Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - LHC Group, IncFinancial_Report.xls
EX-31.2 - EXHIBIT - LHC Group, Inclhc-20140930exx312.htm
EX-31.1 - EXHIBIT - LHC Group, Inclhc-20140930exx311.htm
EX-32.1 - EXHIBIT - LHC Group, Inclhc-20140930exx321.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-33989
 
LHC GROUP, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
71-0918189
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
420 West Pinhook Road, Suite A
Lafayette, LA 70503
(Address of principal executive offices including zip code)
(337) 233-1307
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
  
¨
 
Accelerated filer
 
ý
 
 
 
 
Non-accelerated filer
  
¨  (Do not check if a smaller reporting company)
 
Smaller reporting company  
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Number of shares of common stock, par value $0.01, outstanding as of November 6, 2014: 17,798,483 shares.



LHC GROUP, INC.
INDEX
 
 
 
Page
Part I. Financial Information
 
Item 1.
 
Item 2.
Item 3.
Item 4.
Part II. Other Information
 
Item 1.
Item 1A.
Item 2.
Item 6.

2


PART I — FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
 
September 30, 
 2014
 
December 31, 
 2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
4,876

 
$
14,014

Receivables:
 
 
 
Patient accounts receivable, less allowance for uncollectible accounts of $17,463 and $14,334, respectively
99,652

 
88,964

Other receivables
828

 
608

Amounts due from governmental entities
990

 
1,234

Total receivables, net
101,470

 
90,806

Deferred income taxes
11,152

 
9,251

Prepaid income taxes

 
4,069

Prepaid expenses
8,160

 
6,966

Other current assets
4,205

 
4,449

Receivable due from insurance carrier
7,850

 

Total current assets
137,713

 
129,555

Property, building and equipment, net of accumulated depreciation of $46,022 and $40,935, respectively
33,798

 
31,052

Goodwill
242,218

 
194,893

Intangible assets, net of accumulated amortization of $6,020 and $4,518, respectively
79,988

 
62,184

Other assets
1,914

 
4,542

Total assets
$
495,631

 
$
422,226

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable and other accrued liabilities
$
19,959

 
$
17,217

Salaries, wages, and benefits payable
30,946

 
31,927

Self-insurance reserve
6,858

 
5,862

Current portion of long-term debt
247

 
249

Amounts due to governmental entities
4,242

 
4,391

Legal settlement payable
7,850

 

Total current liabilities
70,102

 
59,646

Deferred income taxes
31,483

 
29,060

Income tax payable
3,415

 
3,415

Revolving credit facility
64,000

 
22,000

Long-term debt, less current portion
818

 
963

Total liabilities
169,818

 
115,084

Noncontrolling interest — redeemable
11,001

 
11,258

Stockholders’ equity:
 
 
 
LHC Group, Inc. stockholders’ equity:
 
 
 
Common stock — $0.01 par value; 40,000,000 shares authorized; 22,002,988 and 21,801,634 shares issued in 2014 and 2013, respectively
220

 
218

Treasury stock — 4,733,432 and 4,693,647 shares at cost, respectively
(35,638
)
 
(34,715
)
Additional paid-in capital
107,497

 
103,972

Retained earnings
239,837

 
223,534

Total LHC Group, Inc. stockholders’ equity
311,916

 
293,009

Noncontrolling interest — non-redeemable
2,896

 
2,875

Total equity
314,812

 
295,884

Total liabilities and equity
$
495,631

 
$
422,226

See accompanying notes to condensed consolidated financial statements.

3


LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
(Unaudited)
 
 
Three Months Ended  
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
Net service revenue
$
187,713

 
$
164,748

 
$
540,261

 
$
493,003

Cost of service revenue
113,122

 
97,966

 
321,983

 
288,223

Gross margin
74,591

 
66,782

 
218,278

 
204,780

Provision for bad debts
3,974

 
2,708

 
11,699

 
9,833

General and administrative expenses
58,432

 
53,047

 
172,658

 
158,827

Operating income
12,185

 
11,027

 
33,921

 
36,120

Interest expense
(643
)
 
(430
)
 
(1,861
)
 
(1,555
)
Non-operating income
235

 
54

 
159

 
184

Income before income taxes and noncontrolling interest
11,777

 
10,651

 
32,219

 
34,749

Income tax expense
3,924

 
3,782

 
11,199

 
12,236

Net income
7,853

 
6,869

 
21,020

 
22,513

Less net income attributable to noncontrolling interests
1,679

 
1,572

 
4,717

 
5,140

Net income attributable to LHC Group, Inc.’s common stockholders
$
6,174

 
$
5,297

 
$
16,303

 
$
17,373

Earnings per share — basic:
 
 
 
 
 
 
 
Net income attributable to LHC Group, Inc.’s common stockholders
$
0.36

 
$
0.31

 
$
0.95

 
$
1.02

Earnings per share — diluted:
 
 
 
 
 
 
 
Net income attributable to LHC Group, Inc.'s common stockholders
$
0.36

 
$
0.31

 
$
0.94

 
$
1.02

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
17,260,078

 
17,083,201

 
17,213,648

 
17,035,541

Diluted
17,356,916

 
17,182,013

 
17,289,554

 
17,109,675

 




See accompanying notes to the condensed consolidated financial statements.


4


LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Amounts in thousands, except share data)
(Unaudited)
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Noncontrolling
Interest Non
Redeemable
 
Total
Equity

Issued
 
Treasury
 
Amount
 
Shares
 
Amount
 
Shares
 
Balance as of December 31, 2013
$
218

 
21,801,634

 
$
(34,715
)
 
(4,693,647
)
 
$
103,972

 
$
223,534

 
$
2,875

 
$
295,884


Net income

 

 

 

 

 
16,303

 
925

 
17,228

(1)
Sale of noncontrolling interest

 

 

 

 
161

 

 

 
161


Purchase of noncontrolling interest

 

 

 

 
(359
)
 

 

 
(359
)

Noncontrolling interest distributions

 

 

 

 

 

 
(904
)
 
(904
)

Nonvested stock compensation

 

 

 

 
3,086

 

 

 
3,086


Issuance of vested stock

 
174,399

 

 

 

 

 

 


Treasury shares redeemed to pay income tax

 

 
(923
)
 
(39,785
)
 

 

 

 
(923
)

Excess tax benefits — vesting nonvested stock

 

 

 

 
64

 

 

 
64


Issuance of common stock under Employee Stock Purchase Plan
2

 
26,955

 

 

 
573

 

 

 
575


Balance as of September 30, 2014
$
220

 
22,002,988

 
$
(35,638
)
 
(4,733,432
)
 
$
107,497

 
$
239,837

 
$
2,896

 
$
314,812

 
 
(1)
Net income excludes net income attributable to noncontrolling interest-redeemable of $3.8 million during the nine months ending September 30, 2014. Noncontrolling interest-redeemable is reflected outside of permanent equity on the condensed consolidated balance sheets. See Note 9 of the Notes to Condensed Consolidated Financial Statements.



See accompanying notes to condensed consolidated financial statements.

5


LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 
 
Nine Months Ended 
 September 30,
 
2014
 
2013
Operating activities:
 
 
 
Net income
$
21,020

 
$
22,513

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
6,874

 
5,958

Provision for bad debts
11,699

 
9,833

Stock-based compensation expense
3,086

 
2,879

Deferred income taxes
522

 
480

Loss on sale of assets
21

 
17

Changes in operating assets and liabilities, net of acquisitions:
 
 
 
Receivables
(12,868
)
 
(18,462
)
Prepaid expenses and other assets
280

 
(1,114
)
Prepaid income taxes
4,005

 
4,262

Accounts payable and accrued expenses
(1,283
)
 
645

Net amounts due to/from governmental entities
95

 
(631
)
Net cash provided by operating activities
33,451

 
26,380

Investing activities:
 
 
 
Purchases of property, building and equipment
(4,872
)
 
(5,997
)
Cash paid for acquisitions, primarily goodwill and intangible assets
(73,194
)
 
(26,920
)
Net cash (used in) investing activities
(78,066
)
 
(32,917
)
Financing activities:
 
 
 
Proceeds from line of credit
72,000

 
64,500

Payments on line of credit
(30,000
)
 
(60,000
)
Proceeds from employee stock purchase plan
575

 
570

Proceeds from debt issuance

 
1,138

Payments on debt
(147
)
 

Noncontrolling interest distributions
(5,086
)
 
(6,286
)
Payment of deferred financing fees
(900
)
 

Excess tax benefits from vesting of stock awards
124

 
11

Redemption of treasury shares
(923
)
 
(794
)
Purchase of additional controlling interest
(359
)
 
(1,879
)
Sale of noncontrolling interest
193

 

Net cash provided by (used in) financing activities
35,477

 
(2,740
)
Change in cash
(9,138
)
 
(9,277
)
Cash at beginning of period
14,014

 
9,720

Cash at end of period
$
4,876

 
$
443

Supplemental disclosures of cash flow information:
 
 
 
Interest paid
$
1,827

 
$
1,523

Income taxes paid
$
6,946

 
$
18,123

See accompanying notes to condensed consolidated financial statements.


6


LHC GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization
LHC Group, Inc. (the “Company”) is a health care provider specializing in the post-acute continuum of care primarily for Medicare beneficiaries. The Company provides home-based services, primarily through home nursing agencies and community based service agencies, hospice services and facility-based services, primarily through long-term acute care hospitals (“LTACHs”). As of September 30, 2014, the Company, through its wholly- and majority-owned subsidiaries, equity joint ventures and controlled affiliates, operated 348 service providers in 29 states within the continental United States.
Unaudited Interim Financial Information
The condensed consolidated balance sheets as of September 30, 2014 and December 31, 2013, and the related condensed consolidated statements of income for the three and nine months ended September 30, 2014 and 2013, condensed consolidated statement of changes in equity for the nine months ended September 30, 2014, condensed consolidated statements of cash flows for the nine months ended September 30, 2014 and 2013 and related notes (collectively, these financial statements and the related notes are referred to herein as the “interim financial information”) have been prepared by the Company. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been included. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from the interim financial information presented. This report should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2014, which includes information and disclosures not included herein.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue and expenses during the reporting period. Actual results could differ from those estimates.
Critical Accounting Policies
The Company’s most critical accounting policies relate to the principles of consolidation, revenue recognition and accounts receivable and allowances for uncollectible accounts.
Principles of Consolidation
The interim financial information includes all subsidiaries and entities controlled by the Company. Control is defined by the Company as ownership of a majority of the voting interest of an entity. The interim financial information includes entities in which the Company receives a majority of the entities’ expected residual returns and absorbs a majority of the entities’ expected losses, as a result of ownership, contractual or other financial interests in the entity. Third party equity interests in the consolidated joint ventures are reflected as noncontrolling interests in the Company’s interim financial information.






7


The following table summarizes the percentage of net service revenue earned by type of ownership or relationship the Company had with the operating entity:
 
 
Three Months Ended  
 September 30,
 
Nine Months Ended  
 September 30,
 
2014
 
2013
 
2014
 
2013
Wholly-owned subsidiaries
54.5
%
 
49.3
%
 
52.9
%
 
48.4
%
Equity joint ventures
42.9

 
48.1

 
44.5

 
48.9

License leasing arrangements
1.8

 
1.8

 
1.8

 
1.9

Management services
0.8

 
0.8

 
0.8

 
0.8

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
All significant intercompany accounts and transactions have been eliminated in the Company’s accompanying interim financial information. Business combinations accounted for under the acquisition method have been included in the interim financial information from the respective dates of acquisition.
The following describes the Company’s consolidation policy with respect to its various ventures excluding wholly-owned subsidiaries:
Equity Joint Ventures
The members of the Company’s equity joint ventures participate in profits and losses in proportion to their equity interests. The Company consolidates these entities as the Company has voting control over the entities. The Company owns a majority equity interest ranging from 51% to 91% in these joint ventures.
License Leasing Arrangements
The Company, through wholly-owned subsidiaries, leases home health licenses necessary to operate certain of its home nursing and hospice agencies. The Company owns 100% of the equity of these entities and consolidates them based on such ownership.
Management Services
The Company has various management services agreements under which the Company manages certain operations of agencies and facilities. The Company does not consolidate these agencies or facilities because the Company does not have an ownership interest in, and does not have an obligation to absorb losses of, the entities that own the agencies and facilities or the right to receive the benefits from those entities.
Revenue Recognition
The Company reports net service revenue at the estimated net realizable amount due from Medicare, Medicaid and others for services rendered. The Company assesses the patient's ability to pay for their healthcare services at the time of patient admission based on the Company's verification of the patient's insurance coverage under the Medicare, Medicaid, and other commercial or managed care insurance program. All such payors contribute to the net service revenue of the Company’s home-based services, hospice services and facility-based services.






8


The following table sets forth the percentage of net service revenue earned by category of payor for the three and nine months ended September 30, 2014 and 2013:
 
 
Three Months Ended  
 September 30,
 
Nine Months Ended  
 September 30,
 
2014
 
2013
 
2014
 
2013
Payor:
 
 
 
 
 
 
 
Medicare
75.2
%
 
80.3
%
 
76.3
%
 
79.8
%
Medicaid
1.7

 
1.3

 
1.4

 
1.4

Other
23.1

 
18.4

 
22.3

 
18.8

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
The following table sets forth the percentage of net service revenue contributed from each reporting segment for the three and nine months ended September 30, 2014 and 2013:
 
 
Three Months Ended  
 September 30,
 
Nine months ended September 30,
 
2014
 
2013
 
2014
 
2013
Home-based services
81.3
%
 
80.6
%
 
80.6
%
 
80.0
%
Hospice services
9.1

 
8.6

 
9.1

 
8.3

Facility-based services
9.6

 
10.8

 
10.3

 
11.7

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
Medicare
Home-Based Services
Home Nursing Services. The Company’s home nursing Medicare patients are classified into one of 153 home health resource groups prior to receiving services. Based on the patient’s home health resource group, the Company is entitled to receive a standard prospective Medicare payment for delivering care over a 60-day period referred to as an episode. The Company recognizes revenue based on the number of days elapsed during an episode of care within the reporting period.
Final payments from Medicare may reflect one of four retroactive adjustments to ensure the adequacy and effectiveness of the total reimbursement: (a) an outlier payment if the patient’s care was unusually costly; (b) a low utilization adjustment if the number of visits was fewer than five; (c) a partial payment if the patient transferred to another provider before completing the episode; or (d) a payment adjustment based upon the level of therapy services required in the population base. In calculating net service revenue, management estimates the impact of these payment adjustments based on historical experience and records this estimate as the services are rendered using the expected level of services that will be provided.
Hospice Services
The Company is paid by Medicare under a per diem payment system. The Company receives one of four predetermined daily or hourly rates based upon the level of care the Company furnished. The Company records net service revenue from hospice services based on the daily or hourly rate and recognizes revenue as hospice services are provided.
Hospice payments are subject to an inpatient cap and an overall Medicare payment cap. The inpatient cap relates to individual programs receiving more than 20% of its total Medicare reimbursement from inpatient care services and the overall Medicare payment cap relates to individual providers receiving reimbursements in excess of a “cap amount,” calculated by multiplying the number of beneficiaries during the period by a statutory amount that is indexed for inflation. The determination for each cap is made annually based on the 12-month period ending on October 31 of each year. The Company monitors its limits on a provider-by-provider basis and records an estimate of its liability for reimbursements received in excess of the cap amount. Annually, the Company receives notification of whether any of its hospice providers have exceeded either cap. As of September 30, 2014, the Company recorded $1.1 million for estimated liabilities in amounts due to governmental entities, of which $0.6 million relates to the cap year ended October 31, 2014 and $0.5 million relates to the cap years ended prior to October 31, 2013.

9


Facility-Based Services
The Company is reimbursed by Medicare for services provided under the LTACH prospective payment system. Each patient is assigned a long-term care diagnosis-related group. The Company is paid a predetermined fixed amount intended to reflect the average cost of treating a Medicare patient classified in that particular long-term care diagnosis-related group. For selected patients, the amount may be further adjusted based on length of stay and facility-specific costs, as well as in instances where a patient is discharged and subsequently re-admitted, among other factors. The Company calculates the adjustment based on a historical average of these types of adjustments for claims paid. Similar to other Medicare prospective payment systems, the rate is also adjusted for geographic wage differences. Revenue is recognized for the Company’s LTACHs as services are provided.
Medicaid, managed care and other payors
The Company’s Medicaid reimbursement is based on a predetermined fee schedule applied to each service provided. Therefore, revenue is recognized for Medicaid services as services are provided based on this fee schedule. The Company’s managed care and other payors reimburse the Company based upon a predetermined fee schedule or an episodic basis, depending on the terms of the applicable contract. Accordingly, the Company recognizes revenue from managed care and other payors in the same manner as the Company recognizes revenue from Medicare or Medicaid.
Accounts Receivable and Allowances for Uncollectible Accounts
The Company reports accounts receivable net of estimated allowances for uncollectible accounts and adjustments. Accounts receivable are uncollateralized and primarily consist of amounts due from Medicare, other third-party payors and patients. To provide for accounts receivable that could become uncollectible in the future, the Company establishes an allowance for uncollectible accounts to reduce the carrying amount of such receivables to their estimated net realizable value. The credit risk for other concentrations of receivables is limited due to the significance of Medicare as the primary payor. The Company believes the credit risk associated with its Medicare accounts, which have historically exceeded 58% of its patient accounts receivable, is limited due to (i) the historical collection rate from Medicare and (ii) the fact that Medicare is a U.S. government payor. The Company does not believe that there are any other concentrations of receivables from any particular payor that would subject it to any significant credit risk in the collection of accounts receivable.
The provision for bad debts is based upon the Company’s assessment of historical and expected net collections, business and economic conditions and trends in government reimbursement. Uncollectible accounts are written off when the Company has determined the account will not be collected.
A portion of the estimated Medicare prospective payment system reimbursement from each submitted home nursing episode is received in the form of a request for anticipated payment (“RAP”). The Company submits a RAP for 60% of the estimated reimbursement for the initial episode at the start of care. The full amount of the episode is billed after the episode has been completed. The RAP received for that particular episode is deducted from the final payment. If a final bill is not submitted within the greater of 120 days from the start of the episode, or 60 days from the date the RAP was paid, any RAP received for that episode will be recouped by Medicare from any other Medicare claims in process for that particular provider. The RAP and final claim must then be resubmitted. For subsequent episodes of care contiguous with the first episode for a particular patient, the Company submits a RAP for 50% instead of 60% of the estimated reimbursement.
The Company’s services to the Medicare population are paid at prospectively set amounts that can be determined at the time services are rendered. The Company’s Medicaid reimbursement is based on a predetermined fee schedule applied to each individual service it provides. The Company’s managed care contracts and contracts with other payors provide for payments based upon a predetermined fee schedule or an episodic basis, depending on the terms of the applicable contract. Because of its payor mix, the Company is able to calculate its actual amount due at the patient level and adjust the gross charges down to the actual amount at the time of billing. This negates the need to record an estimated contractual allowance when reporting net service revenue for each reporting period.
Other Significant Accounting Policies
Earnings Per Share
Basic per share information is computed by dividing the relevant amounts from the condensed consolidated statements of income by the weighted-average number of shares outstanding during the period, under the treasury stock method. Diluted per share information is also computed using the treasury stock method, by dividing the relevant amounts from the condensed consolidated statements of income by the weighted-average number of shares outstanding plus potentially dilutive shares.

10


The following table sets forth shares used in the computation of basic and diluted per share information:
 
 
Three Months Ended  
 September 30,
 
Nine Months Ended  
 September 30,
 
2014
 
2013
 
2014
 
2013
Weighted average number of shares outstanding for basic per share calculation
17,260,078

 
17,083,201

 
17,213,648

 
17,035,541

Effect of dilutive potential shares:
 
 
 
 
 
 
 
Options
4,367

 
4,208

 
4,151

 
4,032

Nonvested stock
92,471

 
94,604

 
71,755

 
70,102

Adjusted weighted average shares for diluted per share calculation
17,356,916

 
17,182,013

 
17,289,554

 
17,109,675

Anti-dilutive shares
3,500

 
94,299

 
173,360

 
181,648

Recently Issued Accounting Pronouncements
FASB issued Accounting Standards Update 2014-8 Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-8”) in April 2014. ASU 2014-8 changed the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on a Company’s operations and financial results. ASU 2014-8 also requires additional disclosures for discontinued operations. ASU 2014-8 is effective for annual periods beginning after December 15, 2014 and for interim periods within those years. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued or available for issuance. The Company adopted this guidance during the three months ended June 30, 2014.
On May 28, 2014, the FASB issued ASU No. 2014-9, Revenue from Contracts with Customers, ("ASU 2014-9") which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-9 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on January 1, 2017. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-9 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.
3. Acquisitions and Disposals
Pursuant to the Company’s strategy for becoming the leading provider of post-acute health care services in the United States, the Company acquired 44 home-based agencies and six hospice agencies during the nine months ended September 30, 2014. The Company maintains an ownership interest in the acquired businesses as set forth below:
 

11


Acquired Businesses
Ownership
Percentage
 
State of Operations
 
Acquisition
Date
EAMC — Lanier Home Health
75
%
 
Alabama
 
2/1/2014
Lifeline Home Health
100
%
 
Kentucky
 
2/1/2014
Louisiana Hospice & Palliative Care of New Orleans
100
%
 
Louisiana
 
3/1/2014
West Virginia Home Health
100
%
 
West Virginia
 
4/1/2014
St. Joseph’s Hospice
100
%
 
West Virginia
 
4/1/2014
Northwestern Illinois Home Health
100
%
 
Illinois
 
4/1/2014
Deaconess-Lifeline Home Health
100
%
 
Kentucky
 
4/1/2014
Deaconess HomeCare
100
%
 
Mississippi
 
4/1/2014
Deaconess HomeCare
100
%
 
Tennessee
 
4/1/2014
Deaconess Hospice
100
%
 
Mississippi
 
4/1/2014
Elk Valley Health Services, LLC
100
%
 
Tennessee
 
4/1/2014
North Carolina Home Health
100
%
 
North Carolina
 
5/1/2014
Professional Nursing Services
100
%
 
North Carolina
 
5/1/2014
Life Care at Home
100
%
 
Massachusetts
 
9/1/2014
Life Care at Home of Tennessee
100
%
 
Tennessee
 
9/1/2014
Life Care at Home
100
%
 
Utah
 
9/1/2014
Life Care at Home
100
%
 
Arizona
 
9/1/2014
At Home Healthcare
100
%
 
Colorado
 
9/1/2014
Life Care at Home
100
%
 
Washington
 
9/1/2014
Each of the acquisitions was accounted for under the acquisition method of accounting, and, accordingly, the accompanying interim financial information includes the results of operations of each acquired entity from the date of acquisition.
The total aggregate purchase price for the Company’s acquisitions was $74.7 million, of which $73.2 million was paid in cash. The purchase prices are determined based on the Company’s analysis of comparable acquisitions and the target market’s potential future cash flows. The Company paid $0.9 million in acquisition-related costs, which was recorded in general and administrative expenses.
The Company’s home-based services segment recognized aggregate goodwill of $43.8 million for the acquisitions and hospice services segment recognized aggregate goodwill of $3.6 million. Goodwill generated from the acquisitions was recognized based on the expected contributions of each acquisition to the overall corporate strategy. The Company expects its portion of goodwill to be fully tax deductible. The following table summarizes the aggregate consideration paid for the acquisitions and the amounts of the assets acquired and liabilities assumed at the acquisition dates, as well as the fair value at the acquisition dates of the noncontrolling interest acquired (amounts in thousands):
 
Consideration
 
Cash
$
73,194

Fair value of total consideration transferred
$
73,194

Recognized amounts of identifiable assets acquired and liabilities assumed
 
Trade name
$
15,878

Certificates of need/licenses
3,088

Other identifiable intangible assets
448

Accounts receivable
9,739

Fixed assets
486

Accounts payable
(1,170
)
Other assets and (liabilities), net
(2,552
)
Total identifiable assets acquired and liabilities assumed
$
25,917

Noncontrolling interest
$
98

Goodwill, including noncontrolling interest of $38
$
47,375


12


Trade names, certificates of need and licenses are indefinite-lived assets and, therefore, not subject to amortization. Acquired trade names that are not being used actively are amortized over the estimated useful life on the straight line basis. The other identifiable assets include non-compete agreements that are amortized over the life of the agreements ranging from two to five years. Noncontrolling interest is valued at fair value by applying a discount to the value of the acquired entity for lack of control. The fair value of the acquired intangible assets is preliminary pending the final valuation of those assets.
The net service revenue of the Deaconess and Elk Valley acquisition from the acquisition date through September 30, 2014 was $35.1 million and contributed $0.7 million to net income. The following pro forma information presents the combined results of operations of the Company and Deaconess and Elk Valley for the nine months ended September 30, 2014 and 2013 as if the acquisition occurred on January 1, 2013 (amounts in thousands, except earnings per share):
 
 
Nine months ended September 30,
 
2014
 
2013
Net service revenue
$
557,802

 
$
547,210

Net income attributable to LHC Group, Inc.’s common stockholders
16,118

 
18,120

Earnings per share — basic
0.94

 
1.06

Earnings per share — diluted
0.93

 
1.06

The pro forma information presented above includes adjustments for (i) depreciation expense, (ii) amortization of identifiable intangible assets, (iii) income tax provision using the Company’s effective tax rate and (iv) estimate of additional costs to provide administrative costs for these locations. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred. In addition, future results may vary significantly from the results reflected in the pro forma information.
Sale of Membership Interest in Companys Subsidiary
During the nine months ended September 30, 2014, the Company sold membership interests in one equity joint venture. The total sale price was $0.2 million.
Purchase of Membership Interest in Company’s Subsidiary
During the nine months ended September 30, 2014, the Company purchased additional membership interests in two equity joint ventures. The total purchase price for the additional membership interests was $0.4 million, which resulted in the Company reducing additional paid in capital by the full purchase price.
4. Goodwill and Intangibles
The changes in recorded goodwill by reporting unit for the nine months ended September 30, 2014 were as follows (amounts in thousands):
 
 
Home-Based
reporting unit
 
Community
Based
reporting unit
 
Hospice
reporting unit
 
Facility-Based
reporting unit
 
Total
Balance as of December 31, 2013
$
173,574

 
$
265

 
$
9,463

 
$
11,591

 
$
194,893

Goodwill from acquisitions
26,899

 
16,874

 
3,564

 

 
47,337

Goodwill related to noncontrolling interests
38

 

 

 

 
38

Goodwill related to disposal
(50
)
 

 

 

 
(50
)
Balance as of September 30, 2014
$
200,461

 
$
17,139

 
$
13,027

 
$
11,591

 
$
242,218




13


Intangible assets consisted of the following as of September 30, 2014 and December 31, 2013 (amounts in thousands):
 
 
September 30, 2014
 
Estimated useful life
 
Gross
carrying
amount
 
Accumulated
amortization
 
Net
carrying
amount
Indefinite-lived assets:
 
 
 
 
 
 
 
Trade names
Indefinite
 
$
59,893

 

 
$
59,893

Certificates of need/licenses
Indefinite
 
13,610

 

 
13,610

Indefinite-lived balance at end of period
 
 
$
73,503

 

 
$
73,503

Definite-lived assets:
 
 
 
 
 
 
 
Trade names
2 months — 5 years
 
$
8,214

 
$
(2,313
)
 
$
5,901

Non-compete agreements
1 month — 3 years
 
4,269

 
(3,707
)
 
562

Favorable leases
9 months — 3 years
 
22

 

 
22

Definite-lived balance at end of period
 
 
$
12,505

 
$
(6,020
)
 
$
6,485

Balance as of September 30, 2014
 
 
$
86,008

 
$
(6,020
)
 
$
79,988

 
 
December 31, 2013
 
Estimated useful life
 
Gross
carrying
amount
 
Accumulated
amortization
 
Net
carrying
amount
Indefinite-lived assets:
 
 
 
 
 
 
 
Trade names
Indefinite
 
$
46,707

 

 
$
46,707

Certificates of need/licenses
Indefinite
 
10,540

 

 
10,540

Indefinite-lived balance at end of period
 
 
$
57,247

 

 
$
57,247

Definite-lived assets:
 
 
 
 
 
 
 
Trade names
3 months — 5 years
 
$
5,625

 
$
(1,055
)
 
$
4,570

Non-compete agreements
3 months — 2 years
 
3,830

 
(3,463
)
 
367

Definite-lived balance at end of period
 
 
$
9,455

 
$
(4,518
)
 
$
4,937

Balance as of December 31, 2013
 
 
$
66,702

 
$
(4,518
)
 
$
62,184

Intangible assets of $74.0 million, net of accumulated amortization, were related to the home-based services segment, $5.0 million were related to the hospice segment, and $1.0 million were related to the facility-based services segment as of September 30, 2014.
5. Debt
Credit Facility
On June 18, 2014, the Company entered into a Credit Agreement (the “Credit Agreement”) with Capital One, National Association, which provides a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of $225.0 million and a letter of credit sub-limit equal to $15.0 million. The Credit Agreement replaces the Third Amended and Restated Credit Agreement with Capital One, National Association, dated August 31, 2012. The expiration date of the Credit Agreement is June 18, 2019. Revolving loans under the Credit Agreement bear interest at either a (1) Base Rate, which is defined as a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate in effect on such day plus 0.5% (b) the Prime Rate in effect on such day and (c) the Eurodollar Rate for a one month interest period on such day plus 1.0%, plus a margin ranging from 0.75% to 1.5% per annum or (2) Eurodollar rate plus a margin ranging from 1.75% to 2.5% per annum. Swing line loans bear interest at the Base Rate. The Company is limited to 15 Eurodollar borrowings outstanding at the same time. The Company is required to pay a commitment fee for the unused commitments at rates ranging from 0.225% to 0.375% per annum depending upon the Company’s consolidated Leverage Ratio, as defined in the Credit Agreement. The Base Rate at September 30, 2014 was 4.50% and the Eurodollar rate was 2.40%. As of September 30, 2014, the interest rate on outstanding borrowings was 2.40%.

14


As of September 30, 2014 and December 31, 2013, respectively, the Company had $64.0 million and $22.0 million drawn and letters of credit totaling $7.1 million and $6.7 million outstanding under its credit facilities with Capital One, National Association.
As of September 30, 2014, the Company had $153.9 million available for borrowing under the Credit Agreement with Capital One, National Association.
Promissory Note
On January 7, 2014, the Company entered into a promissory note with American Bank & Trust Company in an aggregate principal amount of $1.2 million. The promissory note matures on January 6, 2019. Principal payments of $20,000 are due monthly over a period of 60 months. The interest rate on the promissory note is a fixed rate of 4.50%.
6. Income Taxes
As of September 30, 2014, an unrecognized tax benefit of $3.4 million was recorded in income tax payable, which, if recognized, would decrease the Company’s effective tax rate. All of the Company’s unrecognized tax benefit is due to the settlement with the United States of America, which was announced September 30, 2011. On July 30, 2014, the Internal Revenue Service (“IRS”) issued a notice of proposed adjustment asserting that a portion of the original tax deduction claimed by the Company associated with the settlement with the United States of America should be disallowed. The Company advised the IRS that it disagreed with the proposed adjustment. In October 2014, the IRS issued a 30-day letter, formally asserting their position. The Company intends to vigorously defend its original position of the deductibility of the full settlement amount on its 2011 tax return.
7. Stockholder’s Equity
Equity Based Awards
The 2010 Long Term Incentive Plan (the “2010 Incentive Plan”) is administered by the Compensation Committee of the Company’s Board of Directors. A total of 1,500,000 shares of the Company’s common stock are reserved and available for issuance pursuant to awards granted under the 2010 Incentive Plan. A variety of discretionary awards for employees, officers, directors and consultants are authorized under the 2010 Incentive Plan, including incentive or non-qualified statutory stock options and nonvested stock. All awards must be evidenced by a written award certificate which will include the provisions specified by the Compensation Committee of the Board of Directors. The Compensation Committee determines the exercise price for non-statutory stock options. The exercise price for any option cannot be less than the fair market value of the Company’s common stock as of the date of grant.
Share Based Compensation
Nonvested Stock
During the nine months ended September 30, 2014, the Company’s independent directors were granted 26,900 nonvested shares of common stock under the 2005 Director Compensation Plan. The shares were drawn from the 1,500,000 shares of common stock reserved and available for issuance under the 2010 Incentive Plan. The shares vest 100% on the one year anniversary date. During the nine months ended September 30, 2014, employees were granted 172,545 nonvested shares of common stock pursuant to the 2010 Incentive Plan. The shares vest over a five year period, conditioned on continued employment for the full incentive period. The fair value of nonvested shares of common stock is determined based on the closing trading price of the Company’s common stock on the grant date. The weighted average grant date fair value of nonvested shares of common stock granted during the nine months ended September 30, 2014 was $23.59.






15


The following table represents the nonvested stock activity for the nine months ended September 30, 2014:
 
 
Number of
Shares
 
Weighted
average grant
date fair value
Nonvested shares outstanding as of December 31, 2013
506,467

 
$
22.08

Granted
199,445

 
$
23.59

Vested
(175,862
)
 
$
21.94

Forfeited
(2,890
)
 
$
24.56

Nonvested shares outstanding as of September 30, 2014
527,160

 
$
22.15

During the nine months ended September 30, 2014, an independent director of the Company received a share based award, which will be settled in cash at March 1, 2015. The amount of such cash payment will equal the fair market value of 2,600 shares on the settlement date.
As of September 30, 2014, there was $9.0 million of total unrecognized compensation cost related to nonvested shares of common stock granted. That cost is expected to be recognized over the weighted average period of 3.25 years. The total fair value of shares of common stock vested during the nine months ended September 30, 2014 and 2013 was $3.9 million and $3.8 million, respectively. The Company records compensation expense related to nonvested stock awards at the grant date for shares of common stock that are awarded fully vested, and over the vesting term on a straight line basis for shares of common stock that vest over time. The Company recorded $3.1 million and $2.9 million of compensation expense related to nonvested stock grants in the nine months ended September 30, 2014 and 2013, respectively.
Employee Stock Purchase Plan
In 2006, the Company adopted the Employee Stock Purchase Plan whereby eligible employees may purchase the Company’s common stock at 95% of the market price on the last day of the calendar quarter. There were 250,000 shares of common stock initially reserved for the plan. In 2013, the Company adopted the Amended and Restated Employee Stock Purchase Plan, which reserved an additional 250,000 shares of common stock to the plan.
The table below details the shares of common stock issued during 2014:
 
 
Number of
Shares
 
Per share
price
Shares available as of December 31, 2013
272,788

 
 
Shares issued during three months ended March 31, 2014
8,025

 
$
22.84

Shares issued during three months ended June 30, 2014
9,887

 
$
20.96

Shares issued during three months ended September 30, 2014
9,043

 
$
20.30

Shares available as of September 30, 2014
245,833

 
 
Stock Options
As of September 30, 2014, 15,000 options were issued and exercisable. During the nine months ended September 30, 2014, no options were exercised or forfeited and no options were granted.
Treasury Stock
In conjunction with the vesting of the nonvested shares of common stock, recipients incur personal income tax obligations. The Company allows the recipients to turn in shares of common stock to satisfy minimum tax obligations. During the nine months ended September 30, 2014, the Company redeemed 39,785 shares of common stock valued at $0.9 million, related to these tax obligations.


16


8. Commitments and Contingencies
Contingencies
The Company is involved in various legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, management believes the outcome of pending litigation will not have a material adverse effect, after considering the effect of the Company’s insurance coverage, on the Company’s interim financial information.
On June 13, 2012, a putative shareholder securities class action was filed against the Company and its Chairman and Chief Executive Officer in the United States District Court for the Western District of Louisiana, styled City of Omaha Police & Fire Retirement System v. LHC Group, Inc., et al., Case No. 6:12-cv-1609-JTT-CMH. The action was filed on behalf of LHC shareholders who purchased shares of the Company’s common stock between July 30, 2008 and October 26, 2011. Plaintiff generally alleges that the defendants caused false and misleading statements to be issued in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (“the Exchange Act”) and Rule 10b-5 promulgated thereunder and that the Company’s Chairman and Chief Executive Officer is a control person under Section 20(a) of the Exchange Act. On November 2, 2012, Lead Plaintiff City of Omaha Police & Fire Retirement System filed an Amended Complaint for Violations of the Federal Securities Laws (“the Amended Complaint”) on behalf of the same putative class of LHC shareholders as the original Complaint. In addition to claims under Sections 10(b) and 20(a) of the Exchange Act, the Amended Complaint added a claim against the Chairman and Chief Executive Officer for violation of Section 20A of the Exchange Act. The Company believes these claims are without merit. On December 17, 2012, the Company and the Chairman and Chief Executive Officer filed a motion to dismiss the Amended Complaint, which was denied by Order dated March 15, 2013. On June 16, 2014, following mediation, the parties entered into a Stipulation of Settlement. On August 5, 2014, the District Court entered an Order Preliminarily Approving Settlement and Providing for Notice and setting a final fairness hearing for December 11, 2014. If approved, as part of the settlement, the Company’s insurance carrier will fund the entire $7.9 million settlement amount. The Company’s balance sheet reflects the entire settlement in current assets as a receivable due from insurance carrier and correspondingly reflects the entire settlement in current liabilities as a legal settlement payable.
On October 18, 2013, a derivative complaint was filed by a purported Company shareholder against certain of the Company’s current and former executive officers, employees and members of its Board of Directors in the United States District Court for the Western District of Louisiana, styled Plummer v. Myers, et al., Case No. 6:13-cv-2899-JTT-CMH. The action was brought derivatively on behalf of the Company, which is also named as a nominal defendant. Plaintiff generally alleges that the individual defendants breached their fiduciary duties owed to the Company. The complaint also alleges claims for insider selling and unjust enrichment against the Company’s Chairman and Chief Executive Officer and the Company’s former President and Chief Operating Officer.
On December 30, 2013, a related derivative complaint was filed by a purported Company shareholder against certain of the Company’s current and former executive officers, employees and members of its Board of Directors in the United States District Court of the Western District of Louisiana, styled McCormack v. Myers, et al., Case No. 6:13-cv-3301-JTT-CMH. The action was brought derivatively on the Company’s behalf and the Company was also named as a nominal defendant. Plaintiff generally alleges that the individual defendants breached their fiduciary duties owed to the Company and wasted corporate assets. Plaintiff also alleges that the Company’s Chairman and Chief Executive Officer caused false and misleading statements to be issued in violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and that the Company’s Directors are control persons under Section 20(a) of the Exchange Act. The complaint also alleges claims for insider selling, misappropriation of information and unjust enrichment against the Company’s Chairman and Chief Executive Officer and the Company’s former President and Chief Operating Officer.
On March 25, 2014, the McCormack derivative action was consolidated with the Plummer derivative action described above and stayed pending the conclusion of expert discovery in the related City of Omaha shareholder securities class action described above. The parties are presently discussing future case scheduling. The Company believes these claims are without merit and intends to defend this consolidated lawsuit vigorously. The Company cannot predict the outcome or effect of this consolidated lawsuit, if any, on the Company’s financial condition and results of operations.
Except as discussed above, the Company is not aware of any pending or threatened investigations involving allegations of potential wrongdoing.
Any negative findings in the above described lawsuits could result in substantial financial penalties or awards against the Company. At this time, the Company cannot predict the ultimate outcome of these matters or the potential range of damages, if any.

17



Joint Venture Buy/Sell Provisions
Most of the Company’s joint ventures include a buy/sell option that grants to the Company and its joint venture partners the right to require the other joint venture party to either purchase all of the exercising member’s membership interests or sell to the exercising member all of the non-exercising member’s membership interest, at the non-exercising member’s option, within 30 days of the receipt of notice of the exercise of the buy/sell option. In some instances, the purchase price is based on a multiple of the historical or future earnings before income taxes and depreciation and amortization of the equity joint venture at the time the buy/sell option is exercised. In other instances, the buy/sell purchase price will be negotiated by the partners and subject to a fair market valuation process. The Company has not received notice from any joint venture partners of their intent to exercise the terms of the buy/sell agreement nor has the Company notified any joint venture partners of its intent to exercise the terms of the buy/sell agreement.
Compliance
The laws and regulations governing the Company’s operations, along with the terms of participation in various government programs, regulate how the Company does business, the services offered and its interactions with patients and the public. These laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws or regulations, or their interpretations, or the enactment of new laws or regulations could materially and adversely affect the Company’s operations and financial condition.
The Company is subject to various routine and non-routine governmental reviews, audits and investigations. In recent years, federal and state civil and criminal enforcement agencies have heightened and coordinated their oversight efforts related to the health care industry, including referral practices, cost reporting, billing practices, joint ventures and other financial relationships among health care providers. Violation of the laws governing the Company’s operations, or changes in the interpretation of those laws, could result in the imposition of fines, civil or criminal penalties, and/or termination of the Company’s rights to participate in federal and state-sponsored programs and suspension or revocation of the Company’s licenses. The Company believes that it is in material compliance with all applicable laws and regulations.
9. Noncontrolling interest
Noncontrolling Interest-Redeemable
A majority of the Company’s equity joint venture agreements include a provision that requires the Company to purchase the noncontrolling partner’s interest upon the occurrence of certain triggering events, such as death or bankruptcy of the partner or the partner’s exclusion from the Medicare or Medicaid programs. These triggering events and the related repurchase provisions are specific to each individual equity joint venture; if the repurchase provision is triggered in any one equity joint venture, the remaining equity joint ventures would not be impacted. Upon the occurrence of a triggering event, the Company would be required to purchase the noncontrolling partner’s interest at either the fair value or the book value at the time of purchase, as stated in the applicable joint venture agreement. Historically, no triggering event has occurred, and the Company believes the likelihood of a triggering event occurring is remote. The Company has never been required to purchase the noncontrolling interest of any of its equity joint venture partners. According to authoritative guidance, redeemable noncontrolling interests must be reported outside of permanent equity on the consolidated balance sheet in instances where there is a repurchase provision with a triggering event that is outside the control of the Company.
The following table summarizes the activity of noncontrolling interest-redeemable for the nine months ended September 30, 2014 (amounts in thousands):
 
Balance as of December 31, 2013
$
11,258

Net income attributable to noncontrolling interest-redeemable
3,792

Noncontrolling interest-redeemable distributions
(4,182
)
Sale of noncontrolling interest
32

Purchase of noncontrolling interest
101

Balance as of September 30, 2014
$
11,001


18




10. Allowance for Uncollectible Accounts
The following table summarizes the activity in the allowance for uncollectible accounts for the nine months ended September 30, 2014 (amounts in thousands):
 
Balance as of December 31, 2013
$
14,334

Additions
11,699

Deductions
(8,570
)
Balance as of September 30, 2014
$
17,463

11. Fair Value of Financial Instruments
The carrying amounts of the Company’s cash, receivables, accounts payable and accrued liabilities approximate their fair values because of their short maturity. The estimated fair value of intangible assets acquired was calculated using level 3 inputs based on the present value of anticipated future benefits. For the nine months ended September 30, 2014, the carrying value of the Company’s long-term debt approximates fair value as the interest rates approximates current rates.
12. Segment Information
During the first quarter of 2014, the Company had a change in the composition of segments due to the hospice services meeting the criteria of quantitative thresholds established by ASC 280, Segment Reporting. Prior-period segment data has been restated to reflect the newly reportable segment in which hospice services were previously included in home-based services.
The Company’s reportable segments consist of home-based services, hospice services and facility-based services. Home-based services include home nursing services and community based services. Facility-based services include long-term acute care services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The following tables summarize the Company’s segment information for the three and nine months ended September 30, 2014 and 2013 (amounts in thousands):
 

19


 
Three Months Ended September 30, 2014
 
Home-
Based
Services
 
Hospice
Services
 
Facility-
Based
Services
 
Total
Net service revenue
$
152,648

 
$
17,071

 
$
17,994

 
$
187,713

Cost of service revenue
91,506

 
10,431

 
11,185

 
113,122

Provision for bad debts
3,753

 
269

 
(48
)
 
3,974

General and administrative expenses
48,591

 
4,756

 
5,085

 
58,432

Operating income
8,798

 
1,615

 
1,772

 
12,185

Interest expense
(515
)
 
(64
)
 
(64
)
 
(643
)
Non-operating income
190

 
35

 
10

 
235

Income before income taxes and noncontrolling interest
8,473

 
1,586

 
1,718

 
11,777

Income tax expense
3,034

 
521

 
369

 
3,924

Net income
5,439

 
1,065

 
1,349

 
7,853

Less net income attributable to noncontrolling interests
1,185

 
292

 
202

 
1,679

Net income attributable to LHC Group, Inc.’s common stockholders
$
4,254

 
$
773

 
$
1,147

 
$
6,174

Total assets
$
424,780

 
$
34,622

 
$
36,229

 
$
495,631

 
 
Three Months Ended September 30, 2013
 
Home-
Based
Services
 
Hospice
Services
 
Facility-
Based
Services
 
Total
Net service revenue
$
132,739

 
$
14,171

 
$
17,838

 
$
164,748

Cost of service revenue
78,307

 
8,775

 
10,884

 
97,966

Provision for bad debts
2,333

 
318

 
57

 
2,708

General and administrative expenses
44,002

 
3,967

 
5,078

 
53,047

Operating income
8,097

 
1,111

 
1,819

 
11,027

Interest expense
(348
)
 
(39
)
 
(43
)
 
(430
)
Non-operating income
33

 
3

 
18

 
54

Income before income taxes and noncontrolling interest
7,782

 
1,075

 
1,794

 
10,651

Income tax expense
3,028

 
394

 
360

 
3,782

Net income
4,754

 
681

 
1,434

 
6,869

Less net income attributable to noncontrolling interests
1,077

 
202

 
293

 
1,572

Net income attributable to LHC Group, Inc.’s common stockholders
$
3,677

 
$
479

 
$
1,141

 
$
5,297

Total assets
$
351,804

 
$
27,536

 
$
34,693

 
$
414,033


20


 
Nine Months Ended September 30, 2014
 
Home-
Based
Services
 
Hospice
Services
 
Facility-
Based
Services
 
Total
Net service revenue
$
435,588

 
$
49,361

 
$
55,312

 
$
540,261

Cost of service revenue
258,173

 
29,479

 
34,331

 
321,983

Provision for bad debts
10,475

 
467

 
757

 
11,699

General and administrative expenses
142,747

 
13,994

 
15,917

 
172,658

Operating income
24,193

 
5,421

 
4,307

 
33,921

Interest expense
(1,489
)
 
(186
)
 
(186
)
 
(1,861
)
Non-operating income
103

 
40

 
16

 
159

Income before income taxes and noncontrolling interest
22,807

 
5,275

 
4,137

 
32,219

Income tax expense
8,763

 
1,397

 
1,039

 
11,199

Net income
14,044

 
3,878

 
3,098

 
21,020

Less net income attributable to noncontrolling interests
3,329

 
828

 
560

 
4,717

Net income attributable to LHC Group, Inc.’s common stockholders
$
10,715

 
$
3,050

 
$
2,538

 
$
16,303

 
 
Nine Months Ended September 30, 2013
 
Home-
Based
Services
 
Hospice
Services
 
Facility-
Based
Services
 
Total
Net service revenue
$
394,453

 
$
40,988

 
$
57,562

 
$
493,003

Cost of service revenue
229,466

 
25,458

 
33,299

 
288,223

Provision for bad debts
8,009

 
787

 
1,037

 
9,833

General and administrative expenses
131,048

 
11,860

 
15,919

 
158,827

Operating income
25,930

 
2,883

 
7,307

 
36,120

Interest expense
(1,268
)
 
(136
)
 
(151
)
 
(1,555
)
Non-operating income
94

 
21

 
69

 
184

Income before income taxes and noncontrolling interest
24,756

 
2,768

 
7,225

 
34,749

Income tax expense
9,993

 
1,069

 
1,174

 
12,236

Net income
14,763

 
1,699

 
6,051

 
22,513

Less net income attributable to noncontrolling interests
3,417

 
677

 
1,046

 
5,140

Net income attributable to LHC Group, Inc.’s common stockholders
$
11,346

 
$
1,022

 
$
5,005

 
$
17,373

13. Supplemental Cash Flow Information
During the nine months ended September 30, 2014, $2.6 million of licenses associated with the Company’s Point of Care technology were capitalized as additions to property, building and equipment upon placing associated equipment in service. These licenses were purchased during the twelve months ended December 31, 2010 and previously recorded in other assets on the balance sheet.




21


ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to future plans and strategies, anticipated events or trends, future financial performance and expectations and beliefs concerning matters that are not historical facts or that necessarily depend upon future events. The words “may,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions are intended to identify forward-looking statements. Specifically, this report contains, among others, forward-looking statements about:
 
our expectations regarding financial condition or results of operations for periods after September 30, 2014;
our critical accounting policies;
our business strategies and our ability to grow our business;
our participation in the Medicare and Medicaid programs;
the impact of healthcare reform;
the reimbursement levels of Medicare and other third-party payors;
the prompt receipt of payments from Medicare and other third-party payors;
our future sources of and needs for liquidity and capital resources;
the effect of any changes in market rates on our operations and cash flows;
our ability to obtain financing;
our ability to make payments as they become due;
the outcomes of various routine and non-routine governmental reviews, audits and investigations;
our expansion strategy, the successful integration of recent acquisitions and, if necessary, the ability to relocate or restructure our current facilities;
the value of our proprietary technology;
the impact of legal proceedings;
our insurance coverage;
the costs of medical supplies;
our competitors and our competitive advantages;
our ability to attract and retain valuable employees;
the price of our stock;
our compliance with environmental, health and safety laws and regulations;
our compliance with health care laws and regulations;
our compliance with SEC laws and regulations and Sarbanes-Oxley requirements;
the impact of federal and state government regulation on our business; and
the impact of changes in our future interpretations of fraud, anti-kickback or other laws.
The forward-looking statements included in this report reflect our current views about future events and are based on assumptions and are subject to known and unknown risks and uncertainties. Many important factors could cause actual results

22


or achievements to differ materially from any future results or achievements expressed in or implied by our forward-looking statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. Important factors that could cause actual results or achievements to differ materially from the results or achievements reflected in our forward-looking statements include, among other things, the factors discussed in the Part II, Item 1A. “Risk Factors,” included in this report and in our other filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2013 (the “2013 Form 10-K”), as updated by our subsequent filings with the SEC. This report should be read in conjunction with the 2013 Form 10-K, and all of our other filings, including quarterly reports on Form 10-Q and current reports on Form 8-K made with the SEC through the date of this report.
You should read this report, the information incorporated by reference into this report and the documents filed as exhibits to this report completely and with the understanding that our actual future results or achievements may differ materially from what we expect or anticipate.
The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is filed with the SEC. Except as required by law, we assume no responsibility for updating any forward-looking statements.
We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refer to LHC Group, Inc. and its consolidated subsidiaries.
OVERVIEW
We provide quality cost-effective post-acute health care services to our patients. As of September 30, 2014, we had 348 service providers in 29 states: Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Nevada, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin. Our services are classified into three segments: (1) home-based services offered through our home nursing agencies and community based service agencies; (2) hospice services offered through hospice agencies; and (3) facility-based services offered through our long-term acute care hospitals (“LTACHs”).
Through our home-based services segment we offer a wide range of services, including skilled nursing, private duty nursing, medically-oriented social services, and physical, occupational and speech therapy. As of September 30, 2014, the home-based services segment was comprised of the following:
 
Type of Service
Locations
Home Health
283

Community Based Services
13

Management Companies
3

Specialty Services
1

Total home-based service providers
300

Of our 300 home-based services locations, 182 are wholly-owned by us, 111 are majority-owned by us through equity joint ventures, four are under license lease arrangements and the operations of the remaining three locations are only managed by us. We intend to increase the number of home nursing agencies that we operate through continued acquisitions and organic development.
Through our hospice services segment, we offer a wide range of services, including pain and symptom management, emotional and spiritual support, inpatient and respite care, homemaker services, and counseling. As of September 30, 2014, we operate 38 hospice locations, of which 25 are wholly-owned by us, 11 are majority-owned by us through equity joint ventures and two are under license lease arrangements.
We provide facility-based services principally through our LTACHs. As of September 30, 2014, we operate six LTACHs with 8 locations, of which all but one are located within host hospitals. We also operate a family health center and a pharmacy.

23


Of these 10 facility-based services locations, five are wholly-owned by us and five are majority-owned through equity joint ventures.
The percentage of net service revenue contributed from each reporting segment for the three and nine months ended September 30, 2014 and 2013 was as follows:
 
 
Three Months Ended  
 September 30,
 
Nine Months Ended  
 September 30,
 
2014
 
2013
 
2014
 
2013
Home-based services
81.3
%
 
80.6
%
 
80.6
%
 
80.0
%
Hospice services
9.1

 
8.6

 
9.1

 
8.3

Facility-based services
9.6

 
10.8

 
10.3

 
11.7

 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%

We are in the final phase of our company-wide conversion to point of care technology, which is anticipated to be completed during the fourth quarter of 2014. In conjunction with this final phase of our point of care conversion, we are in the process of eliminating certain general and administrative expenses, consolidating a limited number of locations in service area overlap markets and closing three underperforming providers during the fourth quarter of 2014. These initiatives are estimated to yield annual cost savings of $7 million to $8 million when fully implemented beginning in 2015. As part of these efforts, we expect non-recurring costs in the fourth quarter of 2014 of $3 million to $4 million.
Recent Developments
Home-Based Services
When the Patient Protection and Affordable Care Act (“PPACA”) was enacted in 2010, it changed a number of Medicare payment rates, including the reinstatement of the 3% home health rural add-on, which began on April 1, 2010 (expiring January 1, 2016). Other changes from PPACA that took effect on or after January 1, 2011 are:
 
reducing the market basket adjustment to be determined by CMS for each of 2011, 2012 and 2013 by 1%;
instituting a full productivity adjustment beginning in 2015; and
rebasing of the base payment rate for Medicare beginning in 2014 and phasing in over a four year period.
On November 22, 2013, CMS issued a final rule (effective January 1, 2014) regarding payment rates for home health services provided during 2014, which includes the following elements:
decreased base payment rate by 1.05%, which is made up of a market basket increase of 2.3%, rebasing decrease of 2.75% and HH PPS Grouper refinements decrease of 0.6%.
reduced the average case-mix weight for 2014 from 1.3464 to 1.0000. To offset the effect of resetting the case mix average to 1.000, CMS upwardly-adjusted the national, standardized 60-day episode payment rate by the same factor that it used to decrease the weights from $2,137.73 in 2013 to $2,869.27 in 2014.
removed 170 diagnosis codes from assignment to diagnosis groups within HH PPS Grouper.
begin using ICD-10-CM codes within HH PPS Grouper. On April 1, 2014, the “Protecting Access to Medicare Act of 2014” HR4302 was signed, a provision of which delayed the conversion of ICD-10 by one year, to October 1, 2015.
reduced rebasing amounts for 2014 through 2017 by an aggregate of $80.95, which is 3.5% of 2010 rates or 2.75% of 2013 rates.
On October 30, 2014, CMS issued a final rule (effective January 1, 2015) regarding payment rates for home health services provided during 2015. The net impact of all policies in the rule is a reduction in Medicare payments of 0.3%. CMS estimates that freestanding proprietary agencies will have a 0.9% reduction in Medicare reimbursement compared with 2014 levels. The final rule includes the following elements:
 

24


The national, standardized 60-day episode payment rate will increase from $2,869.27 in 2014 to $2,961.38 in 2015. This is a net 3.2% increase in standardized rate, due to application of (1) a wage index budget neutrality factor (+.24%) and (2) a case mix budget neutrality factor (+ 3.66%) to the 2014 standard rate which is offset by a recalibration of the case mix, then subtracting the rebasing adjustment of -$80.95 (2.82% of 2014 rates), then applying the net market basket adjustment of +2.1% (Market Basket=+2.6%, Productivity Adjustment=-0.5%).
The 2013 Office of Management and Budget ("OMB") core-based statistical area (“CBSA”) designations for calculating wage indexes will be adopted. The proposed rule would update the HHA wage index using a 50/50 blend of the existing CBSA designations and the new CBSA designations outlined in a February 28, 2013, Office of Management and Budget bulletin, respectively. In this process, 37 counties will shift from urban to rural and 105 counties will shift from rural to urban.
The face-to-face narrative requirement will be eliminated. CMS will only consider medical records from the patient’s certifying physician or discharging facility in determining initial eligibility for Medicare’s home health benefit. Physician claims for certification/re-certification of eligibility (not the face-to-face encounter visit) will be considered a non-covered service if the HHA claim was non-covered because the patient was ineligible for the home health benefit.
The scheduling and administration of therapy reassessments will be modified to every 30 calendar days as opposed to tracking and counting therapy visits, especially for multiple-discipline therapy episodes.
The 3% rural add-on will only apply to counties that are classified as rural under the 2013 CBSA designations; therefore, 37 counties will shift from urban to rural and pick up the rural add-on, and 105 counties will shift from rural to urban and will lose the rural add-on, but may offset some of that loss by a positive increase in wage index.
CMS also made several minor policy changes, which will not affect reimbursement.
Hospice Services
On August 2, 2013, CMS released its final rule for hospice for fiscal year 2014, which increased Medicare reimbursement payments by 1.0% over fiscal year 2013. The 1.0% increase consists of a 2.5% inflationary market basket update offset by a 0.7% reduction related to the wage index changes and the fifth year of CMS’s seven-year phase-out of its wage index budget neutrality adjustment factor, a 0.5% reduction for the productivity adjustment, and a 0.3% reduction to the market basket as defined by PPACA. The following table shows the hospice Medicare payment rates for fiscal year 2014, which began on October 1, 2013 and ended September 30, 2014:
 
Description
Rate per patient day
Routine Home Care
$
156.06

Continuous Home Care
$
910.78

Full Rate = 24 hours of care
 
$37.95 = hourly rate
 
Inpatient Respite Care
$
161.42

General Inpatient Care
$
694.19

On August 22, 2014, CMS released its final rule for hospice for fiscal year 2015, which increased Medicare reimbursement payments by 1.4% over fiscal year 2014. The 1.4% increase consists of a 2.9% inflationary market basket update offset by a 0.7% reduction related to the wage index changes and the sixth year of CMS's seven-year phase-out of its wage index budget neutrality adjustment factor, a 0.5% reduction for the productivity adjustment, and a 0.3% reduction to the market basket as defined by PPACA. The following table shows the hospice Medicare payment rates for fiscal year 2015, which began on October 1, 2014 and will end September 30, 2015:

25


Description
Rate per patient day
Routine Home Care
$
159.34

Continuous Home Care
$
929.91

Full Rate = 24 hours of care
 
$38.75 = hourly rate
 
Inpatient Respite Care
$
164.81

General Inpatient Care
$
708.77


Facility-Based Services
On August 2, 2013, CMS released its final rule for LTACH Medicare reimbursement for fiscal year 2014, which began on October 1, 2013 and ended September 30, 2014. In the aggregate, payments for fiscal year 2014 increased by 1.3% over fiscal year 2013 rates. The 1.3% increase consists of a 2.5% inflationary market basket update, offset by a 0.5% reduction for the productivity adjustment, and a 0.3% reduction to the market basket as defined by PPACA. LTACH payment rates will also be reduced by approximately 1.3% for the “one-time” budget neutrality adjustment factor and projected increases in estimated high cost outlier payments as compared to fiscal year 2013.
The LTACH fiscal year 2014 final rule also addressed the 25 Percent rule. Under the 25 Percent rule, if an LTACH admits more than 25% of its patients from a single acute care hospital, Medicare will pay the LTACH for cases in excess of the threshold at a lower rate comparable to the Inpatient Prospective Payment System (“IPPS”) that hospitals receive for general acute care. A statutory moratorium on the application of the 25 Percent rule was in place from December 2007 through December 2012. CMS stated its intention to extend the moratorium for fiscal year 2013, but allowed the policy to go into effect in fiscal year 2014. The imposition of the 25 Percent rule applied to all LTACHs beginning with their first cost reporting period beginning on or after October 1, 2013. As described below, recent legislation has suspended the 25 Percent rule for most LTACHs for two years.
On December 26, 2013, President Obama signed into law the Bipartisan Budget Act of 2013 (Public Law 113-67). This new law prevents a scheduled payment reduction for physicians and other practitioners who treat Medicare patients from taking effect on January 1, 2014. Included in the legislation are the following changes to LTACH reimbursement:
 
Medicare discharges from LTACHs will continue to be paid at full LTACH PPS rates if:
the patient spent at least three days in a short-term care hospital (“STCH”) intensive care unit (“ICU”) during a STCH stay that immediately preceded the LTACH stay, or
the patient was on a ventilator for more than 96 hours in the LTACH (based on the MS-LTACH DRG assigned) and had a STCH stay immediately preceding the LTACH stay.
Also, the LTACH discharge cannot have a principal diagnosis that is psychiatric or rehabilitation. 
All other Medicare discharges from LTACHs will be paid at a new “site neutral” rate, which is the lesser of:
the IPPS comparable per diem amount determined using the formula in the short-stay outlier regulation at 42 C.F.R. § 412.529(d)(4) plus applicable outlier payments, or
100% of the estimated cost of the services involved.
The above new payment policy will not be effective until LTACH cost reporting periods beginning on or after October 1, 2015, and the site neutral payment rate will be phased-in over three years.
For cost reporting periods beginning on or after October 1, 2015, discharges paid at the site neutral payment rate or by a Medicare Advantage plan (Part C) will be excluded from the LTACH average length-of-stay (“ALOS”) calculation.
For cost reporting periods beginning in fiscal year 2016 and later, CMS will notify LTACHs of their “LTACH discharge payment percentage” (i.e., the number of discharges not paid at the site neutral payment rate divided by the total number of discharges).

26


For cost reporting periods beginning in fiscal year 2020 and later, LTACHs with less than 50% of their discharges paid at the full LTACH PPS rates will be switched to payment under the IPPS for all discharges in subsequent cost reporting periods. However, CMS will set up a process for LTACHs to seek reinstatement of LTACH PPS rates for applicable discharges.
MedPAC will study the impact of the above changes on quality of care, use of hospice and other post-acute care settings, different types of LTACHs and growth in Medicare spending on LTACHs. MedPAC is to submit a report to Congress with any recommendations by June 30, 2019. The report is to also include MedPAC’s assessment of whether the 25 Percent rule should continue to be applied.
25 Percent rule relief for freestanding LTACHs, HWHs and satellite facilities will be extended without interruption for cost reporting periods beginning on or after December 29, 2007 through December 28, 2016. Grandfathered HWHs will be permanently exempt from the 25 Percent rule. CMS must report to Congress by December 18, 2015 on whether the 25 Percent rule should continue to be applied.
The moratorium on new LTACH facilities and increases in LTACH beds will be renewed for the period from April 1, 2014 to September 30, 2017. Although the introductory language only refers to a moratorium extension for LTACH bed increases, the amendment to the Medicare, Medicaid, and SCHIP Extension Act (“MMSEA”) would extend both moratoriums. No exceptions will apply during this extension of the moratoriums. The original rule renewed the moratorium for the period beginning January 1, 2015; however a provision within HR4302 accelerated the moratorium period beginning on April 1, 2014.
Not later than October 1, 2015, CMS will establish a new functional status quality measure for change in mobility of ventilator patients.
As part of the fiscal year 2015 or 2016 rulemaking, CMS is to study payment rates and regulations that apply to the special category of neoplastic disease LTACHs and may adjust such payment rates.
On August 4, 2014, CMS released its final rule for LTACH Medicare reimbursement for fiscal year 2015, which began on October 1, 2014 and will end on September 30, 2015. In the aggregate, payments for fiscal year 2014 will increase by 1.1% over fiscal year 2014 rates. The 1.1% increase consists of a 2.9% inflationary market basket update, offset by a 0.5% reduction for the productivity adjustment, and a 0.2% reduction to the market basket as defined by PPACA. LTACH payment rates will also be reduced by approximately 1.3% for the "one-time" budget neutrality adjustment factor under the last year of a three-year phase-in and increased by 0.2% for wage index budget neutrality adjustment.
None of the above described estimated changes to Medicare payments for home health, hospice and LTACHs for 2014 include the deficit reduction sequester cuts to Medicare that began on April 1, 2013, which reduced Medicare payments by 2% for patients whose service dates ended on or after April 1, 2013.
RESULTS OF OPERATIONS
Three months ended September 30, 2014
Consolidated financial statements
The following table summarizes our consolidated results of operations for the three months ended September 30, 2014 and 2013 (amounts in thousands, except percentages which are percentages of consolidated net service revenue, unless indicated otherwise):
 

27


 
2014
 
 
2013
 
 
 
Increase
(Decrease)
 
Percentage
Change
Net service revenue
$
187,713

 
 
 
 
$
164,748

 
 
 
 
 
$
22,965

 
13.9
%
Cost of service revenue
113,122

 
60.3
%
 
 
97,966

 
59.5
%
 
 
 
15,156

 
15.5

Provision for bad debts
3,974

 
2.1

 
 
2,708

 
1.6

 
 
 
1,266

 
46.8

General and administrative expenses
58,432

 
31.1

 
 
53,047

 
32.2

 
 
 
5,385

 
10.2

Income tax expense
3,924

 
38.9

(1) 
 
3,782

 
41.7

(1)
 
 
142

 
3.8

Noncontrolling interest
1,679

 


 
 
1,572

 
 
 
 
 
107

 
 
Total non-operating income (expense)
(408
)
 


 
 
(376
)
 
 
 
 
 
(32
)
 
 
Net income attributable to LHC Group, Inc.’s common stockholders
$
6,174

 
 
 
 
$
5,297

 
 
 
 
 
$
877

 
 
 
(1)
Percentage of income from continuing operations attributable to LHC Group, Inc.’s common stockholders.
Net service revenue
The following table sets forth each of our segment’s revenue growth or loss, admissions, census, episodes and patient days for the three months ended September 30, 2014 and the related change from the same period in 2013 (amounts in thousands, except admissions, census, episode data and patient days):
 
 
Same
Store(1)
 
De
Novo(2)
 
Organic(3)
 
Organic
Growth
(Loss) %
 
Acquired(4)
 
Total
 
Total
Growth
(Loss) %
Home-Based Services
 
 
 
 
 
 
 
 
 
 
 
 
 
Home Health
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
132,678

 
$
641

 
$
133,319

 
1.1
 %
 
$
10,469

 
$
143,788

 
9.0
%
Revenue Medicare
$
103,294

 
$
450

 
$
103,744

 
(1.2
)
 
$
7,816

 
$
111,560

 
6.2

New Admissions
30,639

 
180

 
30,819

 
2.2

 
3,143

 
33,962

 
12.7

New Medicare Admissions
21,018

 
101

 
21,119

 
0.8

 
1,851

 
22,970

 
9.7

Average Census
32,715

 
149

 
32,864

 
(1.7
)
 
3,109

 
35,973

 
7.6

Average Medicare Census
24,532

 
99

 
24,631

 
(3.1
)
 
1,985

 
26,616

 
4.8

Home Health Episodes
42,926

 
177

 
43,103

 
2.2

 
3,530

 
46,633

 
10.5

Community-based services
 
 
 
 


 
 
 
 
 


 
 
Revenue
$
945

 
$
111

 
$
1,056

 
28.3

 
$
7,917

 
$
8,973

 
990.3

Billable hours
66,213

 
3,286

 
69,499

 
85.5

 
221,803

 
291,302

 
677.4

Hospice Services
 
 
 
 


 
 
 
 
 


 
 
Revenue
$
15,774

 

 
$
15,774

 
11.3

 
$
1,297

 
$
17,071

 
20.5

Revenue Medicare
$
14,421

 

 
$
14,421

 
10.1

 
$
1,211

 
$
15,632

 
19.3

New Admissions
1,346

 

 
1,346

 
7.5

 
130

 
1,476

 
17.9

New Medicare Admissions
1,158

 

 
1,158

 
8.0

 
114

 
1,272

 
18.7

Average Census
1,301

 

 
1,301

 
13.7

 
103

 
1,404

 
22.8

Average Medicare Census
1,188

 

 
1,188

 
13.9

 
97

 
1,285

 
23.3

Patient days
118,346

 

 
118,346

 
12.4

 
9,486

 
127,832

 
21.4

Facility-Based Services
 
 
 
 


 
 
 
 
 


 
 
LTACHs
 
 
 
 


 
 
 
 
 


 
 
Revenue
$
17,265

 

 
$
17,265

 
0.8

 

 
$
17,265

 
0.8

Patient days
15,362

 

 
15,362

 
0.3

 

 
15,362

 
0.3


(1)
Same store — location that has been in service with us for greater than 12 months.

28


(2)
De Novo — internally developed location that has been in service with us for 12 months or less.
(3)
Organic — combination of same store and de novo.