No wrongdoing to be admitted
Amedisys Inc. is setting aside $150 million to settle a federal government investigation into whether the Baton Rouge home-health company was encouraging unnecessary patient visits to improperly earn bonus payments from Medicare.
Amedisys, which recorded a $91 million loss for the third quarter on Tuesday, said it is not admitting any wrongdoing, but reached the settlement with the U.S. Justice Department in order to resolve matters and avoid a protracted legal battle.
Amedisys operates home health and hospice care centers in 37 states, serving about 360,000 patients annually.
It said Tuesday that it will be shutting down or consolidating 19 operations to cut costs.
The company employs more than 14,800 workers.
“We now look forward to being able to focus without distraction on our mission, providing superior quality care to our patients and referral sources,” said Bill Borne, Amedisys CEO, during the company’s Tuesday morning earnings call with analysts.
Stock analysts who follow Amedisys say the proposed settlement doesn’t clear up all of the lingering legal issues.
The Securities and Exchange Commission is still investigating Amedisys.
Brian Tanquilut, of Jefferies & Co., said the agreement only covers the period until 2010.
“Anything after 2010 is fair game,” he said.
The Justice Department investigation was launched in 2010 after a Wall Street Journal article raised questions about whether home health companies boosted patient visits unnecessarily in order to trigger thousands in bonus payments from Medicare.
Lafayette home health company LHC Group also was mentioned in the article.
LHC Group reported in 2012 that the SEC completed a two-year investigation of the company’s Medicare billing policies, with no penalties to the home health provider.
The Amedisys agreement with the Justice Department is subject to the successful negotiation and execution of the final settlement documents.
No date was mentioned for when the settlement will be finalized; however, Ronald LaBorde, Amedisys’ president and chief financial officer, said the plan is to make two payments to the Justice Department: one of $115 million once the agreement is finalized and a second of $35 million about six months later.
Amedisys will make the payments with a combination of cash on hand and the company’s revolving credit facility.
Borne and LaBorde said they hope the Justice Department settlement will lead to the end of the SEC investigation.
“The SEC inquiries have been quiet for some time,” LaBorde said. “And hopefully, this will help to bring that to the end as well, but we can’t speak for that at this time.”
Tanquilut said the price tag of the settlement was higher than most analysts were expecting.
The combination of a high settlement, Amedisys taking on more debt to reach the agreement and weak earnings should cause the value of the business to change dramatically.
The company’s stock shot up dramatically in early August after investment adviser KKR Asset Management LLC started acquiring a significant stake in the firm, fueling speculation of a corporate shake-up.
Shares of Amedisys dropped by nearly 17.5 percent Tuesday to close at $14.32, down $3.03. The stock closed at a 52-week high on Oct. 16 at $18.16 a share.
Amedisys posted its third-quarter results Tuesday. The company reported a net loss of $91 million during the quarter, or $2.89 per common share. That compares with a $9.9 million profit, or 33 cents a share, in the third quarter of 2012.
Borne said the results for the quarter were below expectations. He blamed the loss on soft volume in the company’s home health and hospice units, along with higher costs for home health. The number of home health admissions were down 2 percent from 2012, while hospice admissions dropped 7 percent.
To control costs, Amedisys plans to shut down or consolidate 19 care centers during the fourth quarter.
That will bring the number of care centers down to about 450. The company has identified which care centers will be closed or consolidated, but would not disclose the locations.
While some employees will be transferred to new care centers, there will be an undisclosed number of job losses, the company said.
Another 35 care centers have been identified as being too small to become profitable.
Borne said the plan is to make small business development investments to try to drive growth.
If no meaningful improvement is seen, then those centers likely will face consolidation or closure in 2014, he said.
Amedisys also issued updated guidance for 2013. The company cut its full-year earnings forecast to between 20 and 25 cents per share from 45 to 55 cents. Amedisys also lowered its 2013 net service revenue forecast to between $1.24 billion and $1.25 billion from the $1.24 billion to $1.28 billion range.
CRT Capital Group LLC Managing Director Sheryl Skolnick lowered her rating on Amedisys from “fair value” to “sell” on Tuesday. Skolnick said she’s concerned that Amedisys’ management doesn’t have a strategy to turn the company around.
The proposed settlement with the Department of Justice will limit Amedisys’ flexibility to acquire home health agencies, one of the company’s methods for growth, she said.