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Amedisys, Inc. (AMED)

Q4 2017 Earnings Conference Call

February 28, 2018 12:00 ET

Executives

David Castille - Managing Director, Finance

Paul Kusserow - President and CEO

Scott Ginn - CFO

Chris Gerard - COO

Dave Kemmerly - General Counsel and SVP, Government Affairs

Analysts

Matt Larew - William Blair

Whit Mayo - Robert W. Baird

Jason Plagman - Jefferies

Joanna Gajuk - Bank of America

Dana Hambly - Stephens

Bill Sutherland - The Benchmark Company

Presentation

Operator

Greetings. And thank you for calling in for the Amedisys Fourth Quarter 2017 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 like to turn the conference over to David Castille, Managing Director of Finance. Thank you. You may begin.

David Castille

Thank you, operator, and welcome to the Amedisys Investor Conference Call to discuss the results of the fourth quarter and year ended December 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 Web site.

Speaking on today's call from Amedisys will be Paul Kusserow, President and Chief Executive Officer; and Scott Ginn, Chief Financial Officer. Also joining us are Chris Gerard, Chief Operating Officer; and 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

Thanks David and welcome to the Amedisys fourth quarter 2017 earnings call.

2017 was a tremendous year for Amedisys. We treated more than 369,000 patients making more than 9.4 million visits across our three segments. We continue to focus on execute and make excellent progress on our strategic pillars, clinical distinction, employer of choice, operational efficiency and growth. That is translated into results, we are all very proud of. A special thanks to our 18,000 employees whose unwavering commitment to providing outstanding care to our patients in their homes has made this a great quarter and year.

For the fourth quarter on an adjusted basis, we grew revenue 11% to $404.2 million, EBITDA by 22% to $37.1 million and earnings per share by 27% to $0.56 per share compared to prior year. For the year in the face of $14 million of rate cuts, we grew revenue by 7% to $1.54 billion. We grew EBITDA over 29% to $142.2 million and we grew EPS by 43% to $2.21 per share. Scott will provide more details on our financial performance in his comments, but these are outstanding results that we're really pleased with.

I'm also pleased that we have issued 2018 revenue guidance of $1.6 billion to $1.64 billion, EBITDA guidance of $158 million to $163 million and EPS guidance of $2.97 and $3.08 per share. Scott will elaborate, but our ability to provide guidance goes to show the stability that our management team has brought to our business and the conviction that we have in our ability to deliver in 2018.

Now let's review the progress we've made within our four strategic areas of focus. First, clinical distinction; we continue working to improve our star scores, clinical outcomes and readmission rates. In the April 2018 stars preview, our quality of patient care star rating was 4.3 with 89% of our home health agencies rated four stars or better. Of particular note, we now have 54 care centers rated at five stars.

Our relentless and uncompromising focus on quality has resulted in nine straight quarters of sequential improvement in stars and is truly differentiated us as an industry leader in quality.

On the value based purchasing front, we expect to see a payment bonus of approximately $1 million in 2018 across the seven VVP pilot states where we operate. This bonus provides additional evidence that our focus on clinical distinction is driving better patient outcomes. We remain strong supporters of further expansion of the VVP program. Differential payments for quality providers sends the right message to the home health community that quality care is important. We encourage CMS to roll this program out across the country and increase the level of risk and reward so that truly differentiated providers benefit.

For our hospice business, the hospice compare December 2017 release of quality metrics shows Amedisys outperforming the national average in six of the seven measurement categories. As of February we're seven out of seven. We are very pleased with these results and fully expect our hospice quality performance to continue leading the industry scoring and reporting becomes more formalized.

Again in hospice, we hope CMS will provide financial incentives to differentiate providers based on quality.

Moving onto employer of choice. For all of 2017, we have discussed our efforts to hire and retain home health business development staff. I'm extremely happy to announce that we have hit our fourth quarter staffing targets adjusted for the closure of care centers in our Florida reorganization. We ended 2017 with 759 business development employees. As a result, we are now seeing growth in the right places which our fourth quarter attest to.

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