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Amedisys Inc (AMED)

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Amedisys, Inc. (AMED)

Q1 2018 Earnings Conference Call

May 8, 2018 11:00 am ET

Executives

Nicholas Muscato - Chief Of Staff

Paul Kusserow - President and CEO

Scott Ginn - CFO

Chris Gerard - COO

David Kemmerly - General Counsel and SVP of Government Affairs

Susan Sender - SVP and Chief Clinical Officer

Analysts

Brian Tanquilut - Jefferies & Company, Inc.

Kevin Ellich - Craig Hallum Capital Group LLC

Matt Larew - William Blair

Frank Morgan - RBC Capital Markets

Matthew Gillmor - Robert W. Baird & Co.

William Sutherland - The Benchmark Company

Joanna Gajuk - Bank of America Merrill Lynch

Presentation

Operator

Greetings and welcome to the Amedisys First Quarter 2018 Earnings 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 your host, Mr. Nick Muscato, Chief of Staff. Please go ahead.

Nicholas Muscato

Thank you, operator, and welcome to the Amedisys investor conference call to discuss the results of the first quarter ended March 31, 2018. A copy of our press release, supplemental slides, and related Form 8-K filings with the SEC are available on the Investor Relations page of 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.

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 on the 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, Nick, and welcome to the Amedisys First Quarter 2018 Earnings Call. We are very pleased with our results for the quarter. We generated $399 million in revenue, up 9% year-over-year; adjusted EBITDA of $42 million, up 30% year-over-year; and adjusted earnings per share of $0.79, up 68% year-over-year. Another impressive quarter delivered by our nearly 18,000 employees.

Let's dive right in to the progress that we have made within our four strategic areas of focus, starting with clinical distinction. Our unwavering focus on clinical quality has once again paid dividends as our July 2018 STARs score preview puts us at an average of 4.38, up from 4.3 in the April release. We now have 72 care centers rated at 5 stars, up 33% from last quarter, and 93% of our overall portfolio is rated at 4 stars or better. This is now the 12th straight quarter of sequential improvement in stars. We are committed to continuing to improve our star ratings and further differentiating ourselves as an industry leader in quality.

This focus on clinical quality is also beginning to generate financial returns as our performance in the Home Health Value-Based Purchasing pilot program indicates. For the quarter, we received approximately $250,000 in bonus payments from CMS. This year is the first year of bonus payments, and the CMS pilot is limited to nine states, seven of which we operate in. As the percentage of payments in VBP grows from 3% to 8% by 2022, we will see meaningful revenue upside for our continued quality performance. As I've stated before, we believe that reimbursement should be tied to quality and outcomes. As such, we again encourage CMS to expand the Value-Based Purchasing program nationwide. If quality is important, those who deliver it should be rewarded.

For our Hospice business, the Hospice Compare May 2018 release of quality metrics shows Amedisys outperforming the national average in all seven measurement categories. We are very pleased with these initial results and fully expect our Hospice quality performance to lead the industry.

Moving on to the employer of choice, as you know, we are a people business. As we discussed throughout 2017, we are focused on hiring and retaining best-in-class talents, whether clinicians, operators, or business development staff. We ended the first quarter with 755 BD FTEs and have steadily increased this number the past four quarters.

We have also worked tirelessly to improve our retention, with full-time voluntary turnover at approximately 22%. We will continue to focus on lowering turnover further in 2018. Anticipating a tighter clinical labor market, we have specifically identified nursing turnover as an area of focus. We believe that retaining our clinical staff has a direct impact on our ability to drive down readmission rates, increase productivity, and ultimately provide better care to our patients.

Now let's discuss operational efficiency. Last quarter, we discussed the productivity improvements we are seeing from the rollout of our labor and productivity and staffing tool. As you may recall, this tool helps our care centers to predict clinician demand and then optimize clinician scheduling. We continue to see its impact on productivity across all disciplines, with skilled nursing productivity improving nearly 8% and PT productivity improving nearly 11% since February of 2017.

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