Amedisys posted a weak first-quarter 2014 with adjusted loss from
continuing operations of $0.07 per share, wider than the Zacks
Consensus Estimate loss by $0.06. It also marked a massive downfall
from the year-ago adjusted income from continuing operations of
$0.15 per share. Revenues of $298.7 million lagged the estimate of
$300 million and were down 9% year over year. Unfavorable weather
and higher-than-expected employee healthcare cost were responsible
for the company's dismal bottom-line results. We believe poor
segment performance, sluggish growth trends and the adverse impact
from sequestration led to the dismal first-quarter results.
However, Amedisys is poised to gain from a solid foothold in the
still untapped home health and Hospice services market which should
catalyze growth. In addition, positive demographic trend is another
upside. Thus we initiate our coverage on Amedisys at Neutral.
Amedisys Inc. (AMED) provides home health and hospice services
throughout the U.S. to more than 360,000 chronic, co-morbid, and
aging American population. The company also offers clinically
focused programs for chronic conditions and various diseases such
as diabetes, coronary artery disease, congestive heart failure,
orthopedics, complex wound care, geriatric surgical recovery,
balance retraining, behavioral health and stroke recovery, as well
as various rehabilitative programs. It provides hospice services to
patients using an interdisciplinary care team comprising a
physician, nurses, home health aides, social workers, therapists,
dieticians, volunteers, counselors, chaplains and bereavement
coordinators, when required. Amedisys was founded in 1982 and is
headquartered in Baton Rouge, LA.
As of Dec 31, 2013, the company had 367 Medicare-certified home
health care centers, 92 Medicare-certified hospice care centers and
one hospice inpatient unit across 37 states within the U.S., the
District of Columbia and Puerto Rico.
The company depends on reimbursement from Medicare (for chronic
care) for a significant portion of its revenue due to the age
demographics of its patient base (average age of 81). Medicare
represented approximately 84% of Amedisys' net service revenue in
2013 compared with 82% in 2012.
Amedisys plans to diversify its payment sources and becomes less
reliant upon Medicare, based on the needs of the aging population,
uncertainty surrounding health care reform, and new health care
models currently in development, such as Accountable Care
Health Care Reform Update
In Nov 2012, Centers for Medicare and Medicaid Services (CMS)
issued a final rule to update and revise Medicare home health
reimbursement rates for fiscal 2013. The final rule includes a 2.3%
market basket increase, a 1% reduction mandated by the Patient
Protection and Affordable Care Act (PPACA), and a negative 1.32%
case-mix adjustment. The net effect of these changes is a 0.04%
decrease in the base rate. Additionally, the wage index was updated
which impacts providers differently depending on their geographic
location and a change made to the outlying observation eligibility
standards. In total, CMS estimates that the effect of these changes
will result in a 0.01% reduction in reimbursement to home health
In Jul 2012, CMS issued a notice to update and revise the
Medicare hospice wage index for fiscal year 2013. The notice
includes a 2.6% market basket update, which is reduced by a
productivity adjustment of 0.7%, a 0.3% adjustment from the PPACA
and 0.7% for the updated wage index and budget neutrality
adjustment factor. The net effect of the notice increases the base
rate for 2013 by 0.9%.
In Mar 2010, President Obama introduced the Patient Protection
and Affordable Care Act (PPACA) and the Health Care and Education
Reconciliation Act of 2010 (HCERA), which amends the PPACA
(collectively, the Health Care Reform Bills). The Health Care
Reform Bills made a number of changes to Medicare payment rates,
including the reinstatement of the 3% home health rural add-on,
which began on Apr 1, 2010 (expiring Jan 1, 2016). The Health Care
Reform Bills also include a systemic rebasing of the amount that
the CMS reimburses for home health services, to be phased in over
four years, beginning in 2014.
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