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AMEDISYS Inc (AMED)

Q1 2017 Earnings Conference Call

May 3, 2017 11:00 AM ET

Executives

David Castille - Managing Director of Finance

Paul Kusserow - President and CEO

Gary Willis - CFO

Chris Gerard - COO

Scott Ginn - CAO

Stephen Seim - Chief Strategy Officer

Dave Kemmerly - SVP of Government Affairs and General Counsel

Analysts

Brian Tanquilut - Jefferies

Sheryl Skolnick - Mizuho Securities

Kevin Ellich - Craig-Hallum

Dana Hambly - Stephens

Presentation

Operator

Greetings, and welcome to the Amedisys First Quarter Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Mr. David Castille, Managing Director of Finance for Amedisys. Thank you, Mr. Castille. You may now begin.

David Castille

Thank you, operator. Welcome to the Amedisys investor conference call to discuss the results of the first quarter ended March 31, 2017. A copy of our press release, supplemental slides and related Form 8-K filing with the SEC are available on the Investor Relations page on our website. Speaking on today's call from Amedisys will be Paul Kusserow, President and Chief Executive Officer; and Gary Willis, Chief Financial Officer.

Before we get started with our call, I would like to remind everyone that statements made on this conference call today may constitute forward-looking statements and are protected under the safe harbor of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Amedisys today. The company assumes no obligation to update information provided on this call to reflect subsequent events other than as required under applicable securities laws.

These forward-looking statements may involve a number of risks and uncertainties, which may cause the company's results or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our Forms 10-K, 10-Q and 8-K.

In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will also be available in our Forms 10-K, 10-Q and 8-K.

Thank you. And now I'll turn the call over to Paul Kusserow.

Paul Kusserow

Thank you, David, and welcome to the Amedisys First Quarter 2017 Earnings Conference Call. For the quarter, we generated $370 million in revenue, adjusted EBITDA of $32 million and adjusted earnings per share of $0.47.

In our Home Health segment, revenue was $271 million for the quarter, down just over $1 million compared to the prior year. This was primarily due to the 2017 CMS reimbursement cut. Same-store Medicare admissions were soft, down 1% in the quarter, but were offset by same-store, non-Medicare episodic admission growth of 35%. On a combined basis, total same-store episodic admission growth was up 3% compared to the first quarter of 2016. Segment EBITDA was $37 million.

In our Hospice segment, revenue increased $13 million or 17% as compared to the first quarter of 2016. Same-store admissions grew 20%. Gross margins were also up due to a combination of rate increases and reduced cost per day. Segment EBITDA was $23 million, an increase of 36% from the prior year. The growth in our Hospice segment continues to outperform our internal projections. To put our Hospice growth into perspective, the Hospice segment has delivered eight straight quarters of double-digit, same-store admissions growth.

Our Hospice average daily census has grown 40% since the first quarter of 2015, and this growth has been all organic. In that same time period, our average daily census per hospice care center has gone from just under 60 to over 80. The segment has also expanded both gross margin and EBITDA margins by leveraging a disciplined staffing model and G&A expenses.

We are extremely proud of what our Hospice team has accomplished. They're singularly focused on providing quality, compassionate care to every referral. It is a privilege and a pleasure to watch our team continuously set higher bars and constantly clear them.

Our new and emerging Personal Care segment continue to grow its revenue as well, both organically and through acquisition. Personal Care will expand for the first time outside of Massachusetts with the acquisition of East Tennessee Personal Care, which is expected to close on June 1. Billable hours grew by over 50% as compared to the first quarter of last year. Keep in mind, this is not reflected in our financial statements since we closed the AHC acquisition on March 1 of last year.

We are now the largest personal care provider and largest provider of pay services in Massachusetts. We are also a very significant provider of SNPs, or special needs programs, in the state. These service offerings round out our capabilities in the market and give Amedisys a unique skill set to serve patients across the continuum of care. We will also learn much more about risk-based models of care, which is important for our future.

With that being said, we have more work to do on organic growth in Home Health, and it has the attention of the entire team. Our Home Health operational leaders are implementing detailed action plans at the regional level to get our growth back up to par. As you may recall, we restructured our business development function in Home Health starting late last year with an initiative called Project Redwood.

The results have largely been encouraging, and we're working hard to adjust the areas that are not performing as expected. Our Home Health business development staff now have much better data, allowing us to target the right referral sources so we can increase our market penetration and grow our volumes. Project Redwood has markedly increased the productivity of our business development employees.

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