rates. Our Revolving Credit Facility and Term Loan
carry a floating interest rate which is tied to the Eurodollar rate (i.e. LIBOR) and the Prime Rate and therefore,
our consolidated statements of operations and our consolidated statements of cash flows will be exposed to
changes in interest rates. As of December 31, 2013, the total amount of outstanding debt subject to interest rate
fluctuations was $45.0 million. A 1.0% interest rate change would cause interest expense to change by
approximately $0.5 million annually.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements are listed under Part IV, Item 15, “Exhibits and Financial Statement Schedules” of this
Annual Report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures which are designed to provide reasonable assurance of
achieving their objectives and to ensure that information required to be disclosed in our reports filed under the
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 Annual Report on Form 10-K, as of December 31, 2013, under the
supervision and with the participation of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as
such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.
Based on this evaluation, our principal executive officer and principal financial officer concluded that our
disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2013, the
end of the period covered by this Annual Report.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Under
the supervision and with the participation of our management, including our principal executive officer and our
principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in
Internal Control – Integrated Framework, our management concluded our internal control over financial
reporting was effective as of December 31, 2013.
56
Our internal control system is designed to provide reasonable assurance to our management and Board of
Directors regarding the preparation and fair presentation of published financial statements. All internal control
systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
KPMG LLP, the independent registered public accounting firm that audited our consolidated financial statements
included in this Form 10-K, has issued a report on our internal control over financial reporting, which is included
herein.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f)) that have occurred during the quarter ended December 31, 2013, that have materially impacted, or are
reasonably likely to materially impact, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that
our disclosure controls or our internal controls over financial reporting will prevent or detect all errors and all
fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that the control system’s objectives will be met. The design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further,
because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud,
if any, have been detected. These inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is based in part on certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls’ effectiveness to future periods are subject
to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies and procedures. Our disclosure controls and procedures are designed to
provide reasonable assurance of achieving their objectives and, based on an evaluation of our controls and
procedures, our principal executive officer and our principal financial officer concluded our disclosure controls
and procedures were effective at a reasonable assurance level as of December 2013, the end of the period covered
by this Annual Report.
57
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Amedisys, Inc.:
We have audited Amedisys, Inc.’s internal control over financial reporting as of December 31, 2013, based on
criteria established in Internal Control – Integrated Framework (1992), issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Amedisys, Inc.’s management
is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal
Control over Financial Reporting under Item 9A. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
limitations,
In our opinion, Amedisys, Inc. maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework
(1992), issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Amedisys, Inc. and subsidiaries as of December 31, 2013 and
2012, and the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2013, and our report dated
March 12, 2014 expressed an unqualified opinion on those consolidated financial statements.
/s/ KPMG LLP
Baton Rouge, Louisiana
March 12, 2014
58
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to the 2014 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2013.
Code of Conduct and Ethics
We have adopted a code of ethics that applies to all of our directors, officers and employees, including our
principal executive officer, principal financial officer and principal accounting officer. This code of ethics, which
is entitled Code of Ethical Business Conduct, is posted at our internet website, http://www.amedisys.com. Any
amendments to, or waivers of the code of ethics will be disclosed on our website promptly following the date of
such amendment or waiver.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the 2014 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2013.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the 2014 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2013.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this item is incorporated by reference to the 2014 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2013.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to the 2014 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2013.
59
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
1. Financial Statements
Report of independent registered public accounting firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated balance sheets at December 31, 2013 and 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
For each of the years in the three-year period ended December 31, 2013:
Consolidated statements of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated statements of comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated statements of stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated statements of cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
2. Financial Statement Schedules
There are no financial statement schedules included in this report as they are either not applicable
or included in the financial statements.
3. Exhibits
The Exhibits are listed in the Index of Exhibits Required by Item 601 of Regulation S-K included
herewith, which is incorporated by reference.
60
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.
SIGNATURES
AMEDISYS, INC.
By:
/S/ RONALD A. LABORDE
Ronald A. LaBorde,
President, Interim Chief Executive Officer
And Member of the Board
Date: March 12, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the date indicated:
Signature
Title
Date
/S/ RONALD A. LABORDE
Ronald A. LaBorde
/S/ SCOTT G. GINN
Scott G. Ginn
/S/ LINDA J. HALL
Linda J. Hall
/S/
JAKE L. NETTERVILLE
Jake L. Netterville
President, Interim Chief Executive
Officer and Member of the Board
(Principal Executive Officer and
Principal Financial Officer)
Senior Vice President of Accounting
and Controller (Principal Accounting
Officer)
Director
Director
March 12, 2014
March 12, 2014
March 12, 2014
March 12, 2014
/S/ DAVID R. PITTS
David R. Pitts
Non-Executive Co-Chairman of the
Board
March 12, 2014
/S/ PETER F. RICCHIUTI
Peter F. Ricchiuti
Director
March 12, 2014
/S/ DONALD A. WASHBURN
Donald A. Washburn
Non-Executive Co-Chairman of the
Board
March 12, 2014
61
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Amedisys, Inc.:
We have audited the accompanying consolidated balance sheets of Amedisys, Inc. and subsidiaries as of
December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive (loss)
income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31,
2013. These consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Amedisys, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2013, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Amedisys Inc.’s internal control over financial reporting as of December 31, 2013, based on
criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated March 12, 2014, expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
/s/ KPMG LLP
Baton Rouge, Louisiana
March 12, 2014
F-1
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patient accounts receivable, net of allowance for doubtful accounts of $14,231, and
$20,994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net of accumulated depreciation of $129,891 and $113,154 . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net of accumulated amortization of $25,133 and $23,457 . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of December 31,
2013
2012
$ 17,303
$ 14,545
111,133
10,669
55,329
10,785
60
205,279
159,025
208,915
36,690
90,214
26,283
169,172
10,631
—
11,440
—
205,788
156,709
209,594
47,050
92,804
18,650
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$726,406
$730,595
Current liabilities:
LIABILITIES AND EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued charge related to U.S. Department of Justice settlement
. . . . . . . . . . . . . . . .
Payroll and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term obligations, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 20,139
150,000
70,801
57,572
13,904
—
312,416
33,000
8,511
$ 29,175
—
79,341
54,855
35,807
5,609
204,787
66,904
4,671
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
353,927
276,362
Commitments and Contingencies – Note 10
Equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued or
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common Stock, $0.001 par value, 60,000,000 shares authorized; 33,413,970, and
31,876,508 shares issued; and 32,538,971 and 31,086,619 shares outstanding . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
Treasury Stock at cost 874,999, and 789,889 shares of common stock . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Amedisys, Inc. stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
467,890
(18,176)
15
(77,561)
372,201
278
32
450,792
(17,116)
15
18,617
452,340
1,893
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
372,479
454,233
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$726,406
$730,595
The accompanying notes are an integral part of these consolidated financial statements.
F-2
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service, excluding depreciation and amortization . . . . . . . . . . . .
General and administrative expenses:
Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Department of Justice settlement
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles impairment charge . . . . . . . . . . . . . . . . .
For the Years Ended December 31,
2013
2012
2011
$1,249,344
717,996
$1,440,836
810,704
$1,418,464
750,439
302,564
6,519
164,991
15,882
36,871
150,000
9,492
327,111
7,217
182,345
21,011
39,200
—
162,103
319,634
8,292
178,880
12,646
37,808
—
579,955
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,404,315
1,549,691
1,887,654
(154,971)
(108,855)
(469,190)
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from equity investments . . . . . . . . . . . . . . . . . . .
Miscellaneous, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense), net . . . . . . . . . . . . . . . . . . . . . . .
54
(4,412)
1,520
4,334
1,496
65
(12,116)
1,695
3,934
(6,422)
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(153,475)
58,773
(115,277)
20,020
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss (income) attributable to noncontrolling interests . . . . . . . . . . . .
(94,702)
(3,073)
(97,775)
1,597
(95,257)
(3,326)
(98,583)
14,995
231
(8,788)
1,494
(794)
(7,857)
(477,047)
102,739
(374,308)
(8,034)
(382,342)
(122)
Net loss attributable to Amedisys, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (96,178) $ (83,588) $ (382,464)
Basic and diluted earnings per common share:
Loss from continuing operations attributable to Amedisys, Inc.
common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss attributable to Amedisys, Inc. common stockholders . . . . . . . .
$
$
(2.98) $
(0.10)
(2.68) $
(0.11)
(13.05)
(0.28)
(3.08) $
(2.79) $
(13.33)
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . .
31,247
29,896
28,693
Amounts attributable to Amedisys, Inc. common stockholders:
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (93,105) $ (80,262) $ (374,430)
(8,034)
(3,073)
(3,326)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (96,178) $ (83,588) $ (382,464)
The accompanying notes are an integral part of these consolidated financial statements.
F-3
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Amounts in thousands)
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss)
For the Years Ended December 31,
2013
2012
2011
$(97,775) $(98,583) $(382,342)
Unrealized gain (loss) on deferred compensation plan assets . . . . . . . . . .
—
2
(12)
Comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive loss (income) attributable to non-controlling interests . . . . . .
(97,775)
1,597
(98,581)
14,995
(382,354)
(122)
Comprehensive loss attributable to Amedisys, Inc. . . . . . . . . . . . . . . . . . . . . . .
$(96,178) $(83,586) $(382,476)
The accompanying notes are an integral part of these consolidated financial statements.
F-4
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except common stock shares)
Common Stock
Total
Shares Amount
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Other
Comprehensive
Loss (Income)
Retained
Earnings
Noncontrolling
Interests
Balance, December 31, 2010 . . . . . . . . $ 879,715 29,232,807
Issuance of stock – employee stock
$ 29
$407,156 $(14,022)
$ 25
$ 484,669
$ 1,858
compensation plan assets . . . . . . . . .
(12)
520,148 30,328,549
30
432,390
(15,770)
purchase plan . . . . . . . . . . . . . . . . . .
Issuance of stock – 401(k) plan . . . . . .
Exercise of stock options . . . . . . . . . . .
Issuance of non-vested stock . . . . . . . .
Non-cash compensation . . . . . . . . . . . .
Tax deficit from stock options
cancelled or exercised, restricted
stock vesting and employee stock
purchase plan . . . . . . . . . . . . . . . . . .
Surrendered shares . . . . . . . . . . . . . . . .
Noncontrolling interest distribution . . .
Net income (loss) . . . . . . . . . . . . . . . . .
Unrealized (loss) on deferred
Balance, December 31, 2011 . . . . . . . .
Issuance of stock – employee stock
purchase plan . . . . . . . . . . . . . . . . . .
Issuance of stock – 401(k) plan . . . . . .
Exercise of stock options . . . . . . . . . . .
Issuance of non-vested stock . . . . . . . .
Non-cash compensation . . . . . . . . . . . .
Tax deficit from stock options
cancelled or exercised, restricted
stock vesting and employee stock
purchase plan . . . . . . . . . . . . . . . . . .
Surrendered shares . . . . . . . . . . . . . . . .
Acquired noncontrolling interests . . . . .
Noncontrolling interest distribution . . .
Assets contributed to equity
investment . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on deferred
compensation plan assets . . . . . . . . .
Balance, December 31, 2012 . . . . . . . .
Issuance of stock – employee stock
purchase plan . . . . . . . . . . . . . . . . . .
Issuance of stock – 401(k) plan . . . . . .
Exercise of stock options . . . . . . . . . . .
Issuance of non-vested stock . . . . . . . .
Non-cash compensation . . . . . . . . . . . .
Tax deficit from stock options
cancelled or exercised, restricted
stock vesting and employee stock
purchase plan . . . . . . . . . . . . . . . . . .
Surrendered shares . . . . . . . . . . . . . . . .
Acquired noncontrolling interests . . . . .
Noncontrolling interest distribution . . .
Assets contributed to equity
investment . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
5,149
12,002
245
—
8,292
242,789 —
1
475,715
7,336 —
369,902 —
—
—
5,149
12,001
245
—
8,292
—
—
—
—
—
(453)
(1,748)
(700)
(382,342)
3,913
9,324
156
—
7,217
(3,045)
(1,346)
15,931
(323)
839
(98,583)
2
—
—
—
—
—
—
—
—
—
—
(453)
—
—
—
—
(1,748)
—
—
—
—
360,114 —
729,915
1
22,119 —
1
435,811
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,913
9,323
156
(1)
7,217
—
—
—
—
—
(3,045)
—
—
—
—
(1,346)
—
—
839
—
—
—
—
—
454,233 31,876,508
32
450,792
(17,116)
3,181
8,581
261
—
6,519
303,989 —
1
702,391
37,558 —
493,524 —
—
—
3,181
8,580
261
—
6,519
—
—
—
—
—
(2,152)
(1,060)
145
(163)
709
(97,775)
—
—
—
—
—
—
—
—
—
—
—
—
(2,152)
—
—
—
—
(1,060)
—
—
709
—
—
—
—
—
—
—
—
—
—
—
—
(12)
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(382,464)
—
102,205
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(700)
122
—
1,280
—
—
—
—
—
—
—
15,931
(323)
—
(83,588)
—
(14,995)
2
15
—
18,617
—
1,893
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
145
(163)
—
(96,178)
—
(1,597)
Balance, December 31, 2013 . . . . . . . . $ 372,479 33,413,970
$ 33
$467,890 $(18,176)
$ 15
$ (77,561)
$
278
The accompanying notes are an integral part of these consolidated financial statements.
F-5
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
For the Years Ended December 31,
2013
2012
2011
$ (97,775)
$ (98,583)
$(382,342)
Cash Flows from Operating Activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash provided by operating activities:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Department of Justice settlement
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401(k) employer match . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of care centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write off of deferred debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles impairment charge . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of impact of acquisitions:
Patient accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
150,000
37,383
16,461
6,519
7,998
2,742
(1,752)
(57,095)
121
(1,520)
699
1,650
9,492
41,578
(501)
(1,596)
(9,876)
(6,104)
3,839
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102,263
Cash Flows from Investing Activities:
Proceeds from sale of deferred compensation plan assets . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from the sale of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of deferred compensation plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposition of care centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flows from Financing Activities:
Proceeds from issuance of stock upon exercise of stock options and warrants . . . . . . .
Proceeds from issuance of stock to employee stock purchase plan . . . . . . . . . . . . . . . .
Tax benefit from stock option exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interest distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of deferred financing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
128
1,809
(111)
(41,736)
(10,067)
(1,627)
5,146
(46,458)
261
3,181
57
(163)
25,500
(25,500)
—
(576)
(55,807)
(53,047)
2,758
14,545
—
40,059
21,728
7,217
10,013
1,471
—
(31,161)
573
(1,695)
1,442
1,575
162,103
(42,840)
10,622
(927)
8,072
(19,994)
(181)
69,494
312
631
(175)
(48,262)
—
(12,499)
—
(59,993)
156
3,913
—
(323)
—
—
60,000
(2,265)
(104,441)
(42,960)
(33,459)
48,004
—
39,559
13,708
8,292
7,550
2,440
—
(122,402)
—
(1,494)
1,576
1,638
579,955
(6,526)
(2,033)
(258)
(1,521)
5,049
(1,981)
141,210
985
—
(545)
(44,415)
(4,500)
(132,235)
—
(180,710)
245
5,149
—
(700)
—
—
—
—
(37,485)
(32,791)
(72,291)
120,295
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 17,303
$ 14,545
$ 48,004
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes, net of refunds received . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental Disclosures of Non-Cash Financing and Investing Activities:
Notes payable issued for/assumed in acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
3,990
3,385
$ —
Notes payable issued for software licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$
$
$
$
7,779
2,945
—
2,214
Acquired non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
145
$ 15,931
$
7,340
$ 11,655
$
$
$
1,058
—
—
The accompanying notes are an integral part of these consolidated financial statements.
F-6
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2013
1. NATURE OF OPERATIONS, CONSOLIDATION AND PRESENTATION OF FINANCIAL
STATEMENTS
Amedisys, Inc., a Delaware corporation, and its consolidated subsidiaries (“Amedisys,” “we,” “us,” or “our”) are
a multi-state provider of home health and hospice services with approximately 84%, 82% and 85% of our
revenue derived from Medicare for 2013, 2012 and 2011, respectively. As of December 31, 2013, we owned and
operated 367 Medicare-certified home health care centers,
including three care centers held for sale, 92
Medicare-certified hospice care centers and one hospice inpatient unit in 37 states within the United States, the
District of Columbia and Puerto Rico.
Use of Estimates
Our accounting and reporting policies conform with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”). In preparing the consolidated financial statements, we are required to make estimates and assumptions
that impact the amounts reported in the consolidated financial statements and accompanying notes. Actual results
could materially differ from those estimates.
Reclassifications and Comparability
Certain reclassifications have been made to prior periods’ financial statements in order to conform to the current
period’s presentation. During 2013, 2012 and 2011, we closed ten, three, and 29 care centers, respectively. In
addition during 2013, we have consolidated 46 care centers with care centers servicing the same markets, sold
assets associated with 20 care centers and classified three care centers as held for sale, which may affect the
comparability of our operating results. In accordance with applicable accounting guidance, the results of
operations for the care centers closed, sold or classified as held for sale are presented in discontinued operations
in our consolidated financial statements. See Note 4 – Discontinued Operations and Assets Held for Sale for
additional information regarding our discontinued operations.
Principles of Consolidation
These consolidated financial statements include the accounts of Amedisys, Inc., and our wholly owned
subsidiaries. All significant intercompany accounts and transactions have been eliminated in our accompanying
consolidated financial statements, and business combinations accounted for as purchases have been included in
our consolidated financial statements from their respective dates of acquisition. In addition to our wholly owned
subsidiaries, we also have certain equity investments that are accounted for as set forth below.
Equity Investments
We consolidate investments when the entity is a variable interest entity and we are the primary beneficiary or if
we have controlling interests in the entity, which is generally ownership in excess of 50%. During 2013, we
recorded a $1.3 million goodwill impairment charge related to an investment we currently consolidate. Third
party equity interests in our consolidated joint ventures are reflected as noncontrolling interests in our
consolidated financial statements.
During 2013, we sold a 30% interest in three of our care centers while maintaining a controlling interest in the
newly formed joint venture. We are accounting for this investment as a consolidated joint venture. The total cash
consideration was $1.6 million resulting in a gain of $1.4 million.
We account for investments in entities in which we have the ability to exercise significant influence under the
equity method if we hold 50% or less of the voting stock and the entity is not a variable interest entity in which
F-7
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
we are the primary beneficiary. The book value of investments that we accounted for under the equity method of
accounting was $11.9 million as of December 31, 2013 and $8.9 million as of December 31, 2012. We account
for investments in entities in which we have less than a 20% ownership interest under the cost method of
accounting if we do not have the ability to exercise significant influence over the investee. The aggregate
carrying amount of our cost method investment, which was acquired during the three-month period ended
March 31, 2013, was $5.0 million as of December 31, 2013.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
We earn net service revenue through our home health and hospice care centers by providing a variety of services
almost exclusively in the homes of our patients. This net service revenue is earned and billed either on an episode
of care basis, on a per visit basis or on a daily basis depending upon the payment terms and conditions
established with each payor for services provided. We refer to home health revenue earned and billed on a 60-day
episode of care as episodic-based revenue.
When we record our service revenue, we record it net of estimated revenue adjustments and contractual
adjustments to reflect amounts we estimate to be realizable for services provided, as discussed below. We
believe, based on information currently available to us and based on our judgment, that changes to one or more
factors that impact the accounting estimates (such as our estimates related to revenue adjustments, contractual
adjustments and episodes in progress) we make in determining net service revenue, which changes are likely to
occur from period to period, will not materially impact our reported consolidated financial condition, results of
operations, cash flows or our future financial results.
Home Health Revenue Recognition
Medicare Revenue
Net service revenue is recorded under the Medicare prospective payment system (“PPS”) based on a 60-day
episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) an
outlier payment if our patient’s care was unusually costly (capped at 10% of total reimbursement per provider
number); (b) a low utilization payment adjustment (“LUPA”) if the number of visits was fewer than five; (c) a
partial payment if our patient transferred to another provider or we received a patient from another provider
before completing the episode; (d) a payment adjustment based upon the level of therapy services required (with
various incremental adjustments made for additional visits, with larger payment increases associated with the
sixth, fourteenth and twentieth visit thresholds); (e) adjustments to payments if we are unable to perform periodic
therapy assessments; (f) the number of episodes of care provided to a patient, regardless of whether the same
home health provider provided care for the entire series of episodes; (g) changes in the base episode payments
established by the Medicare Program; (h) adjustments to the base episode payments for case mix and geographic
wages; and (i) recoveries of overpayments. In addition, we make adjustments to Medicare revenue if we find that
we are unable to produce appropriate documentation of a face to face encounter between the patient and
physician.
We make adjustments to Medicare revenue on completed episodes to reflect differences between estimated and
actual payment amounts, our discovered inability to obtain appropriate billing documentation or authorizations
and other reasons unrelated to credit risk. We estimate the impact of such adjustments based on our historical
experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record this
estimate during the period in which services are rendered as an estimated revenue adjustment and a
F-8
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
corresponding reduction to patient accounts receivable. In addition, management evaluates the potential for
revenue adjustments and, when appropriate, provides allowances based upon the best available information.
Therefore, we believe that our reported net service revenue and patient accounts receivable will be the net
amounts to be realized from Medicare for services rendered.
In addition to revenue recognized on completed episodes, we also recognize a portion of revenue associated with
episodes in progress. Episodes in progress are 60-day episodes of care that begin during the reporting period, but
were not completed as of the end of the period. We estimate this revenue on a monthly basis based upon
historical trends. The primary factors underlying this estimate are the number of episodes in progress at the end
of the reporting period, expected Medicare revenue per episode and our estimate of the average percentage
complete based on visits performed. As of December 31, 2013 and 2012, the difference between the cash
received from Medicare for a request for anticipated payment (“RAP”) on episodes in progress and the associated
estimated revenue was immaterial and, therefore, the resulting credits were recorded as a reduction to our
outstanding patient accounts receivable in our consolidated balance sheets for such periods.
Non-Medicare Revenue
Episodic-based Revenue. We recognize revenue in a similar manner as we recognize Medicare revenue for
episodic-based rates that are paid by other insurance carriers, including Medicare Advantage programs; however,
these rates can vary based upon the negotiated terms.
Non-episodic Based Revenue. Gross revenue is recorded on an accrual basis based upon the date of service at
amounts equal to our established or estimated per-visit rates, as applicable. Contractual adjustments are recorded
for the difference between our standard rates and the contracted rates to be realized from patients, third parties
and others for services provided and are deducted from gross revenue to determine net service revenue and are
also recorded as a reduction to our outstanding patient accounts receivable. In addition, we receive a minimal
amount of our net service revenue from patients who are either self-insured or are obligated for an insurance co-
payment.
Hospice Revenue Recognition
Hospice Medicare Revenue
Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated
payment rates. The estimated payment rates are daily or hourly rates for each of the four levels of care we
deliver. The four levels of care are routine care, general inpatient care, continuous home care and respite care.
Routine care accounts for 99% of our total net Medicare hospice service revenue for 2013, 2012 and 2011,
respectively. We make adjustments to Medicare revenue for an inability to obtain appropriate billing
documentation or acceptable authorizations and other reasons unrelated to credit risk. We estimate the impact of
these adjustments based on our historical experience, which primarily includes our historical collection rate on
Medicare claims, and record it during the period services are rendered as an estimated revenue adjustment and as
a reduction to our outstanding patient accounts receivable.
Additionally, as Medicare hospice revenue is subject to an inpatient cap limit and an overall payment cap for
each provider number, we monitor these caps and estimate amounts due back to Medicare if a cap has been
exceeded. We record these adjustments as a reduction to revenue and an increase in other accrued liabilities. We
have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2011 as of
December 31, 2013. As of December 31, 2013, we have recorded $4.0 million for estimated amounts due back to
F-9
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Medicare in other accrued liabilities for the Federal cap years ended October 31, 2012 through October 31, 2014.
As of December 31, 2012, we have recorded $4.8 million for estimated amounts due back to Medicare in other
accrued liabilities for the Federal cap years ended October 31, 2010 through October 31, 2013.
Hospice Non-Medicare Revenue
We record gross revenue on an accrual basis based upon the date of service at amounts equal to our established
rates or estimated per day rates, as applicable. Contractual adjustments are recorded for the difference between
our established rates and the amounts estimated to be realizable from patients, third parties and others for
services provided and are deducted from gross revenue to determine our net service revenue and patient accounts
receivable.
Cash and Cash Equivalents
Cash and cash equivalents include certificates of deposit and all highly liquid debt instruments with maturities of
three months or less when purchased.
Patient Accounts Receivable
Our patient accounts receivable are uncollateralized and consist of amounts due from Medicare, Medicaid, other
third-party payors and patients. There is no single payor, other than Medicare, that accounts for more than 10%
of our total outstanding patient receivables, and thus we believe there are no other significant concentrations of
receivables that would subject us to any significant credit risk in the collection of our patient accounts receivable.
We fully reserve for accounts which are aged at 365 days or greater. We write off accounts on a monthly basis
once we have exhausted our collection efforts and deem an account to be uncollectible.
We believe the credit risk associated with our Medicare accounts, which represent 67% and 68% of our net
patient accounts receivable at December 31, 2013 and December 31, 2012, respectively, is limited due to our
historical collection rate of over 99% from Medicare and the fact that Medicare is a U.S. government payor.
Accordingly, we do not record an allowance for doubtful accounts for our Medicare patient accounts receivable,
which are recorded at their net realizable value after recording estimated revenue adjustments as discussed above.
During 2013, 2012 and 2011, we recorded $9.0 million, $9.9 million and $10.9 million, respectively, in estimated
revenue adjustments to Medicare revenue.
We believe there is a certain level of credit risk associated with non-Medicare payors. To provide for our non-
Medicare patient accounts receivable that could become uncollectible in the future, we establish an allowance for
doubtful accounts to reduce the carrying amount to its estimated net realizable value.
Medicare Home Health
For our home health patients, our pre-billing process includes verifying that we are eligible for payment from
Medicare for the services that we provide to our patients. Our Medicare billing begins with a process to ensure
that our billings are accurate through the utilization of an electronic Medicare claim review. We submit a RAP
for 60% of our estimated payment for the initial episode at the start of care or 50% of the estimated payment for
any subsequent episodes of care contiguous with the first episode for a particular patient. The full amount of the
episode is billed after the episode has been completed (“final billed”). The RAP received for that particular
episode is then deducted from our final payment. If a final bill is not submitted within the greater of 120 days
from the start of the episode, or 60 days from the date the RAP was paid, any RAPs received for that episode will
be recouped by Medicare from any other claims in process for that particular provider number. The RAP and
final claim must then be re-submitted.
F-10
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Medicare Hospice
For our hospice patients, our pre-billing process includes verifying that we are eligible for payment from
Medicare for the services that we provide to our patients. Our Medicare billing begins with a process to ensure
that our billings are accurate through the utilization of an electronic Medicare claim review. Once each patient
has been confirmed for eligibility, we will bill Medicare on a monthly basis for the services provided to the
patient.
Non-Medicare Home Health and Hospice
For our non-Medicare patients, our pre-billing process primarily begins with verifying a patient’s eligibility for
services with the applicable payor. Once the patient has been confirmed for eligibility, we will provide services
to the patient and bill the applicable payor. Our review and evaluation of non-Medicare accounts receivable
includes a detailed review of outstanding balances and special consideration to concentrations of receivables
from particular payors or groups of payors with similar characteristics that would subject us to any significant
credit risk. We estimate an allowance for doubtful accounts based upon our assessment of historical and expected
net collections, business and economic conditions, trends in payment and an evaluation of collectibility based
upon the date that the service was provided. Based upon our best judgment, we believe the allowance for
doubtful accounts adequately provides for accounts that will not be collected due to credit risk.
Property and Equipment
Property and equipment is stated at cost and we depreciate it on a straight-line basis over the estimated useful
lives of the assets. Additionally, we have internally developed computer software for our own use; such software
development costs are capitalized. We currently have $71.0 million of internally developed software costs related
to the development of AMS3 which will be amortized over a period of 15 years once placed in service. Additions
and improvements (including interest costs for construction of qualifying long-lived assets) are capitalized.
Maintenance and repair expenses are charged to expense as incurred. The cost of property and equipment sold or
disposed of and the related accumulated depreciation are eliminated from the property and related accumulated
depreciation accounts, and any gain or loss is credited or charged to other income (expense).
We consider our reporting units to represent asset groups for purposes of testing long-lived assets for
impairment. We assess the impairment of a long-lived asset group whenever events or changes in circumstances
indicate that the asset’s carrying value may not be recoverable. Factors we consider important that could trigger
an impairment review include but are not limited to the following:
• A significant change in the extent or manner in which the long-lived asset group is being used.
• A significant change in the business climate that could affect the value of the long-lived asset group.
• A significant change in the market value of the assets included in the asset group.
If we determine that the carrying value of long-lived assets may not be recoverable, we compare the carrying
value of the asset group to the undiscounted cash flows expected to be generated by the asset group. If the
carrying value exceeds the undiscounted cash flows, an impairment charge is indicated. An impairment charge is
recognized to the extent that the carrying value of the asset group exceeds its fair value.
F-11
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
We generally provide for depreciation over the following estimated useful service lives.
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . .
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
Lesser of life or lease or expected useful life
3 to 7
5
3 to 7
Years
The following table summarizes the balances related to our property and equipment for 2013 and 2012 (amounts
in millions):
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3.2
25.9
106.6
153.3
$
3.2
25.6
127.8
113.3
As of December 31,
2013
2012
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
289.0
(130.0)
269.9
(113.2)
$ 159.0
$ 156.7
Depreciation expense for 2013, 2012 and 2011 was $35.2 million, $36.3 million and $33.6 million, respectively.
Goodwill and Other Intangible Assets
Goodwill represents the amount of the purchase price in excess of the fair values assigned to the underlying
identifiable net assets of acquired businesses. Goodwill is not amortized, but is subject to an annual impairment
test. Tests are performed more frequently if events occur or circumstances change that would more likely than
not reduce the fair value of the reporting unit below its carrying amount. These events or circumstances include
but are not limited to, a significant adverse change in the business environment; regulatory environment or legal
factors; or a substantial decline in market capitalization of our stock. To determine whether goodwill is impaired,
we perform a two-step impairment test. In the first step of the test, the fair values of the reporting units are
compared to their aggregate carrying values, including goodwill. If the fair value of the reporting unit is greater
than its carrying amount, goodwill is not considered impaired and no further testing is required. If the fair value
of the reporting unit is less than its carrying amount, we would proceed to step two of the test. In step two of the
test, the implied fair value of the goodwill of the reporting unit is determined by a hypothetical allocation of the
fair value calculated in step one to all of the assets and liabilities of that reporting unit (including any recognized
and unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the
fair value was reflective of the price paid to acquire the reporting unit. The implied fair value of goodwill is the
excess, if any, of the calculated fair value after hypothetical allocation to the reporting unit’s assets and
liabilities. If the implied fair value of the goodwill is greater than the carrying amount of the goodwill at the
analysis date, goodwill is not impaired and the analysis is complete. If the implied fair value of the goodwill is
less than the carrying value of goodwill at the analysis date, goodwill is deemed impaired by the amount of that
variance.
We calculate the estimated fair value of our reporting units using discounted cash flows as well as a market
approach that compares our reporting units’ earnings and revenue multiples to those of comparable public
companies. To determine fair value we must make assumptions about a wide variety of internal and external
F-12
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
factors. Significant assumptions used in the impairment analysis include financial projections of free cash flow
(including significant assumptions about operations, in particular expected organic growth rates, future Medicare
reimbursement rates, capital requirements and income taxes), long-term growth rates for determining terminal
value, and discount rates. Our estimates of discounted cash flows may differ from actual cash flows due to,
among other things, economic conditions, changes to our business model or changes in operating performance.
These factors increase the risk of differences between projected and actual performance that could impact future
estimates of fair value of all reporting units. Significant differences between these estimates and actual cash
flows could result in additional impairment in future periods.
Each of our operating segments described in Note 14 – Segment Information is considered to represent an
individual reporting unit for goodwill impairment testing purposes. We consider each of our home health care
centers to constitute an individual business for which discrete financial information is available. However, since
these care centers have substantially similar operating and economic characteristics and resource allocation and
significant investment decisions concerning these businesses are centralized and the benefits broadly distributed,
we have aggregated these care centers and deemed them to constitute a single reporting unit. We have applied
this same aggregation principle to our hospice care centers and have also deemed them to be a single reporting
unit.
During 2013, we did not record any goodwill impairment charges as a result of our annual impairment test and
none of the goodwill associated with our various reporting units was considered at risk of impairment as of
October 31, 2013. Since the date of our last annual goodwill impairment test, there have been no material
developments, events, changes in operating performance or other circumstances that would cause management to
believe it is more likely than not that the fair value of any of our reporting units would be less than its carrying
amount.
Intangible assets consist of Certificates of Need,
licenses, acquired names, non-compete agreements and
reacquired franchise rights. We amortize non-compete agreements, acquired names that we do not intend to use
in the future and reacquired franchise rights on a straight-line basis over their estimated useful lives, which is
generally three years for non-compete agreements and up to five years for reacquired franchise rights and
acquired names. During step one of our annual goodwill impairment test, we determined that the fair value of
certain intangible assets was less than the carrying value and as a result recognized a non-cash other intangibles
impairment charge of $4.6 million during the fourth quarter of 2013. These impairments did not have any impact
on our compliance with our debt covenants or on our cash flows.
Debt Issuance Costs
We amortize deferred debt issuance costs related to our long-term obligations over its term through interest
expense, unless the debt is extinguished, in which case unamortized balances are immediately expensed. We
amortized $0.7 million, $1.4 million and $1.6 million in deferred debt issuance costs in 2013, 2012 and 2011,
respectively. As of December 31, 2013 and 2012, we had unamortized debt issuance costs of $2.2 million and
$2.5 million, respectively, recorded as other assets in our accompanying consolidated balance sheets. During the
fourth quarter of 2013, we expensed $0.1 million of unamortized debt issuance costs as we paid the outstanding
principal amount associated with our existing senior notes. In addition,
in connection with the Second
Amendment to our Credit Agreement, we recorded $0.5 million in deferred debt issuance costs as other assets in
our consolidated balance sheet. The unamortized debt issuance costs of $2.2 million at December 31, 2013, will
be amortized over a weighted-average amortization period of 3.8 years.
F-13
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Fair Value of Financial Instruments
The following details our financial instruments where the carrying value and the fair value differ (amounts in
millions):
Financial Instrument
Fair Value at Reporting Date Using
As of
December 31,
2013
Quoted Prices in
Active Markets for
Identical Items
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs (Level 3)
Long-term obligations . . . . . . . . . . . . . . . . . . . . . . .
$46.9
$—
$45.8
$—
The estimates of the fair value of our long-term debt are based upon a discounted present value analysis of future
cash flows. Due to the existing uncertainty in the capital and credit markets the actual rates that would be
obtained to borrow under similar conditions could materially differ from the estimates we have used.
The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and
the last unobservable, that may be used to measure fair value. The three levels of inputs are as follows:
• Level 1 – Quoted prices in active markets for identical assets and liabilities.
• Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the
assets or liabilities.
• Level 3 – Unobservable inputs that are supported by little or no market activity and are significant to
the fair value of the assets or liabilities.
For our other financial instruments, including our cash and cash equivalents, patient accounts receivable,
accounts payable and accrued expenses, we estimate the carrying amounts’ approximate fair value. Our deferred
compensation plan assets are recorded at fair value.
Income Taxes
We use the asset and liability approach for measuring deferred tax assets and liabilities based on temporary
differences existing at each balance sheet date using currently enacted tax rates. Our deferred tax calculation
requires us to make certain estimates about future operations. Deferred tax assets are reduced by a valuation
allowance when we believe it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The effect of a change in tax rate is recognized as income or expense in the period that includes the
enactment date. As of December 31, 2013 and 2012 our deferred tax assets were $145.5 million and $92.8
million, respectively. As of December 31, 2012 our deferred tax liabilities were $5.6 million.
Management regularly assesses the ability to realize deferred tax assets recorded in the Company’s entities based
upon the weight of available evidence, including such factors as the recent earnings history and expected future
taxable income. During 2012, we released a valuation allowance on specific deferred tax assets as a result of the
expiration of state net operating loss carry forwards. In the event future taxable income is below management’s
estimates or is generated in tax jurisdictions different than projected, we could be required to increase the
valuation allowance for deferred tax assets. This would result in an increase in our effective tax rate.
F-14
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Share-Based Compensation
We record all share-based compensation as expense in the financial statements measured at the fair value of the
award. We recognize compensation cost on a straight-line basis over the requisite service period for each
separately vesting portion of the award. We reflect the excess tax benefits related to stock option exercises as
financing cash flows. Share-based compensation expense for 2013, 2012 and 2011 was $6.5 million, $7.2 million
and $8.3 million, respectively, and the total income tax benefit recognized for these expenses was $2.5 million,
$1.3 million and $1.8 million, respectively.
Weighted-Average Shares Outstanding
Net loss per share attributable to Amedisys, Inc. common stockholders, calculated on the treasury stock method,
is based on the weighted average number of shares outstanding during the period. The following table sets forth,
for the periods indicated, shares used in our computation of the weighted-average shares outstanding, which are
used to calculate our basic and diluted net loss attributable to Amedisys, Inc. common stockholders (amounts in
thousands):
Weighted average number of shares outstanding – basic . . . . . . . . . . .
Effect of dilutive securities:
For the Years Ended December 31,
2013
2012
2011
31,247
29,896
28,693
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested stock and stock units . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
Weighted average number of shares outstanding – diluted . . . . . . . . .
31,247
29,896
28,693
Anti-dilutive securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
688
638
643
Advertising Costs
We expense advertising costs as incurred. Advertising expense for 2013, 2012 and 2011 was $3.9 million, $4.4
million and $4.5 million, respectively.
Recently Issued Accounting Pronouncements
In July 2013, the FASB issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740):
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a
Tax Credit Carryforward Exists requiring an entity to present an unrecognized tax benefit as a reduction of a
deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss or tax credit carryforward,
rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under
the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose.
The ASU does not require new recurring disclosures. It is effective prospectively for fiscal years, and interim
periods, within those years, beginning after December 15, 2013, with early adoption and retrospective application
permitted. We do not expect the adoption of this ASU to have a material impact on our consolidated financial
statements.
3. ACQUISITIONS
We complete acquisitions from time to time in order to pursue our strategy of increasing our market presence by
expanding our service base and enhancing our position in certain geographic areas as a leading provider of home
health and hospice services. The purchase price paid for acquisitions is negotiated through arm’s length
F-15
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
transactions, with consideration based on our analysis of, among other things, comparable acquisitions and
expected cash flows for each transaction. Acquisitions are accounted for as purchases and are included in our
consolidated financial statements from their respective acquisition dates. Goodwill generated from acquisitions is
recognized for the excess of the purchase price over tangible and identifiable intangible assets because of the
expected contributions of the acquisitions to our overall corporate strategy.
2013 Acquisitions
On February 11, 2013, we acquired a 66.7% interest in a joint venture with a medical center in Alabama for a
total purchase price of $0.3 million (subject to certain adjustments). The purchase price was paid with cash on
hand on the date of the transaction. In connection with the acquisition, we recorded goodwill ($0.1 million) and
other intangibles ($0.2 million).
On March 7, 2013, we acquired one hospice care center in North Carolina for a total purchase price of $0.3
million. The purchase price was paid with cash on hand on the date of the transaction. In connection with the
acquisition, we recorded goodwill ($0.1 million) and other intangibles ($0.2 million).
On November 4, 2013, we acquired an 80% interest in a hospice joint venture with a hospital in West Virginia
for a total purchase price of $1.0 million. The purchase price was paid with cash on hand on the date of the
transaction. In connection with the acquisition, we recorded goodwill ($0.8 million) and other intangibles ($0.2
million).
2012 Acquisitions
On May 1, 2012, we acquired one home health care center and four hospice care centers in Louisiana for a total
purchase price of $6.4 million (subject to certain adjustments). The purchase price was paid with cash on hand on
the date of the transaction. In connection with the acquisition, we recorded goodwill ($6.0 million), other
intangibles ($0.5 million) and other assets and liabilities, net ($0.1 million).
On June 1, 2012, we acquired an in-home physicians practice in Florida for a total purchase price of $2.0 million
(subject to certain adjustments). The purchase price was paid with cash on hand on the date of the transaction. In
connection with the acquisition, we recorded goodwill ($1.9 million) and other intangibles ($0.1 million).
On August 6, 2012, we acquired five hospice care centers in North Carolina for a total purchase price of $5.8
to certain adjustments), of which $3.8 million was included in accrued liabilities as of
million (subject
September 30, 2012. As of December 31, 2012, the $3.8 million had been released from accrued liabilities and
paid to the seller. The purchase price was paid with cash on hand on the date of the transaction. In connection
with the acquisition, we recorded goodwill ($5.5 million) and other intangibles ($0.3 million).
As of September 30, 2012, we consolidated an investment previously accounted for under the equity method of
accounting as we obtained control during the third quarter. The consolidation required the previously-held
interest in the investment to be remeasured at fair market value which was based on our preliminary valuation as
of September 30, 2012. As part of the consolidation, we recorded cash ($1.6 million), goodwill ($18.7 million),
other intangibles ($3.1 million), other assets and liabilities, net ($7.5 million) and non-controlling interest ($15.9
million).
4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
As part of our ongoing management of our portfolio of care centers, we review each care center’s current
financial performance, market penetration, forecasted market growth and the impact of proposed CMS payment
F-16
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
revisions. As a result of our review, we consolidated 41 home health care centers and five hospice care centers
with care centers servicing the same markets, sold 19 home health care centers and one hospice care center and
closed 10 home health care centers during 2013. We had previously classified 28 of these care centers as held for
sale during 2013 and we have three care centers remaining classified as held for sale at December 31, 2013.
During 2012, we closed three home health care centers and consolidated five home health care centers and four
hospice care centers with care centers servicing the same markets.
During 2011, we consolidated 27 home health care centers and five hospice care centers with care centers
servicing the same markets, closed 27 home health care centers and two hospice care centers and discontinued
the start-up process associated with two prospective unopened home health care centers.
As we are exiting certain geographical areas and in accordance with applicable accounting guidance, the care
centers which were closed, sold or classified as held for sale in 2013 (32 home health care centers and one
hospice care center), closed in 2012 (three home health care centers) and closed in 2011 (27 home health care
centers and two hospice care centers) are presented as discontinued operations in our consolidated financial
statements. The care centers consolidated with care centers servicing the same markets are presented in
continuing operations as we expect continuing cash flows from these markets. For additional information on the
care centers consolidated with care centers servicing the same markets and the care centers sold see Note 12 –
Exit Activities.
Net revenues and operating results for the periods presented for those care centers classified as discontinued
operations are as follows (dollars in millions):
Net revenues
(Loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit
Discontinued operations, net of tax . . . . . . . . . . . . . . . . . .
For the Years Ended December 31,
2013
$31.2
(5.3)
2.2
$ (3.1)
2012
$47.2
(5.5)
2.2
$ (3.3)
2011
$ 67.3
(13.2)
5.2
$ (8.0)
5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
During 2013, we did not record any goodwill impairment charges as a result of our annual impairment test and
none of the goodwill associated with our various reporting units were considered at risk of impairment as of
October 31, 2013. Since the date of our last annual goodwill impairment test, there have been no material
developments, events, changes in operating performance or other circumstances that would cause management to
believe it is more likely than not that the fair value of any of our reporting units would be less than its carrying
amount.
During step one of our annual goodwill impairment test, we determined that the fair value of certain intangible
assets was less than the carrying value and as a result recognized a non-cash other intangibles impairment charge
of $4.6 million during the fourth quarter of 2013. In addition, we recorded impairment charges of $3.6 million
related to intangibles associated with those care centers that were closed or consolidated during 2013 as
discussed in Note 12 – Exit Activities. Also during 2013, we recorded a $1.3 million goodwill impairment charge
related to an investment we currently consolidate as discussed in Note 1 – Nature of Operations, Consolidation
and Presentation of Financial Statements. These impairments did not have any impact on our compliance with
our debt covenant or on our cash flows.
F-17
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
During the fiscal year 2012, we recognized the following: a non-cash goodwill impairment charge of $157.9
million, a non-cash other intangibles impairment charge of $4.2 million and a deferred tax benefit of $37.0
million. The goodwill impairment charge primarily resulted from a further decline in our market capitalization
and the other intangibles impairment charge was due to a change in the fair value of various non-amortizable
licenses and trade names. Included in the non-cash goodwill and other intangibles impairment charges discussed
above is $17.4 million and $3.1 million, respectively, related to an equity-method investment we were required to
consolidate during the third quarter of 2012, as a result of a significant decline in the projected operating
forecasts during the fourth quarter of 2012. These impairments did not have any impact on our compliance with
our debt covenants or on our cash flows.
During the fiscal year 2011, we recognized the following: a non-cash goodwill impairment charge of $570.8
million, a non-cash other intangibles impairment charge of $9.1 million and a deferred tax benefit of $141.5
million. The impairments primarily resulted from lower forecasted revenues as a result of reimbursement cuts,
declining growth rates and lower operating margins from our home health reporting unit. These impairments did
not have any impact on our compliance with our debt covenants or on our cash flows.
The following tables summarize the activity related to our goodwill for the 2013, 2012 and 2011 (amounts in
millions):
Balances at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Home Health Hospice
Total
$ 723.3
—
(570.8)
152.5
23.6
(157.9)
18.2
0.1
(0.4)
(1.3)
$ 68.1
114.1
—
$ 791.4
114.1
(570.8)
182.2
9.2
—
191.4
0.9
—
—
334.7
32.8
(157.9)
209.6
1.0
(0.4)
(1.3)
Balances at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 16.6
$192.3
$ 208.9
(1) Write-off of goodwill related to the sale of care centers as discussed in Note 12 – Exit Activities.
F-18
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
The following summarizes the activity related to our other intangible assets, net for 2013, 2012 and 2011
(amounts in millions):
Other Intangible Assets, Net
Certificates of
Need and
Licenses
Acquired
Names of
Business(1)
Non-Compete
Agreements &
Reacquired
Franchise
Rights(2)
Balances at December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$41.7
2.5
(1.1)
(9.1)
—
34.0
3.6
(3.9)
—
33.7
0.6
(1.1)
(7.8)
—
$ 4.7
7.3
—
—
(0.2)
11.8
—
(0.3)
—
11.5
—
—
(0.4)
—
$ 7.0
0.5
—
—
(3.3)
4.2
0.4
—
(2.8)
1.8
—
—
—
(1.6)
Total
$53.4
10.3
(1.1)
(9.1)
(3.5)
50.0
4.0
(4.2)
(2.8)
47.0
0.6
(1.1)
(8.2)
(1.6)
Balances at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
$25.4
$11.1
$ 0.2
$36.7
(1) Acquired Names of Business includes $11.1 million of unamortized acquired names and less than $0.1
million of amortized acquired names which have a weighted-average amortization period of 0.3 years.
(2) The weighted-average amortization period of our non-compete agreements is 0.5 years.
(3) Write-off of intangible assets related to the sale of care centers as discussed in Note 12 – Exit Activities.
We expect to recognize the remainder of our amortization expense related to intangible assets during 2014. The
estimated aggregate amortization expense for 2014 is $0.2 million. See Note 3 – Acquisitions for further details
on additions to goodwill and other intangible assets, net.
F-19
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
6. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts is presented below (amounts in millions):
Other current assets:
Payroll tax escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medicare withholds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets:
Workers’ compensation deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health insurance deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other miscellaneous deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses:
Health insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and other settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charity care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Medicare cap liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term obligations:
Reserve for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation plan liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of December 31,
2013
2012
$ 1.2
0.9
5.7
1.5
1.5
$10.8
$ 0.2
1.2
0.9
2.2
16.9
4.9
$26.3
$12.2
16.5
6.2
1.8
0.6
4.0
16.3
$57.6
$ 3.9
3.4
1.2
$ 8.5
$ 1.3
6.3
—
1.5
2.3
$11.4
$ 0.5
1.2
1.1
2.5
8.9
4.5
$18.7
$ 9.5
16.3
6.9
1.2
0.6
4.8
15.6
$54.9
$ 0.4
3.4
0.9
$ 4.7
F-20
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
7. LONG-TERM OBLIGATIONS
Long-term debt consisted of the following for the periods indicated (amounts in millions):
As of December 31,
2013
2012
Senior Notes:
$35.0 million Series A Notes: semi-annual interest only payments; interest rate at
6.07% per annum; due March 25, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
$ 20.0
$30.0 million Series B Notes: semi-annual interest only payments; interest rate at
6.28% per annum; due March 25, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
20.0
$60.0 million Term Loan; $3.0 million principal payments plus accrued interest payable
quarterly; interest rate at ABR Rate plus applicable percentage or Eurodollar Rate plus
the applicable percentage (3.42% at December 31, 2013); due October 26, 2017 . . . . . . .
Promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45.0
1.9
46.9
(13.9)
57.0
5.7
102.7
(35.8)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 33.0
$ 66.9
Maturities of debt as of December 31, 2013 are as follows (amounts in millions):
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term
obligations
$13.9
12.0
12.0
9.0
—
$46.9
Credit Agreement
On October 26, 2012, we entered into a Credit Agreement that provides for senior unsecured facilities in an
initial aggregate principal amount of up to $225 million (the “Credit Facilities”). The Credit Facilities are
comprised of (a) a term loan facility in an initial aggregate principal amount of $60 million (the “Term Loan”);
and (b) a revolving credit facility in an initial aggregate principal amount of up to $165 million (the “Revolving
Credit Facility”). The Credit Facilities are guaranteed by all of our material wholly-owned subsidiaries. We may
increase the aggregate loan amount under the Credit Facilities by a maximum amount of $100 million subject to
receipt from the lenders, at their sole discretion, of commitments totaling the requested amount and the
satisfaction of other terms and conditions.
The Revolving Credit Facility provides for and includes within its $165 million limit a $15 million swingline
facility and commitments for up to $50 million in letters of credit. The Revolving Credit Facility may be used to
provide ongoing working capital and for other general corporate purposes. The final maturity of the Revolving
Credit Facility is October 26, 2017.
The proceeds of the Term Loan and existing cash were used to pay off our existing term loan under our $250
million Revolving Credit Facility dated March 26, 2008 with a principal balance of $15 million and a portion of
F-21
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
our existing senior notes with a principal balance of $60 million. The final maturity of the Term Loan is
October 26, 2017. The Term Loan amortizes beginning December 31, 2012 in 20 equal quarterly installments of
$3.0 million (subject to adjustment for prepayments), with the remaining balance due upon maturity.
On November 11, 2013, we entered into the second amendment to our Credit Agreement which amends our
existing Credit Agreement dated as of October 26, 2012, to add certain covenants, representations and other
provisions in the Credit Agreement to, among other things, allow for the settlement of both the U.S. Department
of Justice investigation and Stark Law Self-Referral matter (and related expenses). This amendment also
(i) amends certain covenants, representations and other provisions in the Credit Agreement, (ii) revises the
exclusions and baskets associated with certain of the representations and covenants in the Credit Agreement
relating to the incurrence of liens, the incurrence of additional debt, sales of assets and other fundamental
corporate changes, acquisitions, investments, and capital expenditures, (iii) revises the exceptions and baskets
associated with the two financial covenants that we are required to maintain under the Credit Agreement and the
ability to make restricted payments and (iv) required us to grant a security interest in substantially all of our and
our wholly-owned subsidiaries’ non-real estate assets pursuant to the Security Agreement.
The interest rate in connection with the Credit Facilities as amended on November 11, 2013, shall be selected
from the following by us: (i) the ABR Rate plus the Applicable Margin (the “Base Rate Advance”) or (ii) the
Eurodollar Rate plus the Applicable Margin (the “Eurodollar Rate Advance”). The ABR Rate means the greatest
of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% per annum and (c) the Eurodollar Rate for an
interest period of one month plus 1% per annum. The “Eurodollar Rate” means the rate at which Eurodollar
deposits in the London interbank market for an interest period of one, two, three or six months (as selected by us)
are quoted. The “Applicable Margin” means 1.50% per annum for Base Rate Advances and 2.50% per annum for
Eurodollar Rate Advances, subject to adjustment depending on our leverage ratio at the end of each quarter as
presented in the table below. We are also subject to a commitment fee under the terms of the Credit Facilities, as
presented in the table below.
Total Leverage Ratio
≥ 2.50
< 2.50 and ≥ 2.00
< 2.00 and ≥ 1.50
< 1.50
Margin for ABR
Loans
Margin for Eurodollar
Loans
Commitment Fee
2.25%
2.00%
1.75%
1.50%
3.25%
3.00%
2.75%
2.50%
0.50%
0.50%
0.50%
0.45%
Our weighted average interest rate for our five year $60.0 million Term Loan was 2.8% for 2013 and 1.7% for
2012.
Our Credit Agreement, as amended on November 11, 2013, requires us to meet two financial covenants. One is a
leverage ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) and the
second is a fixed charge coverage ratio of adjusted EBITDA plus rent expense (“EBITDAR”) (less capital
expenditures less cash taxes) to scheduled debt repayments plus interest expense plus rent expense. These
thresholds vary over the term of the credit facility. As of December 31, 2013, our total leverage ratio was 2.9 and
our fixed charge coverage ratio was 1.4 and we are in compliance with the Credit Agreement. We currently
anticipate we will be in compliance with the covenants associated with our long-term obligations over the next
12 months. In the event we are not in compliance with our debt covenants in the future, we would pursue various
alternatives in an attempt to successfully resolve the non-compliance, which might include, among other things,
seeking debt covenant waivers or amendments.
As of December 31, 2013, our availability under our $165.0 million Revolving Credit Facility was $142.8
million as we had $22.2 million outstanding in letters of credit.
F-22
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Pursuant to the Security Agreement, as of the effective date of the Second Amendment, the Credit Agreement is
secured by substantially all of our and our wholly-owned subsidiaries’ non-real estate assets (subject
to
exceptions for certain immaterial subsidiaries), including all of the stock of our wholly-owned subsidiaries that
are corporations, equity interests in our wholly-owned subsidiaries that are not corporations, our equity interests
in our joint ventures and our investments. If an event of default occurs under the Credit Agreement, the Agent
may, upon the request of a specified percentage of the Lenders, exercise remedies with respect to the collateral,
including, in some instances, taking possession of or selling personal property assets, collecting accounts
receivables, or exercising proxies to take control of the pledged stock and other equity interests.
Amendment and Waiver to Note Purchase Agreement
In addition, on October 26, 2012, we entered into an Amendment (the “Amendment”) and a Waiver (the
“Waiver”) to our Note Purchase Agreement dated March 25, 2008 (the “Note Purchase Agreement”).
Pursuant to the Note Purchase Agreement, we issued and sold on March 26, 2008, three series of senior notes.
The Amendment and the Waiver collectively permit us to repay $15 million of our Series A Senior Notes, $10
Million of our Series B Senior Notes and $35 million of our Series C Senior Notes, in each case prior to their
stated date of maturity. A prepayment fee of $3.6 million was made in connection with the repayment of the
senior notes. The Amendment also generally conforms the Note Purchase Agreement covenants (including
exclusions and baskets) to the covenants included in our new Credit Agreement. In addition, as amended by the
Amendment, the Note Purchase Agreement financial covenants are identical to those described above with
respect to the Credit Agreement.
The Notes are guaranteed by all of our material wholly-owned subsidiaries. As amended by the Amendment, the
Note Purchase Agreement requires at all times that we (i) provide guaranties from wholly-owned subsidiaries
that in the aggregate represent not less than 95% of our consolidated net revenues and adjusted EBITDA from all
wholly-owned subsidiaries, (ii) provide guarantees from subsidiaries that in the aggregate represent not less than
70% of consolidated adjusted EBITDA, subject to certain exceptions and (iii) provide guarantees from any other
subsidiary that is a guarantor under the Credit Agreement.
Termination of $250 Million Revolving Credit Facility
In connection with the execution of the new Credit Agreement and the amendment and waiver to the Note
Purchase Agreement, our $250 million Revolving Credit Facility dated as of March 26, 2008 was terminated on
October 26, 2012. The remaining unamortized deferred debt issuance costs related to the $250 million Revolving
Credit Facility were written off in proportion to the reduction in our borrowing capacity. The balance of the
unamortized deferred debt issuance costs related to the $250 million Revolving Credit Facility shall be deferred
and amortized over the term of the new Credit Agreement.
Repayment of Series B Senior Notes
As consideration for entering into the Second Amendment to our Credit Agreement, prior to the effective date
thereof, we repaid the $20 million outstanding principal amount of our Series B Senior Notes due March 25,
2014 (the “Series B Notes”). A prepayment fee of $0.4 million was made in connection with the repayment of the
Series B Notes prior to their stated date of maturity.
Promissory Notes
Our promissory notes outstanding of $1.9 million as of December 31, 2013 were generally issued in amounts
between $2.5 million and $10.8 million and bear interest in a range of 1.0% to 1.97%. These promissory notes
are primarily promissory notes issued for software licenses.
F-23
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
8. INCOME TAXES
We utilize the asset and liability approach to measuring deferred tax assets and liabilities based on temporary
differences existing at each balance sheet date using currently enacted tax rates in accordance with FASB’s
authoritative guidance for income taxes. Deferred tax assets are reduced by a valuation allowance when we
believe it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
In September 2013, the U.S. Department of the Treasury and the Internal Revenue Service issued final
regulations addressing the acquisition, production and improvement of tangible property, and also proposed
regulations addressing the disposition of property. These regulations replace previously issued temporary
regulations and are effective for tax years beginning January 1, 2014, with optional adoption permitted in 2013.
We have not adopted these regulations in 2013 and are in the process of analyzing the impact of these new
regulations but do not believe they will have a material impact on our consolidated financial statements.
The total provision for income taxes consist of the following (amounts in millions):
Current income tax expense/(benefit):
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense/(benefit):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Years Ended December 31,
2013
2012
2011
$ (2.0)
0.3
(1.7)
$ 9.8
1.4
11.2
$ 15.9
3.8
19.7
(43.2)
(13.9)
(57.1)
(25.7)
(5.5)
(31.2)
(103.1)
(19.3)
(122.4)
Income tax expense/(benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(58.8)
$(20.0)
$(102.7)
F-24
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Net deferred tax assets consist of the following components (amounts in millions):
As of December 31,
2013
2012
Current portion of deferred tax assets (liabilities):
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement Accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent portion of deferred tax assets (liabilities):
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NOL carry forward, expiring beginning in 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
5.6
1.1
59.3
7.0
(18.5)
0.8
55.3
102.6
(24.1)
3.9
2.7
5.3
(0.2)
Noncurrent portion of deferred tax assets (liabilities):
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
90.2
$
8.2
1.2
—
6.7
(22.0)
0.3
(5.6)
114.0
(32.4)
5.2
2.2
4.0
(0.2)
92.8
Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$145.5
$ 87.2
As of December 31, 2013, we have state net operating loss (“NOL”) carry forwards of approximately $117.5
million.
Our recorded valuation allowance above was established against the deferred tax assets to the extent it has been
determined it is more likely than not that those deferred tax assets will not be realized. Future changes in the
determination of the realizability of these deferred tax assets and related valuation allowance could result in
either a decrease or an increase in our provision for income taxes.
We establish our valuation allowance on deferred tax assets when it is more likely than not that some portion or
all of our deferred tax assets will not be realized. Our valuation allowance remained the same from 2012.
Our provision for income taxes differs from the amount computed by applying the statutory Federal income tax
rate to net (loss) income before income taxes from continuing operations. The sources of the tax effects of the
difference are as follows:
For the Years Ended December 31,
2013
2012
2011
Income tax expense/(benefit) computed on federal statutory rate . . . . .
State income taxes and other, net of federal benefit . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Nondeductible expenses and other, net
(35.0)% (35.0)% (35.0)%
(2.4)
(4.4)
0.1
—
(2.1)
(1.2)
20.9
0.3
1.1
2.0
(2.3)
(0.5)
—
16.0
0.3
Income tax expense/(benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(38.3)% (17.4)% (21.5)%
F-25
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
For the year ended December 31, 2013, the effective tax rate on pretax (loss) income from continuing operations
was a benefit of 38.3 percent. The effective tax rate for the year ended December 31, 2013, attributable to
continuing operations differs from the statutory rate primarily due to state taxes, non-deductible expenses, and
tax credits.
The effective tax rate on the pre-tax income from continuing operations for the year ended December 31, 2012,
differs from the statutory rate primarily due to state taxes, a goodwill impairment that was non-deductible for tax
purposes and tax credits.
The effective tax rate on the pre-tax income from continuing operations for the year ended December 31, 2011,
differs from the statutory rate primarily due to a goodwill impairment that was non-deductible for tax purposes
and state taxes on operations.
Uncertain Tax Positions
We account for uncertain tax positions in accordance with the authoritative guidance for uncertain tax positions.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (amounts in
millions):
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plus: additions for tax positions of prior years . . . . . . . . . . . . . . .
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For the Years Ended December 31,
2013
$0.4
3.5
$3.9
2012
$—
0.4
$ 0.4
As of December 31, 2013, there are $3.9 million of uncertain tax benefits accrued within the financial statements.
To the extent penalties and interest are assessed on any underpayment of income tax, such amounts are accrued
and classified as either a component of tax penalties or interest expense in accrued expenses in our consolidated
balance sheet. This is an accounting policy election. As of December 31, 2013, there is less than $0.1 million of
interest and penalties accrued on the balance sheet related to uncertain income tax positions.
We are subject to income taxes in the United States and in many of the 50 individual states, with significant
operations in Louisiana, Alabama, Georgia, and Tennessee. We are open to examination in the United States and
in various individual states for tax years ended December 2009 through December 2013. We are also open to
examination in various states for the years ended 2001-2013 resulting from net operating losses generated and
available for carry forward from those years.
9. CAPITAL STOCK AND SHARE-BASED COMPENSATION
We are authorized by our Certificate of Incorporation to issue 60,000,000 shares of common stock, $0.001 par
value and 5,000,000 shares of preferred stock, $0.001 par value. As of December 31, 2013, 33,413,970 shares
and 32,538,971 shares of common stock and no shares of preferred stock were issued and outstanding,
respectively. Our Board of Directors is authorized to fix the dividend rights and terms, conversion and voting
rights, redemption rights and other privileges and restrictions applicable to our preferred stock.
F-26
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Share-Based Awards
Our 2008 Omnibus Incentive Compensation Plan (the “Plan”) authorizes the grant of various types of equity-
based awards, such as stock awards, restricted stock units, stock appreciation rights and stock options to eligible
participants, which include all of our employees and all employees of our 50% or more owned subsidiaries, our
non-employee directors and certain consultants. The vesting terms of the awards may be tied to continued
employment (or, for our non-employee directors, continued service on the Board of Directors) and/or
achievement of certain pre-determined performance goals. We refer to stock awards subject to service-based
vesting conditions as “non-vested stock” and restricted stock units subject to service-based and performance-
based or market-based vesting conditions as “non-vested stock units.” The Plan is administered by the
Compensation Committee of our Board of Directors, which determines, within the provisions of the Plan, those
eligible employees to whom, and the times at which, awards shall be granted. The Compensation Committee, in
its discretion, may delegate its authority and duties under the Plan to specified officers; however, only the
Compensation Committee may approve the terms of awards to our executive officers.
Equity-based awards may be granted for a number of shares not to exceed, in the aggregate, approximately
4.0 million shares of common stock, and we had approximately 1.7 million shares available at December 31,
2013. The price per share for stock options shall be of no less than the greater of (a) 100% of the fair value of a
share of common stock on the date the option is granted or (b) the aggregate par value of the shares of our
common stock on the date the option is granted. If a stock option is granted to any owner of 10% or more of our
total combined voting power of us and our subsidiaries, the price is to be at least 110% of the fair value of a share
of our common stock on the date the award is granted. Each equity-based award vests ratably over a 12 month-
to-five year period, with the exception of those issued under contractual arrangements that specify otherwise, that
may be exercised during a period as determined by our Compensation Committee or as otherwise approved by
our Compensation Committee. The contractual terms of stock options exercised shall not exceed ten years from
the date such option is granted.
Employee Stock Purchase Plan (“ESPP”)
We have a plan whereby our eligible employees may purchase our common stock at 85% of the market price at
the time of purchase. On June 7, 2012, our stockholders ratified an amendment adopted by our Board of
Directors to increase the total number of shares of our common stock authorized for the issuance under our ESPP
from 2,500,000 shares to 4,500,000 shares, and as of December 31, 2013, there were 1,744,663 shares available
for future issuance. The following is a detail of the purchases that were made or pending Board of Director
approval under the plan:
Employee Stock Purchase Plan Period
2011 and Prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2012 to March 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 1, 2012 to June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 1, 2012 to September 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 1, 2012 to December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2013 to March 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 1, 2013 to June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 1, 2013 to September 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 1, 2013 to December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares Issued
Price
2,142,223
82,619
90,411
83,269
87,082
90,799
75,126
50,982
52,826
2,755,337
$14.41
12.29
10.58
11.75
9.61
9.45
9.86
14.63
12.44
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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
ESPP expense included in general and administrative expense in our accompanying consolidated income
statements was $0.5 million, $0.7 million and $0.8 million for 2013, 2012 and 2011, respectively.
Stock Options
We use the Black-Scholes option pricing model to estimate the fair value of our stock options; however there
have been no stock options granted during 2013, 2012 or 2011.
The following table presents our stock option activity for 2013:
Number of Shares
Weighted
Average Exercise
Price
Outstanding options at January 1, 2013 . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding options at December 31, 2013 . . . . . . . . . . . . . . . . . .
243,886
(37,558)
(11,835)
194,493
Exercisable options at December 31, 2013 . . . . . . . . . . . . . . . . . .
194,493
$20.08
6.95
20.02
$22.62
$22.62
Weighted
Average
Contractual
Life (Years)
1.66
0.83
0.83
The aggregate intrinsic value of our outstanding options and exerciseable options at December 31, 2013 was less
than $0.1 million. Total intrinsic value of options exercised was $0.2 million, $0.1 million and $0.7 million for
2013, 2012 and 2011, respectively.
All of our outstanding options were vested as of October 2008; therefore there was no non-vested stock option
activity for 2013.
Non-Vested Stock
We issue shares of non-vested stock with vesting terms ranging from one to five years. The compensation
expense is determined based on the market price of our common stock at the date of grant applied to the total
number of shares that are anticipated to fully vest. Non-vested stock compensation expense included in general
and administrative expenses in our accompanying consolidated income statements was $5.2 million, $6.4 million
and $7.2 million for 2013, 2012 and 2011, respectively.
The following table presents our non-vested stock award activity for 2013:
Number of Shares
Weighted Average
Grant Date Fair
Value
Non-vested stock at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
643,353
499,049
(296,597)
(72,314)
Non-vested stock at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
773,491
$20.76
10.91
24.29
15.23
$13.56
The weighted average grant date fair value of non-vested stock granted was $10.91, $14.01 and $27.05 in 2013,
2012, and 2011, respectively.
At December 31, 2013, there was $4.0 million of unrecognized compensation cost related to non-vested stock
award payments that we expect to be recognized over a weighted average period of 1.3 years.
F-28
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Non-Vested Stock Units – Service-Based and Performance-Based Awards
We issue non-vested stock unit awards that are service-based, performance-based or a combination of both with
vesting terms ranging from three to four years. Based on the terms and conditions of these awards, we determine
if the awards should be recorded as either equity or liability instruments. The compensation expense is
determined based on the market price of our common stock at the date of grant, applied to the total number of
units that are anticipated to vest, unless the award specifies differently. We did not recognize any compensation
expense related to performance-based non-vested stock units during 2013. Non-vested stock units compensation
expense included in general and administrative expenses in our accompanying consolidated income statements
was $0.1 million and $0.3 million for 2012 and 2011 respectively. We account for such awards similar to our
non-vested stock awards; however, no shares of stock are issued to the recipient until the stock unit awards have
vested and after the pre-determined delivery date has occurred.
The weighted average grant date fair value of non-vested stock units granted was $56.99 and $27.40 in 2012 and
2011, respectively. These non-vested stock units were granted as the result of the achievement of the
performance-based objectives established by the 2010 and 2009 performance-based awards. The performance-
based objectives established by the 2013, 2012 and 2011 awards were not satisfied and as a result, there were no
stock units awarded. At December 31, 2013, there was no unrecognized compensation cost related to our
performance-based non-vested stock units.
Non-Vested Stock Units – Service-Based and Market-Based Awards
During the second quarter of 2013, we awarded market-based awards to certain employees. The target level
established by the award, which is based on our average December 2015 stock price, provides for the recipients
to receive 417,330 non-vested stock units if the target is achieved. If the target objective is surpassed to the point
of achieving the projected maximum payout, the recipients will receive 667,728 non-vested stock units.
For market-based awards, the effect of the market condition is reflected in the fair value of the awards at the date
of grant using a Monte-Carlo simulation model. A Monte-Carlo simulation model estimates the fair value of the
market-based award based upon the expected term, risk-free interest rate and expected volatility. Compensation
expense for market-based awards is recognized over the vesting period regardless of whether the market
conditions are expected to be achieved. Non-vested stock units compensation expense included in general and
administrative expenses in our accompanying consolidated income statements was $0.8 million for 2013. The
fair value of the 2013 award was estimated using the following assumptions:
Forward Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Requisite Service Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.327 % –1.460%
54.38%
3years
$10.51
The following table presents our non-vested stock units activity for 2013:
Number of Shares
Weighted Average
Grant Date Fair
Value
Non-vested stock at January 1, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested stock units at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . .
—
417,330
—
(27,514)
389,816
$ —
10.51
—
10.51
$10.51
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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
The weighted average grant date fair value of non-vested stock units granted was $10.51 in 2013.
At December 31, 2013, there were $3.3 million in unrecognized compensation costs related to our market-based
non-vested stock units that we expect to be recognized over a weighted average period of 2.3 years.
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are involved in the following legal actions:
United States Senate Committee on Finance Inquiry
On May 12, 2010, we received a letter of inquiry from the Senate Finance Committee requesting documents and
information relating to our policies and practices regarding home therapy visits and therapy utilization trends. A
similar letter was sent to the other major publicly traded home health care companies. We cooperated with the
Committee with respect to this inquiry.
On October 3, 2011, the Committee publicly issued a report titled “Staff Report on Home Health and the
Medicare Therapy Threshold.” The Committee recommended that the CMS “must move toward taking therapy
out of the payment model.” We believe that the issuance of the report concludes the Committee’s inquiry, but are
not in a position to speculate on the potential for future legislative or oversight action by the Committee.
Securities Class Action Lawsuits
On June 10, 2010, a putative securities class action complaint was filed in the United States District Court for the
Middle District of Louisiana (the “Court”) against the Company and certain of our current and former senior
executives. Additional putative securities class actions were filed in the Court on July 14, July 16, and July 28,
2010.
On October 22, 2010, the Court issued an order consolidating the putative securities class action lawsuits and the
Federal Derivative Actions (described immediately below) for pre-trial purposes. In the same order,
the
Court appointed the Public Employees Retirement System of Mississippi and the Puerto Rico Teachers’
Retirement System as co-lead plaintiffs (together,
the “Co-Lead Plaintiffs”) for the putative class. On
December 10, 2010, the Court also consolidated the ERISA class action lawsuit (described below) with the
putative securities class actions and Federal Derivative Actions for pre-trial purposes.
On January 18, 2011, the Co-Lead Plaintiffs filed an amended, consolidated class action complaint (the
“Securities Complaint”) which supersedes the earlier-filed securities class action complaints. The Securities
Complaint alleges that the defendants made false and/or misleading statements and failed to disclose material
facts about our business, financial condition, operations and prospects, particularly relating to our policies and
practices regarding home therapy visits under the Medicare home health prospective payment system and the
related alleged impact on our business, financial condition, operations and prospects. The Securities Complaint
seeks a determination that the action may be maintained as a class action on behalf of all persons who purchased
the Company’s securities between August 2, 2005 and September 28, 2010 and an unspecified amount of
damages.
All defendants moved to dismiss the Securities Complaint. On June 28, 2012, the Court granted the defendants’
motion to dismiss the Securities Complaint. On July 26, 2012, the Co-Lead Plaintiffs filed a motion for
reconsideration, which the Court denied on April 9, 2013.
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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
On May 3, 2013, the Co-Lead Plaintiffs appealed the dismissal of the Securities Complaint to the United States
Court of Appeals for the Fifth Circuit. The parties’ appellate briefing is complete and oral argument has been
scheduled for the week of March 31, 2014. While the Company will seek to have the Court’s order granting the
defendants’ motion to dismiss affirmed on appeal, no assurances can be given as to the timing or outcome of the
appeals process.
Derivative Actions
On July 2, 2010, an alleged shareholder of the Company filed a derivative lawsuit in the United States District
Court for the Middle District of Louisiana, purporting to assert claims on behalf of the Company against certain
of our current and former officers and directors. Three similar derivative suits were filed in the Court on
July 15, July 21, and August 2, 2010 (together, the “Federal Derivative Actions”). We are named as a nominal
defendant in all of those actions. As noted above, on October 22, 2010, the Court issued an order consolidating
the Federal Derivative Actions with the putative securities class action lawsuits and for pre-trial purposes.
On January 18, 2011,
the plaintiffs in the Federal Derivative Actions filed a consolidated, amended
complaint (the “Derivative Complaint”) which supersedes the earlier-filed derivative complaints. The Derivative
Complaint alleges that certain of our current and former officers and directors breached their fiduciary duties to
the Company by making allegedly false statements, by allegedly failing to establish sufficient internal controls
over certain of our home health and Medicare billing practices, by engaging in alleged insider trading, and by
committing unspecified acts of waste of corporate assets and unjust enrichment. All defendants in the Federal
Derivative Actions, including the Company as a nominal defendant, moved to dismiss the Derivative Complaint.
That motion was still pending before the Court when the parties reached the settlement described below.
On June 24, 2013, all parties to the Federal Derivative Actions entered into a Stipulation of Settlement (the
“Stipulation”) with respect to the Federal Derivative Actions. On September 5, 2013, following notice to
shareholders and a final approval hearing, the Court issued an order of dismissal with prejudice finally approving
the proposed settlement in accordance with the Stipulation. As part of the Court-approved settlement, the
Company has agreed to adopt and/or maintain certain corporate governance reforms as set forth in the
Stipulation. The Court’s order also awarded co-lead plaintiffs’ counsel of attorneys’ fees and expenses in an
amount of $445,000, which was paid by the Company’s insurer on its behalf. The order dismissed the Federal
Derivative Actions with prejudice, and approved the release of all named defendants by all plaintiffs, the
Company, and its shareholders from all claims that were or could have been alleged in the Federal Derivative
Actions.
On July 23, 2010, a derivative suit (the “State Derivative Action”) was filed in the Nineteenth Judicial District
Court, Parish of East Baton Rouge, State of Louisiana (the “State Court”) which also purported to assert claims
on behalf of the Company against certain of our current and former officers and directors. By order dated
December 8, 2010, the State Derivative Action was stayed pending resolution of the Federal Derivative Actions.
On October 17, 2013, the State Court issued an order granting the parties’ joint motion for dismissal of the State
Derivative Action based on the federal Court’s final approval of the settlement of the Federal Derivative Actions,
and dismissing the State Derivative Action with prejudice.
ERISA Class Action Lawsuit
On September 27, 2010 and October 22, 2010, separate putative class action complaints were filed in the United
States District Court for the Middle District of Louisiana against the Company, certain of our current and former
senior executives and members of our 401(k) Plan Administrative Committee. The suits allege violations of the
Employee Retirement Income Security Act (“ERISA”) since January 1, 2006 and July 1, 2007, respectively. The
F-31
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
plaintiffs brought the complaints on behalf of themselves and a class of similarly situated participants in our
401(k) Plan. The plaintiffs assert that the defendants breached their fiduciary duties to the 401(k) Plan’s
participants by causing the 401(k) Plan to offer and hold Amedisys common stock during the respective class
periods when it was an allegedly unduly risky and imprudent retirement investment because of our alleged
improper business practices. The complaints seek a determination that the actions may be maintained as a class
action, an award of unspecified monetary damages and other unspecified relief. As noted above, on
December 10, 2010, the Court consolidated the putative ERISA class actions with the putative securities class
actions and derivative actions for pre-trial purposes. In addition, on December 10, 2010, the Court appointed
interim lead counsel and interim liaison counsel in the ERISA class action.
On March 10, 2011, Wanda Corbin, Pia Galimba and Linda Trammell (the “Co-ERISA Plaintiffs”), filed an
amended, consolidated class action complaint (the “ERISA Complaint”), which supersedes the earlier-filed
ERISA class action complaints. The ERISA Complaint seeks a determination that the action may be maintained
as a class action on behalf of themselves and a class of similarly situated participants in our 401(k) plan from
January 1, 2008 through present. All of the defendants have moved to dismiss the ERISA Complaint. That
motion is fully briefed and remains pending before the Court.
On November 5, 2013, we reached an agreement in principle to settle the ERISA class action lawsuits on a class-
wide basis under which we would make a payment of $1.2 million (which we anticipate will be paid by our
insurance carrier) and provide additional non-monetary benefits to 401(k) Plan participants. We then negotiated a
formal settlement agreement with the Co-ERISA Plantiffs and on December 13, 2013, submitted it to the Court
for preliminary and final approval. The formal settlement agreement describes how the $1.2 million settlement
payment would be allocated among the putative class of 401(k) Plan participants after certain expenses and fees
are deducted. To date, the Court has not ruled on the motion for preliminary approval or scheduled a final
fairness hearing. The settlement is subject to a number of contingencies, including preliminary and final approval
by the court following notice to the putative class and we can provide no assurances as to whether we will be able
to successfully consummate the settlement.
SEC Investigation
On June 30, 2010, we received notice of a formal investigation from the SEC and received a subpoena for
documents relating to the matters under review by the United States Senate Committee on Finance and other
matters involving our operations. We have cooperated with the SEC with respect to this investigation.
U.S. Department of Justice Civil Investigative Demand (“CID”) Pursuant to False Claims Act and Stark Law
Matters
On September 27, 2010, we received a CID issued by the U.S. Department of Justice pursuant to the federal
False Claims Act. The CID requires the delivery of a wide range of documents and information relating to the
Company’s clinical and business operations, including reimbursement and billing claims submitted to Medicare
for home health services, and related compliance activities. The CID generally covers the period from January 1,
2003. On April 26, 2011, we received a second CID related to the CID issued in September 2010, which
generally covers the same time period as the previous CID and requires the production of additional documents.
Such CIDs are often associated with previously filed qui tam actions, or lawsuits filed under seal under the False
Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. Qui tam actions are brought by private plaintiffs suing on behalf
of the federal government for alleged FCA violations. Subsequently, the Company and certain current and former
employees received additional CIDs for additional documents and/or testimony.
F-32
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
In May 2012, we made a disclosure to CMS under the agency’s Stark Law Self-Referral Disclosure Protocol
relating to certain services agreements between a subsidiary of ours and a large physician group. During some
period of time since December 2007, the arrangements appear not to have complied in certain respects with an
applicable exemption to the Stark Law referral prohibition. Medicare revenue earned as a result of referrals from
the physician group from May 2008 to May 2012, the relevant four year “lookback” period under the Stark Law
Self-Referral Disclosure Protocol, was approximately $4 million. On January 11, 2013, one of our subsidiaries
received a CID from the United States Attorney’s Office for the Northern District of Georgia seeking certain
information relating to that subsidiary’s relationship with this physician group.
We have reached an agreement in principle to resolve both the U.S. Department of Justice investigation and the
Stark Law Self-Referral matter. We have agreed to this tentative settlement without any admission of
wrongdoing to resolve these matters and to avoid the uncertainty and expense of protracted litigation. In
connection with the settlement, we expect to enter into a corporate integrity agreement with the Office of the
Inspector General – HHS. The agreement in principle covers the period from 2008 through 2010 (with respect to
the DOJ investigation) and the period from 2008 through 2012 (with respect to the Stark Law Self-Referral
Disclosure Protocol) and calls for payment of the aggregate sum of $150 million, plus interest thereon at a rate of
2.25 percent per annum, as follows: (a) $115 million plus interest thereon to be payable upon execution of the
settlement documents, and (b) $35 million plus interest thereon to be payable six months thereafter. In addition,
we may incur additional expenses which are not currently estimable related to the settlement agreement and in
connection with compliance measures that may be mandated by the corporate integrity agreement.
The settlement is subject to a number of contingencies, including agreement upon the scope of the matters
released and other material terms, the negotiation and execution of acceptable settlement documents including a
corporate integrity agreement, and approval of our board of directors, the DOJ and the Office of Inspector
General-HHS. We have recorded an accrual of $150 million during the third quarter of 2013 with respect to these
matters. We can provide no assurances as to whether we will be able to successfully consummate the settlement.
Until the settlement actually becomes final, there can be no guarantee that these matters will be resolved on the
basis described above, the outcome of these matters will remain uncertain, and the amount required to resolve
them could differ materially from the amount accrued.
OIG Self-Disclosure
In October 2012, we made a disclosure to the Office of Counsel to the Inspector General of the United States
Department of Health and Human Services (the “OIG”) pursuant to the OIG Provider Self-Disclosure Protocol
regarding certain clinical documentation issues and eligibility regulatory requirements at two of our hospice care
centers. These hospice care centers did not comply in some respects with certain state and Medicare hospice
regulations, including those requiring physicians to certify patient eligibility and requiring patient face-to-face
encounters. We recorded an additional accrual of approximately $1 million during the three-month period ended
September 30, 2013 increasing the total accrual to approximately $2 million as of September 30, 2013 where it
remains at December 31, 2013. We are also in discussions with state healthcare authorities regarding this
matter. We are cooperating with the OIG and the state regulatory authorities in their review of this matter. We
have reached an agreement to pay approximately $2 million to settle the matter with the OIG, The settlement is
subject to a number of contingencies, including negotiation of the settlement agreement, and we can provide no
assurances as to whether we will be able to successfully consummate the settlement.
In September and October 2013, we made preliminary disclosures to OIG under the OIG’s Provider Self-
Disclosure Protocol regarding certain clinical documentation issues at one of our home health care centers. This
care center appears to have not complied with certain Medicare home health regulations, including those relating
F-33
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
to physician signature requirements and face-to-face documentation. As of December 31, 2013, we recorded an
accrual of approximately $0.5 million for this matter. Our review is ongoing, and we intend to cooperate with the
OIG in its review of this matter.
Wage and Hour Litigation
On July 25, 2012, a putative collective and class action complaint was filed in the United States District Court for the
District of Connecticut against us in which three former employees allege wage and hour law violations. The former
employees claim that they were not paid overtime for all hours worked over forty hours in violation of the Federal
Fair Labor Standards Act (“FLSA”), as well as the Pennsylvania Minimum Wage Act. More specifically, they allege
they were paid on both a per-visit and an hourly basis, and that such a pay scheme resulted in their misclassification
as exempt employees, thereby denying them overtime pay. Moreover, in response to a Company motion arguing that
plaintiffs’ complaint was deficient in that it was ambiguous and failed to provide fair notice of the claims asserted
and plaintiffs’ opposition thereto, the Court, on April 8, 2013, held that the complaint adequately raises general
allegations that the plaintiffs were not paid overtime for all hours worked in a week over forty, which may include
claims for unpaid overtime under other theories of liability, such as alleged off-the-clock work, in addition to
plaintiffs’ more clearly stated allegations based on misclassification. On behalf of themselves and a class of current
and former employees they allege are similarly situated, plaintiffs seek attorneys’ fees, back wages and liquidated
damages going back three years under the FLSA and three years under the Pennsylvania statute. On October 8, 2013,
the Court granted plaintiffs’ motion for equitable tolling requesting that the statute of limitations for claims under the
FLSA for plaintiffs who opt-in to the lawsuit be tolled from September 24, 2012, the date upon which plaintiffs filed
their original motion for conditional certification, until 90 days after any notice of this lawsuit is issued following
conditional certification. Following a motion for reconsideration filed by the Company, on December 3, 2013, the
Court modified this order, holding that putative class members’ FLSA claims are tolled from October 29, 2012
through the date of the Court’s order on plaintiffs’ motion for conditional certification. On January 13, 2014, the
Court granted plaintiffs’ July 10, 2013 motion for conditional certification of their FLSA claims and authorized
issuance of notice to putative class members to provide them an opportunity to opt in to the action.
On September 13, 2012, a putative collective and class action complaint was filed in the United States District
Court for the Northern District of Illinois against us in which a former employee alleges wage and hour law
violations. The former employee claims she was paid on both a per-visit and an hourly basis,
thereby
misclassifying her as an exempt employee and entitling her to overtime pay. The plaintiff alleges violations of
Federal and state law and seeks damages under the FLSA and the Illinois Minimum Wage Law. Plaintiff seeks
class certification of similar employees who were or are employed in Illinois and seeks attorneys’ fees, back
wages and liquidated damages going back three years under the FLSA and three years under the Illinois statute.
On May 28, 2013, the Court granted the Company’s motion to stay the case pending resolution of class
certification issues and dispositive motions in the earlier-filed Connecticut case referenced above.
We are unable to assess the probable outcome or reasonably estimate the potential liability, if any, arising from
the SEC investigation and the securities and wage and hour litigation described above. The Company intends to
continue to vigorously defend itself in the securities and wage and hour litigation matters. No assurances can be
given as to the timing or outcome of the SEC investigation, the OIG Self-Disclosure issues or the securities and
wage and hour litigation matters described above or the impact of any of the inquiry, investigation or litigation
matters on the Company, its consolidated financial condition, results of operations or cash flows, which could be
material, individually or in the aggregate.
We recognize that additional putative securities class action complaints and other litigation could be filed, and
that other investigations and actions could be commenced, relating to matters involving our home therapy visits
and therapy utilization trends or other matters.
F-34
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
In addition to the matters referenced in this note, we are involved in legal actions in the normal course of
business, some of which seek monetary damages, including claims for punitive damages. We do not believe that
these normal course actions, when finally concluded and determined, will have a material impact on our
consolidated financial condition, results of operations or cash flows.
Third Party Audits
From time to time, in the ordinary course of business, we are subject to audits under various governmental
programs in which third party firms engaged by CMS conduct extensive review of claims data to identify
potential improper payments under the Medicare program.
In January 2010, our subsidiary that provides home health services in Dayton, Ohio received from a Medicare
Program Safeguard Contractor (“PSC”) a request for records regarding 137 claims submitted by the subsidiary
paid from January 2, 2008 through November 10, 2009 (the “Claim Period”) to determine whether the underlying
services met pertinent Medicare payment requirements. Based on the PSC’s findings for 114 of the claims, which
were extrapolated to all claims for home health services provided by the Dayton subsidiary paid during the Claim
Period, on March 9, 2011, the Medicare Administrative Contractor (“MAC”) for the subsidiary issued a notice of
overpayment seeking recovery from our subsidiary of an alleged overpayment of approximately $5.6 million. We
dispute these findings, and our Dayton subsidiary has filed appeals through the Original Medicare Standard
Appeals Process, in which we are seeking to have those findings overturned. Most recently, a consolidated
administrative law judge (“ALJ”) hearing was held in late March 2013. In January 2014, the ALJ found fully in
favor of our Dayton subsidiary on 74 appeals and partially in favor of our Dayton subsidiary on eight appeals.
Taking into account the ALJ’s decision, certain determinations that our Dayton subsidiary decided not to appeal
as well as certain determinations made by the MAC, of the 114 claims that were originally extrapolated by the
MAC, 76 claims have now been decided in favor of our Dayton subsidiary in full, 10 claims have been decided
in favor of our Dayton subsidiary in part, and 28 claims have been decided against or not appealed by our Dayton
subsidiary. The ALJ has ordered the MAC to recalculate the extrapolation amount based on the ALJ’s decision.
Our Dayton subsidiary can appeal the ALJ’s decisions, and both CMS and the MAC can request that the
Medicare Appeals Council review the ALJ’s decisions. As of December 31, 2013, we have recorded no liability
with respect to the pending appeals as we do not believe that an estimate of a reasonably possible loss or range of
loss can be made at this time.
In July 2010, our subsidiary that provides hospice services in Florence, South Carolina received from a Zone
Program Integrity Contractor (“ZPIC”) a request for records regarding a sample of 30 beneficiaries who received
services from the subsidiary during the period of January 1, 2008 through March 31, 2010 (the “Review Period”)
to determine whether the underlying services met pertinent Medicare payment requirements. We acquired the
hospice operations subject to this review on August 1, 2009; the Review Period covers time periods both before
and after our ownership of these hospice operations. Based on the ZPIC’s findings for 16 beneficiaries, which
were extrapolated to all claims for hospice services provided by the Florence subsidiary billed during the Review
Period, on June 6, 2011, the MAC for the subsidiary issued a notice of overpayment seeking recovery from our
subsidiary of an alleged overpayment. We dispute these findings, and our Florence subsidiary has filed appeals
through the Original Medicare Standard Appeals Process, in which we are seeking to have those findings
overturned. Most recently, we have requested appeal hearings before an ALJ, but the ALJ hearings have not been
scheduled, and no assurances can be given as to the timing or outcome of the ALJ appeal. The current alleged
extrapolated overpayment is $6.1 million. In the event we pay any amount of this alleged overpayment, we are
indemnified by the prior owners of the hospice operations for amounts relating to the period prior to August 1,
2009. As of December 31, 2013, we have recorded no liability for this claim as we do not believe that an estimate
of a reasonably possible loss or range of loss can be made at this time.
F-35
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
for
In July 2009, Beacon Hospice, Inc., a subsidiary we acquired on June 7, 2011 (“Beacon”), received from
Massachusetts Peer Review Organization, Inc. (“MassPro”), an entity contracted with the Massachusetts Office
of Medicaid, a request
records regarding 25 beneficiaries in Boston, Framingham and Plymouth,
Massachusetts, who received hospice services from Beacon during the period of August 1, 2007 through July 31,
2008 (the “Review Period”) to determine whether the underlying services met pertinent MassHealth Program
regulations. Based on MassPro’s findings for 89 of the 112 claims submitted in connection with these
beneficiaries, which were extrapolated to all MassHealth claims for hospice services provided by Beacon billed
during the Review Period, on February 15, 2012, MassPro issued a notice of overpayment seeking recovery from
Beacon of an alleged overpayment of approximately $6.6 million. The Review Period covers a time before our
ownership of Beacon. On December 17, 2012, as a result of an appeal by Beacon, MassPro issued a final notice
of determination of overpayment and fines (the “Final Notice”), determining an overpayment in only 35 of the
original 112 claims and seeking recovery from Beacon in the amount of $0.1 million (the “Final Amount”). In
the Final Notice, MassPro did not extrapolate the findings, and Beacon determined not to contest the Final
Notice. In January 2013, Amedisys paid the Final Amount to MassPro, and the prior owners of Beacon paid the
Final Amount to Amedisys, in accordance with their indemnification obligations set forth in the acquisition
document.
Operating Leases
We have leased office space at various locations under non-cancelable agreements that expire between 2014 and
2021, and require various minimum annual rentals. Our typical operating leases are for lease terms of one to
seven years and may include, in addition to base rental amounts, certain landlord pass-through costs for our pro-
rata share of the lessor’s real estate taxes, utilities and common area maintenance costs. Some of our operating
leases contain escalation clauses, in which annual minimum base rentals increase over the term of the lease.
Total minimum rental commitments as of December 31, 2013 are as follows (amounts in millions):
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$24.3
15.5
10.1
5.5
1.6
0.3
$57.3
In addition, future rental commitments for our discontinued operations locations amounted to $2.7 million as of
December 31, 2013. Rent expense for non-cancelable operating leases was $29.8 million, $30.7 million and
$30.5 million for 2013, 2012 and 2011.
Insurance
We are obligated for certain costs associated with our insurance programs, including employee health, workers’
compensation and professional liability. While we maintain various insurance programs to cover these risks, we
are self-insured for a substantial portion of our potential claims. We recognize our obligations associated with
these costs, up to specified deductible limits in the period in which a claim is incurred, including with respect to
both reported claims and claims incurred but not reported. These costs have generally been estimated based on
historical data of our claims experience. Such estimates, and the resulting reserves, are reviewed and updated by
us on a quarterly basis.
F-36
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
The following table presents details of our insurance programs, including amounts accrued for the periods
indicated (amounts in millions) in accrued expenses in our accompanying balance sheets. The amounts accrued
below represent our total estimated liability for individual claims that are less than our noted insurance coverage
amounts, which can include outstanding claims and claims incurred but not reported.
Type of Insurance
Health insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
As of December 31,
2013
$12.2
17.7
4.7
34.6
(1.2)
2012
$ 9.5
17.3
4.4
31.2
(1.0)
$33.4
$30.2
The retention limit per claim for our health insurance, worker’s compensation and professional liability is $0.9
million, $0.5 million and $0.3 million, respectively.
Employment Contracts
We have commitments related to employment contracts with a number of our senior executives. These contracts
generally commit us to pay severance benefits under certain circumstances.
Other
We are subject to various other types of claims and disputes arising in the ordinary course of our business. While
the resolution of such issues is not presently determinable, we believe that the ultimate resolution of such matters
will not have a significant effect on our consolidated financial condition, results of operations and cash flows.
11. EMPLOYEE BENEFIT PLANS
401(K) Benefit Plan
We maintain a plan qualified under Section 401(k) of the Internal Revenue Code for all employees who have
reached 21 years of age, effective the first month after hire date. Under the plan, eligible employees may elect to
defer a portion of their compensation, subject to Internal Revenue Service limits.
During 2013, 2012 and 2011, our match of contributions to be made to each eligible employee contribution is
$0.375 for every $1.00 of contribution made up to the first 6% of their salary. The match is discretionary and
thus is subject to change at the discretion of management. These contributions are made in the form of our
common stock, valued based upon the fair value of the stock as of the end of each calendar quarter end. We
expensed approximately $7.8 million, $9.7 million and $7.1 million for 2013, 2012 and 2011, respectively.
Deferred Compensation Plan
We have a Deferred Compensation Plan for additional tax-deferred savings to a select group of management or
highly compensated employees. The Deferred Compensation Plan permits participants to defer up to 75% of
compensation that would otherwise be payable to them for the calendar year and up to 100% of their annual
bonus. In addition, we credit to the participants’ accounts such amounts as would have been contributed to our
F-37
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
401(k)/Profit Sharing Plan, but for the limitations that are imposed under the Internal Revenue Code based upon
the participants’ status as highly compensated employees. We may also make additional discretionary allocations
as determined by the Compensation Committee. Amounts credited under the Deferred Compensation Plan are
funded into a rabbi trust, which is managed by a trustee. The trustee has the discretion to manage the assets of the
Deferred Compensation Plan as deemed fit, thus the assets are not necessarily reflective of the same investment
choices made by the participants.
12. EXIT ACTIVITIES
During 2013, we sold assets associated with two home health care centers in Alaska and Washington, as well as a
hospice care center in Washington for cash consideration of approximately $1.6 million and recognized a gain of
approximately $1.0 million which is included in discontinued operations. We also sold our membership interest
in one of our unconsolidated joint ventures for cash consideration of approximately $0.5 million and recognized
a loss of approximately $0.7 million, which is included in other income (expense).
We also reported 28 care centers as held for sale and sold assets associated with 17 of these home health care
centers for cash consideration of approximately $1.4 million and recognized a gain of approximately $0.7 million
which is included in discontinued operations. We closed eight of our home health care centers previously
classified as held for sale and recorded charges of $0.1 million for the write-off of intangible assets and $0.5
million related to lease termination costs which are included in discontinued operations. Three of these home
health care centers remain classified as held for sale as of December 31, 2013.
In addition to the sale and available for sale care centers mentioned above, we consolidated 41 operating home
health care centers and five operating hospice care centers with care centers servicing the same markets and
closed two home health care centers as of December 31, 2013. In connection with these care centers, we recorded
charges of $3.5 million in goodwill and other intangibles impairment expense related to the write-off of
intangible assets, $1.5 million in other general and administrative expenses related to lease termination costs and
$1.8 million in salaries and benefits related to severance costs during 2013.
During 2012, we consolidated five operating home health care centers and four operating hospice care centers
with care centers servicing the same markets and closed three operating home health care centers. We recorded
lease termination liabilities of $0.9 million and severance of $0.1 million as of December 31, 2012; of these costs
$0.2 million related to the closed care centers is included in discontinued operations.
During 2011, we consolidated 27 operating home health care centers and five operating hospice care centers with
care centers servicing the same markets, closed 27 operating home health care centers and two operating hospice
care centers and discontinued the start-up process associated with two prospective unopened home health
locations. We recorded lease termination liabilities of $3.1 million, severance of $0.7 million and charges of $1.5
million related to the write-off of intangibles and other assets, of these costs $2.7 million related to the closed
care centers is included in discontinued operations.
The care centers that were closed or sold in 2013, 2012 and 2011 are presented in discontinued operations in our
consolidated financial statements. See Note 4 – Discontinued Operations and Assets Held For Sale for additional
information.
F-38
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
Our reserve activity for the 2013, 2012 and 2011 closures and consolidations is as follows (amounts in millions):
2013 Exit Activity
2012 Exit Activity
2011 Exit Activity
Lease
Termination
Severance
Lease
Termination
Severance
Lease
Termination
Severance
Balances at December 31, 2010 . . . . . . . . . .
Charge in 2011 . . . . . . . . . . . . . . . . . . . . . . .
Cash expenditures in 2011 . . . . . . . . . . . . . .
Balances at December 31, 2011 . . . . . . . . .
Charge in 2012 . . . . . . . . . . . . . . . . . . . . . . .
Cash expenditures in 2012 . . . . . . . . . . . . . .
Balances at December 31, 2012 . . . . . . . . .
Charge in 2013 . . . . . . . . . . . . . . . . . . . . . . .
Cash expenditures in 2013 . . . . . . . . . . . . . .
$—
—
—
—
—
—
—
2.0
(0.5)
Balances at December 31, 2013 . . . . . . . . .
$ 1.5
$—
—
—
—
—
—
—
1.8
(0.5)
$ 1.3
$—
—
—
—
0.9
(0.3)
0.6
—
(0.5)
$ 0.1
$—
—
—
—
0.1
(0.1)
—
—
—
$—
$—
$—
3.0
(0.3)
2.7
0.1
(2.5)
0.3
—
(0.2)
$ 0.1
0.7
(0.6)
0.1
—
(0.1)
—
—
—
$—
13. VALUATION AND QUALIFYING ACCOUNTS
The following table summarizes the activity and ending balances in our allowance for doubtful accounts and
estimated revenue adjustments (amounts in millions):
Allowance for Doubtful Accounts
Year end
Balance at
Beginning of Year
Provision for
Doubtful
Accounts(1)
2013 . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . .
$21.0
17.4
21.0
$16.4
21.7
13.7
Write-Offs
$(23.2)
(18.1)
(17.3)
Balance at End
of Year
$14.2
21.0
17.4
(1)
Includes $0.6 million, $0.7 million and $1.1 million from discontinued operations for the years ended
December 31, 2013, 2012 and 2011, respectively.
Estimated Revenue Adjustments
Year end
Balance at
Beginning of Year
Provision for
Estimated
Revenue
Adjustments(1) Write-Offs
Balance at End
of Year
2013 . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . .
$6.4
6.8
6.5
$ 9.4
10.6
12.1
$(11.9)
(11.0)
(11.8)
$3.9
6.4
6.8
(1)
Includes $0.4 million, $0.7 million and $1.2 million from discontinued operations for the years ended
December 31, 2013, 2012 and 2011, respectively.
F-39
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
14. SEGMENT INFORMATION
Our operations involve servicing patients through our two reportable business segments: home health and
hospice. Our home health segment delivers a wide range of services in the homes of individuals who may be
recovering from surgery, have a chronic disability or terminal illness or need assistance with the essential
activities of daily living. Our hospice segment provides palliative care and comfort to terminally ill patients and
their families. The “other” column in the following tables consists of costs relating to corporate support functions
that are not directly attributable to a specific segment.
During 2013, we closed ten care centers, sold assets associated with 20 care centers and reported three care
centers as held for sale. During 2012 and 2011, we closed three and 29 care centers, respectively. The care
centers which were closed, sold or classified as held for sale are reflected as discontinued operations in
accordance with applicable accounting guidance. See Note 4 – Discontinued Operations and Assets Held For
Sale for additional information. Prior periods have been reclassified to conform to the current presentation.
Management evaluates performance and allocates resources based on the operating income of the reportable
segments, which includes an allocation of corporate expenses directly attributable to the specific segment and
includes revenues and all other costs directly attributable to the specific segment. Segment assets are not
reviewed by the company’s chief operating decision maker and therefore are not disclosed below (amounts in
millions).
For the Year Ended December 31, 2013
Home Health Hospice
Other
Total
Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service, excluding depreciation and amortization . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Department of Justice settlement . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles impairment charge . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$987.7
578.9
304.8
10.2
10.3
—
8.5
912.7
$261.6
139.1
64.7
5.7
2.1
—
1.0
$ — $1,249.3
718.0
474.0
15.9
36.9
150.0
9.5
—
104.5
—
24.5
150.0
—
212.6
279.0
1,404.3
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 75.0
$ 49.0
$(279.0) $ (155.0)
For the Year Ended December 31, 2012
Home Health Hospice
Other
Total
Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service, excluding depreciation and amortization . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles impairment charge . . . . . . . . . . . . . .
$1,152.1
661.4
331.6
17.1
13.2
161.6
$288.7
149.3
71.8
3.9
1.5
0.5
$ — $1,440.8
810.7
516.7
21.0
39.2
162.1
—
113.3
—
24.5
—
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,184.9
227.0
137.8
1,549.7
Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (32.8)
$ 61.7
$(137.8) $ (108.9)
F-40
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
For the Year Ended December 31, 2011
Home Health Hospice
Other
Total
Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service, excluding depreciation and amortization . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and other intangibles impairment charge . . . . . . . . . . . . . .
$1,201.8
634.5
321.7
11.5
13.2
579.9
$216.6
115.9
49.6
1.2
0.7
—
$ — $1,418.4
750.4
506.8
12.7
37.8
579.9
—
135.5
—
23.9
—
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,560.8
167.4
159.4
1,887.6
Operating (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (359.0)
$ 49.2
$(159.4) $ (469.2)
15. UNAUDITED SUMMARIZED QUARTERLY FINANCIAL INFORMATION
2013:
1st Quarter(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd Quarter(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd Quarter(2)(3)(4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th Quarter(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012:
1st Quarter(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd Quarter(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd Quarter(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th Quarter(6)(7)(8)(9)
Net Income (Loss)
Attributable to
Amedisys, Inc.
Common
Stockholders(1)
Basic
Diluted
Net Income (Loss)
Attributable to
Amedisys, Inc.
$
2.7
1.8
(91.1)
(9.6)
$ 0.09
0.06
(2.89)
(0.30)
$ 0.09
0.06
(2.89)
(0.30)
$ (96.2)
$(3.08)
$(3.08)
$
5.4
7.9
9.9
(106.8)
$ (83.6)
$ 0.18
0.26
0.33
(3.52)
$ 0.18
0.26
0.33
(3.52)
$(2.79)
$(2.79)
Revenue
$ 328.6
315.9
301.3
303.5
$1,249.3
$ 359.1
366.2
363.9
351.6
$1,440.8
(1) Because of the method used in calculating per share data, the quarterly per share data may not necessarily
total to the per share data as computed for the entire year.
(2) During each of the four quarters of 2013, we incurred certain costs associated with the U.S. Department of
Justice Civil Investigative Demand and other legal matters. Net of income taxes, these costs amounted to
$1.2 million, $1.0 million, $0.6 million and $0.5 million for the three-month periods ended March 31,
2013, June 30, 2013, September 30, 2013 and December 31, 2013, respectively.
(3) During the second, third and fourth quarters of 2013, we recognized non-cash goodwill and other intangibles
impairment charges of $1.4 million, $0.9 million and $3.5 million, net of income taxes.
(4) During the third quarter of 2013, we recorded a charge for the accrual of the U.S. Department of Justice
settlement in the amount of $93.9 million, net of income taxes.
(5) Our results for the three month period ended September 30, 2013, included proceeds from our Directors’ &
Officers’ insurance in the amount of $3.4 million, net of income taxes.
F-41
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2013
(6) During each of the four quarters of 2012, we incurred certain costs associated with the U.S. Department of
Justice Civil Investigative Demand. Net of income taxes, these costs amounted to $2.2 million, $0.8 million,
$0.6 million and $1.4 million for
June 30,
2012, September 30, 2012 and December 31, 2012, respectively.
the three-month periods ended March 31, 2012,
(7) During the fourth quarter of 2012, we incurred costs associated with the prepayment of the term loan and a
portion of our existing senior notes associated with our March 26, 2008 Senior Credit Facility. Net of
income taxes, these costs amounted to $2.8 million.
(8) Our results for the three month period ended December 31, 2012, included the settlement of a lawsuit in the
amount of $2.1 million, net of income taxes.
(9) During the fourth quarter of 2012, we recognized a non-cash goodwill and other intangibles impairment
charge of $110.2 million, net of income taxes and non-controlling interests.
16. SUBSEQUENT EVENT
On February 24, 2014, we announced the departure of William F. Borne from his positions as Chief Executive
Officer, Chairman and member of the Board of Directors and the appointment of Ronald A. LaBorde as our
Interim Chief Executive Officer until a permanent replacement is identified. Prior to Mr. LaBorde’s appointment
he served as our Chief Financial Officer and he will continue to serve as our principal financial officer while a
search for an interim Chief Financial Officer is conducted.
F-42
EXHIBIT INDEX
The exhibits marked with the cross symbol (†) are filed and the exhibits marked with a double cross (††) are
furnished with this Form 10-K. Any exhibits marked with the asterisk symbol (*) are management contracts or
compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.
Exhibit
Number
3.1
†3.2
Document Description
Report or Registration Statement
of
Certificate
of
Composite
Incorporation
the Company
of
inclusive of all amendments through
June 14, 2007
The Company’s Quarterly
Report on Form 10-Q for
the quarter ended June 30,
2007
SEC File or
Registration
Number
Exhibit
or Other
Reference
0-24260
3.1
the
of By-Laws
Composite
Company
all
inclusive
amendments through February 24,
2014
of
of
The Company’s Registration
Statement on Form S-3 filed
August 20, 2007
The Company’s Current
Report on Form 8-K filed
on April 1, 2008
333-145582
4.8
0-24260
4.1
The Company’s Current
Report on Form 8-K filed
on October 30, 2012
0-24260
4.1
4.1
Common Stock Specimen
4.2.1
4.2.2
Note Purchase Agreement
dated
March 25, 2008 among Amedisys,
Inc., Amedisys Holding, L.L.C. and
the Purchasers identified on Schedule
A thereto, relating to the issuance and
(a) $35,000,000 aggregate
sale of
principal amount of
their 6.07%
Series A Senior Notes due March 25,
aggregate
$30,000,000
2013
principal amount of
their 6.28%
Series B Senior Notes due March 25,
2014 and (c) $35,000,000 aggregate
their 6.49%
principal amount of
Series C Senior Notes due March 25,
2015
(b)
to
Amendment No. 1 dated October 26,
2012
Purchase
the Note
Agreement dated March 25, 2008
Inc., Amedisys
among Amedisys,
Holding, L.L.C.
relating to the
issuance and sale of (a) $35,000,000
aggregate principal amount of their
6.07% Series A Senior Notes due
March 25, 2013,
(b) $30,000,000
aggregate principal amount of their
6.28% Series B Senior Notes due
March 25, 2014 and (c) $35,000,000
aggregate principal amount of their
6.49% Series C Senior Notes due
March 25, 2015
Document Description
Report or Registration Statement
The Company’s Current
Report on Form 8-K filed
on October 30, 2012
SEC File or
Registration
Number
Exhibit
or Other
Reference
0-24260
4.2
Exhibit
Number
4.2.3
4.2.4
4.3
10.1
10.2*
2008
Waiver No. 1 dated October 26, 2012
to the Note Purchase Agreement
dated March
among
25,
Amedisys, Inc., Amedisys Holding,
L.L.C. relating to the issuance and
(a) $35,000,000 aggregate
sale of
principal amount of
their 6.07%
Series A Senior Notes due March 25,
2013,
(b) $30,000,000 aggregate
their 6.28%
principal amount of
Series B Senior Notes due March 25,
2014 and (c) $35,000,000 aggregate
principal amount of
their 6.49%
Series C Senior Notes due March 25,
2015
Amendment No. 2 and Limited
Waiver dated September 4, 2013 to
the Note Purchase Agreement dated
March 25, 2008 among Amedisys,
Inc., Amedisys Holding, L.L.C. and
the Purchasers identified on Schedule
A thereto, relating to the issuance and
(a) $35,000,000 aggregate
sale of
principal amount of
their 6.07%
Series A Senior Notes due March 25,
(b) $30,000,000 aggregate
2013,
principal amount of
their 6.28%
Series B Senior Notes due March 25,
2014 and (c) $35,000,000 aggregate
their 6.49%
principal amount of
Series C Senior Notes due March 25,
2015
Form of Series B Note due March 25,
2014 (attached as Exhibit C to the
Amendment No. 1 to the Note
Purchase Agreement Incorporated by
reference as Exhibit 4.2.2 hereto)
Form of Director
Agreement dated February 12, 2009
Indemnification
The Company’s Quarterly
Report on Form 10-Q for
ended
the
September 30, 2013
quarter
0-24260
4.2.4
The Company’s Current
Report on Form 8-K filed
on October 30, 2012
0-24260
4.4
The Company’s Annual
Report on Form 10-K for
the year ended December
31, 2008
0-24260
10.1
Amended and Restated Amedisys,
Inc. Employee Stock Purchase Plan
dated June 7, 2012
The Company’s Current
Report on Form 8-K filed
June 8, 2012
0-24260
10.1
Exhibit
Number
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9.1*
10.9.2*
10.9.3*
Document Description
Report or Registration Statement
Inc.
Composite Amedisys,
2008
Incentive Compensation
Omnibus
Plan (inclusive of Plan amendments
dated June 7, 2012 and October 25,
text of
2012 and the
the
2008 Omnibus
Inc.
Amedisys,
Incentive Compensation Plan)
full
The Company’s Annual
Report on Form 10-K for
the
ended
December 31, 2013
year
SEC File or
Registration
Number
Exhibit
or Other
Reference
0-24260
10.3
Form of Nonvested Stock Award
issued under Amedisys,
Agreement
Inc.
Incentive
Compensation Plan
2008 Omnibus
The Company’s Quarterly
Report on Form 10-Q for
the quarter ended June 30,
2008
Form of Restricted Stock Unit
Agreement Issued under Amedisys,
Inc.
Incentive
Compensation Plan
2008 Omnibus
The Company’s Quarterly
Report on Form 10-Q for
the quarter ended June 30,
2008
0-24260
10.3
0-24260
10.4
Inc.
Composite Amedisys,
1998
Stock Option Plan (inclusive of
amendments dated June 10, 2004,
June 8, 2006 and June 22, 2006 and
the full text of the Amedisys, Inc.
1998 Stock Option Plan)
The Company’s Registration
Statement on Form S-8 filed
June 22, 2007
333-143967
4.2
Form of Restricted Stock Unit
Agreement under
the 1998 Stock
Option Plan
The Company’s Current
Report on Form 8-K/A filed
April 24, 2007
Composite Director’s Stock Option
Plan (inclusive of Plan amendments
dated June 10, 2004, and the full text
of the Directors Stock Option Plan)
The Company’s Annual
Report on Form 10-K for
the
ended
December 31, 2005
year
0-24260
4.1
0-24260
10.4
Amended and Restated Employment
Agreement dated January 3, 2011 by
Inc.,
and
and
Amedisys Holding, L.L.C.
William F. Borne
Amedisys,
among
Amendment No. 1 dated December
29, 2011 to Amended and Restated
dated
Employment
January 3, 2011 by and among
Amedisys, Inc., Amedisys Holding,
L.L.C. and William F. Borne
Agreement
Amendment No. 2 dated December
19, 2012 to Amended and Restated
Employment
dated
January 3, 2011 by and among
Amedisys, Inc., Amedisys Holding,
L.L.C. and William F. Borne
Agreement
The Company’s Current
Report on Form 8-K filed
January 7, 2011
0-24260
10.1
The Company’s Current
Report on Form 8-K filed
December 30, 2011
0-24260
10.1
The Company’s Annual
Report on Form 10-K for
the
ended
December 31, 2013
year
0-24260
10.9.3
Exhibit
Number
10.10.1*
10.10.2*
10.10.3*
10.11.1*
10.11.2*
10.12.1*
10.12.2*
10.12.3*
10.13.1*
Document Description
Report or Registration Statement
SEC File or
Registration
Number
Exhibit
or Other
Reference
0-24260
10.1
0-24260
10.2
The Company’s Current
Report on Form 8-K filed
November 2, 2011
The Company’s Current
Report on Form 8-K filed
December 30, 2011
The Company’s Annual
Report on Form 10-K for
ended
the
December 31, 2013
year
The Company’s Current
Report on Form 8-K filed
January 7, 2011
0-24260
10.10.3
0-24260
10.2
Agreement
Employment
dated
November 1, 2011 by and among
Amedisys, Inc., Amedisys Holding,
L.L.C. and Ronald A. LaBorde
1
dated
No.
Amendment
December 29, 2011 to Employment
Agreement dated November 1, 2011
Inc.,
by and among Amedisys,
and
Amedisys Holding, L.L.C.
Ronald A. LaBorde
Amendment No. 2 dated December 19,
2012 to Employment Agreement dated
November 1, 2011 by and among
Amedisys,
Inc., Amedisys Holding,
L.L.C. and Ronald A. LaBorde
Amended and Restated Employment
Agreement dated January 3, 2011 by
Inc.,
and
Amedisys Holding, L.L.C.
and
Jeffrey D. Jeter
Amedisys,
among
Amendment No. 1 dated December
19, 2012 to Amended and Restated
Employment
dated
January 3, 2011 by and among
Amedisys, Inc., Amedisys Holding,
L.L.C. and Jeffrey D. Jeter
Agreement
The Company’s Annual
Report on Form 10-K for
the
ended
December 31, 2013
year
0-24260
10.11.12
Amended and Restated Employment
Agreement dated July 23, 2010 by
Inc.,
and
Amedisys Holding, L.L.C.
and
Michael O. Fleming, M.D.
Amedisys,
among
Amendment No. 1 dated January 3,
2011 to Amended and Restated
Employment Agreement dated July
23, 2010 by and among Amedisys,
Inc., Amedisys Holding, L.L.C. and
Michael O. Fleming, M.D.
Amendment No. 2 dated December
19, 2012 to Amended and Restated
Employment Agreement dated July
23, 2010 by and among Amedisys,
Inc., Amedisys Holding, L.L.C. and
Michael O. Fleming, M.D
Amended and Restated Employment
Agreement dated July 23, 2010 by and
among Amedisys,
Inc., Amedisys
Holding, L.L.C. and David R. Bucey
The Company’s Current
Report on Form 8-K filed
July 27, 2010
0-24260
10.1
The Company’s Current
Report on Form 8-K filed
January 7, 2011
0-24260
10.6
The Company’s Annual
Report on Form 10-K for
ended
the
December 31, 2013
year
0-24260
10.12.3
The Company’s Current
Report on Form 8-K filed
July 27, 2010
0-24260
10.2
Exhibit
Number
10.13.2*
10.13.3*
10.14*
10.15*
10.16*
10.17*
10.18.1
SEC File or
Registration
Number
Exhibit
or Other
Reference
0-24260
10.7
0-24260
10.12.3
0-24260
10.1
0-24260
10.2
0-24260
10.3
0-24260
10.4
0-24260
10.1
Document Description
Report or Registration Statement
The Company’s Current
Report on Form 8-K filed
January 7, 2011
The Company’s Annual
Report on Form 10-K for
ended
the
December 31, 2013
year
The Company’s Current
Report on Form 8-K filed
on April 10, 2012
The Company’s Current
Report on Form 8-K filed
on April 10, 2012
The Company’s Current
Report on Form 8-K filed
on April 10, 2012
The Company’s Current
Report on Form 8-K filed
on April 10, 2012
The Company’s Current
Report on Form 8-K filed
on October 30, 2012
Amendment No. 1 dated January 3,
2011 to Amended and Restated
Employment Agreement dated July
23, 2010 by and among Amedisys,
Inc., Amedisys Holding, L.L.C. and
David R. Bucey
Amendment No. 2 dated December
19, 2012 to Amended and Restated
Employment Agreement dated July
23, 2010 by and among Amedisys,
Inc., Amedisys Holding, L.L.C. and
David R. Bucey
5,
Retention Bonus Agreement dated
April
among
Amedisys, Inc., Amedisys Holding,
L.L.C. and William F. Borne
2012
and
by
5,
Retention Bonus Agreement dated
April
among
Amedisys, Inc., Amedisys Holding,
L.L.C. and Jeffrey D. Jeter
2012
and
by
5,
Retention Bonus Agreement dated
April
among
Amedisys, Inc., Amedisys Holding,
L.L.C. and Michael O. Fleming
2012
and
by
5,
Retention Bonus Agreement dated
April
among
Amedisys, Inc., Amedisys Holding,
L.L.C. and David R. Bucey
2012
and
by
financial
Credit Agreement dated October 26,
2012 among Amedisys,
Inc. and
Amedisys Holding, L.L.C., as co-
the several banks and
borrowers,
other
party
institutions
thereto from time to time, BOKF,
NA DBA Bank of Texas, Compass
Bank, Fifth Third Bank and RBS
Citizens, N.A., as Documentation
Agents, Bank of America, N.A., as
Syndication Agent, JPMorgan Chase
Bank, N.A., as Administrative Agent,
and J.P. Morgan Securities LLC and
Merrill Lynch, Pierce, Fenner &
Smith
as Co-Lead
Arrangers and Joint Bookrunners
Incorporated,
Exhibit
Number
10.18.2
10.18.3
10.19
SEC File or
Registration
Number
Exhibit
or Other
Reference
0-24260
10.1.1
Document Description
Report or Registration Statement
The Company’s Quarterly
Report on Form 10-Q for
the
ended
September 30, 2013
quarter
and
First Amendment
Limited
Waiver dated as of September 4,
2013 to the Credit Agreement dated
October 26, 2012 among Amedisys,
Inc. and Amedisys Holding, L.L.C.,
the several banks
as co-borrowers,
and other financial institutions party
thereto from time to time, BOKF,
NA DBA Bank of Texas, Compass
Bank, Fifth Third Bank and RBS
Citizens, N.A., as Documentation
Agents, Bank of America, N.A., as
Syndication Agent, JPMorgan Chase
Bank, N.A., as Administrative Agent,
and J.P. Morgan Securities LLC and
Merrill Lynch, Pierce, Fenner &
Smith
as Co-Lead
Arrangers and Joint Bookrunners
Incorporated,
Second Amendment dated as of
November 11, 2013 to the Credit
Agreement dated October 26, 2012
among Amedisys, Inc. and Amedisys
Holding, L.L.C., as co-borrowers, the
several banks and other
financial
institutions party thereto from time to
time, BOKF, NA DBA Bank of
Texas, Compass Bank, Fifth Third
Bank and RBS Citizens, N.A., as
Documentation Agents, Bank of
Syndication
America, N.A.,
Agent, JPMorgan Chase Bank, N.A.,
as Administrative Agent, and J.P.
Morgan Securities LLC and Merrill
Lynch, Pierce, Fenner & Smith
Incorporated, as Co-Lead Arrangers
and Joint Bookrunners
as
Security and Pledge Agreement dated
as of November 11, 2013, among
Amedisys, Inc., Amedisys Holding,
L.L.C., the Guarantors party thereto
and JPMorgan Chase Bank, N.A., not
in its individual capacity but solely as
Administrative Agent
The Company’s Quarterly
Report on Form 10-Q for
the
ended
September 30, 2013
quarter
0-24260
10.1.2
The Company’s Quarterly
Report on Form 10-Q for
the
ended
September 30, 2013
quarter
0-24260
10.2
†21.1
†23.1
Subsidiaries of the Registrant
Consent of KPMG LLP
Exhibit
Number
†31.1
††32.1
Document Description
Report or Registration Statement
SEC File or
Registration
Number
Exhibit
or Other
Reference
Certification of Ronald A. LaBorde,
and
Principal Executive Office
Principal Financial Officer, pursuant
to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification of Ronald A. LaBorde,
Principal Executive Office
and
Principal Financial Officer, pursuant
as
to 18 U.S.C. Section 1350,
adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
†101.INS
XBRL Instance
†101.SCH
†101.CAL
†101.DEF
†101.LAB
†101.PRE
XBRL Taxonomy Extension Schema
Document
XBRL
Taxonomy
Calculation Linkbase Document
Extension
XBRL
Definition Linkbase
Taxonomy
Extension
XBRL Taxonomy Extension Labels
Linkbase Document
XBRL
Taxonomy
Presentation Linkbase Document
Extension
Exhibit 31.1
CERTIFICATION
I, Ronald A. LaBorde, certify that:
1. I have reviewed this Annual Report on Form 10-K of Amedisys, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;
4. As the registrant’s sole certifying officer, I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. As the registrant’s sole certifying officer, I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of
Directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 12, 2014
/S/ RONALD A. LABORDE
Ronald A. LaBorde
Principal Executive Officer and Principal Financial Officer
Exhibit 32.1
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Amedisys, Inc. (the “Company”) on Form 10-K for the year ended
December 31, 2013 (the “Report”), I, Ronald A. LaBorde, Chief Financial Officer of the Company, hereby
certify to my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company.
Date: March 12, 2014
/S/ RONALD A. LABORDE
Ronald A. LaBorde
Principal Executive Officer and Principal Financial Officer
COMPANYLEADERSHIP
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
Ronald A. LaBorde
President and Interim Chief Executive Officer
Dale E. Redman
Interim Chief Financial Officer
Jeffrey D. Jeter
Chief Compliance Officer
Michael O. Fleming, MD
Chief Medical Officer
David R. Bucey
General Counsel and Corporate Secretary
Linda J. Hall
Entrepreneur in Residence
Carlson School of Management University
of Minnesota
Ronald A. LaBorde
President and Interim Chief Executive Officer
Amedisys, Inc.
Jake L. Netterville
Chairman, Emeritus, of the Board of Directors
Postlethwaite & Netterville, A Professional
Accounting Corporation
David R. Pitts, Co-Chairman
Chief Executive Officer
Pitts Management Associates, Inc.
Healthcare Management and Consulting
Services
Peter Ricchiuti
Assistant Dean and Director of Research of
BURKENROAD REPORTS
Tulane University’s A.B. Freeman School
of Business
Donald A. Washburn, Co-Chairman
Private Investments
Nathaniel M. Zilkha
Head of Credit and Global
Co-Head of Special Situations
KKR
Performance Graph
Independent Accountants
Stock Listing
Form 10-K Exhibits
A performance graph
comparing the cumulative
total stockholder return on our
common stock for the five-
year period ended December
31, 2013, with the cumulative
total return on the NASDAQ
composite Index and peer-
group Index over the same
period is Included in the Form
10-K.
KPMG LLP
Baton Rouge, Louisiana
Annual Meeting
The annual meeting of
stockholders will take place
on June 5, 2014, at 12:00
p.m. (CDT) at the company’s
corporate headquarters, 5959
South Sherwood Forest Blvd,
Baton Rouge, Louisiana.
The company’s common
stock is listed on the NASDAQ
Global Select Market under
the symbol “AMED.”
Transfer Agent and Registrar
American Stock Transfer &
Trust Company, LLA
6201 15th Avenue
Brooklyn, New York 11219
800.937.5449
A copy of all exhibits to the
company’s Annual Report
on Forms 10-K as filed with
the Securities and Exchange
Commission is available free
of charge on the internet at
www.amedisys.com or by
contacting:
Amedisys, Inc.
5959 S. Sherwood Forest Blvd.
Baton Rouge, LA 70816
Investor@amedisys.com
Amedisys on the Internet
Our company website address is www.amedisys.com. We use our website as a channel of distribution for important company
information. Important information, including press releases, analyst presentations and financial information regarding our
company, is routinely posted on and accessible on the Investor Relations subpage of our website, which is accessible by clicking
on the tab labeled “Investors” on our website home page. We also use our website to expedite public access to time-critical
information regarding our company in advance of or in lieu of distributing a press release or a filing with the SEC disclosing the
same information. Therefore, investors should look to the “Investors” subpage of our website for important and time-critical
information. Visitors to our website can also register to receive automatic e-mail and other notifications alerting them when new
information is made available on the “Investors” subpage of our website. In addition, we make available on the “Investors” subpage
of our website (under the link “SEC filings”) free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as practicable
after we electronically file such reports with the SEC. Further, copies of our Certificate of Incorporation and Bylaws, our Code of
Ethical Business Conduct, our Corporate Governance Guidelines and the charters for the Audit, Compensation, Nominating and
Corporate Governance, Quality of Care and Compliance and Ethics Committees of our Board are also available on the “Investors”
subpage of our website (under the link “Corporate Governance”).
Forward-Looking Statements
When included in this document, words like “believes,” “belief,” “expects,” “plans,” “anticipates,” “intends,” “projects,” “estimates,”
“may,” “might,” “would,” “should” and similar expressions are intended to identify forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and uncertainties
that could cause actual results to differ materially from those described therein. These risks and uncertainties include, but are
not limited to the following: changes in Medicare and other medical payment levels, our ability to open care centers, acquire
additional care centers and integrate and operate these care centers effectively, our ability to divest care centers currently held
for sale, changes in or our failure to comply with existing Federal and state laws or regulations or the inability to comply with
new government regulations on a timely basis, competition in the home health industry, changes in the case mix of patients
and payment methodologies, changes in estimates and judgments associated with critical accounting policies, our ability to
maintain or establish new patient referral sources, our ability to attract and retain qualified personnel, changes in payments and
covered services due to the economic downturn and deficit spending by Federal and state governments, future cost containment
initiatives undertaken by third-party payors, our access to financing due to the volatility and disruption of the capital and credit
markets, our ability to meet debt service requirements and comply with covenants in debt agreements, business disruptions due
to natural disasters or acts of terrorism, our ability to integrate and manage our information systems, our ability to agree on the
terms of a settlement to resolve both the U.S. Department of Justice investigation and the Stark Law Self-Referral matter or fund
required settlement payments in the manner currently contemplated and the changes in law or developments with respect to any
litigation or investigations relating the Company, including the SEC investigation, the OIG Self-Disclosure issues and various other
matters, many of which are beyond our control.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely on any forward-looking statement as a prediction of future events. We expressly disclaim any
obligation or undertaking and we do not intend to release publicly any updates or changes in our expectations concerning the
forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement
may be based, except as required by law. For a discussion of some of the factors discussed above as well as additional factors, see
Part I, Item 1A—“Risk Factors” and Part II, Item 7—“Critical Accounting Policies” within “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the year ended December 31, 2013.