Paul Kusserow – President and Chief Executive Officer David Castille – Managing Director of Finance Ronnie LaBorde – Vice Chairman and Chief Financial Officer Martin Howard – Chief Information Officer Stephen Seim – Chief Strategy Officer.

Brian Tanquilut – Jefferies Dana Nentin – Deutsche Bank Kevin Ellich – Piper Jaffray Frank Morgan – RBC Capital Markets John Ransom – Raymond James Whit Mayo – Robert Baird Ralph Giacobbe – Credit Suisse Toby Wann – Obsidian Research.

Good morning. My name is Angel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amedisys First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you.

David Castille, Managing Director of Finance, you may begin your conference..

Thank you, Angel. Good morning, and welcome to the Amedisys investor conference call to discuss the results of the first quarter ended March 31, 2015. A copy of our press release is accessible on the Investor Relations webpage on our Web site.

Speaking on today's call from Amedisys will be Paul Kusserow, President and CEO; and Ronnie LaBorde, Vice Chairman and CFO.

Before we get started with our call, I would like to remind everyone that any statements made on this conference call today or in our press releases that express a belief, estimation, projection, expectation, anticipation, intent or similar expressions, as well as those that are not limited to historical facts, are considered 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, and the company assumes no obligation to update these statements as circumstances change.

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.

The company disclaims any obligation to update information provided during this call other than as required under applicable securities laws. Our company Web site address is amedisys.com.

We use our Web site as a channel of distribution for important information, including press releases, analyst presentations and financial information regarding the company.

We may use our Web site to expedite public access for time-critical information regarding the company in advance or in lieu of distributing a press release or a filing with the SEC disclosing the same information.

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 be available on our Web site on the Investor Relations page under the tab Financial Reports, Non-GAAP. Thank you, and now I will turn the call over to Paul Kusserow. .

Thank you, David. Welcome to the Amedisys first quarter conference call. This morning, I’m very pleased to announce we reported revenue of $302 million, adjusted EBITDA of $26 million and adjusted earnings per share of $0.30. We are quite encouraged by our strong quarterly performance and the trends we are seeing in our business.

In home health, we continue to generate strong organic growth in Medicare and non-Medicare revenue. Home health segment contribution improved an incremental $20 million year-over-year. We also return to organic volume growth in hospice and ended the quarter with a patient census of over 4700 representing 6% growth from our census at year-end.

We have four months of strong census growth at this point. So we believe that our hospice turnaround is sustainable. In addition to strong organic growth in both business segments, performance this quarter was driven by strong cost control and home health.

And our employees mitigating the impact of weather disruptions meaning our caregivers did a great job and pushed through winter weather to take care of our patients. Previously, I told you about my travels to care centers and meeting with our employees around the country, as well as going on home health and hospice patient visits.

I gained some valuable insights resulting from these visits and used this market feedback to guide our strategies in three areas that I would like to highlight with you today. These are leadership, IT and strategic focus. First, we recently announced several changes to our leadership team.

The most consistent messages I heard out in the field were that we needed improved leadership and resources devoted to three areas, operations, people and IT. It was clear we needed dedicated operational and executional leadership to help streamline processes and implement simplified workflow.

We believe this will drive more efficiency in our operations and increase our productivity. Our new COO, Dan McCoy, will provide the necessary focus and expertise to drive these changes. Dan joins us from Anthem, where he served as SVP of Operations.

I worked with Dan during his tenure as a board member of Availity, a leadingpayer connectivity and revenue cycle solutions provider. I was chairing the board of Availity at that time. Candidly, Anthem was struggling to officially optimize the Availity asset. Then, Dan stepped in.

He was instrumental in driving the adoption of Availity solutions into Anthem's infrastructure. This was an incredibly complex undertaking and Dan organized and implemented it flawlessly. I am confident he will do - drive the same needed changes at Amedisys. We also needed stronger leadership in HR. We are clearly a people business.

Our industry is all about putting the best clinicians in the home and giving them the tools they need to deliver the best possible care. As Amedisys recruits, develops and engages people more effectively, it will increase employee retention and productivity and have a significant impact on our operations and the people we serve.

To maximize our human capital performance, we brought in Chief Human Resources Officer, Larry Pernosky from Humana where he was the lead HR Operations Executive for a company that grew by over 40,000 employees during his 11 years there.

Beyond Humana, Larry has over twenty years of additional in the field, on the floor HR operations experience with companies such as Halliburton, Whirlpool and Fluor. During my have five years at Humana, I worked with Larry on integrating a number of acquisitions and several special projects.

I was thoroughly impressed with his ability to drive systemic change and integration in turnaround situations. My belief is that this will translate well to Amedisys where in many ways, we are reshaping our organization by focusing on enhancing the effectiveness of our people and becoming the employer of choice in HomeCare and hospice.

Finally, we needed a fresh perspective on technology and how we use it. Early in my Amedisys tenure, I engaged delight to provide a third party technology review of AMS3. Marty Howard led this team. I was impressed by his ability to grasp our issues, formulate an optimal strategy and drive us forward with the data driven and fact-based perspective.

Marty is a home health IT veteran, having served as a turnaround CIO and COO of a number of organizations including Optum and private equity-backed home health providers.

He also has an extensive consulting experience as a director with Deloitte, Ernst & Young and KPMG in many IT-related strategy and implementation projects with healthcare companies like Gentiva, Kindred and the Mayo Clinic.

Most importantly, Marty has lead several successful healthcare IT implementations and restructurings in large organizations which leads us to AMS3.

Those of you who have been following the company know we have spent years to developing and attempting to implement AMS3, a next generation proprietary software platform that would be a successor to the platform we have been running on for years, AMS2.

This morning, we are announcing a change in strategic direction that will result in a noncash charge to write off our investment in AMS3. We will transition our operating platform to Homecare Homebase, the industry leader that is used by 74 of the top 100 providers in our space.

Our initial AMS3 beta testing in late 2014 was rocky and raised doubts about the platform's readiness. Based on this testing, we work to improve the product and expanded testing to a larger pool of care centers. The impact on operations at these centers confirmed my doubts.

When combined with the independent Deloitte review of the platform, it became apparent that AMS3 was not ready to be fully implemented across the company. This decision to move away from AMS3 was made to reduce operational risks and get Amedisys out of the software business so that we can focus on our core operations.

We will continue to operate on AMS2 during this transition, which is expected to take 18 to 24 months. The selection of Homecare Homebase resulted from a systemic - a systematic, sorry, and detailed assessment of HomeCare and hospice commercial platforms also including AMS3. Several factors led us to conclude it was our best choice.

Homecare Homebase is a fully hosted scalable system that will fit with our large footprint and plant growth .It is more complete and integrated than its competitors with robust clinical capabilities, analytics and reporting.

It is continuously upgraded and improved to keep pace with regulatory change and best practice needs, and it has a solid combination of supporting business processes and workflows that will lead to efficiency and better outcomes for our patients.

This is a significant pivot point for Amedisys that will result in several one-time restructuring costs but implementing Homecare Homebase will cost less than current projections to fix and move forward with AMS3. It will also allow us to reduce the IT infrastructure we have needed as we built AMS3.

This reduction in IT operating costs will allow us to significantly expand our EBITDA margins. We believe that this full transition well eliminate $20 million annually in operating expenses or approximately 2% of current revenue. We will also see a reduction in CapEx of roughly $10 million from our current levels beginning in 2016.

On our last call, I committed to providing more insight into our strategy. One of our leadership additions was Steve Seim as Chief Strategy Officer. I have quite a bit of background with Steve who led Humana's strategy organization and view him as a key addition to our team.

With Steve's guidance, we have made significant progress on defining and implementing our strategic plan. As we roll out our strategy, we are pursuing a number of opportunities to drive margin improvement in addition to the IT cost reductions and process improvements we've already outlined.

They include improving our clinical staffing mix, streamlining workflows and processes, clinically driven care standardization, improving coding accuracy and additional G&A savings. Our goal here is to drive an additional 200 basis points in EBITDA margin improvement over the next two to three years in addition to our IT operating expense reductions.

Beyond improved earnings, once completed, these improvements to our operations will free clinician capacity to allow us to grow our volume at a rate greater than those driven by favorable demographic trends. Stronger margins will allow us to play more aggressively in the M&A space going forward.

At present, we are proactively seeking out home health and hospice tuck ins in key geographies. In fact, we expect to announce an attractive small tuck in acquisition within the coming months.

While there are a lot of moving parts in the quarter, our operations are healthier than they have been in a long time resulting in our best quarterly EBITDA margin since 2011. We’re relentlessly executing on the strategy we have in place will only serve to drive continued growth and margin expansion.

I will close by asking our team to continue to do what you do best, focusing on our patients and driving positive clinical outcomes. Our job is to provide you with the tools to care for our patients in the most effective and distinctive manner possible. And the steps we have taken recently will begin to do just that.

With that, I will now turn the call over to Ronnie LaBorde for our financial update. .

Thank you, Paul. For the quarter, revenue was $302 million in adjusted earnings per share with $0.30. Adjusted EBITDA was $26 million or 8.7% revenue. And I will say that our core metrics look healthy in both home health and hospice. There were a few adjusting items that we detail in our earnings release.

The largest of which was the $75 million pretax non-cash charge for the write off of our AMS3 platform. I would like to comment on three items that would result in the technology decision. As Paul mentioned we are targeting an annual reduction in IP operating expenses of $20 million once this transition is fully complete in 18 to 24 months.

Secondly, beginning in 2016, capital expenditures are projected to be less than $10 million annually. And finally depreciation expense will step down to $4 million annually beginning in the second quarter of this year. Now turning to our segment results. In home health, revenue was $241 million.

Medicare revenue was up 6% and admissions were up 4% on a same-store basis. Medicare revenue per episode was up 3%. Non-Medicare same-store revenue grew 20% and admissions increased 17% over the prior year. Home health gross margin was 42.5% compared to 39.2% last year. Cost per visit improved by $4.

Home health gross margins improved 50 basis points sequentially and have covered in the 42% to nearly 43% range for the last four quarters. In hospice, revenue was $60 million. Same-store revenue increased 2% with admissions up 7% and ADT up 1%. As Paul mentioned, we saw a 6% increase in our patient census from the end of December to the end of March.

Cost for service per day crept upside driven by a $1 increase in pharmacy costs per day. Hospice gross margin dropped 40 basis points compared to last year. After adjusting for the one-time item that we detailed earlier, total G&A is down $15 million from the prior year and $2 million sequentially.

Turning to cash flow, our cash flow from operations for the quarter before working capital impact was $30 million consistent with levels we have seen in the last four quarters. Working capital changes in the quarter reflected a negative $15 million impact largely because of an increase in DSO to 32 days.

We expect this to substantially reverse in the second quarter. We are currently budgeting between $20 and $25 million for CapEx in 2015. This is an increase from our previous plan of $15 million. But as I previously mentioned, our CapEx run rate should be reduced in 2016 and beyond to below $10 million annually.

Also positively impacting future cash flows, you will note that we have a deferred tax asset on our balance sheet of $147 million at quarter end. At the end of the quarter, we had $100 million in long-term debt outstanding and our total leverage ratio is 1.1 times. We have $99 million available on our revolving credit line.

Over the past year, we have reduced debt by almost $100 million. Our improved performance and strong cash flow over this period have contributed to a very strong balance sheet. As you can tell by our commentary, we are confident that we can maintain this profile.

As our strategic plan evolves and in-forms our capital needs, we will be considering alternatives to efficiently impact shareholder value. Finally again, we are encouraged by our current performance and the consistent improvement in the run rate of our business on an adjusted basis.

Over the next three quarters three quarters, our GAAP results may be impacted as we expect to incur a restructuring cost. Accordingly we are not providing guidance for 2015 at this time. This concludes our prepared remarks. Operator, would you please open up the call for questions. .

Certainly [Operator Instructions] Your first question comes from the line of Brian Tanquilut from Jefferies. Your line is open. .

Hey, good morning, guys. Congratulations. Really a good turnaround here. So Paul, first question for you on the strategic direction of the company, obviously you have brought in a lot of new guys to be on your management team and a lot of them are coming in with managed care experience.

Just wanted to hear your thoughts on where you think you could take this company. Right now, it is home health and hospice.

And should we think that you are going to broaden your scope overtime as opportunities pop up or is it still going to be purely a home health operation?.

Great question, Brian. What we - as we sit back after we are - our initial focus is obviously on improving and becoming the leader in this business. I think we have the scale and we have the markets to do this. So I think that's our first goal.

Then, I think what we are doing is - so we are doing a lot of margin work right now and I think that is appropriate. It is the thing that we need to do. We are also focusing on how to you start to free up some of our capacity so that we can start to push our growth faster.

We believe there is a lot of capacity that we have in our existing operations and so just we believe there is a lot of growth that is inherent in our core business and that we can really start to push that.

I think as we've looked over the landscape, there is a lot of emphasis and some of our friends and competitors are focusing on the post-acute world and making bets in - all through the post-acute world.

I think what we have been focusing on is how can we expand the definition of HomeCare? And how can we – so ideally, what we would like to do is expand that piece in the post-acute world, and then to really own that space.

We believe with technology and all of the other things more and more is going to go into the home, and then we want to be able to participate that in all ways. I think for us to start to push into some of the facility-based things and where there is a lots of capital costs, I don't think that's a natural place for us. We like the home.

We believe the home is the future. We believe more and more people want to stay at home particularly baby boomers to get their care administered there. So we're very excited about the possibilities and the technologies there that are coming in that are great.

So we are going to focus on the home and hope to expand that world to be a bigger piece of the post-acute pie. .

Really appreciate that.

So Paul, shifting gears to Homecare Homebase and AMS3, so how do you envision the shift from AMS3 to Homecare Homebase at the clinician level? In terms of either one potential disruption in the trading and the ramp up required to get that rolled out, and then second in terms of the efficiency gains whether it is in - whatever metric you can share with us over time and how long do you think it will take before we see.

Because I know you've talked about the margin gains from the back-office, but at the clinician level how should we think about the operating metrics once Homecare Homebase is fully rolled out?.

I think what Homecare Homebaseis. I think we made the right decision clearly with Homecare Homebase. It is a great tool. The question is how are we going to use it. And I think that's where we have to master it. I think April has done a nice job mastering it with Encompass. And I think we need to focus on how fundamentally to optimize our staff.

And I think with staff mixes with some of the tools there, that's what we can be looking at.

Ronnie, I don't know if you?.

No. We're very encouraged about what we will see, Brian, and what will happen with the clinicians. That's sort of was one of the pain points that we were incurring with AMS3 and it's just wasn't performing like we had sort of by designed it and hoped to stage. And we think they'll be great relief.

We haven't captured that yet and kind of framed that in a sense of what we think the financial benefit of that will be. That's on top of and that will be in addition to just the restructuring change that we are talking about with this $20 million. We think there are positives to come from that.

We are encouraged by what we will see and how it will positively impact the clinicians..

And one of the things we have seen as we were implementing AMS3, it was very difficult on the centers where we started to implement it, and then for us to do the corrections was extremely difficult. We see that they're more on top of this than we would have been. And therefore we think this will be very effective..

So Paul, from a timing perspective, or Ronnie, from a timing perspective, when do we start the rollout? And then should we expect a little bit of a decline in clinician efficiency near-term before we see the pick up?.

We have - we are anticipating your question, Brian. We brought in Marty Howard, our CIO who you heard about.

And Marty I think it is best - Marty has been studying this so I think it's best for Marty to address - maybe you can just talk a bit about the difference in terms of some of the reasons why we've made these choices, and then what you anticipate in implementation. .

Yes, thank you, Paul. The selection of Homecare Homebase. As Paul noted was a very thorough and detailed assessment of the alternatives and options out there and what was the best fit for an organization like ours. You've heard about the numbers we expect on the cost reduction piece.

In terms of the clinicians and the impact on the care centers, we have been working already very closely with leading consultants and with Homecare Homebase and with our internal team to model out what the implementation is going to look like. As you've heard, we're talking about completing that process in 18 to 24 months.

We are still fine-tuning the assessments in terms of productivity impact as people learn the new system and how long it takes.

We don't have the specifics yet but looking at previous implementations of similar applications in Encompass an other Homecare Homebase facilities and other places where I have been involved, we are typically talking around a dip of around 46 weeks in period followed by an improvement in clinical productivity and performance of the care centers.

Again, we are still working on the final modeling, but that is our intent. And again the rollout is expected to take 18 to 24 months to complete. .

Let me just add one other thing. This choice was not made by me or the people sitting in the room with me. This was made by our clinicians and our people in the field. We showed them our analysis. We made the analysis. We thought that Homecare Homebase was the best suited company.

Homecare Homebase came in, presented to our folks and to our operators, and ultimately the choice was theirs. I am not going to dictate what our operators and clinicians think is best for them. And they unanimously made the choice to move to Homecare Homebase. .

Got it. All right. I'll jump off the queue. Thank you..

Thanks. .

Your next question comes from the line of Darren Lehrich from Deutsche Bank. Your line is open. .

Hi, good morning. This is Dana Nentin for Darren. Just to clarify in terms of the $20 million IT OpEx improvements.

I know you mentioned that you expect the transition to Homecare Homebase to take about 18 to 24 months, but can you provide more color on maybe how those savings might ramp over the next year or two?.

Yes. It was a good question. It will be two things. It will certainly be - it will only become visible really when we are finished, so but it will be happening before as we reduce kind of some G&A cost and supporting calls for our platforms as we kind of wane down the subordinated brand, AMS2.

Those additional cost will be offset by some of the savings, and then we will begin to see that when the platform is fully rolled out. So things will be all set and happening along the way, but they won't become visible really materially until the platforms are installed..

Want to talk about some of the implementations?.

Again, the implementations - we're talking 18 to 24 months. As Ronnie said following that is when we will see the bulk of that. In the interim, the ramp to those savings obviously as we are not doing software development anymore, we will be reducing those costs.

And as we improve the IT operation overall, we will be streamlining and improving our, again, our cost profile overtime to be fully realized after the completion, but there will be progress and reductions along the way as we continue to make improvements both by the switch to Homecare Homebase and in general improvements to the way we structure, organize and practice our IT function..

Okay, great. And then just on the hospice length of stay, I thought it was down to 91 days versus 99 last year and about 102 in Q4.

Is there any color you could provide on what drove that decline?.

Dana it’s good question. There is really no - really I think it’s all part of just the intensity that the new leadership has brought to it. But, we are pleased also to see the 91 days on the discharge there, but no clear method that I would point to into that move. .

Okay, great. Thanks a lot..

Sure. .

Your next question comes from the line of Kevin Ellich from Piper Jaffray. Your line is open. .

Good morning. Thanks for taking the questions. Just going back to the prepared comments, I think Paul - it was either Paul or Ronnie who said, you could see 200 basis points of margin expansion.

What was the timeframe, and I guess where do you think margins can ultimately get to and how sustainable will that be?.

Well, everybody is giving me dirty looks here. We are currently at 8.8 EBITDA margin. We are looking I think if you translate the $20 million, that's two points of EBITDA margin, and then aspirationally, we are looking at another 200 basis points of EBITDA margin. And that's where we are pushing forward. So you put all of that together, 8.8 plus 4. .

Do you think - is there an upper limit or threshold that you're kind of targeting where the government or Medicare is kind of pigeon holed to home health over the last several years?.

No, I think the cuts have been made. I think what they are doing is waiting to see the effect of the cuts. And we don't anticipate them coming back at us until maybe let's say 18, something like that..

Okay. And then – sure, great. And then I guess kind of on that - along those lines, what's your updated thoughts on the bundling initiative BPCI and I know you gave some information last quarter, and I think there is also some legislation - post-acute bundling legislation that is going through the house.

Just wondering what you guys think about all of these things going on with the initiative to drive more value-based reimbursement..

Kevin, it's a good question. And to follow-up on our precise decision, we formally opted out of the Bundle payment program at the end of December. And during the first quarter, all patients on census in that program are now discharged. So we are formally out. Overall, I think it is a great program, great direction.

I think there were challenges that we saw early on being kind of on this leading edge of this initiative. And so I think that is certainly a trend in movement to that to coordinate payments and gain efficiency there.

We thought, again, it's appropriate to step off now considering where we were strategically and operationally , but we'll - as Paul indicated, it is really in the home post-acute space and we want to be that preferred provider, and prepare for the things that will come reimbursement or otherwise in the future.

So we'll keep an eye on it and certainly get prepared for those opportunities that come forward in the future..

And just to add to what Ronnie is saying, you have seen obviously we have a lot of managed care people who have join the management team. We are all used to capitation to risk, to bundles. And we are looking through our managed care business. It is growing. To really continue to learn with our managed care partners.

So we are - we think that's the best way to start to push forward with bundling. .

Okay.

Do you think the legislation, the Backpack Act of 2015, do you think that's got any lags or do you think we're maybe a couple years away from seeing something enacted?.

I would give a bad answer so I am looking over in my government affairs guide update we can release so you'll get a good one now..

I think there is some interest in the Backpack legislation and we certainly are very interested and very keenly aware of it and will be following it. I think your assessment of maybe a couple years away is probably a good estimate. .

Okay. That's helpful. And then Paul, going back at the managed care background that U.S. have.

We have seen some pretty strong non-Medicare home health growth in terms of the revenue and admissions, recertifications, Just wondering what’s driving that? And do we - should we continue to think we could see growth in the mid-teens to 20% range for non-Medicare business?.

All is a part of that but I will let Ronnie answer that piece first. .

So we are not looking for growth rate at that level. I think we feel good about probably low single digits. We saw an uptick in some relationships in the second quarter of last year and so we're going to anniversary that now in this second quarter. So I think the growth rate will come down.

We are still optimistic about that segment of our business growing but not that same rate..

I think in general what we are seeing is as Medicare, as MA Medicare Advantage gets an increasing piece of the pie we see and we are from that business and embrace that business, we see a lot of opportunity there.

We think it is going to continue to grow and to continue to gain market share and therefore we are enthusiastically tweaking our care delivery model so that we can participate and make money by joining with our partners, our MA partners..

Great. And then last one from me, Ronnie you said CapEx for 2015 is expected to be $20 million to $25 million up from $15 million.

Is this due to the Homecare Homebase implementation or is there something else that drove the increase in CapEx?.

That will be the primary driver. That and some other development cost that we are going to incur a little beyond where we thought we might be with AMS2 to support that platform. So all in, that's the reason for the uptick from original plan. .

Great. Thanks, guys..

Thanks. .

Your next question comes from the line of Frank Morgan from RBC Capital Markets. Your line is open. .

Good morning. I wanted to go back to something I thought you said early on in the prepared remarks about options for your capital structure.

Could you elaborate on that, or did I misunderstand that point?.

Well, Frank, That's a good question, and you didn't miss that. Certainly we think we're in a very good position. We worked hard to get here and I think that will open up some opportunities. Certainly as Paul has indicated we're very keenly looking and think we're are well prepared to began to participate in the M&A opportunities again.

We think with this low leverage profile we have an opportunity to and some flexibility to do things. Those will be defined.

With Steve on board now and the work being done, that will continue to - our strategic plan and our longer term view will begin to get honed in and that will in form that things we can do and capital we need to structure of that and then how we might apply it.

So we weren't specific about what those opportunities are, just that we think we do have some now and we look to explore those as we go forward. .

I take it that means be more than just doing M&A..

It’s quiet possible. .

So we're looking at all options. We have to efficiently – we have to attain the right balance and our M&A efforts are really digging in now. We want to be pro active from an M&A perspective. So we have some very good folks out there in the field, starting conversations in key areas for us.

We are optimistic there, but we're also going to be very sensitive about evaluations and our ability to do accretive deals. So we have to look at all our options in terms of how to employ our capital..

Sure, thanks. And then also on the discussion regarding the growth in the MA business. I think you made reference to tweaking some of your care models.

Coming from the managed care side of the business, what do you think is important to them? Obviously visits and rates are important, but in terms of your flexibility to adjust your operate operating model and cost structure how do you think that plays out and how do you envision making those changes so this business in fact - remains profitable as it continues to grow? Thanks..

Sure. I think there is couple of things. One readmissions are very important. So we just brought on a person who - Bruce Perkins on our board, who did all of the contracting for Humana with all the home health companies and in our last Board meeting last weeks, he told us what he was looking for and it was pretty clear.

One that we partner with them in terms of readmissions, that’s very important and two that we provide really good outcomes and how we provide those outcomes with what staff, if I think it's less concerning to managed care companies than it is where there's - to the government which is more formulaic in terms of what caregivers we use.

Staffing optimization I think - is what we are looking at. Does that make sense? Frank.

That makes sense. One more question just on your Medicare.

Can you remind us what your Medicare rate growth was and how that my jive with the changing of the rebasing?.

Over the prior year, we were up about 3%. .

Alright. .

And we we're up slightly. If you take out the looping in both periods sequentially we're up just shy of 1% we thought revenue per ep, which is probably a little bit higher than what we we'd anticipated. We thought flattish to slightly positive. So we came in right in line, I think we got a little better impact than anticipated on the case mix shift.

But overall right in line and it's 3% over the prior year. .

Okay, thanks..

Good growth.

Thanks, Frank. .

Your next question comes from the line of John Ransom from Raymond James. Your line is open. .

Hi, I'm sorry.

I missed a couple of your comments on the M&A strategy, so apologize if you answered this, but what is the multiple now for say bite sized home health deals within your markets? And what's the multiple for maybe larger deals and how does that compare, or do you know yet?.

It's all over the place. Steve, do you want to - we have Steve on here. He's our chief strategy officer. Steve.

I'd agree with that, Paul. I think that we're seeing a lot of variation right now. I think people are seeing expanded multiples in the larger companies and are wondering how that's going to translate. So when we're out in the field. That a lot of give and take.

And obviously things are attracted to us at the right evaluation and are going to be disciplined in how we deploy capital in that space. .

Yes. I think a rule of thumb is the larger they are the more expensive they are at this point. The more private equity or venture money in there the more expensive they are. Hence our strategy is to define geographies where we want to be and then to pro actively start knocking on door and we've done that. .

I noticed there wasn't a number in that answer. .

Yes, okay. So.

Smaller deals, are they six times EBITDA or more? Just curious. .

Hi. I think that we'll see is the answer to that. I think that's something we are working to get our arms around and sense we're going to go but I don't think we are prepared to hone in on a range right now. .

Okay.

And then my second question is if we'd looked out five years - and I know you're trying to build this for the longer term, but what do you think post acute bundling looks like and who's going to control the dollars? Are you going to have to go at risk? Do you think you'll be largely in a fee for service business still or are you going to be more sub capitation? And then what pieces do you think you need to assemble? I mean You have home health and hospice, but is there an asset class that you think you have to own that you don't own now? Just curious about that..

That's a great question. I think there will be people, and you've already seen examples out there. I think some successful, still to be determined of people that are trying to be intermediaries in this space I think to varying degrees of success.

Fundamentally, they are pushing price, and what they're doing is they're piecing things together and trying to wrestle price out, take therapies and then try to sell them as bundles and then say overall you'll get better care coordination at hopefully a cheaper price.

The thing that worries me about these companies, frankly, is they have imperfect information and therefore unless you have the entire continuum of information it's really hard to do pricing and then manage things in bundles effectively. So but I think that’s the first stage of what we we're going to see in the post acute piece.

If somebody can get all of the information, use that information and drive costs down with the varying people that have to participate and then sell effectively to the buyers, fundamentally manage care, I think that's - but we have yet to see it. I think the other pieces will be - is people like us who are going to focus on care in the home.

I think that's going to be an increasing piece of the post acute Bundle. I think we will start to get smart and smarter and partnering with our DME friends out there. I think we'll get more partner-oriented to work with some of the facilities that are out there. We already do that in hospice.

So I think if general we will start to be partners, but I think buying physical assets to me – doesn’t make a lot sense.

I think the idea is to continue to find effective technologies that are out there effective ways to grow, keeping people in their homes which is the most effective from an outcomes perspective and it's the most economically to keep people in their homes. I think if we become the experts at that, we'll do very, very well.

And we'll be partners with everybody in the post acute space. .

And are you seeing - I mean if you had to guess - you have, what, almost 40% of Medicare now in MA plans? Do you think your old partners are Humana and do you think they will leave the charge sooner than what you'll see out of CMS? Are you getting any kind of interesting proposals for bundling or capitation or anything like that coming out of the MA plans?.

I mean we're - we always get interesting proposals. We seen a lot from the MA plans. The larger ones are clearly very innovative and want us to participate. Particularly, once again, I think, guaranteeing and trying to come close to that readmissions. They pick heavily on readmissions. They pick heavily on outcomes.

They pick heavily on - as they are becoming more consumer oriented. How do their members rate us from that perspective. .

Alright. .

How do their members - does this help their satisfaction and enhance their retention? So I think that's very important. So I think those are the ways that they are choosing.

I think the ACOs are the larger people that are out there, the ACL bundlers, the ACO risk takers, we’ve seen a lot of interest from those folks and then ACOs that are trying to build out those capacities and reaching for partnerships. Is it driving a huge portion of our business yet? Absolutely not..

Okay, thank you. .

Sure. .

Your next question comes from the line of Whit Mayo from Robert Baird. Your line is open. .

Thanks, good morning. Ronnie I guess I'm going to have to find something else to complain about besides the IT spend..

I thought we might look for another topic, Whit. So, that's a good day. .

No, no, no, no, no. It's a happy day. I'm glad you guys have made this strategic decision. But my question really is around - I'm trying to reconcile the volume trends within the quarter looking at the press release it looks like the Medicare admissions down 3%, research down, total Medicare episodes down, pricing up.

But it also says the same-store Medicare revenues are up 6%? So I can't figure out how one plus one equals three or four..

Sure. Last year in the first quarter we still had in our results - in total there you saw the care centers we ultimately closed and/or consolidated. So that's in the total comparison and that's why we stepped down to same-store to get – those out of the comparison. But in total that's why it is trending or shows negative.

Okay.

So the 6 % number is the same store number and the metrics you provide are include the care centers that were in operation last year?.

Yes. You’re right. .

Okay. Got it, got it, got it. Okay, that makes – it’s.

So we either reduced or sold, reduced or consolidated 50..

Okay. .

So that – there is 15 less. .

Got it.

So backing into the volume - I mean if your pricing was up, would you say, Ronnie, maybe 2% or something that implies Medicare volumes up 4%? Or is that ballpark, maybe no mass off?.

No, no, no. Same-store - the volume, the admissions were up 4% and we did see a benefit in pricing just shy of 3% over last year. .

Got it. .

It came in and we had some things going through last year that impacted - downward a bit in our revenue per episode. So that's why we see the 3% year-over-year. More closely, sequentially I think we were up just shy of 1% which was pretty consistent with what we anticipated. .

Okay. Got it. No, I'm just trying to get a sense of the underling volume trend lines. .

Yes. .

So that seems more in line with the peer group right now. Other question for Paul - and I don't know if you will like this or really answer it - but what are the pros and cons of the name Amedisys now and also with the new leadership - I'm just trying to get a sense of commitment.

Will they be in Baton Rouge full time? And what's just the commitment to the corporate ties to Baton Rouge not really the operational ties, but just trying to think a year or two down the road kind of what the organization looks like..

That's a very good question, Whit, and I'm going to talk to you about it.

The name as we – I think did you hear the introduction when we were announced?.

I probably didn't pay attention..

Okay. I think it was called Amedysis. .

Yes. .

We constantly get that. So I came in with a very strong opinion. Because when I proudly was telling everyone I was joining Amedisys, they came back with about a hundred variations on how you pronounce it. So it's a tough name for a lot of folks. I also don't think it reflects very well what we do.

I mean we take care of the most vulnerable people in their home and we pride ourselves on that. I think a medical system which is where it oriented from the name, doesn't reflect that. So we are outlooking at it. The reserve I have on the name honestly is in some places it's very strong.

You'll go to doctors' offices and you'll go to where we have been a long time in Georgia, for example, and they'll know us, they'll say it, they put us at the top of the list. And I guess my opinion there is why mess with success? You go into other parts where we're less well known and people really struggle with it.

So we are taking a look at it because I think it doesn't – But I do think the name doesn't reflect the fact that we do take care of people. We're a care organization. And we're largely - 85% of our population is women which we're all very proud of and caregivers.

So I think as we're going through this and starting to look at this, we'll come to some decisions about this and we are certainly going to vet it in the markets and see what we ought to be doing. That's a long answer. The corporate ties to Baton Rouge, we we're delighted with our employees here at Baton Rouge.

I've been very happy since I have come here. We are looking at places where we can draw talent, where we can bring talent to Baton Rouge. Some as we are constantly on the lookout for talent in terms of managed care and bundling certain types of IT, human resources. We are trying to be a 21st century company and are open to locations in other places.

But I do want to say that the people here would do what they do, do a great job at it. I hope the revenue recovery for example and I just talked to these folks yesterday about it. They do a fantastic job. And where we do great work, we're going to keep doing great work. So that's our thought there. .

So I guess the answer is a lot of the new leadership won't necessarily be full time in Baton Rouge?.

Some of them -- everybody is full time now. And they're coming down here but we are looking at very satellite places where our business is closer. .

Got it. .

As you see when I want our people in the middle of our businesses and that's the most important thing. As you've heard, I've spent a lot of time out there. Our COO instead of being around the table with us, Dan McCoy is out there. We're out there all the time. I think it's important that we're close to the business.

And whatever keeps our executives how close to the business businesses and that's the most important. .

Got it. And one last one for Ronnie, just in the EBITDA add backs, you got $2.2 million from interest income, I think and there's another $2 million from equity earnings. Both are just seeing unusually high versus the streamline anything that callout there. Okay..

Yes. Let me say that. So on the adjustments, the debt were noted. On the equity earnings from investment, we had a gain. That was reflected there. That's an adjustment in the miscellaneous net which was over $2 million, two of the items there. Our recovery in life insurance proceeds. Those were adjusted. The AMS3 stands alone. You'll see that.

But the other legal fees, the $2.1 million, that's in the G&A other line. So that's where they would all fall in the P&L. .

Okay. Thanks a lot, guys..

Thank you, Whit. .

Thank you, Whit. .

Your next question comes from the line of Ralph Giacobbe from Credit Suisse. Your line is open. .

Thanks and good morning. You, guys, have done a good job on the cost side.

I guess besides the move to Homecare Homebase, is there anything else besides still left in our agency closures done I guess, at this point? And then when do we sort of get that acceleration - do you think in the revenue line that would sort of allow you to show through the sort of leverage of everything you've done in the – on the cost side?.

I think we believe there's about - we believe there's more margin as we talk about. And I think we need to be in leading in that area. On the revenue growth side, what we're looking at now is capacity.

So I think we believe that as we increase the efficiency of our caregiving operations and do more standardization, have the IT be additive, we believe that we can drive much more productivity. So we believe there's inherent quite a bit of volume growth there.

So I think this year, we should start to see some of that and certainly next year, we're starting to push the idea that we need to really start to grow way above the rates we're doing now..

Okay.

Fair enough and then just on the margin point, you talked about the 400 basis points of the margin improvement, you want to put any type of framework or what period of time we should be thinking about in terms of actually getting to that kind of 12%, 13% margin level? I know it's over years obviously but any help in terms of how you put and frame it out from the perspective of timeline?.

I think we said our ambition was two to three years on at least half of that and so call that our ambitious piece. I think from the IT piece, we're looking at 17 -- end of 17 to extract that out. I think that’s two points there.

And then as we're moving into some of the other areas, care standardization, staffing optimization, capacity frame - I think we could improve on our coding - all those things, we're moving on that very quickly. So I put two to three years out there. I think the team heard it and you probably did.

And I think it's important that we deliver on that within that timeframe..

Okay. That's helpful. And then, just my last one.

Managed care book - I know we talked about it a lot on the call but obviously grow nicely - can you talk about opportunities to maybe expand relationships or conversations you're having with payers maybe even above and beyond Humana potentially even becoming sort of the preferred and exclusive provider? Is that something that it's of interest to you and or the payers at this point?.

I think having a stable partnership - when I talk to my Humana friends and my other payer friends out there that I know, yes, I mean, they are very interested in the stable and good relationship with somebody who can drive here and the home and reduce hospital readmissions. They're all over it.

And so I think the question is, how do we - it's how do we - we need to start to have some of those conversations. We need to obviously be in the markets where they are at and then we need to understand what sort of standard we have to live up to. And then put our money where our mouth is on this. There is a lot of interest.

I would like to be on that spot as you're seeing there's a lot of managed care people who understand this. We're comfortable with taking risks. And obviously with the growth of MA, the world is moving towards that as a way of cost containment and as a way of attracting customers. So I think it's better to lead than to follow in this pace..

Okay. All right. Great. Thank you very much..

Sure. Thank you. .

Your final question comes from the line of Toby Wann from Obsidian Research. Your line is open. .

Hi. Thanks for taking the questions, guys. Just a quick follow-up early read on potential Medicare RAC activity creeping into the home health and hospice and the plan that you, guys, have made that'll be prepared for that..

We know, we have planned for. We’re seeing some activities, nothing really that’s emerging yet in a significant way but we'll sort of until we plan for it anticipate some level of activity pickup. .

Okay. That's helpful. Thank you.

And then one other question, given that the year-over-year change in your average length of stay on hospice, was there - can you kind of give us some details as to maybe what drove out - was there a shift in patient diagnosis mix or anything like that? And then also, can you maybe give us the medium length of stay there at hospice?.

We have - I'll start with your last question first. Although we have this close to medium length of stay but two are the discharge length of stay say, down. There's nothing really again that we would point to. I think the activity, the additional admits and so but that's why part of what I'm seeing census grow more quite frankly than we have.

It's we're gaining patients so on but short length of stay so it's bringing the average down. But no particular diagnosis that we would point to at this time that is really driving that..

Okay. Thanks for taking the questions and congratulations on the quarter on the continued turnaround success..

Thank you, Toby. .

Thanks, Toby. We appreciate it. Okay. I want to thank everybody. Thank you, Operator, and thanks to everyone who joined us on our call today. We sincerely appreciate your interest and I'll get this right, Amedisys. And we look forward to updating you on our visits and on our next quarterly earnings call. Thanks again. Take care..

This concludes today's conference call. You may now disconnect..