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Amedisys Inc (AMED)

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Amedisys Inc. (AMED)

Q2 2017 Earnings Conference Call

July 27, 2017 11:00 AM ET

Executives

David Castille - Managing Director of Finance

Paul Kusserow - President and Chief Executive Officer

Gary Willis - Chief Financial Officer

Chris Gerard - Chief Operating Officer

David Kemmerly - General Counsel and Senior Vice President of Government Affairs

Stephen Seim - Chief Strategy Officer

Scott Ginn - Chief Accounting Officer

Analysts

Brian Tanquilut - Jefferies

John Ransom - Raymond James

Sheryl Skolnick - Mizuho

Whit Mayo - Robert W. Baird

Kevin Ellich - Craig Hallum

Presentation

Operator

Greetings, and welcome to the Amedisys second quarter conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now turn the conference over to you host, Mr. David Castille, Managing Director of Finance. Thank you, Mr. Castille. You may now begin.

David Castille

Thank you. Welcome to the Amedisys investor conference call to discuss the results of the second quarter ended June 30, 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. Also joining us are Chris Gerard, Chief Operating Officer; and Scott Ginn, Chief Accounting Officer; Steve Seim, Chief Strategy Officer, Dave Kemmerly, General Counsel and Senior Vice President of Government Affairs; and David Pearce, Chief Compliance 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 second quarter 2017 earnings conference call. Before we begin, let me first address the two questions that I believe are on everyone's mind, one of them external to our Company and one of them internal. The external question is the home health groupings model or HHGM that was proposed in the CMS 2018 home health rule.

Let me begin by saying that we like you just received the 388 proposed rule late Tuesday afternoon and are not in a position yet to comment on the specific impact to Amedisys and our patients. HHGM as proposed is a complete redesign of the home health payment system. We need information and data from CMS in order to properly and accurately model the impact of HHGM in all the 34 states in which we deliver home health care services.

Having said that, our team is working on modeling the impact if HHGM were to be implemented as presented in the proposed rule. This is challenging as there are still big gaps in information within the rule. It is obviously very early and we and the industry still have a lot of work to do but here is what we know. HHGM is a total payment redesign for home health with the stated intent of better aligning resources and outcomes with reimbursement.

HHGM has an effective date of January 1, 2019 less than 18 months from now. HHGM shifts payment from a 60-day episode to two 30-day periods and eliminates therapy visit thresholds, currently used to adjust reimbursement. This potentially discourages home health providers from taking care of higher acuity patients requiring therapy as part of their treatment and it sends them to higher cost settings.

HHGM is a product of the Affordable Care Act and the previous administration it is an extension of Obamacare. We were told HHGM was created to be budget neutral, but the proposed rule seems to indicate otherwise. HHGM was crafted and proposed by CMS without meaningful input from home health providers. Providing the industry only 60 days to comment on a total payment redesign after no prior collaboration with the industry seems to run counter to the current administration's goal of transparency and reducing the regulatory burden for clinicians' providers and patients in a way that increases quality of care and decreases costs.

First, I want to assure you that we will adjust and adapt to any changes in policy made by the government as we have successfully done in the past. We have the clinical and operational expertise, resources, experience and leadership to do so in an effective and efficient manner. As a recent example of how we have reacted to regulatory changes coming from CMS you can look to last year's rollout of the Pre-Claim Review demonstration. It was conceived by CMS staff without industry input.

Amedisys and the industry advocated against the implementation of PCRD as proposed and offered alternative approaches. At the same time, our care centers in the impacted areas trained and ramped up for the demonstration project. We saw our affirmation rates under PCRD in Illinois surpass our industry peers and we ultimately experienced a 96% affirmation rate on all claims prior to CMS suspending PCRD in Illinois. We anticipate our experience in preparing for HHGM will be similar. Every time there is a change in this industry those with scale, resources, and grit went out, we have plenty of each.

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