Amedisys

2016  
Annual Report

Dear Fellow Shareholders,

It was a little more than two years ago that we sat down and really listened. From our patients, to our employees, to our referral 
sources, to our markets – we looked at the essence of what we do and what drives our business, talked with our employees 
about what “best” looked like and asked our patients what they wanted. We built our strategy around the themes that emerged 
from these conversations. Our four-pronged strategy appears straightforward, because it comes from the people we serve and 
those that serve them. Consistently delivering on it requires discipline, thoughtfulness and relentless focus. We want to be the 
gold standard in our selected disciplines. We believe we know what we should be, and we are working hard to get there. Like 
a family road trip with the inevitable question, “Are we there yet?” - we aren’t. But we are well on our way, and our results show 
we’re making good progress.

Our stakeholders have lots of reasons to be happy with our performance in 2016. We reported revenue of $1.44 billion, a 12% 
increase over 2015, adjusted EBITDA of $110 million and adjusted EPS of $1.55 per diluted share. We grew organically in all of 
our business units, with particular strength in the hospice and personal care segments.

We achieved a key milestone in December as we completed the conversion from our internally developed technology platform 
to HomeCare HomeBase (HCHB). We accomplished this with unprecedented speed, converting nearly 400 care centers in just 
over a year. While this caused some operational disruption during 2016, we are pleased to see this disruption winding down 
in the first quarter of 2017. Our front line clinicians are happy with the way HCHB supports greater efficiency for them in the 
home, and we believe this will support continued improvement in the quality of care our patients receive, as well as better 
clinician productivity.

Also during the year, we closed on three acquisitions, continuing our efforts to use capital to build our business. Our free cash 
flow is strong and improving, giving us enough financial flexibility to invest in promising expansion opportunities we identify  
in the future.

More specifically, we progressed on all four of our key strategies.

ACHIEVE CLINICAL DISTINCTION 
Our primary mission is to provide our patients with outstanding clinical care. No metric better demonstrates this commitment 
than our latest ratings in home health from the all-important Medicare Star Rating program.

We improved our average Star rating each quarter in 2016, with the January 2017 release ranking our Quality of Patient Care 
score of 3.91 Stars and Patient Satisfaction score of 3.80 Stars. We are striving for further improvement in 2017, with our April 
average score for Quality of Patient Care across all of our home health care centers of 4.03 Stars, a 15% increase over last year. 
That’s our best performance to date. Three-quarters of our centers (75%) attained a rating of 4 Stars or better, compared to a 
little over one-quarter last year (32%). With CMS and other payors intending to shift to reimbursement models based on the 
quality of care delivered, we expect to be well positioned to capitalize on this trend.

Our agenda for clinical care remains ambitious. We’re aiming for all of our home health care centers to achieve a quality Star 
rating of 4 or higher by the end of 2017.

Our hospice quality is equally impressive. Our quality of patient care ranks above the national CMS average on all seven quality 
measures tracked. In patient experience, we rank above the national CMS average on all eight quality measures tracked. In last 
year’s CMS hospice final rule, CMS signaled their intention to create a rating system similar to home health’s Star ratings that will 
be publicly available. We expect to be at or near the top of the industry once those ratings are finalized.

BECOME AN EMPLOYER OF CHOICE 
Because our people are our most important asset, and are responsible for the quality of the care our patients receive, we took 
further steps toward improving our “return on people.” We are building a Culture of Engagement, whereby our employees are 
inspired every day to bring their best self to work. This enables them to better serve our patients, colleagues and referring 
physicians and hospitals — helping us to better recruit, retain and develop outstanding, talented people. 

In an industry that generally experiences high turnover rates, typically in the mid-30 percent range, our overall voluntary 
turnover declined to 22% in 2016, with turnover among our full time employees, who are responsible for 85% of our patient 
visits, falling to 18%.

To drive continued improvement as an organization, we continue to listen to our people. Our second annual People 
Engagement Survey response rate was 24% higher than last year. The responses told us both what we are doing well, and 
where we can improve. Based on this feedback, each of our leaders has developed specific plans to address the opportunities 
identified in their areas. As we improve our understanding of the drivers of employee satisfaction through these engagement 
efforts, we expect our retention rates to continue to improve, increasing our return on our human capital. 

OPERATIONAL EXCELLENCE AND EFFICIENCY 
During 2016, Amedisys reached a major milestone in bringing better information technology to our employees: HCHB software 
went live in all our home health and hospice care centers, seven months ahead of our original target. In transitioning from our 
proprietary software to this leading IT platform, we’re now optimizing efficiency and equipping our clinicians to better focus on 
care delivery. Additionally, in 2015 we committed to realize $46 million in annualized run rate efficiencies by the end of 2017, 
and the successful completion of this platform migration is a key milestone in delivering these savings.

Already we have improved the productivity of our existing staff, and now have the ability to deploy our resources more 
effectively. We will continue to maximize efficiencies in putting the right people in the right places at the right time to deliver 
the right high-quality care, and innovate aggressively along these lines.

In 2016, we also designed and developed a propriety productivity and staffing tool that compiles, evaluates and correlates data 
to drive staffing optimization. This tool permits operators to more deeply manage clinician productivity to better understand 
the operational levers available to manage our clinician capacity. 

DRIVING GROWTH
Amedisys grew in all lines of business during 2016 despite challenges with the rapid rollout of HCHB. Amedisys acquired 
Associated Home Care, a leading personal care agency in Massachusetts – a move consistent with our long-term strategy to 
broaden our scope of services that can be delivered at home. The Company also acquired Professional Profiles, a personal 
care agency based in Danvers, Massachusetts, and in early 2017, Home Staff, LLC, a personal care provider, headquartered in 
Worcester, Massachusetts. We are now the largest personal care provider in Massachusetts, caring for more than 15,000 patients 
annually. We also acquired Visiting Nurse Association of Long Island, a nonprofit organization based in Garden City, New York.

In hospice, we’ve produced strong, consistent organic growth, with average daily census increasing by 16% and reaching 5,900 
by the end of 2016. We see this as a validation of the outstanding care provided by our hospice team, the growing acceptance 
of the value of hospice care, and patient’s desire to remain in their homes.

In home health, same store episodic admissions grew by 4%, we completed over seven million patient visits and grew our 
census to over 55,000 patients. We continue to believe the combination of improved business development processes, recent 
leadership additions, and improved capacity driven by our new platform and tools will allow us to see solid year over year 
organic growth in the second half of 2017.

A PROMISING OUTLOOK 
The arrival of the new President has sparked the most questions from investors over the last few months. At this early stage, we 
are working closely with our peers in home health and hospice to communicate our point of view to the Trump Administration. 
We would like to see a regulatory environment more conducive to patient care in the home. We believe we have the 
opportunity as an industry to show the value that healthcare in the home provides, including lower costs, better outcomes and 
higher patient satisfaction.

We remain focused on acquisition growth opportunities. Our current acquisition pipeline collectively represents well over $100 
million in adjusted EBITDA. The good news is that we have both strong free cash flow and a strong balance sheet. We have the 
ability to act on strategic opportunities that we identify across each of our business segments. With our operating team and 
scalable infrastructure in place, and with consumer preferences, aging demographics and the cost advantages of home-based 
care working in our favor, we are well-positioned to be an industry consolidator with an aging-in-place solution in a highly 
fragmented market.

Regardless of the potential policy and regulatory changes driven by the federal government, providing the highest quality of 
care is fundamental for us. What matters most is to do right by our patients and their families. That commitment distinguishes 
us more than anything else from our competition, and serves as a major driver of future growth. Our goal remains nothing less 
than to be the partner of choice wherever our patients call home.

To our shareholders, thank you for your commitment to Amedisys. Despite the large-scale change that the organization 
initiated and implemented in 2016, we delivered solid results and built a strong foundation for the future. Of course, none of 
this would have been possible without the commitment of our more than 16,000 employees - your efforts keep exceeding our 
expectations. We expect to build upon our progress in 2017 and look forward to our continued success. 

Paul Kusserow  
President and Chief Executive Officer

2016 FINANCIALS

Home Health Segment Revenue

Hospice Segment Revenue

)
s
n
o

i
l
l
i

M
n

i

$
(

 1,100

 1,050

 1,000

 950

 900

 850

 120

 100

)
s
n
o

i
l
l
i

M
n

i

$
(

 80

 60

 40

 20

 -

1,086 

 350

 300

316 

1,005 

275 

957 

)
s
n
o

i
l
l
i

M
n

i

$
(

 250

248 

FY14

FY15

FY16

 200

 150

FY14

FY15

FY16

Adjusted EBITDA*

Adjusted EPS*

112 

110 

74 

$1.48 

$1.55 

 $2.00

 $1.50

 $1.00

 $0.50

$0.73 

FY14

FY15

FY16

FY14

FY15

FY16

*The financial results for the years ended December 31, 2014, December 31, 2015 and December 31, 2016 are adjusted for certain items and should be considered non-GAAP financial measures.  
A reconciliation of these non-GAAP financial measures is included in the corresponding Form 8-K detailing annual results filed on February 28, 2017 and March 8, 2016.

 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2016

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.)

3854 American Way, Suite A, 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

Name of Each Exchange on Which Registered

Common Stock, par value $0.001 per share

The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í 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 Í
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 Í 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 Í 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. ‘
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.
Large accelerated filer Í

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 Í
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, 2016 (the last business day of the registrant’s most recently completed second fiscal
quarter) was $1.0 billion. 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 February 24, 2017, the registrant had 33,607,420 shares of Common Stock outstanding.

Smaller reporting company ‘

Accelerated filer ‘

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its 2017 Annual Meeting of Stockholders (the “2017 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, 2016 are
incorporated herein by reference into Part III of this Annual Report on Form 10-K.

SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . .

1

TABLE OF CONTENTS

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.

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2
14
30
30
31
31

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 DISCLOSURES ABOUT MARKET RISK . . . . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . .
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
107
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35
58
58

32
34

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . . . . . 107
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

107
107

107

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . 108

ITEM 16.

FORM 10-K SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109

EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

EX-10.3 COMPOSITE AMEDISYS, INC. 2008 OMNIBUS INCENTIVE COMPENSATION PLAN, AS
AMENDED
EX-10.15 AMEDISYS HOLDING, L.L.C. SEVERANCE PLAN FOR KEY EXECUTIVES, AS AMENDED
EX-21.1 LIST OF SUBSIDIARIES
EX-23.1 CONSENT OF KPMG LLP
EX-31.1 SECTION 302 CERTIFICATION OF PEO
EX-31.2 SECTION 302 CERTIFICATION OF PFO
EX-32.1 SECTION 906 CERTIFICATION OF PEO
EX-32.2 SECTION 906 CERTIFICATION OF PFO
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, 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 healthcare industry,
our ability to integrate our personal care segment into our business efficiently, 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, 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, manage
and keep our information systems secure, our ability to comply with requirements stipulated in our corporate
integrity agreement and changes in law or developments with respect to any litigation relating to the Company,
including 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 Estimates” 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 2016, 2015 and 2014, 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, 2016 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. is a leading healthcare services company focused on bringing care to the home. Our operations
involve servicing patients across the United States through our three operating divisions: home health, hospice
and personal care. We deliver the care that is best for our patients, whether that is home-based recovery and
rehabilitation after an operation or injury, care that empowers patients to manage a chronic disease, hospice care
at the end of life, or providing assistance with daily activities through our personal care division.

We are among the largest, best established and most advanced providers of home health and hospice care in the
United States, with 420 care centers in 34 states. Our 16,000 employees deliver the highest quality of care to the
doorsteps of patients in need, making more than 7.5 million patient visits to 385,000 patients annually. Over
2,200 hospitals and 61,900 physicians nationwide have chosen us as a partner in post-acute care.

Our services are primarily paid for by Medicare due to the age demographics of our patient base (average
age 81). Medicare represented approximately 78% to 82% of our net service revenue over the last three years.
We remain focused on maintaining a profitable and strategically important managed care contract portfolio.

Amedisys is headquartered in Baton Rouge, Louisiana, with an executive office in Nashville, Tennessee. Our
common stock is currently traded on NASDAQ Global Select Market under the trading symbol “AMED”.
Founded and incorporated in Louisiana in 1982, Amedisys was reincorporated as a Delaware corporation prior to
becoming a publicly traded company in August, 1994.

Our strategy is to become the best choice for care wherever our patients call home by excelling in clinical
distinction, operational excellence and efficiency and growth. Our mission is to provide compassionate home
health, hospice and personal care services that apply the most advanced clinical practices toward allowing our
patients to maintain a sense of independence, quality of life and dignity. We believe that focusing on providing
excellent care and becoming an employer of choice across the United States will differentiate us from our
competitors.

Our Home Health Segment:

Amedisys Home Health provides experienced, compassionate healthcare to help our patients recover from
surgery or illness, live with chronic diseases, and prevent avoidable hospital readmissions with 327 care centers
located in 32 states. Our care team includes skilled nurses who are trained and certified to administer
medications, care for wounds, monitor vital signs and provide a wide range of other nursing services; therapists
specialized in physical, speech and occupational therapy; and aides who assist our patients with completing
important personal tasks.

We take an empowering approach to helping our patients and their families understand their condition, how to
manage it and how to live life to the fullest with a chronic disease or other health condition. Our professional and
compassionate clinicians are trained to understand the whole patient – not just their medical diagnosis.

This commitment to clinical distinction is evident in our clinical performance measures such as Star Ratings. In
the Center for Medicare and Medicaid Services (“CMS”) preview reports for the April 2017 release, the Quality
of Patient Care star average across all Amedisys providers is 4.03. This number is subject to change for the final
release, and CMS has indicated proposed changes that may impact star scores starting with the July 2017 release.
Our goal is to have all of our care centers achieve a 4.0 Quality Star Rating, and we are implementing targeted
action plans to continue to improve the quality of care we deliver for our patients across the country. Our Patient
Satisfaction average as of the last known release was 3.76, outperforming the industry average of 3.67.

2

Our Hospice Segment:

Hospice is a special form of care that is designed to provide comfort and support for those who are dealing with 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. We operate 79 hospice care centers in 21 states.

Individuals with a terminal illness such as heart disease, pulmonary disease, Alzheimer’s, HIV/AIDS or cancer
may be eligible for hospice care, if they have a life expectancy of six months or less.

At Amedisys Hospice, our focus is on building and retaining an exceptional team, delivering the highest quality
care and service to our patients and their families, and establishing Amedisys as the preferred and preeminent
hospice provider in each community we serve. In order to realize these goals, we invest in tailored training,
development, and recognition programs for our employees, with specific focus in 2016 on the implementation of
a new electronic medical record, employee skills training and leadership development. This has led to our team’s
consistent achievement at or above the national average in family satisfaction results and quality scores, as well
as the trust of the healthcare community driving a 17% increase in new patient admissions and a 16% increase in
census.

Another element of our approach is our outreach strategy to more fully reach the entire community of eligible
patients. These outreach efforts have built our hospice patient population to more accurately represent the causes
of death in the communities we serve, with a specific focus on heart disease, lung disease, and dementia in order
to address the historical underrepresentation of non-cancer diagnoses.

By working to accept every patient with a life expectancy of six months or less who wants our compassionate
care, we fulfill our hospice mission and strengthen our standing in the community.

Our Personal Care Segment:

On March 1, 2016, Amedisys acquired its first personal care company – an important step in executing our
strategy of improving the continuity of care our patients receive as their clinical needs change. Our new segment
was further expanded when we purchased the assets of Professional Profiles, Inc. on September 1, 2016. We now
operate 14 personal-care care centers in Massachusetts.

Personal care provides assistance with the essential activities of daily living. We believe that personal care
services are highly synergistic with our core skilled home health and hospice businesses, and that by acquiring
these capabilities in one of our most successful regions we will realize these benefits quickly.

Responding to Changing Regulatory and Reimbursement Environment:

As the government continues to seek opportunities to refine payment models, we believe that our strategy of
becoming a leader in providing a range of service across the at-home care center continuum positions us well for
the future. Our ability to provide quality home health, hospice and personal care allows us to partner with health
systems and managed care organizations to improve care coordination, reduce hospitalizations and lower costs.

Homecare Homebase Implementation:

During 2015, we made the strategic decision to discontinue AMS3, our third generation, proprietary operating
system, and transition to Homecare Homebase (“HCHB”), a leading home health and hospice platform. We
completed our rollout of HCHB during 2016 with all our care centers fully transitioned to our new platform as of
November 1, 2016.

Acquisitions:

On March 1, 2016, we acquired Associated Home Care for a total purchase price of $27.7 million. Associated
Home Care owned and operated nine personal-care care centers servicing the state of Massachusetts.

3

On September 1, 2016, we acquired the assets of four personal-care care centers in Massachusetts for a total
purchase price of $4.4 million.

On October 20, 2016, we acquired the assets of a home health care center in New York for a total purchase price
of $4.6 million.

Financial Information:

Financial information for our home health, hospice and personal care segments can be found in our consolidated
financial statements included in this Annual Report on Form 10-K.

Our Employees

As of February 24, 2017, we employed approximately 16,000 employees, consisting of approximately 10,800
home health care employees, 2,800 hospice care employees, 1,800 personal care employees and 600 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,
therapy or speech therapy services, and receive treatment under a plan of care established and
physical
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

January 1, 2014 through December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2015 through December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2016 through December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2017 through December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Base episode
payment

$2,869
$2,961
$2,965
$2,990

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
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 an episode was complete; (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

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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 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. Beginning January 1,
2016, CMS has provided for two separate payment rates for routine care: payments for the first 60 days of care
and care beyond 60 days. In addition to the two routine rates, on January 1, 2016, Medicare also began
reimbursing for a service intensity add-on (“SIA”). The SIA is based on visits made in the last seven days of life
by a registered nurse (“RN”) or medical social worker (“MSW”) for patients in a routine level of 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 be required to reimburse the Medicare program if such caps are exceeded.

The two caps are detailed below:

•

Inpatient Cap. When we provide hospice care on an inpatient basis, the payments that we are entitled
to receive at the higher inpatient reimbursement rate are subject to a cap. This cap limits the number of
days that are paid at the inpatient care rate (both respite and general) under a provider number to 20%
of the total number of days of hospice care (both inpatient and in-home) that is furnished to all
Medicare patients served by the provider. The daily Medicare payment rate for any inpatient days of
service that exceed the cap is at the routine home care rate, and the provider is required to reimburse
Medicare for any amounts it receives in excess of the cap; 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 by these non-Medicare payors based on such negotiated
agreements.

Personal Care Non-Medicare

Personal care payments are received from payor clients including state and local governmental agencies,
insurers and private consumers, based on rates that are either
managed care organizations, commercial
contractual or fixed by legislation.

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 of coding failures, we provide coding training
and annual update training to clinical assessment managers; provide coding training during orientation
for new employees; provide monthly specialized coding education; obtain outside expert coding
instruction; have certified coders code all patient outcome and assessment information sets (“OASIS”)
and have automated coding edits based on pre-defined compliance metrics in our point of care (“POC”)
system.

• Clinical Operations – Regulatory requirements allow patients to be admitted to home health care if
they are considered homebound and require skilled nursing, physical therapy or speech therapy
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; management and evaluation of a patient’s plan of care; physical therapy services
to assist patients with functional limitations and speech therapy services for speech or swallowing
disorders. In order to help monitor and promote compliance with regulatory requirements, we provide
education on Medicare Guidelines and Conditions of participation; 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 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.

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• 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 to our
employees stressing the importance 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 focusing on key risk areas, 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 demonstrative usage of additional providers. 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 entry of new providers or services and the expansion of existing providers or services in their markets
through a CON process, which is periodically evaluated and updated as required by applicable state law.
Currently, state health authorities in 17 states and the District of Columbia 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 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. We provide hospice related services in the following CON states:
Alabama, Maryland, North Carolina, Tennessee and West Virginia.

In every state where required, our care centers 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

7

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 unless a CON or POA is
required. For those states that require a CON or POA, the provider must also complete a separate application
process before billing can commence and receive required approvals for capital expenditures exceeding amounts
above 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
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.

in providing high-quality health care at

Medicare Participation

Our care centers must comply with regulations promulgated by the United States Department of Health and
Human Services and CMS in order to participate in the Medicare program and receive Medicare payments.
Among other things, these regulations, known as “conditions of participation (“COPs”),” 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 adopted alternative sanction enforcement options which allow CMS (i) effective as of
July 1, 2013, to impose temporary management, direct plans of correction, or direct training, and (ii) effective as
of 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 issued a proposed rule on October 9, 2014, revising the
current home health conditions of participation. We provided public comments on the proposed changes. On
January 12, 2017, CMS finalized the new COPs and published them in the Federal Register. The new COPs are
currently scheduled to go into effect on July 13, 2017, though that could be further delayed.

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,
its state law
including the Federal health care programs’ anti-kickback statute and, where applicable,
counterparts. Subject to certain exceptions, these laws prohibit any offer, payment, solicitation or receipt of any
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.

8

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.

ARRA’s numerous other changes to HIPAA have delayed effective dates and require the issuance of
implementing regulations by HHS. The Health Information Technology for Economic and Clinical Health
(“HITECH”) Act was enacted in conjunction with ARRA. On January 25, 2013, HHS issued final modifications
to the HIPAA Privacy, Security, and Enforcement Rules mandated by the HITECH Act, which had been
previously issued as a proposed rule on July 14, 2010. Among other things, these modifications make business
associates of covered entities directly liable for compliance with certain HIPAA requirements, strengthen the
limitations on the use and disclosure of protected health information without individual authorizations, and adopt
the additional HITECH Act enhancements, including enforcement of noncompliance with HIPAA due to willful
neglect. 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.

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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.

On February 12, 2016, CMS finalized the so-called “60-day rule,” which is the obligation of providers to report
and return Medicare overpayments within 60 days of identifying the same. A provider who retains overpayments
beyond 60 days may be liable under the False Claims Act. “Identification” is identified as when a person “has, or
should have through the exercise of reasonable diligence,” identified and quantified the amount of an
overpayment. The final rule also established a six year lookback period, meaning overpayments must be reported
and returned if a person identifies the overpayment within six years of the date the overpayment was received.
Providers must report and return overpayments even if they did not cause the overpayment.

In June 2016, the Department of Justice issued a rule that more than doubles civil monetary penalties under the
False Claims Act. These increases took effect on August 1, 2016 and apply to False Claims Act violations after
November 2, 2015.

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

10

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.

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, Stark Law or False Claims Act, and
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”). Since the 2016 election, it has been widely discussed that the PPACA will be
“repealed and replaced.” The effect of any major modification or repeal of the PPACA on our business,
operations, or financial condition cannot be predicted at this time.

Even as of December 31, 2016, it is difficult to predict the full impact of PPACA due to the law’s complexity and
phased in effective dates, as well as 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. 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 four-year phased rebasing of the
home health payment system that began in 2014 and will continue through 2017. 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.” 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 I, Item 1A, “Risk Factors: Risks Related to Laws and Government Regulations” for a more complete
discussion of PPACA and the risks it presents to our businesses.

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The Improving Medicare Post-Acute Care Transformation Act

In October 2014, the Improving Medicare Post-Acute Care Transformation Act (“IMPACT Act”) was signed into
law requiring the reporting of standardized patient assessment data for quality improvement, payment and
discharge planning purposes across the spectrum of post-acute care providers (“PACs”), including skilled nursing
facilities and home health agencies. The IMPACT Act requires PACs to begin reporting: (1) standardized patient
assessment data at admission and discharge by October 1, 2018 for post-acute care providers, including skilled
nursing facilities and by January 1, 2019 for home health agencies; (2) new quality measures, including
functional status, skin integrity, medication reconciliation, incidence of major falls, and patient preference
regarding treatment and discharge at various intervals between October 1, 2016 and January 1, 2019; and
(3) resource use measures,
including Medicare spending per beneficiary, discharge to community, and
hospitalization rates of potentially preventable readmissions by October 1, 2016 for post-acute care providers,
including skilled nursing facilities and by October 1, 2017 for home health agencies. Failure to report such data
when required would subject a facility to a two percent reduction in market basket prices then in effect.

The IMPACT Act further requires HHS and the Medicare Payment Advisory Commission (“MedPAC”), a
commission chartered by Congress to advise it on Medicare payment issues, to study alternative PAC payment
models, including payment based upon individual patient characteristics and not care setting, with corresponding
Congressional reports required based on such analysis. The IMPACT Act also included provisions impacting
Medicare-certified hospices, including: (1) increasing survey frequency for Medicare-certified hospices to once
every 36 months; (2) imposing a medical review process for facilities with a high percentage of stays in excess of
180 days; and (3) updating the annual aggregate Medicare payment cap.

The Comprehensive Care for Joint Replacement Bundled Payment Program

In November 2015, CMS announced the final Comprehensive Care for Joint Replacement bundled payment
program (“CJR Program”). The CJR Program implements a mandatory payment model in which acute care
hospitals in 67 metropolitan statistical areas will receive a bundled payment for all inpatient care provided in
connection with a lower extremity joint replacement or reattachment procedure, as well as for all related care
provided within a 90-day episode of care following discharge from such hospital. The bundled payment will be
in lieu of separate payments provided to post-acute healthcare providers for services provided within such 90-day
episode of care. The CJR Program will test this payment model over five performance periods between April 1,
2016 and December 31, 2020 to see if Medicare expenditures can be reduced while at the same time improving
care coordination and preserving or enhancing the quality of care provided to Medicare beneficiaries.

Pre-Claim Review Demonstration for Home Health Services

On June 8, 2016, CMS announced the implementation of a three year Medicare pre-claim review demonstration
for home health services provided to beneficiaries in the states of Illinois, Florida, Texas, Michigan and
Massachusetts. The demonstration began in Illinois in August 2016 and will expand to Florida for home health
services that begin on or after April 1, 2017. CMS is expected to announce staggered start dates for the other
states in the coming months. The pre-claim review is a process through which a request for provisional
affirmation of coverage is submitted for review before a final claim is submitted for payment. The pre-claim
review demonstration may result in an increase in administrative costs or reimbursement delays related to home
health services in such states, which could have an adverse effect on our results of operations and cash flow.

Home Health Groupings Model

In the Calendar Year 2017 Home Health Proposed Rule, released in July 2016, CMS provided information
regarding potential changes to the Home Health Prospective Payment System (“HHPPS”), known as the Home
Health Groupings Model (“HHGM”). Among a number of major differences from the current payment system,
the HHGM would distinguish between referrals from institutions and those from the community, with

12

community referrals receiving lower payments. In addition, a 60-day episode would consist of two 30-day
periods, each paid separately, with the initial 30-day period paid higher than any other period. CMS did not
solicit comments at that time but noted that a more detailed Technical Report would be released with additional
research and analysis conducted on the HHGM. The HHGM Technical Report was issued in December 2016. We
are closely monitoring this potential change to the HHPPS and have joined industry stakeholders in directly
engaging CMS on this concept and its impact on home health agencies. CMS has not indicated if HHGM will be
included in the Calendar Year 2018 Home Health Proposed Rule which will be released in mid-summer 2017. At
this time we are unable to determine the impact this potential change in reimbursement methodology might have
on Amedisys.

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.

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.
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 reasonably practicable after we electronically file or furnish 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,
Compliance and Ethics, 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”). Reference to
our website does not constitute incorporation by reference of the information contained on the website and
should not be considered part of this document.

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

Federal and state changes to reimbursement and other aspects of Medicare and Medicaid 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 78%, 80% and 82% of our
revenue during 2016, 2015 and 2014, respectively. Payments received from Medicare are subject to changes
made through federal legislation. When such changes are implemented, we must also modify our internal billing
processes and procedures accordingly, which can require significant time and expense. These changes, as further
detailed in Part I, Item 1, “Business: 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. Any
such changes, including retroactive adjustments, adopted in the future by the Center for Medicare and Medicaid
Services (“CMS”) could have a material adverse effect on our business and consolidated financial condition,
results of operations and cash flows.

In April of 2015, Congress passed and President Obama signed the so-called “doc fix” in the form of the
Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”). This law replaces a long-standing
physician reimbursement formula with statutorily prescribed physician payment updates and provisions.
MACRA provides for an increase of 3% of the payment amount otherwise made for home health services
furnished in rural areas, and sets Medicare reimbursements for post-acute care providers to increase by 1.0% in
fiscal year 2018.

On September 1, 2016, CMS published annual changes in Medicaid hospice payment rates. As finalized, CMS
estimates hospices will see a 2.1% ($350 million) increase in Medicare payments for fiscal year 2017, which
reflects a market basket update of 2.7%, reduced by 0.6% as required by PPACA. CMS will reimburse hospice
providers with two routine home care rates, to provide separate payment rates for the first 60 days of care and
care beyond 60 days, a change that was instituted in 2016. In addition, the rule finalizes changes to the hospice
quality reporting program, including new quality measures. The final rule also describes a potential future
enhanced data collection instrument as well as plans to publicly display quality measures and other hospice data
beginning in the middle of 2017. As of December 31, 2016, we estimate our impact of the 2017 final rule to be
an increase of approximately 2%.

In October 2016, CMS issued a final rule to update and revise Medicare home health reimbursement rates for
calendar year 2017. The final rule implements the final year of the four-year phase-in of the rebasing adjustments

14

to the home health prospective payment system rates as required by the PPACA. CMS also provides an update to
the Home Health Quality Reporting Program. CMS estimates that the net impact of the payment provisions of the
final rule will result in a decrease of 0.7% in reimbursement to home health providers. The decrease is the result
of a 2.8% market basket increase minus 0.3% for productivity, a 2.3% decrease for the last year in the four-year
rebasing cycle and a 0.97% decrease for the second year in a three-year series of cuts for nominal case mix
growth. Our impact could differ depending on differences in the wage index and the impact of coding and outlier
changes. As of December 31, 2016, we estimate our impact of the 2017 final rule to be a decrease of
approximately 2%.

On February 2, 2016 CMS published a final rule adding new requirements for Medicaid home health services.
Among other things, the final rule requires that for the initial ordering of home health services, the physician
must document that a face-to-face encounter that is related to the primary reason the beneficiary requires home
health services occurred no more than 90 days before or 30 days after the start of services. The final rule requires
that for the initial ordering of certain medical equipment, the physician or authorized non-physician practitioner
must document that a face-to-face encounter that is related to the primary reason the beneficiary requires medical
equipment occurred no more than 6 months prior to the start of services. Although the final rule’s stated effective
date is July 1, 2016, CMS created an exception for state legislation by giving state agencies that require state
legislation to until July 1, 2017 or July 1, 2018 to publish requirements imposed by the rule.

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 payors to contain health care costs. We
cannot assure you that reimbursement payments under governmental 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. Any such 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
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 the Medicare program 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.

Quality reporting requirements may negatively impact Medicare reimbursement.

Hospice quality reporting was mandated by PPACA, which directs the Secretary to establish quality reporting
requirements for hospice programs. For fiscal year 2014, and each subsequent year, failure to submit required
quality data will result in a 2 percentage point reduction to the market basket percentage increase for that fiscal
year. This quality reporting program is currently “pay-for-reporting,” meaning it is the act of submitting data that
determines compliance with program requirements.

15

Similarly,
in the Calendar Year 2015 Home Health Final Rule, CMS proposed to establish a new
“Pay-for-Reporting Performance Requirement” with which provider compliance with quality reporting program
requirements can be measured. Home health agencies that do not submit quality measure data to CMS are subject
to a 2.0% reduction in their annual home health payment update percentage. Home health agencies are required
to report prescribed quality assessment data for a minimum of 70.0% of all patients with episodes of care that
occur on or after July 1, 2015. This compliance threshold increases by 10.0% in each of two subsequent periods-
-i.e., for episodes beginning on or after July 1, 2016 and before June 30, 2017, home health agencies must score
at least 80%, and for episodes beginning on or after July 1, 2017 and thereafter, the required performance level is
at least 90%.

The Improving Medicare Post-Acute Care Transformation Act of 2014 (the “IMPACT Act”) requires the
submission of standardized data by home health agencies and other providers. Specifically, the IMPACT Act
requires, among other significant activities, the reporting of standardized patient assessment data with regard to
quality measures, resource use, and other measures. Failure to report data as required will subject providers to a
2% reduction in market basket prices then in effect. Additionally, reporting activities associated with the
IMPACT Act are anticipated to be quite burdensome.

There can be no assurance that all of our agencies will continue to meet quality reporting requirements in the
future which may result in one or more of our agencies seeing a reduction in its Medicare reimbursements.
Regardless, we, like other healthcare providers, are likely to incur additional expenses in an effort to comply with
additional and changing quality reporting requirements.

Any economic downturn, deepening of an 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, sustained 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

16

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 operating under a Corporate Integrity Agreement. Violations of this agreement could result in
substantial penalties or exclusion from participation in the Medicare program.

On April 23, 2014, with no admissions of liability on our part, we entered into a settlement agreement with the
U.S. Department of Justice relating to certain of our clinical and business operations. Concurrently with our entry
into this agreement, we entered into a Corporate Integrity Agreement (“CIA”) with the Office of Inspector
General-HHS (“OIG”). The CIA, which has a term of five years, formalizes various aspects of our already
existing ethics and compliance programs and contains other requirements designed to help ensure our ongoing
compliance with federal health care program requirements. Among other things, the CIA requires us to maintain
our existing compliance program, executive compliance committee and compliance committee of the Board of
Directors; provide certain compliance training; continue screening new and current employees to ensure they are
eligible to participate in federal health care programs; engage an independent review organization (“IRO”) to
perform certain auditing and reviews and prepare certain reports regarding our compliance with federal health
care programs, our billing submissions to federal health care programs and our compliance and risk mitigation
programs; and provide certain reports and management certifications to the OIG. Additionally,
the CIA
specifically requires that we report substantial overpayments that we discover we have received from the federal
health care programs, as well as probable violations of federal health care laws. Upon breach of the CIA, we
could become liable for payment of certain stipulated penalties, or could be excluded from participation in
federal health care programs. Although we believe that we are currently in compliance with the CIA, any
violations of the agreement 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. We are also a defendant in several class action lawsuits. See Part II, Item 8,
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 class
action, and any potential liability costs associated with this matter, and we maintain no insurance that covers
any portion of the pending class action lawsuits.

With respect to the pending securities class action, we may be obligated to indemnify (and advance legal
expenses to) both current and former officers, employees and directors in connection with this matter. We
maintain directors’ and officers’ liability insurance that we believe should cover a portion of the legal costs and
potential liability costs associated with this matter. 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. Furthermore, our insurance carriers may seek to deny coverage in this matter, in which
case we may have to fund the indemnification amounts owed to such directors and officers ourselves. We do not

17

maintain any insurance that will cover any part of the class action lawsuits in which we are defendants. If our
insurance coverage 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 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:

•

•

•

•

•

•

•

•

•

•

•

•

•

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;

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:

•

•

•

•

•

•

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 establish 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.

18

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 as well as in accordance with the requirements of our CIA, in which third party firms engaged
by CMS or by the Company 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:

•

•

•

•

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 for home health care centers through a regulation published in 2012; under the regulation,
CMS may impose temporary management, direct a plan of correction, direct training or 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 issued a proposed rule on October 9,
2014, revising the Medicare conditions of participation for home health care centers across the industry, with an
unknown effective date. We provided public comments on the proposed changes, but do not know at this time
what effect the finalized 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.

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

19

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. 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, which 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 phased-in effective
dates, as well as 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.

PPACA makes a number of changes to Medicare payment rates and also calls for a rebasing of the home health
payment system that began in 2014 and will continue through 2017. 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.”

Regulations implementing the provisions of the PPACA and related initiatives 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, 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. 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.

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 these payors to seek to lower their 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.

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Finally, efforts to repeal or substantially modify provisions of the PPACA continue in Congress. The ultimate
outcomes of legislative efforts to repeal, substantially amend, eliminate or reduce funding for the PPACA is
unknown. While these attempts have not been successful to date, the results of the Presidential and Congressional
elections in 2016 could have a significant impact on future efforts to amend or repeal PPACA. In addition to the
prospect for legislative repeal or revision, the President and members of his administration hostile to the PPACA
could seek to impose substantial changes upon the PPACA through administrative action, including revised
regulation and other Executive Branch action. The effect of any major modification or repeal of the PPACA on
our business, operations, or financial condition cannot be predicted, but could be materially adverse.

Risks Related to our Growth Strategies

Our growth strategy depends on our ability to acquire additional care centers and integrate and operate these
care centers effectively. If our growth strategy is unsuccessful or we are not able to successfully integrate
newly acquired care centers into our existing operations, 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. In 2012, the OIG released a report that concluded Medicare had overpaid home health agencies due to
in 2014, CMS adopted a temporary
inappropriate and questionable billing practices. Citing this report,
moratorium on new home health agencies and home health agency subunits in certain regions of Texas,
Michigan, Florida and Illinois. On July 29, 2016, CMS announced it was extending such moratorium for an
additional six months, and that the moratorium would be expanded statewide in each targeted state. 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,

21

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 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.

We could face a variety of risks by expanding into our personal care line of business.

We established a personal care segment of our business with the acquisition of Associated Home Care, which
closed on March 1, 2016. Risks of our entry into the new personal care segment include, without limitation:
(i) potential diversion of management’s time and other resources from our existing home health and hospice
businesses; (ii) unanticipated liabilities or contingencies; (iii) the need for additional capital and other resources
to expand into this new line of business; and (iv) inefficient integration of operational and management systems
and controls. Entry into a new line of business may also subject us to new laws and regulations with which we
are not familiar, and may lead to increased litigation and regulatory risk. If we are unable to successfully
implement our growth strategies, our revenue and profitability may not grow as we expect, our competitiveness
may be materially and adversely affected, and our reputation and business may be harmed.

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 in certain states.

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

22

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. Further, if states
remove existing CONs or POAs, we would face increased competition in these states. For example, in 2013, the
Governor of South Carolina vetoed funding for that state’s CON program, effectively shutting down the program.
Following a judicial challenge, the South Carolina Supreme Court ruled in April 2014 that the South Carolina
Department of Health and Environmental Control was statutorily obligated to administer the CON program,
regardless of the Governor’s veto. Following this ruling, legislation has been introduced in the South Carolina
House of Representatives for the purpose of limiting the application of that state’s CON program. We do not
know at this time what the outcome of this matter will be in South Carolina, and whether this will have any
impact upon our operations. Similarly, there can be no assurances that other states will not seek to eliminate or
limit their existing CON or POA programs in a similar manner, leading to increased competition in these states.
Further, 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, 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
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. We believe that hospitals, physicians and other
referral sources refer patients to us in large part because of our reputation for delivering quality care. 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.

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 systems provided
by external contractors and other service providers. 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

23

problems we may experience with the implementation of the new 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 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 or
other malicious software programs 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, legal claims or proceedings, 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, which may deter our ability to obtain
licenses on commercially reasonable terms from the third party, if at all, or cause the third party to 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.

24

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. 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.

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 in addition to our annual impairment test. If we were to
conclude that a 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
Part II, Item 8, Note 5 – Goodwill and Other Intangible Assets, Net to our consolidated financial statements for
additional information.

Because we have grown in part through acquisitions, goodwill and other acquired intangible assets represent a
substantial portion of our assets. Goodwill was approximately $289.0 million as of December 31, 2016 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 $83.8 million as of December 31, 2016, 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
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

25

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 February 24, 2017, we had approximately 16,000 employees (10,800 home health, 2,800 hospice, 1,800
personal care and 600 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.
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.

We depend greatly on the efforts of our executive officers and other key employees to manage our operations.
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.

26

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 and flooding. 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 in billings and collections 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.

CMS is implementing a three-year pre-claim review demonstration for home health services in the states of
Illinois, Florida, Michigan, Massachusetts, and Texas, which will be phased in during 2016 and 2017, depending
on the state. CMS is testing whether pre-claim review improves methods for the identification, investigation, and
prosecution of Medicare fraud occurring among home health agencies providing services to Medicare
beneficiaries. Additionally, CMS is testing whether the demonstration helps reduce expenditures while
maintaining or improving quality of care. The pre-claim review demonstration for home health services does not
create new clinical documentation requirements. CMS has indicated that home health agencies will submit the
same information they currently submit for payment, but will do so earlier in the process. CMS has further
indicated that this demonstration should not delay care to Medicare beneficiaries and does not alter the Medicare
home health benefit. However,
in increased administrative costs or delays in
reimbursement for home health services in states subject to the demonstration.

this process could result

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.

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

27

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, 2016, we had total outstanding indebtedness of approximately $95.7 million, comprised
mainly of indebtedness incurred in connection with our April 23, 2014 settlement agreement with the U.S.
Department of Justice relating to certain of our clinical and business operations. 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.

28

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, 2016, investors held a short position of approximately
3.2 million shares of our common stock which represented 9.5% 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.

29

Sales of substantial amounts of our common 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested stock outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested stock units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,597,215

—

1,204,572
1,008,157
281,458
209,378
474,286

As of December 31,
2016

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 executive office is located in Nashville, Tennessee in a leased property consisting of 15,825 square feet; our
corporate headquarters is located in Baton Rouge, Louisiana in a leased property consisting of 75,243 square feet.
We believe we have adequate space to accommodate our corporate staff located in these locations for the
foreseeable future.

30

In addition to our executive office and corporate headquarters, we also lease facilities for our home health,
hospice and personal-care care centers. 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
the lease period. The following table shows the location of our 327 Medicare-certified home health care centers,
79 Medicare-certified hospice care centers and 14 personal-care care centers at December 31, 2016:

State

Home Health Hospice Personal Care

State

Home Health Hospice Personal Care

Alabama . . . . . . . . . . .
Arkansas . . . . . . . . . . .
Arizona . . . . . . . . . . . .
California . . . . . . . . . .
Connecticut . . . . . . . . .
Delaware . . . . . . . . . . .
Florida . . . . . . . . . . . . .
Georgia . . . . . . . . . . . .
Illinois . . . . . . . . . . . . .
Indiana . . . . . . . . . . . .
Kansas . . . . . . . . . . . . .
Kentucky . . . . . . . . . . .
Louisiana . . . . . . . . . . .
Massachusetts . . . . . . .
Maine . . . . . . . . . . . . .
Maryland . . . . . . . . . . .

Mississippi

. . . . . . . . .

Missouri

. . . . . . . . . . .

30
5
3
4
4
2
28
62
2
5
1
17
10
5
2
8

10

6

7

—
—
—

—
—

1

6
—

1
1
—
4
8
4
2

—

—

—
—
—
—
—
—
—
—
—
—
—
—
—
14
—
—

—

—

ITEM 3. LEGAL PROCEEDINGS

2
5
2
8

New Jersey . . . . . . .
New York . . . . . . . .
New Hampshire . . .
North Carolina . . . .
Ohio . . . . . . . . . . . . —
Oklahoma . . . . . . . .
Oregon . . . . . . . . . .
Pennsylvania . . . . . .
Rhode Island . . . . . .
South Carolina . . . .
Tennessee . . . . . . . .
Texas . . . . . . . . . . . . —
Virginia . . . . . . . . . .
West Virginia . . . . .
Wisconsin . . . . . . . .
. .
Washington, D.C.

6
3
7
1
19
43

14
11
1
1

Total

. . . . . . . .

327

1

—

2
6
1
—

1
6
2
7
11
1
1
6
—
—

79

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

14

See Part II, Item 8, Note 10 – Commitments and Contingencies for information concerning our legal proceedings.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

31

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PART II

Market Information and Holders

Our common stock trades on the NASDAQ Global Select Market 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, 2016:

First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31, 2015:

First Quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Price Range of
Common Stock

High

Low

$48.48
54.42
55.16
48.13

$31.27
43.61
48.34
45.00

$31.16
46.12
45.48
34.58

$25.83
24.81
36.11
34.72

As of February 24, 2017, there were approximately 513 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; provided, however, that we may pay (i) dividends payable solely in our equity securities and (ii)
dividends if (1) no default or event of default under the Credit Agreement shall have occurred and be continuing at
the time of such dividend or would result therefrom, (2) we demonstrate that, upon giving pro forma effect to such
dividend, our consolidated leverage ratio (as defined in the Credit Agreement) is less than 2.00 to 1.0 and (3) we
demonstrate a minimum liquidity of $50 million upon giving effect to such dividend.

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, 2016:

Period
October 1, 2016 to October 31,

2016 . . . . . . . . . . . . . . . . . . . . . .

November 1, 2016 to

November 30, 2016 . . . . . . . . . .
December 1, 2016 to December 31,
2016 . . . . . . . . . . . . . . . . . . . . . .

(a)
Total Number
of Shares (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

676

—

11,472
12,148(1)

$43.86

—

42.85
$42.91

—

—

—
—

$ —

—

—
$ —

(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.

32

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, 2016, 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, 2011 and the
reinvestment of dividends. The peer group we selected is comprised of: 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.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Amedisys, Inc., the NASDAQ Composite Index,
 and a Peer Group

$450

$400

$350

$300

$250

$200

$150

$100

$50

$0

31-Dec-2011

31-Dec-2012

31-Dec-2013

31-Dec-2014

31-Dec-2015

31-Dec-2016

Amedisys, Inc. 

NASDAQ Composite

Peer Group

Amedisys, Inc. . . . . . . . . . . . . . . . . . . . . . . .
NASDAQ Composite . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . .

$100.00
$100.00
$100.00

$103.64
$116.41
$153.62

$134.10
$165.47
$198.06

$269.02
$188.69
$223.44

$360.40
$200.32
$314.73

$390.74
$216.54
$331.94

12/31/2011

12/31/2012

12/31/2013

12/31/2014

12/31/2015

12/31/2016

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.

33

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, 2016, based on our continuing operations. The financial
data for the years ended December 31, 2016, 2015 and 2014 should be read together with our consolidated
financial statements and related notes included in Item 8, “Financial Statements and Supplementary Data” and
the information included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” herein.

2016 (1)

2015 (2)

2014 (3)
(Amounts in thousands, except per share data)

2013 (4)

2012 (5)

Income Statement Data:
Net service revenue . . . . . . . . . . . . . . . . . . . . . . $1,437,454 $1,280,541 $1,204,554 $1,249,344 $1,440,836
Operating income (loss) from continuing

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

57,340 $

(9,166) $

24,047 $ (154,971) $ (108,855)

Net income (loss) from continuing operations

attributable to Amedisys, Inc. . . . . . . . . . . . . . $

37,261 $

(3,021) $

12,992 $ (93,105) $ (80,262)

Net income (loss) from continuing operations
attributable to Amedisys, Inc. per basic
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Net income (loss) from continuing operations
attributable to Amedisys, Inc. per diluted
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1.12 $

(0.09) $

0.40 $

(2.98) $

(2.68)

1.10 $

(0.09) $

0.40 $

(2.98) $

(2.68)

(1) During 2016, we recorded charges related to Homecare Homebase (“HCHB”) implementation costs in the
amount of $8.4 million ($5.1 million, net of tax) and recognized a non-cash charge to write off assets as a
result of our conversion to the HCHB platform in the amount of $4.4 million ($2.7 million, net of tax).
(2) During 2015, we recorded non-cash charges to write off the software costs incurred related to the
development of AMS3 Home Health and Hospice in the amount of $75.2 million ($45.5 million, net of tax)
and to reduce the carrying value of our corporate headquarters in the amount of $2.1 million ($1.2 million,
net of tax).

(3) During 2014, we recorded charges for relators’ fees and exit and restructuring activity in the amount of
$13.9 million ($8.5 million, net of tax) and recognized non-cash other intangibles impairment charges of
$3.1 million ($2.0 million, net of tax).

(4) 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) and recognized non-cash goodwill and other
intangibles impairment charges of $9.5 million ($5.8 million, net of tax).

(5) During 2012, we recorded a $162.1 million ($110.2 million, net of tax and non-controlling interests) charge
for the impairment of goodwill and other intangibles and incurred certain costs associated with our exit
activities in the amount of $2.7 million ($1.6 million, net of tax).

2016

2015

2014
(Amounts in thousands)

2013

2012

Balance Sheet Data:
Total assets (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $734,029
Total debt, including current portion (1) . . . . . . . . . . .
$ 93,029
Total Amedisys, Inc. stockholders’ equity . . . . . . . . . . $460,203
Cash dividends declared per common share . . . . . . . .

$666,956

$681,715
$728,132
$ 96,630 $113,586 $ 44,735 $100,248
$452,340
$409,568

$397,167
$ — $ — $ — $ — $ —

$724,237

$372,201

(1) Total assets and Total debt, including current portion have been recast to present our retrospective adoption
of Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying
the Presentation of Debt Issuance Costs.

34

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 2016, 2015 and 2014. This discussion
should be read in conjunction with our audited financial statements included in Item 8, “Financial Statements
and Supplementary Data” 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 provider of high-quality in-home healthcare and related services to the chronic, co-morbid, aging
American population, with approximately 78%, 80% and 82% of our revenue derived from Medicare for 2016,
2015 and 2014, respectively.

Our operations involve servicing patients through our three reportable business segments: home health, hospice
and personal care. 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. Our personal care segment provides
patients assistance with the essential activities of daily living. As of December 31, 2016, we owned and operated
327 Medicare-certified home health care centers, 79 Medicare-certified hospice care centers and 14 personal-care
care centers in 34 states within the United States and the District of Columbia.

2016 Developments

• Completed the rollout of Homecare Homebase (“HCHB”), a leading platform for home health and

hospice companies, to all of our care centers.

•

Integrated Infinity HomeCare which we acquired on December 31, 2015.

• Closed the acquisition of Associated Home Care on March 1, 2016, which resulted in the establishment
of our personal care segment which was further expanded with the purchase of the assets of
Professional Profiles, Inc. on September 1, 2016.

2017 Strategy

• Continue to focus on growth through acquisitions in all three segments and increased volumes in

existing care centers.

• Continue to focus on commitment to clinical distinction with a goal of all care centers achieving a 4.0

Quality Star Rating.

• Gain operating efficiencies from investments in infrastructure, including HCHB.

•

Focus on recruitment and retention of world class employees while fostering a culture of engagement
to become the employer of choice in the industry.

Financial Performance

The year ended December 31, 2016 continued our focus on operational improvements that began during 2014
despite the disruption related to the conversion from our proprietary operating system to HCHB.

35

Our home health care centers experienced same store revenue and admissions growth in 2016. The home health
segment saw an increase in non-Medicare revenue and Medicare revenue per episode offset by increases in cost
per visit and other operating expenses which resulted in a $2 million reduction in our operating income over the
year ended December 31, 2015 (see “Results of Operations”).

Our hospice segment achieved significant growth in admissions and average daily census combined with strong
cost controls in 2016, all of which helped deliver an $8 million improvement in our operating income over the
year ended December 31, 2015 (see “Results of Operations”).

Care Centers Summary

Home Health

Hospice

Personal Care

At December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated/Sold . . . . . . . . . . . . . . . . . . . . . . . . .

At December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated/Sold . . . . . . . . . . . . . . . . . . . . . . . . .

At December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/Start-Ups . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

At December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

367
(51)

316
15
(2)

329
1
(3)

327

92
(12)

80
1
(2)

79
—
—

79

—
—

—
—
—

—
14
—

14

When we refer to “same store business,” we mean home health, hospice and personal-care care centers that we
have operated for at least the last twelve months; when we refer to “acquisitions,” we mean home health, hospice
and personal-care care centers that we acquired within the last twelve months; and when we refer to “start-ups,”
we mean home health, hospice and personal-care 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, hospice and personal care services are a highly fragmented and highly competitive industry. The
degree of competiveness varies based 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 healthcare need exists. Currently, 68% and 40% 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. The Centers for Medicare and Medicaid Services
(“CMS”) instituted a rebasing cut of approximately $81 per episode (2.7%) per year for 2014 – 2017; however,

36

we do expect some offset from a market basket update in each of these years. The following payment
adjustments are effective for the years indicated based on CMS’s final rules relative to Medicare reimbursement:

Home Health

Hospice

2017 (1)

2016

2015

2017 (2)

2016

2015

Market Basket Update . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rebasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50/50 Blend of Wage Index . . . . . . . . . . . . . . . . . . . . . . .
Nominal Case Mix Adjustment
. . . . . . . . . . . . . . . . . . . .
PPACA Adjustment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Budget Neutrality Adjustment Factor . . . . . . . . . . . . . . . .
Productivity Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . .

2.8 % 2.3 % 2.6 % 2.7 % 2.4 % 2.9 %
(2.3)
—
(0.9)
—
—
(0.3)

—
—
0.2 —
—
—
(0.3)
(0.3)
(0.7)
(0.7)
(0.5)
(0.5)

(2.8)
(2.4)
—
—
(0.9) —
—
—
0.4
—
(0.5)
(0.4)

—
—
—
(0.3)
—
(0.3)

(1) Effective for episodes scheduled to be completed on or after January 1, 2017.
(2) Effective for services provided from October 1, 2016 to September 30, 2017.

(0.7)% (1.4)% (0.3)% 2.1 % 1.1 % 1.4 %

Our company-specific impact of the final rules could differ depending on differences in the wage index and the
impact of coding and outlier changes.

As part of the 2016 final rule issued in October 2015, CMS finalized their proposal to implement a Home Health
Value-Based Purchasing model in nine states that seeks to test whether incentives for better care can improve
outcomes in the delivery of home health services. Financial impacts from this change, either positive or negative,
would begin January 1, 2018, applied to that calendar year based on 2015 performance data. Care centers
operating in the states included in the proposed model account for approximately 31% of our 2016 home health
Medicare revenue.

Governmental Inquiries and Investigations and Other Litigation

September 2010 Civil Investigative Demand Issued by the U.S. Department of Justice

On April 23, 2014, with no admission of liability on our part, we entered into a settlement agreement to resolve
the U.S. Department of Justice investigation which began with a Civil Investigative Demand (“CID”) issued by
the U.S. Department of Justice on September 27, 2010 and the Stark Law Self-Referral Matter disclosed to CMS
in May 2012. Pursuant to the settlement agreement, on May 2, 2014, we paid the United States an initial payment
in the amount of $116.5 million representing the first installment of $115 million plus interest thereon due under
the settlement agreement, and on October 23, 2014, we paid the United States an additional payment in the
amount of $35.8 million, representing the second and final installment of $35 million plus interest thereon due
under the settlement agreement.

The settlement agreement also resolved allegations made against us by various qui tam relators, who were
required to dismiss their claims with prejudice. We accrued and paid various relators’ attorneys’ fees and
expenses in the aggregate sum of approximately $3.9 million during 2014.

In connection with the settlement agreement, on April 23, 2014, we entered into a corporate integrity agreement
(“CIA”) with the Office of Inspector General-HHS (“OIG”). The CIA formalizes various aspects of our already
existing ethics and compliance programs and contains other requirements designed to help ensure our ongoing
compliance with federal health care program requirements. Among other things, the CIA requires us to maintain
our existing compliance program, executive compliance committee and compliance committee of the Board of
Directors; provide certain compliance training; continue screening new and current employees to ensure they are
eligible to participate in federal health care programs; engage an independent review organization to perform
certain auditing and reviews and prepare certain reports regarding our compliance with federal health care

37

programs, our billing submissions to federal health care programs and our compliance and risk mitigation
programs; and provide certain reports and management certifications to the OIG. Additionally,
the CIA
specifically requires that we report substantial overpayments that we discover we have received from federal
health care programs, as well as probable violations of federal health care laws. Upon breach of the CIA, we
could become liable for payment of certain stipulated penalties, or could be excluded from participation in
federal health care programs. The CIA has a term of five years. We expect the CIA to impact operating expenses
by approximately $1 to $2 million annually.

May 2015 Subpoena Duces Tecum Issued by the U.S. Department of Justice

On May 21, 2015, we received a Subpoena Duces Tecum (“Subpoena”) issued by the U.S. Department of Justice.
The Subpoena requests the delivery of information regarding 53 identified hospice patients to the United States
Attorney’s Office for the District of Massachusetts. It also requests the delivery of documents relating to our
hospice clinical and business operations and related compliance activities.

November 2015 Civil Investigative Demand Issued by the U.S. Department of Justice

On November 3, 2015, we received a CID issued by the U.S. Department of Justice pursuant to the federal False
Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through
designated facilities in the Morgantown, West Virginia area.

June 2016 Civil Investigative Demand Issued by the U.S. Department of Justice

On June 27, 2016, we received a CID issued by the U.S. Department of Justice pursuant to the federal False
Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through
designated facilities in the Parkersburg, West Virginia area.

See Item 8, Note 10 – Commitments and Contingencies to our consolidated financial statements for additional
information regarding our April 2014 CIA, the May 2015 Subpoena issued by the U.S. Department of Justice, the
November 2015 CID issued by the U.S. Department of Justice, the June 2016 CID issued by the U.S. Department
of Justice and for a discussion of and updates regarding class action litigation we are involved in. No assurances
can be given as to the timing or outcome of these items.

38

Results of Operations

Consolidated

The following table summarizes our results from continuing operations (amounts in millions):

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin, excluding depreciation and amortization . . . . . . . . .
% of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
% of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . .

Net loss from discontinued operations . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . .

For the Years Ended December 31,
2014
2015
2016

$1,437.4
604.4

$1,280.5
554.6

$1,204.5
513.4

42.0%
542.7

37.7%
4.4

57.3

4.2
(23.9)
38.9%

37.6

—
(0.4)

43.3%
486.5

38.0%
77.3

(9.2)

8.9
(2.0)
650.6%

(2.3)

—
(0.7)

(3.0)

42.6%
486.3

40.4%
3.1

24.0

(3.1)
(7.7)
36.6%

13.3

(0.2)
(0.3)

$

12.8

Net income (loss) attributable to Amedisys, Inc.

. . . . . . . . . . . . . .

$

37.3

$

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Our 2016 operating results include the results of Infinity HomeCare (“Infinity”), Associated Home Care and
Professional Profiles beginning on the date of their acquisition. These three acquisitions accounted for
$85 million of our $157 million increase in revenue and $35 million of our $56 million increase in other
operating expenses. Our operating results were also impacted by an increase of approximately $21 million in
costs associated with our move to HCHB. Approximately $8 million relates to implementation services provided
by a third party while $4 million is the result of a non-cash charge to write off assets (primarily laptops) not
compatible with our new platform. The remaining $9 million is related to disruption in care center operations as
well as additional corporate resources to support multiple systems. In addition to the $21 million related to
HCHB, we experienced an increase of $5 million in bad debt and contractual reserves due to increased write-offs
and accounts receivable aging due to the HCHB disruption. While we anticipated these costs to continue as we
completed the roll-out, our care centers generally return to normal operating results approximately 60 to 90 days
after implementation; we completed the HCHB roll-out during the three-month period ended December 31, 2016.
Additionally, our results were impacted by approximately $12 million as a result of the 2016 CMS rate cut.

39

Total other income (expense), net decreased $1 million in 2016 from 2015 after considering the impact of the
following items (amounts in millions):

Legal settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from equity method investment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense related to tax audit reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Life insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt refinance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense related to long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on disposal of property and equipment or sale of care centers . . . . . . . . .

For the Years Ended
December 31,

2016

2015

$ 7.4
6.7

$ 2.3
3.5
(0.6) —
1.0
—
(3.2)
—
(7.6)
(4.5)
0.2
—

$ 0.7

$ 4.5

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Our 2015 results were impacted by a $75 million non-cash charge to write off the software costs incurred related
to the development of AMS3 Home Health and Hospice and a $2 million non-cash charge to reduce the carrying
value of our corporate headquarters.

During the first quarter of 2014, we committed to a plan to consolidate 21 operating home health care centers and
four operating hospice care centers with care centers servicing the same markets and close 23 home health care
centers and six hospice care centers. As a result of this exit activity, we reduced our regional leadership structure
and corporate support functions. Separate from the restructuring costs, we also recorded severance costs
associated with the departure of our former Chief Executive Officer and a charge for relator fees associated with
our U.S. Department of Justice settlement during the first quarter of 2014. Additionally, we recorded a non-cash
other intangibles impairment charge during the fourth quarter of 2014. The following details the costs associated
with these activities (amounts in millions):

For the Year Ended December 31, 2014

Home Health Hospice Corporate

Total

Severance (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring severance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease terminations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exit and restructuring activities cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Department of Justice Settlement/Relator Fees . . . . . . . . . . . . . . .

$ 2.0
2.1
1.9
1.6

7.6
—

$ 0.1
0.6
0.2
1.5

2.4
—

$—

3.0
—
—

3.0
3.9

$ 2.1
5.7
2.1
3.1

13.0
3.9

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7.6

$ 2.4

$ 6.9

$16.9

(a)

Includes $0.8 million and $0.1 million for severance included in cost of service for home health and
hospice, respectively.

Our operating results were impacted by the sale, closure and consolidation of numerous care centers as
mentioned above. Accordingly, our results for the year ended December 31, 2015 were not fully comparable to
the year ended December 31, 2014.

Our operating income, excluding the $77 million asset impairment charges in 2015 and the $17 million in costs
incurred in 2014 noted above, increased $27 million as our home health operating income increased $29 million,
our hospice operating income increased $13 million and our corporate operating expense increased $15 million.

40

The primary drivers of our improvement in performance were the closure/consolidation of care centers that had a
negative operating contribution, an increase in our revenue per episode, an increase in non-Medicare revenue,
growth in hospice census and a reduction in operating expenses. The increase in corporate operating expenses
was primarily due to the $6 million Wage and Hour Litigation settlement accrual and HCHB maintenance and
hosting and implementation costs of $8 million. The increase in HCHB maintenance and hosting was offset by a
$4 million decrease in depreciation and amortization as we moved from our proprietary software to HCHB.

Total other income (expense), net decreased $1 million in 2015 from 2014 after considering the impact of the
following items (amounts in millions):

Legal settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from equity method investment
. . . . . . . . . . . . . . . . . . . . . . .
Life insurance proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt refinance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (loss) on disposal of property and equipment or sale of care centers . . . . . .

For the Years Ended
December 31,

2015

$ 7.4
6.7
1.0
(3.2)
0.2

$12.1

2014

$ 1.1
—
—
(0.5)
0.7

$ 1.3

The difference in income tax expense in 2015 and 2014 was driven primarily by the decrease in income before
income taxes. Additionally, the effective tax rate for the year ended December 31, 2015 does not provide a
meaningful comparison to other periods. The effective tax rate for the year was influenced by the relationship of
the amount of “effective tax rate drivers” (i.e. non-deductible expenses, non-taxable income, tax credits,
valuation allowance, uncertain tax positions, etc.) to (loss) income before income taxes. A significant asset
impairment was recorded during the three-month period ended March 31, 2015, resulting in a scenario where the
company’s (loss) income before income taxes for 2015 was near zero. Consequently, for 2015, the relationship
between the “effective tax rate drivers” and (loss) income before income taxes was distorted.

41

Home Health Division

The following table summarizes our home health segment results from continuing operations:

For the Years Ended December 31,
2014
2015
2016

Financial Information (in millions):
Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

822.4
263.1

761.4 $
243.7

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,085.5
643.7

441.8
303.2

1,005.1
584.2

420.9
280.6

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

138.6

$

140.3 $

751.5
205.4

956.9
559.4

397.5
294.4

103.1

Key Statistical Data:
Medicare:
Same Store (1):
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recertifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (2):
Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recertifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Completed episodes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average revenue per completed episode (3) . . . . . . . . . . . . . . . . . . . . . . .
Visits per completed episode (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare:
Same Store (1):
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recertifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (2):
Admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recertifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (2):
Visiting Clinician Cost per Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Clinical Manager Cost per Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

$

2%
3%
0%

3%
3%
(1%)

1%
0%
1%

194,662
103,193
289,862
5,124,002
2,839
17.5

178,226
99,762
269,227
4,797,734

$

2,825 $
17.5

177,243
102,263
272,864
4,794,609
2,768
17.3

8%
2%
8%

21%
18%
14%

19%
17%
13%

98,448
38,618
2,050,975

96,934
35,870
1,954,543

83,940
32,074
1,651,745

81.18
$
8.53 $

78.23 $
8.29 $

78.47
8.30

86.77

Total Cost per Visit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

89.71

$

86.52 $

Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,174,977

6,752,277

6,446,354

(1) Same store information represents the percent increase (decrease) in our Medicare and Non-Medicare
revenue, admissions or recertifications for the period as a percent of the Medicare and Non-Medicare
revenue, admissions or recertifications of the prior period.

(2) Total includes acquisitions; based on continuing operations for all periods presented.
(3) Average Medicare revenue per completed episode is the average Medicare revenue earned for each

Medicare completed episode of care.

(4) 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.

42

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Overall, our operating income decreased $2 million on a $21 million increase in gross margin offset by a
$23 million increase in other operating expenses. These results are inclusive of Infinity which accounted for
$49 million of our total revenue increase and $18 million of other operating expenses. Our results have been
negatively impacted by approximately $12 million related to the CMS rate cut which became effective January 1,
2016 and approximately $6 million as the result of disruptions associated with the roll-out of HCHB.

Net Service Revenue

Our Medicare revenue increased $61 million which is inclusive of $48 million from acquired care centers. The
increase in same store revenue is due to higher admission volumes. Our revenue per episode was relatively flat
despite the impact of the CMS rate cut in 2016; the increase was due to an increase in patient acuity.

Our non-Medicare revenue increased approximately $19 million, with revenues from episodic payors increasing
16% while our revenue from per visit payors grew 5%. We continue to focus on contract payors with significant
concentrations in our markets and those that add incremental margin to our operations as we continue to evaluate
our portfolio of managed care contracts.

Cost of Service, Excluding Depreciation and Amortization

Our cost of service increased $59 million primarily as a result of a 6% increase in visits and a 4% increase in cost
per visit. The increase in cost per visit is primarily due to higher health insurance expense, planned wage
increases and additional costs related to our HCHB roll-out. We believe that the impact of the HCHB roll-out is
temporary and will normalize now that the roll-out is complete.

Other Operating Expenses

Other operating expenses increased $23 million due to increases in other care center related expenses, primarily
salaries and benefits, travel and training expense and HCHB maintenance and hosting fees. Other operating
expense related to care centers acquired from Infinity were approximately $18 million. We have completed the
consolidation of our legacy Florida operations with Infinity and the conversion of Infinity to our back office
platform.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Overall, our operating income excluding the $8 million in exit activity costs in 2014, increased $29 million on a
$22 million increase in gross margin and a $7 million decline in other operating expenses. 2014 results included
revenue of $16 million and operating losses of $5 million for those care centers that were closed, consolidated or
sold.

Net Service Revenue

Our Medicare revenue increase of approximately $10 million consisted of a $16 million increase due to higher
revenue per episode offset by $6 million due to lower volumes. The decrease in volumes is primarily due to the
sale, closure and consolidation of 51 care centers since December 31, 2013, as we experienced a 3% increase in
same store admissions in 2015. Net service revenue included a reduction of $1 million for the estimated impact
of the 2016 rate change.

Our non-Medicare revenue increased $38 million as we have focused on contracted payors with significant
concentrations in our markets and those that add incremental margin to our operations.

43

As mentioned above, we have closed numerous care centers since December 31, 2013. Accordingly, our 2015
results were not fully comparable to the prior year. The following table summarizes our net service revenue for
our operating care centers and those care centers that were closed, consolidated or sold.

For the Years Ended
December 31,

2015

2014

Revenue (in millions):
Operating care centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated/Sold care centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,005.1

—

$941.2
15.7

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,005.1

956.9

Cost of Service, Excluding Depreciation and Amortization

Our cost of service, excluding the $1 million in exit activity costs in 2014, increased $26 million primarily as a
result of a 5% increase in visits. Our cost per visit remained relatively flat.

Other Operating Expenses

Other operating expenses, excluding the $7 million in exit activity costs in 2014, decreased $7 million due to
decreases in other care center related expenses as a result of our closure and consolidation strategy and the
reduction in divisional leadership; the majority of the reductions were in salaries and benefits and rent expense,
offset by a $5 million increase in legal expense related to the self-disclosure matter. In addition, our provision for
doubtful accounts decreased $3 million and our depreciation and amortization expense decreased $4 million
compared to 2014.

44

Hospice Division

The following table summarizes our hospice segment results from continuing operations:

For the Years Ended
December 31,

2016

2015

2014

Financial Information (in millions):
Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 297.7
18.3

$ 258.5 $ 232.6
15.0

16.9

316.0
163.1

152.9
77.0

275.4
141.7

133.7
66.0

247.6
131.7

115.9
63.4

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

75.9 $ 67.7 $ 52.5

Key Statistical Data:
Same Store (1):
Medicare revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hospice admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average daily census . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total (2):
Hospice admissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average daily census . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue per day, net
Cost of service per day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average discharge length of stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15%
9%
17%
16%

13%
18%
16%
12%

(2%)
6%
(3%)
(4%)

22,526
5,912
$146.05
$ 75.36
96

19,205
17,081
5,105
4,632
$146.51
$147.78
$ 76.06 $ 77.93
100

92

(1) Same store information presented is the percent increase (decrease) in our Medicare and Non-Medicare
revenue, Hospice admissions or average daily census for the period as a percent of the Medicare and
Non-Medicare revenue, Hospice admissions or average daily census of the prior period.

(2) Total includes acquisitions; based on continuing operations for all periods presented.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Overall, our operating income increased $8 million on a $19 million increase in gross margin offset by an
$11 million increase in other operating expenses.

Net Service Revenue

Our hospice revenue increased approximately $41 million due to an increase in our average daily census as a
result of a 17% increase in hospice admissions. We benefited from a 1.1% hospice rate increase effective
October 1, 2015. Beginning January 1, 2016, CMS provided for two separate payment rates for routine care:
payments for the first 60 days of care and care beyond 60 days. In addition to the two rates, beginning January 1,
2016, Medicare is also reimbursing for a service intensity add-on (“SIA”). The SIA is based on visits made in the
last seven days of life by a registered nurse (“RN”) or medical social worker (“MSW”) for patients in a routine
level of care.

Our revenue per day was impacted by an increase in contractual reserves and write-offs which occurred during
the HCHB roll-out. We expect to return to normal levels during 2017.

45

Cost of Service, Excluding Depreciation and Amortization

Our hospice cost of service increased $21 million as the result of a 16% increase in average daily census.

Other Operating Expenses

Other operating expenses increased $11 million due to increases in other care center related expenses, primarily
salaries and benefits and HCHB maintenance and hosting fees. We have experienced an increase in days revenue
outstanding, net as we transitioned to the HCHB platform. As such, our provision for doubtful accounts increased
approximately $4 million, which is reflective of an increase in our accounts receivable aging. We do expect to
return to normal days revenue outstanding, net now that we are on one operating platform.

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Overall, our operating income, excluding the $2 million in exit activity costs in 2014, increased $13 million on
an $18 million increase in gross margin offset by a $5 million increase in other operating expenses.

Net Service Revenue

Our hospice revenue increased $28 million, primarily as the result of an increase in our average daily census as a
result of a 16% increase in hospice admissions. We benefitted from a 1.4% hospice rate increase effective
October 1, 2014.

As mentioned above, we have closed numerous care centers since December 31, 2013. Accordingly, our 2015
results were not fully comparable to the prior year. The following table summarizes our net service revenue for
our operating care centers and those care centers that were closed, consolidated or sold.

Revenue (in millions):
Operating care centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Closed/Consolidated/Sold care centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended
December 31,

2015

2014

$275.4
—

$243.4
4.2

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

275.4

247.6

Cost of Service, Excluding Depreciation and Amortization

Our hospice cost of service increased $10 million as the result of a 10% increase in average daily census offset
by a decrease in cost of service per day. We experienced significant improvement in pharmacy and DME cost per
day during 2015.

Other Operating Expenses

Other operating expenses, excluding the $2 million in exit activity costs in 2014, increased $5 million due to
increases in other care center related expenses, primarily salaries and benefits expense and travel costs.

46

Personal Care Division

The following table summarizes our personal care segment results from continuing operations:

Financial Information (in millions):
Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Medicare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

For the Years Ended
December 31,

2016

2015

2014

—
35.9

35.9
26.3

9.6
8.1

1.5

$—
—

—
—

—
—

—
—

—
—

—
—

$—

$—

Key Statistical Data:
Billable hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Clients served . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,539,093
51,520

—
—

—
—

Year Ended December 31, 2016

On March 1, 2016, we acquired Associated Home Care, a personal care home health care company with 9 care
centers. On September 1, 2016, we acquired the assets of Professional Profiles, Inc. which owned and operated 4
personal-care care centers. In addition, during the three-month period ended September 30, 2016 we opened a
start-up personal-care care center. Operating income related to our new personal care division for 2016 was
approximately $2 million on net service revenue of $36 million and cost of service of $26 million; other
operating expenses were approximately $8 million.

Corporate

The following table summarizes our corporate results from continuing operations:

For the Years Ended
December 31,

2016

2015

2014

Financial Information (in millions):
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses before asset impairment charge . . . . . . . . . . . .
Asset impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$141.9
12.4

$154.3
4.4

$126.5
13.4

$139.9
77.3

$114.4
17.2

$131.6
—

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$158.7

$217.2

$131.6

Corporate expenses consist of costs relating to our executive management and administrative support functions,
primarily information services, accounting, finance, billing and collections, legal, compliance, risk management,
procurement, marketing, clinical administration, training, human resources and administration.

Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015

Corporate other operating expenses have increased approximately $14 million which is inclusive of
approximately $12 million in corporate support expenses related to acquisitions, a $3 million increase in
non-cash compensation and a $4 million increase related to HCHB implementation costs offset by decreases of
approximately $5 million in various other costs (including a $2 million decrease in legal settlement expenses).

47

Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014

Excluding the $77 million asset impairment charge in 2015 and the $7 million in exit and restructuring activities
costs and relator fees associated with our U.S. Department of Justice settlement agreement during 2014,
corporate other operating expenses increased $15 million which is inclusive of the $6 million Wage and Hour
Litigation settlement accrual, $4 million in HCHB maintenance and hosting costs, $4 million related to HCHB
implementation and $2 million in severance costs.

Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows for the periods indicated (amounts in millions):

For the Years Ended
December 31,

2016

2015

2014

Cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . .
Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . .

$ 62.2
(52.0)
(7.5)

$107.8
(67.4)
(20.9)

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . .

2.7
27.5

19.5
8.0

$(65.5)
(14.3)
70.5

(9.3)
17.3

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . .

$ 30.2

$ 27.5

$ 8.0

Cash provided by operating activities decreased $45.6 million during 2016 compared to 2015 primarily due to a
decrease in our cash collections relative to growth in accounts receivable as our days revenue outstanding, net
increased eight days (approximately $41 million) from December 31, 2015. For additional information regarding
our operating performance, see “Results of Operations”. Cash provided by operating activities increased
$173.3 million during 2015 compared to 2014 primarily due to an increase in our operating performance as
compared to 2014 and the payment of the $150.0 million in 2014 under our settlement agreement with the U.S.
Department of Justice. The recognition of the asset impairment charge of $77.3 million, which resulted in the net
loss for 2015 was a non-cash item and therefore had no impact on our cash flow from operations.

Cash used in investing activities decreased $15.4 million during 2016 compared to 2015 primarily due to
decreases in cash paid for acquisitions ($33.6 million), capital expenditures ($5.7 million) and investments
($2.4 million), offset by decreases in proceeds from the sale of property and equipment related to the sale of our
former corporate headquarters and in proceeds from the sale of investments. Cash used in investing activities
increased $53.1 million during 2015 compared to 2014 primarily due to our acquisition activity ($69.1 million)
and an increase in capital expenditures ($9.4 million), offset by proceeds from the sale of property and equipment
($20.0 million) and investments ($5.0 million).

Cash used in financing activities decreased $13.4 million during 2016 compared to 2015 primarily due to tax
benefits from stock compensation plans and a decrease in repayments of outstanding borrowings, offset by
repurchases of company stock pursuant to our stock repurchase program. Cash used in financing activities
increased $91.4 million during 2015 compared to 2014 primarily due to an increase in our borrowings under our
long-term obligations partially offset by principal payments.

Liquidity

Typically, our principal source of liquidity is the collection of our patient accounts receivable, primarily through
the Medicare program. 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.

48

During 2016, we spent $6.8 million in routine capital expenditures compared to $9.3 million and $7.0 million
during 2015 and 2014, respectively. Routine capital expenditures primarily include equipment and computer
software and hardware. In addition, we spent $8.9 million in non-routine capital expenditures related to leasehold
improvements and IT infrastructure upgrades compared to $12.1 million and $5.0 million during 2015 and 2014,
respectively, related to enhancements to our point of care software. Our capital expenditures for 2017 are
expected to be approximately $10.0 million – $12.0 million.

During 2014, we paid the U.S. government $152.3 million representing the $150 million settlement plus interest
thereon due under the settlement agreement to resolve both the U.S. Department of Justice investigation and the
Stark Law Self-Referral Matter.

On August 28, 2015, we entered into a Credit Agreement that provides for senior secured facilities in an initial
aggregate principal amount of up to $300 million comprised of (a) a term loan facility in an initial aggregate
principal amount of $100 million and (b) a revolving credit facility in an initial aggregate principal amount of up
to $200 million. The net proceeds of the term loan and existing cash on hand were used to pay off (i) our existing
term loan under our prior Credit Agreement dated as of October 22, 2012, as amended with a principal balance of
$27 million and (ii) our existing term loan under our prior Second Lien Credit Agreement dated July 28, 2014,
with a principal balance of $70 million.

As of December 31, 2016, we had $30.2 million in cash and cash equivalents and $173.3 million in availability
under our $200.0 million Revolving Credit Facility. Based on our operating forecasts and our new debt service
requirements, we believe we will have sufficient liquidity to fund our operations, capital requirements and debt
service requirements.

Outstanding Patient Accounts Receivable

Our patient accounts receivable, net increased $41.0 million from December 31, 2015 to December 31, 2016. Our
cash collection as a percentage of revenue was 99% and 100% for December 31, 2016 and 2015, respectively.
Our days revenue outstanding, net at December 31, 2016 was 40.2 days which is an increase of 8.3 days from
December 31, 2015. We have experienced a slowdown in collections primarily as the result of our shift from our
legacy platforms (AMS2 and AMS3) to HCHB. We anticipate further reductions in days revenue outstanding
now that we have completed our HCHB implementation and are completely off our legacy system. Our days
revenue outstanding, net at December 31, 2015 does not include Infinity HomeCare, which was acquired on
December 31, 2015.

Our patient accounts receivable includes unbilled receivables and are aged based upon our initial service date.
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. Our unbilled patient accounts receivable can be impacted by acquisition
activity, probe edits or regulatory changes which result in additional information or procedures needed prior to
billing. 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.

49

Provision for estimated revenue adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended
December 31,

2016

$ 7.9
19.5

$27.4

2015

$ 6.1
14.1

$20.2

As a percent of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.9%

1.6%

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, 2016:
Medicare patient accounts receivable, net (1) . . . . . . . . . . . . . . . . . . .

$82.7

$17.1

$ 1.4

$—

$101.2

Other patient accounts receivable:

Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13.6
39.8

3.6
10.4

3.6
7.6

0.2
3.8

21.0
61.6

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$53.4

$14.0

$11.2

$ 4.0

$ 82.6

Allowance for doubtful accounts (2)

. . . . . . . . . . . . . . . . . . . . .

Non-Medicare patient accounts receivable, net

. . . . . . . . . . . . . . . . .

Total patient accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . .

Days revenue outstanding, net (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . .

(17.7)

$ 64.9

$166.1

40.2

0-90

91-180

181-365 Over 365

Total

At December 31, 2015:
Medicare patient accounts receivable, net (1) . . . . . . . . . . . . . . . . . . .

$73.5

$7.0

$(0.4)

$—

$ 80.1

Other patient accounts receivable:

Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12.4
31.2

1.7
8.1

0.9
5.1

—
2.0

15.0
46.4

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$43.6

$9.8

$ 6.0

$ 2.0

$ 61.4

Allowance for doubtful accounts (2)

. . . . . . . . . . . . . . . . . . . . .

Non-Medicare patient accounts receivable, net

. . . . . . . . . . . . . . . . .

Total patient accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . .

Days revenue outstanding, net (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . .

(16.5)

$ 44.9

$125.0

31.9

(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.

50

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for estimated revenue adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended
December 31,

2016

$ 4.0
7.9
(7.8)

$ 4.1

2015

$ 3.1
6.1
(5.2)

$ 4.0

Our estimated revenue adjustments were 3.9% and 4.8% of our outstanding Medicare patient accounts
receivable at December 31, 2016 and December 31, 2015, respectively.

(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,

2016

2015

Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 16.5
19.5
(18.3)

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 17.7

$ 14.3
14.1
(11.9)

$ 16.5

Our allowance for doubtful accounts was 21.5% and 26.9% of our outstanding Medicaid and private patient
accounts receivable at December 31, 2016 and 2015, 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,
2016 and 2015 by our average daily net patient revenue for the three-month periods ended December 31,
2016 and 2015, respectively.

Indebtedness

Credit Agreement

On August 28, 2015, we entered into a Credit Agreement that provides for senior secured facilities in an initial
aggregate principal amount of up to $300 million.

The Credit Facilities are comprised of (a) a term loan facility in an initial aggregate principal amount of
$100 million (the “Term Loan”); and (b) a revolving credit facility in an initial aggregate principal amount of up
to $200 million (the “Revolving Credit Facility”). The Revolving Credit Facility provides for and includes within
its $200 million limit a $25 million swingline facility and commitments for up to $50 million in letters of credit.
Upon lender approval, we may increase the aggregate loan amount under the Credit Facilities by a maximum
amount of $150 million.

The net proceeds of the Term Loan and existing cash on hand were used to pay off (i) our existing term loan
under our Prior Credit Agreement, dated as of October 22, 2012, as amended (the “Prior Credit Agreement”)
with a principal balance of $27 million and (ii) our existing term loan under our prior Second Lien Credit
Agreement dated July 28, 2014 (the “Second Lien Credit Agreement”), with a principal balance of $70 million.
The final maturity of the Term Loan is August 28, 2020. The Term Loan began amortizing on March 31, 2016
remaining quarterly installments of
and will continue amortizing over 14 quarterly installments (four

51

$1.25 million followed by eight quarterly installments of $2.5 million beginning March 31, 2018, followed by
two quarterly installments of $3.1 million beginning March 31, 2020, subject to adjustment for prepayments),
with the remaining balance due upon maturity.

The Revolving Credit Facility may be used to provide ongoing working capital and for general corporate
purposes of the Company and its subsidiaries,
including permitted acquisitions, as defined in the Credit
Agreement. The final maturity of the Revolving Credit Facility is August 28, 2020 and will be payable in full at
that time.

The interest rate in connection with the Credit Facilities shall be selected from the following by us: (i) the Base
Rate plus the Applicable Rate or (ii) the Eurodollar Rate plus the Applicable Rate. The “Base Rate” means a
fluctuating rate per annum equal to the highest of (a) the federal funds rate plus 0.50% per annum, (b) the prime
rate of interest established by the Administrative Agent, 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 Rate” is based on the consolidated leverage ratio and is presented in the table below. As of
December 31, 2016, the Applicable Rate is 1.00% per annum for Base Rate Loans and 2.00% per annum for
Eurodollar Rate Loans. We are also subject to a commitment fee and letter of credit fee under the terms of the
Credit Facilities, as presented in the table below.

Consolidated Leverage Ratio
≥ 2.75 to 1.0
< 2.75 to 1.0 but ≥ 1.75 to 1.0
< 1.75 to 1.0 but ≥ 0.75 to 1.0
< 0.75 to 1.0

Margin for
ABR Loans

Margin for
Eurodollar Loans

Commitment
Fee

Letter of
Credit Fee

2.00%
1.50%
1.00%
0.50%

3.00%
2.50%
2.00%
1.50%

0.40%
0.35%
0.30%
0.25%

3.00%
2.50%
2.00%
1.50%

Our weighted average interest rate for our $100.0 million Term Loan, under our Credit Agreement, was 2.5% for
2016 and 2.7% for the period August 28, 2015 to December 31, 2015. Our weighted average interest rate for our
$200.0 million Revolving Credit Facility was 3.5% for 2016.

As of December 31, 2016, our availability under our $200.0 million Revolving Credit Facility was
$173.3 million as we had $26.7 million outstanding in letters of credit.

The Credit Agreement requires maintenance of two financial covenants: (i) a consolidated leverage ratio of
funded indebtedness to EBITDA, as defined in the Credit Agreement, and (ii) a consolidated fixed charge
coverage ratio of EBITDA plus rent expense (less cash taxes less capital expenditures) to scheduled debt
repayments plus interest expense plus rent expense, all as defined in the Credit Agreement. Each of these
covenants is calculated over rolling four-quarter periods and also is subject to certain exceptions and baskets. As
of December 31, 2016, our consolidated leverage ratio was 1.0 and our consolidated fixed charge coverage ratio
was 3.8 and we are in compliance with the Credit Agreement. The Credit Agreement also contains customary
covenants, including, but not limited to, restrictions on: incurrence of liens; incurrence of additional debt; sales of
assets and other fundamental corporate changes; investments; and declarations of dividends. These covenants
contain customary exclusions and baskets.

The Credit Facilities are guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries. The
Credit 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 and (ii) provide guarantees from subsidiaries that in the aggregate represent not less than 70%
of consolidated adjusted EBITDA, subject to certain exceptions.

In connection with entering into the Credit Agreement, we entered into (i) a Security Agreement with the
Administrative Agent dated August 28, 2015 and (ii) a Pledge Agreement with the Administrative Agent dated as

52

of August 28, 2015 for the purpose of securing the payment of our obligations under the Credit Agreement.
Pursuant to the Security Agreement and the Pledge Agreement, as of the effective date of the Credit Agreement,
our obligations under the Credit Agreement are secured by (i) the grant of a first lien security interest in the
non-real estate assets of substantially all of our direct and indirect, wholly-owned subsidiaries (subject to
exceptions) and (ii) the pledge of the equity interests in (a) substantially all of our direct and indirect, wholly-
owned corporate, limited liability company and limited partnership subsidiaries and (b) those joint ventures
which constitute subsidiaries under the Credit Agreement (subject, in the case of the Pledge Agreement, to
exceptions).

In connection with the entry into the Credit Agreement, on August 28, 2015, each of the Prior Credit Agreement
and the Second Lien Credit Agreement were terminated. The Company paid a call premium of $700,000
associated with the termination of the Second Lien Credit Agreement and the voluntary prepayment of the
amounts owed thereunder as of August 28, 2015, and expensed $2.5 million in deferred debt issuance costs
during the three-month period ended September 30, 2015. Also in connection with our entry into the Credit
Agreement, we recorded $2.4 million in deferred debt issuance costs as other assets in our consolidated balance
sheet during 2015 which was reclassified to long-term obligations, less current portion during 2016 in accordance
with Accounting Standards Update 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the
Presentation of Debt Issuance Costs.

Stock Repurchase Program

On September 9, 2015, we announced that our Board of Directors authorized a stock repurchase program, under
which we may repurchase up to $75 million of our outstanding common stock on or before September 6, 2016.

Under the terms of the program, we may repurchase shares from time to time in open market transactions, block
purchases or in private transactions in accordance with applicable federal securities laws and other legal
requirements. We may enter into Rule 10b5-1 plans to effect some or all of the repurchases. The timing and the
amount of the repurchases, if any, was determined by management based on a number of factors, including but
not limited to share price, trading volume and general market conditions, as well as on working capital
requirements, general business conditions and other factors.

Pursuant to this program, we repurchased 324,141 shares of our common stock at a weighted average price of
$37.96 per share and a total cost of approximately $12.3 million during 2016 and 116,859 shares of our common
stock at a weighted average price of $39.20 per share and a total cost of approximately $4.6 million during 2015.
The repurchased shares are classified as treasury shares. The stock repurchase program expired on September 6,
2016.

Contractual Obligations and Medicare Liabilities

Our future contractual obligations and Medicare liabilities at December 31, 2016 were as follows (amounts in
millions):

Long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 95.7
8.3
Interest on long-term obligations (1) . . . . . . . . . . . . . . . . . . . . . . . . .
72.0
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2
Capital commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47.3
Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.1
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

$228.6

53

Payments Due by Period
4-5
Years

Less than
1 Year

1-3
Years

After
5 Years

$ 5.2
2.6
23.5
1.2
14.0
0.3

$46.8

$20.5 $70.0

$—
1.2 —
4.6
13.4
—
—
8.5 —
—

4.5
30.5
—
24.8
3.8 —

$84.1

$93.1

$ 4.6

(1)

Interest on debt with variable rates was calculated using the current rate of that particular debt instrument at
December 31, 2016.

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, hospice and personal-care 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. 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

54

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 the number of days elapsed during an episode of care.

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. 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.
Beginning for the cap year ending October 31, 2014, providers are required to self-report and pay their estimated
cap liability by March 31st of the following year. As of December 31, 2016, we have settled our Medicare
hospice reimbursements for all fiscal years through October 31, 2012 and we have recorded $0.8 million for
estimated amounts due back to Medicare in other accrued liabilities for the Federal cap years ended October 31,
2013 through October 31, 2016. As of December 31, 2015, we had recorded $1.4 million for estimated amounts
due back to Medicare in other accrued liabilities for the Federal cap years ended October 31, 2013 through
October 31, 2016.

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.

55

Personal Care Revenue Recognition

Personal Care Non-Medicare Revenue

We generate net service revenues by providing our services directly to patients primarily on a per hour, visit or
unit basis. We receive payment for providing such services from our payor clients, including state and local
governmental agencies, managed care organizations, commercial insurers and private consumers. Net service
revenues are principally provided based on authorized hours, visits or units determined by the relevant agency, at
a rate that is either contractual or fixed by legislation which are recognized as net service revenue at the time
services are rendered.

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 collectability 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
upon independent third-party actuarial calculations which consider historical claims data. 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
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

56

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 and personal-care care centers and have also deemed them to be a
single reporting unit.

During 2016, 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, 2016. 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 and non-compete agreements. We
amortize non-compete agreements and acquired names that we do not intend to use in the future 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 acquired names.

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, 2016 and 2015 our net deferred tax assets were $107.9 million and
$125.2 million, respectively.

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. In the event future taxable income is below management’s estimates or is generated in tax

57

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) or the Prime Rate and therefore, our
consolidated statements of operations and our consolidated statements of cash flows are exposed to changes in
interest rates. As of December 31, 2016, the total amount of outstanding debt subject to interest rate fluctuations
was $95.0 million. A 1.0% interest rate change would cause interest expense to change by approximately
$0.9 million annually.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

58

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 (the
Company) as of December 31, 2016 and 2015, and the related consolidated statements of operations,
comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period
ended December 31, 2016. 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 consolidated financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the consolidated 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, 2016 and 2015, and the results of their
operations and their cash flows for each of the years in the three-year period ended December 31, 2016, 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, 2016, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated March 1, 2017, expressed an unqualified
opinion on the effectiveness of Amedisys, Inc.’s internal control over financial reporting.

/s/ KPMG LLP

Baton Rouge, Louisiana
March 1, 2017

59

AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)

As of December 31,
2015
2016

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,197
Patient accounts receivable, net of allowance for doubtful accounts of $17,716, and

$ 27,502

$16,526 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net of accumulated depreciation of $138,650 and $141,793 . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Intangible assets, net of accumulated amortization of $27,864 and $25,386 . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

166,056
7,397
11,260

214,910
36,999
288,957
46,755
107,940
38,468

125,010
8,110
14,641

175,263
42,695
261,663
44,047
125,245
32,802

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $734,029

$681,715

Current liabilities:

LIABILITIES AND EQUITY

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term obligations, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 30,358
82,480
63,290
5,220

181,348
87,809
3,730

$ 25,682
72,546
71,965
5,000

175,193
91,630
4,456

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

272,887

271,279

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; 35,253,577, and

34,786,966 shares issued; and 33,597,215 and 33,607,282 shares outstanding . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock at cost 1,656,362, and 1,179,684 shares of common stock . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total Amedisys, Inc. stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35
537,472
(46,774)
15
(30,545)

460,203
939

35
504,290
(26,966)
15
(67,806)

409,568
868

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

461,142

410,436

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $734,029

$681,715

The accompanying notes are an integral part of these consolidated financial statements.

60

AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)

For the Years Ended December 31,
2014
2015
2016

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,437,454
833,055
Cost of service, excluding depreciation and amortization . . . . . . . . . . . .
General and administrative expenses:

$1,280,541
725,915

$1,204,554
691,061

Salaries and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)
Other income (expense):

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from equity method investments . . . . . . . . . . . . .
Miscellaneous, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total other income (expense), net . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Amedisys, Inc.

306,981
16,401
180,048
19,519
19,678
4,432
1,380,114
57,340

279,425
11,824
161,186
14,053
20,036
77,268
1,289,707
(9,166)

292,497
5,597
143,644
16,294
28,307
3,107
1,180,507
24,047

75
(5,164)
5,588
3,727
4,226
61,566
(23,935)
37,631
—
37,631
(370)
37,261

$

71
(10,783)
9,823
9,747
8,858
(308)
(2,004)
(2,312)
—
(2,312)
(709)
(3,021) $

94
(8,217)
2,991
2,061
(3,071)
20,976
(7,671)
13,305
(216)
13,089
(313)
12,776

$

Basic earnings per common share:

Income (loss) from continuing operations attributable to Amedisys,

Inc. common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) attributable to Amedisys, Inc. common

1.12 $
—

(0.09) $

—

0.40
(0.01)

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1.12 $

(0.09) $

0.39

Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . .

33,198

33,018

32,301

Diluted earnings per common share:

Income (loss) from continuing operations attributable to Amedisys,

Inc. common stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

Discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) attributable to Amedisys, Inc. common

1.10 $
—

(0.09) $

—

0.40
(0.01)

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

1.10 $

(0.09) $

0.39

Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . .

33,741

33,018

32,823

Amounts attributable to Amedisys, Inc. common stockholders:

Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . .
Discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

$

37,261
—
37,261

$

$

(3,021) $
—
(3,021) $

12,992
(216)
12,776

The accompanying notes are an integral part of these consolidated financial statements.

61

AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Amounts in thousands)

For the Years Ended December 31,
2015

2016

2014

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$37,631

$(2,312) $13,089

—

—

—

Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to non-controlling interests . . . . . . . . . . . . . . .

37,631
(370)

(2,312)
(709)

13,089
(313)

Comprehensive income (loss) attributable to Amedisys, Inc.

. . . . . . . . . . . . . . . . .

$37,261

$(3,021) $12,776

The accompanying notes are an integral part of these consolidated financial statements.

62

AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except common stock shares)

Common Stock
Shares Amount

Additional
Paid-in
Capital

Treasury
Stock

Total

Accumulated
Other
Comprehensive
Loss (Income)

Retained
Earnings

Noncontrolling
Interests

Balance, December 31, 2013 . . . . . . . . . $372,479 33,413,970
Issuance of stock – employee stock

33

467,890

(18,176)

15

(77,561)

278

purchase plan . . . . . . . . . . . . . . . . . . .
Issuance of stock – 401(k) plan . . . . . . .
Exercise of stock options . . . . . . . . . . . .
Issuance/(cancellation) of non-vested

stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash compensation . . . . . . . . . . . . .
Tax deficit from stock options exercised
and restricted stock vesting . . . . . . . .
Surrendered shares . . . . . . . . . . . . . . . . .
Sale of noncontrolling interest . . . . . . . .
Decrease in noncontrolling interest . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . .

2,433
7,062
564

—
5,597

(579)
(1,684)
(1,549)
350
13,089

176,796 —
430,919

1
28,229 —

519,612
—

1
—

—
—
—
—
—

—
—
—
—
—

2,433
7,061
564

(1)
5,597

(579)
—
(493)
(710)
—

—
—
—

—
—

—
(1,684)
—
—
—

—
—
—

—
—

—
—
—
—
—

—
—
—

—
—

—
—
—
—
12,776

Balance, December 31, 2014 . . . . . . . . . 397,762 34,569,526
Issuance of stock – employee stock

35

481,762

(19,860)

15

(64,785)

purchase plan . . . . . . . . . . . . . . . . . . .
Issuance of stock – 401(k) plan . . . . . . .
Exercise of stock options . . . . . . . . . . . .
Issuance/(cancellation) of non-vested

stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash compensation . . . . . . . . . . . . .
Tax benefit from stock options
exercised and restricted stock
vesting . . . . . . . . . . . . . . . . . . . . . . . .
Tax deficit from stock options exercised
and restricted stock vesting . . . . . . . .
Surrendered shares . . . . . . . . . . . . . . . . .
Shares repurchased . . . . . . . . . . . . . . . . .
Noncontrolling interest distribution . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . .

2,204
6,032
399

79,323 —
184,412 —
15,380 —

—
11,824

(61,675) —
—

—

2,073

(4)
(2,525)
(4,581)
(436)
(2,312)

—

—
—
—
—
—

—

—
—
—
—
—

2,204
6,032
399

—
11,824

2,073

—
—
—

—
—

—

(4)

—
—
—
—

—
(2,525)
(4,581)
—
—

—
—
—

—
—

—

—
—
—
—
—

—
—
—

—
—

—

—
—
—
—
(3,021)

Balance, December 31, 2015 . . . . . . . . . 410,436 34,786,966
Issuance of stock – employee stock

35

504,290

(26,966)

15

(67,806)

purchase plan . . . . . . . . . . . . . . . . . . .
Issuance of stock – 401(k) plan . . . . . . .
Issuance/(cancellation) of non-vested

stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash compensation . . . . . . . . . . . . .
Tax benefit from stock options
exercised and restricted stock
vesting . . . . . . . . . . . . . . . . . . . . . . . .
Surrendered shares . . . . . . . . . . . . . . . . .
Shares repurchased . . . . . . . . . . . . . . . . .
Noncontrolling interest distribution . . . .
Assets contributed to equity

2,483
6,682

63,688 —
145,660 —

—
16,401

257,263 —
—

—

2,483
6,682

—
16,401

—
—

—
—

7,241
(7,493)
(12,315)
(329)

—
—
—
—

—
—

—
—
—
—

—
—

—
7,241
—
(7,493)
— (12,315)
—

—

375
—

—
—

—
—

—
—

—
—
—
—

—
—

—
—

—
—

—
—
—
—

—
37,261

investment

. . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . .

405
37,631

Balance, December 31, 2016 . . . . . . . . . $461,142 35,253,577

$ 35

$537,472 $(46,774)

$ 15

$(30,545)

$

The accompanying notes are an integral part of these consolidated financial statements.

63

—
—
—

—
—

—
—
(1,056)
1,060
313

595

—
—
—

—
—

—

—
—
—
(436)
709

868

—
—

—
—

—
—
—
(329)

30
370

939

AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

For the Years Ended December 31,
2015

2016

2014

Cash Flows from Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401(k) employer match . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of property and equipment
Gain on sale of care centers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write off of deferred debt issuance costs/debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings from equity method investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred debt issuance costs/debt discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return on equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset impairment charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities, net of impact of acquisitions:

Patient accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. Department of Justice settlement
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 37,631

$

(2,312)

$ 13,089

19,678
19,519
16,401
6,875
196
582
—
24,547
—
(5,588)
740
4,323
4,432

(55,519)
4,231
(11,415)
3,970
—
(7,618)
(726)

20,036
14,053
11,824
6,089
—
775
(184)
(677)
2,512
(9,823)
959
5,610
77,268

(36,493)
6,455
(3,523)
7,639
—
8,406
(829)

28,347
16,369
5,597
6,216
—
4,592
(2,967)
22,561
488
(2,991)
797
2,025
3,107

(5,290)
(6,269)
1,694
(3,168)
(150,000)
3,495
(3,226)

Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,259

107,785

(65,534)

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 investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale 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 options exercised and restricted stock vesting . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-controlling interest distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of revolving line of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of company stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets contributed to equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

230
—
—
(15,717)
(1,040)
—
(35,522)
—

(52,049)

—
2,483
7,241
(329)
134,500
(134,500)

—
(5,000)
—
(12,315)
405

1,229
20,000
(19)
(21,429)
(3,485)
5,000
(69,130)
413

(67,421)

399
2,204
2,073
(436)
63,400
(78,400)
100,000
(103,000)
(2,553)
(4,581)
—

Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7,515)

(20,894)

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,695
27,502

19,470
8,032

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 30,197

$ 27,502

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:
(Sale) acquisition of non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

$

2,897

$

6,175

755

$ (12,185)

— $

— $ (1,549)

The accompanying notes are an integral part of these consolidated financial statements.

64

11
3
(132)
(12,008)
(6,407)
—
—
4,233

(14,300)

564
2,433
—
—

241,800
(226,800)
68,250
(13,904)
(1,780)
—
—

70,563

(9,271)
17,303

8,032

7,602

(1,766)

$

$

$

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016

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, hospice and personal care services with approximately 78%, 80% and 82%
of our revenue derived from Medicare for 2016, 2015 and 2014, respectively. As of December 31, 2016, we
owned and operated 327 Medicare-certified home health care centers, 79 Medicare-certified hospice care centers
and 14 personal-care care centers in 34 states within the United States and the District of Columbia.

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. In compliance with Accounting Standards Update (“ASU”) 2015-03, Interest – Imputation
of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, we have reclassified 2015
amounts related to unamortized debt issuance costs from other assets, net to long-term obligations, less current
portion.

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%. Third party equity
interests in our consolidated joint ventures are reflected as noncontrolling interests in our consolidated financial
statements. During the three-month period ended September 30, 2016, we sold a 30% interest in one of our care
centers while maintaining controlling interest in the newly formed joint venture.

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
we are the primary beneficiary. The book value of investments that we accounted for under the equity method of
accounting was $27.8 million as of December 31, 2016 and $25.7 million as of December 31, 2015. 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.

65

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

We earn net service revenue through our home health, hospice and personal-care 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 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 corresponding reduction to patient
accounts receivable. 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

66

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

of the reporting period, expected Medicare revenue per episode and our estimate of the average percentage
complete based on the number of days elapsed during an episodes of care. As of December 31, 2016 and 2015,
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%, 99%, and 98% of our total net Medicare hospice service revenue for 2016, 2015
and 2014, respectively. Beginning January 1, 2016, CMS has provided for two separate payment rates for routine
care: payments for the first 60 days of care and care beyond 60 days. In addition to the two routine rates,
beginning January 1, 2016, Medicare is also reimbursing for a service intensity add-on (“SIA”). The SIA is based
on visits made in the last seven days of life by a registered nurse (“RN”) or medical social worker (“MSW”) for
patients in a routine level of care.

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 we estimate a cap
has been exceeded. We record these adjustments as a reduction to revenue and an increase in other accrued
liabilities. Beginning for the cap year ending October 31, 2014, providers are required to self-report and pay their
estimated cap liability by March 31st of the following year. As of December 31, 2016, we have settled our
Medicare hospice reimbursements for all fiscal years through October 31, 2012 and we have recorded
$0.8 million for estimated amounts due back to Medicare in other accrued liabilities for the Federal cap years

67

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

ended October 31, 2013 through October 31, 2016. As of December 31, 2015, we had recorded $1.4 million for
estimated amounts due back to Medicare in other accrued liabilities for the Federal cap years ended October 31,
2013 through October 31, 2016.

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.

Personal Care Revenue Recognition

Personal Care Non-Medicare Revenue

We generate net service revenues by providing our services directly to patients primarily on a per hour, visit or
unit basis. We receive payment for providing such services from our payor clients, including state and local
governmental agencies, managed care organizations, commercial insurers and private consumers. Net service
revenues are principally provided based on authorized hours, visits or units determined by the relevant agency, at
a rate that is either contractual or fixed by legislation, which are recognized as net service revenue at the time
services are rendered.

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. As of December 31, 2016, there is one single payor, other than Medicare, that
accounts for more than 10% of our total outstanding patient receivables (approximately 10.1%). 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 61% and 64% of our net
patient accounts receivable at December 31, 2016 and December 31, 2015, 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 2016, 2015 and 2014, we recorded $7.9 million, $6.1 million and $5.1 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.

68

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

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 resubmitted.

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, Hospice, and Personal Care

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 collectability 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. 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 general and administrative expenses.

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.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

• 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.

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 5

Years

As of December 31, 2014, we had $75.8 million of internally developed software costs related to the
development of AMS3 Home Health and Hospice (“AMS3”). Expanded beta testing to additional sites in
February of 2015 demonstrated that AMS3 was disruptive to operations. Additional analysis of the system
determined that the system was not ready to be fully implemented and would require significant time and
investment to redesign. Therefore, during the three-month period ended March 31, 2015, we made the decision to
discontinue AMS3 and recorded a non-cash asset impairment charge of $75.2 million to write-off the software
costs incurred related to the development of AMS3.

During 2015, we began the transition of all our care centers from our proprietary operating system to Homecare
Homebase (“HCHB”), a leading home health and hospice platform, with all of our care centers operating on
HCHB as of December 31, 2016. As part of our conversion process, we determined that a number of assets
(primarily laptops) were not compatible with HCHB and had no other alternative or secondary use. As a result,
we recorded a non-cash asset impairment charge of $4.4 million to write-off these assets during the three-month
period ended December 31, 2016.

During the three-month period ended September 30, 2015, we commenced an active program to sell our
corporate headquarters located in Baton Rouge, Louisiana. In accordance with U.S. GAAP, we classified this
asset as held for sale and reduced the carrying value of the asset to its estimated fair value less estimated costs to
sell the asset; no further depreciation expense for the asset was recorded. As a result, we recorded a non-cash
asset impairment charge of $2.1 million during the three-month period ended September 30, 2015. The asset was
sold during the three-month period ended December 31, 2015 and the Company now leases equivalent office
space.

70

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

The following table summarizes the balances related to our property and equipment for 2016 and 2015 (amounts
in millions):

Building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.9
71.9
96.8

2.3
89.6
92.6

As of December 31,

2016

2015

Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

175.6
(138.6)

184.5
(141.8)

$ 37.0 $ 42.7

Depreciation expense for 2016, 2015 and 2014 was $17.2 million, $20.0 million and $28.0 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
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.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

Each of our operating segments described in Note 15 – 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 personal-care care centers and have also deemed
them to be a single reporting unit.

During 2016, 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, 2016. 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 and non-compete agreements. We
amortize non-compete agreements and acquired names that we do not intend to use in the future 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 acquired names.

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, $0.8 million and $0.7 million in deferred debt issuance costs in 2016, 2015 and 2014,
respectively. As of December 31, 2016 and 2015, we had unamortized debt issuance costs of $2.7 million and
$3.4 million, respectively, recorded as long-term obligations,
less current portion in our accompanying
consolidated balance sheets. The unamortized debt issuance costs of $2.7 million at December 31, 2016, will be
amortized over a weighted-average amortization period of 3.7 years.

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

Long-term obligations

Fair Value at Reporting Date Using

As of
December 31, 2016

Quoted Prices in Active
Markets for Identical
Items
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)

$95.7

$ —

$97.8

$ —

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.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

• 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.

Our deferred compensation plan assets are recorded at fair value and are considered a level 2 measurement. For
our other financial instruments, including our cash and cash equivalents, patient accounts receivable, accounts
payable, payroll and employee benefits and accrued expenses, we estimate the carrying amounts’ approximate
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, 2016 and 2015 our net deferred tax assets were $107.9 million and
$125.2 million, respectively.

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. 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.

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 2016, 2015 and 2014 was $16.4 million,
$11.8 million and $5.6 million, respectively, and the total income tax benefit recognized for these expenses was
$6.4 million, $4.7 million and $2.0 million, respectively.

73

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

Weighted-Average Shares Outstanding

Net income (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 income (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,

2016

2015

2014

33,198

33,018

32,301

Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-vested stock and stock units . . . . . . . . . . . . . . . . . . . . . . . . .

162
381

—
—

1
521

Weighted average number of shares outstanding – diluted . . . . . . . . .

33,741

33,018

32,823

Anti-dilutive securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

221

922

106

Advertising Costs

We expense advertising costs as incurred. Advertising expense for 2016, 2015 and 2014 was $7.8 million,
$6.9 million and $4.7 million, respectively.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize
the amount of revenue for which it expects to be entitled for the transfer of promised goods or services to
customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP. In August 2015, the
FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,
to defer the effective date of the standard from January 1, 2017, to January 1, 2018, with an option that permits
companies to adopt the standard as early as the original effective date. The new ASU reflects the decisions
reached by the FASB at its meeting in July 2015. Early application prior to the original effective date is not
permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The
Company does not expect an impact on its consolidated financial statements upon implementation of ASU
2014-09 and ASU 2015-14 on January 1, 2018, but is still evaluating the effect the standard will have on its
related disclosures.

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying
the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to
a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of
that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance
costs are not affected by the amendments in this ASU. ASU 2015-03 is effective for annual and interim periods
beginning on or after December 15, 2015. We adopted this ASU during the three-month period ended March 31,
2016, and applied the change retrospectively for prior period balances of unamortized debt issuance costs,
resulting in a $3.4 million reduction in other assets, net and long-term obligations, less current portion, on our
consolidated balance sheet as of December 31, 2015.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require lessees to recognize a
lease liability and right-of-use asset for all leases (with the exception of short-term leases) at the commencement
date. The ASU is effective for annual and interim periods beginning on or after December 15, 2018. Early
adoption is permitted. The standard requires a modified retrospective transition method which requires
application of the new guidance for all periods presented. While the Company expects adoption of this standard
to lead to a material increase in the assets and liabilities recorded on our balance sheet, we are still evaluating the
overall impact on our consolidated financial statements and related disclosures and the effect of the standard on
our ongoing financial reporting.

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvement
to Employee Share-Based Payment Accounting, which will simplify the accounting for share-based payment
award transactions, including income tax consequences, classification of awards as either equity or liability, and
classification on the statement of cash flows. The ASU is effective for annual and interim periods beginning after
December 15, 2016. Early adoption is permitted. The element of the new standard that will have the most impact
on our consolidated financial statements will be income tax consequences. Excess tax benefits and tax
deficiencies on share-based compensation awards will now be included in our tax provision within our
consolidated statement of operations as discrete items in the reporting period in which they occur, rather than our
current accounting of recording in additional paid-in capital on our consolidated balance sheets.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Cash Payments, which provides specific guidance on eight cash flow classification issues not
specifically addressed by U.S. GAAP. The ASU is effective for annual and interim periods beginning after
December 15, 2017. Early adoption is permitted. The standard should be applied using a retrospective transition
method unless it is impractical to do so for some of the issues. In such case, the amendments for those issues
would be applied prospectively as of the earliest date practicable. The Company is evaluating the effect that ASU
2016-15 will have on its consolidated financial statements and related disclosures and the effect of the standard
on its ongoing financial reporting.

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, hospice and personal care services. The purchase price paid for acquisitions is negotiated through arm’s
length transactions, with consideration based on our analysis of, among other things, comparable acquisitions and
expected cash flows. 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. We typically engage outside appraisal firms to assist in the
fair value determination of identifiable intangible assets. Preliminary purchase price allocation is adjusted, as
necessary, up to one year after the acquisition closing date if management obtains more information regarding
asset valuation and liabilities assumed.

2016 Acquisitions

Personal Care Division

On March 1, 2016, we acquired Associated Home Care which owns and operates 9 personal-care care centers
servicing the state of Massachusetts for a total purchase price of $27.7 million, net of cash acquired (subject to

75

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

certain adjustments), of which $0.5 million was placed in escrow for indemnification purposes and working
capital price adjustments. The purchase price was paid with cash on hand on the date of the transaction. Based on
our preliminary purchase price allocation, in connection with the acquisition, we recorded goodwill ($23.5
million) and other assets and liabilities, net ($4.2 million) during the three-month period ended March 31, 2016.
During the three-month period ended June 30, 2016, we received the final report from our outside appraisal firm.
As a result, we reduced our preliminary goodwill by $5.0 million and recorded corresponding increases in the fair
value of assets acquired ($0.2 million), other intangibles – acquired names of business ($3.5 million) and other
intangibles – non-compete agreements ($1.3 million). We expect the entire amount of goodwill recorded for this
acquisition to be deductible for income tax purposes over approximately 15 years.

On September 1, 2016, we acquired the assets of Professional Profiles, Inc. which owns and operates 4 personal-
care care centers servicing the state of Massachusetts for a total purchase price of $4.4 million, (subject to certain
adjustments), of which $0.7 million was placed in a promissory note to be paid over 24 months, subject to any
offsets or withholds for indemnification purposes. The purchase price was paid with cash on hand on the date of
the transaction. During the three-month period ended September 30, 2016, we recorded goodwill ($4.2 million)
and other intangibles – non-compete agreements ($0.2 million) in connection with the acquisition. We expect the
entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over
approximately 15 years.

Home Health Division

On October 20, 2016, we acquired the assets of a former nonprofit organization in New York for a purchase price
of $4.6 million. During the three-month period ended December 31, 2016, we recorded goodwill ($4.4 million)
and other intangibles – certificate of need ($0.2 million) in connection with the acquisition. We expect the entire
amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15
years.

The following table contains unaudited pro forma condensed consolidated statement of operations information
assuming that our 2016 acquisitions closed on January 1, 2015, for the years ended December 31, 2016 and 2015
(amounts in millions, except per share data):

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . .

$1,449.7
53.9
35.0
1.04
1.03

$
$

$1,322.2
(7.8)
0.4
$ (0.01)
$ (0.01)

2016

2015

The pro forma information presented above includes adjustments for (i) amortization of identifiable intangible
assets and (ii) income tax provision using the Company’s statutory tax rate. This pro forma information is
presented for illustrative purposes only and may not be indicative of the results of operations that would have
actually occurred. In addition, future results may vary significantly from the results reflected in the pro forma
information.

76

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

2015 Acquisitions

Hospice Division

On July 24, 2015, we acquired one hospice care center in Tennessee for a total purchase price of $5.8 million.
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).

Home Health Division

On October 2, 2015, we acquired the assets of a home health care center in Georgia 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 ($0.3 million).

On December 31, 2015, we acquired Infinity HomeCare (“Infinity”) for a total purchase price of $63 million, net
of cash acquired (subject to certain adjustments), of which $3.2 million was placed in escrow for indemnification
purposes and working capital price adjustments. The purchase price was paid with cash on hand on the date of
the transaction. Infinity owned and operated 15 home health care centers servicing the state of Florida. In
connection with the acquisition, we recorded goodwill ($50.2 million), other intangibles ($10.9 million) and
other assets and liabilities, net ($1.9 million). Approximately $47.6 million of the $50.2 recorded as goodwill is
expected to be deductible for income tax purposes over approximately 15 years.

4. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

As of December 31, 2013, we had three care centers classified as held for sale. During 2014, we sold assets
associated with two of these care centers and consolidated one of these care centers with a care center servicing
the same market. There were no care centers classified as held for sale as of December 31, 2014.

As we exited certain geographical areas and in accordance with applicable accounting guidance, the care centers
which were classified as held for sale as of December 31, 2013 and subsequently sold in 2014 are presented as
discontinued operations in our consolidated financial statements. The care center consolidated with a care center
servicing the same markets is 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 13 – Exit Activities and Restructuring Activities.

Operating results for the twelve-month period ended December 31, 2014 for those care centers classified as
discontinued operations are as follows:
income tax benefit of
$0.1 million and net loss from discontinued operations of $0.2 million.

loss before income taxes of $0.3 million,

5. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

During 2016, 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,
2016. 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 the fiscal year 2015, 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.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

During the fiscal year 2014, we recognized a non-cash other intangible impairment charge of $0.9 million during
step one of our 2014 annual goodwill impairment test. In addition, we recorded non-cash impairment charges of
$2.2 million related to those care centers that were closed or consolidated during 2014 as discussed in Note 13 –
Exit and Restructuring Activities.

The following table summarizes the activity related to our goodwill for 2016, 2015 and 2014 (amounts in
millions):

Home Health Hospice

Personal Care

Total

Goodwill

Balances at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Write-off (1)

$16.6
(0.1)

$192.3
(3.2)

Balances at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balances at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments related to acquisitions . . . . . . . . . . . . . . . . . . . . .

16.5
50.6

67.1
4.4
0.1

189.1
5.5

194.6
—
—

$ —
—

—
—

—
22.7
—

$208.9
(3.3)

205.6
56.1

261.7
27.1
0.1

Balances at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . .

$71.6

$194.6

$22.7

$288.9

(1) Write-off of goodwill related to the sale of care centers as discussed in Note 13 – Exit and Restructuring

Activities.

During 2016, we adjusted goodwill by $0.1 million as a result of our completion of the purchase price accounting
for our 2015 acquisition of Infinity.

The following table summarizes the activity related to our other intangible assets, net for 2016, 2015 and 2014
(amounts in millions):

Other Intangible Assets, Net

Certificates of
Need and
Licenses

Acquired
Names of
Business

Non-Compete
Agreements (2)

Balances at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balances at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balances at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25.4
(0.2)
(2.1)
—

23.1
1.1
(0.3)

23.9
0.2
—

$11.1
—
(1.0)
—

10.1
4.1
—

14.2
3.5
—

$ 0.2
—
—
(0.2)

—
5.9
—

5.9
1.5
(2.5)

Total

$36.7
(0.2)
(3.1)
(0.2)

33.2
11.1
(0.3)

44.0
5.2
(2.5)

Balances at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . .

$24.1

$17.7

$ 4.9

$46.7

(1) Write-off of intangible assets related to the sale of care centers as discussed in Note 13 – Exit and

Restructuring Activities.

(2) The weighted average amortization period of our non-compete agreements is 1.9 years.

See Note 3 – Acquisitions for further details on additions to goodwill and other intangible assets, net.

78

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

The estimated aggregate amortization expense related to intangible assets for each of the five succeeding years is
as follows (amounts in millions):

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2.7
2.2
—
—
—

$ 4.9

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due from joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other assets:

Workers’ compensation deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Health insurance deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other miscellaneous deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accrued expenses:

Health insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal and other settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charity care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estimated Medicare cap liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hospice cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OIG self-disclosure accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patient liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other long-term obligations:

Reserve for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation plan liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79

As of December 31,
2015
2016

$ 6.7
1.3
1.7
1.6

$11.3

$ 0.4
0.5
0.9
27.8
8.9

$38.5

$10.6
26.8
5.7
0.4
1.4
0.8
7.2
—
4.3
6.1

$63.3

$ 0.3
1.8
1.6

$ 3.7

$ 6.2
0.5
1.8
6.1

$14.6

$ 0.3
1.2
1.5
25.7
4.1

$32.8

$11.7
23.9
10.5
0.6
0.7
1.4
6.8
4.7
5.1
6.6

$72.0

$ 0.7
2.8
0.9

$ 4.4

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

7. LONG-TERM OBLIGATIONS

Long-term debt consisted of the following for the periods indicated (amounts in millions):

$100.0 million Term Loan; principal payments plus accrued interest payable quarterly;
interest rate at ABR Rate plus applicable percentage or Eurodollar Rate plus the
applicable percentage (2.77% at December 31, 2016); due August 28, 2020 . . . . . . . . . . .

$200.0 million Revolving Credit Facility; interest only quarterly payments; interest rate at
ABR Rate plus applicable percentage or Eurodollar Rate plus the applicable percentage;
due August 28, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current portion of long-term obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2016

2015

$95.0

$100.0

—
0.7
(2.7)

93.0
(5.2)

—
—
(3.4)

96.6
(5.0)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$87.8

$ 91.6

Maturities of debt as of December 31, 2016 are as follows (amounts in millions):

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Long-term
obligations

$ 5.2
10.5
10.0
70.0
—

$95.7

Credit Agreement

On August 28, 2015, we entered into a Credit Agreement that provides for senior secured facilities in an initial
aggregate principal amount of up to $300 million (the “Credit Facilities”).

The Credit Facilities are comprised of (a) a term loan facility in an initial aggregate principal amount of
$100 million (the “Term Loan”); and (b) a revolving credit facility in an initial aggregate principal amount of up
to $200 million (the “Revolving Credit Facility”). The Revolving Credit Facility provides for and includes within
its $200 million limit a $25 million swingline facility and commitments for up to $50 million in letters of credit.
Upon lender approval, we may increase the aggregate loan amount under the Credit Facilities by a maximum
amount of $150 million.

The net proceeds of the Term Loan and existing cash on hand were used to pay off (i) our existing term loan
under our prior Credit Agreement, dated as of October 22, 2012, as amended (the “Prior Credit Agreement”) with
a principal balance of $27 million and (ii) our existing term loan under our prior Second Lien Credit Agreement
dated July 28, 2014 (the “Second Lien Credit Agreement”), with a principal balance of $70 million. The final
maturity of the Term Loan is August 28, 2020. The Term Loan began amortizing on March 31, 2016 and will

80

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

continue amortizing over 14 quarterly installments (four remaining quarterly installments of $1.25 million
followed by eight quarterly installments of $2.5 million, followed by two quarterly installments of $3.1 million,
subject to adjustment for prepayments), with the remaining balance due upon maturity.

The Revolving Credit Facility may be used to provide ongoing working capital and for general corporate
purposes of the Company and our subsidiaries, including permitted acquisitions, as defined in the Credit
Agreement. The final maturity of the Revolving Credit Facility is August 28, 2020 and will be payable in full at
that time.

The interest rate in connection with the Credit Facilities shall be selected from the following by us: (i) the Base
Rate plus the Applicable Rate or (ii) the Eurodollar Rate plus the Applicable Rate. The “Base Rate” means a
fluctuating rate per annum equal to the highest of (a) the federal funds rate plus 0.50% per annum, (b) the prime
rate of interest established by the Administrative Agent, 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 Rate” is based on the consolidated leverage ratio and is presented in the table below. As of
December 31, 2016, the Applicable Rate is 1.00% per annum for Base Rate Loans and 2.00% per annum for
Eurodollar Rate Loans. We are also subject to a commitment fee and letter of credit fee under the terms of the
Credit Facilities, as presented in the table below.

Consolidated Leverage Ratio
≥ 2.75 to 1.0
< 2.75 to 1.0 but ≥ 1.75 to 1.0
< 1.75 to 1.0 but ≥ 0.75 to 1.0
< 0.75 to 1.0

Margin for ABR
Loans

Margin for Eurodollar
Loans

Commitment
Fee

Letter of
Credit Fee

2.00%
1.50%
1.00%
0.50%

3.00%
2.50%
2.00%
1.50%

0.40%
0.35%
0.30%
0.25%

3.00%
2.50%
2.00%
1.50%

Our weighted average interest rate for our $100.0 million Term Loan, under our Credit Agreement, was 2.5% for
2016 and 2.7% for the period August 28, 2015 to December 31, 2015. Our weighted average interest rate for our
$200.0 million Revolving Credit Facility was 3.5% for 2016.

As of December 31, 2016, our availability under our $200.0 million Revolving Credit Facility was
$173.3 million as we had $26.7 million outstanding in letters of credit.

The Credit Agreement requires maintenance of two financial covenants: (i) a consolidated leverage ratio of
funded indebtedness to EBITDA, as defined in the Credit Agreement, and (ii) a consolidated fixed charge
coverage ratio of EBITDA plus rent expense (less cash taxes less capital expenditures) to scheduled debt
repayments plus interest expense plus rent expense, all as defined in the Credit Agreement. Each of these
covenants is calculated over rolling four-quarter periods and also is subject to certain exceptions and baskets. As
of December 31, 2016, our consolidated leverage ratio was 1.0 and our consolidated fixed charge coverage ratio
was 3.8 and we are in compliance with the Credit Agreement. The Credit Agreement also contains customary
covenants, including, but not limited to, restrictions on: incurrence of liens; incurrence of additional debt; sales of
assets and other fundamental corporate changes; investments; and declarations of dividends. These covenants
contain customary exclusions and baskets.

The Credit Facilities are guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries. The
Credit Agreement requires at all times that we (i) provide guarantees from wholly-owned subsidiaries that in the
less than 95% of our consolidated net revenues and adjusted EBITDA from all
aggregate represent not

81

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

wholly-owned subsidiaries and (ii) provide guarantees from subsidiaries that in the aggregate represent not less
than 70% of consolidated adjusted EBITDA, subject to certain exceptions.

In connection with entering into the Credit Agreement, we entered into (i) a Security Agreement with the
Administrative Agent dated August 28, 2015 and (ii) a Pledge Agreement with the Administrative Agent dated as
of August 28, 2015 for the purpose of securing the payment of our obligations under the Credit Agreement.
Pursuant to the Security Agreement and the Pledge Agreement, as of the effective date of the Credit Agreement,
our obligations under the Credit Agreement are secured by (i) the grant of a first lien security interest in the
non-real estate assets of substantially all of our direct and indirect, wholly-owned subsidiaries (subject to
exceptions) and (ii) the pledge of the equity interests in (a) substantially all of our direct and indirect, wholly-
owned corporate, limited liability company and limited partnership subsidiaries and (b) those joint ventures
which constitute subsidiaries under the Credit Agreement (subject, in the case of the Pledge Agreement, to
exceptions).

In connection with our entry into the Credit Agreement, on August 28, 2015, each of the Prior Credit Agreement
and the Second Lien Credit Agreement were terminated. The Company paid a call premium of $700,000
associated with the termination of the Second Lien Credit Agreement and the voluntary prepayment of the
amounts owed thereunder as of August 28, 2015, and expensed $2.5 million in deferred debt issuance costs
during the three-month period ended September 30, 2015. Also in connection with our entry into the Credit
Agreement, we recorded $2.4 million in deferred debt issuance costs as other assets in our consolidated balance
sheet during 2015 which was reclassified to long-term obligations, less current portion during 2016 in accordance
with ASU 2015-03.

Promissory Notes

Our promissory note outstanding of $0.7 million, issued in conjunction with an acquisition, bears an interest rate
of 2.6%.

8. INCOME TAXES

Income taxes attributable to continuing operations consist of the following (amounts in millions):

For the Years Ended December 31,
2015

2016

2014

Current income tax expense/(benefit):

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local

Deferred income tax expense/(benefit):

Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State and local
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (0.5)
(0.1)

(0.6)

22.1
2.4
—

24.5

$ 2.2
0.5

2.7

(0.5)
(0.1)
(0.1)

(0.7)

$(13.9)
(1.1)

(15.0)

21.0
1.6
0.1

22.7

Income tax expense/(benefit) from continuing operations . . . . . . . .

$23.9

$ 2.0

$ 7.7

82

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

Total income tax expense for the years ended December 31, 2016, 2015 and 2014 was allocated as follows
(amounts in millions):

Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended December 31,

2016

$23.9
—
(0.1)
—
(7.2)

$16.6

2015

$ 2.0
—
0.2
(0.1)
(2.1)

$—

2014

$ 7.7
(0.1)
(0.1)
—
0.6

$ 8.1

A reconciliation of significant differences between the reported amount of income tax expense and the expected
amount of income tax expense that would result from applying the U.S. federal statutory income tax rate of
35 percent to income before taxes from continuing operations is as follows:

For the Years Ended December 31,

2016

2015 (1)

2014

Income tax expense at U.S. federal statutory rate . . . . . . . . . . . . .
. .
State and local income taxes, net of federal income tax benefit
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other items, net (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income tax expense/(benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.0 %
4.8
0.1
(0.6)
(1.0)
0.6

38.9 %

35.0 %
(7.1)
79.1
136.0
(230.3)
(663.3)

(650.6)%

35.0 %
5.8
1.5
(8.4)
0.6
2.1

36.6 %

(1) The information provided for the year ended December 31, 2015 does not provide a meaningful
reconciliation of the effective tax rate or comparable to other periods. The effective tax rate for the year is
influenced by the relationship of the amount of “effective tax rate drivers” (i.e. non-deductible expenses,
non-taxable income, tax credits, valuation allowance, uncertain tax positions, etc.) to income or loss before
taxes. A significant asset impairment was recorded in the first quarter, resulting in a scenario where the
company’s loss before tax for the year was near zero. Consequently, for 2015, the relationship between the
“effective tax rate drivers” and loss before taxes is distorted.
Includes various items such as, non-deductible expenses, non-taxable income, return-to-accrual adjustments,
and foreign tax rate differential.

(2)

As of December 31, 2016 and 2015, the Company had income taxes receivable of $1.3 million and $0.5 million,
respectively, included in other current assets.

83

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

Deferred tax assets (liabilities) consist of the following components (amounts in millions):

As of December 31,
2015
2016

Deferred tax assets:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued payroll & employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carryforwards (2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6.9
11.4
10.9
56.3
7.8
44.2
4.8
1.1

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

143.4
(0.4)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

143.0

Deferred tax (liabilities):
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross deferred tax (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7.8)
(23.2)
(3.2)
(0.9)

(35.1)

$ 6.4
5.1
9.8
72.2
5.0
48.5
4.7
4.0

155.7
(0.3)

155.4

(9.5)
(18.5)
(0.2)
(2.0)

(30.2)

Net deferred tax assets (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$107.9

$125.2

(1) The net operating loss (“NOL”) carry forwards in the income tax returns include unrecognized tax benefits
resulting from uncertain tax positions. Accordingly, the deferred tax assets recognized for the NOL carry
forwards, as of December 31, 2016 and 2015, are presented net of unrecognized tax benefits of $3.1 million.
(2) The tax credit carry forwards in the income tax returns include unrecognized tax benefits resulting from
uncertain tax positions. Accordingly, the deferred tax assets recognized for the tax credit carry forwards are
presented net of unrecognized tax benefits of $0.7 million for each of the years ended December 31, 2016
and 2015.

As of December 31, 2016, we have U.S. net operating loss (“NOL”) carry forwards of $102.1 million that are
available to reduce future taxable income and begin to expire in 2034. In addition, we have research and
development
tax credits, and alternative minimum tax credits of $1.9 million,
$0.2 million and $1.4 million, respectively, available to reduce future U.S. federal income taxes. The research
and development tax credits and employment tax credits begin to expire in 2032, and the alternative minimum
tax credits are available indefinitely.

tax credits, employment

As of December 31, 2016, we have state NOL carry forwards of $268.4 million that are available to reduce future
taxable income. In addition, we have $3.1 million of various state tax credits available to reduce future taxable
income. The state NOL and tax credit carry forwards begin to expire at various times.

The valuation allowance for deferred tax assets as of December 31, 2016 and 2015 was $0.4 million and
$0.3 million, respectively. The net change in the total valuation allowance for the year ended December 31, 2016
and December 31, 2015 was an increase of $0.1 million and a decrease of $0.3 million, respectively. The valuation
allowance during 2016 and 2015 was primarily related to certain state NOL and state tax credit carry forwards.

84

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income in those jurisdictions during the periods in which those
temporary differences become deductible. Management considers the scheduled reversal of deferred tax
liabilities (including the impact of available carry back and carry forward periods), projected future taxable
income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax assets, the
Company will need to generate future taxable income before the expiration of the carry forwards governed by the
tax code. Based on the current level of pretax earnings, the Company will generate the minimum amount of
future taxable income to support the realization of the deferred tax assets. As a result, management believes that
it is more likely than not that we will realize the benefits of these deferred tax assets, net of the existing valuation
allowances at December 31, 2016. The amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to current year . . . . . . . . . . . .
Additions for tax positions related to prior year . . . . . . . . . . . . . .
Reductions for tax positions related to prior years . . . . . . . . . . . .
Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Years Ended December 31,

2016

$ 4.7
—
—
—
(0.6)
—

$ 4.1

2015

$ 4.0
—
1.0
—
(0.3)
—

$ 4.7

As of December 31, 2016, there are $0.3 million and $3.8 million of unrecognized tax benefits recorded in
accrued other long-term obligations and deferred income taxes, respectively, within the consolidated balance
sheet.

Included in the balance of unrecognized tax benefits at December 31, 2016 is $4.1 million of tax benefits that, if
recognized in future periods, would impact our effective tax rate.

During the years ended December 31, 2016 and 2015, we recognized interest and penalties of $(0.1) million and
$0.2 million, respectively, as components of penalties or interest expense in connection with our reserve for
uncertain tax positions. Interest and penalties, related to uncertain tax positions, included in the consolidated
balance sheet at December 31, 2016 and 2015 were less than $0.1 and $0.2 million, respectively.

We are subject to income taxes in the U.S. and in many of the 50 individual states, with significant operations in
Louisiana, Alabama, Georgia, and Tennessee. We are open to examination in the U.S. and in various individual
states for tax years ended December 31, 2013 through December 31, 2016. We are also open to examination in
various states for the years ended 2001 – 2016 resulting from net operating losses generated and available for
carry forward from those years.

85

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

We believe that it is reasonably possible that decreases of up to $0.3 million in unrecognized tax benefits, each of
which are individually insignificant, may be recognized by the end of December 31, 2017 as a result of an
anticipated settlement and lapse of the statute of limitations.

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, 2016, there were
35,253,577 and 33,597,215 shares of common stock issued and outstanding, respectively, and no shares of
preferred stock issued or outstanding. 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.

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
5.5 million shares of common stock, and we had approximately 1.2 million shares available at December 31,
2016. 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
six 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

86

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

from 2,500,000 shares to 4,500,000 shares, and as of December 31, 2016, there were 1,460,800 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

Shares Issued

Price

2014 and Prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2015 to March 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 1, 2015 to June 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 1, 2015 to September 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 1, 2015 to December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1, 2016 to March 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
April 1, 2016 to June 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 1, 2016 to September 30, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
October 1, 2016 to December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,899,528
24,368
15,750
18,984
19,082
13,850
14,236
16,520
16,882

3,039,200

$13.78
22.76
33.77
32.27
33.42
41.09
42.91
40.32
36.24

ESPP expense included in general and administrative expense in our accompanying consolidated statements of
operations was $0.4 million for each of 2016, 2015 and 2014, respectively.

Stock Options

We use the Black-Scholes option pricing model to estimate the fair value of our stock options. There were
268,538, 590,647 and 250,000 options granted during 2016, 2015 and 2014, respectively. Stock option
compensation expense included in general and administrative expense in our accompanying consolidated
statements of operations was $6.3 million, $3.8 million and $0.1 million for 2016, 2015 and 2014, respectively.

The fair value of the 2016 awards were estimated using the following assumptions:

Risk Free Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.19% – 1.58%
53.44% – 54.89%
5.86 – 6.25 years
$25.99

We used the simplified method to estimate the expected term for the stock options granted during 2016.

The following table presents our stock option activity for 2016:

Number of
Shares

Weighted
Average Exercise
Price

Weighted
Average Contractual
Life (Years)

Outstanding options at January 1, 2016 . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . .

838,494
268,538

—
(98,875)

Outstanding options at December 31, 2016 . . . . . . . . . . . . . . . 1,008,157

Exercisable options at December 31, 2016 . . . . . . . . . . . . . . . .

281,458

$30.18
37.21
—
35.45

$31.54

$28.86

9.31

8.42

8.21

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

The aggregate intrinsic value of our outstanding options and exercisable options at December 31, 2016 was
$11.9 million and $3.9 million, respectively. There were no options exercised during 2016. Total intrinsic value
of options exercised was $0.2 million and $0.1 million for 2015 and 2014, respectively.

The following table presents our non-vested stock option award activity for 2016:

Non-vested stock options at January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

775,994
268,538
(219,872)
(97,961)

Non-vested stock options at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

726,699

Weighted Average
Grant Date Fair
Value

$30.47
37.21
29.55
35.38

$32.58

At December 31, 2016, there was $7.2 million of unrecognized compensation cost related to stock options that
we expect to be recognized over a weighted-average period of 2.1 years.

Non-Vested Stock

We issue shares of non-vested stock with vesting terms ranging from one to six 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 statements of operations was $2.3 million,
$5.0 million and $4.6 million for 2016, 2015 and 2014, respectively.

The following table presents our non-vested stock award activity for 2016:

Non-vested stock at January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

500,888
21,202
(222,783)
(89,929)

Non-vested stock at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

209,378

Weighted Average
Grant Date Fair
Value

$18.24
50.55
18.00
17.26

$22.20

The weighted average grant date fair value of non-vested stock granted was $50.55, $28.48 and $16.38 in 2016,
2015, and 2014, respectively.

At December 31, 2016, there was $1.4 million of unrecognized compensation cost related to non-vested stock
award payments that we expect to be recognized over a weighted average period of 0.9 years.

Non-Vested Stock Units

We issue non-vested stock unit awards that are service-based, performance-based or a combination of both with
vesting terms ranging from one to six years. Based on the terms and conditions of these awards, we determine if

88

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

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 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.

Non-Vested Stock Units – Service-Based

Service-based non-vested stock unit compensation expense included in general and administrative expenses in
our accompanying consolidated statements of operations was $3.6 million and $1.0 million for 2016 and 2015,
respectively.

The following table presents our service-based non-vested stock units activity for 2016:

Number of Shares

Weighted Average
Grant Date Fair
Value

Non-vested stock units at January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested stock units at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . .

183,332
147,896
(32,607)
(49,192)

249,429

$37.89
45.60
38.81
39.38

$42.05

The weighted average grant date fair value of service-based non-vested stock units granted was $45.60 and
$37.98 in 2016 and 2015, respectively.

At December 31, 2016, there was $6.7 million of unrecognized compensation cost related to our service-based
non-vested stock units that we expect to be recognized over a weighted average period of 2.2 years.

Non-Vested Stock Units – Service-Based and Performance-Based Awards

During 2016, we awarded performance-based awards to certain employees. The target level established by the
award, which is based on the Company’s 2016 adjusted earnings before interest,
taxes and depreciation
(“EBITDA”), provided for the recipients to receive 182,796 non-vested stock units if the target was achieved.
The target number of shares to be potentially awarded has been reduced by forfeitures as indicated in the table
below. Performance-based non-vested stock units compensation expense included in general and administrative
expenses in our consolidated statements of operations was $3.7 million and $1.3 million for 2016 and 2015,
respectively.

The following table presents our performance-based non-vested stock units activity for 2016:

Non-vested stock units at January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Non-vested stock units at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . .

151,063
182,796
(44,729)
(64,273)

224,857

$39.44
46.29
34.83
42.41

$45.08

Number of Shares

Weighted Average
Grant Date Fair
Value

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016—(Continued)

The weighted average grant date fair value of performance-based non-vested stock units granted was $46.29 and
$39.54 in 2016 and 2015, respectively.

At December 31, 2016, there were $6.4 million in unrecognized compensation costs related to our performance-
based non-vested stock units that we expect to be recognized over a weighted average period of 2.0 years.

Non-Vested Stock Units – Service-Based and Market-Based Awards

During 2013, we awarded market-based awards to certain employees. The target level established by the award,
which was based on our average December 2015 stock price, provided for the recipients to receive 417,330
non-vested stock units if the target is achieved. If the target objective was surpassed to the point of achieving the
projected maximum payout, the recipients would receive 667,728 non-vested stock units. The target number of
shares to be potentially awarded was reduced by forfeitures as indicated in the table below. As of March 3, 2016,
it was determined that the market-based objective established by the award was satisfied at maximum payout and
as a result, 248,654 stock units were awarded to the recipients on April 1, 2016.

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. Market-based non-vested stock units compensation expense included in
general and administrative expenses in our accompanying consolidated statements of operations was
$0.1 million, $0.3 million and $0.5 million for 2016, 2015 and 2014, respectively. 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%
3 years
$10.51

The following table presents our market-based non-vested stock units activity for 2016:

Number of Shares

Weighted Average
Grant Date Fair
Value

Non-vested stock units at January 1, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled, forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

164,534
93,257
(248,654)
(9,137)

Non-vested stock units at December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . .

—

$10.51
10.51
10.51
10.51

$ —

(1) Represents shares awarded upon achievement of maximum payout.

The weighted average grant date fair value of market-based non-vested stock units granted was $10.51 in 2013.
All of our outstanding market-based non-vested stock units were fully vested as of April 1, 2016.

90

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings – Ongoing

We are involved in the following legal actions:

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 “District Court”) against the Company and certain of our current and former
senior executives. Additional putative securities class actions were filed in the District Court on July 14, July 16,
and July 28, 2010.

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 District 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 District Court denied on April 9, 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 “Fifth Circuit”). On October 2, 2014, a three-judge panel of the Fifth
Circuit issued a decision reversing the District Court’s dismissal of the Securities Complaint. On October 16,
2014, all defendants filed a petition with the Fifth Circuit to review the three-judge panel’s decision en banc, or
as a whole court. On December 29, 2014, the Fifth Circuit denied the defendants’ motion for en banc review of
the Fifth Circuit panel’s decision reversing the District Court’s dismissal of the Securities Complaint. The case
then returned to the District Court for further proceedings. On March 30, 2015, the defendants filed a Petition for
Writ of Certiorari (the “Petition”) with the United States Supreme Court asking the Supreme Court to consider
whether the Fifth Circuit erred in reversing the District Court’s dismissal of the Securities Complaint. The
Supreme Court denied the Petition on June 29, 2015, which did not affect the ongoing proceedings before the
District Court, including the District Court’s consideration of a motion filed on April 3, 2015, by the Co-Lead
Plaintiffs for leave to amend the Securities Complaint, which motion was granted by the District Court. On
December 15, 2015, the defendants filed a motion to dismiss the Co-Lead Plaintiffs’ First Amended Consolidated
Complaint. All discovery in the case is currently stayed pursuant to federal law. The parties agreed to explore the
possibility of a mediated settlement of this matter, and a mediation was held on June 21, 2016. The parties were
unable to resolve this matter during the mediation. On August 19, 2016, the District Court denied the defendants
motion to dismiss the Co-Lead Plantiffs’ First Amended Consolidated Complaint. The Defendants filed an
Answer to the Complaint on October 20, 2016. The case is currently in discovery.

We are unable to assess the probable outcome or reasonably estimate the potential liability, if any, arising from
the securities litigation described above. The Company intends to continue to vigorously defend itself in the
securities litigation matter but, if decided adverse to the Company, its impact could be material. No assurances

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

can be given as to the timing or outcome of the securities matter described above or the impact of any of the
inquiry 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.

Subpoena Duces Tecum Issued by the U.S. Department of Justice

On May 21, 2015, we received a Subpoena Duces Tecum (“Subpoena”) issued by the U.S. Department of Justice.
The Subpoena requests the delivery of information regarding 53 identified hospice patients to the United States
Attorney’s Office for the District of Massachusetts. It also requests the delivery of documents relating to our
hospice clinical and business operations and related compliance activities. The Subpoena generally covers the
period from January 1, 2011, through the present. We are fully cooperating with the U.S. Department of Justice
with respect to this investigation. Based on the information currently available to us, we cannot predict the timing
or outcome of this investigation or reasonably estimate the amount or range of potential losses, if any, which may
arise from this matter.

Civil Investigative Demand Issued by the U.S. Department of Justice

On November 3, 2015, we received a civil investigative demand (“CID”) issued by the U.S. Department of
Justice pursuant to the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for
hospice services provided through designated facilities in the Morgantown, West Virginia area. The CID requests
the delivery of information to the United States Attorney’s Office for the Northern District of West Virginia
regarding 66 identified hospice patients, as well as documents relating to our hospice clinical and business
operations in the Morgantown area. The CID generally covers the period from January 1, 2009 through
August 31, 2015. We are fully cooperating with the U.S. Department of Justice with respect to this investigation.
Based on the information currently available to us, we cannot predict the timing or outcome of this investigation
or reasonably estimate the amount or range of potential losses, if any, which may arise from this matter.

On June 27, 2016, we received a CID issued by the U.S. Department of Justice pursuant to the federal False
Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through
designated facilities in the Parkersburg, West Virginia area. The CID requests the delivery of information to the
United States Attorney’s Office for the Southern District of West Virginia regarding 68 identified hospice
patients, as well as documents relating to our hospice clinical and business operations in the Parkersburg area.
The CID generally covers the period from January 1, 2011 through June 20, 2016. We are fully cooperating with
the U.S. Department of Justice with respect to this investigation. Based on the information currently available to
us, we cannot predict the timing or outcome of this investigation or reasonably estimate the amount or range of
potential losses, if any, which may arise from this matter.

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.

Legal Proceedings – Settled

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

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016

former employees claim that they were not paid overtime for all hours worked over 40 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 40, 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 April 17, 2014, that notice was mailed to putative class members. The period within which putative class
members were permitted to opt into the action expired on July 16, 2014.

On September 10, 2014, the plaintiffs in the Connecticut case filed a motion for leave to amend their complaint
to add a new claim under the Kentucky Wage and Hour Act (“KWHA”) alleging that the Company did not pay
certain home health clinicians working in the Commonwealth of Kentucky all of the overtime wages they were
owed, either because the Company misclassified them as exempt from overtime or, while treating them as
overtime eligible, did not properly pay them overtime for all hours worked over 40 in a week. 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 five years before the filing of their original
complaint under the KWHA. On October 1, 2014, the Company filed an opposition to the plaintiffs’ motion to
amend. On October 15, 2014, plaintiffs filed a reply brief in support of their motion. On December 12, 2014, the
Court granted the plaintiffs’ motion to amend the complaint to add the claims under the KWHA. The Company
and the plaintiffs agreed to explore the possibility of a mediated settlement of the Connecticut case, and on
February 23, 2015 filed a joint motion to stay proceedings for six months to pursue that process, which was
granted by the Court on February 24, 2015.

On June 10, 2015, the Company and plaintiffs participated in a mediation whereby they agreed to fully resolve
all of plaintiffs’ claims in the lawsuit for $8.0 million, subject to approval by the Court. The settlement
agreement was submitted to the Court for preliminary approval and plaintiffs requested certification of
Pennsylvania and Kentucky classes for the sole purpose of this proposed settlement. The Court granted
preliminary approval, notice was issued to members of the settlement classes to provide them with an
opportunity to object to the settlement and, in the case of members of the Pennsylvania and Kentucky classes, opt
out of the settlement. Following this notice period, the Court held a final fairness hearing for the purpose of
considering objections and deciding whether to grant final approval of the settlement. As of September 30, 2015,
we had an accrual of $8.0 million for this matter. On January 29, 2016, the Court approved the final settlement of
this case. The settlement became effective on February 26, 2016. As a result of the final amount calculated by the
settlement administrator based on claims timely submitted, we reduced our accrual to $5.3 million as of
December 31, 2015; this amount was paid during the three-month period ended March 31, 2016.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016—(Continued)

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, and that such a pay
scheme resulted in her misclassification as an exempt employee, thereby denying her overtime. 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. On
December 23, 2015, the parties agreed to explore the possibility of a mediated settlement of the Illinois case, and
a mediation occurred on April 18, 2016. The parties agreed to settle the case for $0.8 million, subject to court
approval, which the Company had accrued as of September 30, 2016. On August 4, 2016, the Court approved the
final settlement of this case. The final payment of $0.6 million was paid on November 21, 2016.

Frontier Litigation

On April 2, 2015, Frontier Home Health and Hospice, L.L.C. (“Frontier”) filed a complaint against the Company
in the United States District Court for the District of Connecticut alleging breach of contract, negligent
misrepresentation and unfair and deceptive trade practices under Conn. Gen. Stat. §42-110b. Frontier acquired
our interest in five home health and four hospice care centers in Wyoming and Idaho in April 2014. The
complaint alleges that certain of the hospice patients on service at the time of the acquisition did not meet
Medicare eligibility requirements and that we breached certain of the representations and warranties under the
purchase agreement and therefore, the businesses were worth less than the purchase price. Under the complaint,
Frontier seeks declaratory judgment from the District Court that, under the terms of the purchase agreement with
Frontier, we are obligated to determine the amount of the alleged Medicare overpayments and reimburse the
government for the same in a timely manner, as well as unspecified compensatory and punitive damages,
attorneys’ fees and pre- and post-judgment
interest. The Company resolved the Frontier litigation for
$2.9 million during the three-month period ended December 31, 2016.

Other Investigative Matters – Ongoing

Corporate Integrity Agreement

On April 23, 2014, with no admissions of liability on our part, we entered into a settlement agreement with the
U.S. Department of Justice relating to certain of our clinical and business operations. Concurrently with our entry
into this agreement, we entered into a corporate integrity agreement (“CIA”) with the Office of Inspector
General-HHS (“OIG”). The CIA formalizes various aspects of our already existing ethics and compliance
programs and contains other requirements designed to help ensure our ongoing compliance with federal health
care program requirements. Among other things, the CIA requires us to maintain our existing compliance
program, executive compliance committee and compliance committee of the Board of Directors; provide certain
compliance training; continue screening new and current employees to ensure they are eligible to participate in
federal health care programs; engage an independent review organization to perform certain auditing and reviews
and prepare certain reports regarding our compliance with federal health care programs, our billing submissions
to federal health care programs and our compliance and risk mitigation programs; and provide certain reports and
management certifications to the OIG. Additionally, the CIA specifically requires that we report substantial
overpayments that we discover we have received from federal health care programs, as well as probable
violations of federal health care laws. Upon breach of the CIA, we could become liable for payment of certain
stipulated penalties, or could be excluded from participation in federal health care programs. The corporate
integrity agreement has a term of five years.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016—(Continued)

Computer Inventory and Data Security Reporting

On March 1 and March 2, 2015, we provided official notice under federal and state data privacy laws concerning
the outcome of an extensive risk management process to locate and verify our large computer inventory. The
process identified approximately 142 encrypted computers and laptops for which reports were required under
federal and state data privacy laws. The devices at issue were originally assigned to Company clinicians and
other team members who left the Company between 2011 and 2014. We reported these devices to the U.S.
Department of Health and Human Services, state agencies, and individuals whose information may be involved,
as required under applicable law because we could not rule out unauthorized access to patient data on the
devices. The Office of Civil Rights, U.S. Department of Health and Human Services (“OCR”) is reviewing our
compliance with applicable laws, as is typical for any data breach involving more than 500 individuals. We are
cooperating with OCR in its review and if any other regulatory reviews are formally commenced, will cooperate
with applicable regulatory authorities. In accordance with our CIA, we have notified the OIG of this matter.

Frontier Litigation

Separate from the Frontier litigation described above under “Legal Proceedings – Settled”, the Company engaged
an independent auditing firm to perform a clinical audit of the hospice care centers acquired by Frontier. No
assurances can be given as to the timing or outcome of the audit on the Company, its consolidated financial
condition, results of operations or cash flows, which could be material, individually or in the aggregate.

Other Investigative Matters – Settled

Corporate Integrity Agreement

During the course of our compliance with the CIA, the Company identified several reportable events and notified
the OIG as required. As of December 31, 2015, the Company had an accrual of $4.7 million for these matters. On
May 5, 2016, the company entered into a settlement agreement with the OIG and the matters were fully resolved
for $4.7 million; this amount was paid during the three-month period ended June 30, 2016.

Third Party Audits – Ongoing

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 the Centers for Medicare and Medicaid Services (“CMS”)
conduct extensive review of claims data to identify potential improper payments under the Medicare program.

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. An ALJ hearing was held in early January 2015. On January 18, 2016 we received a letter dated
January 6, 2016 referencing the ALJ hearing decision for the overpayment issued on June 6, 2011. The decision
was partially favorable with a new overpayment amount of $3.7 million with a balance owed of $5.6 million

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016—(Continued)

including interest based on 9 disputed claims (originally 16). We filed an appeal to the Medicare Appeals
Council on the remaining 9 disputed claims and also argued that the statistical method used to select the sample
was not valid. No assurances can be given as to the timing or outcome of the Medicare Appeals Council decision.
As of June 30, 2016, Medicare has withheld payments of $5.7 million (including additional interest) as part of
their standard procedures once this level of the appeal process has been reached. In the event we are not able to
recoup 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, 2016, we have an indemnity receivable for the
amount withheld related to the period prior to August 1, 2009.

In July 2016,
the Company received a request for medical records from SafeGuard Services, L.L.C.
(“SafeGuard”), a ZPIC, related to services provided by some of the care centers that the Company acquired from
Infinity Home Care, L.L.C. The review period covers time periods both before and after our ownership of the
care centers, which were acquired on December 31, 2015. Subsequent to the initial ZPIC letter, on September 16,
2016, the Company received a letter from SafeGuard notifying the Company that the Winterhaven, Bradenton,
and Tampa care centers were on a prepayment review. On October 28, 2016, the company received a “Notice of
Suspension of Medicare Payments” for up to 180 days for these three care centers. On January 10, 2017, the
Company received a letter from SafeGuard notifying the Company that the Clearwater care center was on a
prepayment review. Subsequently, on February 2, 2017, the Company received a “Notice of Suspension of
Medicare Payments” for up to 180 days for the Clearwater care center. Based on the information currently
available to the Company, the Company cannot predict the timing or outcome of this audit or reasonably estimate
the amount or range of potential losses, which may arise from this matter.

Third Party Audits – Settled

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
disputed these findings, and our Dayton subsidiary filed appeals through the Original Medicare Standard Appeals
Process, in which we were seeking to have those findings overturned. 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
were decided in favor of our Dayton subsidiary in full, 10 claims were decided in favor of our Dayton subsidiary
in part, and 28 claims were decided against or not appealed by our Dayton subsidiary. The ALJ ordered the MAC
to recalculate the extrapolation amount based on the ALJ’s decision. The Medicare Appeals Council could decide
on its own motion to review the ALJ’s decisions. As of July 13, 2016, we were notified that the PSC elected not
to re-extrapolate the overpayment and instead issued a new calculated overpayment
in the amount of
$0.2 million. The overpayment has been paid in full and the matter is fully resolved.

Operating Leases

We have leased office space at various locations under non-cancelable agreements that expire between 2017 and
2026, and require various minimum annual rentals. Our typical operating leases are for lease terms of one to seven

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2016—(Continued)

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, 2016 are as follows (amounts in millions):

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$23.5
17.5
13.0
9.1
4.3
4.6

$72.0

Rent expense for non-cancelable operating leases was $27.5 million, $23.7 million and $26.5 million for 2016,
2015 and 2014.

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.

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,

2016

$10.6
26.8
4.7

42.1
(0.8)

2015

$11.7
23.9
4.1

39.7
(0.9)

$41.3

$38.8

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.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016—(Continued)

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 2016, 2015 and 2014, our match of contributions to be made to each eligible employee contribution was
$0.375 for every $1.00 of contribution made up to the first 6% of their salary. Effective January 1, 2017, our
match of contributions to be made to each eligible employee contribution is $0.44 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 $6.9 million, $6.1 million
and $6.2 million for 2016, 2015 and 2014, respectively.

Deferred Compensation Plan

We had a Deferred Compensation Plan for additional tax-deferred savings to a select group of management or
highly compensated employees. Amounts credited under the Deferred Compensation Plan were 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.

Effective January 1, 2015, all prospective salary deferrals ceased. Participants will be allowed to make
transactions with any remaining account balances as they wish per plan guidelines.

12. STOCK REPURCHASE PROGRAM

On September 9, 2015, we announced that our Board of Directors authorized a stock repurchase program, under
which we may repurchase up to $75 million of our outstanding common stock on or before September 6, 2016.

Under the terms of the program, we could repurchase shares from time to time in open market transactions, block
purchases or in private transactions in accordance with applicable federal securities laws and other legal
requirements. We could enter into Rule 10b5-1 plans to effect some or all of the repurchases. The timing and the
amount of the repurchases, if any, was determined by management based on a number of factors, including but
not limited to share price, trading volume and general market conditions, as well as on working capital
requirements, general business conditions and other factors.

Pursuant to this program, we repurchased 324,141 shares of our common stock at a weighted average price of
$37.96 per share and a total cost of approximately $12.3 million during 2016 and 116,859 shares of our common
stock at a weighted average price of $39.20 per share and a total cost of approximately $4.6 million. The
repurchased shares are classified as treasury shares. The stock repurchase program expired on September 6, 2016.

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AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016—(Continued)

13. EXIT AND RESTRUCTURING ACTIVITIES

As of December 31, 2013, we reported three home health care centers as held for sale. During 2014, we sold
assets associated with two of these care centers for cash consideration of approximately $0.8 million and
recognized a gain of approximately $0.8 million which is included in discontinued operations. The remaining
care center classified as held for sale was consolidated with a care center servicing the same market during 2014.

During 2014, the Company sold its interest in five home health and four hospice care centers in Wyoming and
Idaho for approximately $5.0 million and recognized a gain of $2.1 million. We also exited our hospice inpatient
unit in New Hampshire and recognized a loss of $0.5 million.

In addition to the exit activity related to the care centers mentioned above, we consolidated 21 operating home
health care centers and four operating hospice care centers with care centers servicing the same markets and
closed 22 home health care centers and four hospice care centers during 2014. In connection with these care
centers, we recorded non-cash charges of $2.2 million in other intangibles impairment expense related to the
write-off of intangible assets, $2.1 million in other general and administrative expenses related to lease
termination costs and $2.1 million in salaries and benefits related to severance costs. These care centers were not
concentrated in certain selected geographical areas and did not meet the criteria to be classified as discontinued
operations in accordance with applicable accounting guidance.

Restructuring Activity

During 2014, we restructured our regional leadership and corporate support functions. As such, we recorded
charges of $3.4 million in salaries and benefits related to severance costs. In addition, during 2014, William F.
Borne stepped down from his positions as Chief Executive Officer, Chairman and a member of our Board of
Directors and we recorded charges of $2.3 million in salaries and benefits related to severance costs.

Our reserve activity for our 2014 exit and restructuring activity is as follows (amounts in millions):

2014 Exit Activity
Lease
Termination

Severance

Balances at December 31, 2013 . . . . . . . . . . . . . . . . . . . .
Charge in 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash expenditures in 2014 . . . . . . . . . . . . . . . . . . . . . . . .

Balances at December 31, 2014 . . . . . . . . . . . . . . . . . . . .
Charge in 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash expenditures in 2015 . . . . . . . . . . . . . . . . . . . . . . . .

Balances at December 31, 2015 . . . . . . . . . . . . . . . . . . . .
Charge in 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash expenditures in 2016 . . . . . . . . . . . . . . . . . . . . . . . .

$—
2.1
(1.6)

0.5
—
(0.4)

0.1
—
(0.1)

$—
7.8
(5.5)

2.3
—
(1.9)

0.4
—
(0.4)

Balances at December 31, 2016 . . . . . . . . . . . . . . . . . . . .

$—

$—

99

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016—(Continued)

14. 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) Write-Offs

Balance at End
of Year

2016 . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . .

$16.5
14.3
14.2

$19.5
14.1
16.4

$(18.3)
(11.9)
(16.3)

$17.7
16.5
14.3

(1)

Includes $0.1 million from discontinued operations for the year ended December 31, 2014.

Estimated Revenue Adjustments

Year End

Balance at
Beginning of Year

Provision for
Estimated
Revenue

Adjustments (1) Write-Offs

Balance at End
of Year

2016 . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . .

$4.0
3.1
3.9
Includes $0.1 million from discontinued operations for the year ended December 31, 2014.

$(7.8)
(5.2)
(5.9)

$7.9
6.1
5.1

$4.1
4.0
3.1

(1)

15. SEGMENT INFORMATION

Our operations involve servicing patients through our three reportable business segments: home health, hospice
and personal care. 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. Our personal care segment, which was established with the acquisition of Associated Home Care
during the three-month period ended March 31, 2016, provides patients with assistance with the essential
activities of daily living. The “other” column in the following tables consists of costs relating to executive
management and administrative support functions, primarily information services, accounting, finance, billing
and collections, legal, compliance, risk management, procurement, marketing, clinical administration, training,
human resources and administration.

100

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016—(Continued)

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).

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service, excluding depreciation and

amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Asset impairment charge . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Year Ended December 31, 2016

Home Health Hospice

Personal Care

Other

Total

$1,085.5

$316.0

$35.9

$ — $1,437.4

643.7
283.4
13.8
6.0
—

946.9

163.1
70.2
5.5
1.3
—

240.1

26.3
7.9
0.2
—
—

34.4

—
141.9
—
12.4
4.4

158.7

833.1
503.4
19.5
19.7
4.4

1,380.1

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

$ 138.6

$ 75.9

$ 1.5

$(158.7) $

57.3

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service, excluding depreciation and

amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Asset impairment charge . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

Home Health Hospice

For the Year Ended December 31, 2015
Other
Personal Care

Total

$1,005.1

$275.4

$ —

$ — $1,280.5

584.2
263.2
12.2
5.2
—

864.8

141.7
62.7
1.9
1.4
—

207.7

—
—
—
—
—

—

—
126.5
—
13.4
77.3

217.2

725.9
452.4
14.1
20.0
77.3

1,289.7

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

$ 140.3

$ 67.7

$ —

$(217.2) $

(9.2)

Net service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of service, excluding depreciation and

amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Asset impairment charge . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .

Home Health Hospice

For the Year Ended December 31, 2014
Other
Personal Care

Total

$956.9

$247.6

$ —

$ — $1,204.5

559.4
269.0
14.8
9.0
1.6

853.8

131.7
58.3
1.5
2.1
1.5

195.1

—
—
—
—
—

—

—
114.4
—
17.2
—

131.6

691.1
441.7
16.3
28.3
3.1

1,180.5

Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . .

$103.1

$ 52.5

$ —

$(131.6) $

24.0

101

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016—(Continued)

16. UNAUDITED SUMMARIZED QUARTERLY FINANCIAL INFORMATION

2016:
1st Quarter (2)(3)(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd Quarter (2)(3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd Quarter (2)(3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th Quarter (2)(3)(4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2015:
1st Quarter (6)(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2nd Quarter (7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3rd Quarter (6)(7)(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4th Quarter (7)(8)(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net Income (Loss)
Attributable to
Amedisys, Inc.
Common
Stockholders (1)

Basic

Diluted

$ 0.19 $ 0.19
0.32
0.34
0.26

0.32
0.34
0.27

$ 1.12 $ 1.10

$(1.07) $(1.07)
0.32
0.25
0.38

0.32
0.25
0.39

$(0.09) $(0.09)

Net Income (Loss)
Attributable to
Amedisys, Inc.

$ 6.2
10.7
11.4
8.9

$ 37.3

$(35.0)
10.6
8.4
12.9

$ 3.0

Revenue

$ 348.8
360.7
361.6
366.3

$1,437.4

$ 301.6
314.1
326.4
338.4

$1,280.5

(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 2016, we incurred certain costs associated with the implementation of
Homecare Homebase. Net of income taxes, these costs amounted to $1.5 million, $1.6 million, $1.2 million
and $0.8 million for the three-month periods ended March 31, 2016, June 30, 2016, September 30, 2016 and
December 31, 2016, respectively.

(3) During each of the four quarters of 2016, we incurred certain costs associated with various legal matters.
Net of income taxes, these costs amounted to $0.9 million, $0.3 million, $0.2 million and $1.8 million for
the three-month periods ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016,
respectively.

(4) During each of the four quarters of 2016, we incurred certain costs associated with various acquisition costs.
Net of income taxes, these costs amounted to $1.0 million, $0.2 million, $0.3 million and $0.5 million for
the three-month periods ended March 31, 2016, June 30, 2016, September 30, 2016 and December 31, 2016,
respectively.

(5) During the fourth quarter of 2016, we recorded a non-cash asset impairment charge to write-off assets as a
result of our conversion from our proprietary operating system to Homecare Homebase in the amount of
$2.7 million, net of income taxes.

(6) During the first quarter of 2015, we recorded a non-cash asset impairment charge to write-off the software
costs incurred related to the development of AMS3 Home Health and Hospice in the amount of
$45.5 million, net of income taxes. During the third quarter of 2015, we recorded a non-cash asset
impairment charge related to our corporate headquarters in the amount of $1.2 million, net of income taxes.
(7) During each of the four quarters of 2015, we incurred certain costs associated with various legal matters.
Net of income taxes, these costs amounted to $1.3 million, $4.8 million, $0.2 million and $(1.1) million for
the three-month periods ended March 31, 2015, June 30, 2015, September 30, 2015 and December 31, 2015,
respectively.

102

AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016—(Continued)

(8) During the fourth quarter of 2015, we recorded an accrual related to an OIG Self-Disclosure matter. Net of

income taxes, this charge amounted to $3.4 million.

(9) During the third and fourth quarters of 2015, we incurred certain costs associated with the implementation
of Homecare Homebase. Net of income taxes, these costs amounted to $1.2 million and $1.4 million for the
three-month periods ended September 30, 2015 and December 31, 2015, respectively.

17. RELATED PARTY TRANSACTIONS

On November 20, 2015, we engaged KKR Consulting, LLC (“KKR Capstone”), a consulting company of
operational professionals that works exclusively with portfolio companies of Kohlberg Kravis Roberts & Co.
Nathaniel M. Zilkha, a member of our Board of Directors, is a member of KKR Management, LLC, which is an
affiliate of KKR Asset Management LLC (“KAM”), a substantial stockholder of our Company, and an affiliate
of Kohlberg Kravis Roberts & Co. KKR Capstone will receive a fee in connection with providing consulting
services to the Company in the ordinary course of business. Mr. Zilkha will not receive any direct compensation
or direct financial benefit from the engagement of KKR Capstone. During 2016, we incurred costs of
approximately $1.6 million related to this related party engagement.

Effective October 22, 2015, we entered into a contract for telemonitoring services with Care Innovations, LLC
(“Care Innovations”). Paul Kusserow, our President and Chief Executive Officer, is a member of the Advisory
Board to Care Innovations. Care Innovations will receive an annual fee of approximately $1.8 million in
connection with our contract for telemonitoring services for the Company. Care Innovations has confirmed to us
that Mr. Kusserow will not receive any direct compensation or direct financial benefit from the engagement of
Care Innovations as our telemonitoring partner. During 2016 we incurred costs of approximately $1.5 million
related to this related party engagement.

18. SUBSEQUENT EVENTS

On February 1, 2017, we acquired Home Staff, LLC, a personal care provider with three care centers for a
purchase price of $4.0 million.

Unaudited – On February 28, 2017, we signed a definitive agreement to acquire Tenet Healthcare’s home health
and hospice operations in Arizona, Illinois, Massachusetts and Texas. We do not believe that the closing of this
acquisition will have a material impact on our 2017 results of operations.

103

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, 2016, 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, 2016, the
end of the period covered by this Annual Report on Form 10-K.

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, 2016.

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.

In conducting this evaluation, management did not include an assessment of internal control over financial
reporting of Associated Home Care acquired on March 1, 2016 and Professional Profiles, Inc. acquired on
September 1, 2016, which are included in the consolidated financial statements of the Company for the year
ended December 31, 2016. Associated Home Care and Professional Profiles accounted for approximately 1% of
total assets and 2% of revenue as of and for the year ended December 31, 2016. As a result of its evaluation,
management has concluded that the Company’s internal control over financial reporting was effective as of
December 31, 2016 based on those criteria.

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.

104

Changes in Internal Controls

During 2015, we began the implementation of Homecare Homebase (“HCHB”) with all care centers operating on
HCHB as of December 31, 2016. The Company has included the changes to processes, information technology
systems and other components of internal controls over financial reporting as part of its ongoing implementation
activities as part of its review of internal controls over financial reporting.

There have been no other 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, 2016 that have materially affected, or
are reasonably likely to materially affect, 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 2016, the end of the period covered
by this Annual Report.

105

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, 2016, based on
criteria established in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring
Organizations of the Treadway Commission. 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 Amedisys, Inc.’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 consolidated 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 consolidated
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
consolidated financial statements.

internal control over financial reporting may not prevent or detect
Because of its inherent
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, 2016, based on criteria established in Internal Control – Integrated Framework
(2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Amedisys, Inc. acquired Associated Home Care on March 1, 2016 and the assets of Professional Profiles, Inc. on
September 1, 2016, and management excluded from its assessment of the effectiveness of Amedisys, Inc.’s internal
control over financial reporting as of December 31, 2016, Associated Home Care and Professional Profiles, Inc.’s
internal control over financial reporting associated with approximately 1% of total assets and 2% of revenue
included in the consolidated financial statements of Amedisys, Inc. as of and for the year ended December 31, 2016.
Our audit of internal control over financial reporting of Amedisys, Inc. also excluded an evaluation of the internal
control over financial reporting of Associated Home Care and Professional Profiles, Inc.

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, 2016 and
2015, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2016, and our report dated
March 1, 2017, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP
Baton Rouge, Louisiana
March 1, 2017

106

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 2017 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2016.

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 2017 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2016.

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 2017 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2016.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

The information required by this item is incorporated by reference to the 2017 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2016.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item is incorporated by reference to the 2017 Proxy Statement to be filed with
the SEC within 120 days after the end of the year ended December 31, 2016.

107

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

1. Financial Statements

All financial statements are set forth under Part II, Item 8 of this report.

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 Exhibit Index required by Item 601 of Regulation S-K immediate
following the signature pages of this report, which is incorporated by reference.

ITEM 16. FORM 10-K SUMMARY

None.

108

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/ PAUL B. KUSSEROW

Paul B. Kusserow,
President, Chief Executive Officer and
Member of the Board

Date: March 1, 2017

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/ PAUL B. KUSSEROW
Paul B. Kusserow

/S/ GARY D. WILLIS
Gary D. Willis

/S/ SCOTT G. GINN
Scott G. Ginn

/S/ LINDA J. HALL
Linda J. Hall

/S/

JULIE D. KLAPSTEIN
Julie D. Klapstein

/S/ RICHARD A. LECHLEITER
Richard A. Lechleiter

/S/

JAKE L. NETTERVILLE
Jake L. Netterville

/S/ BRUCE D. PERKINS
Bruce D. Perkins

/S/

JEFFREY A. RIDEOUT
Jeffrey A. Rideout

President, Chief Executive Officer
and Member of the Board (Principal
Executive Officer)

March 1, 2017

Chief Financial Officer (Principal
Financial Officer)

March 1, 2017

Chief Accounting Officer (Principal
Accounting Officer)

March 1, 2017

Director

Director

Director

Director

Director

Director

March 1, 2017

March 1, 2017

March 1, 2017

March 1, 2017

March 1, 2017

March 1, 2017

/S/ DONALD A. WASHBURN
Donald A. Washburn

Non-Executive Chairman of
Board

the

March 1, 2017

/S/ NATHANIEL M. ZILKHA
Nathaniel M. Zilkha

Director

109

March 1, 2017

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. The registrant
agrees to furnish to the Commission supplementally upon request a copy of any schedules or exhibits omitted
pursuant to Item 601(b)(2) of Regulation S-K of any material plan of acquisition, disposition or reorganization
set forth below.

Document Description

Report or Registration Statement

Purchase

Agreement

dated
Equity
February 5, 2016, by and between the
Company, as Purchaser, and Michael
Trigilro, as Seller
Composite of Certificate of Incorporation
of
all
amendments through June 14, 2007

the Company

inclusive

of

Composite of By-Laws of the Company
inclusive of
through
April 20, 2016

amendments

all

4.1

Common Stock Specimen

Form of
Agreement dated February 12, 2009

Director

Indemnification

SEC File or
Registration
Number

Exhibit
or Other
Reference

0-24260

2.1

0-24260

3.1

0-24260

3.2

333-145582

4.8

0-24260

10.1

The Company’s Quarterly
Report on Form 10-Q for
the quarter ended March 31,
2016
The Company’s Quarterly
Report on Form 10-Q for
the quarter ended June 30,
2007

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended March 31,
2016

The Company’s Registration
Statement on Form S-3 filed
August 20, 2007

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2008

Inc.
Amended and Restated Amedisys,
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

Composite Amedisys, Inc. 2008 Omnibus
Incentive Compensation Plan (inclusive of
Plan amendments dated June 7, 2012 and
October 25, 2012, April 23, 2015 and
June 4, 2015,
January 20, 2017 and
February 22, 2017 and the full text of the
Amedisys, Inc. 2008 Omnibus Incentive
Compensation Plan)

Form of Nonvested
Stock Award
Agreement Issued under the Amedisys,
Inc.
Incentive
Compensation Plan

Omnibus

2008

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2008

0-24260

10.3

110

Exhibit
Number

2.1

3.1

3.2

10.1

10.2*

†10.3*

10.4*

Exhibit
Number

10.5*

10.6*

10.7*

10.8

10.9*

10.10*

10.11*

10.12*

Document Description

Report or Registration Statement

Restricted

Stock Unit
Form of
Agreement Issued under the Amedisys,
Inc.
Incentive
Compensation Plan

Omnibus

2008

Form of Stock Option Award Agreement
Issued under the Amedisys, Inc. 2008
Omnibus Incentive Compensation Plan

The Company’s Quarterly
Report on Form 10-Q for
the quarter ended June 30,
2008

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2014

Form of Performance Stock Option
Award Agreement
the
Amedisys, Inc. 2008 Omnibus Incentive
Compensation Plan

Issued under

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2014

Form of Restricted
Stock Award
Agreement Issued under the Amedisys,
Inc.
Incentive
Compensation Plan

Omnibus

2008

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2014

Form of Restricted Performance Stock
Award Agreement
the
Amedisys, Inc. 2008 Omnibus Incentive
Compensation Plan

Issued under

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2014

SEC File or
Registration
Number

Exhibit
or Other
Reference

0-24260

10.4

0-24260

10.6

0-24260

10.7

0-24260

10.8

0-24260

10.9

Composite Amedisys, Inc. 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

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
year ended December 31,
2005

Agreement

Employment
dated
December 11, 2014 by and among
Inc., Amedisys Holding,
Amedisys,
L.L.C. and Paul B. Kusserow

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2014

0-24260

10.4

0-24260

10.12

10.13.1*

10.13.2*

Agreement

Employment
dated
November 1, 2011 by and among
Inc., Amedisys Holding,
Amedisys,
L.L.C. and Ronald A. LaBorde

Amendment No. 1 dated December 29,
2011 to Employment Agreement dated
November 1, 2011 by and among
Amedisys,
Inc., Amedisys Holding,
L.L.C. and Ronald A. LaBorde

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

0-24260

10.1

0-24260

10.2

111

Exhibit
Number

10.13.3*

10.13.4*

10.14*

†10.15*

10.16.1

Document Description

Report or Registration Statement

Amendment No. 2 dated December 19,
2012 to Employment Agreement dated
November
among
Amedisys, Inc., Amedisys Holding, L.L.C.
and Ronald A. LaBorde

2011

and

by

1,

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2013

SEC File or
Registration
Number

Exhibit
or Other
Reference

0-24260

10.10.3

Amendment No. 3 dated May 1, 2014 to
dated
Employment
November
among
Amedisys, Inc., Amedisys Holding, L.L.C.
and Ronald A. LaBorde

Agreement
by

2011

and

1,

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2014

0-24260

10.4

Employment Agreement dated as of
May 2, 2016 between Amedisys, Inc. and
Jeffrey D. Jeter

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2016

0-24260

10.1

Amedisys Holding, L.L.C. Severance Plan
for Key Executives dated as of April 30,
2015 (inclusive of all amendments thereto
adopted on or before December 13, 2016)

The Company’s Current
Report on Form 8-K filed on
October 30, 2012

0-24260

10.1

other

banks

Credit Agreement dated October 26, 2012
Inc. and Amedisys
among Amedisys,
the
Holding, L.L.C., as co-borrowers,
several
financial
and
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 Incorporated, as Co-Lead
Arrangers and Joint Bookrunners

112

Exhibit
Number

10.16.2

10.16.3

10.16.4

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
quarter ended September 30,
2013

First Amendment and 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., 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 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 Incorporated, as
Co-Lead Arrangers and Joint Bookrunners

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended September 30,
2013

0-24260

10.1.2

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended March 31,
2014

0-24260

10.3

11,

dated
to

as
of
Amendment
Second
November
the Credit
2013
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 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 Incorporated, as
Co-Lead Arrangers and Joint Bookrunners

L.L.C.,

Third Amendment dated as of April 17,
2014 to the Credit Agreement dated
October 26, 2012 among Amedisys, Inc.
as
and Amedisys Holding,
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 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 Incorporated, as
Co-Lead Arrangers and Joint Bookrunners

113

Document Description

Report or Registration Statement

SEC File or
Registration
Number

Exhibit
or Other
Reference

0-24260

10.1.2

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2014

Exhibit
Number

10.16.5

10.17

10.18

10.19

10.20

L.L.C.,

Fourth Amendment dated as of July 28,
2014 to the Credit Agreement dated
October 26, 2012 among Amedisys, Inc.
and Amedisys Holding,
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 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 Incorporated, as
Co-Lead Arrangers and Joint Bookrunners

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

Second Lien Credit Agreement dated as of
July 28, 2014 by and among Amedisys, Inc.
and Amedisys Holding,
as
co-borrowers, the banks and other financial
institutions or entities from time to time
parties thereto as lenders, and Cortland
Capital Market
as
Administrative Agent

Services

L.L.C.,

LLC,

and

Lien

Second
Pledge
Security
Agreement dated as of July 28, 2014 by and
among Amedisys, Inc., Amedisys Holding,
L.L.C,
the guarantors party thereto and
Cortland Capital Market Services LLC, not
in its individual capacity, but solely as
collateral agent for the secured parties

Intercreditor Agreement dated as of July 28,
2014 by and among JPMorgan Chase Bank,
N.A., as Administrative Agent for the first
priority secured parties, Cortland Capital
Market Services LLC, as Administrative
the second priority secured
Agent
indirect
parties,
subsidiaries
and
of Amedisys,
Amedisys Holding, L.L.C. from time to
time party thereto

direct

Inc.

and

and

the

for

114

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended September 30,
2013

0-24260

10.2

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2014

0-24260

10.8

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2014

0-24260

10.9

The Company’s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2014

0-24260

10.10

Exhibit
Number

10.21.1

10.212

10.21.3

10.22

10.23

SEC File or
Registration
Number

Exhibit
or Other
Reference

0-24260

10.1

Document Description

Report or Registration Statement

The Company’s Current
Report on Form 8-K filed
September 2, 2015

Credit Agreement dated as of August 28,
2015, among Amedisys, Inc. and Amedisys
Holding, L.L.C., as borrowers, certain
subsidiaries of Amedisys, Inc. party thereto
as guarantors, Bank of America, N.A., as
Administrative Agent, Swingline Lender
and L/C Issuer, JPMorgan Chase Bank,
N.A., as Syndication Agent, Citizens Bank,
N.A., Compass Bank, Fifth Third Bank, and
Regions Bank,
as Co-Documentation
Agents, the lenders party thereto, Merrill
Lynch,
Smith
Incorporated, Citizens Bank N.A., Fifth
Third Bank and J.P. Morgan Securities
LLC, as Joint Lead Arrangers, and Merrill
Lynch,
Smith
Incorporated and J.P. Morgan Securities
LLC, as Joint Bookrunners

Fenner

Fenner

Pierce,

Pierce

&

&

The Company’s Current
Report on Form 8-K filed
September 2, 2015

0-24260

10.2

The Company’s Current
Report on Form 8-K filed
September 2, 2015

0-24260

10.3

The Company’s Current
Report on Form 8-K filed on
April 24, 2014

0-24260

10.1

Security Agreement dated as of August 28,
2015, among Amedisys, Inc. and Amedisys
Holding, L.L.C., as borrowers, certain other
identified as “grantors” on the
parties
thereto and Bank of
signature pages
America, N.A.,
as
in
Administrative Agent

capacity

its

Pledge Agreement dated as of August 28,
2015, among Amedisys, Inc. and Amedisys
Holding, L.L.C., as borrowers, certain other
identified as “pledgers” on the
parties
thereto, and Bank of
signature pages
America, N.A.,
as
in
Administrative Agent

capacity

its

Settlement Agreement effective April 23,
2014 by and among (a) the United States of
America, acting through the United States
Department of Justice and on Behalf of the
Office
the
Department of Health and Human Services,
(b) Amedisys, Inc. and Amedisys Holding,
L.L.C. and (c) the various Relators named
therein

Inspector General

of

of

Corporate Integrity Agreement effective
April 22, 2014 between the Office of
Inspector General of the Department of
Health and Human Services and Amedisys,
Inc. and Amedisys Holding, L.L.C.

The Company’s Current
Report on Form 8-K filed on
April 24, 2014

0-24260

10.2

115

Exhibit
Number

10.24

10.25

†21.1

†23.1

†31.1

†31.2

††32.1

††32.2

SEC File or
Registration
Number

Exhibit
or Other
Reference

0-24260

10.27

Document Description

Report or Registration Statement

Agreement and Plan of Merger dated
October 31, 2015 by and among
Amedisys Health Care West, L.L.C.,
IHC Acquisitions, L.L.C., Infinity Home
Care, L.L.C., Axiom HealthEquity
Infinity
Holdings Management, LLC,
Healthcare
and
Amedisys, Inc.

Holdings,

LLC,

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2015

The Company’s Annual
Report on Form 10-K for the
year ended December 31,
2015

0-24260

10.28

Inc.,

Agreement of Purchase and Sale dated
as of November 25, 2015, between
Amedisys,
through its wholly-
owned subsidiary, Amedisys Property,
Franciscan
L.L.C.,
Missionaries of Our Lady of the Lake
Heath System, Inc., as purchaser.

seller

and

as

Subsidiaries of the Registrant

Consent of KPMG LLP

Certification of Paul B. Kusserow,
President and Chief Executive Officer
(principal executive officer), pursuant to
Section 302 of the Sarbanes-Oxley Act
of 2002

Certification of Gary D. Willis, Chief
financial
Financial Officer
officer), pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

(principal

Certification of Paul B. Kusserow,
President and Chief Executive Officer
(principal executive officer), pursuant to
18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002

Certification of Gary D. Willis, Chief
financial
Financial Officer
18 U.S.C.
officer),
to
Section 1350, as adopted pursuant
Section 906 of the Sarbanes-Oxley Act
of 2002

(principal
to

pursuant

†101.INS

XBRL Instance

†101.SCH

†101.CAL

XBRL Taxonomy Extension Schema
Document

XBRL Taxonomy Extension Calculation
Linkbase Document

116

Exhibit
Number

†101.DEF

†101.LAB

†101.PRE

Document Description

Report or Registration Statement

SEC File or
Registration
Number

Exhibit
or Other
Reference

XBRL Taxonomy Extension Definition
Linkbase

XBRL Taxonomy Extension Labels
Linkbase Document

XBRL Taxonomy Extension Presentation
Linkbase Document

117

Exhibit 31.1 

I, Paul B. Kusserow, certify that:  

CERTIFICATION  

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2016, 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. The registrant’s other certifying officer(s) and I are 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. The registrant’s other certifying officer(s) and 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 the 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 1, 2017  

/S/ Paul B. Kusserow
Paul B. Kusserow
President and Chief Executive Officer 
(Principal Executive Officer) 

  
Exhibit 31.2 

I, Gary D. Willis, certify that:  

CERTIFICATION  

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2016, 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. The registrant’s other certifying officer(s) and I are 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. The registrant’s other certifying officer(s) and 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 the 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 1, 2017  

/S/ Gary D. Willis
Gary D. Willis
Chief Financial Officer 
(Principal Financial Officer)

  
CERTIFICATION OF PRINCIPAL EXECUTIVE 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, 2016 (the 
“Report”), I, Paul B. Kusserow, President and Chief Executive 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 results of 
operations of the Company.  

Exhibit 32.1 

Date: March 1, 2017  

/S/ Paul B. Kusserow 
Paul B. Kusserow 
President and Chief Executive Officer
(Principal Executive Officer)

  
CERTIFICATION OF PRINCIPAL 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, 2016 (the 
“Report”), I, Gary D. Willis, 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 results of 
operations of the Company.  

Exhibit 32.2 

Date: March 1, 2017  

/S/ Gary D. Willis 
Gary D. Willis 
Chief Financial Officer 
(Principal Financial Officer)

  
COMPANYLEADERSHIP

BOARD OF DIRECTORS

EXECUTIVE OFFICERS

Paul B. Kusserow 
President and Chief Executive Officer

Christopher T. Gerard 
Chief Operating Officer 

Scott G. Ginn 
Chief A   ccounting Officer 

David L. Kemmerly 
General Counsel 

Michael P. North 
Chief Information Officer

David Pearce 
Chief Compliance Officer

Larry R. Pernosky 
Chief Human Resources Officer

Stephen E. Seim 
Chief Strategy Officer

Susan Sender 
Chief Clinical Operations Officer

Gary D. Willis 
Chief Financial Officer

Donald A. Washburn  
Non-Executive Chairman of the Board 
Private Investments 

Linda J. Hall 
Entrepreneur-in-Residence  
Carlson School of Business at the University of 
Minnesota

Julie D. Klapstein 
Former CEO 
Availity

Paul B. Kusserow 
President and Chief Executive Officer 
Amedisys, Inc.

Richard A. Lechleiter 
President  
Catholic Education Foundation 
Retired Executive Vice President and Chief Financial 
Officer, Kindred Healthcare, Inc.

Jake L. Netterville 
Chairman, Emeritus, of the Board of Directors 
Postlethwaite & Netterville, A Professional 
Accounting Corporation

Bruce D. Perkins 
Former President of Healthcare Services  
Humana

Jeffrey A. Rideout, M.D., M.A., FACP 
President and CEO  
the Integrated Healthcare Association

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, 2016, 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 8, 2017, at 1:00 p.m. 
(CDT) at the Nashville office, 
209 10th Avenue South, Suite 
512, Nashville, TN 37203.

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, LLC 
6201 15th Avenue 
Brooklyn, New York 11219 
800.937.5449

A copy of all exhibits to the 
company’s Annual Report 
on Form 10-K as filed with 
the Securities and Exchange 
Commission is available free 
of charge on our website at 
www.amedisys.com or by 
contacting:

Amedisys, Inc.  
3854 American Way, Suite A, 
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, 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. 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, 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 healthcare 
industry, our ability to integrate our personal care segment into our business efficiently, 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 an economic downturn and deficit spending by federal and state governments, future cost containment initiatives 
undertaken by third-party payors, our access to financing, 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, manage 
and keep our information systems secure, our ability to comply with the requirements stipulated in our corporate integrity 
agreement, and changes in law or developments with respect to any litigation relating the Company, including 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, 2016.

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