AMEDISYS INC - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-24260

AMEDISYS, INC.

(Exact Name of Registrant as Specified in its Charter)



Delaware						11-3131700
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3854 American Way, Suite A, Baton Rouge, LA 70816

(Address of principal executive offices, including zip code)

(225) 292-2031 or (800) 467-2662

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

AMED

The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date, is as follows: Common stock, $0.001 par value, 32,602,425 shares outstanding as of October 29, 2021.

TABLE OF CONTENTS



SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS		1
;
PART I.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS:
	CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020	2
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)	3
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	47
ITEM 4.	CONTROLS AND PROCEDURES	47

PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	49
ITEM 1A.	RISK FACTORS	49
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	49
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	49
ITEM 4.	MINE SAFETY DISCLOSURES	49
ITEM 5.	OTHER INFORMATION	49
ITEM 6.	EXHIBITS	50
SIGNATURES		51

SPECIAL CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

When included in this Quarterly Report on Form 10-Q, or in other documents that we file with the Securities and Exchange Commission (“SEC”) or in statements made by or on behalf of the Company, words like “believes,” “belief,” “expects,” “strategy,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “will,” “could,” “would,” “should” and similar expressions are intended to identify forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a variety of risks and uncertainties that could cause actual results to differ materially from those described therein. These risks and uncertainties include, but are not limited to the following: the impact of the novel coronavirus pandemic ("COVID-19"), including the measures that have been and may be taken by governmental authorities to mitigate it, on our business, financial condition and results of operations, the impact of current and proposed federal, state and local vaccine mandates, including potential staffing shortages, changes in or our failure to comply with existing federal and state laws or regulations or the inability to comply with new government regulations on a timely basis, changes in Medicare and other medical payment levels, our ability to open care centers, acquire additional care centers and integrate and operate these care centers effectively, competition in the healthcare industry, changes in the case mix of patients and payment methodologies, changes in estimates and judgments associated with critical accounting policies, our ability to maintain or establish new patient referral sources, our ability to consistently provide high-quality care, our ability to attract and retain qualified personnel, our ability to keep our patients and employees safe, changes in payments and covered services by federal and state governments, future cost containment initiatives undertaken by third-party payors, our access to financing, our ability to meet debt service requirements and comply with covenants in debt agreements, business disruptions due to natural disasters or acts of terrorism, widespread protests or civil unrest, our ability to integrate, manage and keep our information systems secure, our ability to realize the anticipated benefits of acquisitions, changes in law or developments with respect to any litigation relating to the Company, including various other matters, many of which are beyond our control.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on any forward-looking statement as a prediction of future events. We expressly disclaim any obligation or undertaking and we do not intend to release publicly any updates or changes in our expectations concerning the forward-looking statements or any changes in events, conditions or circumstances upon which any forward-looking statement may be based, except as required by law. For a discussion of some of the factors discussed above as well as additional factors, see our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 25, 2021, particularly, Part I, Item 1A - Risk Factors therein, which are incorporated herein by reference, and Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q. Additional risk factors may also be described in reports that we file from time to time with the SEC.

Available Information

Our company website address is www.amedisys.com. We use our website as a channel of distribution for important company information. Important information, including press releases, analyst presentations and financial information regarding our company, is routinely posted on and accessible on the Investor Relations subpage of our website, which is accessible by clicking on the tab labeled “Investors” on our website home page. Visitors to our website can also register to receive automatic e-mail and other notifications alerting them when new information is made available on the Investor Relations subpage of our website. In addition, we make available on the Investor Relations subpage of our website (under the link “SEC filings”), free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as reasonably practicable after we electronically file or furnish such reports with the SEC. Further, copies of our Certificate of Incorporation and Bylaws, our Code of Ethical Business Conduct, our Corporate Governance Guidelines and the charters for the Audit, Compensation, Quality of Care, Compliance and Ethics and Nominating and Corporate Governance Committees of our Board are also available on the Investor Relations subpage of our website (under the link “Governance”). Reference to our website does not constitute incorporation by reference of the information contained on the website and should not be considered part of this document. Our electronically filed reports can also be obtained on the SEC’s internet site at http://www.sec.gov.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMEDISYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)


	September 30, 2021 (Unaudited)		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	124,458	$	81,808
Restricted cash	3,750		1,549
Patient accounts receivable	274,570		255,145
Prepaid expenses	16,080		10,217
Other current assets	14,024		13,265
Total current assets	432,882		361,984
Property and equipment, net of accumulated depreciation of $100,407 and $95,024	20,381		23,719
Operating lease right of use assets	100,028		93,440
Goodwill	1,188,054		932,685
Intangible assets, net of accumulated amortization of $20,309 and $22,973	118,084		74,183
Deferred income taxes	10,111		47,987
Other assets	68,105		33,200
Total assets	$	1,937,645	$	1,567,198
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	41,649	$	42,674
Payroll and employee benefits	155,123		146,929
Accrued expenses	154,264		166,192
Provider relief fund advance	58,535		60,000
Current portion of long-term obligations	13,225		10,496
Current portion of operating lease liabilities	31,553		30,046
Total current liabilities	454,349		456,337
Long-term obligations, less current portion	434,781		204,511
Operating lease liabilities, less current portion	67,723		61,987
Other long-term obligations	31,991		33,622
Total liabilities	988,844		756,457
Commitments and Contingencies—Note 6
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; 37,659,284 and 37,470,212 shares issued; and 32,590,775 and 32,814,278 shares outstanding	38		38
Additional paid-in capital	720,875		698,287
Treasury stock, at cost 5,068,509 and 4,655,934 shares of common stock	(420,665)		(319,092)

Retained earnings	605,016		429,991
Total Amedisys, Inc. stockholders’ equity	905,264		809,224
Noncontrolling interests	43,537		1,517
Total equity	948,801		810,741
Total liabilities and equity	$	1,937,645	$	1,567,198

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

AMEDISYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except per share data)

(Unaudited)


	For the Three-Month Periods Ended September 30,				For the Nine-Month Periods Ended September 30,
	2021		2020		2021		2020
Net service revenue	$	553,485	$	544,070	$	1,654,795	$	1,520,814
Other operating income	(4)		4,812		13,300		27,592
Cost of service, excluding depreciation and amortization	310,294		297,668		916,188		878,633
General and administrative expenses:
Salaries and benefits	119,373		123,146		349,533		330,329
Non-cash compensation	4,397		7,124		17,860		19,758
Other	55,158		49,348		158,995		142,616
Depreciation and amortization	7,487		8,283		21,763		19,955
Operating expenses	496,709		485,569		1,464,339		1,391,291
Operating income	56,772		63,313		203,756		157,115
Other income (expense):
Interest income	—		31		49		258
Interest expense	(2,730)		(2,692)		(6,734)		(8,675)
Equity in earnings from equity method investments	1,444		1,435		3,932		2,399
Gain (loss) on equity method investments	—		—		31,092		(2,980)
Miscellaneous, net	490		122		1,253		662
Total other (expense) income, net	(796)		(1,104)		29,592		(8,336)
Income before income taxes	55,976		62,209		233,348		148,779
Income tax (expense) benefit	(10,731)		10,202		(57,192)		(9,175)
Net income	45,245		72,411		176,156		139,604
Net income attributable to noncontrolling interests	(239)		(430)		(1,131)		(1,147)
Net income attributable to Amedisys, Inc.	$	45,006	$	71,981	$	175,025	$	138,457
Basic earnings per common share:
Net income attributable to Amedisys, Inc. common stockholders	$	1.38	$	2.20	$	5.36	$	4.26
Weighted average shares outstanding	32,607		32,662		32,658		32,469
Diluted earnings per common share:
Net income attributable to Amedisys, Inc. common stockholders	$	1.37	$	2.16	$	5.30	$	4.16
Weighted average shares outstanding	32,899		33,260		33,021		33,267

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

AMEDISYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Amounts in thousands, except common stock shares)

(Unaudited)


	For the Three-Months Ended September 30, 2021
	Total		Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interests
			Shares	Amount
Balance, June 30, 2021	$	875,887	37,553,355	$	38	$	714,334	$	(400,110)	$	—	$	560,010	$	1,615
Issuance of stock – employee stock purchase plan	1,061		5,095	—		1,061		—		—		—		—
Issuance/(cancellation) of non-vested stock	—		87,460	—		—		—		—		—		—
Exercise of stock options	1,083		13,374	—		1,083		—		—		—		—
Non-cash compensation	4,397		—	—		4,397		—		—		—		—
Surrendered shares	(9,750)		—	—		—		(9,750)		—		—		—
Shares repurchased	(10,805)		—	—		—		(10,805)		—		—		—
Noncontrolling interest distribution	(459)		—	—		—		—		—		—		(459)
Acquired noncontrolling interest	42,142		—	—		—		—		—		—		42,142
Net income	45,245		—	—		—		—		—		45,006		239
Balance, September 30, 2021	$	948,801	37,659,284	$	38	$	720,875	$	(420,665)	$	—	$	605,016	$	43,537

	For the Three-Months Ended September 30, 2020
	Total		Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interests
			Shares	Amount
Balance, June 30, 2020	$	722,259	36,831,298	$	37	$	665,580	$	(257,625)	$	—	$	312,859	$	1,408
Issuance of stock – employee stock purchase plan	914		5,414	—		914		—		—		—		—
Issuance/(cancellation) of non-vested stock	—		81,767	—		—		—		—		—		—
Exercise of stock options	3,123		538,965	—		3,123		—		—		—		—
Non-cash compensation	7,124		—	—		7,124		—		—		—		—
Surrendered shares	(47,788)		—	—		13,358		(61,146)		—		—		—
Noncontrolling interest distribution	(300)		—	—		—		—		—		—		(300)
Net income	72,411		—	—		—		—		—		71,981		430
Balance, September 30, 2020	$	757,743	37,457,444	$	37	$	690,099	$	(318,771)	$	—	$	384,840	$	1,538

	For the Nine-Months Ended September 30, 2021
	Total		Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interests
			Shares	Amount
Balance, December 31, 2020	$	810,741	37,470,212	$	38	$	698,287	$	(319,092)	$	—	$	429,991	$	1,517
Issuance of stock – employee stock purchase plan	3,022		13,357	—		3,022		—		—		—		—
Issuance/(cancellation) of non-vested stock	—		148,529	—		—		—		—		—		—
Exercise of stock options	1,706		27,186	—		1,706		—		—		—		—
Non-cash compensation	17,860		—	—		17,860		—		—		—		—
Surrendered shares	(16,694)		—	—		—		(16,694)		—		—		—
Shares repurchased	(84,879)		—	—		—		(84,879)		—		—		—
Noncontrolling interest distribution	(1,253)		—	—		—		—		—		—		(1,253)
Acquired noncontrolling interest	42,142		—	—		—		—		—		—		42,142
Net income	176,156		—	—		—		—		—		175,025		1,131
Balance, September 30, 2021	$	948,801	37,659,284	$	38	$	720,875	$	(420,665)	$	—	$	605,016	$	43,537

	For the Nine-Months Ended September 30, 2020
	Total		Common Stock			Additional Paid-in Capital		Treasury Stock		Accumulated Other Comprehensive Income		Retained Earnings		Noncontrolling Interests
			Shares	Amount
Balance, December 31, 2019	$	641,513	36,638,021	$	37	$	645,256	$	(251,241)	$	15	$	246,383	$	1,063
Issuance of stock – employee stock purchase plan	2,600		16,772	—		2,600		—		—		—		—
Issuance of stock – 401(k) plan	3,057		18,312	—		3,057		—		—		—		—
Issuance/(cancellation) of non-vested stock	—		166,651	—		—		—		—		—		—
Exercise of stock options	6,070		617,688	—		6,070		—		—		—		—
Non-cash compensation	19,758		—	—		19,758		—		—		—		—
Surrendered shares	(54,172)		—	—		13,358		(67,530)		—		—		—
Noncontrolling interest distribution	(672)		—	—		—		—		—		—		(672)
Write-off of other comprehensive income	(15)		—	—		—		—		(15)		—		—
Net income	139,604		—	—		—		—		—		138,457		1,147
Balance, September 30, 2020	$	757,743	37,457,444	$	37	$	690,099	$	(318,771)	$	—	$	384,840	$	1,538

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

AMEDISYS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	For the Nine-Month Periods Ended September 30,
	2021		2020
Cash Flows from Operating Activities:
Net income	$	176,156	$	139,604
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	21,763		19,955
Non-cash compensation	17,860		19,758
Amortization and impairment of operating lease right of use assets	30,181		29,149
Gain on disposal of property and equipment	(64)		(77)
(Gain) loss on equity method investments	(31,092)		2,980
Write-off of other comprehensive income	—		(15)
Deferred income taxes	34,729		(2,762)
Equity in earnings from equity method investments	(3,932)		(2,399)
Amortization of deferred debt issuance costs/debt discount	669		653
Return on equity method investments	4,268		3,919
Changes in operating assets and liabilities, net of impact of acquisitions:
Patient accounts receivable	(17,638)		6,486
Other current assets	(6,219)		(28,217)
Other assets	(938)		(91)
Accounts payable	(1,192)		(1,627)
Accrued expenses	(9,363)		25,594
Other long-term obligations	(1,785)		38,481
Operating lease liabilities	(27,372)		(25,576)
Operating lease right of use assets	(2,304)		(2,775)
Net cash provided by operating activities	183,727		223,040
Cash Flows from Investing Activities:
Proceeds from sale of deferred compensation plan assets	126		94
Proceeds from sale of property and equipment	140		80
Purchases of property and equipment	(5,187)		(2,995)
Investments in technology assets	(147)		—
Investments in equity method investees	—		(875)
Proceeds from sale of equity method investment	—		17,876
Acquisitions of businesses, net of cash acquired	(264,872)		(299,723)
Net cash used in investing activities	(269,940)		(285,543)
Cash Flows from Financing Activities:
Proceeds from issuance of stock upon exercise of stock options	1,706		6,070
Proceeds from issuance of stock to employee stock purchase plan	3,022		2,600
Shares withheld to pay taxes on non-cash compensation	(16,694)		(54,172)
Noncontrolling interest distribution	(1,253)		(672)
Proceeds from borrowings under term loan	290,312		—
Proceeds from borrowings under revolving line of credit	500,700		432,000
Repayments of borrowings under revolving line of credit	(551,700)		(357,000)
Principal payments of long-term obligations	(5,893)		(7,360)
Debt issuance costs	(2,792)		—
Purchase of company stock	(84,879)		—
Provider relief fund advance	(1,465)		60,000
Net cash provided by financing activities	131,064		81,466
Net increase in cash, cash equivalents and restricted cash	44,851		18,963
Cash, cash equivalents and restricted cash at beginning of period	83,357		96,490
Cash, cash equivalents and restricted cash at end of period	$	128,208	$	115,453


Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	3,479	$	4,902
Cash paid for income taxes, net of refunds received	$	25,482	$	30,290
Cash paid for operating lease liabilities	$	29,676	$	28,351
Cash paid for finance lease liabilities	$	1,509	$	1,483
Supplemental Disclosures of Non-Cash Activity:
Right of use assets obtained in exchange for operating lease liabilities	$	34,881	$	29,876
Right of use assets obtained in exchange for finance lease liabilities	$	814	$	822
Reductions to right of use assets resulting from reductions to operating lease liabilities	$	1,183	$	767

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

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, personal care and high acuity care services with approximately 75% of our net service revenue derived from Medicare for the three and nine-month periods ended September 30, 2021 and approximately 76% and 75% of our net service revenue derived from Medicare for the three and nine-month periods ended September 30, 2020, respectively. As of September 30, 2021, we owned and operated 328 Medicare-certified home health care centers, 177 Medicare-certified hospice care centers, 14 personal-care care centers and 8 high acuity care joint ventures in 38 states within the United States and the District of Columbia.

Basis of Presentation

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly our financial position, our results of operations and our cash flows in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting. Our results of operations for the interim periods presented are not necessarily indicative of the results of our operations for the entire year and have not been audited by our independent auditors.

This report should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 (the “Form 10-K”), which includes information and disclosures not included herein. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from the interim financial information presented, as allowed by SEC rules and regulations.

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted Accounting Standards Update ("ASU") 2020-10, Codification Improvements, which included minor technical corrections and clarifications to improve consistency and clarify the application of various provisions of the codification by amending the codification to include all disclosure guidance in the appropriate disclosure sections and by amending and adding new headings, cross referencing to other guidance and refining or correcting terminology. Our adoption of this standard did not have a material effect on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference the London Inter-Bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued, subject to meeting certain criteria. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which adds implementation guidance to ASU 2020-04 to clarify certain optional expedients in Topic 848. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and may generally be applied prospectively through December 31, 2022. This standard will not have an effect on our condensed consolidated financial statements.

Use of Estimates

Our accounting and reporting policies conform with U.S. GAAP. In preparing the unaudited condensed consolidated financial statements, we are required to make estimates and assumptions that impact the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Principles of Consolidation

These unaudited condensed consolidated financial statements include the accounts of Amedisys, Inc. and our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated and business combinations accounted for as purchases have been included 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 ("VIE") and we are the primary beneficiary or if we have controlling interests in the entity, which is generally ownership in excess of 50%. Third-party equity interests in our consolidated joint ventures are reflected as noncontrolling interests in our condensed consolidated financial statements. We account for investments in entities in which we have the ability to exercise significant influence under the equity method if we hold 50% or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary. The book value of investments that we account for under the equity method of accounting was $48.3 million and $14.2 million as of September 30, 2021 and December 31, 2020, respectively, and is reflected in other assets within our condensed consolidated balance sheets.

In connection with the acquisition of Contessa Health ("Contessa") on August 1, 2021, we obtained interests in several joint ventures with health system partners and a professional corporation that employs clinicians. Each of these entities meets the criteria to be classified as a VIE. As of September 30, 2021, we are proportionately consolidating seven of our eight joint ventures with health system partners as well as the professional corporation as we have concluded that we are the primary beneficiary of these VIEs. We have management agreements in place with each of these entities whereby we manage the entities and run the day-to-day operations. As such, we possess the power to direct the activities that most significantly impact the economic performance of the VIEs. The significant activities include, but are not limited to, negotiating provider and payor contracts, establishing patient care policies and protocols, making employment and compensation decisions, developing the operating and capital budgets, performing marketing activities and providing accounting support. We also have the obligation to absorb any expected losses and the right to receive benefits. We account for one of our joint ventures with a health system partner under the equity method of accounting as we are not considered to be the primary beneficiary of this VIE.

The terms of the agreements with each VIE prohibit us from using the assets of the VIE to satisfy the obligations of other entities. The carrying amount of the VIEs’ assets and liabilities included in our condensed consolidated balance sheet are as follows (amounts in millions):


	September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	3.7
Patient accounts receivable	2.5
Other current assets	0.1
Total current assets	6.3
Property and equipment	0.1
Total assets	$	6.4
LIABILITIES
Current liabilities:
Payroll and employee benefits	$	0.3
Accrued expenses	3.3
Current portion of long-term obligations	0.8
Total current liabilities	4.4
Other long-term obligations	0.1
Total liabilities	$	4.5

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

During the three-month period ended June 30, 2021, a third-party acquired a majority of the issued and outstanding membership interests of one of our equity method investments, Medalogix, for cash, with the remaining membership interests rolling over into a newly formed entity that includes Medalogix as well as another healthcare predictive data and analytics company. We rolled over 100% of our ownership interest in Medalogix to the newly formed entity, and in connection with this transaction, we recognized a $31.1 million gain based on the purchase price of Medalogix which is reflected in gain (loss) on equity method investments within our condensed consolidated statements of operations.

During the three-month period ended June 30, 2020, we sold our investment in the Heritage Healthcare Innovation Fund, LP via a secondary transaction for $17.9 million which resulted in a $3.0 million loss which is reflected in gain (loss) on equity method investments within our condensed consolidated statements of operations. The Company's original investment was made in 2010 and no longer fit within our strategic areas of focus. Proceeds from the sale were used to pay down debt and fund capital needs.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

We account for revenue from contracts with customers in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, 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 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 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.

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 75% of our net service revenue for the three and nine-month periods ended September 30, 2021 and approximately 76% and 75% of our net service revenue for the three and nine-month periods ended September 30, 2020, respectively.

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 audits and 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.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Revenue by payor class as a percentage of total net service revenue is as follows:


	For the Three-Month Periods Ended September 30,				For the Nine-Month Periods Ended September 30,
	2021		2020		2021		2020
Home Health:
Medicare	41	%	41	%	41	%	41	%
Non-Medicare - Episodic-based	8	%	7	%	8	%	6	%
Non-Medicare - Non-episodic based	12	%	12	%	12	%	13	%
Hospice:
Medicare	34	%	35	%	34	%	34	%
Non-Medicare	2	%	2	%	2	%	2	%
Personal Care	3	%	3	%	3	%	4	%
	100	%	100	%	100	%	100	%

Home Health Revenue Recognition

Medicare Revenue

Effective January 1, 2020, the Centers for Medicare and Medicaid Services ("CMS") implemented a revised case-mix adjustment methodology, the Patient-Driven Groupings Model ("PDGM"), to better align payment with patient care needs and ensure that clinically complex and ill beneficiaries have adequate access to home health care. PDGM uses 30-day periods of care rather than 60-day episodes of care as the unit of payment, eliminates the use of the number of therapy visits provided in determining payment and relies more heavily on clinical characteristics and other patient information.

Net service revenue is recorded based on the established Federal Medicare home health payment rate for a 30-day period of care. ASC 606 notes that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice. We have elected to apply the "right to invoice" practical expedient and therefore, our revenue recognition is based on the reimbursement we are entitled to for each 30-day payment period. We utilize our historical average length of stay for each 30-day period of care as the measure of progress towards the satisfaction of our performance obligation.

PDGM uses timing, admission source, functional impairment levels and principal and other diagnoses to case-mix adjust payments. The case-mix adjusted payment for a 30-day period of care is subject to additional adjustments based on certain variables, including, but not limited to (a) an outlier payment if our patient's care was unusually costly (capped at 10% of total reimbursement per provider number); (b) a low utilization payment adjustment (“LUPA”) if the number of visits provided was less than the established threshold, which ranges from two to six visits and varies for every case-mix group under PDGM; (c) a partial payment if a patient is transferred to another provider or from another provider before completing the 30-day period of care; and (d) the applicable geographic wage index. Payments for routine and non-routine supplies are included in the 30-day payment rate.

Medicare can also make various adjustments to payments received if we are unable to produce appropriate billing documentation or acceptable authorizations. We estimate the impact of such adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record this estimate during the period in which services are rendered to revenue with a corresponding reduction to patient accounts receivable.

Amounts due from Medicare include variable consideration for retroactive revenue adjustments due to settlements of audits and payment reviews. We determine our estimates for non-contractual revenue adjustments related to audits and payment reviews based on our historical experience and success rates in the claim appeals and adjudication process.

All Medicare contracts are required to have a signed plan of care which represents a single performance obligation, comprised of the delivery of a series of distinct services that are substantially similar and have a similar pattern of transfer to the customer. Accordingly, 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. 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.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Medicare home health benefit requires that beneficiaries be homebound (meaning that the beneficiary is unable to leave his/her home without a considerable and taxing effort), require intermittent skilled nursing, physical therapy or speech therapy services, and receive treatment under a plan of care established and periodically reviewed by a physician. In order to provide greater flexibility during the novel coronavirus pandemic ("COVID-19"), CMS relaxed the definition of homebound status through the duration of the public health emergency. During the pandemic, a beneficiary is considered homebound if they have been instructed by a physician not to leave their home because of a confirmed or suspected COVID-19 diagnosis or if the patient has a condition that makes them more susceptible to contracting COVID-19. Therefore, if a beneficiary is homebound due to COVID-19 and requires skilled services, the services will be covered under the Medicare home health benefit.

During 2020, 20% of reimbursement from each Medicare episode, referred to as a request for anticipated payment ("RAP"), was billed near the start of each 30-day period of care, and cash was typically received before all services were rendered. Any cash received from Medicare for a RAP for a 30-day period of care that exceeded the associated revenue earned was recorded to accrued expenses within our condensed consolidated balance sheets. CMS fully eliminated all upfront payments associated with RAPs effective January 1, 2021.

Non-Medicare Revenue

Episodic-based Revenue. We recognize revenue in a similar manner as we recognize Medicare revenue for amounts that are paid by other insurance carriers, including Medicare Advantage programs; however, these amounts can vary based upon the negotiated terms, the majority of which range from 95% to 100% of Medicare rates.

Non-episodic based Revenue. 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 our historical experience to reflect the estimated transaction price. We receive a minimal amount of our net service revenue from patients who are either self-insured or are obligated for an insurance co-payment.

Hospice Revenue Recognition

Hospice Medicare Revenue

Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the estimated payment rates. The estimated payment rates are predetermined daily or hourly rates for each of the four levels of care we deliver. The four levels of care are routine care, general inpatient care, continuous home care and respite care. Routine care accounted for 97% of our total Medicare hospice service revenue for the three and nine-month periods ended September 30, 2021 and September 30, 2020. There are two separate payment rates for routine care: payments for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, we may also receive a service intensity add-on (“SIA”). The SIA is based on visits made in the last seven days of life by a registered nurse or medical social worker for patients in a routine level of care.

The performance obligation is the delivery of hospice services to the patient, as determined by a physician, each day the patient is on hospice care.

We make adjustments to Medicare revenue for non-contractual revenue adjustments, which include our inability to obtain appropriate billing documentation or acceptable authorizations and other reasons unrelated to credit risk. We estimate the impact of these non-contractual revenue adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record it during the period services are rendered.

Additionally, our hospice service revenue is subject to certain limitations on payments from Medicare which are considered variable consideration. We are subject to an inpatient cap limit and an overall Medicare payment cap for each provider number. We monitor these caps on a provider-by-provider basis and estimate amounts due back to Medicare if we estimate a cap has been exceeded. We record these adjustments as a reduction to revenue and an increase in accrued expenses within our condensed consolidated balance sheets. Providers are required to self-report and pay their estimated cap liability by February 28th of the following year. As of September 30, 2021, we have recorded $8.6 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 2016 through September 30, 2021; $2.5 million of this balance was acquired with the AseraCare acquisition. As of December 31, 2020, we had recorded $9.3 million for estimated amounts due back to Medicare in accrued expenses for the Federal cap years ended October 31, 2014 through September 30, 2021.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Hospice Non-Medicare Revenue

Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to our established rates or estimated per day rates, as applicable. Contractual revenue adjustments are recorded for the difference between our standard rates and the contractual rates to be realized from patients, third-party payors and others for services provided and are deducted from gross revenue to determine our net service revenue. We also make non-contractual adjustments to non-Medicare revenue based on our historical experience to reflect the estimated transaction price.

Personal Care Revenue Recognition

Personal Care Revenue

We generate net service revenues by providing our services directly to patients based on authorized hours, visits or units determined by the relevant agency, at a rate that is either contractual or fixed by legislation. Net service revenue is recognized at the time services are rendered based on gross charges for the services provided, reduced by estimates for contractual and non-contractual revenue adjustments. We receive payment for providing such services from payors, including state and local governmental agencies, managed care organizations, commercial insurers and private consumers. Payors include the following elder service agencies: Aging Services Access Points ("ASAPs"), Senior Care Options ("SCOs"), Program of All-Inclusive Care for the Elderly ("PACE") and the Veterans Administration ("VA").

High Acuity Care Revenue Recognition

High Acuity Care Revenue

Our revenues are derived from contracts with (1) health insurance plans for the coordination and provision of home recovery care services to patients who are enrolled members in those insurance plans and (2) health system partners for the coordination and provision of home recovery care services to patients who are discharged early from a health system facility to complete their inpatient stay at home.

Our health insurance plan contracts provide for fixed payment rates for a 30-day or 60-day episode of care indexed to assigned patient diagnoses in return for our obligation to assume risk for the coordination and payment of required medical services necessary to treat the medical condition for which the patient was diagnosed in a home-based setting. Our performance obligation is the coordination and provision of patient care in accordance with physicians’ orders over either a 30-day or 60-day episode of care. The majority of our care coordination services and direct patient care is provided in the first five to seven days of the episode period (the "acute phase"). Monitoring services and follow-up direct patient care, as deemed necessary by the treating physician, is provided throughout the remainder of the episode. Since the majority of our services are provided during the acute phase, we recognize net service revenues over the acute phase based on gross charges for the service provided per the applicable managed care contract rates, reduced by estimates for revenue adjustments.

Our contracts with health system partners provide for reimbursement on a per diem basis at the contracted rate for each day during the remainder of an inpatient acute stay serviced at the patient’s home. The performance obligation is the coordination and provision of required medical services, as determined by the treating physician, for each day the patient receives inpatient-equivalent care at home. As such, revenues are recognized as services are administered and as our performance obligations are satisfied on a per diem basis, reduced by estimates for revenue adjustments.

We recognize adjustments to revenue during the period in which changes to estimates of assigned patient diagnoses or episode terminations become known, in accordance with the applicable managed care contracts. For certain health insurance plans, revenue is reduced by amounts owed by enrollees to healthcare providers under deductible, coinsurance or copay provisions of health insurance plan policies, since those amounts are repaid to the health insurance plans by us as part of a retrospective reconciliation process.

Government Grants

In the absence of specific guidance to account for government grants under U.S. GAAP, we have decided to account for government grants in accordance with International Accounting Standard ("IAS") 20, Accounting for Government Grants and Disclosure of Government Assistance, and as such, we recognize grant income on a systematic basis in line with the recognition of expenses or the loss of revenues for which the grants are intended to compensate. We recognize grants once both of the following conditions are met: (1) we are able to comply with the relevant conditions of the grant and (2) the grant will be

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

received. See Note 3 - Novel Coronavirus Pandemic ("COVID-19") for additional information on our accounting for government funds received under the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") and the Mass Home Care ASAP COVID-19 Provider Sustainability Program.

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. Our cash balance as of September 30, 2021 includes $58.5 million associated with unutilized CARES Act Provider Relief Fund ("PRF") funds, which were repaid to the U.S. Department of Health and Human Services ("HHS") in October 2021. Restricted cash includes cash that is not available for ordinary business use. As of September 30, 2021, we had $3.8 million of restricted cash that was placed into escrow accounts related to the indemnity and closing payment adjustment provisions within the purchase agreements for various acquisitions.

The following table summarizes the balances related to our cash, cash equivalents and restricted cash (amounts in millions):


	As of September 30, 2021		As of December 31, 2020
Cash and cash equivalents	$	124.4	$	81.8
Restricted cash	3.8		1.5
Cash, cash equivalents and restricted cash	$	128.2	$	83.3

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. The Company's non-Medicare third-party payor base is comprised of a diverse group of payors that are geographically dispersed across the country. As of September 30, 2021, there is no single payor, other than Medicare, that accounts for 10% of our total outstanding patient receivables. Thus, we believe there are no other significant concentrations of receivables that would subject us to any significant credit risk in the collection of our patient accounts receivable. We write off accounts on a monthly basis once we have exhausted our collection efforts and deem an account to be uncollectible. We believe the collectability risk associated with our Medicare accounts, which represent 65% and 64% of our patient accounts receivable at September 30, 2021 and December 31, 2020, 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. Prior to January 1, 2021, we submitted a RAP for 20% of our estimated payment for each 30-day period of care. The RAP received was then deducted from our final payment. Effective January 1, 2021, CMS eliminated all upfront payments associated with RAPs.

Medicare Hospice

For our hospice patients, our pre-billing process includes verifying that we are eligible for payment from Medicare for the services that we provide to our patients. Our Medicare billing begins with a process to ensure that our billings are accurate through the utilization of an electronic Medicare claim review. We bill Medicare on a monthly basis for the services provided to the patient.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Non-Medicare Home Health, Hospice, Personal Care and High Acuity Care

For our non-Medicare patients, our pre-billing process primarily begins with verifying a patient’s eligibility for services with the applicable payor. Once the patient has been confirmed for eligibility, we will provide services to the patient and bill the applicable payor. Our review and evaluation of non-Medicare accounts receivable includes a detailed review of outstanding balances and special consideration to concentrations of receivables from particular payors or groups of payors with similar characteristics that would subject us to any significant credit risk.

Business Combinations

We account for acquisitions using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Acquisitions are accounted for as purchases and are included in our condensed consolidated financial statements from their respective acquisition dates. Assets acquired and liabilities assumed, if any, are measured at fair value on the acquisition date using the appropriate valuation method. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets. In determining the fair value of identifiable intangible assets, we use various valuation techniques including discounted cash flow analysis, the income approach, the cost approach and the market approach. These valuation methods require us to make estimates and assumptions surrounding projected revenues and costs, growth rates and discount rates.

Fair Value of Financial Instruments

The following details our financial instruments where the carrying value and the fair value differ (amounts in millions):


	Fair Value at Reporting Date Using
Financial Instrument	Carrying Value as of September 30, 2021		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Long-term obligations	$	450.8	$	—	$	468.5	$	—

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.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 the weighted-average shares outstanding, which are used to calculate our basic and diluted net income attributable to Amedisys, Inc. common stockholders (amounts in thousands):


	For the Three- Month Periods Ended September 30,		For the Nine- Month Periods Ended September 30,
	2021	2020	2021	2020
Weighted average number of shares outstanding - basic	32,607	32,662	32,658	32,469
Effect of dilutive securities:
Stock options	113	336	135	506
Non-vested stock and stock units	179	262	228	292
Weighted average number of shares outstanding - diluted	32,899	33,260	33,021	33,267
Anti-dilutive securities	141	36	82	31

3. NOVEL CORONAVIRUS PANDEMIC ("COVID-19")

In March 2020, the World Health Organization declared COVID-19 a pandemic. As a healthcare at home company, we have been and will continue to be impacted by the effects of COVID-19; however, we remain committed to carrying out our mission of caring for our patients. We will continue to closely monitor the impact of COVID-19 on all aspects of our business, including the impacts to our employees, patients and suppliers; however, at this time, we are unable to estimate the ultimate impact the pandemic will have on our consolidated financial condition, results of operations or cash flows.

On March 27, 2020, the CARES Act was signed into legislation. The CARES Act provided for $175 billion to healthcare providers, including hospitals on the front lines of the COVID-19 pandemic. Of this total allocated amount, $30 billion was distributed immediately to providers based on their proportionate share of Medicare fee-for-service reimbursements in 2019. Healthcare providers were required to sign an attestation confirming receipt of the Provider Relief Fund ("PRF") funds and agree to the terms and conditions of payment. Our home health and hospice segments received approximately $100 million from the first $30 billion of funds distributed to healthcare providers in April 2020, which is inclusive of $2 million related to our joint venture care centers (equity method investments). We also acquired approximately $6 million of PRF funds in connection with the acquisition of AseraCare. Under the terms and conditions for receipt of the payment, we were allowed to use the funds to cover lost revenues and health care costs related to COVID-19 through June 30, 2021, and we were required to properly and fully document the use of these funds in reports to the U.S. Department of Health and Human Services ("HHS"). All required reporting was completed during the three-month period ended September 30, 2021.

For our wholly-owned subsidiaries, we utilized PRF funds to the extent we had qualifying COVID-19 expenses; we did not use PRF funds to cover lost revenues resulting from COVID-19. The grant income associated with the COVID-19 expenses incurred through June 30, 2021 is reflected in other operating income within our condensed consolidated statements of operations.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

We did not fully utilize the PRF funds received; therefore, we have recorded a liability for the amount to be repaid which totaled $59 million (including interest) at September 30, 2021 and $60 million at December 31, 2020 (see the Provider Relief Fund Advance account in current liabilities within our condensed consolidated balance sheets). All unutilized funds were repaid in October 2021. In summary, the total funds that we received from the CARES Act PRF have been accounted for as follows as of September 30, 2021 (amounts in millions):


	Amount
Funds utilized through June 30, 2021 by consolidated entities	$	46.6
Funds to be repaid to the government by consolidated entities (excludes $0.2 million of interest to be repaid)	58.3
Funds utilized through June 30, 2021 by unconsolidated joint ventures	1.3
Funds to be repaid to the government by unconsolidated joint ventures	0.6
	$	106.8

The CARES Act also provided for the temporary suspension of the automatic 2% reduction of Medicare claim reimbursements ("sequestration") for the period May 1, 2020 through December 31, 2020. In December 2020, Congress passed additional COVID-19 relief legislation as part of the Consolidated Appropriations Act, 2021. This legislation extended the suspension of sequestration through March 31, 2021. In April 2021, Congress passed H.R. 1868, which among other items, provided for an additional extension of the temporary suspension of sequestration through December 31, 2021. We estimate that the suspension of sequestration will increase our 2021 net service revenue by approximately $36 million.

Additionally, the CARES Act provided for the deferral of the employer share of social security tax (6.2%), effective for payments due after the enactment date through December 31, 2020. Fifty percent of the deferred payroll taxes are due on December 31, 2021 with the remaining amounts due on December 31, 2022. During 2020, we deferred approximately $55 million of social security tax; approximately $28 million is reflected in each of payroll and employee benefits and other long-term obligations within our condensed consolidated balance sheets.

Our personal care segment did not receive funds under the CARES Act; however, it did receive funds totaling $1 million from the Mass Home Care ASAP COVID-19 Provider Sustainability Program, which were used during 2020 to cover costs related to COVID-19.

4. ACQUISITIONS

We complete acquisitions from time to time in order to pursue our strategy of increasing our market presence by expanding our service base and enhancing our position in certain geographic areas as a leading provider of home health, hospice, personal care and high acuity care services. The purchase price paid for acquisitions is negotiated through arm’s length transactions, with consideration based on our analysis of, among other things, comparable acquisitions and expected cash flows. Acquisitions are accounted for as purchases and are included in our condensed consolidated financial statements from their respective acquisition dates. Goodwill generated from acquisitions is recognized for the excess of the purchase price over tangible and identifiable intangible assets because of the expected contributions of the acquisitions to our overall corporate strategy. We typically engage outside appraisal firms to assist in the fair value determination of identifiable intangible assets for significant acquisitions. The preliminary purchase price allocation is adjusted, as necessary, up to one year after the acquisition closing date if management obtains more information regarding asset valuations and liabilities assumed.

2021 Acquisitions

On May 1, 2021, we acquired the regulatory assets of a home health provider in Randolph County, North Carolina for a purchase price of $2.5 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $2.4 million and other intangibles (certificate of need) of $0.1 million in connection with the acquisition.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On July 1, 2021, we acquired Visiting Nurse Association ("VNA"), a home health and hospice provider with locations in Nebraska and Iowa for a purchase price of $20.1 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $19.4 million and other intangibles (licenses) of $0.7 million in connection with the acquisition.

On July 12, 2021, we acquired the regulatory assets of a home health provider in New York for a purchase price of $1.5 million. The purchase price was paid with cash on hand on the date of the transaction. Based on the Company's preliminary valuation, we recorded goodwill of $1.4 million and other intangibles (certificate of need) of $0.1 million in connection with the acquisition.

On August 1, 2021, we acquired Contessa, a leader in hospital-at-home and skilled nursing facility ("SNF") at-home services for an estimated purchase price of $240.7 million, net of cash acquired. With the addition of Contessa’s risk-based model and claims analytics capabilities, we will be able to bring the essential elements of inpatient hospital and SNF care to patients’ homes, allowing us to become a risk-bearing, home-based care delivery organization, expanding well beyond traditional home health and hospice. Contessa operates as a wholly-owned division of Amedisys and is reported as a separate operating segment. Under the purchase agreement, the purchase price is subject to a net working capital adjustment, whereby the purchase price will be adjusted to the extent the actual net working capital of Contessa as of the closing differs from the required net working capital under the purchase agreement.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company is in the process of reviewing the fair value of the assets acquired and liabilities assumed. Based on the Company's preliminary valuation, the total estimated consideration of $240.7 million has been allocated to assets acquired and liabilities assumed as of the acquisition date as follows (amounts in millions):


	Amount
ASSETS
Patient accounts receivable	$	1.5
Prepaid expenses	0.3
Other current assets	0.1
Property and equipment	0.3
Operating lease right of use assets	0.8
Intangible assets	55.2
Other assets	3.3
Total assets acquired	$	61.5
LIABILITIES AND EQUITY
Accounts payable	$	(0.1)
Payroll and employee benefits	(0.6)
Accrued expenses	(3.4)
Operating lease liabilities	(0.8)
Deferred income taxes	(3.1)
Current portion of long-term obligations	(0.9)
Other long-term obligations	(0.2)
Total liabilities assumed	(9.1)
Noncontrolling interests	(42.1)
Total equity assumed	(42.1)
Total liabilities and equity assumed	$	(51.2)
Net identifiable assets acquired	$	10.3
Goodwill	230.4
Total consideration	$	240.7

Intangible assets acquired include acquired names ($28.6 million), technology ($19.9 million) and non-compete agreements ($6.7 million). The non-compete agreements will be amortized over a weighted-average period of 2.0 years and the technology will be amortized over a weighted-average period of 7.0 years. The preliminary fair value of noncontrolling interest was determined using a discounted cash flow analysis and an income approach.

Contessa contributed $1.5 million in net service revenue and an operating loss of $3.8 million (inclusive of technology intangibles amortization totaling $0.5 million) during the three-month period ended September 30, 2021.

2020 Acquisitions

On June 1, 2020, we acquired Homecare Preferred Choice, Inc., doing business as AseraCare Hospice ("AseraCare"), a national hospice care provider with 44 locations, for an estimated purchase price of $230.4 million, net of cash acquired and inclusive of a $32 million tax asset. The closing payment for the purchase price included estimates for cash, working capital and various other items. Under the purchase agreement, the purchase price was subject to a closing payment adjustment for any differences between estimated amounts included in the closing payment and actual amounts at close, not to exceed $1.0 million. The closing payment adjustment, which was finalized in October 2020, reduced the purchase price by $0.8 million, from $230.4 million to $229.6 million.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company finalized its valuation of the assets acquired and liabilities assumed during the three-month period ended June 30, 2021. The total consideration of $229.6 million has been allocated to assets acquired and liabilities assumed as of the acquisition date as follows (amounts in millions):


	Amount
ASSETS
Patient accounts receivable	$	15.3
Prepaid expenses	0.7
Property and equipment	0.6
Operating lease right of use assets	5.9
Intangible assets	24.3
Other assets	0.1
Total assets acquired	$	46.9
LIABILITIES
Accounts payable	$	(6.3)
Payroll and employee benefits	(5.9)
Accrued expenses	(11.9)
Operating lease liabilities	(5.4)
Total liabilities assumed	$	(29.5)
Net identifiable assets acquired	$	17.4
Goodwill	212.2
Total consideration	$	229.6

Intangible assets acquired include licenses ($8.7 million), certificates of need ($0.7 million), acquired names ($5.7 million) and non-compete agreements ($9.2 million). The acquired names will be amortized over a weighted-average period of 2.0 years, and the non-compete agreements will be amortized over a weighted-average period of 1.7 years.

We expect the entire amount of goodwill recorded for this acquisition to be deductible for income tax purposes over approximately 15 years.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

5. LONG-TERM OBLIGATIONS

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


	September 30, 2021		December 31, 2020
$450.0 million Term Loan; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus Applicable Rate (1.6% at September 30, 2021); due July 30, 2026	450.0		164.1
$550.0 million Revolving Credit Facility; interest only payments; interest rate at Base Rate plus Applicable Rate or Eurodollar Rate plus Applicable Rate; due July 30, 2026	—		51.0
Promissory notes	0.8		—
Finance leases	2.0		2.6
Principal amount of long-term obligations	452.8		217.7
Deferred debt issuance costs	(4.8)		(2.7)
	448.0		215.0
Current portion of long-term obligations	(13.2)		(10.5)
Total	$	434.8	$	204.5

First Amendment to Amended and Restated Credit Agreement

On February 4, 2019, we entered into the First Amendment to our Credit Agreement (as amended by the First Amendment, the "Amended Credit Agreement"). The Amended Credit Agreement provided for a senior secured credit facility in an initial aggregate principal amount of up to $725.0 million, which included a $550.0 million Revolving Credit Facility 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.

Second Amendment to Amended and Restated Credit Agreement

On July 30, 2021, we entered into the Second Amendment to our Credit Agreement (as amended by the Second Amendment, the "Second Amended Credit Agreement"). The Second Amended Credit Agreement provides for a senior secured credit facility in an initial aggregate principal amount of up to $1.0 billion, which includes a $550.0 million Revolving Credit Facility and a term loan facility with a principal amount of up to $450.0 million (the "Amended Term Loan Facility" and collectively with the Revolving Credit Facility, the "Amended Credit Facility").

Net proceeds from the $450.0 million Amended Term Loan Facility were used to fund 100% of the Contessa acquisition.

The loans issued under the Amended Credit Facility bear interest on a per annum basis, at our election, at either: (i) the Base Rate plus the Applicable Rate or (ii) the 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, 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 September 30, 2021, 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 Second Amended Credit Agreement, as presented in the table below.


Pricing Tier	Consolidated Leverage Ratio	Commitment Fee	Letter of Credit Fee	Eurodollar Rate Loans and Daily Floating LIBOR Rate Loans	Base Rate Loans
I	> 3.00 to 1.0	0.30%	1.75%	2.00%	1.00%
II	< 3.00 to 1.0 but > 2.00 to 1.0	0.25%	1.50%	1.75%	0.75%
III	< 2.00 to 1.0 but > 0.75 to 1.0	0.20%	1.25%	1.50%	0.50%
IV	< 0.75 to 1.0	0.15%	1.00%	1.25%	0.25%

The final maturity date of the Amended Credit Facility is July 30, 2026. The Revolving Credit Facility will terminate and be due and payable as of the final maturity date. The Amended Term Loan Facility, however, is subject to quarterly amortization

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

of principal in the amount of (i) 0.625% for the period commencing on July 30, 2021 and ending on September 30, 2023, and (ii) 1.250% for the period commencing on October 1, 2023 and ending on July 30, 2026. The remaining balance of the Amended Term Loan Facility must be paid upon the final maturity date. In addition to the scheduled amortization of the Amended Term Loan Facility, and subject to customary exceptions and reinvestment rights, we are required to prepay the Amended Term Loan Facility first and the Revolving Credit Facility second with 100% of all net cash proceeds received by any loan party or any subsidiary thereof in connection with (a) any asset sale or disposition where such loan party receives net cash proceeds in excess of $5 million or (b) any debt issuance that is not permitted under the Second Amended Credit Agreement.

The Second 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 Second Amended Credit Agreement, and (ii) a consolidated interest coverage ratio of EBITDA to cash interest charges, as defined in the Second Amended Credit Agreement. Each of these covenants is calculated over rolling four-quarter periods and also is subject to certain exceptions and baskets. The Second 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 Second Amended Credit Agreement. In connection with our entry into the Second Amended Credit Agreement, we recorded $2.8 million in deferred debt issuance costs as long-term obligations, less current portion within our condensed consolidated balance sheet during the three-month period ended September 30, 2021.

The Revolving Credit Facility is guaranteed by substantially all of our wholly-owned direct and indirect subsidiaries. The Second 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.

Our weighted average interest rate for borrowings under our $550.0 million Revolving Credit Facility was 2.9% and 1.9% for the three and nine-month periods ended September 30, 2021, respectively, and 1.8% and 2.2% for the three and nine-month periods ended September 30, 2020, respectively. Our weighted average interest rate for borrowings under our $450.0 million Amended Term Loan Facility was 1.6% and 1.5% for the three and nine-month periods ended September 30, 2021, respectively, and 1.7% and 2.3% for the three and nine-month periods ended September 30, 2020, respectively.

As of September 30, 2021, our consolidated leverage ratio was 1.2, our consolidated interest coverage ratio was 27.5 and we are in compliance with our covenants under the Second 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 September 30, 2021, our availability under our $550.0 million Revolving Credit Facility was $519.9 million as we have no outstanding borrowings and $30.1 million outstanding in letters of credit.

Joinder Agreements

In connection with the Compassionate Care Hospice ("CCH") acquisition, we entered into a Joinder Agreement, dated as of February 4, 2019 (the “CCH Joinder”), pursuant to which CCH and its subsidiaries were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement (now the Second Amended Credit Agreement), the Amended and Restated Security Agreement, dated as of June 29, 2018 (the “Amended and Restated Security Agreement”), and the Amended and Restated Pledge Agreement, dated as of June 29, 2018 (the “Amended and Restated Pledge Agreement”). In connection with the AseraCare acquisition, we entered into a Joinder Agreement, dated as of June 12, 2020, pursuant to which the AseraCare entities were made parties to, and became subject to the terms and conditions of, the Amended Credit Agreement (now the Second Amended Credit Agreement), the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement (the “AseraCare Joinder"). In connection with the Contessa acquisition and the Second Amendment, we entered into a Joinder Agreement, dated as of September 3, 2021, pursuant to which Contessa and its subsidiaries and Asana Hospice, which we acquired on January 1, 2020, and its subsidiaries were made parties to, and became subject to the terms and conditions of, the Second Amended Credit Agreement, the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement (the “Contessa and Asana Joinder,” and together with the CCH Joinder and the AseraCare Joinder, the “Joinders”).

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pursuant to the Joinders, the Amended and Restated Security Agreement and the Amended and Restated Pledge Agreement, CCH and its subsidiaries, the AseraCare entities, Contessa and its subsidiaries and Asana Hospice and its subsidiaries granted in favor of the Administrative Agent a first lien security interest in substantially all of their personal property assets and pledged to the Administrative Agent each of their respective subsidiaries' issued and outstanding equity interests. CCH and its subsidiaries, the AseraCare entities, Contessa and its subsidiaries and Asana Hospice and its subsidiaries also guaranteed our obligations, whether now existing or arising after the respective effective dates of the Joinders, under the Second Amended Credit Agreement pursuant to the terms of the Joinders and the Second Amended Credit Agreement.

6. COMMITMENTS AND CONTINGENCIES

Legal Proceedings - Ongoing

We are involved in legal actions in the normal course of business, some of which seek monetary damages, including claims for punitive damages. Based on information available to us as of the date of this filing, we do not believe that these normal course actions, when finally concluded and determined, will have a material impact on our consolidated financial condition, results of operations or cash flows.

Legal fees related to all legal matters are expensed as incurred.

Legal Proceedings - Completed

Subpoena Duces Tecum and Civil Investigative Demands Issued by the U.S. Department of Justice

On May 7, 2021, the U.S. Department of Justice notified the Company that they were closing their investigation into the below-referenced Subpoena Duces Tecum ("Subpoena") and civil investigative demands ("CIDs"). As of March 31, 2021, we had recorded a total of $6.5 million to accrued expenses in our condensed consolidated balance sheets related to these matters. During the three-month period ended June 30, 2021, we reversed our accrual related to these matters.

On May 21, 2015, we received a Subpoena issued by the U.S. Department of Justice. The Subpoena requested the delivery of information regarding 53 identified hospice patients to the United States Attorney’s Office for the District of Massachusetts. It also requested the delivery of documents relating to our hospice clinical and business operations and related compliance activities. The Subpoena generally covered the period from January 1, 2011 through May 21, 2015.

On November 3, 2015, we received a CID issued by the U.S. Department of Justice pursuant to the federal False Claims Act relating to claims submitted to Medicare and/or Medicaid for hospice services provided through designated facilities in the Morgantown, West Virginia area. The CID requested 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 covered the period from January 1, 2009 through August 31, 2015.

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 requested 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 covered the period from January 1, 2011 through June 20, 2016.

Third Party Audits - Ongoing

From time to time, in the ordinary course of business, we are subject to audits under various governmental programs in which third party firms engaged by CMS, including Recovery Audit Contractors (“RACs”), Zone Program Integrity Contractors (“ZPICs”), Uniform Program Integrity Contractors (“UPICs”), Program Safeguard Contractors (“PSCs”), Medicaid Integrity Contractors (“MICs”), Supplemental Medical Review Contractors (“SMRCs”) and the Office of Inspector General (“OIG”), conduct extensive reviews of claims data to identify potential improper payments. We cannot predict the ultimate outcome of any regulatory reviews or other governmental audits and investigations.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 September 30, 2021, 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. This amount is recorded as an indemnity receivable within other assets in our condensed consolidated balance sheets.

In July 2016, the Company received a request for medical records from SafeGuard Services, L.L.C (“SafeGuard”), a ZPIC, related to services provided by some of the care centers that the Company acquired from Infinity Home Care, L.L.C. The review period 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.

As of September 30, 2021, 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 condensed consolidated balance sheets. The net of these two amounts, $6.5 million, was recorded as a reduction in net service revenue in our condensed consolidated statements of operations during 2017. As of September 30, 2021, $1.5 million of receivables have been impacted by this payment suspension.

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

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.

7. SEGMENT INFORMATION

Our operations involve servicing patients through our four reportable business segments: home health, hospice, personal care and high acuity care. Our home health segment delivers a wide range of services in the homes of individuals who may be recovering from surgery, have a chronic disability or terminal illness or need assistance with completing important personal tasks. Our hospice segment provides palliative care and comfort to terminally ill patients and their families. Our personal care segment provides patients with assistance with the essential activities of daily living. Our high acuity care segment, which was established with the acquisition of Contessa during the three-month period ended September 30, 2021, delivers the essential elements of inpatient hospital and skilled nursing facility ("SNF") care to patients in their homes. The “other” column in the following tables consists of costs relating to executive management and administrative support functions, primarily information services, accounting, finance, billing and collections, legal, compliance, risk management, procurement, marketing, clinical administration, training, human resources and administration.

Management evaluates performance and allocates resources based on the operating income of the reportable segments, which includes an allocation of corporate expenses directly attributable to the specific segment and includes revenues and all other costs directly attributable to the specific segment. Segment assets are not reviewed by the company’s chief operating decision maker and therefore are not disclosed below (amounts in millions).

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


	For the Three-Month Period Ended September 30, 2021
	Home Health		Hospice		Personal Care		High Acuity Care		Other		Total
Net service revenue	$	338.6	$	197.5	$	15.9	$	1.5	$	—	$	553.5
Other operating income	—		—		—		—		—		—
Cost of service, excluding depreciation and amortization	190.1		107.6		11.7		0.9		—		310.3
General and administrative expenses	82.4		49.5		2.6		3.9		40.5		178.9
Depreciation and amortization	1.1		0.7		0.1		0.5		5.1		7.5
Operating expenses	273.6		157.8		14.4		5.3		45.6		496.7
Operating income (loss)	$	65.0	$	39.7	$	1.5	$	(3.8)	$	(45.6)	$	56.8

	For the Three-Month Period Ended September 30, 2020
	Home Health		Hospice		Personal Care		High Acuity Care		Other		Total
Net service revenue	$	326.0	$	199.7	$	18.4	$	—	$	—	$	544.1
Other operating income	2.6		1.7		0.5		—		—		4.8
Cost of service, excluding depreciation and amortization	180.0		104.1		13.5		—		—		297.6
General and administrative expenses	78.8		47.8		3.2		—		49.9		179.7
Depreciation and amortization	1.0		0.6		—		—		6.7		8.3
Operating expenses	259.8		152.5		16.7		—		56.6		485.6
Operating income (loss)	$	68.8	$	48.9	$	2.2	$	—	$	(56.6)	$	63.3

	For the Nine-Month Period Ended September 30, 2021
	Home Health		Hospice		Personal Care		High Acuity Care		Other		Total
Net service revenue	$	1,016.5	$	586.9	$	49.9	$	1.5	$	—	$	1,654.8
Other operating income	7.3		6.0		—		—		—		13.3
Cost of service, excluding depreciation and amortization	563.5		314.4		37.4		0.9		—		916.2
General and administrative expenses	243.8		144.4		8.8		3.9		125.5		526.4
Depreciation and amortization	3.3		2.0		0.2		0.5		15.8		21.8
Operating expenses	810.6		460.8		46.4		5.3		141.3		1,464.4
Operating income (loss)	$	213.2	$	132.1	$	3.5	$	(3.8)	$	(141.3)	$	203.7

	For the Nine-Month Period Ended September 30, 2020
	Home Health		Hospice		Personal Care		High Acuity Care		Other		Total
Net service revenue	$	919.8	$	546.2	$	54.8	$	—	$	—	$	1,520.8
Other operating income	17.7		8.9		1.0		—		—		27.6
Cost of service, excluding depreciation and amortization	543.8		293.1		41.7		—		—		878.6
General and administrative expenses	226.7		127.4		9.5		—		129.2		492.8
Depreciation and amortization	2.9		1.7		0.1		—		15.2		19.9
Operating expenses	773.4		422.2		51.3		—		144.4		1,391.3
Operating income (loss)	$	164.1	$	132.9	$	4.5	$	—	$	(144.4)	$	157.1

AMEDISYS, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

8. CAPITAL STOCK AND SHARE-BASED COMPENSATION

On August 10, 2020, Paul B. Kusserow, President, Chief Executive Officer and Chairman of the Board of Amedisys, exercised 500,000 stock options previously awarded to him under our 2008 Omnibus Incentive Compensation Plan. In connection with the exercise, Mr. Kusserow surrendered 231,683 shares of common stock to us to satisfy tax withholding and strike price obligations and elected to hold the net 268,317 shares issued to him. The surrendered shares are classified as treasury shares. This transaction resulted in a cash outflow of $40.4 million, reflected within financing activities in our condensed consolidated statement of cashflows, related to the remittance of tax withholding obligations on Mr. Kusserow's behalf. In addition, Mr. Kusserow's stock option exercise resulted in a $24.0 million income tax benefit that was recorded in our condensed consolidated statement of operations during the three-month period ended September 30, 2020. We recognize compensation expense for stock option awards on a straight-line basis over the requisite service period for each separately vesting portion of the award in accordance with ASC 718, Compensation: Stock Compensation; however, the income tax deduction related to stock options is not recognized until the stock option exercise date. As a result, for awards that are expected to result in a tax deduction, a deferred tax asset is created as the entity recognizes compensation expense for GAAP purposes. If the tax deduction exceeds the cumulative GAAP compensation expense for the award, the tax benefit associated with any excess deduction is recognized as an income tax benefit in the statement of operations.

9. SHARE REPURCHASES

On December 23, 2020, 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 December 31, 2021 (the "Existing Share Repurchase Program").

Under the terms of the Existing Share Repurchase program, we are allowed to repurchase shares from time to time through open market purchases, unsolicited or solicited privately negotiated transactions, an accelerated stock repurchase program, and/or a trading plan in compliance with Exchange Act Rule 10b5-1. The timing and the amount of the repurchases will be determined by management based on a number of factors, including but not limited to share price, trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors.

Pursuant to this program, we repurchased 54,609 shares of our common stock at a weighted average price of $197.84 per share and a total cost of approximately $11 million during the three-month period ended September 30, 2021 and 351,714 shares of our common stock at a weighted average price of $241.30 per share and a total cost of approximately $85 million during the nine-month period ended September 30, 2021. The repurchased shares are classified as treasury shares.

On August 2, 2021, our Board of Directors authorized a share repurchase program, under which we may repurchase up to $100 million of our outstanding common stock through December 31, 2022, to commence upon the completion of the Company's Existing Share Repurchase Program (the "New Share Repurchase Program").

Under the terms of the New Share Repurchase Program, we are allowed to repurchase shares from time to time through open market purchases, unsolicited or solicited privately negotiated transactions, an accelerated stock repurchase program, and/or a trading plan in compliance with Exchange Act Rule 10b5-1. The timing and the amount of the repurchases will be determined by management based on a number of factors, including but not limited to share price, trading volume and general market conditions, as well as on working capital requirements, general business conditions and other factors.

10. RELATED PARTY TRANSACTIONS

We have an investment in Medalogix, a healthcare predictive data and analytics company, which is accounted for under the equity method. We incurred costs of approximately $1.4 million and $4.1 million during the three and nine-month periods ended September 30, 2021, respectively, and approximately $1.1 million and $2.2 million during the three and nine-month periods ended September 30, 2020, respectively, in connection with our usage of Medalogix's analytics platforms. We believe that the terms of these transactions are consistent with those negotiated at arm's length.

11. SUBSEQUENT EVENTS

On October 18, 2021, we acquired the regulatory assets of a home health provider in North Carolina for a purchase price of $4.5 million.

ITEM 2. 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 the three and nine-month periods ended September 30, 2021. This discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included herein, and the consolidated financial statements and notes and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 (the “Form 10-K”), which are incorporated herein by this reference. Historical results that appear in the condensed consolidated financial statements should not be interpreted as being indicative of future operations.

Unless otherwise provided, “Amedisys,” “we,” “our,” and the “Company” refer to Amedisys, Inc. and our consolidated subsidiaries.

Overview

We are a provider of high-quality in-home healthcare and related services to the chronic, co-morbid, aging American population, with approximately 75% of our net service revenue derived from Medicare for the three and nine-month periods ended September 30, 2021 and approximately 76% and 75% of our net service revenue derived from Medicare for the three and nine-month periods ended September 30, 2020, respectively.

Our operations involve servicing patients through our four reportable business segments: home health, hospice, personal care and high acuity care. Our home health segment delivers a wide range of services in the homes of individuals who may be recovering from 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 with assistance with the essential activities of daily living. Our high acuity care segment, which was established with the acquisition of Contessa Health ("Contessa") during the three-month period ended September 30, 2021, delivers the essential elements of inpatient hospital and skilled nursing facility ("SNF") care to patients in their homes. As of September 30, 2021, we owned and operated 328 Medicare-certified home health care centers, 177 Medicare-certified hospice care centers, 14 personal-care care centers and 8 high acuity care 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	High Acuity Care
As of December 31, 2020	320	180	14	—
Acquisitions/Startups/Denovos	8	1	—	8
Closed/Consolidated	—	(4)	—	—
As of September 30, 2021	328	177	14	8

Recent Developments

Governmental Inquiries and Investigations and Other Litigation

See Note 6 – Commitments and Contingencies to our condensed consolidated financial statements for a discussion of and updates regarding legal proceedings and investigations we are involved in. No assurances can be given as to the timing or outcome of these items.

Payment

Hospice

On July 31, 2020, the Centers for Medicare and Medicaid Services ("CMS") issued a final rule to update hospice payment rates and the wage index for fiscal year 2021, effective for services provided beginning October 1, 2020. CMS estimated hospices serving Medicare beneficiaries would see a 2.4% increase in payments. This increase was the result of a 2.4% market basket adjustment as required under the Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act (collectively, "PPACA"). The rule also changed the hospice wage index by adopting the most recent Office of Management and Budget statistical area delineations with a five percent cap on wage index decreases. Finally, CMS increased the aggregate cap amount by 2.4% to $30,684. Based on our analysis of the final rule, we estimated that our impact would be in line with the 2.4% increase.

On July 29, 2021, CMS issued the final rule to update hospice payment rates and the wage index for fiscal year 2022, effective for services provided beginning October 1, 2021. CMS estimates hospices serving Medicare beneficiaries will see a 2.0% increase in payments. This increase is the result of a 2.7% market basket adjustment as required under PPACA less a 0.7% productivity adjustment. Additionally, CMS increased the aggregate cap amount by 2.0% to $31,298. The final rule also rebases the labor shares for all four levels of care, includes updates to the hospice conditions of participation ("COPs"), which make permanent certain flexibilities allowed during the COVID-19 public health emergency, and finalizes changes to the Hospice Quality Reporting Program. Based on our analysis of the final rule, we expect our impact to be in line with the 2.0% increase.

Home Health

On October 29, 2020, CMS issued the Home Health Final Rule for Medicare home health providers for calendar year 2021. CMS estimated that the final rule would result in a 1.9% increase in payments to home health providers. The increase was the result of a 2.0% market basket adjustment reduced by 0.1% for the rural add-on. Based on our analysis of the final rule, we estimated that our impact would be in line with the 1.9% increase. Additionally, CMS made permanent the telehealth flexibilities that were announced in the Interim Final Rule (Emergency Rule) for COVID-19 in March 2020. These flexibilities allow home health agencies to provide certain care via telehealth if it is clinically appropriate and included in the plan of care; however, these visits still do not count as visits for purposes of patient eligibility or payment.

On November 2, 2021, CMS issued the Home Health Final Rule for Medicare home health providers for calendar year 2022. CMS estimates that the final rule will result in a 3.2% increase in payments to home health providers. This increase is the result of a 2.6% payment update (3.1% market basket adjustment less a 0.5% productivity adjustment) plus a 0.7% fixed-dollar loss ratio adjustment, reduced by 0.1% for the rural add-on. The proposed rule also provides for the expansion of the Home Health Value-Based Purchasing ("HHVBP") model to all 50 states beginning January 1, 2023 with calendar year 2023 being the first performance year and calendar year 2025 being the first payment year with a proposed maximum payment adjustment, up or down, of 5%. We are currently evaluating the final rule's impact on our home health operations.

Novel Coronavirus Pandemic ("COVID-19")

Our operations and financial performance continue to be impacted by COVID-19. The financial impacts of COVID-19 are discussed in further detail under "Results of Operations" below. While we currently believe that we have a reasonable view of operations, the uncertainty created by COVID-19 could alter our outlook of the pandemic's impact on our consolidated financial condition, results of operations or cash flows. The following factors could potentially impact our performance: the increase or decrease in the number of COVID-19 cases nationwide, the severity and impacts of new variants of the virus, uncertainty regarding vaccine utilization rates and efficacy, staffing shortages due to current and proposed federal, state and local vaccine mandates, the utilization of elective procedures, the return of patient confidence to enter a hospital or a doctor's office, the ability to have access to our patients in their homes and in facilities, supply chain disruption and our ability to find suitable alternative products at reasonable prices, cost normalization around personal protective equipment ("PPE") and any future or prolonged shelter-in-place orders and other federal, state and local requirements. Potential impacts of COVID-19 on our results include lower revenue; higher salary and wage expense related to quarantine pay, contract clinicians and training; and increased supply costs related to supply chain constraints, PPE and COVID-19 testing. The impacts to net service revenue may consist of the following:

•lower volumes due to interruption of the operations of our referral sources, patients' unwillingness to accept services and restrictions on access to facilities for hospice services;

•lower reimbursement due to missed visits resulting in an increase in low utilization payment adjustments ("LUPAs") and lost billing periods; and

•lower hospice average daily census due to a decline in our average length of stay.

On March 27, 2020, the bipartisan Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into legislation. The CARES Act provided for the following:

•$175 billion to healthcare providers, including hospitals on the front lines of the COVID-19 pandemic. Of this total allocated amount, $30 billion was distributed immediately to providers based on their proportionate share of Medicare fee-for-service reimbursements in 2019. Healthcare providers were required to sign an attestation confirming receipt of the Provider Relief Fund ("PRF") funds and agree to the terms and conditions of payment. Our home health and hospice segments received approximately $100 million from the first $30 billion of funds distributed to healthcare providers in April 2020, which is inclusive of $2 million related to our joint venture care centers (equity method investments). We also acquired approximately $6 million of PRF funds in connection with the acquisition of AseraCare. Consistent with the terms and conditions for receipt of the payment, we were allowed to use the funds to cover lost revenues and health care costs related to COVID-19 through June 30, 2021, and we were required to properly and fully document the use of these funds in reports to the U.S. Department of Health and Human Services ("HHS"). All required reporting was completed during the three-month period ended September 30, 2021.

For our wholly-owned subsidiaries, we only utilized PRF funds to the extent we had qualifying COVID-19 expenses; we did not use PRF funds to cover lost revenues resulting from COVID-19. The grant income associated with the COVID-19 expenses incurred is reflected in other operating income within our condensed consolidated statements of operations.

•The temporary suspension of the automatic 2% reduction of Medicare claim reimbursements ("sequestration") for the period May 1, 2020 through December 31, 2020. In December 2020, Congress passed additional COVID-19 relief legislation as part of the Consolidated Appropriations Act, 2021. This legislation extended the suspension of sequestration through March 31, 2021. In April 2021, Congress passed H.R. 1868, which among other items, provided for an additional extension of the temporary suspension of sequestration through December 31, 2021. We estimate that the suspension of sequestration will increase our 2021 net service revenue by approximately $36 million.

•The deferral of the employer share of social security tax (6.2%), effective for payments due after the enactment date through December 31, 2020. Fifty percent of the deferred payments is due on December 31, 2021 with the remaining amounts due on December 31, 2022. During 2020, we deferred approximately $55 million of social security tax; approximately $28 million is reflected in each of payroll and employee benefits and other long-term obligations within our condensed consolidated balance sheets.

•The temporary suspension of Medicare patient coverage criteria and documentation and care requirements and the expansion of providing home health and hospice care to patients via telehealth.

•The ability for non-physician practitioners to certify for home health, order home health services, establish and review plans of care and certify and recertify eligibility.

The well-being of our employees has been one of our top priorities during the pandemic. We have taken the following steps to support our employees: implemented paid leave during any required quarantine periods; awarded bonuses to our clinicians and caregivers who have seen patients during the pandemic; completed an early cash pay-out of employee paid-time-off; instituted work-from-home arrangements for our corporate and administrative support employees; allowed employees to temporarily suspend any 401(k) plan loan deductions and offered employees the option of making a withdrawal from their 401(k) plan for coronavirus-related distributions without incurring the additional 10% early withdrawal penalty; expanded access to telehealth services to all employees; provided access to COVID-19 self-test kits to all employees and created a COVID-19 Resource Center, available 24 hours a day, seven days a week for employees to access educational materials, safety documents, policies, clinical protocols and operational metrics.

The safety of our clinicians and patients has also been a focus, and as a result, we have made the following business changes: developed clinical protocols for COVID-19 testing, proper usage of PPE, caring for COVID-positive patients and maintaining safety measures in our care centers; researched each state's vaccination plan to develop a state by state protocol to work with local health departments and other health systems to obtain vaccine appointments for our clinical staff; implemented software enabling us to track staff that have been vaccinated; procured PPE and created a centralized distribution center for all critical PPE, allowing us to flex our supplies on a care center by care center basis, based on need and demand.

Results of Operations

Three-Month Period Ended September 30, 2021 Compared to the Three-Month Period Ended September 30, 2020

Consolidated

The following table summarizes our consolidated results of operations (amounts in millions):


	For the Three-Month Periods Ended September 30,
	2021			2020
Net service revenue	$	553.5		$	544.1
Other operating income	—			4.8
Cost of service, excluding depreciation and amortization	310.3			297.6
Gross margin, excluding depreciation and amortization	243.2			251.3
% of revenue	43.9		%	46.2		%
Other operating expenses	178.9			179.7
% of revenue	32.3		%	33.0		%
Depreciation and amortization	7.5			8.3
Operating income	56.8			63.3
Total other expense	(0.8)			(1.1)
Income tax (expense) benefit	(10.7)			10.2
Effective income tax rate	19.2		%	(16.4		%)
Net income	45.2			72.4
Net income attributable to noncontrolling interests	(0.2)			(0.4)
Net income attributable to Amedisys, Inc.	$	45.0		$	72.0

We continued to see the impact of COVID-19 in our third quarter 2021 operating results as the Delta variant resulted in an increase in clinician quarantines, testing and our hospice discharge rate. On a consolidated basis, our operating income decreased $7 million on a $9 million increase in net service revenue. The year-over-year decrease in operating income is primarily due to the acquisition of Contessa on August 1, 2021, a decrease in other operating income due to the expiration of the CARES Act PRF funds, a decline in our hospice average daily census, which is the main driver of hospice revenue, and an increase in our cost of service resulting from increases in both home health cost per visit and hospice cost of service per day which are described in more detail below. Partially offsetting these items, our results were positively impacted by rate increases, improvements in clinician utilization and discipline mix and a decrease in our other operating expenses.

Our results for the three-month period ended September 30, 2021 include the acquisition of Contessa on August 1, 2021, which contributed $2 million in revenue and an operating loss of $4 million, which is inclusive of less than $1 million in intangibles amortization.

As noted above, for our wholly-owned subsidiaries, we utilized the CARES Act PRF funds to cover COVID-19 expenses incurred by our home health and hospice segments through June 30, 2021. Our personal care segment received funds from the Mass Home Care ASAP COVID-19 Provider Sustainability Program during 2020; we used these funds to cover COVID-19 expenses incurred in 2020 as well. We recorded income related to both of these programs in other operating income within our condensed consolidated statements of operations. We did not have any government grant funds available to offset the COVID-19 costs incurred during the three-month period ended September 30, 2021, which totaled $4 million.

Our operating results reflect a $1 million decrease in our other operating expenses compared to prior year. Excluding the Contessa acquisition, our other operating expenses decreased 3% due to lower incentive compensation accruals, lower employer payroll taxes associated with employee stock option exercises and lower acquisition and integration costs partially offset by a slowdown in prior year spend related to COVID-19, the addition of resources to support growth, planned wage increases and higher recruiting fees.

Home Health Segment

The following table summarizes our home health segment results of operations:


	For the Three-Month Periods Ended September 30,
	2021			2020
Financial Information (in millions):
Medicare	$	228.2		$	222.2
Non-Medicare	110.4			103.8
Net service revenue	338.6			326.0
Other operating income	—			2.6
Cost of service	190.1			180.0
Gross margin	148.5			148.6
Other operating expenses	82.4			78.8
Depreciation and amortization	1.1			1.0
Operating income	$	65.0		$	68.8
Same Store Growth (1):
Medicare revenue	2		%	5		%
Non-Medicare revenue	6		%	4		%
Total admissions	1		%	5		%
Total volume (2) (6)	1		%	6		%


Key Statistical Data - Total (3):
Admissions	86,732			85,578
Recertifications (6)	46,919			46,186
Total volume (6)	133,651			131,764

Medicare completed episodes	78,318			77,552
Average Medicare revenue per completed episode (4)	$	2,969		$	2,886
Medicare visits per completed episode (5)	13.8			14.4

Visiting Clinician Cost per Visit	$	94.24		$	89.10
Clinical Manager Cost per Visit	$	9.85		$	8.91
Total Cost per Visit	$	104.09		$	98.01
Visits	1,826,505			1,836,895

(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. 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, start-ups and denovos.

(4) Average Medicare revenue per completed episode is the average Medicare revenue earned for each Medicare completed episode of care. Average Medicare revenue per completed episode reflects the transition to PDGM effective January 1, 2020 and the suspension of sequestration effective May 1, 2020.

(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.

(6) Prior year amounts have been recast to conform to the current year calculation.

Operating Results

Overall, our operating income decreased $4 million on a $13 million increase in net service revenue. Year over year increases in volumes and Medicare revenue per episode as well as improvement in our operating performance driven by improvements in clinician utilization and discipline mix were offset by a decrease in other operating income due to the expiration of the CARES Act PRF funds, an increase in our total cost per visit and an increase in our other operating expenses which are described in more detail below.

Net Service Revenue

Our net service revenue increased $13 million (4%) on a 1% increase in volume and a 3% increase in Medicare revenue per episode. The volume growth was driven by a 1% increase in admissions and a 2% increase in recertifications. The increase in Medicare revenue per episode is the result of a 1.9% increase in reimbursement, an increase in the functional impairment of our patients and a change in the source/timing and geographic dispersion of our patients.

Other Operating Income

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. Overall, our total cost of service increased 6% primarily due to a 6% increase in our total cost per visit partially offset by a 1% decrease in total visits. The 6% increase in our total cost per visit is primarily due to planned wage increases, higher costs associated with the utilization of contractors to supplement our staffing levels, increases in new hire pay and higher health insurance costs.

Other Operating Expenses

Other operating expenses increased $4 million primarily due to a slowdown in prior year spend related to COVID-19, planned wage increases, the addition of resources to support volume growth, increased costs associated with insurance and legal settlements and higher recruiting fees partially offset by lower incentive compensation costs.

Hospice Segment

The following table summarizes our hospice segment results of operations:


	For the Three-Month Periods Ended September 30,
	2021			2020
Financial Information (in millions):
Medicare	$	187.8		$	189.0
Non-Medicare	9.7			10.7
Net service revenue	197.5			199.7
Other operating income	—			1.7
Cost of service	107.6			104.1
Gross margin	89.9			97.3
Other operating expenses	49.5			47.8
Depreciation and amortization	0.7			0.6
Operating income	$	39.7		$	48.9
Same Store Growth (1):
Medicare revenue	(1		%)	3		%
Hospice admissions	1		%	9		%
Average daily census	(5		%)	—		%
Key Statistical Data - Total (2):
Hospice admissions	13,292			13,026
Average daily census	13,272			13,953
Revenue per day, net	$	161.74		$	155.57
Cost of service per day	$	88.06		$	81.05
Average discharge length of stay	94			101

(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. 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, start-ups and denovos.

Operating Results

Overall, our operating income decreased $9 million on a $2 million decrease in net service revenue. The year-over-year decreases are primarily due to a decline in our average daily census, an increase in our cost of service per day, a decrease in other operating income due to the expiration of the CARES Act PRF funds and an increase in our other operating expenses. These items were partially offset by the increase in reimbursement effective October 1, 2020.

Net Service Revenue

Our net service revenue decreased $2 million primarily due to a decline in our average daily census, which is the main driver of hospice revenue, partially offset by the increase in reimbursement effective October 1, 2020. Our same store average daily census was down 5% year over year primarily due to a decline in our length of stay resulting from a delay in the timing of patients coming onto service and an increase in the discharge rate of our patients.

Other Operating Income

Cost of Service, Excluding Depreciation and Amortization

Our hospice cost of service increased 3% primarily due to a 9% increase in our cost of service per day partially offset by a 5% decline in our average daily census. The increase in our cost of service per day is due to planned wage increases, higher costs associated with the utilization of contractors to supplement our staffing levels, increased costs to retain employees, higher transportation costs, higher respite utilization and an increase in visits performed by our hourly hospice aides and licensed practical nurses due to COVID-19 access restrictions being eased. In addition, our hospice cost of service per day was impacted by the decline in our average daily census; a portion of the cost associated with our salaried clinicians is fixed, so our cost of service metric will increase as our average daily census declines.

Other Operating Expenses

Other operating expenses increased $2 million primarily due to a slowdown in prior year spend related to COVID-19, planned wage increases, the addition of resources to support volume growth and higher recruiting fees partially offset by lower incentive compensation costs.

Personal Care Segment

The following table summarizes our personal care segment results of operations:


	For the Three-Month Periods Ended September 30,
	2021		2020
Financial Information (in millions):
Medicare	$	—	$	—
Non-Medicare	15.9		18.4
Net service revenue	15.9		18.4
Other operating income	—		0.5
Cost of service	11.7		13.5
Gross margin	4.2		5.4
Other operating expenses	2.6		3.2
Depreciation and amortization	0.1		—
Operating income	$	1.5	$	2.2
Key Statistical Data - Total:
Billable hours	558,227		673,161
Clients served	8,697		10,153
Shifts	240,736		280,470
Revenue per hour	$	28.44	$	27.33
Revenue per shift	$	65.95	$	65.59
Hours per shift	2.3		2.4

Operating Results

Operating income related to our personal care segment decreased $1 million on a $3 million decrease in net service revenue. The decrease in net service revenue is due to the impact of COVID-19 and staffing shortages. The revenue impact has been partially mitigated by a reduction in costs as most of our personal care employees are paid on an hourly basis.

High Acuity Care Segment

The following table summarizes our high acuity care segment results of operations:


	For the Three-Month Periods Ended September 30,
	2021			2020
Financial Information (in millions):
Medicare	$	—		$	—
Non-Medicare	1.5			—
Net service revenue	1.5			—
Other operating income	—			—
Cost of service	0.9			—
Gross margin	0.6			—
Other operating expenses	3.9			—
Depreciation and amortization	0.5			—
Operating loss	$	(3.8)		$	—
Key Statistical Data - Total:
Full risk admissions	46			—
Limited risk admissions	188			—
Total admissions	234			—
Direct medical loss ratio	52.6		%	—
Number of joint ventures	8			—
Market penetration	31		%	—
Patient satisfaction	92		%	—

Operating Results

Overall, our high acuity care segment generated revenue totaling $2 million and an operating loss of $4 million. We expect improvement in our operating income as we leverage our operating structure through growth in current and future joint ventures.

Net Service Revenue

We provide home recovery care services for high acuity patients on either a full risk or limited risk basis, each with different reimbursement arrangements. Full risk admissions are admissions for which we assume the risk for all related healthcare services during a 30-day or 60-day episodic period in exchange for a contracted bundled rate payment based upon the assigned diagnosis related group ("DRG"). Limited risk admissions are admissions for which we assume the risk for certain healthcare services during a shorter acute phase period (equivalent to an inpatient hospital stay) in exchange for a contracted per diem payment.

During the quarter, we generated net service revenue of $2 million resulting from 46 full risk admissions and 188 limited risk admissions across our seven active joint ventures with health system partners. Revenue per episode was comprised of $9,191 for full risk episodes and $5,524 for limited risk episodes. The significant utilization of limited risk episodes was primarily due to the impact of heavy COVID-19 surges across certain of our joint venture markets and the resulting patient acuity which necessitated that a portion of our patients' inpatient stays occur within the inpatient hospital facilities rather than in the home.

Cost of Service, Excluding Depreciation and Amortization

Our cost of service consists primarily of medical costs associated with direct clinician care provided to our patients during the applicable episode period, whether such care was provided on the day of program admission, in the patients’ homes or via telehealth. Our cost of service was favorably impacted by the significant utilization of limited risk episodes, which exclude certain high-cost components of full risk episode spend such as emergency room costs and inpatient hospitalization costs.

Other Operating Expenses

Other operating expenses primarily consist of salaries and benefits. We have made significant investments to build the clinical, operational and technological infrastructure necessary to support the development and future growth of home recovery care programs on a national scale. We have employees at both the local market level and at our corporate offices, including a virtual care unit that enables us to provide monitoring services and virtual patient rounding visits via telehealth.

Corporate

The following table summarizes our corporate results of operations:


	For the Three-Month Periods Ended September 30,
	2021		2020
Financial Information (in millions):
Other operating expenses	$	40.5	$	49.9
Depreciation and amortization	5.1		6.7
Total operating expenses	$	45.6	$	56.6

Corporate expenses consist of costs related to our executive management and corporate 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.

Corporate other operating expenses decreased approximately $9 million during the three-month period ended September 30, 2021 due to lower incentive compensation costs, lower employer payroll taxes associated with employee stock option exercises, lower costs associated with insurance and legal settlements and lower acquisition and integration costs partially offset by planned wage increases and additional functional support.

Nine-Month Period Ended September 30, 2021 Compared to the Nine-Month Period Ended September 30, 2020

Consolidated

The following table summarizes our consolidated results of operations (amounts in millions):


	For the Nine-Month Periods Ended September 30,
	2021			2020
Net service revenue	$	1,654.8		$	1,520.8
Other operating income	13.3			27.6
Cost of service, excluding depreciation and amortization	916.2			878.6
Gross margin, excluding depreciation and amortization	751.9			669.8
% of revenue	45.4		%	44.0		%
Other operating expenses	526.4			492.8
% of revenue	31.8		%	32.4		%
Depreciation and amortization	21.8			19.9
Operating income	203.7			157.1
Total other income (expense)	29.6			(8.3)
Income tax expense	(57.2)			(9.2)
Effective income tax rate	24.5		%	6.2		%
Net income	176.1			139.6
Net income attributable to noncontrolling interests	(1.1)			(1.1)
Net income attributable to Amedisys, Inc.	$	175.0		$	138.5

On a consolidated basis, our operating income increased approximately $47 million on a revenue increase of $134 million. The year-over-year increases are primarily related to the impact of COVID-19 on prior year’s results, the acquisition of AseraCare on June 1, 2020, rate increases, the suspension of sequestration effective May 1, 2020, severance incurred in prior year related to reductions in staffing primarily within our home health segment, improvements in clinician utilization and discipline mix and the closure of our hospice U.S. Department of Justice ("DOJ") matters (see Note 6 - Commitments and Contingencies to our condensed consolidated financial statements for additional information). Partially offsetting these items, we experienced a decline in our same store hospice average daily census, which is the main driver of hospice revenue, an increase in our revenue adjustments, an increase in our cost of service resulting from increases in both our home health cost per visit and hospice cost of service per day and an increase in other operating expenses. Additionally, our results were impacted by the acquisition of Contessa on August 1, 2021, which contributed $2 million in revenue and an operating loss of $4 million, which is inclusive of less than $1 million in intangibles amortization.

Our AseraCare acquisition, which closed on June 1, 2020, includes nine months of acquired operations in the current year compared to four months in the prior year. For the nine-month period ended September 30, 2021, this acquisition contributed $75 million in revenue and operating income of $0.1 million, which is inclusive of $1 million in acquisition and integration costs and $6 million in intangibles amortization. For the nine-month period ended September 30, 2020, the AseraCare acquisition contributed $37 million in revenue and an operating loss of $7 million, which is inclusive of $7 million in acquisition and integration costs and $3 million in intangibles amortization.

As noted above, for our wholly-owned subsidiaries, we utilized the CARES Act PRF funds and Mass Home Care ASAP COVID-19 Provider Sustainability Program funds to cover COVID-19 expenses incurred through June 30, 2021. We recorded income related to both of these programs, which totaled $13 million and $28 million, to other operating income within our condensed consolidated statements of operations during the nine-month periods ended September 30, 2021 and 2020, respectively. Due to the expiration of the CARES Act PRF funds on June 30, 2021, we were not able to recognize any operating income during the three-month period ended September 30, 2021 to offset the $4 million of COVID-19 costs incurred during the quarter.

Our operating results reflect an increase in our other operating expenses compared to prior year. Our 2021 other operating expenses include two months of the acquired operations of Contessa and nine months of the acquired operations of AseraCare compared to four months in the prior year, both of which have resulted in a year over year increase totaling $11 million. Excluding the Contessa and AseraCare acquisitions, our other operating expenses increased 5% due to a slowdown in prior year spend related to COVID-19, the addition of resources to support growth, planned wage increases, higher health insurance costs,

investments related to PDGM, higher recruiting costs, increased costs associated with insurance and legal settlements, increased information technology fees and higher acquisition and integration costs partially offset by lower incentive compensation costs, lower employer payroll taxes associated with employee stock option exercises, lower costs directly attributable to COVID-19 and higher gains on the sale of fleet vehicles.

Total other income for the nine-month period ended September 30, 2021 includes a $31 million gain related to our investment in Medalogix (see Note 1 - Nature of Operations, Consolidation and Presentation of Financial Statements to our condensed consolidated financial statements for additional information).

Home Health Segment

The following table summarizes our home health segment results of operations:


	For the Nine-Month Periods Ended September 30,
	2021			2020
Financial Information (in millions):
Medicare	$	684.4		$	619.0
Non-Medicare	332.1			300.8
Net service revenue	1,016.5			919.8
Other operating income	7.3			17.7
Cost of service	563.5			543.8
Gross margin	460.3			393.7
Other operating expenses	243.8			226.7
Depreciation and amortization	3.3			2.9
Operating income	$	213.2		$	164.1
Same Store Growth (1):
Medicare revenue	10		%	(4		%)
Non-Medicare revenue	10		%	2		%
Total admissions	8		%	(1		%)
Total volume (2)(6)	6		%	1		%


Key Statistical Data - Total (3):
Admissions	265,933			245,880
Recertifications (6)	136,744			132,811
Total volume (6)	402,677			378,691

Medicare completed episodes	232,838			221,848
Average Medicare revenue per completed episode (4)	$	2,962		$	2,811
Medicare visits per completed episode (5)	14.0			15.2

Visiting Clinician Cost per Visit	$	91.94		$	88.64
Clinical Manager Cost per Visit	$	9.54		$	9.10
Total Cost per Visit	$	101.48		$	97.74
Visits	5,553,423			5,563,992

(2) Total volume includes all admissions and recertifications.

(3) Total includes acquisitions, start-ups and denovos.

(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.

(6) Prior year amounts have been recast to conform to the current year calculation.

Operating Results

Overall, our operating income increased $49 million on a $97 million increase in net service revenue. The year over year increases are primarily related to the impact of COVID-19 on prior year's results, an increase in our Medicare revenue per episode, which is described in more detail below, severance incurred in prior year related to reductions in staffing and significant improvement in our operating performance driven by improvements in our clinician utilization and discipline mix, both of which have contributed to year over year gross margin expansion. These items were partially offset by an increase in our total cost per visit, a decrease in other operating income due to the expiration of the CARES Act PRF funds and an increase in our other operating expenses.

Net Service Revenue

Our net service revenue increased $97 million (11%) on a 6% increase in total volume and a 5% increase in Medicare revenue per episode. The volume growth was driven by an 8% increase in admissions and a 3% increase in recertification volume. Our admissions were significantly impacted by COVID-19 in prior year. The increase in Medicare revenue per episode is the result of a 1.9% increase in reimbursement, a full year of the 2.0% benefit related to the suspension of sequestration (effective May 1, 2020), an increase in the functional impairment of our patients and a change in the source/timing and geographic dispersion of our patients.

Other Operating Income

Other operating income consists of the recognition of funds received from the CARES Act PRF, which were available for use through June 30, 2021. For our wholly-owned subsidiaries, we utilized the funds to cover COVID-19 related costs only and recognized income related to these costs totaling $7 million and $18 million during the nine-month periods ended September 30, 2021 and 2020, respectively. We incurred COVID-19 related costs totaling $2 million during the three-month period ended September 30, 2021; however, we were not able to recognize any income to offset these costs due to the expiration of the CARES Act PRF funds on June 30, 2021. The COVID-19 costs were associated with the purchase of PPE, bonuses paid to our clinicians, premiums paid to contract clinicians in COVID-19 high demand areas, clinician training, quarantine pay and COVID-19 testing. The COVID-19 costs incurred during the nine-month period ended September 30, 2021 totaling $9 million have been recorded to cost of service within our condensed consolidated statements of operations. Of the $18 million of COVID-19 costs incurred in the prior year, $17 million was recorded to cost of service and $1 million was recorded to other operating expenses within our condensed consolidated statements of operations.

Cost of Service, Excluding Depreciation and Amortization

Our total cost of service increased 4% primarily due to a 4% increase in our total cost per visit. Our total visits were relatively flat year over year despite a 6% increase in total volume primarily due to improvements in clinician utilization, as evidenced by a decline of 1.2 visits per completed episode year over year. The 4% increase in our total cost per visit is due to planned wage increases, higher costs associated with the utilization of contractors to supplement our staffing levels, increases in new hire pay, inclement weather pay and higher health insurance costs partially offset by a decrease in COVID-19 costs and severance incurred in prior year in connection with a reduction in staffing.

Other Operating Expenses

Other operating expenses increased approximately $17 million primarily due to planned wage increases, the addition of resources to support volume growth, higher health insurance costs, higher recruiting fees, investments related to PDGM and increased costs associated with insurance and legal settlements. These increases were partially offset by lower incentive compensation accruals and lower costs directly attributable to COVID-19 in the current year.

Hospice Segment

The following table summarizes our hospice segment results of operations:


	For the Nine-Month Periods Ended September 30,
	2021			2020
Financial Information (in millions):
Medicare	$	556.2		$	516.5
Non-Medicare	30.7			29.7
Net service revenue	586.9			546.2
Other operating income	6.0			8.9
Cost of service	314.4			293.1
Gross margin	278.5			262.0
Other operating expenses	144.4			127.4
Depreciation and amortization	2.0			1.7
Operating income	$	132.1		$	132.9
Same Store Growth (1):
Medicare revenue	—		%	4		%
Hospice admissions	3		%	3		%
Average daily census	(4		%)	1		%
Key Statistical Data - Total (2):
Hospice admissions	39,650			35,755
Average daily census	13,282			12,841
Revenue per day, net	$	161.87		$	155.23
Cost of service per day	$	86.68		$	83.29
Average discharge length of stay	95			98

(2) Total includes acquisitions, start-ups and denovos.

Operating Results

Our operating results for the nine-month period ended September 30, 2021 include the results of the acquisition of AseraCare on June 1, 2020 (44 hospice care centers). Acquisitions are included in our condensed consolidated financial statements from their respective acquisition dates. As a result, our hospice segment operating results for 2021 and 2020 are not fully comparable.

Overall, our operating income decreased $1 million on a $41 million increase in net service revenue. The year over year decrease in operating income is primarily due to a decline in our same store average daily census, an increase in our revenue adjustments, an increase in our cost of service per day, a decrease in other operating income due to the expiration of the CARES Act PRF funds and an increase in our other operating expenses. These items were partially offset by changes in reimbursement, the suspension of sequestration effective May 1, 2020, the acquisition of AseraCare which resulted in increases to net service revenue and operating income totaling $38 million and $5 million, respectively, and the reversal of a $7 million accrual previously recorded in connection with settlement discussions with the DOJ; we received notice during the second quarter of 2021 that the DOJ has closed its investigation (see Note 6 - Commitments and Contingencies to our condensed consolidated financial statements for additional information).

Net Service Revenue

Our net service revenue increased $41 million. Our results include nine months of the acquired operations of AseraCare in the current year compared to four months in the prior year which resulted in an increase to net service revenue of $38 million. Additionally, revenue was positively impacted by the increase in reimbursement effective October 1, 2020 ($12 million), the suspension of sequestration effective May 1, 2020 ($4 million) and the reversal of a $7 million accrual as mentioned above. These items were partially offset by a 4% decline in our same store average daily census, which is the main driver of hospice revenue, and an increase in revenue adjustments. Our same store average daily census was down year over year primarily due to a decline in our length of stay during the fourth quarter of 2020 resulting from a delay in the timing of patients coming onto service and an increase in the discharge rate of our patients. This lower length of stay resulted in a declining census as we exited 2020 and has continued to impact our 2021 results. We are currently seeing discharge rates higher than historical averages.

Other Operating Income

Other operating income consists of the recognition of funds received from the CARES Act PRF which were available for use through June 30, 2021. For our wholly-owned subsidiaries, we utilized the funds to cover COVID-19 related costs only and recognized income related to these costs totaling $6 million and $9 million during the nine-month periods ended September 30, 2021 and 2020, respectively. We incurred COVID-19 related costs totaling $1 million during the three-month period ended September 30, 2021; however, we were not able to recognize any income to offset these costs due to the expiration of the CARES Act PRF funds on June 30, 2021. The COVID-19 costs were associated with the purchase of PPE, bonuses paid to our clinicians, clinician training, quarantine pay and COVID-19 testing and have been recorded to cost of service within our condensed consolidated statements of operations.

Cost of Service, Excluding Depreciation and Amortization

Our hospice cost of service increased 7%. Excluding our AseraCare acquisition, our cost of service increased less than 1% due to planned wage increases, higher costs associated with the utilization of contractors to supplement our staffing levels, increased costs to retain employees, higher health insurance costs, higher transportation costs and an increase in visits performed by our hourly hospice aides and licensed practical nurses due to access restrictions being eased partially offset by a 4% decline in our same store average daily census and lower COVID-19 costs.

Other Operating Expenses

Other operating expenses increased $17 million, approximately $12 million of which is related to our AseraCare acquisition. The remaining increase is due to a slowdown in prior year spend related to COVID-19, the addition of resources to support growth, planned wage increases, higher health insurance costs, increased costs associated with insurance and legal settlements and higher recruiting fees partially offset by lower incentive compensation accruals.

Personal Care Segment

The following table summarizes our personal care segment results of operations:


	For the Nine-Month Periods Ended September 30,
	2021		2020
Financial Information (in millions):
Medicare	$	—	$	—
Non-Medicare	49.9		54.8
Net service revenue	49.9		54.8
Other operating income	—		1.0
Cost of service	37.4		41.7
Gross margin	12.5		14.1
Other operating expenses	8.8		9.5
Depreciation and amortization	0.2		0.1
Operating income	$	3.5	$	4.5
Key Statistical Data - Total:
Billable hours	1,774,965		2,067,958
Clients served	11,597		14,057
Shifts	759,242		896,141
Revenue per hour	$	28.11	$	26.51
Revenue per shift	$	65.71	$	61.18
Hours per shift	2.3		2.3

Operating Results

Operating income related to our personal care segment decreased $1 million on a $5 million decrease in net service revenue. The decrease in net service revenue is due to the impact of COVID-19 and staffing shortages partially offset by rate increases. The impact of COVID-19 has been partially mitigated by a reduction in costs as most of our personal care employees are paid on an hourly basis.

High Acuity Care Segment

The following table summarizes our high acuity care segment results of operations:


	For the Nine-Month Periods Ended September 30,
	2021			2020
Financial Information (in millions):
Medicare	$	—		$	—
Non-Medicare	1.5			—
Net service revenue	1.5			—
Other operating income	—			—
Cost of service	0.9			—
Gross margin	0.6			—
Other operating expenses	3.9			—
Depreciation and amortization	0.5			—
Operating loss	$	(3.8)		$	—
Key Statistical Data - Total:
Full risk admissions	46			—
Limited risk admissions	188			—
Total admissions	234			—
Direct medical loss ratio	52.6		%	—
Number of joint ventures	8			—
Market penetration	31		%	—
Patient satisfaction	92		%	—

Operating Results

Net Service Revenue

We generated net service revenue of $2 million resulting from 46 full risk admissions and 188 limited risk admissions across our seven active joint ventures with health system partners. Revenue per episode was comprised of $9,191 for full risk episodes and $5,524 for limited risk episodes. The significant utilization of limited risk episodes was primarily due to the impact of heavy COVID-19 surges across certain of our joint venture markets and the resulting patient acuity which necessitated that a portion of our patients' inpatient stays occur within the inpatient hospital facilities rather than in the home.

Cost of Service, Excluding Depreciation and Amortization

Other Operating Expenses

Corporate

The following table summarizes our corporate results of operations:


	For the Nine-Month Periods Ended September 30,
	2021		2020
Financial Information (in millions):
Other operating expenses	$	125.5	$	129.2
Depreciation and amortization	15.8		15.2
Total operating expenses	$	141.3	$	144.4

Corporate other operating expenses decreased approximately $4 million during the nine-month period ended September 30, 2021. Other operating expenses associated with our AseraCare acquisition declined $5 million year over year primarily due to higher acquisition and integration costs incurred in prior year. Excluding the AseraCare acquisition, corporate other operating expenses increased $1 million year over year due to planned wage increases, additional functional support, higher health insurance costs, increased information technology fees, increased costs associated with legal settlements and higher acquisition and integration costs; these items were partially offset by lower incentive compensation costs, lower employer payroll taxes associated with employee stock option exercises and higher gains on the sale of fleet vehicles.

Liquidity and Capital Resources

Cash Flows

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


	For the Nine-Month Periods Ended September 30,
	2021		2020
Cash provided by operating activities	$	183.7	$	223.0
Cash used in investing activities	(269.9)		(285.5)
Cash provided by financing activities	131.1		81.5
Net increase in cash, cash equivalents and restricted cash	44.9		19.0
Cash, cash equivalents and restricted cash at beginning of period	83.3		96.5
Cash, cash equivalents and restricted cash at end of period	$	128.2	$	115.5

Cash provided by operating activities decreased $39.3 million during the nine-month period ended September 30, 2021 compared to the nine-month period ended September 30, 2020 primarily due to the deferral of payroll taxes and the receipt of CARES Act PRF funds in prior year as well as an increase in days revenue outstanding in the current year partially offset by an increase in operating income.

Our cash used in investing activities primarily consists of acquisition activity and the purchase of property and equipment. Cash used in investing activities decreased $15.6 million during the nine-month period ended September 30, 2021 compared to the nine-month period ended September 30, 2020 as a result of a reduction in acquisition spend.

Our financing activities primarily consist of borrowings under our term loan and/or revolving credit facility, repayments of borrowings, the remittance of taxes associated with shares withheld on non-cash compensation, proceeds related to the exercise of stock options and the purchase of stock under either our employee stock purchase plan or our stock repurchase program.

Cash provided by financing activities totaled $131.1 million during the nine-month period ended September 30, 2021 primarily due to borrowings under our Second Amended Credit Agreement to fund acquisitions partially offset by the repurchase of company stock and the repayments of borrowings. Cash provided by financing activities totaled $81.5 million during the nine-month period ended September 30, 2020 due to borrowings under our Amended Credit Agreement to minimize potential cash disruption related to COVID-19. Additionally, during the nine-month period ended September 30, 2020, our financing activities included the receipt of PRF funds which we did not expect to retain totaling $60.0 million partially offset by the remittance of tax withholding obligations related to non-cash compensation and stock option exercises (see Note 8 - Capital Stock and Share-Based Compensation to our condensed consolidated financial statements for additional information).

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 the nine-month period ended September 30, 2021, we spent $5.2 million in capital expenditures as compared to $3.0 million during the nine-month period ended September 30, 2020. Our capital expenditures for 2021 are expected to be approximately $6.0 million to $8.0 million, excluding the impact of any future acquisitions.

Additionally, during the nine-month period ended September 30, 2021, pursuant to our authorized stock repurchase program, we repurchased 351,714 shares of our common stock at a weighted average price of $241.30 per share and a total cost of approximately $85 million. The repurchased shares are classified as treasury shares.

As of September 30, 2021, we had $124.4 million in cash and cash equivalents and $519.9 million in availability under our $550.0 million Revolving Credit Facility. Our cash and cash equivalents include $58.5 million of unutilized CARES Act PRF funds, which were repaid to the U.S. Department of Health and Human Services ("HHS") during October 2021 and therefore, are recorded as a liability within our condensed consolidated balance sheet as of September 30, 2021.

Based on our operating forecasts and our 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 $19.5 million from December 31, 2020 primarily due to the elimination of requests for anticipated payment ("RAPs") effective January 1, 2021. Our cash collection as a percentage of revenue was 104% and 106% for the nine-month periods ended September 30, 2021 and 2020, respectively. Our days revenue outstanding at September 30, 2021 was 43.5 days, which is an increase of 3.3 days from December 31, 2020 and a increase of 0.8 days from June 30, 2021.

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 last day of the billing period and varies by state for Medicaid-reimbursable services and 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 September 30, 2021:
Medicare patient accounts receivable	$	169.7	$	6.2	$	0.5	$	1.6	$	178.0
Other patient accounts receivable:
Medicaid	17.4		1.9		0.8		—		20.1
Private	68.4		7.4		0.7		—		76.5
Total	$	85.8	$	9.3	$	1.5	$	—	$	96.6
Total patient accounts receivable									$	274.6
Days revenue outstanding (1)									43.5
	0-90		91-180		181-365		Over 365		Total
At December 31, 2020:
Medicare patient accounts receivable	$	156.2	$	5.4	$	2.1	$	0.8	$	164.5
Other patient accounts receivable:
Medicaid	20.7		1.7		1.5		—		23.9
Private	58.4		6.4		1.9		—		66.7
Total	$	79.1	$	8.1	$	3.4	$	—	$	90.6
Total patient accounts receivable									$	255.1
Days revenue outstanding (1)									40.2

(1)Our calculation of days revenue outstanding is derived by dividing our ending patient accounts receivable at September 30, 2021 and December 31, 2020 by our average daily net patient service revenue for the three-month periods ended September 30, 2021 and December 31, 2020, respectively.

Indebtedness

Second Amendment to Amended and Restated Credit Agreement

Net proceeds from the $450.0 million Amended Term Loan Facility were used to fund 100% of the Contessa acquisition.

See Note 5 - Long Term Obligations to our condensed consolidated financial statements for additional details on our outstanding long-term obligations.

Stock Repurchase Program

Inflation

We do not believe inflation has significantly impacted our results of operations.

Critical Accounting Estimates

See Part II, Item 7 – Critical Accounting Estimates and our consolidated financial statements and related notes in Part II, Item 8 of our 2020 Annual Report on Form 10-K, for accounting policies and related estimates we believe are the most critical to understanding our condensed consolidated financial statements, financial condition and results of operations and which require complex management judgment and assumptions, or involve uncertainties. These critical accounting estimates include revenue recognition and goodwill and other intangible assets. There have not been any changes to our significant accounting policies or their application since we filed our 2020 Annual Report on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk from fluctuations in interest rates. Our Revolving Credit Facility carries a floating interest rate which is tied to the Eurodollar rate (i.e. LIBOR) and the Prime Rate and therefore, our condensed consolidated statements of operations and our condensed consolidated statements of cash flows are exposed to changes in interest rates. As of September 30, 2021, the total amount of outstanding debt subject to interest rate fluctuations was $450.0 million. A 1.0% interest rate change would cause interest expense to change by approximately $4.5 million annually, assuming the Company makes no principal repayments.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures which are designed to provide reasonable assurance of achieving their objectives and to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, disclosed and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. This information is also accumulated and communicated to our management and Board of Directors to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q, as of September 30, 2021, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.

Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2021, the end of the period covered by this Quarterly Report.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that have occurred during the quarter ended September 30, 2021, that have materially impacted, or are reasonably likely to materially impact, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal controls over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls’ effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and, based on an evaluation of our controls and procedures, our principal executive officer and our principal financial officer concluded our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2021, the end of the period covered by this Quarterly Report.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 6 - Commitments and Contingencies to the condensed consolidated financial statements for information concerning our legal proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides the information with respect to purchases made by us of shares of our common stock during each of the months during the three-month period ended September 30, 2021:


Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs
July 1, 2021 to July 31, 2021	37,374		$	260.87	—	$	25,925,725
August 1, 2021 to August 31, 2021	—		—		54,609	115,120,504		(2)
September 1, 2021 to September 30, 2021	—		—		—	115,120,504		(2)
	37,374	(1)	$	260.87	54,609	$	115,120,504

(1)Includes shares of common stock surrendered to us by certain employees to satisfy tax withholding and/or strike price obligations in connection with the vesting of non-vested stock and exercise of stock options previously awarded to such employees under our 2008 and 2018 Omnibus Incentive Compensation Plans.

(2)Includes amounts remaining under our existing $100 million share repurchase program, approved by our Board of Directors on December 17, 2020 (the "Existing Share Repurchase Program"), and an additional $100 million under a new share repurchase program approved by our Board of Directors on August 2, 2021 (the "New Share Repurchase Program"), which will commence upon the completion of the Existing Share Repurchase Program. We may repurchase shares under the Existing Share Repurchase Program through December 31, 2021 and under the New Share Repurchase Program through December 31, 2022.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The exhibits marked with the cross symbol (†) are filed and the exhibits marked with a double cross (††) are furnished with this Form 10-Q. Any exhibits marked with the asterisk symbol (*) are management contracts or compensatory plans or arrangements filed pursuant to Item 601(b)(10)(iii) of Regulation S-K.

Exhibit
Number

Document Description

Report or Registration Statement

SEC File or
Registration
Number

Exhibit
or Other
Reference

3.1

Composite of Certificate of Incorporation of the Company inclusive of all amendments through June 14, 2007

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

0-24260

3.1

†3.2

Composite of By-Laws of the Company inclusive of all amendments through October 20, 2021

10.1

Second Amendment to Amended and Restated Credit Agreement, dated as of July 30, 2021, by and among Amedisys, Inc. and Amedisys Holding, L.L.C., as the borrowers, the Guarantors party thereto, the Lenders party thereto, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, and the other L/C Issuers party thereto (Immaterial schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the U.S. Securities and Exchange Commission upon request.)

The Company's Current Report on Form 8-K filed on August 4, 2021

0-24260

10.1

†31.1

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

†31.2

Certification of Scott G. Ginn, Executive Vice President and Chief Financial Officer (principal financial officer), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

††32.1

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

††32.2

Certification of Scott G. Ginn, Executive Vice President and Chief Financial Officer (principal financial officer), pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

†101.INS

Inline XBRL Instance - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

†101.SCH

Inline XBRL Taxonomy Extension Schema Document

†101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

†101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase

†101.LAB

Inline XBRL Taxonomy Extension Labels Linkbase Document

†101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



AMEDISYS, INC. (Registrant)

By:						/s/ SCOTT G. GINN
						Scott G. Ginn,
						Principal Financial Officer and
						Duly Authorized Officer

Date: November 3, 2021