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 2019, 2018 and 2017. 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 74%, 73% and 76% of our revenue derived from Medicare for 2019, 2018 and 2017, 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, 2019, we owned and operated 321 Medicare-certified home health care centers, 138 Medicare-certified hospice care centers and 12 personal-care care centers, including unconsolidated joint ventures, in 38 states within the United States and the District of Columbia.
Care Centers Summary (Includes Unconsolidated Joint Ventures)
|
|
|
|
|
|
|
|
|
|
|
Home Health
|
|
Hospice
|
|
Personal Care
|
At December 31, 2016
|
330
|
|
|
81
|
|
|
14
|
|
Acquisitions/Start-Ups/De Novos
|
3
|
|
|
2
|
|
|
7
|
|
Closed/Consolidated
|
(10
|
)
|
|
—
|
|
|
(6
|
)
|
At December 31, 2017
|
323
|
|
|
83
|
|
|
15
|
|
Acquisitions/Start-Ups/De Novos
|
1
|
|
|
1
|
|
|
1
|
|
Closed/Consolidated
|
(1
|
)
|
|
—
|
|
|
(4
|
)
|
At December 31, 2018
|
323
|
|
|
84
|
|
|
12
|
|
Acquisitions/Start-Ups/De Novos
|
3
|
|
|
59
|
|
|
—
|
|
Closed/Consolidated
|
(5
|
)
|
|
(5
|
)
|
|
—
|
|
At December 31, 2019
|
321
|
|
|
138
|
|
|
12
|
|
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 and start-ups that are an expansion of a same store care center; 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 “de novos,” we mean home health, hospice and personal-care care centers opened by us in the last twelve months which are not an expansion of a same store care center. 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.
2019 Developments
|
|
•
|
Continued to deliver on our goal of clinical distinction with 86% of our care centers at 4+ Stars in the January 2020 Home Health Compare ("HHC") release.
|
|
|
•
|
Outperformed the industry on all Hospice Item Set ("HIS") measures.
|
|
|
•
|
Performed over 12.3 million visits.
|
|
|
•
|
Lowered company voluntary turnover rate to 16.9%.
|
|
|
•
|
Acquired and successfully integrated Compassionate Care Hospice ("CCH") and RoseRock Healthcare ("RoseRock") and signed a definitive agreement to acquire Asana Hospice (subsequently closed on January 1, 2020) making Amedisys the third largest hospice company in the United States, exceeding 11,000 in hospice average daily census.
|
|
|
•
|
Successfully piloted several tools and data analytics platforms of Medalogix, a predictive data and analytics company, helping to further optimize our current business and enabling us to work more closely with Medicare Advantage payors.
|
|
|
•
|
Implemented pay practice changes and staffing model efficiencies to further drive operational excellence.
|
|
|
•
|
Invested in the business to prepare ourselves for the Patient-Driven Groupings Model ("PDGM").
|
|
|
•
|
Executed innovative personal care partnership with ClearCare, giving Amedisys access to personal care services nationwide.
|
|
|
•
|
Increased net service revenue 18% and operating income 14%.
|
|
|
•
|
Expanded home health gross margin as a percentage of revenue by 150 basis points.
|
|
|
•
|
Delivered over $200 million in cash flow from operations.
|
2020 Strategy
|
|
•
|
Continue our commitment to clinical distinction with a goal of all care centers achieving a minimum of 4.0 Quality Star Rating.
|
|
|
•
|
Continue to focus on consistent organic growth (de novos) and inorganic expansion in all three segments.
|
|
|
•
|
Focus on recruitment and retention, applying more sophisticated analytics to understand what drives turnover.
|
|
|
•
|
Successfully implement PDGM.
|
|
|
•
|
Invest in further expansion of Medalogix products.
|
|
|
•
|
Deliver on CCH expectations through realization of synergies.
|
|
|
•
|
Expand revenue in innovative payment relationships with Medicare Advantage payors.
|
|
|
•
|
Build infrastructure to provide care coordination to patients in need of home health, hospice or personal care.
|
|
|
•
|
Incubate new and innovative relationships focused on expanding our breadth and depth inside the home.
|
Financial Performance
Results for the year ended December 31, 2019 reflect the results of our continued focus on operational improvements and efficiencies and the successful acquisition and integration of our hospice acquisitions.
Our home health care centers experienced growth in volumes and improvement in utilization and clinician mix which, combined with the positive impact of the 2019 changes in reimbursement, led to the segment delivering a $27 million increase in operating income.
Our hospice segment completed the acquisitions of CCH and RoseRock. These acquisitions contributed approximately $22 million in operating income to the hospice segment.
Our personal care segment contributed approximately $8 million in operating income during 2019.
Economic and Industry Factors
Our home health, hospice and personal care segments operate in a highly fragmented and highly competitive industry. The degree of competitiveness 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, 70% and 28% 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. These reform efforts 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.
Payment
In July 2019, the Centers for Medicare and Medicaid Services ("CMS") issued a final rule to update hospice payment rates and the wage index for fiscal year 2020. The rule includes a rebasing of continuous home care, inpatient respite care and general inpatient care to better reflect the costs of care. This rebasing resulted in a reduction in routine home care payments of 2.7% to achieve budget neutrality. In addition, CMS eliminated the one-year “lag” in the use of the hospital wage index in an effort to align with the Inpatient Prospective Payment System ("IPPS") and other payment systems. CMS estimates hospices serving Medicare beneficiaries would see an estimated 2.6% increase in payments. This increase is the result of a 3.0% market basket adjustment less a 0.4% productivity adjustment. We have estimated the impact of the final rule on us to be an increase in revenue of approximately 0.5%; however, we are expecting the impact on gross margin percentage to be a reduction of approximately 0.5% as the majority of the revenue increase will be passed through to the general inpatient and respite facilities. These estimates are subject to change based on our mix of patients.
The CMS Calendar Year 2019 Home Health Final Rule, released in November 2018, provided for the first payment rate increase for home health providers since 2010. In the 2019 rule, CMS also issued proposed payment changes for Medicare home health providers for 2020. These proposed changes included changes to the Home Health Prospective Payment System ("HHPPS") case-mix adjustment methodology through the use of a new PDGM for home health payments, a change in the unit of payment from a 60-day payment period to a 30-day payment period and the elimination of the use of therapy visits in the determination of payments.
The CMS Calendar Year 2020 Home Health Final Rule, released in October 2019, confirmed the implementation of PDGM effective January 1, 2020 as well as the change in the unit of payment. Additionally, in an effort to eliminate fraud risks, CMS is reducing requests for anticipated payment ("RAPs") for 2020 to 20% with the full elimination of RAPs in 2021. CMS estimates that the final rule will result in a 1.3% increase in payments to home health providers. The increase is the result of a statutorily mandated 1.5% market basket increase pursuant to the Bipartisan Budget Act of 2018, reduced by 0.2% for the rural add-on. In calculating the impact, CMS also assumed that the industry will make certain behavioral changes related to coding practices, low utilization payment adjustment ("LUPA") management and co-morbidities. As a result, CMS reduced reimbursement by 4.36%. We have estimated the impact of the final rule on us to be a reduction in revenue of 2.8%. Our current view is that we can offset the impact via a mix of appropriate behavioral changes and cost levers which include clinician mix and utilization.
The following payment adjustments are effective for each of the years indicated based on CMS’s final rules:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home Health
|
|
Hospice
|
|
2020 (1)
|
|
2019
|
|
2018 (2)
|
|
2020 (3)
|
|
2019
|
|
2018
|
Market Basket Update
|
1.5
|
%
|
|
3.0
|
%
|
|
1.0
|
%
|
|
3.0
|
%
|
|
2.9
|
%
|
|
1.0
|
%
|
Rural Add-On Adjustment
|
(0.2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Nominal Case Mix Adjustment
|
—
|
|
|
—
|
|
|
(0.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
PPACA Adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
Productivity Adjustment
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
(0.8
|
)
|
|
—
|
|
Estimated Industry Impact
|
1.3
|
%
|
|
2.2
|
%
|
|
0.1
|
%
|
|
2.6
|
%
|
|
1.8
|
%
|
|
1.0
|
%
|
Behavioral Assumptions
|
(4.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
Estimated Industry Impact Including Behavioral Assumptions
|
(3.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
Estimated Company-Specific Impact (4)
|
(2.8
|
)%
|
|
1.2
|
%
|
|
(0.7
|
)%
|
|
0.5
|
%
|
|
1.6
|
%
|
|
1.0
|
%
|
|
|
(1)
|
The estimated industry impact of 1.3% only applies to episodes that started on or before December 31, 2019 and are scheduled to complete on or after January 1, 2020. The estimated industry impact including behavioral assumptions of (3.1)% only applies to episodes that started on or after January 1, 2020.
|
|
|
(2)
|
Includes the targeted extension of the home health rural add-on payment from the Bipartisan Budget Act of 2018.
|
|
|
(3)
|
Effective for services provided from October 1, 2019 to September 30, 2020.
|
|
|
(4)
|
Our company-specific impact of the home health final rule differs depending on differences in the wage index and the impact of coding and outlier changes. Our company-specific impact of the hospice final rule differs based on our mix of patients.
|
Payor Changes
Effective November 1, 2019, one of our episodic payors phased out their episodic plan offering, and the members were transferred to plans that pay per visit. We expect the overall financial impact of the change to be minimal.
Partnerships
In July 2019, we signed an agreement with ClearCare, Inc. ("ClearCare"), the provider of the personal care industry’s leading software platform, representing 4,000 personal care agencies in every zip code in the United States. Our agreement with ClearCare creates an opportunity to establish a network partnership between Amedisys and personal care agencies using ClearCare in order to better coordinate patient care. Long term, we believe this allows us to build a nation-wide network of personal care agencies and furthers our efforts to provide patients with a true care continuum in the home. This relationship will also help us as we continue to have innovative payment conversations with Medicare Advantage plans who have begun to recognize the value that combined home health, hospice and personal care services bring to their members and care delivery infrastructure.
Governmental Inquiries and Investigations and Other Litigation
See Item 8, Note 10 – Commitments and Contingencies to our consolidated financial statements for additional information regarding our corporate integrity agreement ("CIA"), the CCH CIA, the subpoena and civil investigative demands issued by the U.S. Department of Justice and the South Carolina and Florida Zone Program Integrity Contractor audits. No assurances can be given as to the timing or outcome of these items.
Results of Operations
Consolidated
The following table summarizes our consolidated results of operations (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Net service revenue
|
$
|
1,955.6
|
|
|
$
|
1,662.6
|
|
|
$
|
1,511.3
|
|
Gross margin, excluding depreciation and amortization
|
805.3
|
|
|
669.7
|
|
|
607.9
|
|
% of revenue
|
41.2
|
%
|
|
40.3
|
%
|
|
40.2
|
%
|
Other operating expenses
|
607.9
|
|
|
501.3
|
|
|
482.3
|
|
% of revenue
|
31.1
|
%
|
|
30.1
|
%
|
|
31.9
|
%
|
Depreciation and amortization
|
18.4
|
|
|
13.3
|
|
|
17.1
|
|
Securities Class Action Lawsuit settlement, net
|
—
|
|
|
—
|
|
|
28.7
|
|
Asset impairment charge
|
1.5
|
|
|
—
|
|
|
1.3
|
|
Operating income
|
177.5
|
|
|
155.1
|
|
|
78.5
|
|
Total other (expense) income, net
|
(7.1
|
)
|
|
3.8
|
|
|
2.3
|
|
Income tax expense
|
(42.5
|
)
|
|
(38.8
|
)
|
|
(50.1
|
)
|
Effective income tax rate
|
24.9
|
%
|
|
24.4
|
%
|
|
62.0
|
%
|
Net income
|
127.9
|
|
|
120.1
|
|
|
30.7
|
|
Net income attributable to noncontrolling interests
|
(1.1
|
)
|
|
(0.8
|
)
|
|
(0.4
|
)
|
Net income attributable to Amedisys, Inc.
|
$
|
126.8
|
|
|
$
|
119.3
|
|
|
$
|
30.3
|
|
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Overall, our operating income increased $22 million on a revenue increase of $293 million. Our 2019 operating results include the acquisitions of CCH and RoseRock which contributed approximately $174 million in revenue and an operating loss of approximately $5 million and is inclusive of $14 million in acquisition and integration costs and $6 million in intangibles amortization.
Additionally, our operating income was negatively impacted by a $7 million accrual related to settlement discussions with the U.S. Department of Justice (see Item 8, Note 10 - Commitments and Contingencies to our consolidated financial statements for additional information) and a $2 million asset impairment charge related to our acquired names intangibles (see Item 8, Note 4 - Goodwill and Other Intangible Assets, Net to our consolidated financial statements for additional information).
Our year-to-date performance reflects growth and operating improvement in all three segments of our legacy operations. We expanded gross margin as a percentage of revenue in our home health and personal care segments. Both segments benefitted from rate increases with home health also delivering improvements in clinician utilization and discipline mix. Our hospice segment's gross margin as a percentage of revenue decreased due to our acquisition activity. Additionally, our other operating expenses as a percentage of revenue increased only 1% compared to 2018; this increase is inclusive of approximately $16 million in acquisition and integration costs. Excluding the acquisition and integration costs, our other operating expenses as a percentage of revenue remained relatively flat compared to 2018 despite planned wage increases and the addition of resources to support growth.
Total other (expense) income, net includes the following items (amounts in millions):
|
|
|
|
|
|
|
|
|
|
For the Years Ended
December 31,
|
|
2019
|
|
2018
|
Interest income
|
$
|
0.1
|
|
|
$
|
0.3
|
|
Interest expense
|
(14.5
|
)
|
|
(7.4
|
)
|
Equity in earnings from equity method investments
|
5.3
|
|
|
7.7
|
|
Miscellaneous, net
|
2.0
|
|
|
3.2
|
|
|
$
|
(7.1
|
)
|
|
$
|
3.8
|
|
Interest expense increased $7 million in 2019 from 2018 as a result of an increase in borrowings under our Amended Credit Agreement (see Item 8, Note 7 – Long-Term Obligations to our consolidated financial statements for additional information
regarding our Amended Credit Agreement). Equity in earnings from equity method investments includes gains of $2 million and $5 million for 2019 and 2018, respectively.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Overall, our operating income increased $77 million on a revenue increase of $151 million. Our 2017 operating results were negatively impacted $40 million; these impacts include a $30 million charge for the Securities Class Action Lawsuit settlement and related legal fees, a $7 million reduction in revenue as a result of the Florida ZPIC audit and charges of approximately $3 million related to our home health closures and restructuring plan. Excluding these 2017 impacts, operating income increased $37 million, driven by continued growth in our home health and hospice segments, increases in clinical productivity in our home health segment and a continued focus on maintaining cost discipline, as our other operating expenses increased only 3% on a 10% increase in net service revenue. In addition, our gross margin as a percentage of revenue was relatively flat despite a net reduction of $3 million in net service revenue and gross margin resulting from the 2018 changes in reimbursement and planned wage increases.
Our 2018 operating results include the results of our acquisition of Christian Care at Home, which provided home health services to the state of Kentucky, East Tennessee Personal Care Services, which owned and operated one personal-care care center servicing the state of Tennessee, and certain personal care operations from Bring Care Home in Massachusetts. These three acquisitions accounted for approximately $5 million of our $151 million increase in revenue and $1 million of our $15 million increase in other operating expenses.
Total other income, net includes the impact of the following items (amounts in millions):
|
|
|
|
|
|
|
|
|
|
For the Years Ended
December 31,
|
|
2018
|
|
2017
|
Interest income
|
$
|
0.3
|
|
|
$
|
0.1
|
|
Interest expense
|
(7.4
|
)
|
|
(5.0
|
)
|
Equity in earnings from equity method investments
|
7.7
|
|
|
3.4
|
|
Miscellaneous, net
|
3.2
|
|
|
3.8
|
|
|
$
|
3.8
|
|
|
$
|
2.3
|
|
Interest expense includes interest expense related to the Florida ZPIC audit of $2 million for 2018. Equity in earnings from equity method investments includes gains of $5 million and $1 million for 2018 and 2017, respectively. Miscellaneous, net includes proceeds from legal settlements of $1 million and $2 million for 2018 and 2017, respectively. Excluding these items, total other income, net increased $1 million in 2018 from 2017.
Our 2017 income tax expense includes a $21 million charge related to the remeasurement of our deferred tax assets and liabilities to the enacted corporate income tax rate of 21% as required by the enactment of H.R. 1 (Tax Cuts and Jobs Act), on December 22, 2017 (see Item 8, Note 8 - Income Taxes to our consolidated financial statements).
Home Health Division
The following table summarizes our home health segment results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Financial Information (in millions):
|
|
|
|
|
|
Medicare
|
$
|
859.2
|
|
|
$
|
830.8
|
|
|
$
|
793.3
|
|
Non-Medicare
|
397.2
|
|
|
343.7
|
|
|
290.6
|
|
Net service revenue
|
1,256.4
|
|
|
1,174.5
|
|
|
1,083.9
|
|
Cost of service
|
754.1
|
|
|
722.1
|
|
|
670.9
|
|
Gross margin
|
502.3
|
|
|
452.4
|
|
|
413.0
|
|
Asset impairment charge
|
1.5
|
|
|
—
|
|
|
1.3
|
|
Other operating expenses
|
301.4
|
|
|
279.8
|
|
|
281.9
|
|
Operating income
|
$
|
199.4
|
|
|
$
|
172.6
|
|
|
$
|
129.8
|
|
Same Store Growth (1):
|
|
|
|
|
|
Medicare revenue
|
4
|
%
|
|
6
|
%
|
|
(4
|
%)
|
Non-Medicare revenue
|
16
|
%
|
|
18
|
%
|
|
17
|
%
|
Total admissions
|
7
|
%
|
|
5
|
%
|
|
2
|
%
|
Total volume (2)
|
5
|
%
|
|
7
|
%
|
|
4
|
%
|
Key Statistical Data - Total (3):
|
|
|
|
|
|
Medicare:
|
|
|
|
|
|
Admissions
|
195,513
|
|
|
190,748
|
|
|
190,132
|
|
Recertifications
|
110,460
|
|
|
112,773
|
|
|
106,774
|
|
Total volume
|
305,973
|
|
|
303,521
|
|
|
296,906
|
|
|
|
|
|
|
|
Completed episodes
|
300,551
|
|
|
296,223
|
|
|
290,227
|
|
Visits
|
5,207,563
|
|
|
5,261,315
|
|
|
5,067,436
|
|
Average revenue per completed episode (4)
|
$
|
2,920
|
|
|
$
|
2,854
|
|
|
$
|
2,823
|
|
Visits per completed episode (5)
|
17.3
|
|
|
17.6
|
|
|
17.3
|
|
Non-Medicare:
|
|
|
|
|
|
Admissions
|
133,180
|
|
|
118,577
|
|
|
107,665
|
|
Recertifications
|
62,108
|
|
|
55,736
|
|
|
46,364
|
|
Total volume
|
195,288
|
|
|
174,313
|
|
|
154,029
|
|
Visits
|
3,065,745
|
|
|
2,772,339
|
|
|
2,347,363
|
|
Total (3):
|
|
|
|
|
|
Visiting Clinician Cost per Visit
|
$
|
83.11
|
|
|
$
|
81.88
|
|
|
$
|
82.04
|
|
Clinical Manager Cost per Visit
|
$
|
8.04
|
|
|
$
|
8.01
|
|
|
$
|
8.44
|
|
Total Cost per Visit
|
$
|
91.15
|
|
|
$
|
89.89
|
|
|
$
|
90.48
|
|
Visits
|
8,273,308
|
|
|
8,033,654
|
|
|
7,414,799
|
|
|
|
(1)
|
Same store information represents the percent change in our Medicare, Non-Medicare and Total revenue, admissions or volume for the period as a percent of the Medicare, Non-Medicare and Total revenue, admissions or volume of the prior period. Effective July 1, 2019, same store is defined as care centers that we have operated for at least the last twelve months and startups that are an expansion of a same store care center.
|
|
|
(2)
|
Total volume includes all admissions and recertifications.
|
|
|
(3)
|
Total includes acquisitions and de novos.
|
|
|
(4)
|
Average Medicare revenue per completed episode is the average Medicare revenue earned for each Medicare completed episode of care.
|
|
|
(5)
|
Medicare visits per completed episode are the home health Medicare visits on completed episodes divided by the home health Medicare episodes completed during the period.
|
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Operating Results
Overall, our operating income increased $27 million on an $82 million increase in net service revenue. Our gross margin as a percentage of revenue was positively impacted by the 2019 changes in reimbursement, growth in volumes, the acuity level of our patients, improved utilization and a focus on discipline mix. The impact of the 2019 change in reimbursement was an increase in net service revenue and gross margin of approximately $12 million.
Net Service Revenue
Our revenue increased $82 million (7%) on a 5% increase in total volume and a 2% increase in Medicare revenue per episode. The volume growth was driven by a 7% increase in admissions offset by lower recertification volume. The increase in Medicare revenue per episode is the result of a 1.2% increase in reimbursement with the remainder due to an increase in the acuity level of our patients. Additionally, our non-Medicare (per visit and episodic) rates increased approximately 3% which is a combination of rate increases and increases in the acuity level of our patients. Revenue was also positively impacted by a reduction in our revenue adjustments.
Cost of Service, Excluding Depreciation and Amortization
Our cost of service consists of costs associated with direct clinician care in the homes of our patients as well as the cost of clinical managers who monitor the overall delivery of care. Our cost of service increased 4% on a 3% increase in total visits. Our total cost per visit increased approximately 1% as improvements in clinician utilization and optimization of discipline mix partially offset planned wage increases. Additionally, changes in our home health care center staffing resulted in a shift of some office staff from cost of service to other operating expenses totaling approximately $4 million.
Other Operating Expenses
Other operating expenses increased approximately $22 million primarily due to an increase in salaries and benefits expense as a result of the addition of resources to support volume growth, planned wage increases and the home health staffing shifts referenced above.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Operating Results
Overall, our operating income increased $43 million on a $91 million increase in net service revenue. The $43 million increase includes a $7 million reduction in revenue related to the Florida ZPIC audit in 2017. Our growth in volumes and increases in clinician productivity positively impacted our gross margin as a percentage of revenue, which increased despite the 2018 changes in reimbursement and planned wage increases. The impact of the 2018 changes in reimbursement was a reduction in net service revenue and gross margin of approximately $7 million.
Net Service Revenue
Our revenue increased $91 million on a 7% increase in total volume. The volume growth was driven by a 5% increase in admissions and a 130 basis point increase in our Medicare recertification rate. In addition to the increase in volume, our revenue per episode was up $31 per episode as a result of an increase in the acuity level of our patients which enabled us to overcome the 70 basis point reimbursement reduction effective January 1, 2018.
Cost of Service, Excluding Depreciation and Amortization
Our cost of service increased 8% on an 8% increase in total visits. Our increase in total visits was driven by growth in volumes as well as an increase in visits per completed episode which is the result of an increase in the acuity level of our patients. Our cost per visit decreased 1% as an increase in clinician productivity offset planned wage increases.
Other Operating Expenses
Other operating expenses decreased approximately $2 million on an 8% increase in net service revenue primarily due to a decrease in salaries and benefits expense as 2017 operating expenses included approximately $3 million in costs related to our home health restructuring plan. Additionally, we experienced decreases in rent expense, professional fees and telecommunications expense which were offset by increases in information technology expense and travel and training expense.
Hospice Division
The following table summarizes our hospice segment results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Financial Information (in millions):
|
|
|
|
|
|
Medicare
|
$
|
586.6
|
|
|
$
|
390.2
|
|
|
$
|
350.7
|
|
Non-Medicare
|
30.6
|
|
|
20.7
|
|
|
17.1
|
|
Net service revenue
|
617.2
|
|
|
410.9
|
|
|
367.8
|
|
Cost of service
|
335.1
|
|
|
212.0
|
|
|
187.5
|
|
Gross margin
|
282.1
|
|
|
198.9
|
|
|
180.3
|
|
Other operating expenses
|
139.1
|
|
|
85.7
|
|
|
77.5
|
|
Operating income
|
$
|
143.0
|
|
|
$
|
113.2
|
|
|
$
|
102.8
|
|
Same Store Growth (1):
|
|
|
|
|
|
Medicare revenue
|
7
|
%
|
|
11
|
%
|
|
17
|
%
|
Hospice admissions
|
4
|
%
|
|
8
|
%
|
|
11
|
%
|
Average daily census
|
7
|
%
|
|
11
|
%
|
|
15
|
%
|
Key Statistical Data - Total (2):
|
|
|
|
|
|
Hospice admissions
|
40,194
|
|
|
27,596
|
|
|
25,381
|
|
Average daily census
|
11,164
|
|
|
7,588
|
|
|
6,820
|
|
Revenue per day, net
|
$
|
151.47
|
|
|
$
|
148.36
|
|
|
$
|
147.75
|
|
Cost of service per day
|
$
|
82.24
|
|
|
$
|
76.53
|
|
|
$
|
75.31
|
|
Average discharge length of stay
|
98
|
|
|
100
|
|
|
93
|
|
|
|
(1)
|
Same store information represents the percent change in our Medicare revenue, Hospice admissions or average daily census for the period as a percent of the Medicare revenue, Hospice admissions or average daily census of the prior period. Effective July 1, 2019, same store is defined as care centers that we have operated for at least the last twelve months and startups that are an expansion of a same store care center.
|
|
|
(2)
|
Total includes acquisitions and de novos.
|
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Operating Results
On February 1, 2019, we acquired CCH, which owned and operated 53 hospice care centers. On April 1, 2019, we acquired RoseRock, which owned and operated one hospice care center. Acquisitions are included in our consolidated financial statements from their respective acquisition dates. As a result, our hospice segment operating results for 2019 and 2018 are not fully comparable.
Overall, our operating income increased $30 million on a $206 million increase in net service revenue. Our operating income was negatively impacted by a $7 million reduction to revenue and gross margin related to settlement discussions with the U.S. Department of Justice (see Item 8, Note 10 - Commitments and Contingencies to our consolidated financial statements for additional information). Our operating results were positively impacted by changes in reimbursement, which resulted in an increase in net service revenue and gross margin of approximately $7 million and $6 million, respectively. The majority of the revenue increase associated with the 2020 change in reimbursement, which became effective October 1, 2019, will be passed through to our general inpatient and respite facilities. Our operating results were also positively impacted by continued growth and by our acquisitions which contributed approximately $174 million in net service revenue and $22 million in operating income to our hospice segment's results for the year ended December 31, 2019.
Net Service Revenue
Our hospice revenue increased $206 million; approximately $174 million of which is attributable to our acquisition activities. The remaining $32 million increase is the result of a 7% increase in our average daily census and increases in reimbursement totaling 1.6% and 0.5% effective for services provided from October 1, 2018 and October 1, 2019, respectively, partially offset by an increase in our revenue adjustments, which include a $7 million reduction to revenue and gross margin related to the U.S. Department of Justice matter noted above.
Cost of Service, Excluding Depreciation and Amortization
Our hospice cost of service increased $123 million, approximately $110 million of which is attributable to our acquisition activity. The remaining $13 million increase is primarily due to a 7% increase in average daily census, planned wage increases and an increase in our general inpatient and respite facility costs as the majority of the reimbursement increase, which became effective October 1, 2019, will be passed through to these facilities. Our cost of service per day increased 7%, largely driven by our acquisitions as our same store cost of service per day remained relatively flat. We expect our acquisitions' cost of service per day to approximate our legacy metric as we fully integrate them during 2020.
Other Operating Expenses
Other operating expenses increased $53 million; approximately $42 million of the increase is related to our acquisition activity. The remaining $11 million increase is due to increases in other care center related expenses, primarily salaries and benefits expense due to the addition of resources to support census growth and planned wage increases, professional fees and travel and training expense.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Operating Results
Overall, our operating income increased $10 million on a $43 million increase in net service revenue. The 12% increase in net service revenue was partially offset by a lower gross margin as a percentage of revenue primarily related to planned wage increases, an increase in revenue adjustments and amounts due back to Medicare for hospice caps and an increase in other operating expenses.
Net Service Revenue
Our hospice revenue increased $43 million on an 11% increase in our average daily census and a 1.0% and 1.6% increase in reimbursement effective for services provided from each October 1, 2017 and October 1, 2018, respectively. We experienced a $2 million increase in our revenue adjustments and cap which partially offset the revenue increase for the year ended December 31, 2018.
Cost of Service, Excluding Depreciation and Amortization
Our hospice cost of service increased $25 million (13%) as the result of an 11% increase in average daily census. Our cost of service per day increased 2% primarily due to an increase in salary cost per day as a result of planned wage increases.
Other Operating Expenses
Other operating expenses increased $8 million on a 12% increase in net service revenue. The increase was related to other care center related expenses, primarily salaries and benefits expense, advertising expense, information technology expense, professional fees and travel and training expense as a result of the addition of resources to support census growth.
Personal Care Division
The following table summarizes our personal care segment results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Financial Information (in millions):
|
|
|
|
|
|
Medicare
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-Medicare
|
82.0
|
|
|
77.2
|
|
|
59.6
|
|
Net service revenue
|
82.0
|
|
|
77.2
|
|
|
59.6
|
|
Cost of service
|
61.1
|
|
|
58.8
|
|
|
45.0
|
|
Gross margin
|
20.9
|
|
|
18.4
|
|
|
14.6
|
|
Other operating expenses
|
12.5
|
|
|
13.1
|
|
|
9.7
|
|
Operating income
|
$
|
8.4
|
|
|
$
|
5.3
|
|
|
$
|
4.9
|
|
Key Statistical Data:
|
|
|
|
|
|
Billable hours
|
3,308,338
|
|
|
3,248,304
|
|
|
2,604,794
|
|
Clients served
|
17,364
|
|
|
17,981
|
|
|
16,774
|
|
Shifts
|
1,488,175
|
|
|
1,468,541
|
|
|
1,195,511
|
|
Revenue per hour
|
24.80
|
|
|
23.75
|
|
|
22.86
|
|
Revenue per shift
|
55.13
|
|
|
52.54
|
|
|
49.80
|
|
Hours per shift
|
2.2
|
|
|
2.2
|
|
|
2.2
|
|
Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018
Operating income related to our personal care segment increased $3 million on a $5 million increase in net service revenue. These results are inclusive of the acquisitions of East Tennessee Personal Care Services (May 2018) and Bring Care Home (October 2018). As a result, our personal care operating results for 2019 and 2018 are not fully comparable.
Gross margin as a percentage of revenue increased 170 basis points as the segment benefited from rate increases combined with operating cost controls. Additionally, other operating expenses decreased approximately $1 million resulting in an increase in operating income.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Operating income related to our personal care segment remained flat on an $18 million increase in net service revenue. 2018 revenues were positively impacted by the following acquisitions: Intercity Home Care (October 2017), East Tennessee Personal Care Services (May 2018) and Bring Care Home (October 2018). The segment experienced a decrease in gross margin as a percentage of revenue related to additional costs associated with these acquisitions and the Employer Medical Assistance Contribution program ("EMAC") that became effective in the state of Massachusetts on January 1, 2018. Other operating expenses increased $3 million on an $18 million increase in net service revenue. Acquisitions are included in our consolidated financial statements from their respective acquisition dates. As a result, our personal care operating results for 2018 and 2017 are not fully comparable.
Corporate
The following table summarizes our corporate results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Financial Information (in millions):
|
|
|
|
|
|
Other operating expenses
|
$
|
160.9
|
|
|
$
|
127.6
|
|
|
$
|
117.8
|
|
Depreciation and amortization
|
12.4
|
|
|
8.4
|
|
|
12.5
|
|
Total operating expenses before Securities Class Action Lawsuit settlement, net
|
$
|
173.3
|
|
|
$
|
136.0
|
|
|
$
|
130.3
|
|
Securities Class Action Lawsuit settlement, net
|
—
|
|
|
—
|
|
|
28.7
|
|
Total operating expenses
|
$
|
173.3
|
|
|
$
|
136.0
|
|
|
$
|
159.0
|
|
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, 2019 Compared to the Year Ended December 31, 2018
During 2019, corporate operating expenses increased $37 million; approximately $27 million of which is attributable to the CCH acquisition: $7 million relates to CCH corporate and administrative support functions, $6 million relates to CCH intangibles amortization and approximately $14 million relates to CCH acquisition and integration costs. Excluding the impact of the CCH acquisition, corporate operating expenses increased $10 million which represents 3% of our $293 million increase in revenue. This increase is primarily due to increases in salaries and benefits expense and information technology expense which were partially offset by decreases in professional fees and legal settlements as well as gains on the sale of fleet vehicles.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Excluding the Securities Class Action Lawsuit settlement during the year ended December 31, 2017, corporate operating expenses increased 4% on a 10% increase in net service revenue. Approximately $2 million of the increase was related to a reduction in our indemnity receivable related to the Florence, South Carolina third party audit (see Item 8, Note 10 - Commitments and Contingencies to our consolidated financial statements for additional information). The remaining increase was related to increases in salaries and benefits expense and travel and training expense which were offset by a decrease in depreciation and amortization.
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,
|
|
2019
|
|
2018
|
|
2017
|
Cash provided by operating activities
|
$
|
202.0
|
|
|
$
|
223.5
|
|
|
$
|
105.7
|
|
Cash used in investing activities
|
(352.9
|
)
|
|
(22.2
|
)
|
|
(44.0
|
)
|
Cash provided by (used in) financing activities
|
227.2
|
|
|
(267.4
|
)
|
|
(5.5
|
)
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
76.3
|
|
|
(66.1
|
)
|
|
56.2
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
20.2
|
|
|
86.4
|
|
|
30.2
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
96.5
|
|
|
$
|
20.2
|
|
|
$
|
86.4
|
|
Cash provided by operating activities totaled $202.0 million for 2019, $223.5 million for 2018 and $105.7 million for 2017. During each year, we maintained sufficient liquidity to finance our capital expenditures, both routine and non-routine, and acquisitions. Changes in our cash provided by operating activities during the past three years were primarily the result of fluctuations in our net income, the collections of our accounts receivable and the timing of payments of accrued expenses. During 2017, operating cash flows were negatively impacted by approximately $30 million related to the Securities Class Action Lawsuit settlement (see Item 8, Note 10 – Commitments and Contingencies to our consolidated financial statements).
Cash used in investing activities increased $330.7 million during 2019 compared to 2018 primarily due to the acquisitions of CCH and RoseRock. Cash used in investing activities decreased $21.8 million during 2018 compared to 2017 primarily due to decreases in cash paid for acquisitions ($24.5 million) and capital expenditures ($4.1 million) offset by an increase in investments ($6.7 million).
Cash provided by financing activities totaled $227.2 million during 2019 and is primarily related to our borrowings under our Amended Credit Agreement to fund acquisitions. Cash used in financing activities increased $261.9 million during 2018 compared to 2017 primarily due to our repurchase of company stock and the repayments of borrowings under our Term Loan and Revolving Credit Facility offset by borrowings under our new Credit Agreement.
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.
During 2019, we spent $7.9 million in capital expenditures compared to $6.6 million and $10.7 million during 2018 and 2017, respectively. Our capital expenditures for 2020 are expected to be approximately $6.0 million to $8.0 million, excluding the impact of any future acquisitions.
As of December 31, 2019, we had $30.3 million in cash and cash equivalents and $449.8 million in availability under our $550.0 million Revolving Credit Facility.
During 2017, we settled the Securities Class Action Lawsuit for approximately $43.7 million, of which approximately $15.0 million was paid by the Company's insurance carriers; we used cash on hand to make the required remaining $28.7 million payment.
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 increased $48.6 million from December 31, 2018 to December 31, 2019 primarily due to our acquisition activity. Our cash collection as a percentage of revenue was 105% and 104% for the twelve-month periods ended December 31, 2019 and 2018, respectively. Our days revenue outstanding, net at December 31, 2019 was 40.9 days which is an increase of 2.9 days from December 31, 2018. Our acquisition activity has negatively impacted our days revenue outstanding by approximately 2.3 days.
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, varies by state for Medicaid-reimbursable services and varies among insurance companies and other private payors.
The following schedules detail our patient accounts receivable, by payor class, aged based upon initial date of service (amounts in millions, except days revenue outstanding):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0-90
|
|
91-180
|
|
181-365
|
|
Over 365
|
|
Total
|
At December 31, 2019:
|
|
|
|
|
|
|
|
|
|
Medicare patient accounts receivable
|
$
|
115.2
|
|
|
$
|
13.8
|
|
|
$
|
6.8
|
|
|
$
|
1.0
|
|
|
$
|
136.8
|
|
Other patient accounts receivable:
|
|
|
|
|
|
|
|
|
|
Medicaid
|
22.6
|
|
|
5.7
|
|
|
4.0
|
|
|
—
|
|
|
32.3
|
|
Private
|
60.0
|
|
|
6.3
|
|
|
2.2
|
|
|
—
|
|
|
68.5
|
|
Total
|
$
|
82.6
|
|
|
$
|
12.0
|
|
|
$
|
6.2
|
|
|
$
|
—
|
|
|
$
|
100.8
|
|
Total patient accounts receivable
|
|
|
|
|
|
|
|
|
$
|
237.6
|
|
Days revenue outstanding (1)
|
|
|
|
|
|
|
|
|
40.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0-90
|
|
91-180
|
|
181-365
|
|
Over 365
|
|
Total
|
At December 31, 2018:
|
|
|
|
|
|
|
|
|
|
Medicare patient accounts receivable
|
$
|
95.5
|
|
|
$
|
8.1
|
|
|
$
|
1.0
|
|
|
$
|
1.8
|
|
|
$
|
106.4
|
|
Other patient accounts receivable:
|
|
|
|
|
|
|
|
|
|
Medicaid
|
13.1
|
|
|
2.7
|
|
|
1.1
|
|
|
—
|
|
|
16.9
|
|
Private
|
51.3
|
|
|
6.7
|
|
|
4.4
|
|
|
3.3
|
|
|
65.7
|
|
Total
|
$
|
64.4
|
|
|
$
|
9.4
|
|
|
$
|
5.5
|
|
|
$
|
3.3
|
|
|
$
|
82.6
|
|
Total patient accounts receivable
|
|
|
|
|
|
|
|
|
$
|
189.0
|
|
Days revenue outstanding (1)
|
|
|
|
|
|
|
|
|
38.0
|
|
|
|
(1)
|
Our calculation of days revenue outstanding, net is derived by dividing our ending net patient accounts receivable at December 31, 2019 and 2018 by our average daily net patient revenue for the three-month periods ended December 31, 2019 and 2018, respectively.
|
Indebtedness
First Amendment to Amended and Restated Credit Agreement
On February 4, 2019, we entered into the First Amendment to the Credit Agreement (as amended by the First Amendment, the “Amended Credit Agreement”). The Amended Credit Agreement provides for a senior secured credit facility in an initial aggregate principal amount of up to $725.0 million, which includes the $550.0 million Revolving Credit Facility under the Credit Agreement, and a term loan facility in the principal amount of up to $175.0 million (the “Term Loan Facility” and collectively with the Revolving Credit Facility, the “Credit Facility”), which was added by the First Amendment.
We borrowed the entire principal amount of the Term Loan Facility on February 4, 2019 in order to fund a portion of the purchase price of the CCH acquisition, with the remainder of the purchase price and associated transactional fees and expenses funded by proceeds from the Revolving Credit Facility.
Our weighted average interest rate for borrowings under our $550.0 million Revolving Credit Facility was 4.0% for the period ended December 31, 2019. Our weighted average interest rate for borrowings under our $175.0 million Term Loan Facility was 3.8% for the period February 4, 2019 to December 31, 2019.
As of December 31, 2019, our consolidated leverage ratio was 1.0 and our consolidated interest coverage ratio was 17.2 and we are in compliance with our covenants under the Amended Credit Agreement.
As of December 31, 2019, our availability under our $550.0 million Revolving Credit Facility was $449.8 million as we have $70.0 million outstanding in borrowings and $30.2 million outstanding in letters of credit.
See Item 8, Note 7 - Long Term Obligations to our consolidated financial statements for additional details on our outstanding long-term obligations.
Share Repurchase
2019 Stock Repurchase Program
On February 25, 2019, we announced that our Board of Directors authorized a stock repurchase program, under which we may repurchase up to $100 million of our outstanding common stock through March 1, 2020.
Under the terms of the program, we are allowed to 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 are allowed to enter into Rule 10b5-1 plans to effect some or all of the repurchases. 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.
We did not repurchase any shares pursuant to this stock purchase program during 2019.
2018 Share Repurchase
On June 4, 2018, we purchased 2,418,304 of our common shares from affiliates of KKR Credit Advisors (US) LLC ("KKR"), representing one-half of KKR's then current holdings in the Company and 7.1% of the aggregate outstanding shares of the Company's common stock for a total purchase price of $181.4 million including related direct costs. The Company repurchased the shares at $73.96 which represents 96% of the closing stock price of the Company's common stock on June 4, 2018. The repurchased shares are classified as treasury shares.
Contractual Obligations
Our future contractual obligations at December 31, 2019 were as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
Total
|
|
Less than
1 Year
|
|
1-3
Years
|
|
4-5
Years
|
|
After
5 Years
|
Long-term obligations
|
$
|
242.3
|
|
|
$
|
8.2
|
|
|
$
|
17.5
|
|
|
$
|
216.6
|
|
|
$
|
—
|
|
Interest on long-term obligations (1)
|
22.3
|
|
|
6.9
|
|
|
10.3
|
|
|
5.1
|
|
|
—
|
|
Finance leases
|
3.6
|
|
|
1.9
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
Operating leases
|
90.7
|
|
|
30.2
|
|
|
39.3
|
|
|
14.2
|
|
|
7.0
|
|
Capital commitments
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchase obligations
|
11.1
|
|
|
4.2
|
|
|
6.6
|
|
|
0.3
|
|
|
—
|
|
Uncertain tax positions
|
2.7
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
$
|
373.0
|
|
|
$
|
51.7
|
|
|
$
|
78.1
|
|
|
$
|
236.2
|
|
|
$
|
7.0
|
|
|
|
(1)
|
Interest on debt with variable rates was calculated using the current rate for that particular debt instrument at December 31, 2019.
|
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 account for revenue from contracts with customers in accordance with Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (collectively, "ASC 606"), and as such, we recognize revenue in the period in which we satisfy our performance obligations under our contracts by transferring our promised services to our customers in amounts that reflect the consideration to which we expect to be entitled in exchange for providing patient care, which are the transaction prices allocated to the distinct services. The Company's cost of obtaining contracts is not material.
Revenues are recognized as performance obligations are satisfied, which varies based on the nature of the services provided. Our performance obligation is the delivery of patient care services in accordance with the nature and frequency of services outlined in physicians' orders, which are determined by a physician based on a patient's specific goals.
The Company's performance obligations relate to contracts with a duration of less than one year; therefore, the Company has elected to apply the optional exemption provided by ASC 606 and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. The unsatisfied or partially unsatisfied performance obligations are generally completed when the patients are discharged, which generally occurs within days or weeks of the end of the reporting period.
We determine the transaction price based on gross charges for services provided, reduced by estimates for contractual and non-contractual revenue adjustments. Contractual revenue adjustments include adjustments provided to patients and third-party payors based on contracted rates. Non-contractual revenue adjustments include discounts provided to self-pay, uninsured patients or other payors, adjustments resulting from payment reviews and adjustments arising from our inability to obtain appropriate billing documentation, authorizations or face-to-face documentation. Subsequent changes to the estimate of the transaction price are recorded as adjustments to net service revenue in the period of change.
Contractual revenue adjustments are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third party payors and others for services provided. Non-contractual revenue adjustments are recorded for self-pay, uninsured patients and other payors by major payor class based on our historical collection experience, aged accounts receivable
by payor and current economic conditions. Non-contractual revenue adjustments represent the difference between amounts billed and amounts we expect to collect based on our collection history with similar payors. The Company assesses its ability to collect for the healthcare services provided at the time of patient admission based on the Company's verification of the patient's insurance coverage under Medicare, Medicaid, and other commercial or managed care insurance programs. Medicare represents approximately 74% of the Company's consolidated net service revenue.
Amounts due from third-party payors, primarily commercial health insurers and government programs (Medicare and Medicaid), 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 payment reviews based on our historical experience and success rates in the claim appeals and adjudication process.
We determine our estimates for non-contractual revenue adjustments related to our inability to obtain appropriate billing documentation, authorizations, or face-to-face documentation based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims. Revenue is recorded at amounts we estimate to be realizable for services provided.
Home Health Revenue Recognition
Medicare Revenue
Net service revenue is recorded under the Medicare prospective payment system (“PPS”) based on an established Federal Medicare home health episode payment rate, that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if a patient’s care was unusually costly (capped at 10% of total reimbursement per provider number); (b) a LUPA if the number of visits was four or fewer; (c) a partial payment if a patient transferred to another provider or we admitted a patient transferring 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) 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; (f) changes in the base episode payments established by the Medicare Program; and (g) adjustments to the base episode payments for case mix and geographic wages. Medicare rates are based on the severity of the patient's condition, service needs and goals, and other factors relating to the cost of providing services and supplies, bundled into an episode of care, not to exceed 60 days. 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.
The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave their 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. All Medicare contracts are required to have a signed plan of care which represents a single performance obligation, comprising of the delivery of a series of distinct services that are substantially similar and have a similar pattern of transfer to the customer. Accordingly, the Company accounts 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. Expected Medicare revenue per episode is recognized based on a pro-rated service output method, utilizing our historical average length of episode prior to discharge.
The base episode payment can be adjusted based on each patient's health including clinical condition, functional abilities and service needs, as well as for the applicable geographic wage index, low utilization, patient transfers and other factors. The services covered by the episode payment include all disciplines of care in addition to medical supplies. 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 as a reduction to revenue and a corresponding reduction to patient accounts receivable.
A portion of reimbursement from each Medicare episode is billed near the start of each episode, and cash is typically received before all services are rendered. The amount of revenue recognized for episodes of care which are incomplete at period end is based on the company's average percentage of days complete on episodes as of the end of the year. As of December 31, 2019, 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 recorded to accrued expenses within our consolidated balance sheet.
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 which generally range from 90% to 100% of Medicare rates.
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. 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 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.
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 99%, 97% and 97% of our total net Medicare hospice service revenue for each of 2019, 2018 and 2017, respectively. 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 (“RN”) or medical social worker (“MSW”) 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.
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 consolidated balance sheet. Beginning for the cap year ending October 31, 2017, providers are required to self-report and pay their estimated cap liability by February 28th of the following year. As of December 31, 2019, we have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2012. As of December 31, 2019, we have recorded $5.7 million in accrued expenses for estimated amounts due back to Medicare for the Federal cap years ended October 31, 2013 through September 30, 2020; approximately $1.9 million of this amount is related to the cap liability acquired as part of the CCH acquisition. As of December 31, 2018, we had recorded $1.7 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 2013 through September 30, 2019.
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 revenue adjustments to non-Medicare revenue based on 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).
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 the market capitalization of our stock.
Generally Accepted Accounting Principles ("GAAP") allows for impairment testing to be done on either a quantitative or qualitative basis. During 2019, we utilized a qualitative analysis for our annual impairment test and determined that there were no triggering events that would indicate that it is "more likely than not" that the carrying values of our reporting units are higher than their respective fair values. As a result, we did not record any goodwill impairment charges and none of the goodwill associated with our various reporting units was considered at risk of impairment as of October 31, 2019. 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 their carrying amounts.
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 two to three years for non-compete agreements and up to five years for acquired names. Our indefinite-lived intangible assets are reviewed for impairment annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. During 2019, we performed a qualitative assessment to determine if any of our indefinite-lived intangible assets were impaired; as a result of this analysis, we wrote off approximately $1.5 million of acquired names during the three-month period ended December 31, 2019. 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 remaining intangible assets would be less than their carrying amounts.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Amedisys, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Amedisys, Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2019, 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) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, 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 February 19, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 due to the adoption of Accounting Standards Update (ASU) 2016-02, Leases (Topic 842); ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements (collectively, Topic 842).
Basis for Opinion
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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Acquisition of Compassionate Care Hospice - Valuation of certain intangible assets
As discussed in Notes 2 and 3 to the consolidated financial statements, the Company accounts for acquisitions using the acquisition method of accounting. Assets acquired are measured at fair value on the acquisition date using various valuation methods. The Company acquired Compassionate Care Hospice (CCH) for the purchase price of $327.9 million, net of cash acquired of $6.7 million, on February 1, 2019. Intangible assets acquired in connection with this transaction include Medicare licenses, certificates of need, trade name and non-compete agreements.
We identified the valuation of certain intangible assets, which consist of Medicare licenses, trade name, and non-compete agreements, acquired in the CCH transaction as a critical audit matter. Subjective auditor judgment was required to evaluate the identification of intangible assets acquired, valuation methodologies, and significant assumptions used in the valuation of these certain intangible assets. Specifically, the significant assumptions include projected revenue growth rates, projected earnings before interest, taxes, depreciation and amortization (EBITDA), and the discount rate. These assumptions relate to the future performance of the acquired business and changes to these assumptions could have a significant effect on the Company’s estimate of fair value of the intangible assets.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s acquisition accounting process, including controls over the identification of intangible assets acquired, assessment of the valuation methodologies, and the development of the significant assumptions used in the valuation of the intangible assets. We read the purchase agreement to identify the significant terms, conditions, and intangible assets acquired. We evaluated the Company’s projected revenue growth rates and projected EBITDA by comparing such assumptions to those of CCH’s peers and to industry reports. Additionally, we compared the Company’s projected revenue growth rates and projected EBITDA to CCH’s and the Company’s historical actual results. We involved valuation professionals with specialized skills and knowledge, who assisted in:
|
|
•
|
Evaluating the Company’s identification of intangible assets acquired;
|
|
|
•
|
Assessing the valuation methodologies used by the Company in the valuation analysis; and
|
|
|
•
|
Evaluating the weighted average cost of capital (WACC), which was used by the Company to determine the discount rate, by comparing the Company's inputs to the WACC to publicly available data for comparable entities and assessing the resulting WACC.
|
Revenue recognition - Evaluation of the non-contractual revenue adjustment estimates for Home Health and Hospice
As discussed in Note 2 to the consolidated financial statements, the Company determines the transaction price based on gross charges for services provided, reduced by contractual revenue adjustments and an estimate for non-contractual revenue adjustments. Non-contractual revenue adjustments are recorded for self-pay, uninsured patients, and other payors by major payor class based on historical collection experience, evaluated for current economic conditions. Adjustments resulting from payment reviews and adjustments arising from the inability to obtain applicable billing documentation, authorizations or face-to-face documentation are factors that are relevant to the estimate of ultimate collection. The non-contractual revenue adjustments represent the difference between amounts billed and amounts the Company expects to collect based on its collection history with similar payors.
We identified the evaluation of the non-contractual revenue adjustment estimates noted above for Home Health and Hospice as a critical audit matter. Subjective and complex auditor judgment was required to evaluate the method and historical collection experience used by the Company when developing the non-contractual revenue adjustment estimate. Specifically, the significant judgments relate to evaluating the relevance and reliability of historical collection experience to the determination of the estimate, include evaluation of current conditions, trends, and other factors.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls related to the Company’s revenue process, including controls over the method and significant judgments for estimating non-contractual revenue adjustments noted above. We assessed the outcome of the estimation of non-contractual revenue adjustments in the prior period consolidated financial statements to identify circumstances or conditions that are relevant to the determination of the current year estimate. We also evaluated current conditions, trends, and other factors relevant to the estimation of ultimate collection to assess the current year methodology and relevance of historical collection experience in determining the current year estimate.
/s/ KPMG LLP
We have served as the Company's auditor since 2002.
Baton Rouge, Louisiana
February 19, 2020
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
30,294
|
|
|
$
|
20,229
|
|
Restricted cash
|
66,196
|
|
|
—
|
|
Patient accounts receivable
|
237,596
|
|
|
188,972
|
|
Prepaid expenses
|
8,243
|
|
|
7,568
|
|
Other current assets
|
8,225
|
|
|
7,349
|
|
Total current assets
|
350,554
|
|
|
224,118
|
|
Property and equipment, net of accumulated depreciation of $96,137 and $95,472
|
28,113
|
|
|
29,449
|
|
Operating lease right of use assets
|
84,791
|
|
|
—
|
|
Goodwill
|
658,500
|
|
|
329,480
|
|
Intangible assets, net of accumulated amortization of $7,044 and $693
|
64,748
|
|
|
44,132
|
|
Deferred income taxes
|
21,427
|
|
|
35,794
|
|
Other assets
|
54,612
|
|
|
54,145
|
|
Total assets
|
$
|
1,262,745
|
|
|
$
|
717,118
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable
|
$
|
31,259
|
|
|
$
|
28,531
|
|
Payroll and employee benefits
|
120,877
|
|
|
92,858
|
|
Accrued expenses
|
137,111
|
|
|
99,475
|
|
Current portion of long-term obligations
|
9,927
|
|
|
1,612
|
|
Current portion of operating lease liabilities
|
27,769
|
|
|
—
|
|
Total current liabilities
|
326,943
|
|
|
222,476
|
|
Long-term obligations, less current portion
|
232,256
|
|
|
5,775
|
|
Operating lease liabilities, less current portion
|
56,128
|
|
|
—
|
|
Other long-term obligations
|
5,905
|
|
|
6,234
|
|
Total liabilities
|
621,232
|
|
|
234,485
|
|
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; 36,638,021 and 36,252,280 shares issued; and 32,284,051 and 31,973,505 shares outstanding
|
37
|
|
|
36
|
|
Additional paid-in capital
|
645,256
|
|
|
603,666
|
|
Treasury stock at cost 4,353,970 and 4,278,775 shares of common stock
|
(251,241
|
)
|
|
(241,685
|
)
|
Accumulated other comprehensive income
|
15
|
|
|
15
|
|
Retained earnings
|
246,383
|
|
|
119,550
|
|
Total Amedisys, Inc. stockholders’ equity
|
640,450
|
|
|
481,582
|
|
Noncontrolling interests
|
1,063
|
|
|
1,051
|
|
Total equity
|
641,513
|
|
|
482,633
|
|
Total liabilities and equity
|
$
|
1,262,745
|
|
|
$
|
717,118
|
|
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Net service revenue
|
$
|
1,955,633
|
|
|
$
|
1,662,578
|
|
|
$
|
1,511,272
|
|
Cost of service, excluding depreciation and amortization
|
1,150,337
|
|
|
992,863
|
|
|
903,377
|
|
General and administrative expenses:
|
|
|
|
|
|
Salaries and benefits
|
394,452
|
|
|
316,522
|
|
|
305,938
|
|
Non-cash compensation
|
25,040
|
|
|
17,887
|
|
|
16,295
|
|
Other
|
188,434
|
|
|
166,897
|
|
|
159,980
|
|
Depreciation and amortization
|
18,428
|
|
|
13,261
|
|
|
17,123
|
|
Asset impairment charge
|
1,470
|
|
|
—
|
|
|
1,323
|
|
Securities Class Action Lawsuit settlement, net
|
—
|
|
|
—
|
|
|
28,712
|
|
Operating expenses
|
1,778,161
|
|
|
1,507,430
|
|
|
1,432,748
|
|
Operating income
|
177,472
|
|
|
155,148
|
|
|
78,524
|
|
Other income (expense):
|
|
|
|
|
|
Interest income
|
78
|
|
|
278
|
|
|
158
|
|
Interest expense
|
(14,515
|
)
|
|
(7,370
|
)
|
|
(5,031
|
)
|
Equity in earnings from equity method investments
|
5,338
|
|
|
7,692
|
|
|
3,381
|
|
Miscellaneous, net
|
2,037
|
|
|
3,240
|
|
|
3,769
|
|
Total other (expense) income, net
|
(7,062
|
)
|
|
3,840
|
|
|
2,277
|
|
Income before income taxes
|
170,410
|
|
|
158,988
|
|
|
80,801
|
|
Income tax expense
|
(42,503
|
)
|
|
(38,859
|
)
|
|
(50,118
|
)
|
Net income
|
127,907
|
|
|
120,129
|
|
|
30,683
|
|
Net income attributable to noncontrolling interests
|
(1,074
|
)
|
|
(783
|
)
|
|
(382
|
)
|
Net income attributable to Amedisys, Inc.
|
$
|
126,833
|
|
|
$
|
119,346
|
|
|
$
|
30,301
|
|
Basic earnings per common share:
|
|
|
|
|
|
Net income attributable to Amedisys, Inc. common stockholders
|
$
|
3.95
|
|
|
$
|
3.64
|
|
|
$
|
0.90
|
|
Weighted average shares outstanding
|
32,142
|
|
|
32,791
|
|
|
33,704
|
|
Diluted earnings per common share:
|
|
|
|
|
|
Net income attributable to Amedisys, Inc. common stockholders
|
$
|
3.84
|
|
|
$
|
3.55
|
|
|
$
|
0.88
|
|
Weighted average shares outstanding
|
32,990
|
|
|
33,609
|
|
|
34,304
|
|
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Net income
|
$
|
127,907
|
|
|
$
|
120,129
|
|
|
$
|
30,683
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
Comprehensive income
|
127,907
|
|
|
120,129
|
|
|
30,683
|
|
Comprehensive income attributable to non-controlling interests
|
(1,074
|
)
|
|
(783
|
)
|
|
(382
|
)
|
Comprehensive income attributable to Amedisys, Inc.
|
$
|
126,833
|
|
|
$
|
119,346
|
|
|
$
|
30,301
|
|
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except common stock shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Treasury
Stock
|
|
Accumulated
Other
Comprehensive
Income
|
|
Retained
Earnings (Deficit)
|
|
Noncontrolling
Interests
|
Shares
|
|
Amount
|
|
Balance, December 31, 2016
|
$
|
461,142
|
|
|
35,253,577
|
|
|
$
|
35
|
|
|
$
|
537,472
|
|
|
$
|
(46,774
|
)
|
|
$
|
15
|
|
|
$
|
(30,545
|
)
|
|
$
|
939
|
|
Issuance of stock – employee stock purchase plan
|
2,382
|
|
|
53,848
|
|
|
—
|
|
|
2,382
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuance of stock – 401(k) plan
|
8,223
|
|
|
156,487
|
|
|
—
|
|
|
8,223
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuance/(cancellation) of non-vested stock
|
—
|
|
|
139,016
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercise of stock options
|
4,554
|
|
|
144,206
|
|
|
—
|
|
|
4,554
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash compensation
|
16,295
|
|
|
—
|
|
|
—
|
|
|
16,295
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Tax benefit from stock options exercised and restricted stock vesting
|
448
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
448
|
|
|
—
|
|
Surrendered shares
|
(6,939
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,939
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Noncontrolling interest distribution
|
(216
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(216
|
)
|
Assets contributed to equity investment
|
(146
|
)
|
|
—
|
|
|
—
|
|
|
(146
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income
|
30,683
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,301
|
|
|
382
|
|
Balance, December 31, 2017
|
516,426
|
|
|
35,747,134
|
|
|
35
|
|
|
568,780
|
|
|
(53,713
|
)
|
|
15
|
|
|
204
|
|
|
1,105
|
|
Issuance of stock – employee stock purchase plan
|
2,429
|
|
|
38,961
|
|
|
—
|
|
|
2,429
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuance of stock – 401(k) plan
|
9,232
|
|
|
129,451
|
|
|
—
|
|
|
9,232
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuance/(cancellation) of non-vested stock
|
—
|
|
|
174,044
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercise of stock options
|
5,953
|
|
|
162,690
|
|
|
—
|
|
|
5,953
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash compensation
|
17,887
|
|
|
—
|
|
|
—
|
|
|
17,887
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Surrendered shares
|
(6,570
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,570
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Shares repurchased
|
(181,402
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(181,402
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Noncontrolling interest distribution
|
(1,090
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,090
|
)
|
Repurchase of noncontrolling interest
|
(361
|
)
|
|
—
|
|
|
—
|
|
|
(614
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
253
|
|
Net income
|
120,129
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
119,346
|
|
|
783
|
|
Balance, December 31, 2018
|
482,633
|
|
|
36,252,280
|
|
|
36
|
|
|
603,666
|
|
|
(241,685
|
)
|
|
15
|
|
|
119,550
|
|
|
1,051
|
|
Issuance of stock – employee stock purchase plan
|
3,187
|
|
|
30,483
|
|
|
—
|
|
|
3,187
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuance of stock – 401(k) plan
|
9,753
|
|
|
79,056
|
|
|
—
|
|
|
9,753
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuance/(cancellation) of non-vested stock
|
—
|
|
|
189,134
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Exercise of stock options
|
3,611
|
|
|
87,068
|
|
|
—
|
|
|
3,611
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash compensation
|
25,040
|
|
|
—
|
|
|
—
|
|
|
25,040
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Surrendered shares
|
(9,556
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,556
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
Noncontrolling interest distribution
|
(1,062
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,062
|
)
|
Net income
|
127,907
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
126,833
|
|
|
1,074
|
|
Balance, December 31, 2019
|
$
|
641,513
|
|
|
36,638,021
|
|
|
$
|
37
|
|
|
$
|
645,256
|
|
|
$
|
(251,241
|
)
|
|
$
|
15
|
|
|
$
|
246,383
|
|
|
$
|
1,063
|
|
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
Net income
|
$
|
127,907
|
|
|
$
|
120,129
|
|
|
$
|
30,683
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
18,428
|
|
|
13,261
|
|
|
17,123
|
|
Non-cash compensation
|
25,040
|
|
|
17,887
|
|
|
16,295
|
|
401(k) employer match
|
10,509
|
|
|
8,976
|
|
|
8,754
|
|
Amortization and impairment of operating lease right of use assets
|
35,905
|
|
|
—
|
|
|
—
|
|
Loss on disposal of property and equipment
|
141
|
|
|
714
|
|
|
—
|
|
Deferred income taxes
|
13,466
|
|
|
20,271
|
|
|
52,178
|
|
Equity in earnings from equity method investments
|
(5,338
|
)
|
|
(7,692
|
)
|
|
(3,381
|
)
|
Amortization of deferred debt issuance costs/debt discount
|
873
|
|
|
797
|
|
|
735
|
|
Return on equity investment
|
4,955
|
|
|
6,158
|
|
|
5,321
|
|
Asset impairment charge
|
1,470
|
|
|
—
|
|
|
1,323
|
|
Changes in operating assets and liabilities, net of impact of acquisitions:
|
|
|
|
|
|
Patient accounts receivable
|
(24,146
|
)
|
|
12,224
|
|
|
(34,672
|
)
|
Other current assets
|
(2,682
|
)
|
|
8,679
|
|
|
(4,940
|
)
|
Other assets
|
832
|
|
|
2,947
|
|
|
(12,749
|
)
|
Accounts payable
|
(11,329
|
)
|
|
3,165
|
|
|
(2,843
|
)
|
Accrued expenses
|
42,096
|
|
|
13,524
|
|
|
31,843
|
|
Other long-term obligations
|
(329
|
)
|
|
2,443
|
|
|
61
|
|
Operating lease liabilities
|
(32,295
|
)
|
|
—
|
|
|
—
|
|
Operating lease right of use assets
|
(3,503
|
)
|
|
—
|
|
|
—
|
|
Net cash provided by operating activities
|
202,000
|
|
|
223,483
|
|
|
105,731
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
Proceeds from sale of deferred compensation plan assets
|
448
|
|
|
715
|
|
|
622
|
|
Proceeds from the sale of property and equipment
|
162
|
|
|
54
|
|
|
249
|
|
Purchases of property and equipment
|
(7,888
|
)
|
|
(6,558
|
)
|
|
(10,707
|
)
|
Investments in equity method investees
|
(210
|
)
|
|
(7,144
|
)
|
|
(476
|
)
|
Acquisitions of businesses, net of cash acquired
|
(345,460
|
)
|
|
(9,260
|
)
|
|
(33,715
|
)
|
Net cash used in investing activities
|
(352,948
|
)
|
|
(22,193
|
)
|
|
(44,027
|
)
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
Proceeds from issuance of stock upon exercise of stock options
|
3,611
|
|
|
5,953
|
|
|
4,554
|
|
Proceeds from issuance of stock to employee stock purchase plan
|
3,187
|
|
|
2,429
|
|
|
2,382
|
|
Shares withheld upon stock vesting
|
(9,556
|
)
|
|
(6,570
|
)
|
|
(6,939
|
)
|
Non-controlling interest distribution
|
(1,062
|
)
|
|
(1,090
|
)
|
|
(216
|
)
|
Proceeds from borrowings under term loan
|
175,000
|
|
|
—
|
|
|
—
|
|
Proceeds from borrowings under revolving line of credit
|
262,500
|
|
|
138,000
|
|
|
—
|
|
Repayments of borrowings under revolving line of credit
|
(200,000
|
)
|
|
(130,500
|
)
|
|
—
|
|
Principal payments of long-term obligations
|
(5,624
|
)
|
|
(91,450
|
)
|
|
(5,319
|
)
|
Debt issuance costs
|
(847
|
)
|
|
(2,433
|
)
|
|
—
|
|
Purchase of company stock
|
—
|
|
|
(181,402
|
)
|
|
—
|
|
Repurchase of noncontrolling interest
|
—
|
|
|
(361
|
)
|
|
—
|
|
Net cash provided by (used in) financing activities
|
227,209
|
|
|
(267,424
|
)
|
|
(5,538
|
)
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
76,261
|
|
|
(66,134
|
)
|
|
56,166
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
20,229
|
|
|
86,363
|
|
|
30,197
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
96,490
|
|
|
$
|
20,229
|
|
|
$
|
86,363
|
|
Supplemental Disclosures of Cash Flow Information:
|
|
|
|
|
|
Cash paid for interest
|
$
|
9,628
|
|
|
$
|
3,522
|
|
|
$
|
2,697
|
|
Cash paid for income taxes, net of refunds received
|
$
|
29,522
|
|
|
$
|
14,278
|
|
|
$
|
315
|
|
Supplemental Disclosures of Non-Cash Financing Activities:
|
|
|
|
|
|
Note payable issued for software licenses
|
$
|
—
|
|
|
$
|
418
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of these consolidated financial statements.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
1. NATURE OF OPERATIONS, CONSOLIDATION AND PRESENTATION OF FINANCIAL STATEMENTS
Amedisys, Inc., a Delaware corporation (together with its consolidated subsidiaries, referred to herein as “Amedisys,” “we,” “us,” or “our”), is a multi-state provider of home health, hospice and personal care services with approximately 74%, 73% and 76% of our revenue derived from Medicare for 2019, 2018 and 2017, respectively. As of December 31, 2019, we owned and operated 321 Medicare-certified home health care centers, 138 Medicare-certified hospice care centers and 12 personal-care care centers in 38 states within the United States and the District of Columbia.
Recently Adopted Accounting Pronouncements
On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842); ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; and ASU 2018-11, Targeted Improvements (collectively, "Topic 842") using a modified retrospective transition approach, which requires the new standards to be applied to all leases existing at the date of initial application. Under Topic 842, lessees are required to recognize a lease liability and right-of-use asset ("ROU asset") for all leases with a term greater than twelve months and to disclose key information about leasing arrangements. Additionally, leases will be classified as either financing or operating; the classification will determine the pattern of expense recognition and classification within the statement of operations. We are using the standards' effective date as our date of initial application. Consequently, our financial information was not updated and the disclosures required under the new standard are not provided for dates and periods prior to January 1, 2019. The new standard provides several optional practical expedients that can be adopted at transition. We have elected the "package of practical expedients," which allows us to not reassess our prior conclusions regarding lease identification, lease classification and initial direct costs. We did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. The most significant effects related to this adoption relate to (1) the recognition of new ROU assets and lease liabilities on our balance sheet for our real estate and fleet operating leases; and (2) significant new disclosures about our leasing activities. Upon adoption, we recognized approximately $80 million in operating leases liabilities with corresponding ROU assets of approximately the same amount. The new standard also provides practical expedients for an entity’s ongoing accounting. We have elected the practical expedient that allows us to not separate lease and non-lease components for all of our leases. We are applying the short-term lease recognition exemption to certain information technology leases; therefore, we have not recognized ROU assets and lease liabilities for these leases.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployees Share-Based Payment Accounting which expands the scope of Topic 718 to include share-based payments issued to nonemployees for goods or services. Our adoption of this standard on January 1, 2019 did not have an effect on our consolidated financial statements.
On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (collectively, "ASC 606"), the new accounting standards issued by the Financial Accounting Standards Board ("FASB") on revenue recognition, using the full retrospective method. ASC 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. The standards supersede existing revenue recognition requirements and eliminate most industry-specific guidance from U.S. Generally Accepted Accounting Principles ("U.S. GAAP"). The core principle of the revenue recognition standard is to require an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. As a result of the Company's adoption of ASC 606, the revenue and related estimated uncollectible amounts owed to us by non-Medicare payors that were historically classified as provision for doubtful accounts are now considered a revenue adjustment in determining net service revenue. Accordingly, the Company reports estimated uncollectible balances due from third-party payors and uncollectible balances associated with patient responsibility as a reduction of the transaction price and therefore, as a reduction in net service revenue (or as it relates to Hospice room and board, an increase in cost of service, excluding depreciation and amortization) when historically these amounts were classified as provision for doubtful accounts within operating expenses within our consolidated statements of operations. In addition, the adoption of ASC 606 resulted in increased disclosure, including qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance to assist entities with evaluating whether transactions should be accounted for as an acquisition (or disposal) of assets or a business. We adopted this ASU effective January 1, 2018, on a prospective basis. The impact on our consolidated financial statements and related disclosures will depend on the facts and circumstances of any specific future transactions as evaluated under the new framework.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge (Step 2 of the goodwill impairment test). Instead, impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit. The ASU is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. We adopted this ASU effective January 1, 2018, on a prospective basis and will apply this guidance to our future tests of goodwill impairment.
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. 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. Our adoption of this standard on January 1, 2018, using a retrospective transition method for each period presented, did not have an effect on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting, which simplified the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liability and classification within the statement of cash flows. The ASU was effective for annual and interim periods beginning after December 15, 2016. We adopted this ASU effective January 1, 2017, and as a result, we recorded a $0.4 million increase to our non-current deferred tax asset and retained earnings for tax benefits that were not previously recognized under the prior rules. Additionally, on a prospective basis, we recorded excess tax benefits totaling $3.2 million as a discrete item in our income tax provision within our consolidated statements of operations for the year ended December 31, 2017. Historically, these amounts were recorded as additional paid-in capital in our consolidated balance sheet. We also elected to prospectively apply the change to the presentation of cash payments made to taxing authorities on the employees' behalf for shares withheld upon stock vesting within our consolidated statement of cash flows and to continue our current policy of estimating forfeitures of stock-based compensation awards at grant date and revising in subsequent periods to reflect actual forfeitures.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improves consistent application by clarifying and amending existing guidance. The ASU is effective for annual and interim periods beginning after December 15, 2020. Early adoption is permitted. While the Company does not expect a material impact upon adoption of ASU 2019-12, we are still evaluating the effect the standard will have on our consolidated financial statements and related disclosures and ongoing financial reporting.
Use of Estimates
Our accounting and reporting policies conform with 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.
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.
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 2016, we sold a 30% interest in one of our care centers while maintaining a controlling interest in the newly formed joint venture; we repurchased the 30% interest during 2018.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
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. During 2018, we made a $7.0 million investment in a healthcare analytics company; this investment is accounted for under the equity method. The book value of investments that we account for under the equity method of accounting totaled $35.7 million and $35.1 million as of December 31, 2019 and 2018, respectively, and is reflected in other assets within our consolidated balance sheets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
We account for revenue from contracts with customers in accordance with ASC 606, and as such, we recognize revenue in the period in which we satisfy our performance obligations under our contracts by transferring our promised services to our customers in amounts that reflect the consideration to which we expect to be entitled in exchange for providing patient care, which are the transaction prices allocated to the distinct services. The Company's cost of obtaining contracts is not material.
Revenues are recognized as performance obligations are satisfied, which varies based on the nature of the services provided. Our performance obligation is the delivery of patient care services in accordance with the nature and frequency of services outlined in physicians' orders, which are determined by a physician based on a patient's specific goals.
The Company's performance obligations relate to contracts with a duration of less than one year; therefore, the Company has elected to apply the optional exemption provided by ASC 606 and is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. The unsatisfied or partially unsatisfied performance obligations are generally completed when the patients are discharged, which generally occurs within days or weeks of the end of the reporting period.
We determine the transaction price based on gross charges for services provided, reduced by estimates for contractual and non-contractual revenue adjustments. Contractual revenue adjustments include adjustments provided to patients and third-party payors based on contracted rates. Non-contractual revenue adjustments include discounts provided to self-pay, uninsured patients or other payors, adjustments resulting from payment reviews and adjustments arising from our inability to obtain appropriate billing documentation, authorizations or face-to-face documentation. Subsequent changes to the estimate of the transaction price are recorded as adjustments to net service revenue in the period of change.
Contractual revenue adjustments are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third party payors and others for services provided. Non-contractual revenue adjustments are recorded for self-pay, uninsured patients and other payors by major payor class based on our historical collection experience, aged accounts receivable by payor and current economic conditions. The non-contractual revenue adjustments represent the difference between amounts billed and amounts we expect to collect based on our collection history with similar payors. The Company assesses its ability to collect for the healthcare services provided at the time of patient admission based on the Company's verification of the patient's insurance coverage under Medicare, Medicaid, and other commercial or managed care insurance programs. Medicare represents approximately 74% of the Company's consolidated net service revenue.
Amounts due from third-party payors, primarily commercial health insurers and government programs (Medicare and Medicaid), 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 payment reviews based on our historical experience and success rates in the claim appeals and adjudication process.
We determine our estimates for non-contractual revenue adjustments related to our inability to obtain appropriate billing documentation, authorizations, or face-to-face documentation based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims. Revenue is recorded at amounts we estimate to be realizable for services provided.
Revenue by payor class as a percentage of total net service revenue is as follows:
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
|
2017
|
Home Health:
|
|
|
|
|
|
Medicare
|
44
|
%
|
|
50
|
%
|
|
53
|
%
|
Non-Medicare - Episodic-based
|
9
|
%
|
|
9
|
%
|
|
8
|
%
|
Non-Medicare - Non-episodic based
|
12
|
%
|
|
12
|
%
|
|
11
|
%
|
Hospice (1):
|
|
|
|
|
|
Medicare
|
30
|
%
|
|
23
|
%
|
|
23
|
%
|
Non-Medicare
|
1
|
%
|
|
1
|
%
|
|
1
|
%
|
Personal Care
|
4
|
%
|
|
5
|
%
|
|
4
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
(1) Acquired Compassionate Care Hospice on February 1, 2019 and RoseRock Healthcare on April 1, 2019.
Home Health Revenue Recognition
Medicare Revenue
Net service revenue is recorded under the Medicare prospective payment system (“PPS”) based on an established Federal Medicare home health episode payment rate, that is subject to adjustment based on certain variables including, but not limited to: (a) an outlier payment if a 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 four or fewer; (c) a partial payment if a patient transferred to another provider or we admitted a patient transferring 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) 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; (f) changes in the base episode payments established by the Medicare Program; and (g) adjustments to the base episode payments for case mix and geographic wages. Medicare rates are based on the severity of the patient's condition, service needs and goals, and other factors relating to the cost of providing services and supplies, bundled into an episode of care, not to exceed 60 days. 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.
The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave their 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. All Medicare contracts are required to have a signed plan of care which represents a single performance obligation, comprising of the delivery of a series of distinct services that are substantially similar and have a similar pattern of transfer to the customer. Accordingly, the Company accounts 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. Expected Medicare revenue per episode is recognized based on a pro-rated service output method, utilizing our historical average length of episode prior to discharge.
The base episode payment can be adjusted based on each patient's health including clinical condition, functional abilities and service needs, as well as for the applicable geographic wage index, low utilization, patient transfers and other factors. The services covered by the episode payment include all disciplines of care in addition to medical supplies. 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 as a reduction to revenue and a corresponding reduction to patient accounts receivable.
A portion of reimbursement from each Medicare episode is billed near the start of each episode, and cash is typically received before all services are rendered. The amount of revenue recognized for episodes of care which are incomplete at period end is based on the company's average percentage of days complete on episodes as of the end of the year. As of December 31, 2019, 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 recorded to accrued expenses within our consolidated balance sheets.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
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 which generally range from 90% to 100% of Medicare rates.
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. 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 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.
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 99%, 97% and 97% of our total net Medicare hospice service revenue for each of 2019, 2018 and 2017, respectively. 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 (“RN”) or medical social worker (“MSW”) 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.
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 consolidated balance sheet. Beginning for the cap year ending October 31, 2017, providers are required to self-report and pay their estimated cap liability by February 28th of the following year. As of December 31, 2019, we have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2012. As of December 31, 2019, we have recorded $5.7 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 2013 through September 30, 2020; approximately $1.9 million of this amount is related to the cap liability acquired as part of the Compassionate Care Hospice ("CCH") acquisition. As of December 31, 2018, we had recorded $1.7 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 2013 through September 30, 2019.
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 historical experience, to reflect the estimated transaction price.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
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).
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 December 31, 2019, we had $66.2 million of restricted cash that was placed into an escrow account to fund the acquisition of Asana Hospice on January 1, 2020.
The following table summarizes the balances related to our cash, cash equivalents and restricted cash for 2019 and 2018 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
Cash and cash equivalents
|
$
|
30.3
|
|
|
$
|
20.2
|
|
Restricted cash
|
66.2
|
|
|
—
|
|
Cash, cash equivalents and restricted cash
|
$
|
96.5
|
|
|
$
|
20.2
|
|
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. As of December 31, 2019, there is only one payor, other than Medicare, that accounts for more than 10% of our total outstanding patient receivables (approximately 10.4%). 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 collectibility risk associated with our Medicare accounts, which represent 58% and 56% of our net patient accounts receivable at December 31, 2019 and December 31, 2018, 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.
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 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
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
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, 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.
Property and Equipment
Property and equipment is stated at cost and depreciated on a straight-line basis over the estimated useful lives of the assets or life of the lease, if shorter. 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 assess the impairment of a long-lived asset group whenever events or changes in circumstances indicate that the asset’s carrying value may not be recoverable. Factors we consider important that could trigger an impairment review include but are not limited to the following:
|
|
•
|
A significant change in the extent or manner in which the long-lived asset group is being used.
|
|
|
•
|
A significant change in the business climate that could affect the value of the long-lived asset group.
|
|
|
•
|
A significant change in the market value of the assets included in the asset group.
|
If we determine that the carrying value of long-lived assets may not be recoverable, we compare the carrying value of the asset group to the undiscounted cash flows expected to be generated by the asset group. If the carrying value exceeds the undiscounted cash flows, an impairment charge is indicated. An impairment charge is recognized to the extent that the carrying value of the asset group exceeds its fair value.
We generally provide for depreciation over the following estimated useful service lives.
|
|
|
|
Years
|
Building
|
39
|
Leasehold improvements
|
Lesser of lease term or expected useful life
|
Equipment and furniture
|
3 to 7
|
Vehicles
|
5
|
Computer software
|
2 to 7
|
Finance leases
|
3
|
During 2018, we reviewed the balances of our property and equipment and as a result, eliminated those asset balances and related accumulated depreciation for which the asset was no longer in service.
The following table summarizes the balances related to our property and equipment for 2019 and 2018 (amounts in millions):
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
Building and leasehold improvements
|
$
|
8.7
|
|
|
$
|
8.7
|
|
Equipment and furniture
|
55.6
|
|
|
53.4
|
|
Finance leases
|
5.2
|
|
|
2.9
|
|
Computer software
|
54.7
|
|
|
59.9
|
|
|
124.2
|
|
|
124.9
|
|
Less: accumulated depreciation
|
(96.1
|
)
|
|
(95.5
|
)
|
|
$
|
28.1
|
|
|
$
|
29.4
|
|
Depreciation expense for 2019, 2018 and 2017 was $11.6 million, $10.8 million and $14.4 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 the market capitalization of our stock.
Each of our operating segments described in Note 14 – Segment Information is considered to represent an individual reporting unit for goodwill impairment testing purposes. We consider each of our home health care centers to constitute an individual business for which discrete financial information is available. However, since these care centers have substantially similar operating and economic characteristics and resource allocation and significant investment decisions concerning these businesses are centralized and the benefits broadly distributed, we have aggregated these care centers and deemed them to constitute a single reporting unit. We have applied this same aggregation principle to our hospice and personal-care care centers and have also deemed each of them to be a single reporting unit.
During 2019, we performed a qualitative assessment to determine if it is more likely than not that the fair value of the reporting units are less than their carrying values by evaluating relevant events and circumstances including financial performance, market conditions and share price. Based on this assessment, we did not record any goodwill impairment charges and none of the goodwill associated with our various reporting units was considered at risk of impairment as of October 31, 2019. 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 their carrying amounts.
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 two to three years for non-compete agreements and up to five years for acquired names. Our indefinite-lived intangible assets are reviewed for impairment annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of the intangible asset below its carrying amount. During 2019, we performed a qualitative assessment to determine if any of our indefinite-lived intangible assets were impaired; as a result of this analysis, we wrote off approximately $1.5 million of acquired names during the three-month period ended December 31, 2019. 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 remaining intangible assets would be less than their carrying amounts.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
Debt Issuance Costs
During 2019, we recorded $0.8 million in deferred debt issuance costs as a reduction to long-term obligations, less current portion in our consolidated balance sheet in connection with our entry into the Amended Credit Agreement (See Note 7 - Long-Term Obligations). As of December 31, 2019 and 2018, we had unamortized debt issuance costs of $3.5 million recorded as a reduction to long-term obligations, less current portion in our accompanying consolidated balance sheets. We amortize deferred debt issuance costs related to our long-term obligations over the term of the obligation through interest expense, unless the debt is extinguished, in which case unamortized balances are immediately expensed. The unamortized debt issuance costs of $3.5 million at December 31, 2019 will be amortized over a weighted-average amortization period of 4.1 years.
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
December 31, 2019
|
|
Quoted Prices in Active
Markets for Identical
Items
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
Long-term obligations
|
$
|
242.3
|
|
|
$
|
—
|
|
|
$
|
240.8
|
|
|
$
|
—
|
|
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.
|
|
|
•
|
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, 2019 and 2018, our net deferred tax assets were $21.4 million and $35.8 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. Upon adoption of ASU 2016-09 in 2017, we started recording the excess tax benefits related to stock option exercises as operating cash flows; these amounts were previously classified as financing cash flows. Share-based compensation expense for 2019, 2018 and 2017 was $25.0 million, $17.9 million and $16.3 million, respectively, and the total income tax benefit recognized for these expenses was $4.6 million, $4.3 million and $6.4 million, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
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 Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Weighted average number of shares outstanding – basic
|
32,142
|
|
|
32,791
|
|
|
33,704
|
|
Effect of dilutive securities:
|
|
|
|
|
|
Stock options
|
545
|
|
|
502
|
|
|
281
|
|
Non-vested stock and stock units
|
303
|
|
|
316
|
|
|
319
|
|
Weighted average number of shares outstanding – diluted
|
32,990
|
|
|
33,609
|
|
|
34,304
|
|
Anti-dilutive securities
|
117
|
|
|
50
|
|
|
271
|
|
Advertising Costs
We expense advertising costs as incurred. Advertising expense for 2019, 2018 and 2017 was $8.5 million, $7.0 million and $6.5 million, respectively.
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 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 valuation and liabilities assumed.
2019 Acquisitions
Hospice Division
On February 1, 2019, we acquired CCH, a national hospice care provider headquartered in New Jersey, for a purchase price of $327.9 million, net of cash acquired of $6.7 million.
The Company has finalized its valuation of the assets acquired and liabilities assumed. The total consideration of $327.9 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 CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
|
|
|
|
|
|
Amount
|
Patient accounts receivable
|
$
|
24.5
|
|
Prepaid expenses
|
0.8
|
|
Other current assets
|
0.1
|
|
Property and equipment
|
0.2
|
|
Intangible assets
|
27.2
|
|
Operating lease right of use assets
|
3.4
|
|
Other assets
|
1.1
|
|
Total assets acquired
|
57.3
|
|
Accounts payable
|
(14.9
|
)
|
Payroll and employee benefits
|
(11.7
|
)
|
Accrued expenses
|
(11.7
|
)
|
Deferred tax liability
|
(0.9
|
)
|
Operating lease liabilities
|
(3.4
|
)
|
Total liabilities acquired
|
(42.6
|
)
|
Net identifiable assets acquired
|
14.7
|
|
Goodwill
|
313.2
|
|
Total estimated consideration
|
$
|
327.9
|
|
Intangible assets acquired include licenses, certificates of need, acquired names and non-compete agreements. The acquired names and non-compete agreements will be amortized over a weighted-average period of 2.0 and 2.3 years, respectively.
CCH contributed approximately $167.4 million in net service revenue and an operating loss of $5.6 million (inclusive of acquisition and integration costs totaling $14.5 million) during the year ended December 31, 2019.
We expect $278.8 million 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 for the years ended December 31, 2019 and 2018 assuming that the CCH acquisition closed on January 1, 2018 (amounts in millions, except per share data):
|
|
|
|
|
|
|
|
|
|
For the Year
Ended December 31,
|
|
2019
|
|
2018
|
Net service revenue
|
$
|
1,971.7
|
|
|
$
|
1,852.8
|
|
Operating income
|
183.8
|
|
|
175.7
|
|
Net income attributable to Amedisys, Inc.
|
130.5
|
|
|
124.6
|
|
Basic earnings per share
|
4.06
|
|
|
3.80
|
|
Diluted earnings per share
|
$
|
3.96
|
|
|
$
|
3.71
|
|
The pro forma information presented above includes adjustments for (i) amortization of identifiable intangible assets, (ii) interest on additional debt required to fund the CCH acquisition, (iii) non-recurring transaction costs and (iv) income taxes based on 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.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
On April 1, 2019, we acquired RoseRock Healthcare ("RoseRock"), an Oklahoma based hospice provider, for a purchase price of $17.5 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we have recorded goodwill ($15.8 million) and other intangibles including acquired names ($1.0 million) and non-compete agreements ($0.7 million). The acquired names and non-compete agreement will each be amortized over a weighted-average period of 3.0 years. RoseRock contributed approximately $6.8 million in net service revenue and $0.8 million in operating income for the year ended December 31, 2019. We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.
2018 Acquisitions
Home Health Division
On March 1, 2018, we acquired the assets of Christian Care at Home which provided home health services to the state of Kentucky for a total purchase price of $2.3 million. The purchase price was paid with cash on hand on the date of the transaction. We recorded goodwill ($2.1 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.
Personal Care Division
On May 1, 2018, we acquired the assets of East Tennessee Personal Care Services which owned and operated one personal-care care center servicing the state of Tennessee for a total purchase price of $2.0 million (subject to certain adjustments, of which $0.2 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. We recorded goodwill ($1.9 million) and other intangibles - non-compete agreements ($0.1 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.
On October 1, 2018, we acquired the assets of Bring Care Home which serviced the state of Massachusetts for a total purchase price of $5.7 million (subject to certain adjustments, of which $0.6 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. We recorded goodwill ($5.5 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.
4. GOODWILL AND OTHER INTANGIBLE ASSETS, NET
During 2019, 2018 and 2017, 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 31st of each respective year (the date of our annual goodwill impairment test). 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 their carrying amounts.
The following table summarizes the activity related to our goodwill for 2019 and 2018 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
Home Health
|
|
Hospice
|
|
Personal Care
|
|
Total
|
Balances at December 31, 2017 (1)
|
$
|
85.0
|
|
|
$
|
199.3
|
|
|
$
|
35.6
|
|
|
$
|
319.9
|
|
Additions
|
2.1
|
|
|
—
|
|
|
7.5
|
|
|
9.6
|
|
Balances at December 31, 2018
|
87.1
|
|
|
199.3
|
|
|
43.1
|
|
|
329.5
|
|
Additions
|
—
|
|
|
329.0
|
|
|
—
|
|
|
329.0
|
|
Balances at December 31, 2019
|
$
|
87.1
|
|
|
$
|
528.3
|
|
|
$
|
43.1
|
|
|
$
|
658.5
|
|
|
|
(1)
|
Net of prior years' accumulated impairment losses of $733.7 million, which is inclusive of write-offs related to the sale and closure of care centers.
|
During 2017, we recorded a non-cash other intangible assets impairment charge of $1.3 million related to care centers that were closed or consolidated during 2017 as discussed in Note 13 - Exit and Restructuring Activities. During 2019, we recorded a non-cash other intangible assets impairment charge of $1.5 million related to acquired names which are no longer in use or are associated with care centers that were closed.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
The following table summarizes the activity related to our other intangible assets, net for 2019 and 2018 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Intangible Assets, Net
|
|
Certificates of
Need and
Licenses
|
|
Acquired
Names -Unamortizable
|
|
Acquired
Names -Amortizable (3)
|
|
Non-Compete
Agreements (3)
|
|
Total
|
Balances at December 31, 2017 (2)
|
$
|
23.7
|
|
|
$
|
19.6
|
|
|
$
|
—
|
|
|
$
|
2.8
|
|
|
$
|
46.1
|
|
Additions
|
0.2
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.5
|
|
Amortization
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.5
|
)
|
|
(2.5
|
)
|
Balances at December 31, 2018
|
23.9
|
|
|
19.6
|
|
|
—
|
|
|
0.6
|
|
|
44.1
|
|
Additions
|
13.7
|
|
|
—
|
|
|
10.0
|
|
|
5.2
|
|
|
28.9
|
|
Write-off (1)
|
—
|
|
|
(1.5
|
)
|
|
—
|
|
|
—
|
|
|
(1.5
|
)
|
Amortization
|
—
|
|
|
—
|
|
|
(4.4
|
)
|
|
(2.4
|
)
|
|
(6.8
|
)
|
Balances at December 31, 2019
|
$
|
37.6
|
|
|
$
|
18.1
|
|
|
$
|
5.6
|
|
|
$
|
3.4
|
|
|
$
|
64.7
|
|
|
|
(1)
|
Write-off of intangible assets related to our annual impairment analysis as discussed above.
|
|
|
(2)
|
Net of prior years' accumulated amortization of $5.0 million for non-compete agreements.
|
|
|
(3)
|
The weighted average remaining amortization period of our amortizable acquired names and non-compete agreements is 1.2 years and 1.5 years, respectively.
|
See Note 3 – Acquisitions for further details on additions to goodwill and other intangible assets, net.
The estimated aggregate amortization expense related to intangible assets for each of the five succeeding years is as follows (amounts in millions):
|
|
|
|
|
|
Intangible Asset Amortization
|
2020
|
$
|
7.3
|
|
2021
|
1.5
|
|
2022
|
0.2
|
|
2023
|
—
|
|
2024
|
—
|
|
|
$
|
9.0
|
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
5. DETAILS OF CERTAIN BALANCE SHEET ACCOUNTS
Additional information regarding certain balance sheet accounts is presented below (amounts in millions):
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
Other current assets:
|
|
|
|
Payroll tax escrow
|
$
|
1.5
|
|
|
$
|
1.5
|
|
Income tax receivable
|
2.0
|
|
|
1.6
|
|
Due from joint ventures
|
2.0
|
|
|
1.9
|
|
Other
|
2.7
|
|
|
2.3
|
|
|
$
|
8.2
|
|
|
$
|
7.3
|
|
Other assets:
|
|
|
|
Workers’ compensation deposits
|
$
|
0.2
|
|
|
$
|
0.4
|
|
Health insurance deposits
|
0.5
|
|
|
0.5
|
|
Other miscellaneous deposits
|
1.0
|
|
|
0.8
|
|
Indemnity receivable
|
13.6
|
|
|
14.2
|
|
Equity method investments
|
35.7
|
|
|
35.1
|
|
Other
|
3.6
|
|
|
3.1
|
|
|
$
|
54.6
|
|
|
$
|
54.1
|
|
Accrued expenses:
|
|
|
|
Health insurance
|
$
|
15.8
|
|
|
$
|
12.4
|
|
Workers’ compensation
|
33.4
|
|
|
30.9
|
|
Florida ZPIC audit, gross liability
|
17.4
|
|
|
17.4
|
|
Legal settlements and other audits
|
19.0
|
|
|
13.0
|
|
Income tax payable
|
0.5
|
|
|
—
|
|
Charity care
|
2.7
|
|
|
1.7
|
|
Estimated Medicare cap liability
|
5.7
|
|
|
1.7
|
|
Hospice cost of revenue
|
24.4
|
|
|
9.9
|
|
Patient liability
|
9.4
|
|
|
6.3
|
|
Other
|
8.8
|
|
|
6.2
|
|
|
$
|
137.1
|
|
|
$
|
99.5
|
|
Other long-term obligations:
|
|
|
|
Reserve for uncertain tax positions
|
$
|
3.1
|
|
|
$
|
2.9
|
|
Deferred compensation plan liability
|
1.0
|
|
|
1.3
|
|
Other
|
1.8
|
|
|
2.0
|
|
|
$
|
5.9
|
|
|
$
|
6.2
|
|
6. LEASES
We determine whether an arrangement is a lease at inception. We have operating leases, primarily for offices and fleet, that expire at various dates over the next nine years. We also have finance leases covering certain office equipment that expire at various dates over the next three years. Our leases do not contain any restrictive covenants.
Our office leases generally contain renewal options for periods ranging from one to five years. Because we are not reasonably certain to exercise these renewal options, the options are not considered in determining the lease term, and payments associated with the option years are excluded from lease payments. Our office leases also generally include termination options, which allow for early termination of the lease after the first one to three years. Because we are not reasonably certain to exercise these termination options, the options are not considered in determining the lease term; payments for the full lease term are included in lease payments. Our office leases do not contain any material residual value guarantees.
Our fleet leases include a term of 367 days with monthly renewal options thereafter. Our fleet leases also include terminal rental adjustment clauses (“TRAC”), which provide for a final rental payment adjustment at the end of the lease, typically based on the amount realized from the sale of the vehicle. The TRAC is structured such that it will almost always result in a significant payment by us to the lessor if the renewal option is not exercised. Based on the significance of the TRAC adjustment at the initial lease
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
expiration, we believe that it is reasonably certain that we will exercise the monthly renewal options; therefore, the renewal options are considered in determining the lease term, and payments associated with the renewal options are included in lease payments.
For our fleet and office equipment leases, we use the implicit rate in the lease as the discount rate. For our office leases, the implicit rate is typically not available, so we use our incremental borrowing rate as the discount rate. Our lease agreements include both lease and non-lease components. We have elected the practical expedient that allows us to not separate lease and non-lease components for all of our leases.
Payments due under our operating and finance leases include fixed payments as well as variable payments. For our office leases, variable payments include amounts for our proportionate share of operating expenses, utilities, property taxes, insurance, common area maintenance and other facility-related expenses. For our vehicle and equipment leases, variable payments consist of sales tax.
The components of lease cost for the year ended December 31, 2019 are as follows (amounts in millions):
|
|
|
|
|
|
For the Year Ended December 31, 2019
|
Operating lease cost:
|
|
Operating lease cost
|
$
|
35.0
|
|
Impairment of operating lease ROU assets
|
0.9
|
|
Total operating lease cost
|
35.9
|
|
|
|
Finance lease cost:
|
|
Amortization of ROU assets
|
1.7
|
|
Interest on lease liabilities
|
0.2
|
|
Total finance lease cost
|
1.9
|
|
|
|
Variable lease cost
|
2.6
|
|
Short-term lease cost
|
0.2
|
|
|
|
Total lease cost
|
$
|
40.6
|
|
Amounts reported in the consolidated balance sheet as of December 31, 2019 for our operating leases are as follows (amounts in millions):
|
|
|
|
|
|
December 31, 2019
|
Operating lease ROU assets
|
$
|
84.8
|
|
|
|
Current portion of operating lease liabilities
|
27.8
|
|
Operating lease liabilities, less current portion
|
56.1
|
|
Total operating lease liabilities
|
$
|
83.9
|
|
Amounts reported in the consolidated balance sheet as of December 31, 2019 for finance leases are included in the table below. The finance lease ROU assets are recorded within property and equipment, net of accumulated depreciation within our consolidated balance sheet. The finance lease liabilities are recorded within current portion of long-term obligations and long-term obligations, less current portion within our consolidated balance sheet.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
|
|
|
|
|
|
December 31, 2019
|
Finance lease ROU assets
|
$
|
5.2
|
|
Accumulated amortization
|
(1.8
|
)
|
Finance lease ROU assets, net
|
3.4
|
|
|
|
Current installments of obligations under finance leases
|
1.7
|
|
Long-term portion of obligations under finance leases
|
1.7
|
|
Total finance lease liabilities
|
$
|
3.4
|
|
Supplemental cash flow information and non-cash activity related to our leases are as follows (amounts in millions):
|
|
|
|
|
|
For the Year Ended
December 31, 2019
|
Cash paid for amounts included in the measurement of lease liabilities and ROU assets:
|
|
Operating cash flow from operating leases
|
$
|
(35.8
|
)
|
Financing cash flow from finance leases
|
(1.7
|
)
|
|
|
ROU assets obtained in exchange for lease obligations:
|
|
Operating leases
|
116.0
|
|
Finance leases
|
2.9
|
|
|
|
Reductions to ROU assets resulting from reductions to lease obligations:
|
|
Operating leases
|
(1.7
|
)
|
Finance leases
|
—
|
|
Amounts disclosed for ROU assets obtained in exchange for lease obligations include amounts added to the carrying amount of ROU assets resulting from lease modifications and reassessments.
Weighted average remaining lease terms and discount rates for our leases as of December 31, 2019 are as follows:
|
|
|
|
|
Years
|
Weighted average remaining lease term:
|
|
Operating leases
|
3.9
|
|
Finance leases
|
2.1
|
|
|
Rate
|
Weighted average discount rate:
|
|
Operating leases
|
3.9
|
%
|
Finance leases
|
5.3
|
%
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
Maturities of lease liabilities as of December 31, 2019 are as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
|
Operating
Leases
|
|
Finance
Leases
|
2020
|
$
|
30.2
|
|
|
$
|
1.9
|
|
2021
|
24.3
|
|
|
1.4
|
|
2022
|
15.0
|
|
|
0.3
|
|
2023
|
9.2
|
|
|
—
|
|
2024
|
5.0
|
|
|
—
|
|
Thereafter
|
7.0
|
|
|
—
|
|
Total undiscounted lease payments
|
90.7
|
|
|
3.6
|
|
Less: Imputed interest
|
(6.8
|
)
|
|
(0.2
|
)
|
Total lease liabilities
|
$
|
83.9
|
|
|
$
|
3.4
|
|
7. LONG-TERM OBLIGATIONS
Long-term debt consists of the following for the periods indicated (amounts in millions):
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
$175.0 million Term Loan; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus the Applicable Rate (3.3% at December 31, 2019); due February 4, 2024
|
$
|
171.7
|
|
|
$
|
—
|
|
$550.0 million Revolving Credit Facility; interest only payments; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus the Applicable Rate (5.3% at December 31, 2019); due February 4, 2024
|
70.0
|
|
|
7.5
|
|
Promissory notes
|
0.6
|
|
|
1.1
|
|
Finance leases
|
3.4
|
|
|
2.3
|
|
Principal amount of long-term obligations
|
245.7
|
|
|
10.9
|
|
Deferred debt issuance costs
|
(3.5
|
)
|
|
(3.5
|
)
|
|
242.2
|
|
|
7.4
|
|
Current portion of long-term obligations
|
(9.9
|
)
|
|
(1.6
|
)
|
Total
|
$
|
232.3
|
|
|
$
|
5.8
|
|
Maturities of debt as of December 31, 2019 are as follows (amounts in millions):
|
|
|
|
|
|
|
|
Long-term
obligations
|
2020
|
$
|
10.0
|
|
2021
|
10.1
|
|
2022
|
9.0
|
|
2023
|
82.0
|
|
2024
|
134.6
|
|
|
$
|
245.7
|
|
Credit Agreement
On June 29, 2018, we entered into our Amended and Restated Credit Agreement ("Credit Agreement") that provides for a senior secured revolving credit facility in an initial aggregate principal amount of up to $550.0 million (the "Revolving Credit Facility"). The Revolving Credit Facility provides for and includes within its $550.0 million limit a $25.0 million swingline facility and commitments for up to $60.0 million in letters of credit. Upon lender approval, we may increase the aggregate loan amount under the Revolving Credit Facility by either i) $125.0 million or ii) an unlimited amount subject to a leverage limit of 0.5x under the maximum allowable consolidated leverage ratio which is currently 3.0x per the Credit Agreement.
The funds available under the Revolving Credit Facility were used to pay off our existing indebtedness under our prior credit agreement, dated as of August 28, 2015 (the "Prior Credit Agreement"), with a principal balance of $127.5 million. The final
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
maturity of the Revolving Credit Facility is June 29, 2023 and there is no mandatory amortization on the outstanding principal balances which are payable in full 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.
First Amendment to Amended and Restated Credit Agreement
On February 4, 2019, we entered into the First Amendment to the Credit Agreement (as amended by the First Amendment, the “Amended Credit Agreement”). The Amended Credit Agreement provides for a senior secured credit facility in an initial aggregate principal amount of up to $725.0 million, which includes the $550.0 million Revolving Credit Facility under the Credit Agreement, and a term loan facility with a principal amount of up to $175.0 million (the “Term Loan Facility” and collectively with the Revolving Credit Facility, the “Credit Facility”), which was added by the First Amendment.
We borrowed the entire principal amount of the Term Loan Facility on February 4, 2019 in order to fund a portion of the purchase price of the CCH acquisition, with the remainder of the purchase price and associated transactional fees and expenses funded by proceeds from the Revolving Credit Facility.
The loans issued under the 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 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 plus 1% per annum. The “Eurodollar Rate” means the quoted rate per annum equal to the London Interbank Offered Rate ("LIBOR") or a comparable successor rate approved by the Administrative Agent for an interest period of one, two, three or six months (as selected by us). The “Applicable Rate” is based on the consolidated leverage ratio and is presented in the table below. As of December 31, 2019, the Applicable Rate is 0.50% per annum for Base Rate Loans and 1.50% per annum for Eurodollar Rate Loans. We are also subject to a commitment fee and letter of credit fee under the terms of the Amended Credit Agreement, as presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pricing Tier
|
Consolidated Leverage Ratio
|
|
Base Rate Loans
|
|
Eurodollar Rate Loans
|
|
Commitment
Fee
|
|
Letter of
Credit Fee
|
I
|
≥ 3.00 to 1.0
|
|
1.00
|
%
|
|
2.00
|
%
|
|
0.35
|
%
|
|
1.75
|
%
|
II
|
< 3.00 to 1.0 but ≥ 2.00 to 1.0
|
|
0.75
|
%
|
|
1.75
|
%
|
|
0.30
|
%
|
|
1.50
|
%
|
III
|
< 2.00 to 1.0 but ≥ 0.75 to 1.0
|
|
0.50
|
%
|
|
1.50
|
%
|
|
0.25
|
%
|
|
1.25
|
%
|
IV
|
< 0.75 to 1.0
|
|
0.25
|
%
|
|
1.25
|
%
|
|
0.20
|
%
|
|
1.00
|
%
|
The final maturity date of the Credit Facility is February 4, 2024. The Revolving Credit Facility will terminate and be due and payable as of the final maturity date. The Term Loan Facility, however, is subject to quarterly amortization of principal in the amount of (i) 0.625% for the period commencing on February 4, 2019 and ending on March 31, 2020, (ii) 1.250% for the period commencing on April 1, 2020 and ending on March 31, 2023, and (iii) 1.875% for the period commencing on April 1, 2023 and ending on February 4, 2024. The remaining balance of the Term Loan Facility must be paid upon the final maturity date. In addition to the scheduled amortization of the Term Loan Facility, and subject to customary exceptions and reinvestment rights, we are required to prepay the 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 Amended Credit Agreement.
The 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 Amended Credit Agreement, and (ii) a consolidated interest coverage ratio of EBITDA to cash interest charges, as defined in the Amended Credit Agreement. Each of these covenants is calculated over rolling four-quarter periods and also is subject to certain exceptions and baskets. The 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 Amended Credit Agreement. In connection with our entry into the Amended Credit Agreement, we recorded $0.8 million in deferred debt issuance costs as long-term obligations, less current portion within our consolidated balance sheet during the year ended December 31, 2019.
The Revolving Credit Facility is guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries. The 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.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
Our weighted average interest rate for borrowings under our $175.0 million Term Loan Facility was 3.8% for the period February 4, 2019 to December 31, 2019. Our weighted average interest rate for borrowings under our $550.0 million Revolving Credit Facility was 4.0% for the period ended December 31, 2019 and 3.8% for the period June 29, 2018 to December 31, 2018.
As of December 31, 2019, our consolidated leverage ratio was 1.0, our consolidated interest coverage ratio was 17.2 and we are in compliance with our covenants under the Amended Credit Agreement. In the event we are not in compliance with our debt covenants in the future, we would pursue various alternatives in an attempt to successfully resolve the non-compliance, which might include, among other things, seeking debt covenant waivers or amendments.
As of December 31, 2019, our availability under our $550.0 million Revolving Credit Facility was $449.8 million as we have $70.0 million outstanding in borrowings and $30.2 million outstanding in letters of credit.
Joinder Agreement
In connection with the CCH acquisition, we entered into a Joinder Agreement, dated as of February 4, 2019, pursuant to which CCH and its subsidiaries were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement, the Amended and Restated Security Agreement, dated as of June 29, 2018, and the Amended and Restated Pledge Agreement, dated as of June 29, 2018. Pursuant to the Joinder, the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement, CCH 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 also guaranteed our obligations, whether now existing or arising after the effective date of the Joinder, under the Amended Credit Agreement pursuant to the terms of the Joinder and the Amended Credit Agreement.
Promissory Notes
Our promissory notes outstanding of $0.6 million, issued in conjunction with acquisitions and software licenses, bear interest rates ranging from 4.3% to 7.0%.
Finance Leases
Our finance leases outstanding of $3.4 million relate to leased equipment and bear interest rates ranging from 5.2% to 14.3%.
8. INCOME TAXES
Income taxes attributable to continuing operations consist of the following (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Current income tax expense/(benefit):
|
|
|
|
|
|
Federal
|
$
|
24.2
|
|
|
$
|
16.4
|
|
|
$
|
(2.0
|
)
|
State and local
|
4.8
|
|
|
2.1
|
|
|
(0.1
|
)
|
|
29.0
|
|
|
18.5
|
|
|
(2.1
|
)
|
Deferred income tax expense/(benefit):
|
|
|
|
|
|
Federal
|
9.5
|
|
|
14.5
|
|
|
51.2
|
|
State and local
|
4.0
|
|
|
5.8
|
|
|
1.0
|
|
|
13.5
|
|
|
20.3
|
|
|
52.2
|
|
Income tax expense
|
$
|
42.5
|
|
|
$
|
38.8
|
|
|
$
|
50.1
|
|
Total income tax expense for the years ended December 31, 2019, 2018 and 2017 was allocated as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Income from continuing operations
|
$
|
42.5
|
|
|
$
|
38.8
|
|
|
$
|
50.1
|
|
Interest expense
|
0.3
|
|
|
0.1
|
|
|
—
|
|
Stockholders’ equity
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
Goodwill
|
0.9
|
|
|
—
|
|
|
—
|
|
|
$
|
43.7
|
|
|
$
|
38.9
|
|
|
$
|
49.8
|
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
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 21% in 2019 and 2018 and 35% in 2017 to income before taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Income tax expense at U.S. federal statutory rate (1)
|
21.0
|
%
|
|
21.0
|
%
|
|
35.0
|
%
|
State and local income taxes, net of federal income tax benefit
|
4.8
|
|
|
4.8
|
|
|
3.8
|
|
Excess tax benefits from share-based compensation
|
(1.9
|
)
|
|
(1.6
|
)
|
|
(3.5
|
)
|
Tax rate change (2)
|
—
|
|
|
—
|
|
|
26.5
|
|
Other items, net (3)
|
1.0
|
|
|
0.2
|
|
|
0.2
|
|
Income tax expense
|
24.9
|
%
|
|
24.4
|
%
|
|
62.0
|
%
|
|
|
(1)
|
On December 22, 2017, H.R. 1, originally known as the Tax Cuts and Jobs Act was enacted, which eliminated the progressive U.S. federal corporate tax rate structure with a maximum corporate tax rate of 35% and replaced it with a flat tax rate of 21%, effective January 1, 2018.
|
|
|
(2)
|
According to Accounting Standard Codification ("ASC") 740, Income Taxes, deferred tax assets and liabilities are remeasured to reflect the effects of enacted changes in tax rates at the date of enactment, even though the tax rate changes are not effective until a future period. The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate, pursuant to the Tax Cuts and Jobs Act, resulted in a $21.4 million deferred income tax expense during 2017.
|
|
|
(3)
|
Includes various items such as non-deductible expenses, non-taxable income, tax credits, valuation allowance, uncertain tax positions and return-to-accrual adjustments.
|
As of December 31, 2019 and 2018, the Company had income taxes receivable of $2.0 million and $1.6 million, respectively, included in other current assets within our consolidated balance sheets.
Deferred tax assets (liabilities) consist of the following components (amounts in millions):
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2019
|
|
2018
|
Deferred tax assets:
|
|
|
|
Allowance for doubtful accounts
|
$
|
—
|
|
|
$
|
5.6
|
|
Accrued payroll & employee benefits
|
15.1
|
|
|
11.2
|
|
Workers’ compensation
|
9.0
|
|
|
8.3
|
|
Amortization of intangible assets
|
—
|
|
|
14.7
|
|
Share-based compensation
|
7.9
|
|
|
6.9
|
|
Compliance matters
|
4.8
|
|
|
2.2
|
|
Net operating loss carryforwards
|
3.7
|
|
|
5.9
|
|
Tax credit carryforwards
|
3.1
|
|
|
2.8
|
|
Other
|
0.8
|
|
|
0.7
|
|
Gross deferred tax assets
|
44.4
|
|
|
58.3
|
|
Less: valuation allowance
|
(0.4
|
)
|
|
(0.7
|
)
|
Net deferred tax assets
|
44.0
|
|
|
57.6
|
|
Deferred tax liabilities:
|
|
|
|
Property and equipment
|
(4.3
|
)
|
|
(4.4
|
)
|
Amortization of intangible assets
|
(0.3
|
)
|
|
—
|
|
Deferred revenue
|
(13.5
|
)
|
|
(13.5
|
)
|
Investment in partnerships
|
(3.3
|
)
|
|
(3.1
|
)
|
Other liabilities
|
(1.2
|
)
|
|
(0.8
|
)
|
Gross deferred tax liabilities
|
(22.6
|
)
|
|
(21.8
|
)
|
Net deferred tax assets (liabilities)
|
$
|
21.4
|
|
|
$
|
35.8
|
|
The Company utilized its remaining U.S. federal net operating loss ("NOL") carryforwards, research and development tax credits and employment tax credits in 2018; however, as of December 31, 2019, the Company has $0.1 million of federal NOL carryforwards acquired from the acquisition of CCH.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
As of December 31, 2019, we have state NOL carryforwards of $73.9 million that are available to reduce future taxable income and $3.9 million of various state tax credits available to reduce future state income taxes. The state NOL and tax credit carryforwards expire at various times.
As of December 31, 2019 and 2018, the valuation allowance for deferred tax assets, which is primarily related to certain state NOLs and state tax credit carryforwards, was $0.4 million and $0.7 million, respectively. The net change in the total valuation allowance for the year ended December 31, 2019 was a decrease of $0.3 million; there was no change in the total valuation allowance for the year ended December 31, 2018.
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 carryback and carryforward 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 carryforwards governed by the tax code. Based on the current level of pretax earnings, the Company will generate the minimum amount of future taxable income needed to support the realization of the deferred tax assets. As a result, as of December 31, 2019, 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. 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 carryforward 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Balance at beginning of period
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
4.1
|
|
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
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
Change in statutory tax rate (1)
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
Settlements
|
—
|
|
|
—
|
|
|
—
|
|
Balance at end of period
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
|
(1)
|
The Company's remeasurement of its deferred tax assets and liabilities to reflect the enacted reduced tax rate as a result of the Tax Cuts and Jobs Act resulted in a $1.1 million reduction in its uncertain tax positions recorded in net deferred tax assets at December 31, 2017.
|
As of December 31, 2019 and 2018, there is $2.7 million of unrecognized tax benefits recorded in other long-term obligations within the consolidated balance sheet that, if recognized in future periods, would impact our effective tax rate.
We recognized $0.3 million and $0.1 million of interest as components of interest expense in connection with our reserve for uncertain tax positions during the years ended December 31, 2019 and 2018, respectively; we recognized a benefit of less than $0.1 million of interest as a component of interest expense in connection with our reserve for uncertain tax positions during the year ended December 31, 2017. Interest related to uncertain tax positions included in the consolidated balance sheet at December 31, 2019 and 2018 was $0.4 million and $0.1 million, respectively.
We are subject to income taxes in the U.S. and in many individual states, with significant operations in Louisiana, South Carolina, Alabama, Georgia, Massachusetts and Tennessee. We are open to examination in the U.S. and in various individual states for tax years ended December 31, 2014 through December 31, 2019. We are also open to examination in various states for the years ended 2004 – 2019 resulting from net operating losses generated and available for carryforward from those years.
9. CAPITAL STOCK AND SHARE-BASED COMPENSATION
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
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, 2019, there were 36,638,021 and 32,284,051 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
On March 29, 2018, our Board of Directors and the Compensation Committee approved, subject to stockholder approval, the Amedisys, Inc. 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”). On June 6, 2018, our stockholders approved the 2018 Plan at the Company's annual meeting of stockholders. The 2018 Plan replaces our 2008 Omnibus Incentive Compensation Plan (the “2008 Plan”), which terminated on June 6, 2018 when the stockholders approved the 2018 Plan. The 2018 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 or a combination of service-based and performance-based vesting conditions as “non-vested stock units.” The 2018 Plan is administered by the Compensation Committee of our Board of Directors, which determines, within the provisions of the 2018 Plan, those eligible participants 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 2018 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 2.5 million shares of common stock. We had approximately 2.0 million shares available at December 31, 2019. The price per share for stock options shall be 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 the 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 four year period, with the exception of those issued under contractual arrangements that specify otherwise, and 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. The Company analyzes historical data of forfeited awards to develop an estimated forfeiture rate that is applied to the Company's non-cash compensation expense; however, all non-cash compensation expense is adjusted to reflect actual vestings and forfeitures.
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 issuance under our ESPP from 2,500,000 shares to 4,500,000 shares, and as of December 31, 2019, there were 1,348,327 shares available for future issuance. The following is a detail of the purchases that were made under the plan:
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan Period
|
Shares Issued
|
|
Price
|
2017 and Prior
|
3,089,489
|
|
|
$
|
15.25
|
|
January 1, 2018 to March 31, 2018
|
10,913
|
|
|
51.29
|
|
April 1, 2018 to June 30, 2018
|
8,673
|
|
|
72.64
|
|
July 1, 2018 to September 30, 2018
|
6,052
|
|
|
106.22
|
|
October 1, 2018 to December 31, 2018
|
7,856
|
|
|
99.54
|
|
January 1, 2019 to March 31, 2019
|
7,181
|
|
|
104.77
|
|
April 1, 2019 to June 30, 2019
|
8,230
|
|
|
103.20
|
|
July 1, 2019 to September 30, 2019
|
7,216
|
|
|
111.36
|
|
October 1, 2019 to December 31, 2019
|
6,063
|
|
|
141.88
|
|
|
3,151,673
|
|
|
|
ESPP expense included in general and administrative expense in our accompanying consolidated statements of operations was $0.6 million, $0.5 million and $0.4 million for each of 2019, 2018 and 2017, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
Stock Options
We use the Black-Scholes option pricing model to estimate the fair value of our stock options. There were 142,122, 163,666 and 308,292 options granted during 2019, 2018 and 2017, respectively. Stock option compensation expense included in general and administrative expense in our accompanying consolidated statements of operations was $6.2 million, $5.7 million and $5.6 million for 2019, 2018 and 2017, respectively.
The fair values of the awards were estimated using the following assumptions for each 2019, 2018 and 2017:
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2019
|
|
2018
|
|
2017
|
Risk Free Rate
|
1.44% - 2.53%
|
|
2.56% - 3.04%
|
|
1.99% - 2.16%
|
Expected Volatility
|
42.46% - 43.83%
|
|
42.00% - 45.32%
|
|
50.18% - 51.81%
|
Expected Term
|
6.00 - 6.25 years
|
|
4.12 - 6.25 years
|
|
5.78 - 6.25 years
|
Weighted Average Fair Value
|
$54.42
|
|
$42.48
|
|
$28.02
|
Dividend Yield
|
—%
|
|
—%
|
|
—%
|
We used the simplified method to estimate the expected term for the stock options granted during 2019, 2018 and 2017 as adequate historical experience is not available to provide a reasonable estimate.
The following table presents our stock option activity for 2019:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average Exercise
Price
|
|
Weighted
Average Contractual
Life (Years)
|
Outstanding options at January 1, 2019
|
833,315
|
|
|
$
|
36.79
|
|
|
6.76
|
Granted
|
142,122
|
|
|
121.32
|
|
|
|
Exercised
|
(87,068
|
)
|
|
41.48
|
|
|
|
Canceled, forfeited or expired
|
(12,395
|
)
|
|
66.18
|
|
|
|
Outstanding options at December 31, 2019
|
875,974
|
|
|
$
|
49.62
|
|
|
6.26
|
Exercisable options at December 31, 2019
|
570,224
|
|
|
$
|
29.73
|
|
|
5.31
|
The aggregate intrinsic value of our outstanding options and exercisable options at December 31, 2019 was $102.7 million and $78.2 million, respectively. Total intrinsic value of options exercised was $7.3 million, $9.7 million and $3.9 million for 2019, 2018 and 2017, respectively. The tax benefit from stock options exercised during the period amounted to $1.3 million, $1.6 million and $0.3 million for 2019, 2018 and 2017, respectively.
The following table presents our non-vested stock option activity for 2019:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair Value
|
Non-vested stock options at January 1, 2019
|
370,470
|
|
|
$
|
30.97
|
|
Granted
|
142,122
|
|
|
54.42
|
|
Vested
|
(194,638
|
)
|
|
31.19
|
|
Forfeited
|
(12,204
|
)
|
|
32.84
|
|
Non-vested stock options at December 31, 2019
|
305,750
|
|
|
$
|
41.66
|
|
At December 31, 2019, there was $6.1 million of unrecognized compensation cost related to stock options that we expect to be recognized over a weighted-average period of 1.8 years.
Non-Vested Stock
We issue shares of non-vested stock with a vesting term of one year. 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 $1.2 million, $1.4 million and $1.7 million for 2019, 2018 and 2017, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
The following table presents our non-vested stock activity for 2019:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair
Value
|
Non-vested stock at January 1, 2019
|
14,904
|
|
|
$
|
80.54
|
|
Granted
|
9,859
|
|
|
119.12
|
|
Vested
|
(14,904
|
)
|
|
80.54
|
|
Canceled, forfeited or expired
|
—
|
|
|
—
|
|
Non-vested stock at December 31, 2019
|
9,859
|
|
|
$
|
119.12
|
|
The weighted average grant date fair value of non-vested stock granted was $119.12, $80.54 and $62.67 in 2019, 2018 and 2017, respectively.
At December 31, 2019, there was $0.8 million of unrecognized compensation cost related to non-vested stock awards that we expect to be recognized over a weighted average period of 0.4 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 four years. Based on the terms and conditions of these awards, we determine if the awards should be recorded as either equity or liability instruments. The compensation expense is determined based on the market price of our common stock at the date of grant, applied to the total number of units that are anticipated to vest, unless the award specifies differently. We 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 $8.7 million, $4.5 million and $3.6 million for 2019, 2018 and 2017, respectively.
The following table presents our service-based non-vested stock units activity for 2019:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair
Value
|
Non-vested stock units at January 1, 2019
|
240,400
|
|
|
$
|
69.49
|
|
Granted
|
82,605
|
|
|
123.70
|
|
Vested
|
(78,119
|
)
|
|
58.75
|
|
Canceled, forfeited or expired
|
(13,468
|
)
|
|
79.68
|
|
Non-vested stock units at December 31, 2019
|
231,418
|
|
|
$
|
91.87
|
|
The weighted average grant date fair value of service-based non-vested stock units granted was $123.70, $95.14 and $53.79 in 2019, 2018 and 2017, respectively.
At December 31, 2019, there was $11.4 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 1.9 years.
Non-Vested Stock Units – Service-Based and Performance-Based Awards
During 2019, we awarded performance-based awards to certain employees. The target level established by the award, which is based on the Company’s 2019 adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), provided for the recipients to receive 102,585 non-vested stock units if the target was achieved. For a select group of employees, if the target objective is surpassed to the point of achieving the projected maximum payout, the recipients will receive an additional 18,327 non-vested stock units during the three-month period ending March 31, 2020. 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 $8.4 million, $5.8 million and $5.0 million for 2019, 2018 and 2017, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
The following table presents our performance-based non-vested stock units activity for 2019:
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted Average
Grant Date Fair
Value
|
Non-vested stock units at January 1, 2019
|
226,677
|
|
|
$
|
65.76
|
|
Granted
|
102,585
|
|
|
128.89
|
|
Vested
|
(101,156
|
)
|
|
61.12
|
|
Canceled, forfeited or expired
|
(20,682
|
)
|
|
82.72
|
|
Non-vested stock units at December 31, 2019
|
207,424
|
|
|
$
|
97.55
|
|
The weighted average grant date fair value of performance-based non-vested stock units granted was $128.89, $79.59 and $52.99 in 2019, 2018 and 2017, respectively.
At December 31, 2019, there was $13.2 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.
10. COMMITMENTS AND CONTINGENCIES
Legal Proceedings – Ongoing
We are involved in the following legal actions:
Subpoena Duces Tecum and Civil Investigative Demands 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 May 21, 2015. We are fully cooperating with the U.S. Department of Justice with respect to this investigation.
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.
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 our analysis of sample claims data in connection with preliminary settlement discussions with the U.S. Department of Justice regarding the above matters, we have recorded a total of $6.5 million to accrued expenses in our consolidated balance sheet related to this matter. Due to the ongoing nature of the investigations and current stage of the settlement discussions, we are unable to estimate a range of potential loss at this time, and we cannot predict the timing or outcome of these investigations.
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 fees related to all legal matters are expensed as incurred.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
Legal Proceedings – Settled
Securities Class Action Lawsuits
As previously disclosed, between June 10 and July 28, 2010, several putative securities class action complaints were filed in the United States District Court for the Middle District of Louisiana (the “District Court”) against the Company and certain of our former senior executives. The cases were consolidated into the first-filed action Bach, et al. v. Amedisys, Inc., et al. Case No. 3:10-cv-00395, and the District Court appointed as co-lead plaintiffs the Public Employees’ Retirement System of Mississippi and the Puerto Rico Teachers’ Retirement System (the “Co-Lead Plaintiffs”).
The Plaintiffs were granted leave to file a First Amended Consolidated Complaint (the “First Amended Securities Complaint”) on behalf of all purchasers or acquirers of Amedisys’ securities between August 2, 2005 and September 30, 2011. The First Amended Securities Complaint alleges that the Company and seven individual defendants violated Section 10(b), Section 20(a), and Rule 10b-5 of the Securities Exchange Act of 1934 by materially misrepresenting the Company’s financial results and concealing a scheme to obtain higher Medicare reimbursements and additional patient referrals by (1) providing medically unnecessary care to patients, including certifying and re-certifying patients for medically unnecessary 60-day treatment episodes; (2) implementing clinical tracks such as “Balanced for Life” and wound care programs that provided a pre-set number of therapy visits irrespective of medical need; (3) “upcoding” patients’ Medicare forms to attribute a “primary diagnosis” to a medical condition associated with higher billing rates; and (4) providing improper and illegal remuneration to physicians to obtain patient certifications or re-certifications. The First Amended Securities Complaint sought certification of the case as a class action and an unspecified amount of damages, as well as interest and an award of attorneys’ fees.
On June 12, 2017, the Company reached an agreement-in-principle to settle this matter. All parties to the action executed a binding term sheet that, subject to final documentation and court approval, provided in part for a settlement payment of approximately $43.7 million, and the dismissal with prejudice of the litigation. Approximately $15.0 million of the settlement amount was paid by the Company’s insurance carriers. The net of these two amounts, $28.7 million, was recorded as a charge in our consolidated statements of operations and paid with cash on hand during 2017. On December 19, 2017, the Court entered the final order and judgment on the case.
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 formalized various aspects of our already existing ethics and compliance programs and contained other requirements designed to help ensure our ongoing compliance with federal health care program requirements. Among other things, the CIA required 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 audits 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 required that we report substantial overpayments that we discovered we had received from federal health care programs, as well as probable violations of federal health care laws. The corporate integrity agreement had a term of five years that ended on April 21, 2019. We filed our final annual report on July 19, 2019.
Compassionate Care Hospice Corporate Integrity Agreement
On January 30, 2015, CCH entered into a CIA with the OIG. The CIA required that CCH provide annual on-site compliance training; develop and implement policies to ensure compliance with federal health care program requirements; screen new and current employees to ensure that they are eligible to participate in federal health care programs; establish a compliance committee that contains both a Compliance Officer and a Chief Quality Officer; retain a Governing Authority expert who will periodically complete a compliance program review; and retain an independent review organization (IRO) to complete claims review for hospice services rendered in New York. The OIG waived the claims review for the final year of the CCH CIA based on the closure of the New York operations. Additionally, the CIA required that CCH report substantial overpayments that CCH discovered it received from federal health care programs, as well as probable violations of federal criminal, civil or administrative health care laws. Upon breach of the CIA, CCH could have become liable for payment of certain stipulated penalties, or could have been excluded from participation in federal health care programs. The CIA had a term of five years that ended on January 30, 2020.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
Third Party Audits – Ongoing
From time to time, in the ordinary course of business, we are subject to audits under various governmental programs including Recovery Audit Contractors (“RACs”), Zone Program Integrity Contractors (“ZPICs”), Uniform Program Integrity Contractors ("UPICs"), Program Safeguard Contractors (“PSCs”) and Medicaid Integrity Contractors (“MICs”), in which third party firms engaged by the Centers for Medicare and Medicaid Services (“CMS”) 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 December 31, 2019, 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 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. Accordingly, the Company reduced its indemnity receivable from $4.9 million to $2.8 million. The $2.1 million impact was recorded to general and administrative expenses, other within our consolidated statements of operations during the year ended December 31, 2018. As of December 31, 2019, we have an indemnity receivable of approximately $2.8 million 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. 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 are 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 covers claims between January 2, 2014 and September 13, 2016. The Clearwater Request for Repayment covers 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 has been reduced to $26.0 million and the alleged overpayment for the Clearwater Care Center has been reduced to $3.3 million. The Company has now filed Level III Administrative Appeals, and will continue to vigorously pursue its appeal rights, which include contesting the methodology used by the ZPIC contractor to perform statistical extrapolation. The Company is contractually entitled to indemnification by the prior owners for all claims prior to December 31, 2015, for up to $12.6 million.
At this stage of the review, based on the information currently available to the Company, the Company cannot predict the timing or outcome of this review. The Company estimates a low-end potential range of loss related to this review of $6.5 million (assuming the Company is successful in seeking indemnity from the prior owners and unsuccessful in demonstrating that the extrapolation method used by SafeGuard was erroneous). The Company has reduced its high-end potential range of loss from $38.8 million (the maximum amount Palmetto claims has been overpaid for both the Lakeland Care Centers and the Clearwater Care Center, of which amount $12.6 million is subject to indemnification by the prior owners) to $29.3 million based on the partial success achieved by the Company in prosecuting its Level I and II Administrative Appeals.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
As of December 31, 2019, we have an accrued liability of approximately $17.4 million related to this matter. We expect to be indemnified by the prior owners for approximately $10.9 million of the total $12.6 million available indemnification related to this matter and have recorded this amount within other assets in our consolidated balance sheet as of December 31, 2019. The net of these two amounts, $6.5 million, was recorded as a reduction in revenue in our consolidated statements of operations during 2017. As of December 31, 2019, $1.5 million of net receivables have been impacted by this payment suspension.
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.
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
Type of Insurance
|
2019
|
|
2018
|
Health insurance
|
$
|
15.8
|
|
|
$
|
12.4
|
|
Workers’ compensation
|
33.4
|
|
|
30.9
|
|
Professional liability
|
5.1
|
|
|
4.3
|
|
|
54.3
|
|
|
47.6
|
|
Less: long-term portion
|
(1.3
|
)
|
|
(1.1
|
)
|
|
$
|
53.0
|
|
|
$
|
46.5
|
|
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 $1.0 million per incident and our professional liability insurance has a retention limit of $0.3 million per incident.
Severance
We have commitments related to our Key Executive Severance Plan applicable to a number of our senior executives, as well as the employment agreement entered into with our Chief Executive Officer, each of which generally commit us to pay severance benefits under certain circumstances.
Other
We are subject to various other types of claims and disputes arising in the ordinary course of our business. While the resolution of such issues is not presently determinable, we believe that the ultimate resolution of such matters will not have a significant effect on our consolidated financial condition, results of operations and cash flows.
11. EMPLOYEE BENEFIT PLANS
401(k) Benefit Plan
We maintain a plan qualified under Section 401(k) of the Internal Revenue Code for all employees who have reached 21 years of age, effective the first month after hire date. Under the plan, eligible employees may elect to defer a portion of their compensation, subject to Internal Revenue Service limits.
Effective January 1, 2017, our match of contributions to be made to each eligible employee contribution is $0.44 for every $1.00 contributed 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 $10.5 million, $9.0 million and $8.8 million related to our 401(k) benefit plan for 2019, 2018 and 2017, respectively.
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
Deferred Compensation Plan
We had a Deferred Compensation Plan for additional tax-deferred savings for 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 that would have been 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. SHARE REPURCHASE
2019 Stock Repurchase Program
On February 25, 2019, we announced that our Board of Directors authorized a stock repurchase program, under which we may repurchase up to $100 million of our outstanding common stock through March 1, 2020.
Under the terms of the program, we are allowed to 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 are allowed to enter into Rule 10b5-1 plans to effect some or all of the repurchases. 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.
We did not repurchase any shares pursuant to this stock repurchase program during the year ended December 31, 2019.
2018 Share Repurchase
On June 4, 2018, we purchased 2,418,304 of our common shares from affiliates of KKR Credit Advisors (US) LLC ("KKR"), representing one-half of KKR's then current holdings in the Company and 7.1% of the aggregate outstanding shares of the Company's common stock for a total purchase price of $181.4 million including related direct costs. The Company repurchased the shares at $73.96 which represents 96% of the closing stock price of the Company's common stock on June 4, 2018. The repurchased shares are classified as treasury shares.
13. EXIT AND RESTRUCTURING ACTIVITIES
During 2017, we closed four Florida home health care centers, consolidated another three Florida home health care centers with care centers servicing the same markets and implemented a plan to restructure our home health division. As a result of these actions, we recorded non-cash charges of $1.3 million in asset impairment expense related to the write-off of intangible assets, $0.6 million in other general and administrative expenses related to lease termination costs and $3.0 million in salaries and benefits related to severance costs which was offset by a reduction in non-cash compensation of approximately $1.0 million within our consolidated statements of operations for 2017.
l4. 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 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. 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.
Management evaluates performance and allocates resources based on the operating income of the reportable segments, which includes an allocation of corporate expenses attributable to the specific segment as well as 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).
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2019
|
|
Home Health
|
|
Hospice
|
|
Personal Care
|
|
Other
|
|
Total
|
Net service revenue
|
$
|
1,256.4
|
|
|
$
|
617.2
|
|
|
$
|
82.0
|
|
|
$
|
—
|
|
|
$
|
1,955.6
|
|
Cost of service, excluding depreciation and amortization
|
754.1
|
|
|
335.1
|
|
|
61.1
|
|
|
—
|
|
|
1,150.3
|
|
General and administrative expenses
|
297.2
|
|
|
137.5
|
|
|
12.3
|
|
|
160.9
|
|
|
607.9
|
|
Depreciation and amortization
|
4.2
|
|
|
1.6
|
|
|
0.2
|
|
|
12.4
|
|
|
18.4
|
|
Asset impairment charge
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
Operating expenses
|
1,057.0
|
|
|
474.2
|
|
|
73.6
|
|
|
173.3
|
|
|
1,778.1
|
|
Operating income (loss)
|
$
|
199.4
|
|
|
$
|
143.0
|
|
|
$
|
8.4
|
|
|
$
|
(173.3
|
)
|
|
$
|
177.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2018
|
|
Home Health
|
|
Hospice
|
|
Personal Care
|
|
Other
|
|
Total
|
Net service revenue
|
$
|
1,174.5
|
|
|
$
|
410.9
|
|
|
$
|
77.2
|
|
|
$
|
—
|
|
|
$
|
1,662.6
|
|
Cost of service, excluding depreciation and amortization
|
722.1
|
|
|
212.0
|
|
|
58.8
|
|
|
—
|
|
|
992.9
|
|
General and administrative expenses
|
276.3
|
|
|
84.6
|
|
|
12.8
|
|
|
127.6
|
|
|
501.3
|
|
Depreciation and amortization
|
3.5
|
|
|
1.1
|
|
|
0.3
|
|
|
8.4
|
|
|
13.3
|
|
Operating expenses
|
1,001.9
|
|
|
297.7
|
|
|
71.9
|
|
|
136.0
|
|
|
1,507.5
|
|
Operating income (loss)
|
$
|
172.6
|
|
|
$
|
113.2
|
|
|
$
|
5.3
|
|
|
$
|
(136.0
|
)
|
|
$
|
155.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2017
|
|
Home Health
|
|
Hospice
|
|
Personal Care
|
|
Other
|
|
Total
|
Net service revenue
|
$
|
1,083.9
|
|
|
$
|
367.8
|
|
|
$
|
59.6
|
|
|
$
|
—
|
|
|
$
|
1,511.3
|
|
Cost of service, excluding depreciation and amortization
|
670.9
|
|
|
187.5
|
|
|
45.0
|
|
|
—
|
|
|
903.4
|
|
General and administrative expenses
|
278.4
|
|
|
76.6
|
|
|
9.5
|
|
|
117.8
|
|
|
482.3
|
|
Depreciation and amortization
|
3.5
|
|
|
0.9
|
|
|
0.2
|
|
|
12.5
|
|
|
17.1
|
|
Securities Class Action Lawsuit settlement, net
|
—
|
|
|
—
|
|
|
—
|
|
|
28.7
|
|
|
28.7
|
|
Asset impairment charge
|
1.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Operating expenses
|
954.1
|
|
|
265.0
|
|
|
54.7
|
|
|
159.0
|
|
|
1,432.8
|
|
Operating income (loss)
|
$
|
129.8
|
|
|
$
|
102.8
|
|
|
$
|
4.9
|
|
|
$
|
(159.0
|
)
|
|
$
|
78.5
|
|
15. UNAUDITED SUMMARIZED QUARTERLY FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
Attributable to
Amedisys, Inc.
Common
Stockholders (1)
|
|
Revenue
|
|
Net Income
Attributable to
Amedisys, Inc.
|
|
Basic
|
|
Diluted
|
2019
|
|
|
|
|
|
|
|
1st Quarter
|
$
|
467.3
|
|
|
$
|
31.3
|
|
|
$
|
0.98
|
|
|
$
|
0.95
|
|
2nd Quarter
|
493.0
|
|
|
33.7
|
|
|
1.05
|
|
|
1.02
|
|
3rd Quarter
|
494.6
|
|
|
34.1
|
|
|
1.06
|
|
|
1.03
|
|
4th Quarter
|
500.7
|
|
|
27.7
|
|
|
0.86
|
|
|
0.83
|
|
|
$
|
1,955.6
|
|
|
$
|
126.8
|
|
|
$
|
3.95
|
|
|
$
|
3.84
|
|
2018
|
|
|
|
|
|
|
|
1st Quarter
|
$
|
399.3
|
|
|
$
|
27.2
|
|
|
$
|
0.80
|
|
|
$
|
0.79
|
|
2nd Quarter
|
411.6
|
|
|
33.3
|
|
|
1.00
|
|
|
0.98
|
|
3rd Quarter
|
417.3
|
|
|
31.4
|
|
|
0.99
|
|
|
0.96
|
|
4th Quarter
|
434.4
|
|
|
27.5
|
|
|
0.86
|
|
|
0.84
|
|
|
$
|
1,662.6
|
|
|
$
|
119.3
|
|
|
$
|
3.64
|
|
|
$
|
3.55
|
|
|
|
(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.
|
AMEDISYS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019
16. RELATED PARTY TRANSACTIONS
During 2018, we made a $7.0 million investment in Medalogix, a healthcare predictive data and analytics company; this investment is accounted for under the equity method. During the year ended December 31, 2019, we incurred costs of approximately $0.5 million in connection with the usage of Medalogix's analytics platforms. We believe that the terms of these transactions are consistent with those negotiated at arm’s length.
On June 4, 2018, we purchased 2,418,304 of our common shares from affiliates of KKR, representing one-half of KKR's holdings in the Company and 7.1% of the aggregate outstanding shares of the Company's common stock for a total purchase price of $181.4 million including related direct costs. The Company repurchased the shares at $73.96 which represents 96% of the closing stock price of the Company's common stock on June 4, 2018. At the time of the transaction, KKR held approximately 14.2% of the Company's outstanding shares of common stock. As of December 31, 2019, KKR is no longer a shareholder of the Company's stock.
17. SUBSEQUENT EVENTS
On January 1, 2020, we acquired 100% of the membership interests in Asana Hospice, a hospice provider with locations in Pennsylvania, Ohio, Texas, Missouri and Kansas for a purchase price of $67.0 million.