Scott Ginn - Senior Vice President of Accounting and Controller Paul Kusserow - President and Chief Executive Officer Ronnie LaBorde - Vice Chairman and Chief Financial Officer Steve Seim - Head of Strategy Michael North - Senior Vice President of Operations and Interim Chief Information Officer.

Brian Tanquilut - Jefferies & Company, Inc. Frank Morgan - RBC Capital Markets Sheryl Skolnick - Mizuho Securities USA Inc. Ryan Halsted - Wells Fargo Securities, LLC.

Greetings and welcome to the Amedisys Third Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. And interactive question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being record.

I would now like to turn the conference over to your host, Mr. Scott Ginn, Senior Vice President of Finance and Accounting. Thank you. You may begin..

Thank you, Matt. Welcome to the Amedisys investor conference call to discuss the results of the third quarter ended September 30, 2016. A copy of our press release, supplemental slides and related Form 8-K filing with the SEC are available on the Investor Relations page on our website.

Speaking on today’s call from Amedisys will be Paul Kusserow, President and Chief Executive Officer; and Ronnie LaBorde, Vice Chairman and Chief Financial Officer.

Before we get started with our call, I’d like to remind everyone that statements made on this conference call today may constitute forward-looking statements and are protected under the Safe Harbor of the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Amedisys today.

The Company assumes no obligation to update information provided on this call to reflect subsequent events, other than as required under applicable securities laws. These forward-looking statements may involve a number of risks and uncertainties which may cause the Company’s results or actual outcomes to differ materially from such statements.

These risks and uncertainties include factors detailed in our SEC filings including our Forms 10-K, 10-Q and 8-K.

In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will be available on our website 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, Scott. Hello everyone and welcome to the Amedisys third quarter conference call. All in all this was a mixed quarter for Amedisys. One which drew lots of challenges at us and where as the whole we responded well. Many of the issues we dealt with were self-induced transformative changes like the HomeCare HomeBase implementation.

Some were environmental. The heavy flooding that impacted a number of our employees at our Baton Rouge headquarters and care centers in the area. The key to a good company though is how well it responds and gets on top of change. And I'm satisfied with our responses and reactions. And I continue to be very optimistic about our future.

With that backdrop let's turn to our operational performance. During the quarter Amedisys reported revenue of $362 million, up 11% year-over-year. Adjusted EBITDA was $26 million and adjusted EPS was $0.36. Home Health generated $269 million of revenue and segment level EBITDA of $32 million.

Hospice generated $82 million of revenue on continued strong growth and segment level EBITDA of $21 million. Finally, our personal care business segment recorded impressive same-store growth of 8% in billable hours for the quarter.

I’ve discussed in our earnings preannouncement last week we faced some challenges in the quarter with respect to Home Health growth particularly in August. We also saw higher than anticipated health insurance cost and increased bad debt expenses largely due to the platform transfer from AMS2 to HomeCare HomeBase.

Hospice and personal care exceeded growth targets for the quarter and continued their strong performance. Home Health growth was challenging, Home Health was in the depths of the HomeCare HomeBase implementation and disruption was at its peak during August.

The disastrous flooding in Baton Rouge only acerbated these issues and with over 30% of our employees homes flooded in the area. Adjusting for closures caused by Hurricane Matthew and some HomeCare HomeBase disruption October growth looks to be recovering to the levels we have seen in the first and second quarter.

On Monday our last group of care centers went live on HomeCare HomeBase. The completion of an accelerated implementation timeline where we trained over 11,000 employees on the new system over a period of 15 months. This was an exhaustive but necessary effort and I am extremely proud the team for managing through this change.

Our implementation teams led by Mike North, [Dion Graham and Christi Covington] have performed tremendously. Based on past experience we should be clear of operational disruption as our last group of care centers finished post implementation mid-way through the first quarter of 2017.

While we are managing through this disruption, we are seeing encouraging signs in several areas of our businesses. As I mentioned, Hospice is performing well, delivering double-digit same-store admissions growth for the sixth straight quarter. Revenue is up 12% year-over-year and average daily census topped 6,000 for the quarter.

The regulatory environment is favorable as well so we are encouraged by our prospects here. Our new personal care business unit is thriving in Massachusetts and we integrated our Professional Profiles acquisition in a matter of weeks.

We are pursuing additional opportunities for personal care tuck-in acquisitions in the Massachusetts and Southern New England markets and we look to expand this platform in other states, particularly Florida, Tennessee and Pennsylvania where we have a strong Home Health and Hospice presence.

I am also happy to report that we achieved our planned operational efficiency goal during the quarter. The G&A expense leverage that we have been discussing is starting to materialize. We remain on track to deliver the $46 million annualized run rate savings, we have discussed in prior quarters by the fourth quarter of 2017.

I want to take a moment to discuss the four pillars of our strategy and provide an update on each beginning with clinical distinction. In Home Health, we are making outstanding progress with our quality of patient care star rating.

In the most recent October release, our average rating was 3.74; our average in the January preview is expected to be 3.91. 50% our care centers are at four stars or above in the October release with that number rising to 65% in the January preview. Our patient satisfaction star rating is at 3.76, 5% above the industry average.

Additionally, based on the recently released value-based purchasing progress report, we are confident we will be a net recipient of funds when the first value-based payments are distributed in 2018. For our final point in Home Health clinical distinction, the emphasis on quality is paying dividends in other area.

Care centers with four plus stars have demonstrated year-over-year growth of 6% year-to-date. The chart on Page 8 of our slide shows a correlation between star ratings and turnover as well. This confirms we are focusing on the right thing. In Hospice, we are above industry average in Hospice information set and cap scores.

CMS also intends to begin public reporting on Hospice quality measures in 2017. Second on the people side, voluntary turnover remained stable at 23%. In addition, we are in the pilot stages of rolling out a promising proprietary productivity tool that will help us to more effectively optimize our labor force.

As I mentioned previously good people, practices drive growth.

Third, our operational efficiency metrics are trending well with the HomeCare, HomeBase rollout winding down we are making significant progress towards our $46 million run rate savings achieving almost $5 million of that saving to date versus our target of $3.5 million in Q3 that was previously disclosed.

Finally, all of these efforts should lead to growth. Driving growth across our business is a primary focus. For the quarter, our Home Health Medicare admissions grew 1% and total episodic admissions grew 3%. These are not satisfactory results. We need to continue to improve. This is obviously short of our growth target.

Our emphasis on Home Health business mix continues to progress as we saw same-store admission for non-episodic business declined 7%. We are seeing encouraging results on our business development optimization pilot.

In those areas where implementation is completed, we have seen substantial productivity gains from our business development reps and promising sign as incremental volume growth in the early stages of this pilot.

On the inorganic front, we closed on our acquisition of the Visiting Nurse Association of Long Island, representing a market extension into Kings and Queens Counties in New York. The eighth and ninth largest medical eligible populations in the nation.

As previously mentioned, we are experiencing continuing strong organic growth in Hospice and personal care and we are actively engaged in screening M&A prospects in both segment. Our M&A pipeline remains robust, but we are continuing to exercise discipline with regard to valuation.

We have seen sellers come to market with warranty price expectations and many of those deals are not getting done. As expected, we are seeing some recent signs of moderating expectation.

With our HomeCare HomeBase implementation close to the finish line and a few acquisitions under our belt this past year, we are confident in our ability to complete and integrated acquisition successfully. On the regulatory front, pre-claim review continues to be a controversial topic for Home Health providers.

As many of you have seen CMS delayed the implementation of PCR and as acknowledged issues with this program in Illinois, a state where we have very little exposure. Legislation in Congress has been introduced to delay the implementation and the National Association of HomeCare and Hospice are not has indicated that they will file suit over PCR.

Although there is much activity on this front, we continue to prepare as if PCR will continue its rollout in the other four states at some point in the near future. Our position is that any policy action aimed at fraud in the industry should target certain activities that indicate potential fraud rather than penalize all providers with a broad brush.

I would like to provide a quick update on a few leadership changes. As you saw in our press release and 8-K this morning, Chris Gerard has agreed to join the executive team as Chief Operating Officer. Chris brings over 20 years of Home Health and Hospice experience to the Company and will be responsible for operations in all three business segments.

He joins us from Kindred Healthcare, where he served as Vice President of the South Central region for the Kindred at Home division. He also served as COO at Kindred at Home prior to the Gentiva acquisition.

He was the Founder, President and CEO of IntegraCare Home Health, a strong company that he started and grew into 54 branches and successfully sold to Kindred. Chris brings a deep and intuitive knowledge of the industry and tremendous operational expertise. We are very excited for him to join the team. Mike North will become our permanent CIO.

His work in implementing HomeCare HomeBase in over 400 care centers, building the implementation and integration teams, solving complex problems as they arise. And his prior IT experience at Humana and Kindred make him a great choice. I work with Mike for five years prior to his coming to Amedisys so I know his capabilities well.

He is a great executive with a strong IT background. With respect to our CFO search, it is progressing well, but obviously not completed. The good news is that Ronnie LaBorde has agreed to stay on for the first quarter of 2017 if needed. This will help to transition of our executive team on several fronts.

Finally, I would be remiss if I didn't mention the impact on our employees from the recent flooding in Baton Rouge in surrounding areas. We had over 120 employees whose homes were flooded in August between our corporate offices employees and our care centers in the area.

Many of those affected are still not back in their homes and are waiting on some kind of help whether it would be from insurance or FEMA. For those who are home many are living in gutted houses with much of their belongings ruined. I am really proud of the way our organization responded.

Our employees banded together to volunteer time to help those in need. We also provide financial assistance to those impacted. Despite the incredible devastation, our clinicians kept track of their patients and continue to provide care despite the fact that many of their houses were flooded.

We came together, we did the right things and we continue to do the right things, we will be a better organization for it. We also receive the tragic news of the death of our founder Bill Borne. Bill with a unique visionary who had a large impact not only on our Company, but on the entire Home Health industry.

We will continue to honor Bill’s legacy and vision by committing to build upon the wonderful foundation that he laid. With that, I'll turn it over to Ronnie LaBorde..

Thank you, Paul. On a GAAP basis, we generated $362 million in revenue and earnings per share of $0.34 in the quarter. Slide 18 of our supplemental slides provides detail regarding the income or expense items adjusting our GAAP results that we have characterized as non-core, temporary and/or one-time in nature.

The schedule also details the income statement line item that each adjustment will impact. Now let's begin by discussing our quarterly adjusted results and our year-over-year comparisons. On a consolidated basis revenue was $362 million, up $35 million or 11%, EBITDA was $26 million down less than $1 million.

Our comparative results were impacted by first $3 million Medicare rate cut in Home Health, a $2 million increase in bad debt expense and $2.7 million in temporary expenses related to HomeCare HomeBase disruption as outlined on Slide 10 of our slide deck. Our earnings per share was $0.36, up $0.02 over the prior year. Now looking at segment results.

In the Home Health segment revenue was $269 million, up $15 million over the prior year. Medicare same-store admissions were up 1%. Our Medicare recertification rate was 37% excluding our infinity acquisition and the effect of the HomeCare HomeBase disruption. Our non-Medicare per visit admissions were down 7%.

Successfully are continuing to reduce that level of business relative to our Medicare fee-for-service business. Segment EBITDA was $32 million down just under $3 million from last year.

Our cost per visit was up $4 over last year and this increase resulted primarily from approximately $2 of increased salaries and wages, $1 of increased health insurance costs and approximately $0.65 of HomeCare HomeBase disruption costs. Turning to the Hospice segment. Revenue was $82 million, up $9 million over the prior year.

Same-store admissions were up 16% and our same-store ADC was up 14%. Segment EBITDA was $21 million an increase of $2 million from last year and our cost of service per day was flat. Turning to G&A. I'd like to refer you to Slide 4 of our supplemental slide deck.

On an adjusted basis our total G&A was $119 million, this includes $8 million related to acquisitions. Before this acquisition G&A cost were up slightly year-over-year. Looking to Home Health our G&A was up $5 million to $71 million or 26.3% of Home Health revenue, a 40 basis point increase year-over-year.

Our Hospice G&A was up $1 million to $17 million or 21.2% of Hospice revenue. This was an 80 basis point decrease from last year. And finally, our corporate G&A was $29 million, up slightly less than $1 million from the prior year and down sequentially reflecting planned reduction.

As a percentage of total revenue and our total corporate G&A was down 70 basis points from the prior year. Our cash flow from operations for the quarter before changes in working capital was $35 million.

Working capital increased $28 million during the quarter reflecting an increase in accounts receivable and the reduction of accrued expenses essentially at quarter end timing issue. Our net accounts receivable balance has again increased and this increase was $10 million during the third quarter.

The increase resulted primarily from the HomeCare HomeBase implementation process. Bad debt expense also increased $1 million in the period again mainly due to the aging of our receivable balances. Now that all of our care centers are live on HomeCare HomeBase. We are developing a plan to return accounts receivable balances to more normalized levels.

We are confident in our ability to collect this cash and will keep you apprised of our expected pace of recovery. CapEx for the quarter was $4 million and $14 million year-to-date. We now estimated CapEx will come in between $15 million and $20 million for the year down from our initial estimate of $20 million to $25 million.

At quarter end we had a cash balance of $9 million and $173 million available on our revolving credit line. Providing total available liquidity of $182 million at quarter end. At September 30, we had $97 million borrowed under our credit facility and our total leverage ratio was 0.9 times adjusted EBITDA for the last 12-months.

I'd like to make a comment and update you on the final rule for 2017 because as you know CMS recently published the final rule for Home Health. The overall update of negative 70 basis points is slightly better than the proposed cut of 100 basis points. Changes to the outlier payment method were finalized as proposed.

Case mix ways were updated from the proposed rule by using more recent claims data. This resulted in changes to the case mix weights and we are currently in the process of reviewing how the impact of these changes may differ from our original assessment of the proposed rule.

Our work continues and we will know this in the next few weeks hopefully as we work through that. Looking to the fourth quarter, we expect strong volume growth in our Hospice and Personal Care segment. We will be winding down our HomeCare HomeBase implementation project with it concluding in early 2017.

In Home Health, I'd like to mention the following items which will impact fourth quarter results. As Paul mentioned earlier, we expect to see fourth quarter growth rates improved over the third quarter. The 2017 Medicare rate cut will impact episodes beginning in 2016 and completing in 2017.

But following items now will impact our overall results for the quarter. We will see lower but continued disruption costs for the HomeCare HomeBase implementation. Our continued achievement of our efficiencies with a target of $5.5 million for the quarter will occur in the fourth quarter.

Bad debt expenses will likely be consistent with third quarter levels. And lastly, consistent with seasonal claims expectations our fourth quarter healthcare cost will be substantially equal to the third quarter expense. Despite the impact outlined, we remain confident in our 2017 plan.

This concludes our prepared remarks and operator I’d ask you now to please open up the call for questions..

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Our first question is from Brian Tanquilut from Jefferies. Please go ahead..

Hey. Good morning, guys. Paul, if you don't mind talking us through the HomeCare HomeBase rollout and the disruption. So obviously last quarter, you raised the chop impact and then it was slightly worse than that for the quarter obviously and now we see it flowing all the way through to Q1.

So as you look back what did we missed or what did you guys missed in Q3 and could you give us more comfort in your visibility that this ends after Q1 of 2017and that it ends at $800,000 of extra chop in 2017?.

Thanks, Brain. I'm going to give you some comments and then I'm going to turn it over to Mike North who's been in charge of the implementation and he has been out to all the care centers as we've been rolling this out. I think some of the things that surprised us on this were our research first thing.

What we saw was when we initiated the transfer from one system to the other, the time of implementation the research went down and then it's taken them 60 days about to get back to normal level.

And then there's been some other things, transportation certainly has affected our AR in a way that it's harder to – with new systems, it’s more difficult for folks to get the bills out immediately as they're learning this new system. They do catch up and we do return to normal levels. We say between 60 and 90 days, it's closer to 60 days.

So based on the way the implementation is working at this point will fundamentally finish everything in terms of HomeCare HomeBase from the implementation perspective at the end of December.

What we're doing is what we're talking about is there's going to be about, I think about 60 care centers that are going to drag into the next year in January and then 30 in February. So it's really the tail end in the 60-day post implementation phase. So the majority of the company is going to be through it.

They should be operating that according to improving – the other thing that we're doing is I’ve been out in the field pretty considerably and we now see that there's a lot more potential to drive better efficiencies out there.

So we're actually going to go out and do it again and make sure that everybody is learning, make sure that we distribute the best practices, follow-up after three, four, five, six months and say how you doing? What don't you know, let's work on the efficiencies that can be generated here? So we feel good about it. I believe this is exactly on track.

I guess if there was any and if we would have to make to our statement it might have been that while we finish on the dot at the end of December. There is a 60-day post implementation piece which does affect performance, but it will be in a small group of care center.

In terms of the debt, I don't know Ronnie or Mike if you want to comment any more specifically..

Well, so one thing I’d comment on Brian. Great question. Very insightful because the nuance here is around AR, what happens is we train everybody up front, but the speed of this integration and this transformation caused they don't have anything to build for the first 60 days. As a result it's a challenge for them when the building time comes.

So it's really – like Paul said, it really didn't surprise us at all as we started getting into this. So we're very confident about their ability to come out. We've seen it in every region they've come out of it at most 60 days afterwards.

So it really isn't something we're concerned about based on what we had seen with all the different regions that’s online already..

And then follow-up to that either Paul or Mike, obviously it had an impact on organic growth.

So if you don’t mind just walking us through how exactly organic growth is impacted by the rollout and how do you gain confidence in the reacceleration of that growth other than the some of the disruption that you've already talked about as we think about Q4 and then into 2017?.

Yes. I think there's been just in general as we – it's quite clear we initially when we started to measure disruption levels because we started in the AMS3 three areas in Louisiana and Mississippi and we saw almost an immediate jump. So we took a lot of the calculations that we had here and said this is a lesser impact.

Then what actually ended up happening when we went to AMS2 which was really built deep into the organization and was harder to migrate from. So I guess I think our initial estimates we made when we came to AMS2 getting that out of the system and getting people to start to change their methodologies was quite significant.

On the growth piece, largely I think we've had some issues in terms of just creating the capacity hasn’t really appeared yet, we still had some staffing issues. People are focused more in terms of the internal operations. So we've missed some.

We are seeing definitely some impact of growth particularly when we come into regions where they're very oriented towards AMS2. We've seen growth slowdown and people spend more time in the facilities and then we've seen a harder time getting built, harder time on the back end which is affected somewhat the front end..

Last question Ronnie, if free cash flows and working capital I mean how should we think about, obviously it we was a little weaker idea, but is there anything else you want to walk us through on the cash flow side?.

Sure. Brian, thank you. Good morning and thanks for the question. Yes. It’s lumpy. I would say this and you can – we kind of frame this down the way I'm thinking about it and we're thinking about it on Page 17 of the deck.

And you can see that cash flow just prior to working capital changes it's been pretty consistent and look pretty good through the – over the last five quarter or certainly into this year.

What we've faced in total this year, again it’s build up AR and this has turned into about a $45 million build of AR since year-end that we need to get back out of the balance sheet and we think we will. So what you saw in the third quarter, I’m saying that’s year-to-date.

In the third quarter it was $28 million of working capital a piece of that was AR another piece was just kind of the timing of some accrued expenses over the year. Of course of the year, the timing of those expenses and accrued expenses are net positive to working capital not a use.

So fundamentally it's AR and we're focused on it we're going to get it back down. We don't have you know with the up tick in the third quarter HomeCare HomeBase activity kind of contribute to that.

We're getting much - trying to get much more granular and have a much firmer view on pace of recovery and the effort that will require to kind of catch up and then of course keep up..

So let me just add something to that Brian. We recently went out and created a group that fundamentally just manages our managed care business, so roughly $250 million. We have somebody that we brought in was very good contracting, her name is [Christie Batoly] from [indiscernible] Tennessee Blue.

And her job fundamentally is to go through the whole contracting system, go through the workflow, go through, work with our folks in AR in this piece of business which does gum up our AR.

And so we've hopefully in the next quarter we've made some very interesting or testing out some very interesting technology which we think will drive cost and drive our AR days down in managed care, but also we need to go back and look at our contracts clean up our contracts.

So that this becomes less onerous, less difficult that's our most difficult area. So in general we anticipate as this area is going to get a lot better. Because you know after HomeCare HomeBase the fee-for-service business should go back to where it is. The managed care business as we've indicated is extraordinarily difficult and expensive.

And we're trying to do at the same time clean that up and make that more streamline..

All right. Thank you guys..

Thanks Brian..

Our next question comes from Frank Morgan from RBC Capital Markets. Please go ahead..

Just going back to the issue around volumes I may have missed part of this when I hopped in late. But I'm just curious if you could kind of parse out how much is weather related and I know at one point there was discussion around a sales force and contract optimization strategy.

Just curious is that in some way might be disruptive to volume in the quarter? Thanks..

Sure. Let me talk about the optimization project that we have we call it project Redwood. We've implemented it now in about four regions and what we've seen is a lot - much better productivity and this has come from what we basically are trying to do here Frank is we're trying to have better targets.

So we actually know where all the fish are here, so we know fee-for-service Medicare is we know what our level of penetration is there and what we're trying to do is to focus our sales folks specifically on you know fishing where the fish are.

We want to deal it with the best people and we want to make sure that we eliminate a lot of the unnecessary calls we've actually found in certain cases we've been able to eliminate up to 30% of the calls that we're making because we've determined it's not very good business for us or the level, or we're over penetrated in that business.

So we've given started to give the sales force a really strong tools here. And they have a really very good ability to target go in and sell.

Where we also done now is we've seen as you saw in the deck I think it's Page 8 where we see a strong correlation between quality and growth where we've actually been able to quantify that in a very statistically relevant way.

So we're able to do - so now what we're doing is we're taking some of our protocols and quality protocols and putting those together and turning those into sales material. So that fundamentally we can drive that business based on quality and we've seen that when people buy and quality it drives our growth and our margins up.

So you want to take part two of that Ronnie..

Frank, good morning. With respect to the weather, I think as we moved through and say how we are thinking about it and what we saw. As move through the quarter, we really wanted to get more out of August as far as production.

And so a lot of facts, like Paul said the depth and probably the most intense period with respect to census involved in HomeCare HomeBase implementation. So we have that going on. We have the weather and the rain, and the floods in Baton Rouge. So a lot of factors impacted that and we just didn't hit our peak that we wanted in August.

And so now as we turn back looking into this quarter, of course, early October we had the effect of Matthew in some markets.

So when we take that out and kind of think about HomeCare HomeBase disruption, we're starting to see, it maybe challenging the fourth quarter, but we still feel confident that we are – and focused on getting back to our aspirational goals of mid single-digit.

So we have that going on kind of our BD transformation where we're trying to apply our better science to market, get better production, more efficient production. All that's underway and I think we’re confident that will bear some fruit as we move forward.

So that's how we're focused on kind of rebuilding and getting more consistent growth in our Home Health segment..

Yes. And Frank just anecdotally on this, so Baton Rouge that corporate headquarters were basically shut for a week. I got in there as quickly as I could a couple of days after the roads cleared.

And just in terms of the activity that we were all focused on, then Bill was missing and everybody was holding their breath on that and that didn't turn out well.

So I think the idea is – there was a week of real physical problems and then definitely a week of sorting things out and dealing with a lot of the psychology of that which was very difficult.

So I say at least two weeks were – and I don't know how to quantify this and Ronnie and Scott had pushback about trying to really quantify about it, but it was a very impactful event particularly with losing someone who's run the company for 30 plus years and the people who worked with him for that amount of years and then amount of devastation and people that were involved in either unfortunately as victims or also stepping in and taking on family members and all that it really supply shut down for about two weeks..

Got it. And then back to the HomeCare HomeBase implementation. I guess I'm trying to understand like, why would that affect either your marketing staff or your referral sources.

I mean certainly the weather seems reasonable, but help me understand how that really translates into impacting referral sources or the people who are the marking side? And then I will hop off. Thanks..

Sure.

It hurts the – in general when the office is going through a transformation and when there is training and when the care coordinators are going through training and when people bring back orders, fundamentally orders from referral sources and care coordinators and nurse managers are then trying to turn this around are also in the midst of training.

What we've seen is that – the loop of – and remember our business is you go out, you get the business. You bring it back to the care center. In the care center you sort it out, you put together a plan, you bring it back to the physician or the hospital.

They okay it when then you bringing it back to the care center and they put together a schedule on a care plan and you go out and you send the nurses out. The fact that it touches the offices twice and when the officers are in relative disruption it slows things down. Yes. Please, Mike North..

Frank, this is Mike North. Straight question, so fundamentally yes, they don't have a lot of training in HomeCare HomeBase. Paul is exactly right and that's what I saw spending the last 12 months out in the centers.

They work so tightly with the sales organization that the fact that it does have to come back and hit the center twice and they're all under the stress of working through two systems for 60 days. We just can’t help, but impacted BD side as well.

So I think as they get through it, you see that that's one of the quickest thing that recovers is from a sales perspective that disruption goes away and then you start talking about the AR piece of it. So that the point is, the way we've set our centers up and how closely that they work together both on the back office and the sales side.

It was natural that it had an impact there, but it goes away very quickly..

I think the other point that we've seen. The last point I'll leave you with is when you are far going back and forth between two platforms and the two scheduling functions between the two platforms. What we saw is some confusion on capacity and the confusion was that we were questioned did we actually have the capacity to do some visits.

And I think in certain cases we were wrong. We did have to capacity, but due to the toggling, we missed out on it. And so that gets cleared relatively quickly, but it was something that came out, but we see that clear a very quickly, but it does occur..

Okay. Thank you..

Okay..

Our next question is from Sheryl Skolnick from Mizuho. Please go ahead..

Good morning, gentlemen. So let me start here. There's two sort of broad issues I think that are a little bit concerning and maybe confusing folks and maybe we can get you to help us understand what's going on.

First of all, there's been an awful lot of management change and I understand Ronnie's decision and believe me understand it - I'd like to say IT retire. So I understand those kinds of personal life events decision, but you're promoting Mike North. Great job Mike, terrific, congratulation..

Thank you, Sheryl..

It's been an amazing feat that you've done everything you've done and done it as well as you have even though the fact is down it could have been a whole lot worse. And we've seen it that way and then now regarding the change in COO.

So what's going on there because the way the stock is reacting, it is reacting as if that's signaling a problem, you got a CFO, CIO and COO change all in six months. So can we get that elephant out of the room and can you just give us some disclosure on that.

And then the second issue is we really need to understand a little bit more detail of the possible about the fourth quarter because it's hard to measure your puts and takes, but the qualitative things that you've given us, so I think I understand, but I'm not sure. And I think we'd all like to get over the fourth quarter and get focused on 2017.

So getting those two issues off the table I think that would be really helpful if you can help?.

I think you're right. I think those are two central issues, so let's talk about the management changes. On IT where we're going as a Company necessitated a different type of leadership in terms of integration and implementation. We have a very good IT team.

Mike and a lot of this revolves around HomeCare HomeBase making it work, making it think, making sure it's implemented, so Mike I think is a good choice there.

On the CFO piece, as I mentioned we're in the middle of a search now, Ronnie's been fantastic and has agreed to provide a bridge as long as we need it and to provide some overlap with the new CFO coming in. We have some very good candidates in the pike and we're happy with what we have.

We have some good internal folks and we've got some good external folks, but we're going to make the right decisions if Ronnie is willing to be the bridge, we're going to make the right decision. We're going to have a really good transfer. On the COO, I think what – let me just give you my opinion here.

I think we need more folks on this management team who really know the nits and nats of the business. If you look at our two previous hires, I think we have a lot of very good generalists who are doing a great job with the business.

I think we need to balance that with some specific people who have been in this business, have it in their DNA and when you put the mix together I think it's going to be a wonderful combination. If you look at our last two hires, we brought in.

David Pearce who has tremendous capabilities coming from Kindred and tremendous capabilities in compliance, and then Susan Sender come in as our Chief Clinical Officer and she's a fantastic operator as well as a great clinician.

And with Chris Gerard, we believe we're getting somebody who actually built the business from the ground up, who knows the metrics incredibly well, we've got great regional leadership out there and we want to make sure that they were providing some additive expertise that goes out there. So I think what we're doing is it's providing good balance.

Dan McCoy he is the COO through January done a fantastic job and but doesn't come from the industry..

Just before we move on to the next question about the guidance to the fourth quarter or the commentary on the fourth quarter, so you do understand that when you miss the quarter and you have implementation in AR and unexpected expenses and on top of that change management, how nervous that makes us.

So is this is signal that you're looking at 1% specifically 1% growth rate in Medicare admissions as should we not look at that as part of the reason why you're making these changes that it's purely coincidental and you would have made these changes anyway..

Yes, I guess what I'm seeing is in the process is what we're doing is as the business evolves. We're bringing in folks that can respond best to the changes that are occurring in the business and what's emerging.

And so I guess to be and maybe I should have communicated this better to you all is we brought in some really good general it’s about a year and a half ago. Really and we've done a nice job for folks who don't come from this business.

There always has been an intent when I've made this quite clear hopefully with our Board and everyone else is that we do need to bring an expertise to balance this out. And so that’s what we're in the process filling. We have good and the people that we're bringing in its providing a very good balance.

And so I am quite comfortable with it and if people perceive that there's chaos in the sea suite that's not the case at all..

Right. Okay. And then just that's great to hear. Thank you. And then moving on to being a little bit more specific with the puts and takes for the quarter. Can we kind of use this third quarter as a base line and quantify it a little bit more perhaps..

Sure. Sheryl, good morning.

The thing we try to give a bit of a list some thing think about it and I would say that our view for both Hospice and personal care that would be substantially undisturbed and look to have good fourth quarter operating results and I think that overall as we wind up HomeCare HomeBase implementation and kind of get to that to the tail end by the end of the quarter.

Just some things to think about. I think we updated our disruption expectation and so you see we thought it would be a $1.2 million in the fourth quarter and we updated that to 1.8 just based on our experience and not to be too optimistic about what we'll do in the fourth quarter.

So we update that the initiatives we in fact achieved beyond playing in the third and so we feel really good about achieving the 5.5 and 4. So as a backdrop just how we can think sequentially about that overall is a little bit of improvement in the realization of efficiencies and a little bit more probably all set a little bit more disruption.

The big issue when we do that or the other two is we talked about bad debt and hospitalization expenses and it turns out and in the third quarter we talked about the kind of surprise or unexpected level of hospital claims, but thinking about overall results that level of claims going to really we think we realize and it won’t be a surprise as we said it won't be a surprise as expected in the fourth quarter.

So no sequential benefit as the surprise comes back out and we saw the up tick in bad debt to about 6.8% of the non-Medicare revenue I think given the way receivables age as we began to bring that down I wouldn’t expect that to start trending down too quickly.

So sequentially it's going to end up with you know be driven a large part of what the growth we realize. We feel good about in improving but that's going to drive kind of a change in Home Health results..

Right. That’s basically what you said before and I got the dollar amounts on the net differences because you have these very helpful tables in here.

But the healthcare costs, so essentially what you're saying is whatever that expense was in this quarter because of seasonality it’s going to be the same expense in the fourth quarter and will have the same negative impact.

So is it right? It was everything that you've just said and with Hospice growing and with some replenishment of volume in admissions in the agencies that are maturing on HomeCare HomeBase.

You do a little bit better sequentially in the fourth quarters then you did in the third? Is that the right way to interpret that?.

Yes..

A little bit better. So a couple – maybe but not, yes but not outrageous..

Exactly. Well to bring it back, we just trying to signal, I think we've got consensus for the fourth quarter will be – we don't think we have a real high probability of reaching that as we sit. So that's what we're trying to also say that we think we can see some improvement, but not enough as we sit here.

We don’t have a lot of sight to get to where fourth quarter consensus at this moment..

Right, which I'm looking at is $0.48 and some of the numbers have come down a little bit, but not much..

A little bit. Yes. That's right..

Yes. I would tend to agree coming of the quarter you just had and that shouldn’t surprise anybody. But okay, all right. That's helpful. And then if you can just indulge me on one more question. I really appreciate that..

Absolutely..

Thank you. You made comments about implementing a sales strategy here.

Is that the project redwood you were talking about or is this something different?.

It’s exactly that Sheryl. So we’ve gotten the results back from four of the regions where we've actually implemented it. And what we've seen is very strong productivity by rep increases as we've consolidated accounts. Remember we've got eliminated over 30% maybe even more of the accounts that we were calling on.

So we've sorted through, we basically just becoming more efficient and effective. And then what we’ve – so we've increased the productivity quite considerably in that double-digit. We started to see in all cases incremental growth over the base level of growth small kind of a percentage to 2%. And for us it's very encouraging.

We expect that to get better. But yes, I would have liked to. We’re out of the gate like a lion, but it’s a big change in this area. And the other thing is what we're finding, frankly, and this is why we're delighted, we have Susan here. We need quality wins in this market as you saw on the chart. If you have quality which we're doing really well on.

There's a correlation between quality and growth. And then we have to communicate that quality which we don't particularly do well now and say here is what we're doing in these areas that make us better than everybody else. And that’s they key here. So we have protocols.

We need to get those protocols not only for our clinicians, but we need to have our sales folks out there showing those protocols how to all our referral sources that we want to get business from so that they think of us first as highly differentiated..

Okay. All right. And just one final thing. So your Hospice business were the agencies that were implemented first on HomeCare HomeBase.

And they are continuing, right, so they're basically you're mature group of agencies and they are generating double-digit growth? And so the ones that were implemented first have now had it in place for close to a year or a little over a year?.

Yes, close to a year. .

So with those agencies and I realize that Hospice and Home Health are not the same, but the pattern of restoring the admission I mean one of the things that I guess would make you confident is about 2017 would be the experience that you've got out of those agencies. And here is the period of disruption.

We've now learned from that, different Home Health and Hospice sounds like a more intensive in Home Health and Hospice. But still as we've matured it through the Home Health, the first Hospice and then the first Home Health agencies. Here's the pattern we see and this is why we're confident in 2017.

So how long is that period before everything comes back to normal? The 60-day implementation period or is there a period after that?.

So Sheryl, this is Mike. Great question and very similar to what we talked about in the past. There's a period after the 60-day, so during the 60 days they're managing two systems.

I think what really encourages us Sheryl is that we go back and we run kind of a retrospective and look back at all the different regions that have gone live and it's a very, very consistent pattern.

Graphically I can show they do come out of it, it's not the same for every region, but it's usually from 30 to 60 days after they're fully live, so in other words, 60 days to get off both systems and another 30 to 60 days before I'll say it back to normal and we are very encouraged.

It is a consistent pattern that we see and I think that’s what gives us a lot of confidence about 2017..

Got it. Thank you so much..

Thanks Sheryl..

Your next question comes from Ryan Halsted from Wells Fargo. Please go ahead..

Thanks, good morning..

Hey, Ryan..

So switching gears to M&A, have you given any guidance around Visiting Nurses Association of New York sort of what you expect from that transaction?.

This is Steve Seim. No we haven't yet. Essentially what we've bought there is we bought CON access and the works going on to get it staffed and the push to get in there as quickly if we can, but we haven't provided a specific target at this point..

We got fishing license Ryan, that's why we bought it and it's adjacent to some other areas, so we're able to go into some of the larger systems there and offer more coverage. So we're optimistic about it, but it’s fundamentally starting up. This was a place that was very dormant. So we're building it up from there.

And so initially we'll see some, we have to rehire a fair amount of folks build it up and then we anticipate the amount of Medicare eligible there in that population that will have some – that this will be a very good site for..

I just think you made a good point that one of the things that was attractive to us in addition to how much Medicare population there was there is how strong the care centers are – that are going to be the ones driving our operations there. So yes, it was one of reason that is very attractive for us. And we got a good team in place there..

Okay. And then as far as I guess the broader M&A environment, when you look around – you see some large health systems becoming a lot more active or getting a lot more active in Home Health. You guys are seem to be mostly concentrated on Hospice and the private duty business.

And I know you want to be disciplined, but is there anything else you can do to really try to get things more active on the consolidation front in Home Health whether it would be partnerships or other types of ideas?.

Yes I’d say we're interested in – just to be clear, Home Health is obviously the majority of our business we know how to do it. We like this. We are looking at deals, but we're also seeing that the pricing in particular on pure Home Health deals without real geographic concentration particularly if it’s in the CON.

We're interested in those types of deals. So we're looking for the – and we're also finding we've done a really nice job of building referrals back and forth between Hospice and Home Health and also we're starting to see that we can do that in personal care. So we want to make sure it's our footprint.

We want to make sure that we can migrate things over to either personal care or a Hospice. So we want to make sure we land in the right place and we want to make sure we get some concentration. So yes, we still have a extremely good pike.

I think the issue is – I think that a lot of people are hinting at is where are we going to pull the trigger on something sizeable versus some of the smaller stuff that we've done and we're doing pretty well on some deals we've got a lot of things close.

But we're going to maintain our discipline particularly in terms of pricing and then in terms of what we really believe the synergies to be. Because we're starting to see prices come down a little and we want to make sure that we take advantage of that.

So we're actively out there looking, but I'd say, you know, I more than anyone who would like to do as everybody here around the table is going to test.

I more than anybody would like to do a nice big deal, but we're going to hold our discipline particularly in this environment with PCR out there with the new rate cuts that are coming out, the value based purchasing all that needs to get factored in.

And in some of the deals I've seen out they’re particularly in Home Health that has not been factored in and I think it will be a nasty surprise for some folks. I guess from a JV perspective which I think is what you're referring to. I think there are opportunities and we're pushing that harder.

That’s not our classic mode of operations, but we are seeing people who are interested in divestitures, we are in talks with people who are interested in divestitures, large hospital systems in particular. We are interested in buying portions of their businesses and operating them and doing joint deals. So we are having those conversations as well..

So that's very helpful. As far as the final Medicare Home Health rule and your review of it.

I guess are you looking to determine if the changes to the case mix had a sort of lessening effect of the benefit from proposed to final or sort of how should we think about the impact of the proposed rule I think you outlined 2.5% impact which was greater than what you know the aggregate rule was expected to have.

Could we think about sort of again this benefit or this change to the final rule. Maybe having a disproportionately better impact to you from proposed to final..

Ryan as we said I wouldn't - we're not sitting here thinking there might be a benefit to us we need to quantify. So we don’t want to get ahead and begin to suggest the change from our view on the proposal. But early indications are it's not a positive impact to us but again not quantifying what that change will be..

Yes the case mix piece was changed more than we had thought. So while they gave us something we have to determine what they're thinking back in terms of the case mix waiting and then the therapy.

So that’s clearly for us what we're running through we have to run it through our models and since we just got it, we've been testing it and that’s what we're testing right now..

Okay. I know it's early and maybe I didn't ask the question that clearly, I meant the final rule I guess was 30 basis points better than the proposed rule. Is it possible that that incremental benefit could be sort of fully appreciated by you guys or could it be more or less which direction do you think you're kind of leaning towards..

I would say no I think you answered it very - I mean you asked a very clearly. Our answer probably wasn’t succinct and it’s because we don't quite know. But again from our overall view from the proposed rule I would say we don't sit at this moment saying that's going to be a bit more positive with the final rule.

All in we've got to do the math and can't quantify it yet but I don't think it's a positive direction overall even though the base rate was slightly positive to the proposal. So all in I think we'll assess that but not thinking today that it's going to be a positive effect for us..

Okay. That’s clear. Last one Hurricane Matthew it looked like it impacted fair number of your locations. I realize it didn't have quite the impact as the flooding but any initial thoughts on the impact from Hurricane Matthew..

Ron.

Do you want to talk about that?.

We certainly saw an impact in our care centers especially in that week within our Carolina markets and within our Georgia market. So we saw that hit, pretty pleased with the way the other regions performed within that month, but they're pretty busy and recover quickly we certainly did feel a little bit of softness in those markets impact about..

Flooding there that caused that came out of what turned out is the Hurricane didn't turn out to be as brutal as we thought, what turned out to be again with the subsequent flooding. Block a lot of our access in North and South Carolina our ability to get out particularly around the coastal area in Georgia..

Okay.

Was it disruptive enough that you care to call out any potential impact to volume growth?.

I think once we get to the final end of the quarter we’ll kind of access exactly where we are if it impacted research, what we close - process close in October now getting final numbers. So we’ll have some deal on that when we get to the end of this quarter..

Okay. Thanks for taking my questions..

Thanks Ryan. Appreciate it. End of Q&A.

This does include the question-and-answer session portion. And I would like to turn the floor back over to Mr. Kusserow for any closing comments..

Great. Thank you very much Matt. Thanks everyone who joined us on our call today. Thanks to our employees on the call. Great job despite lots of obstacles out there. We appreciate everyone's interest in Amedisys and we look forward to updating you on our visits and our next quarterly earnings call. Thanks. Have a good day..

This conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time..