AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Net service revenue by payor class as a percentage of total net service revenue is as follows: | | | | | | | | | | | |
| For the Three-Month Periods Ended March 31, |
| 2023 | | 2022 |
Home Health: | | | |
Medicare | 39 | % | | 41 | % |
Non-Medicare - Episodic-based | 7 | % | | 8 | % |
Non-Medicare - Non-episodic based | 15 | % | | 12 | % |
Hospice: | | | |
Medicare | 33 | % | | 34 | % |
Non-Medicare | 2 | % | | 2 | % |
Personal Care | 3 | % | | 3 | % |
High Acuity Care | 1 | % | | < 1% |
| 100 | % | | 100 | % |
Home Health Revenue Recognition
Medicare Revenue
All Medicare contracts are required to have a signed plan of care which represents a single performance obligation, comprised of the delivery of a series of distinct services that are substantially similar and have a similar pattern of transfer to the customer. Accordingly, we account for the series of services ("episode") as a single performance obligation satisfied over time, as the customer simultaneously receives and consumes the benefits of the goods and services provided. An episode starts the first day a billable visit is performed and ends 60 days later or upon discharge, if earlier, with multiple continuous episodes allowed. Each 60-day episode includes two 30-day payment periods.
Net service revenue is recorded based on the established Federal Medicare home health payment rate for a 30-day period of care. ASC 606 notes that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice. We have elected to apply the "right to invoice" practical expedient and therefore, our revenue recognition is based on the reimbursement we are entitled to for each 30-day payment period. We utilize our historical average length of stay for each 30-day period of care as the measure of progress towards the satisfaction of our performance obligation.
Effective January 1, 2020, the Centers for Medicare and Medicaid Services ("CMS") implemented a revised case-mix adjustment methodology, the Patient-Driven Groupings Model ("PDGM"). PDGM uses timing, admission source, functional impairment levels and principal and other diagnoses to case-mix adjust payments. The case-mix adjusted payment for a 30-day period of care is subject to additional adjustments 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 provided was less than the established threshold, which ranges from two to six visits and varies for every case-mix group; (c) a partial payment if a patient is transferred to another provider or from another provider before completing the 30-day period of care; and (d) the applicable geographic wage index. Payments for routine and non-routine supplies are included in the 30-day payment rate.
Medicare can also make various adjustments to payments received if we are unable to produce appropriate billing documentation or acceptable authorizations. 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 to revenue with a corresponding reduction to patient accounts receivable.
Amounts due from Medicare include variable consideration for retroactive revenue adjustments due to settlements of audits and payment reviews. We determine our estimates for non-contractual revenue adjustments related to audits and payment reviews based on our historical experience and success rates in the claim appeals and adjudication process.
The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave his/her home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services and receive treatment under a plan of care established and periodically reviewed by a physician.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Effective January 1, 2022, CMS implemented a new Notice of Admission ("NOA") process. The NOA process requires a one-time submission that establishes the home health period of care and covers all contiguous 30-day periods of care until the patient is discharged from home health services. If the NOA is not submitted timely, a payment reduction is applied equal to 1/30 of the 30-day payment rate for each day from the start of care until the date the NOA is submitted.
Non-Medicare Revenue
Payments from non-Medicare payors are either a percentage of Medicare rates, per-visit rates or case rates depending upon the terms and conditions established with such payors. Approximately 30% of our managed care contract volume affords us the opportunity to receive additional payments if we achieve certain quality or process metrics as defined in each contract (e.g. star ratings and acute-care hospitalization rates).
Episodic-based Revenue. We recognize revenue in a similar manner as we recognize Medicare revenue for amounts that are paid by other insurance carriers, including Medicare Advantage programs; however, these amounts can vary based upon the negotiated terms, the majority of which range from 95% to 100% of Medicare rates.
Non-episodic based Revenue. For our per visit contracts, 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. For our case rate contracts, gross revenue is recorded over our historical average length of stay using the established case rate for each admission. Contractual revenue 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. We also make non-contractual revenue adjustments to non-episodic revenue based on our historical experience to reflect the estimated transaction price. 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.
Under our case rate contracts, we may receive reimbursement before all services are rendered. Any cash received that exceeds the associated revenue earned is recorded to deferred revenue in accrued expenses within our condensed consolidated balance sheets.
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 predetermined 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 accounted for 97% of our total Medicare hospice service revenue for the three-month periods ended March 31, 2023 and 2022. There are 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, we may also receive a service intensity add-on (“SIA”). The SIA is based on visits made in the last seven days of life by a registered nurse or medical social worker for patients in a routine level of care.
The performance obligation is the delivery of hospice services to the patient, as determined by a physician, each day the patient is on hospice care.
We make adjustments to Medicare revenue for non-contractual revenue adjustments, which include our inability to obtain appropriate billing documentation or acceptable authorizations and other reasons unrelated to credit risk. We estimate the impact of these non-contractual revenue adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record it during the period services are rendered.
Amounts due from Medicare include variable consideration for retroactive revenue adjustments due to settlements of audits and payment reviews. We determine our estimates for non-contractual revenue adjustments related to audits and payment reviews based on our historical experience and success rates in the claim appeals and adjudication process.
Additionally, our hospice service revenue is subject to certain limitations on payments from Medicare which are considered variable consideration. We are subject to an inpatient cap limit and an overall Medicare payment cap for each provider number. We monitor these caps on a provider-by-provider basis 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 accrued expenses within our condensed consolidated balance sheets. Providers are required to self-report and pay their estimated cap liability by February 28th of the following year. As of March 31, 2023, we have recorded $4.1 million for estimated amounts due back to Medicare
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
in accrued expenses for the Federal cap years ended October 31, 2016 through September 30, 2023. As of December 31, 2022, we had recorded $4.3 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 2016 through September 30, 2023.
Hospice Non-Medicare Revenue
Gross revenue is recorded 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 revenue adjustments are recorded for the difference between our standard rates and the contractual rates to be realized from patients, third-party payors and others for services provided and are deducted from gross revenue to determine our net service revenue. We also make non-contractual adjustments to non-Medicare revenue based on our historical experience to reflect the estimated transaction price.
Personal Care Revenue Recognition
Personal Care Revenue
We generate net service revenues by providing our services directly to patients based on authorized hours, visits or units determined by the relevant agency, at a rate that is either contractual or fixed by legislation. Net service revenue is recognized at the time services are rendered based on gross charges for the services provided, reduced by estimates for contractual and non-contractual revenue adjustments. We receive payment for providing such services from payors, including state and local governmental agencies, managed care organizations, commercial insurers and private consumers. Payors include the following elder service agencies: Aging Services Access Points ("ASAPs"), Senior Care Options ("SCOs"), Program of All-Inclusive Care for the Elderly ("PACE") and the Veterans Administration ("VA").
High Acuity Care Revenue Recognition
High Acuity Care Revenue
Our revenues are derived from contracts with (1) health insurance plans for the coordination and provision of home recovery care services to clinically-eligible patients who are enrolled members in those insurance plans and (2) health system partners for the coordination and provision of home recovery care services to clinically-eligible patients who are discharged early from a health system facility to complete their inpatient stay at home.
Under our health insurance plan contracts, we provide home recovery care services, which include hospital-equivalent ("H@H") and skilled nursing facility ("SNF") equivalent services ("SNF@H"), for high acuity care patients on a full risk basis whereby we assume the financial risk for the coordination and payment of all hospital or SNF replacement medical services necessary to treat the medical condition for which the patient was diagnosed in a home-based setting for a 30-day (H@H) or 60-day (SNF@H) episode of care in exchange for a fixed contracted bundled rate. For H@H programs, the fixed rate is based on the assigned diagnosis related group ("DRG") and the 30-day post-discharge related spend. For SNF@H programs, the fixed rate is based on the 60-day post-discharge related spend. Our performance obligation is the coordination and provision of patient care in accordance with physicians’ orders over either a 30-day or 60-day episode of care. The majority of our care coordination services and direct patient care is provided in the first five to seven days of the episode period (the "acute phase"). Monitoring services and follow-up direct patient care, as deemed necessary by the treating physician, are provided throughout the remainder of the episode. Since the majority of our services are provided during the acute phase, we recognize net service revenues over the acute phase based on gross charges for the services provided per the applicable managed care contract rates, reduced by estimates for revenue adjustments.
Under our contracts with health system partners, we provide home recovery care services for high acuity patients on a limited risk basis whereby we assume the risk for certain healthcare services during the remainder of an inpatient acute stay serviced at the patient’s home in exchange for a contracted per diem rate. The performance obligation is the coordination and provision of required medical services, as determined by the treating physician, for each day the patient receives inpatient-equivalent care at home. As such, revenues are recognized as services are administered and as our performance obligations are satisfied on a per diem basis, reduced by estimates for revenue adjustments.
We recognize adjustments to revenue during the period in which changes to estimates of assigned patient diagnoses or episode terminations become known, in accordance with the applicable managed care contracts. For certain health insurance plans, revenue is reduced by amounts owed by enrollees to healthcare providers under deductible, coinsurance or copay provisions of health insurance plan policies, since those amounts are repaid to the health insurance plans by us as part of a retrospective reconciliation process.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents include certificates of deposit and all highly liquid debt instruments with maturities of three months or less when purchased. Restricted cash includes cash that is not available for ordinary business use. As of March 31, 2023 and December 31, 2022, we had $19.7 million and $13.6 million, respectively, classified as restricted cash related to funds placed into escrow accounts in connection with the indemnity, closing payment and other provisions within the purchase agreements of our acquisitions.
The following table summarizes the balances related to our cash, cash equivalents and restricted cash (amounts in millions): | | | | | | | | | | | |
| As of March 31, 2023 | | As of December 31, 2022 |
Cash and cash equivalents | $ | 49.4 | | | $ | 40.5 | |
Restricted cash | 19.7 | | | 13.6 | |
Cash, cash equivalents and restricted cash | $ | 69.1 | | | $ | 54.1 | |
Patient Accounts Receivable
We report accounts receivable from services rendered at their estimated transaction price, which includes contractual and non-contractual revenue adjustments based on the amounts expected to be due from payors. Our patient accounts receivable are uncollateralized and consist of amounts due from Medicare, Medicaid, other third-party payors and patients. Our non-Medicare third-party payor base is comprised of a diverse group of payors that are geographically dispersed across the country. As of March 31, 2023, there is no single payor, other than Medicare, that accounts for more than 10% of our total outstanding patient receivables. 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 write off accounts on a monthly basis once we have exhausted our collection efforts and deem an account to be uncollectible. We believe the collectability risk associated with our Medicare accounts, which represented 67% of our patient accounts receivable at March 31, 2023 and December 31, 2022, is limited due to our historical collection rate of over 99% from Medicare and the fact that Medicare is a U.S. government payor.
We do not believe there are any significant concentrations of revenues from any payor that would subject us to any significant credit risk in the collection of our accounts receivable.
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 bill Medicare following the end of each 30-day period of care or upon discharge, if earlier, for the services provided to the patient.
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. We bill Medicare on a monthly basis for the services provided to the patient.
Non-Medicare Home Health, Hospice, Personal Care and High Acuity 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.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Business Combinations
We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Acquisitions are accounted for as purchases and are included in our condensed consolidated financial statements from their respective acquisition dates. Assets acquired, liabilities assumed and noncontrolling interests, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets. In determining the fair value of identifiable intangible assets and any noncontrolling interests, we use various valuation techniques including the income approach, the cost approach and the market approach. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, growth rates and discount rates.
Fair Value of Financial Instruments
The following details our financial instruments where the carrying value and the fair value differ (amounts in millions): | | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value at Reporting Date Using |
Financial Instrument | Carrying Value as of March 31, 2023 | | Quoted Prices in Active Markets for Identical Items (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
Long-term obligations | $ | 383.3 | | | $ | — | | | $ | 374.7 | | | $ | — | |
The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The three levels of inputs are as follows:
•Level 1 – Quoted prices in active markets for identical assets and liabilities.
•Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•Level 3 – Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
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.
Weighted-Average Shares Outstanding
Net income 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 weighted-average shares outstanding, which are used to calculate our basic and diluted net income attributable to Amedisys, Inc. common stockholders (amounts in thousands):
| | | | | | | | | | | |
| For the Three- Month Periods Ended March 31, |
| 2023 | | 2022 |
Weighted average number of shares outstanding - basic | 32,558 | | | 32,555 | |
Effect of dilutive securities: | | | |
Stock options | 13 | | | 65 | |
Non-vested stock and stock units | 72 | | | 146 | |
Weighted average number of shares outstanding - diluted | 32,643 | | | 32,766 | |
Anti-dilutive securities | 323 | | | 188 | |
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. INVESTMENTS
We consolidate investments when the entity is a variable interest entity ("VIE") 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 condensed consolidated financial statements.
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 VIE in which we are the primary beneficiary. The book value of investments that we account for under the equity method of accounting was $38.9 million and $40.5 million as of March 31, 2023 and December 31, 2022, respectively, and is reflected in other assets within our condensed consolidated balance sheets.
We account for investments in entities in which we have less than 20% ownership interest under the cost method of accounting if we do not have the ability to exercise significant influence over the investee. During the three-month period ended March 31, 2022, we made a $15.0 million investment in a home health benefit manager, which is accounted for under the cost method. The book value of investments that we account for under the cost method of accounting was $20.0 million as of March 31, 2023 and December 31, 2022 and is reflected in other assets within our condensed consolidated balance sheets.
Our high acuity care segment includes interests in several joint ventures with health system partners and a professional corporation that employs clinicians. Each of these entities meets the criteria to be classified as a VIE. As of March 31, 2023, we are consolidating all but one of our admitting joint ventures with health system partners as well as the professional corporation as we have concluded that we are the primary beneficiary of these VIEs. We have management agreements in place with each of these entities whereby we manage the entities and run the day-to-day operations. As such, we possess the power to direct the activities that most significantly impact the economic performance of the VIEs. The significant activities include, but are not limited to, negotiating provider and payor contracts, establishing patient care policies and protocols, making employment and compensation decisions, developing the operating and capital budgets, performing marketing activities and providing accounting support. We also have the obligation to absorb any expected losses and the right to receive benefits. Additionally, from time to time, we may be required to provide joint venture funding. Our high acuity care segment also includes one admitting joint venture with a health system partner that is accounted for under the equity method of accounting.
The terms of the agreements with each VIE prohibit us from using the assets of the VIE to satisfy the obligations of other entities. The carrying amount of the VIEs’ assets and liabilities included in our condensed consolidated balance sheets are as follows (amounts in millions):
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | | | | | | | | | | |
| As of March 31, 2023 | | As of December 31, 2022 |
ASSETS | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 7.3 | | | $ | 15.6 | |
Patient accounts receivable | 6.9 | | | 6.1 | |
Other current assets | 0.5 | | | 0.6 | |
Total current assets | 14.7 | | | 22.3 | |
Property and equipment | 0.1 | | | 0.1 | |
Operating lease right of use assets | 0.1 | | | 0.1 | |
Goodwill | 8.5 | | | 8.5 | |
Intangible assets | 0.4 | | | 0.4 | |
Other assets | 0.2 | | | 0.2 | |
Total assets | $ | 24.0 | | | $ | 31.6 | |
LIABILITIES | | | |
Current liabilities: | | | |
Accounts payable | $ | 0.3 | | | $ | 0.1 | |
Payroll and employee benefits | 0.6 | | | 0.5 | |
Accrued expenses | 6.4 | | | 5.8 | |
Operating lease liabilities | — | | | 0.1 | |
Current portion of long-term obligations | 0.2 | | | 0.2 | |
Total liabilities | $ | 7.5 | | | $ | 6.7 | |
4. 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, personal care and high acuity 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 condensed 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 for significant acquisitions. The preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date if management obtains more information regarding asset valuations and liabilities assumed.
2023 Acquisitions
On January 20, 2023, we acquired the regulatory assets of a home health provider in West Virginia for a purchase price of $0.4 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $0.3 million and other intangibles (certificate of need) of $0.1 million in connection with the acquisition.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2022 Acquisitions
On April 1, 2022, we acquired 15 home health care centers from Evolution Health, LLC, a division of Envision Healthcare, doing business as Guardian Healthcare, Gem City, and Care Connection of Cincinnati ("Evolution"), for an estimated purchase price of $67.8 million. A portion of the purchase price ($51.1 million) was paid to the seller with cash on hand and proceeds from borrowings under our Revolving Credit Facility. The remainder ($16.7 million) was placed into an escrow account in accordance with the closing payment, indemnity and other provisions within the purchase agreement and recorded as restricted cash within our condensed consolidated balance sheet. Corresponding liabilities were also recorded to accrued expenses and other long-term obligations within our condensed consolidated balance sheet related to these contingent consideration arrangements.
Of the total $16.7 million placed into escrow, $1.0 million was set aside for the closing payment adjustment. The closing payment calculated on the acquisition date included estimates for cash, working capital and various other items. Under the purchase agreement, the purchase price was subject to an adjustment for any differences between estimated amounts included in the closing payment and actual amounts at close. The closing payment adjustment, which was finalized during the three-month period ended September 30, 2022, reduced the purchase price by $1.3 million from $67.8 million to $66.5 million. The remaining $15.7 million placed into escrow relates to certain outstanding matters existing as of the acquisition date as well as potential losses the Company may incur for which the seller has an obligation to indemnify the Company. This amount will either be paid to third parties as outstanding matters are resolved or to the seller at certain intervals in the future. As of March 31, 2023, $5.7 million of the $16.7 million has been released from escrow.
$15 million of goodwill recorded for this acquisition will be deductible for income tax purposes over approximately two to five years.
The Company has finalized its valuation of the assets acquired and liabilities assumed. During the three-month period ended March 31, 2023, total assets acquired decreased $0.2 million (primarily patient accounts receivable) and total liabilities assumed remained flat as a result of our review. These adjustments resulted in a $0.2 million increase in goodwill. The total consideration of $66.5 million has been allocated to assets acquired and liabilities assumed as of the acquisition date as follows (amounts in millions):
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| | | | | |
| Amount |
ASSETS | |
Patient accounts receivable | $ | 7.3 | |
Prepaid expenses | 0.2 | |
Other current assets | 0.1 | |
Property and equipment | 1.9 | |
Operating lease right of use assets | 3.2 | |
Intangible assets (licenses) | 1.3 | |
Deferred income tax asset | 0.1 | |
Other assets | 0.1 | |
Total assets acquired | $ | 14.2 | |
LIABILITIES | |
Accounts payable | $ | (0.8) | |
Payroll and employee benefits | (2.6) | |
Accrued expenses | (2.6) | |
Operating lease liabilities | (2.8) | |
Current portion of long-term obligations | (0.6) | |
Total liabilities assumed | (9.4) | |
Net identifiable assets acquired | $ | 4.8 | |
Goodwill | 61.7 | |
Total consideration | $ | 66.5 | |
On April 1, 2022, we acquired two home health locations from AssistedCare Home Health, Inc. and RH Homecare Services, LLC, doing business as AssistedCare Home Health and AssistedCare of the Carolinas ("AssistedCare"), respectively, for a purchase price of $24.7 million. A portion of the purchase price ($22.2 million) was paid to the seller with cash on hand and proceeds from borrowings under our Revolving Credit Facility. The remainder ($2.5 million) was placed into an escrow account in accordance with the indemnity provisions within the purchase agreement and is reflected in restricted cash within our condensed consolidated balance sheet. A corresponding liability was also recorded to other long-term obligations within our condensed consolidated balance sheet related to this contingent consideration arrangement. The $2.5 million will either be paid to third parties or to the seller at certain intervals in the future.
We recorded goodwill of $24.0 million and other intangibles of $0.7 million in connection with the acquisition. Intangible assets acquired include licenses ($0.5 million), certificates of need ($0.2 million) and acquired names (less than $0.1 million). The acquired names will be amortized over a weighted average period of one year. The entire amount of goodwill recorded for this acquisition will be deductible for income tax purposes over approximately 15 years.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. DISPOSITIONS
On February 10, 2023, we signed a definitive agreement to sell our personal care business (excluding the Florida operations). The divestiture closed on March 31, 2023. We received net proceeds of $47.8 million and recognized a $2.2 million loss during the three-month period ended March 31, 2023 which is reflected in miscellaneous, net within our condensed consolidated income statement. The net proceeds of $47.8 million is inclusive of $6.0 million that was placed into an escrow account in accordance with the closing payment and indemnity provisions within the purchase agreement; this amount is recorded as restricted cash within our condensed consolidated balance sheet as of March 31, 2023.
The disposition of our personal care business did not qualify as a discontinued operation because it did not represent a strategic shift that has or will have a major effect on the Company's operations or financial results.
The carrying amounts of the assets and liabilities associated with our personal care reporting unit included in our condensed consolidated balance sheet as of December 31, 2022 were as follows (amounts in millions):
| | | | | |
| As of December 31, 2022 |
ASSETS | |
Current assets: | |
Patient accounts receivable | $ | 9.6 | |
Prepaid expenses | 0.1 | |
Other current assets | 9.7 | |
Property and equipment | 0.1 | |
Operating lease right of use assets | 2.5 | |
Goodwill | 43.1 | |
Total assets | $ | 55.4 | |
LIABILITIES | |
Current liabilities: | |
Accounts payable | $ | 0.4 | |
Payroll and employee benefits | 0.6 | |
Accrued expenses | 1.8 | |
Current portion of operating lease liabilities | 0.6 | |
Total current liabilities | 3.4 | |
Operating lease liabilities, less current portion | 1.9 | |
Total liabilities | $ | 5.3 | |
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. LONG-TERM OBLIGATIONS
Long-term debt consists of the following for the periods indicated (amounts in millions): | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
$450.0 million Term Loan; interest rate at Base Rate plus Applicable Rate or Term SOFR Rate plus Applicable Rate (6.1% at March 31, 2023); due July 30, 2026 | $ | 383.1 | | | $ | 435.9 | |
$550.0 million Revolving Credit Facility; interest only payments; interest rate at Base Rate plus Applicable Rate or Term SOFR Rate plus Applicable Rate; due July 30, 2026 | — | | | — | |
Promissory notes | 0.2 | | | 0.2 | |
Finance leases | 20.1 | | | 2.3 | |
Principal amount of long-term obligations | 403.4 | | | 438.4 | |
Deferred debt issuance costs | (3.3) | | | (3.5) | |
| 400.1 | | | 434.9 | |
Current portion of long-term obligations | (26.9) | | | (15.5) | |
Long-term obligations, less current portion | $ | 373.2 | | | $ | 419.4 | |
Second Amendment to the Credit Agreement
On July 30, 2021, we entered into the Second Amendment to our Credit Agreement (as amended by the Second Amendment, the "Second Amended Credit Agreement"). The Second Amended Credit Agreement provides for a senior secured credit facility in an initial aggregate principal amount of up to $1.0 billion, which includes a $550.0 million Revolving Credit Facility and a term loan facility with a principal amount of up to $450.0 million (the "Amended Term Loan Facility" and collectively with the Revolving Credit Facility, the "Amended Credit Facility").
Third Amendment to the Credit Agreement
On March 10, 2023, we entered into the Third Amendment to our Credit Agreement (as amended by the Third Amendment, the "Third Amended Credit Agreement"). The Third Amendment (i) formally replaced the use of the London Interbank Offered Rate ("LIBOR") with the Secured Overnight Financing Rate ("SOFR") for interest rate pricing and (ii) allowed for the disposition of our personal care business.
The loans issued under the Amended Credit Facility bear interest on a per annum basis, at our election, at either: (i) the Base Rate plus the Applicable Rate or (ii) the Term SOFR 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 Term SOFR Rate plus 1% per annum. The “Term SOFR Rate” means the quoted rate per annum equal to the SOFR for an interest period of one or three months (as selected by us) plus the SOFR adjustment of 0.10%. The “Applicable Rate” is based on the consolidated leverage ratio and is presented in the table below. As of March 31, 2023, the Applicable Rate is 0.50% per annum for Base Rate loans and 1.50% per annum for Term SOFR Rate loans. We are also subject to a commitment fee and letter of credit fee under the terms of the Third Amended Credit Agreement, as presented in the table below.
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Pricing Tier | Consolidated Leverage Ratio | Base Rate Loans | Term SOFR Loans and SOFR Daily Floating Rate Loans | Commitment Fee | Letter of Credit Fee |
I | > 3.00 to 1.0 | 1.00% | 2.00% | 0.30% | 1.75% |
II | < 3.00 to 1.0 but > 2.00 to 1.0 | 0.75% | 1.75% | 0.25% | 1.50% |
III | < 2.00 to 1.0 but > 0.75 to 1.0 | 0.50% | 1.50% | 0.20% | 1.25% |
IV | < 0.75 to 1.0 | 0.25% | 1.25% | 0.15% | 1.00% |
The final maturity date of the Amended Credit Facility is July 30, 2026. The Revolving Credit Facility will terminate and be due and payable as of the final maturity date. The Amended Term Loan Facility, however, is subject to quarterly amortization of principal in the amount of (i) 0.625% for the period commencing on July 30, 2021 and ending on September 30, 2023, and (ii) 1.250% for the period commencing on October 1, 2023 and ending on July 30, 2026. The remaining balance of the
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amended Term Loan Facility must be paid upon the final maturity date. In addition to the scheduled amortization of the Amended Term Loan Facility, and subject to customary exceptions and reinvestment rights, we are required to prepay the Amended Term Loan Facility first and the Revolving Credit Facility second with 100% of all net cash proceeds received by any loan party or any subsidiary thereof in connection with (a) any asset sale or disposition where such loan party receives net cash proceeds in excess of $5 million or (b) any debt issuance that is not permitted under the Third Amended Credit Agreement.
Net proceeds received from the divestiture of our personal care line of business were used to pay a portion of our Term Loan during the three-month period ended March 31, 2023.
The Third Amended Credit Agreement requires maintenance of two financial covenants: (i) a consolidated leverage ratio of funded indebtedness to Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), as defined in the Third Amended Credit Agreement, and (ii) a consolidated interest coverage ratio of EBITDA to cash interest charges, as defined in the Third Amended Credit Agreement. Each of these covenants is calculated over rolling four-quarter periods and also is subject to certain exceptions and baskets. The Third Amended 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 as detailed in the Third Amended Credit Agreement.
The Revolving Credit Facility is guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries. The Third Amended Credit Agreement requires at all times that we (i) provide guarantees 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.
As of March 31, 2023 and 2022, we had no outstanding borrowings under our $550.0 million Revolving Credit Facility. Our weighted average interest rate for borrowings under our Amended Term Loan Facility was 6.1% and 1.7% for the three-month periods ended March 31, 2023 and 2022, respectively.
As of March 31, 2023, our consolidated leverage ratio was 1.6, our consolidated interest coverage ratio was 10.3 and we are in compliance with our covenants under the Third Amended Credit Agreement.
As of March 31, 2023, our availability under our $550.0 million Revolving Credit Facility was $519.2 million as we have no outstanding borrowings and $30.8 million outstanding in letters of credit.
Joinder Agreements
In connection with the Compassionate Care Hospice ("CCH") acquisition, we entered into a Joinder Agreement, dated as of February 4, 2019 (the “CCH Joinder”), pursuant to which CCH and its subsidiaries were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement (now the Third Amended Credit Agreement), the Amended and Restated Security Agreement, dated as of June 29, 2018 (the “Amended and Restated Security Agreement”), and the Amended and Restated Pledge Agreement, dated as of June 29, 2018 (the “Amended and Restated Pledge Agreement”). In connection with the AseraCare acquisition, we entered into a Joinder Agreement, dated as of June 12, 2020, pursuant to which the AseraCare entities were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement (now the Third Amended Credit Agreement), the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement (the “AseraCare Joinder"). In connection with the Contessa acquisition and the Second Amendment, we entered into a Joinder Agreement, dated as of September 3, 2021, pursuant to which Contessa and its subsidiaries and Asana Hospice ("Asana"), which we acquired on January 1, 2020, and its subsidiaries were made parties to, and became subject to the terms and conditions of, the Second Amended Credit Agreement (now the Third Amended Credit Agreement), the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement (the “Contessa and Asana Joinder,” and together with the CCH Joinder and the AseraCare Joinder, the “Joinders”).
Pursuant to the Joinders, the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement, CCH and its subsidiaries, the AseraCare entities, Contessa and its subsidiaries and Asana and its subsidiaries granted in favor of the Administrative Agent a first lien security interest in substantially all of their personal property assets and pledged to the Administrative Agent each of their respective subsidiaries' issued and outstanding equity interests. CCH and its subsidiaries, the AseraCare entities, Contessa and its subsidiaries and Asana and its subsidiaries also guaranteed our obligations, whether now
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
existing or arising after the respective effective dates of the Joinders, under the Third Amended Credit Agreement pursuant to the terms of the Joinders and the Third Amended Credit Agreement.
Promissory Notes
Our outstanding promissory note totaling $0.2 million, obtained through the acquisition of Contessa on August 1, 2021, bears an interest rate of 6.5%.
Finance Leases
Our outstanding finance leases totaling $20.1 million relate to leased equipment and fleet vehicles and bear interest rates ranging from 2.2% to 7.7%.
Effective January 1, 2023, the master lease agreement for our fleet leases was modified to remove the residual value guarantee provided by the lessor on each of our fleet leases. The modification resulted in a change in the classification of our fleet leases from operating leases to finance leases. In connection with the modification, we reclassified approximately $15 million from the operating lease asset and liability accounts to the property and equipment and current/long-term obligations accounts within our condensed consolidated balance sheet. Additionally, following the modification, expenses associated with our fleet leases will now be recorded in depreciation expense and interest expense within our condensed consolidated income statement as opposed to cost of service and general and administrative expenses which is where the expenses were reflected in prior periods.
7. COMMITMENTS AND CONTINGENCIES
Legal Proceedings - Ongoing
We are involved in legal actions in the normal course of business, some of which seek monetary damages, including claims for punitive damages. Based on information available to us as of the date of this filing, 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 fees related to all legal matters are expensed as incurred.
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 CMS, including Recovery Audit Contractors (“RACs”), Zone Program Integrity Contractors (“ZPICs”), Uniform Program Integrity Contractors (“UPICs”), Program Safeguard Contractors (“PSCs”), Medicaid Integrity Contractors (“MICs”), Supplemental Medical Review Contractors (“SMRCs”) and the Office of the Inspector General (“OIG”), conduct extensive reviews of claims data to identify potential improper payments. We cannot predict the ultimate outcome of any regulatory reviews or other governmental audits and investigations.
In July 2010, our subsidiary that provides hospice services in Florence, South Carolina received from a 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 Medicare Administrative Contractor (“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 administrative law judge ("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, 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 March 31, 2023, 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 entitled to be indemnified by the prior owners of the hospice
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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
operations for amounts relating to the period prior to August 1, 2009. On January 10, 2019, an arbitration panel from the American Health Lawyers Association determined that the prior owners' liability for their indemnification obligation was $2.8 million. This amount is recorded as an indemnity receivable within other assets in our condensed consolidated balance sheets.
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 covered time periods both before and after our ownership of the care centers, which were acquired on December 31, 2015. In August 2017, the Company received Requests for Repayment from Palmetto GBA, LLC ("Palmetto") regarding Infinity Home Care of Lakeland, LLC ("Lakeland Care Centers") and Infinity Home Care of Pinellas, LLC ("Clearwater Care Center"). The Palmetto letters were based on a statistical extrapolation performed by SafeGuard which alleged an overpayment of $34.0 million for the Lakeland Care Centers on a universe of 72 Medicare claims totaling $0.2 million in actual claims payments using a 100% error rate and an overpayment of $4.8 million for the Clearwater Care Center on a universe of 70 Medicare claims totaling $0.2 million in actual claims payments using a 100% error rate.
The Lakeland Request for Repayment covered claims between January 2, 2014 and September 13, 2016. The Clearwater Request for Repayment covered claims between January 2, 2015 and December 9, 2016. As a result of partially successful Level I and Level II Administrative Appeals, the alleged overpayment for the Lakeland Care Centers was reduced to $26.0 million and the alleged overpayment for the Clearwater Care Center was reduced to $3.3 million. The Company filed Level III Administrative Appeals, and the ALJ hearings regarding the Lakeland Request for Repayment and the Clearwater Request for Repayment were held in April 2022.
The Company received the results of the ALJ hearings for the Clearwater Care Center and the Lakeland Care Centers on June 23, 2022 and June 30, 2022, respectively. The ALJ decisions for both the Clearwater Care Center and the Lakeland Care Centers were partially favorable for the claims that were reviewed, but the extrapolations were upheld. As a result, we increased our total accrual related to these matters from $17.4 million to $25.2 million, excluding interest. The repayment for the Lakeland Care Centers totaling $34.3 million ($22.8 million extrapolated repayment plus $11.5 million accrued interest) was made during the three-month period ended September 30, 2022. The repayment for the Clearwater Care Center totaling $3.7 million ($2.4 million extrapolated repayment plus $1.2 million accrued interest) was made during the three-month period ended December 31, 2022. Additionally, we wrote off $1.5 million of receivables that were impacted by these matters. We expect to be indemnified by the prior owners, upon exhaustion of the parties' appeal rights, for approximately $10.9 million and have recorded this amount within other assets in our condensed consolidated balance sheets.
Insurance
We are obligated for certain costs associated with our insurance programs, including employee health, workers’ compensation, professional liability and fleet. 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.
Our health insurance has an exposure limit of $1.3 million for any individual covered life. Our workers’ compensation insurance has a retention limit of $2.0 million per incident. Our professional liability insurance has a retention limit of $0.3 million per incident. Our fleet insurance has an exposure limit of $0.4 million per accident.
8. SEGMENT INFORMATION
Our operations involve servicing patients through our four reportable business segments: home health, hospice, personal care and high acuity 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 completing important tasks. Our hospice segment provides palliative care and comfort to terminally ill patients and their families. Our personal care segment provides patients with assistance with the essential activities of daily living. Our high acuity care segment delivers the essential elements of inpatient hospital, palliative and SNF care to patients in their homes. 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.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In connection with our reorganization initiatives, management has revised its measurement of our reportable segments' operating income (loss). Effective January 1, 2023, we transitioned corporate functions that were previously included within our high acuity care segment to the corporate support function in order to realize operational efficiencies. Additionally, effective January 1, 2023, we transitioned from the high acuity care segment to the home health segment the operations of a home health care center that was contributed to the high acuity care segment by one of our health system partners during 2022. Prior periods have been recast to conform to the current year presentation.
Management evaluates performance and allocates resources based on the operating income of the reportable segments, which includes an allocation of corporate expenses directly attributable to the specific segment and includes revenues and all other costs directly attributable to the specific segment. Segment assets are not reviewed by the company’s chief operating decision maker and therefore are not disclosed below (amounts in millions).
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| For the Three-Month Period Ended March 31, 2023 |
| Home Health | | Hospice | | Personal Care | | High Acuity Care | | Other | | Total |
Net service revenue | $ | 343.3 | | | $ | 193.4 | | | $ | 15.0 | | | $ | 4.7 | | | $ | — | | | $ | 556.4 | |
Cost of service, inclusive of depreciation | 197.0 | | | 101.4 | | | 11.1 | | | 5.5 | | | — | | | 315.0 | |
General and administrative expenses | 89.1 | | | 47.9 | | | 2.3 | | | 4.4 | | | 50.9 | | | 194.6 | |
Depreciation and amortization | 1.1 | | | 0.6 | | | — | | | 0.8 | | | 1.9 | | | 4.4 | |
Operating expenses | 287.2 | | | 149.9 | | | 13.4 | | | 10.7 | | | 52.8 | | | 514.0 | |
Operating income (loss) | $ | 56.1 | | | $ | 43.5 | | | $ | 1.6 | | | $ | (6.0) | | | $ | (52.8) | | | $ | 42.4 | |
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| For the Three-Month Period Ended March 31, 2022 |
| Home Health | | Hospice | | Personal Care | | High Acuity Care | | Other | | Total |
Net service revenue | $ | 335.7 | | | $ | 193.1 | | | $ | 14.0 | | | $ | 2.5 | | | $ | — | | | $ | 545.3 | |
Cost of service | 185.2 | | | 106.4 | | | 10.8 | | | 2.4 | | | — | | | 304.8 | |
General and administrative expenses | 83.2 | | | 51.3 | | | 2.2 | | | 4.3 | | | 43.5 | | | 184.5 | |
Depreciation and amortization | 0.9 | | | 0.6 | | | 0.1 | | | 0.8 | | | 5.6 | | | 8.0 | |
Operating expenses | 269.3 | | | 158.3 | | | 13.1 | | | 7.5 | | | 49.1 | | | 497.3 | |
Operating income (loss) | $ | 66.4 | | | $ | 34.8 | | | $ | 0.9 | | | $ | (5.0) | | | $ | (49.1) | | | $ | 48.0 | |
9. SHARE REPURCHASES
On August 2, 2021, our Board of Directors authorized a share repurchase program, under which we could repurchase up to $100 million of our outstanding common stock through December 31, 2022 (the "2022 Share Repurchase Program").
Under the terms of the 2022 Share Repurchase Program, we were allowed to repurchase shares from time to time through open market purchases, unsolicited or solicited privately negotiated transactions, an accelerated stock repurchase program, and/or a trading plan in compliance with Exchange Act Rule 10b5-1. The timing and the amount of the repurchases were 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. We did not repurchase any shares under the 2022 Share Repurchase Program during the three-month period ended March 31, 2022. The 2022 Share Repurchase Program expired on December 31, 2022.
On February 2, 2023, our Board of Directors authorized a share repurchase program, under which we may repurchase up to $100 million of our outstanding common stock through December 31, 2023 (the "2023 Share Repurchase Program").
Under the terms of the 2023 Share Repurchase Program, we are allowed to repurchase shares from time to time through open market purchases, unsolicited or solicited privately negotiated transactions, an accelerated stock repurchase program, and/or a trading plan in compliance with Exchange Act Rule 10b5-1. The timing and the amount of the repurchases will be 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. Effective January 1, 2023,
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
repurchases are subject to a 1% excise tax under the Inflation Reduction Act. We have not repurchased any shares under the 2023 Share Repurchase Program as of March 31, 2023.
10. RELATED PARTY TRANSACTIONS
We have an investment in Medalogix, a healthcare predictive data and analytics company, which is accounted for under the equity method. We incurred costs of approximately $2.4 million during each of the three-month periods ended March 31, 2023 and 2022 in connection with our usage of Medalogix's analytics platforms. We believe that the terms of these transactions are consistent with those negotiated at arm's length.
11. SUBSEQUENT EVENTS
On May 3, 2023, Amedisys, Option Care Health, Inc., a Delaware corporation ("Option Care Health"), and Uintah Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Option Care Health ("Merger Sub") entered into an Agreement and Plan of Merger (the "Merger Agreement"). The Merger Agreement provides for, among other things and subject to the satisfaction or waiver of the conditions set forth therein, the merger of Merger Sub with and into Amedisys (the "Merger"), with Amedisys surviving the Merger as a wholly-owned subsidiary of Option Care Health.
Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of Amedisys’ common stock issued and outstanding (excluding shares held by Amedisys as treasury stock or owned by Option Care Health or Merger Sub or any of their respective subsidiaries, in each case, immediately prior to the Effective Time) will be converted into the right to receive 3.0213 (the "Exchange Ratio") fully paid and nonassessable shares of Option Care Health common stock (and, if applicable, cash in lieu of fractional shares) (the "Merger Consideration"), less any applicable withholding taxes.
Pursuant to the terms of the Merger Agreement, as of the Effective Time, each outstanding time-based vesting Amedisys restricted stock unit award (each, an "Amedisys RSU") and Amedisys option to purchase shares of Amedisys common stock (each, an "Amedisys Option") will be converted into an equivalent restricted stock unit award or option, as applicable, of Option Care Health relating to the number of shares of Option Care Health common stock (each, a "Converted RSU" or a "Converted Option", as applicable) equal to (1) the number of shares of Amedisys common stock subject to such Amedisys RSU or Amedisys Option immediately prior to the Effective Time, multiplied by (2) the Exchange Ratio, rounded to the nearest whole number of shares of Option Care Health common stock. A Converted Option will have an exercise price per share equal to (1) the exercise price per share of the equivalent Amedisys Option immediately prior to the Effective Time divided by (2) the Exchange Ratio, rounded to the nearest whole cent. In addition, each Amedisys performance-based vesting restricted stock unit award (each, an "Amedisys PSU") will be converted into an equivalent restricted stock unit award of Option Care Health relating to the number of shares of Option Care Health common stock (each, a "Converted PSU") equal to (1) the number of shares of Amedisys common stock subject to such Amedisys PSU immediately prior to the Effective Time, multiplied by (2) the Exchange Ratio, assuming achievement at target performance with respect to any Amedisys PSU for which the level of performance-vesting has not yet been determined, rounded to the nearest whole number of shares of Option Care Health common stock. Each Converted RSU, Converted Option and Converted PSU shall have the same terms and conditions (including any double-trigger protections but excluding any performance-based vesting conditions) that applied to the corresponding Amedisys RSU, Amedisys Option or Amedisys PSU immediately prior to the Effective Time (other than any other terms rendered inoperative by reason of the transactions contemplated by the Merger Agreement or other immaterial or administrative or ministerial changes).
The completion of the Merger is subject to certain conditions, including: (1) the adoption of the Merger Agreement by Amedisys’ stockholders, (2) the adoption of the Charter Amendment (as defined in the Merger Agreement) and the approval of the issuance of shares of Option Care Health common stock in the Merger by Option Care Health stockholders, (3) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (4) the receipt of other required regulatory approvals, (5) the absence of any order or law that has the effect of enjoining or otherwise prohibiting the completion of the Merger, (6) the approval for listing of the shares of Option Care Health common stock to be issued in connection with the Merger on the Nasdaq Global Select Market and the effectiveness of a registration statement with respect to such common stock, (7) subject to certain exceptions, the accuracy of the representations and warranties of the other party and (8) performance by each party of its respective obligations under the Merger Agreement.
Amedisys expects to incur certain significant costs relating to the Merger, such as legal, accounting, financial advisory, printing and other professional services fees, as well as other customary payments. If the Merger Agreement is terminated due to a recommendation change by Amedisys’ board of directors or under certain circumstances where a proposal for an alternative transaction has been made to Amedisys and, within 12 months following termination, Amedisys enters into a definitive
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
agreement providing for an alternative transaction or consummates an alternative transaction, Amedisys will be required to pay to Option Care Health a termination fee of $106,000,000.