Form 10-Q for the Quarterly Period Ended September 30, 2003

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kv06Ep1vc8wyonkxTm/mgwngqcRgjqL5rr8dEjprvYus5v0jZeeroE86yKDjXORu eLi3REUOufkKpOWXUvaY1Q== 0001193125-03-076373.txt : 20031110 0001193125-03-076373.hdr.sgml : 20031110 20031110171633 ACCESSION NUMBER: 0001193125-03-076373 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMEDISYS INC CENTRAL INDEX KEY: 0000896262 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 113131700 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24260 FILM NUMBER: 03989460 BUSINESS ADDRESS: STREET 1: 11100 MEAD ROAD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 BUSINESS PHONE: 2252922031 MAIL ADDRESS: STREET 1: 11100 MEAD ROAD STE 300 CITY: BATON ROUGE STATE: LA ZIP: 70816 FORMER COMPANY: FORMER CONFORMED NAME: ANALYTICAL NURSING MANAGEMENT CORP DATE OF NAME CHANGE: 19940819 FORMER COMPANY: FORMER CONFORMED NAME: M&N CAPITAL CORP DATE OF NAME CHANGE: 19930125 10-Q 1 d10q.htm FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003 Form 10-Q for the Quarterly Period Ended September 30, 2003

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-24260

AMEDISYS, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware

11-3131700

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

11100 Mead Road, Suite 300, Baton Rouge, LA 70816

(Address of principal executive offices including zip code)

(225) 292-2031

(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Number of shares of Common Stock, par value $.001, outstanding as of November 5, 2003: 9,893,838 shares

PART I.
FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002	3

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2002	4

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures about Market Risks	21

Item 4.	Controls and Procedures	21

PART II.
OTHER INFORMATION

Item 1.	Legal Proceedings	21

Item 2.	Changes in Securities	21

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Submission of Matters to a Vote of Security Holders	21

Item 5.	Other Information	21

Item 6.	Exhibits and Reports on Form 8-K	27

Item 1. FINANCIAL STATEMENTS

AMEDISYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of September 30, 2003 and December 31, 2002

(Dollar amounts in 000’s, except share data)

	September 30, 2003			December 31, 2002
	(unaudited)
ASSETS
CURRENT ASSETS:

Cash and cash equivalents	$	10,064		$	4,861
Patient accounts receivable, net of allowance for doubtful accounts of $2,641 at September 30, 2003 and $1,865 at December 31, 2002		11,567			14,102
Prepaid expenses		1,428			1,600
Deferred income taxes		2,424			1,803
Inventory and other current assets		955			857

Total current assets		26,438			23,223

Property and equipment, net		6,919			8,257
Deferred income taxes		—			1,711
Other assets, net		34,331			25,768

Total assets	$	67,688		$	58,959

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:

Accounts payable	$	2,411		$	2,495
Accrued expenses:
Payroll and payroll taxes		8,755			6,504
Insurance		2,265			2,171
Income taxes		641			297
Legal settlements		1,292			1,887
Other		3,491			3,074
Current portion of long-term debt		3,970			3,903
Current portion of obligations under capital leases		1,773			2,476
Current portion of Medicare liabilities		8,433			8,948

Total current liabilities		33,031			31,755

Long-term debt		2,829			4,474
Obligations under capital leases		396			1,042
Deferred income taxes		1,766			—
Long-term Medicare liabilities		3,078			3,898
Other long-term liabilities		1,212			827

Total liabilities		42,312			41,996

STOCKHOLDERS’ EQUITY:

Preferred stock, $.001 par value, 5,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $.001 par value, 30,000,000 shares authorized; 9,850,454 and 9,163,809 shares issued at September 30, 2003 and December 31, 2002, respectively		10			9
Additional paid-in capital		32,807			29,439
Treasury stock at cost (4,167 shares of common stock held at September 30, 2003 and December 31, 2002)		(25	)		(25	)
Accumulated deficit		(7,416	)		(12,460	)

Total stockholders’ equity		25,376			16,963

Total liabilities and stockholders’ equity	$	67,688		$	58,959

See accompanying notes to consolidated financial statements

AMEDISYS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and nine months ended September 30, 2003 and 2002

(Unaudited, Dollar amounts in 000’s, except per share data)

	Three months ended						Nine months ended
	September 30, 2003			September 30, 2002			September 30, 2003			September 30, 2002
Net service revenue	$	37,048		$	33,066		$	100,374		$	97,770
Cost of service revenue		15,199			15,079			41,208			43,521

Gross margin		21,849			17,987			59,166			54,249

General and administrative expenses:
Salaries and benefits		10,462			9,428			30,204			28,495
Other		7,495			6,157			20,330			17,394

Total general and administrative expenses		17,957			15,585			50,534			45,889

Operating income		3,892			2,402			8,632			8,360

Other income and expense:
Interest income		18			36			59			78
Interest expense		(296	)		(456	)		(997	)		(1,453	)
Other income (expense), net		273			(58	)		482			148

Total other expense, net		(5	)		(478	)		(456	)		(1,227	)

Income before income taxes		3,887			1,924			8,176			7,133

Income tax expense		1,506			705			3,132			253

Net income	$	2,381		$	1,219		$	5,044		$	6,880

Basic weighted average common shares outstanding		9,713			9,058			9,507			8,283

Basic income per common share	$	0.25		$	0.13		$	0.53		$	0.83

Diluted weighted average common shares outstanding		10,108			9,594			9,756			8,843

Diluted income per common share	$	0.24		$	0.13		$	0.52		$	0.78

See accompanying notes to consolidated financial statements

AMEDISYS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2003 and 2002

(Unaudited, Dollar amounts in 000’s)

	Nine months ended
	September 30, 2003			September 30, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,044		$	6,880
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,276			2,250
Provision for bad debts		1,581			2,078
Deferred income taxes		2,856			(355	)
Tax benefit from stock option exercises		9			—
Compensation expense		102			—
Other		—			(95	)
Changes in assets and liabilities:
Decrease in accounts receivable		954			6,724
Decrease (increase) in inventory and other current assets		143			(1,966	)
Increase in other assets		(289	)		(173	)
Decrease in accounts payable		(85	)		(495	)
Increase (decrease) in accrued expenses		3,428			(274	)

Net cash provided by operating activities		16,019			14,574

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net		(745	)		(907	)
Cash used in purchase acquisitions		(6,304	)		(1,875	)
Partnership distributions		—			(66	)

Net cash used in investing activities		(7,049	)		(2,848	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments on line of credit agreements		—			(7,422	)
Proceeds from issuance of notes payable and capital leases		1,151			916
Payments on notes payable and capital leases		(5,130	)		(5,312	)
Decrease in Medicare liabilities, net		(1,335	)		(2,701	)
Increase (decrease) in long-term liabilities		387			(137	)
Proceeds from private placement of stock, net		—			9,526
Proceeds from issuance of stock from Employee Stock Purchase Plan		463			531
Proceeds from issuance of stock upon exercise of stock options and warrants		697			447

Net cash used in financing activities		(3,767	)		(4,152	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		5,203			7,574
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		4,861			3,515

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	10,064		$	11,089

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	912		$	1,351

Income taxes	$	21		$	817

See accompanying notes to consolidated financial statements.

AMEDISYS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization

Amedisys, Inc. (“Amedisys” or “the Company”) is a multi-state provider of home health care nursing services. At September 30, 2003, the Company operated seventy-five home care nursing offices and two corporate offices in the southern and southeastern United States.

In the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the Company’s financial position at September 30, 2003, the results of operations for the three and nine months ended September 30, 2003 and 2002, and cash flows for the nine months ended September 30, 2003 and 2002. The results of operations for the interim periods are not necessarily indicative of results of operations for the entire year. These interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements and related notes in the Company’s Form 10-K.

2. Revenue Recognition

Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the Company’s established rates or estimated reimbursement rates, as applicable. Allowances and contractual adjustments are recorded for the difference between the established rates and the amounts estimated to be payable by third parties and are deducted from gross revenues to determine net service revenues. Net service revenues are the estimated net amounts realizable from patients, third party payors and others for services rendered, including estimated retroactive adjustments under reimbursement agreements.

Prior to the implementation of the Medicare Prospective Payment System (“PPS”) on October 1, 2000, reimbursement for home health care services to patients covered by the Medicare program was based on reimbursement of allowable costs subject to certain limits. Final reimbursement was determined after submission of annual cost reports and audits thereof by the fiscal intermediaries. Retroactive adjustments have been accrued on an estimated basis in the period the related services were rendered and will be adjusted in future periods as final settlements are determined. Estimated settlements for cost report years 1997 through September 30, 2000, which are still subject to audit by the intermediary and the Department of Health and Human Services, are recorded in short-term and long-term Medicare liabilities. Under the new PPS rules, annual cost reports are still required as a condition of participation in the Medicare program, but there are no material final settlements or retroactive adjustments.

The Company is paid by Medicare based on episodes of care. An episode of care is defined as a length of care up to sixty days with multiple continuous episodes allowed. A base episode payment is established by the Medicare Program through federal legislation for all episodes of care ended on or after the applicable time periods detailed below:

Period	Base episode payment
Beginning October 1, 2000 through March 31, 2001	$	2,115 per episode
April 1, 2001 through September 30, 2001	$	2,264 per episode
October 1, 2001 through September 30, 2002	$	2,274 per episode
October 1, 2002 through September 30, 2003	$	2,159 per episode
October 1, 2003 through September 30, 2004	$	2,231 per episode	(*)

*	based on current legislation, see Note 4

With respect to Medicare, the applicability of a change in its base episode payment rate is dependent upon the completion date of the episode; therefore, changes in base episode payments, both positive and negative, will impact the financial results of the Company up to sixty days in advance of the effective date (see Note 4 to the Financial Statements).

The base episode payment is adjusted by applicable regulations including, but not limited to, the following: a case mix adjuster consisting of eighty (80) home health resource groups (“HHRG”), the applicable geographic wage index, low utilization, intervening events and other factors. The episode payment will be made to providers regardless of the cost to provide care. The services covered by the episode payment include all disciplines of care, in addition to medical supplies, within the scope of the home health benefit.

Medicare revenue is recognized as services are provided based on the number of patient visits performed during the reporting period and historical weighted average revenue per visit (“Rate”). This Rate is based on the historical average final episode payment divided by the historical average number of visits per episode. Episodes in progress at the end of the reporting period are reviewed on a percentage of completion basis using the historical average total number of visits per episode. The Company further refined its Medicare revenue recognition process during the year ended December 31, 2002 through an analysis of all episodes completed from October 1, 2000 through December 31, 2002 with respect to the historical average calculations referred to above. No material modifications resulted from this process. The Company has continued this analysis on a monthly basis through September 30, 2003 and intends to continue this analysis on an ongoing basis.

3. Earnings Per Share

Earnings per common share are based on the weighted average number of shares outstanding during the period. The following table sets forth the computation of basic and diluted net income per common share for the three and nine month periods ended September 30, 2003 and 2002 (in 000’s, except per share amounts):

	Three months ended September 30,				Nine months ended September 30,
	2003		2002		2003		2002
Basic Net Income per Share:
Net Income	$	2,381	$	1,219	$	5,044	$	6,880

Weighted Average Number of Shares Outstanding		9,713		9,058		9,507		8,283

Net Income per Common Share – Basic	$	0.25	$	0.13	$	0.53	$	0.83

Diluted Net Income per Share:
Net Income	$	2,381	$	1,219	$	5,044	$	6,880

Weighted Average Number of Shares Outstanding		9,713		9,058		9,507		8,283
Effect of Dilutive Securities:
Stock Options		359		375		225		436
Warrants		36		161		24		124

Average Shares – Diluted		10,108		9,594		9,756		8,843

Net Income per Common Share – Diluted	$	0.24	$	0.13	$	0.52	$	0.78

For the three months ended September 30, 2003, there were additional 217,000 of potentially dilutive securities that were anti-dilutive at the end of the period, as compared to 74,000 potentially dilutive securities for the same period in 2002. For the nine months ended September 30, 2003, there were additional 456,000 of potentially dilutive securities that were anti-dilutive at the end of the period, compared with 124,000 potentially dilutive securities for the nine months ended September 30, 2002.

4. Medicare Reimbursement Changes

The Company derived 91% and 88% of its net service revenue from the Medicare program for the nine months ended September 30, 2003 and 2002, respectively.

A scheduled reduction in base episode payments was implemented effective October 1, 2002 for all episodes of care ended on or after October 1, 2002 and reflected an actual decrease of 7%, offset by an inflationary update of 2.1%, resulting in a net decrease to reimbursement of approximately 5.05%. In addition to the reduction effective October 1, 2002, the provision in BIPA whereby home health providers received a 10% increase in payments that began April, 2001 for service patients in rural areas expired on March 31, 2003. Patients in rural areas account for approximately 30% of the Company’s Medicare patient population.

In the quarter ended March 31, 2003, the Company reflected a decrease to Medicare revenues of approximately $200,000 for patients in rural areas with 60-day episodes that were completed on or after April 1, 2003, and has been approximately $900,000 per quarter in subsequent quarters through September 30, 2003. Revenue per episode has improved as a result of more intensive analysis of episodes while they are in progress rather than on a retrospective basis, and has been made possible through several technical improvements to the information systems utilized by the Company. In particular, the use of scanning technology and associated edits of admission data has allowed the Company to standardize, and minimize inconsistencies in, assessment data. Further, exception reporting on a real time basis has allowed a centralized episode review team to operate in tandem with both admission nurses and clinical review staff in each of the Company’s operating locations to achieve more consistent clinical outcomes.

The scheduled inflation rate increase effective October 1, 2003 was a 3.3% increase to the base episode payment, although this was reduced to approximately 3.0% when wage adjustments specific to each of the Company’s operating locations are included. Legislation is currently being considered by Congress which might impact this increase on a retrospective basis, and there is no guarantee that Congress will not alter this payment mechanism either this year, or in subsequent years.

With respect to Medicare reimbursement changes, the applicability of the reimbursement change is dependent upon the completion date of the episode; therefore, changes in reimbursement, both positive and negative, will impact the financial results of the Company up to sixty days in advance of the effective date.

5. Acquisitions

Effective April 1, 2002, the Company, through its wholly-owned subsidiary Amedisys Texas, Ltd., acquired certain assets and liabilities of Christus Spohn Home Health Services associated with its operations in Corpus Christi, Texas for which the Company paid $875,000 cash at closing and executed a promissory note for $1,000,000 bearing interest at 7% annually and payable over a three-year term in quarterly principal and interest installments of $93,000 beginning July 1, 2002. In connection with this acquisition, the Company recorded $1,893,000 of goodwill in the second quarter of 2002.

Effective August 1, 2002, the Company, through its wholly-owned subsidiary Amedisys Texas, Ltd., acquired certain assets and liabilities of Baylor All Saints Medical Center and All Care, Inc. associated with their home health care operations in Fort Worth, Texas, for which the Company paid $1,000,000 cash at closing and executed a promissory note for $200,000. The promissory note, bearing interest at 7% per annum, is payable in quarterly principal payments of $25,000, plus accrued interest, beginning November 2002. In connection with this acquisition, the Company recorded $1,191,000 of goodwill in the third quarter of 2002.

Effective October 1, 2002, the Company, through its wholly-owned subsidiary Amedisys Georgia, L.L.C., acquired certain assets and liabilities of Hospital Authority of Valdosta and Lowndes County, Georgia associated with their home health care operations in Valdosta, Georgia. In consideration for the acquired assets and liabilities, the Company paid $250,000 cash at closing. In connection with this acquisition, the Company recorded $253,000 of goodwill in the fourth quarter of 2002.

Effective July 1, 2003, the Company, through its wholly-owned subsidiary Amedisys Arkansas, L.L.C., acquired certain assets and liabilities of Van Buren H.M.A., Inc. associated with their home health care operations in Van Buren, Arkansas. In connection with this acquisition, the Company recorded $391,000 of goodwill and other intangibles in the third quarter of 2003.

Effective August 1, 2003, the Company, through its wholly-owned subsidiary Amedisys LA Acquisitions, LLC., acquired substantially all of the assets and certain liabilities of Standard Home Health Care Inc. and Cypress Health Services, LLC, collectively trading as Metro Preferred Home Care (“Metro”). In consideration for the acquired assets and liabilities, the Company paid $6,000,000 cash at closing and executed a three-year promissory note in the amount of $1,000,000, which is subject to achievement of certain minimum earnings of the acquired operations, and issued 163,000 shares of Amedisys, Inc. common stock, for a total purchase price of approximately $8,000,000. The promissory note, bearing a maximum interest rate of 5% per annum, is payable in arrears in equal quarterly installments, plus accrued interest, beginning December 2003. In connection with this acquisition, the Company recorded $8,166,000 of goodwill and other intangibles in the third quarter of 2003.

6. Long-Term Debt

Long-term debt consists primarily of notes payable to banks and other financial institutions and notes payable to sellers in purchase acquisitions that are due in monthly or quarterly installments through 2006. Long-term debt includes the following as of September 30, 2003 and December 31, 2002 (in 000’s):

	September 30, 2003			December 31, 2002
Long-term debt payable to NPF Capital– interest, at a variable rate, 7.25% at September 30, 2003 and 7.50% at December 31, 2002	$	4,106		$	5,882
Long-term debt - interest ranging from 2.67-8.00%		2,693			2,495

		6,799			8,377
Less current portion		(3,970	)		(3,903	)

Long-term debt	$	2,829		$	4,474

Certain of these borrowings, approximately $4,390,000 and $6,281,000 at September 30, 2003 and December 31, 2002, repectively, are secured by furniture, fixtures, and computer equipment. Maturities of debt as of September 30, 2003 are as follows (in 000’s):

12 months ended
September 30, 2004	$	3,970
September 30, 2005		2,486
September 30, 2006		343

7. Capital Leases

The Company acquired certain software and equipment under capital leases for which the related liabilities have been recorded at the present value of future minimum lease payments due under the leases. The present minimum lease payments under the capital leases and the net present value of future minimum lease payments at September 30, 2003 are as follows (in 000’s):

12 months ended
September 30, 2004	$	1,843
September 30, 2005		259
September 30, 2006		131
September 30, 2007		30
September 30, 2008		4

Total future minimum lease payments		2,267
Amount representing interest		(98	)

Present value of future minimum lease payments		2,169
Less current portion		(1,773	)

Obligations under capital leases	$	396

8. Amounts Due To Medicare

Prior to the implementation of PPS on October 1, 2000, the Company recorded Medicare revenues at the lower of its actual costs, the Medicare per visit cost limit, or a per beneficiary cost limit on an individual provider basis. Under the previous Medicare cost-based reimbursement system, ultimate reimbursement under the Medicare program was determined upon review of annual cost reports submitted by the Company and audited by Medicare. The Company is obligated to repay Medicare for amounts paid to the Company that exceeded its entitlement under its audited cost reports.

At September 30, 2003, the Company estimates an aggregate payable to Medicare of $11.5 million, of which $8.4

million is reflected in current liabilities in the accompanying balance sheets, and $3.1 million is reflected in long-term Medicare liabilities. These amounts were $12.8 million, $8.9 million and $3.9 million, respectively as of December 31, 2002.

For the cost report year ended December 31, 2000, the Company has estimated aggregate overpayments by Medicare of $5.7 million as of September 30, 2003. Of this amount, $4.5 million is attributable to aggregate overpayments, $4.4 million of which was related to a one-time advance by Medicare. These amounts are currently being repaid to Medicare in thirty-six (36), forty-eight (48), or sixty (60) equal monthly installments pursuant to agreements reached with Centers for Medicare & Medicaid Services (“CMS”) during 2002 and 2003, including interest at 12.625%. The obligation may be prepaid at any time without penalty, are unsecured and contain no financial covenants. However, should the Company fail to pay an installment on the due date, CMS is entitled to withhold the full amount of principal due under the relevant agreement from any amounts otherwise due to the Company.

Also included in the $5.7 million balance for the cost report year ended December 31, 2000 is an estimate of $1.2 million which reflects the Company’s estimate of amounts likely to be assessed by CMS when Medicare audits of the various subsidiaries are complete, expected to be during the first half of 2004.

For the cost report years ended 1999 and prior, the Company has an estimated net payable of $4.5 million, all of which is reflected in current liabilities in the accompanying consolidated balance sheets. Of this amount, $3.5 million is related to a bankrupt subsidiary and to various providers closed prior to 1999. During the quarter ended September 30, 2003, the Company received $1.6 million upon finalization of cost reports in relation to fiscal year 1999 and certain cost reports for fiscal year 2000. An additional amount of $1.0 million was reserved during the fourth quarter of 2002 as a result of the fiscal intermediary notifying the Company that it had reopened previously settled cost reports for the fiscal year ended December 31, 1997.

The Company also has established a liability of $1.3 million to cover other estimated settlement issues.

The fiscal intermediary, acting on behalf of CMS, has finalized cost reports for most, but not all, of the Company’s provider numbers in relation to the fiscal years ended December 31, 1999, and 2000, and is entitled to reopen settled cost reports for up to three years after issuing final assessments.

9. Liquidity

The Company had a working capital deficit of $6,593,000 and $8,532,000 at September 30, 2003 and December 31, 2002, respectively. Included in this deficit at September 2003 are short-term Medicare liabilities of $5.8 million which the Company does not expect to be required to fully liquidate in cash during the next twelve months. This short-term Medicare liability includes $3.1 million owed by a subsidiary of the Company currently in bankruptcy and anticipated cost report settlements yet to be finalized. At the time these settlement amounts are agreed with the fiscal intermediary acting on behalf of CMS, the Company may apply for thirty-six month, or longer, payment plans. There can be no assurance that such requests will be granted.

The Company has certain other contingencies and reserves, including litigation reserves, recorded as current liabilities at September 30, 2003 that management believes it will not be required to liquidate in cash during 2003. However, in the event that all current liabilities become due within twelve months, the Company may be required to obtain debt financing and/or sell securities on unfavorable terms. There can be no assurance that such action may not be necessary to ensure appropriate liquidity for the operations of the Company.

10. Income Taxes

The Company files a consolidated federal income tax return that includes all subsidiaries. State income tax returns are filed individually by the subsidiaries in accordance with state statutes.

The Company uses the asset and liability approach to measuring deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates in accordance with Statement of Financial Accounting Standards No. 109 (“SFAS 109”), “Accounting for Income Taxes”. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. As of December 31, 2001, the Company had a recorded valuation allowance of $2,587,000. Management of the Company determined, based on the first quarter 2002 operating results and projections

for fiscal year 2002, that it was more likely than not that the Company would be able to use all of the previously unrecognized tax benefits. Accordingly, the Company eliminated all of the valuation allowance in the first quarter of 2002.

Total income tax expense (benefit) for the three and nine month periods ended September 30, 2003 and 2002 is as follows (in 000’s):

	Three Months ended September 30,				Nine Months ended September 30,
	2003		2002		2003		2002
Current income tax expense	$	179	$	229	$	268	$	608
Deferred income tax expense (benefit)		1,327		476		2,864		(355	)

Total income tax expense (benefit)	$	1,506	$	705	$	3,132	$	253

Total tax expense on income before taxes resulted in effective tax rates that differed from the federal statutory income tax rate. A reconciliation of these rates is as follows:

	Three Months ended September 30,				Nine Months ended September 30,
	2003		2002		2003		2002
Income taxes computed on federal statutory rate	35	%	35	%	35	%	35	%
State income taxes and other	2		4		2		2
Removal of valuation allowance	—		—		—		(36	)
Nondeductible expenses and other	2		(2	)	1		3

Total	39	%	37	%	38	%	4	%

Net deferred tax assets consist of the following components as of September 30, 2003 and December 31, 2002 (in 000’s):

	September 30, 2003			December 31, 2002
Deferred tax assets:
NOL carryforward	$	986		$	3,101
Allowance for doubtful accounts		978			691
Self-insurance reserves		396			304
Deferred revenue		1,634			1,634
Losses of consolidated subsidiaries not consolidated for tax purposes, expiring beginning in 2010		140			140
Expenses not currently deductible for tax purposes		1,379			670
Other		(565	)		566
Deferred tax liabilities:
Amortization of intangible assets		(2,722	)		(2,069	)
Property and equipment		(1,568	)		(1,523	)

Net deferred tax assets	$	658		$	3,514

11. Effect of New Financial Accounting Standards

In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” FIN 45 requires a company to recognize a liability for the obligations it has undertaken in issuing a guarantee. This liability would be recorded at the inception of a guarantee and would be measured at fair value. The measurement provisions of this statement apply prospectively to guarantees issued or modified after December 31, 2002. The disclosure provisions apply to financial statements for periods ending after December 15, 2002. See further discussion of guarantees in Note 17. The Company has adopted the measurement provisions of this statement in the first quarter of 2003 and the adoption did not have a material effect on the Company’s financial statements.

In January 2003, the FASB issue FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” FIN 46 requires a company to consolidate a variable interest entity if it is designated as the primary beneficiary of that entity even if the company does not have a majority voting interest. A variable interest entity is generally defined as an entity where its equity is unable to finance its activities or where the owners of the entity lack the risks and rewards of ownership. The provisions of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date. The Company does not have any variable interest entities; therefore, adoption of this statement did not have an effect on the Company’s financial statements.

12. Goodwill and Other Intangible Assets

In accordance with SFAS 142, the Company discontinued the amortization of goodwill effective January 1, 2002. Changes in the carrying amount of goodwill for the three and nine month periods ended September 30, 2003 and 2002 are as follows (in 000s):

	Three Months ended September 30,				Nine Months ended September 30,
	2003		2002		2003		2002
Balance at beginning of period	$	25,553	$	24,051	$	25,581	$	22,216
Intangibles acquired in period		8,593		1,279		8,565		3,114

Balance at end of period	$	34,146	$	25,330	$	34,146	$	25,330

13. Private Placement of Common Stock

On April 26, 2002, the Company completed a private placement of 1,460,000 shares of Common Stock with private investors at a price of $6.94 per share. This placement provided net proceeds to the Company of approximately $9.4 million. The Company engaged Belle Haven Investments, L.P. (“BHI”) and Sanders Morris Harris (“Sanders”) as placement agents for this transaction pursuant to which BHI received $544,300 in cash and BHI and its principals received warrants to purchase up to 64,500 shares of common stock exercisable at $8.12 per share and Sanders received $15,615 in cash and warrants to purchase up to 4,500 shares of common stock exercisable at $8.12 per share. Through September 30, 2003, the Company has used the net proceeds i) to pay $1,560,000 of outstanding Medicare liabilities for which the Company was paying interest at an average annual rate of 13.75%, ii) in connection with acquisitions of $1,000,000, iii) to decrease borrowings under its lines of credit agreements, and iv) to increase cash balances.

14. Stockholders’ Equity

The following table summarizes the activity in Stockholders’ Equity for the nine months ended September 30, 2003 (in 000’s, except share information):

	Common Stock Shares	Common Stock Amount		Additional Paid-in Capital		Treasury Stock			Retained Earnings (Deficit)			Total Stockholders’ Equity
Balance, December 31, 2002	9,163,809	$	9	$	29,439	$	(25	)	$	(12,460	)	$	16,963
Issuance of stock for Employee Stock Purchase Plan	107,863		—		463		—			—			463
Issuance of stock for 401(k) match	186,618		1		998		—			—			999
Exercise of warrants	149,158		—		462		—			—			462
Exercise of stock options	64,192		—		235		—			—			235
Issuance of stock as compensation	15,682		—		102		—			—			102
Tax benefit from stock option exercises	—		—		9		—			—			9
Issuance of stock in connection with acquisition	163,132		—		1,099		—			—			1,099
Net income	—		—		—		—			5,044			5,044

Balance, September 30, 2003	9,850,454	$	10	$	32,807	$	(25	)	$	(7,416	)	$	25,376

15. Restructuring

In response to the significant reduction in Medicare reimbursement effective October 1, 2002 (Note 4) and in anticipation of the further reduction that occurred on April 1, 2003, management initiated major changes in its operations, including termination of employees and abandonment and buyouts of certain leased space in December 2002. As a result of this restructuring plan, 117 employees were terminated. In 2002, the Company recorded $1,640,000 of costs associated with its restructuring plan. These costs were comprised of $1,209,000 for employee severance and $431,000 of costs associated with the abandonment and buyout of existing operating leases that were included in general and administrative expenses for the year ended December 31, 2002. During 2002, $262,000 of termination benefits were paid associated with the termination of 83 employees and charged against the accrued expenses, and in the nine months ended September 30, 2003 $685,000 of termination benefits, and $202,805 of costs associated with the abandonment and buyout of operating leases were paid and charged against the accrued expenses. There were no other changes to the accrued liability. At September 30, 2003, a liability of $490,000 remains in other accrued liabilities for the unpaid portion of the benefits and lease cancellation payments and buyouts associated with the restructuring plan. The unpaid benefits should be paid through the period ending September 30, 2005 and the lease payments will be ratably paid over the lease terms.

16. Health Insurance Portability and Accountability Act

The Health Insurance Portability and Accountability Act (“HIPAA”) was enacted August 21, 1996 to assure health insurance portability, reduce health care fraud and abuse, guarantee security and privacy of health information and enforce standards for health information. Organizations were required to be in compliance with certain HIPAA provisions relating to security and privacy beginning April 14, 2003. Organizations are subject to significant fines and penalties if found not to be compliant with the provisions outlined in the regulations. Regulations issued pursuant to HIPAA impose ongoing obligations relative to training, monitoring and enforcement, and management has implemented processes and procedures to ensure continued compliance with these regulations.

Pursuant to the provisions of HIPAA, covered health care providers were required to comply with the statute’s electronic Health Care Transactions and Code Sets Requirements by October 16, 2002, or secure automatic one-year

extensions to the deadline. Prior to the regulatory deadline, the Company and its subsidiaries secured the automatic one year extension in accordance with the directives of CMS. This automatic extension expired on October 16, 2003. This deadline has further been extended by both the Company’s fiscal intermediary and many of the state Medicaid agencies to which the Company submits billings. To date, the Company has completed the conversion process for a majority of its operating entities, and all remaining entities will be fully converted prior to the deadlines imposed by individual payors. To the extent that other state Medicaid agencies have notified the Company that they are ready to receive submissions pursuant to the new HIPAA standards the Company has converted accordingly.

17. Guarantees

At September 30, 2003, the Company has issued guarantees aggregating $605,000 related to office leases of subsidiaries. Approximately $129,000 of this amount is related to guarantees on locations that have been sold which the Company has the right to recover amounts under the sale agreement from the buyer, if payments are requested. The Company has not received any requests to make payments under these guarantees. Approximately $89,000 is related to locations that have been closed and the landlords have obtained judgements against the Company for unpaid rent. The Company has reserved substantially all of these amounts in Legal settlements at September 30, 2003. The above amounts were $769,000, $158,000 and $89,000 respectively at December 31, 2002.

18. Stock-Based Compensation

The Company has two stock option plans, the Amedisys, Inc. 1998 Stock Option Plan and the Amedisys, Inc. Directors Stock Option Plan (“the Plans”). The Company accounts for its stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Statement of Financial Accounting Standards No. 123 “Accounting for Stock-Based Compensation” (“SFAS 123”), and SFAS 148 “Accounting for Stock-Based Compensation – Transition and Disclosure” permit the continued use of the intrinsic value-based method prescribed by APB 25, but require additional disclosures, including pro-forma calculations of earnings and net earnings per share as if the fair value method of accounting prescribed by SFAS 123 had been applied. The following table illustrates the effect on net income and earnings per share if the Company had recognized compensation expense for the Plans using the fair-value recognition method in SFAS 123 (in 000’s, except per share amounts):

	Three Months ended September 30,						Nine Months ended September 30,
	2003			2002			2003			2002
Net income:
As reported	$	2,381		$	1,219		$	5,044		$	6,880
Deduct: Total stock-based employee compensation determined under fair value based method for all awards, net of taxes		(132	)		(169	)		(464	)		(570	)

Pro forma	$	2,249		$	1,050		$	4,580		$	6,310

Basic earnings per share:
As reported	$	0.25		$	0.13		$	0.53		$	0.83
Pro forma	$	0.23		$	0.12		$	0.48		$	0.76

Diluted earnings per share:
As reported	$	0.24		$	0.13		$	0.52		$	0.78
Pro forma	$	0.22		$	0.11		$	0.47		$	0.71

Black-Scholes option pricing model assumptions:
Risk free interest rate		3.55-5.16	%		4.57-5.80	%		3.55-5.16	%		4.57-5.80	%
Expected life (years)		10			10			10			10
Volatility		58.85-110.35	%		92.28-115.18	%		58.85-110.35	%		92.28-115.18	%
Expected annual dividend yield		—			—			—			—

19. Receivable from National Century Financial Enterprises (“NCFE”)

In November 2002, the Company elected to terminate its asset financing facility with NPF VI, Inc. (“NPF VI”) and advised its payors that payments should be directed to the bank accounts of the Company rather than bank accounts controlled by NPF VI under collateral arrangements for the facility. NPF VI has filed for Chapter 11 bankruptcy. The Company is taking legal and other action to recover funds that have not been released to the Company. During the fourth quarter of 2002, the Company recorded a full reserve of approximately $7.1 million related to this receivable.

In the second quarter of 2003, the Company received $56,000 in funds in connection with this receivable, which is recorded in Other income. The Company does not expect to receive additional funds other than through the legal and other actions referred to above.

The Company continues to make monthly payments on its note with NPF Capital, which is a separate entity from NPF VI.

20. Subsequent Events

Effective November 1, 2003, the Company, through its wholly-owned subsidiary Amedisys Texas, Ltd., acquired certain assets and liabilities of St. Luke’s Episcopal Hospital associated with its home health services program for which the Company paid $500,000 cash at closing and executed a promissory note for $1,000,000 bearing interest at the Prime Rate plus two percent and payable over a three-year term in equal monthly installments beginning December 1, 2003. In connection with this acquisition, the Company will record substantially all of the purchase price as goodwill and other intangibles in the fourth quarter of 2003.

Item

2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of the Company’s results of operations and financial condition. This discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included herein, and the Consolidated Financial Statements and Notes and the related Management’s Discussion and Analysis in the Company’s Form 10-K for the year ended December 31, 2002.

RESULTS OF OPERATIONS

Three and Nine Months ended September 30, 2003 compared to Three and Nine Months ended September 30, 2002

Net Service Revenue. Net service revenue increased $3,982,000 or 12% for the three months ended September 30, 2003 and $2,604,000, or 3%, for the nine months ended September 30, 2003 as compared to the same periods in 2002. For the three months ended September 30, 2003 as compared to the same period in 2002, this increase was attributed to an increase in Medicare revenue of $5,231,000, partially offset by a $1,249,000 decline in revenue from non-Medicare payors, primarily as a result of management’s decision in the fourth quarter of 2002 to exit certain insurance and managed care contracts. Of this increase in Medicare revenue, $2,635,000 is attributable to the Metro acquisition, and the remaining $2,596,000 ,despite the reimbursement reductions referred to in Liquidity and Capital Resources, reflects an increase in total Medicare patient admissions (see below), an increase in episodes per patient, and an improvement in revenue per episode. The increase in episodes per patient, and the improvement in revenue per episode, are a result of more intensive analysis of episodes while they are in progress rather than on a retrospective basis, and has been made possible through several technical improvements to the information systems used by the Company. In particular, the use of scanning technology and associated edits of admission data, has allowed the Company to standardize, and minimize inconsistencies in, assessment data. Further, exception reporting on a real time basis has allowed a centralized episode review team to operate in tandem with both admission nurses and clinical review staff in each of the Company’s operating locations to achieve more consistent clinical outcomes.

For the nine months ended September 30, 2003, as compared to the same period in 2002, the increase in revenue of $2,604,000 is attributable to an increase in Medicare revenue of $5,400,000 partially offset by a decline in non-Medicare revenue of $2,796,000. This increase, and decrease respectively, are primarily attributable to the factors outlined above.

Further, the Company accrued $279,000 with respect to a recent increase in the Base episode payment. This increase was effective October 1, 2003 and affects episodes in progress on this effective date.

Total patient admissions for the quarter, and nine months, ended September 30, 2003 declined from the prior year by, 194 and 896 respectively, or 2% and 3%. Medicare patient admissions, however, increased by approximately 18%, and 13%, respectively for the three and nine months ended September 30, 2003, respectively, over the comparable periods of 2002.

The increase in Medicare admissions for the most recent quarter is comprised primarily of internal growth (see below) of 10% with acquisitions contributing growth of 8%. The Metro acquisition contributed 7% of the increase. Admissions from other non-Medicare payors declined from 3,848 in the quarter ended September 30, 2002 to 2,327 in the same period in 2003, and from 10,111 in the nine months ended September 30, 2002 to 6,375 in the comparable period of 2003 primarily due to the Company’s decision to terminate certain contracts in the fourth quarter of 2002.

The Company has elected to define internal growth to include growth from operating locations owned by the Company for more than twelve months, any start up locations initiated by the Company, and from those acquisitions where the monthly Medicare admissions at the acquired locations does not exceed 1% of total Company admissions in the month of acquisition.

Cost of Service Revenue. Cost of service revenue remained comparable for the three months ended September 30, 2003 and decreased 5% for the nine months ended September 30, 2003 as compared to the same periods in 2002. Patient visits increased by 9,000, or 3%, and decreased by 70,000, or 9%, for the three and nine months ended September 30, 2003, respectively, when compared with the same periods in 2002. Patient visits associated with the recent Metro acquisition contributed 35,000 visits to the three month total. These changes occurred primarily as a result of a decrease in the number of visits associated with Medicare episodes of care, and the decline in non-Medicare admissions referred to above. The decline in the number of visits associated with Medicare episodes of care derives from greater adherence by clinical staff to the clinical tracks used by the Company. Cost of revenue was favorably impacted by decreased expenses relating to the restructuring of clinical manager and program manager positions as well as decreased field staff costs and mileage costs as a result of the overall decline in patient visits.

General and Administrative Expenses (“G&A”). G&A increased by $2.4 million, or 15%, for the three months ended September 30, 2003 and $4.6 million, or 10% for the nine months ended September 30, 2003, as compared to the same periods in 2002. As a percentage of net service revenue, G&A increased to 48% for the three months and 50% for the nine month ended September 30, 2003 from 47% for the same periods of 2002. The increase for the three months ended September 30, 2003 is primarily attributable to $1.4 million associated with the recent Metro acquisition, to increases in accrued bonuses of $591,000, increased fees associated with professional and legal services of $466,000, increases in employee benefits of $550,000, and fees associated with the use of an outside contractor for scanning technologyutilized by the Company. These increases were offset by reductions to other employee costs when compared with the same period in 2002.

For the nine months ended September 30, 2003, the increase is primarily attributable to $1.4 million associated with the recent Metro acquisition, to amounts paid for retention bonuses during 2002 that were expensed through September 30, 2003 ($108,000), increases in accrued bonuses ($1,827,000), increases in other expenses, which include an additional reserve for the Office of Inspector General (“OIG”) matter, increased fees associated with professional services ($1,457,000), offset by lower bad debt expense ($500,000). Increased fees were primarily caused by the Company engaging the services of attorneys with respect to the NCFE matter and in relation to applications and associated appeals for Certificates of Need (“CON”) required for service area expansion.

Operating Income. The Company had operating income of $3.9 million for the three months ended September 30, 2003 and $8.6 million for the nine months ended September 30, 2003 as compared with $2.4 million and $8.4 in the same periods of 2002. These increases are attributable to both the increases in revenue and increase in expenses discussed above.

Other Income and Expense, Net. Other expense, net decreased by $473,000 or 99%, to $5,000 for the three months ended September 30, 2003 and by $771,000 or 63% for the nine months ended September 30, 2003 as compared to the same periods in 2002. The decrease for the most recent quarter is primarily attributable to lower interest expense incurred during 2003 attributable to lower interest-bearing liabilities and a lower interest rate on the note to NPF Capital, offset by the gain on the sale of land of $265,000. For the nine months ended September 30, 2003, the decrease is attributable, in addition to matters described above, to the receipt of $56,000 in relation to amounts previously reserved for the NCFE matter, and $125,000 received by the Company as consideration for declining to participate further in the CON process in certain locations.

Income Tax Expense. Income tax expense of $1,506,000 was recorded for the three months ended September 30, 2003 and $3,132,000 for the nine months ended September 30, 2003. An effective income tax rate of 39% and 38% was recorded on income before taxes during these periods. The income tax expense for the nine months ended September 30, 2002 resulted primarily from elimination of the valuation allowance that had been recorded for net deferred tax assets.

CRITICAL ACCOUNTING POLICIES

The financial statements are prepared in accordance with generally accepted accounting principles and include amounts based on management’s judgements and estimates. These judgements and estimates are based on, among other things, historical experience and information available from outside sources. The critical accounting policies presented below have been discussed with the Audit Committee as to the development and selection of the accounting estimates used as well as the disclosures provided herein. Actual results could differ materially from these estimates.

Medicare Revenue Recognition

Prior to the implementation of the Medicare Prospective Payment System (“PPS”) on October 1, 2000, reimbursement for home health care services to patients covered by the Medicare program was based on allowable costs subject to certain limits. Final reimbursement was determined after submission of annual cost reports and audits thereof by the Medicare fiscal intermediaries, which often result in overpayments, which the Company is obligated to return to Medicare, or underpayments, which Medicare is obligated to pay to the Company. Retroactive adjustments have been accrued on an estimated basis in the period the related services were rendered and will be adjusted in future periods as final settlements are determined. Estimated settlements for cost report years ended 1997 through September 30,2000, which are still subject to audit by the intermediary and the Department of Health and Human Services, are recorded in short-term and long-term Medicare liabilities. Under the new PPS rules, annual cost reports are still required as a condition of participation in the Medicare program, but there are no final settlements or retroactive adjustments.

Period	Base episode payment
Beginning October 1, 2000 through March 31, 2001	$	2,115 per episode
April 1, 2001 through September 30, 2001	$	2,264 per episode
October 1, 2001 through September 30, 2002	$	2,274 per episode
October 1, 2002 through September 30, 2003	$	2,159 per episode
October 1, 2003 through September 30, 2004	$	2,231 per episode	(*)

*	based on current legislation

Non-Medicare Revenue Recognition

The Company has agreements with third party payors that provide for payments to the Company at amounts different from its established rates. Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to the Company’s established rates or estimated reimbursement rates, as applicable. Allowances and contractual adjustments are recorded for the difference between the established rates and the amounts estimated to be payable by third parties and are deducted from gross revenues to determine net service revenues. Net service revenues are the estimated net amounts realizable from patients, third party payors and others for services rendered, including estimated retroactive adjustments under reimbursement agreements.

Collectibility of Accounts Receivable

The process for estimating the ultimate collectibility of accounts receivable involves judgement, with the greatest subjectivity relating to non-Medicare accounts receivable. The Company currently records an allowance for uncollectible accounts on a percentage of revenues basis unless a specific issue is noted, at which time an additional allowance may be recorded.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes the Company’s debt obligations at September 30, 2003 (in 000’s):

	Payments Due by Period
Debt Obligations	Total		Less than 1 year		1-3 years		4-5 years
Long-Term Debt	$	6,799	$	3,970	$	2,829	$	—

Capital Lease Obligations		2,169		1,773		363		33

Medicare Liabilities		11,511		8,433		3,078		—

Total Debt Cash Obligations	$	20,479	$	14,176	$	6,270	$	33

At September 30, 2003, the Company was indebted under various promissory notes for $6.8 million, including amounts due for the Company’s note with NPF Capital, Inc. of $4.1 million. The Company’s principal and interest requirements due under all promissory notes are approximately $4.3 million for those due in less than one year, and $2.9 million thereafter. At September 30, 2003 the Company also had obligations under capital leases of $2.2 million, including amounts due to CareSouth under the License Agreement of $1.2 million. The Company’s principal and interest requirements due under all capital leases are approximately $1.8 million for those due in less than one year and $424,000 thereafter.

At September 30, 2003, the Company estimates an aggregate payable to Medicare of $11.5 million, of which $8.4 million is reflected in current liabilities in the accompanying balance sheets, and $3.1 million is reflected in long-term Medicare liabilities. These amounts were $12.8 million, $8.9 million and $3.9 million, respectively as of December 31, 2002.

For the cost report year ended December 31, 2000, the Company has estimated aggregate overpayments by Medicare of $5.7 million as of September 30, 2003. Of this amount, $4.5 million is attributable to aggregate overpayments, $4.4 million of which was related to a one-time advance by Medicare. These amounts are currently being repaid to Medicare in thirty-six (36), forty-eight (48), or sixty (60) equal monthly installments pursuant to agreements reached with CMS during 2002 and 2003, including interest at 12.625%. The obligation may be prepaid at any time without penalty, are unsecured and contain no financial covenants. However, should the Company fail to pay an installment on the due date, CMS is entitled to withhold the full amount of principal due under the relevant agreement from any amounts otherwise due to the Company.

The Company also has established a liability of $1.3 million to cover other estimated settlement issues.

The Company’s operating activities provided $16,019,000 in cash during the nine months ended September 30, 2003, whereas such activities provided $14,574,000 in cash during the nine months ended September 30, 2002. Cash provided by operating activities in 2003 is primarily attributable to net income of $5,044,000; net non-cash items of depreciation and amortization of $2,276,000, provision for bad debts of $1,581,000, deferred income taxes of $2,856,000; and changes in assets and liabilities of $4,151,000. These asset and liability changes include a decrease in accounts receivable of $1.0 million due to improvements made in the Company’s billing processes, and an increase in accrued expenses of $3.4 million due to accruals for bonuses, insurance reserves, and the settlement with the OIG.

Investing activities used $7,049,000 for the nine months ended September 30, 2003, whereas such activities used $2,848,000 for the nine months ended September 30, 2002. Cash used by investing activities in 2003 is attributed to cash used in acquisitions of $6,304,000 and the purchase of property and equipment of $745,000. The Company does not expect that capital expenditures in fiscal 2003 will exceed $1.8 million, as compared with $1.3 million in 2002.

Financing activities used cash during the nine months ended September 30, 2003 of $3,767,000, whereas such activities used $4,152,000 during the same period in 2002. Cash used by financing activities in 2003 is primarily attributed to payments on notes payable and capital leases of $5,130,000 and net decreases in Medicare liabilities of $1,335,000, offset by $1,151,000 in proceeds from the issuance of notes payable and capital leases and $1,160,000 of proceeds received from the issuance of stock upon exercise of stock options and warrants and the purchase of stock through the Company’s Employee Stock Purchase Plan.

Revenue per episode has improved as a result of more intensive analysis of episodes while they are in progress rather than on a retrospective basis, and has been made possible through several technical improvements to the information systems utilized by the Company. In particular, by making available exception reporting on a real time basis when combined with the use of scanning technology and associated edits of admission data, has allowed a centralized episode review team to operate in tandem with both admission nurses, and clinical review staff, based in each of the Company’s operating locations.

The scheduled inflation rate increase effective October 1, 2003 was a 3.3% increase to the base episode payment, although this was be reduced to approximately 3.0% when wage adjustments specific to each of the Company’s operating locations are included. Legislation is currently being considered by Congress which might impact this increase on a retrospective basis, and there is no guarantee that Congress will not alter this payment mechanism either this year, or in subsequent years.

With respect to Medicare base episode payment changes, the applicability of the change is dependent upon the completion date of the episode; therefore, changes in payments, both positive and negative, will impact the financial results of the Company up to sixty days in advance of the effective date of the change.

The Company had a working capital deficit of $6,593,000 and $8,532,000 at September 30, 2003 and December 31, 2002, respectively. Included in this deficit at September 30, 2003 are short-term Medicare liabilities of $5.8 million which the Company does not expect to be required to fully liquidate in cash during the next twelve months. These Medicare liabilities include $3.1 million owed by a subsidiary of the Company currently in bankruptcy, and anticipated cost report settlements yet to be finalized, together with reserves associated therewith. At the time these settlement amounts are agreed with the fiscal intermediary acting on behalf of CMS, the Company intends to apply for thirty-six month, or longer, payment plans. There can be no assurance that such requests will be granted.

The Company has certain other contingencies and reserves, including litigation reserves, recorded as current liabilities at September 30, 2003 that management believes will not be required to liquidate in cash during the next twelve months. However, in the event that all current liabilities become due within twelve months, the Company may be required to obtain debt financing and/or sell securities on unfavorable terms, which could impact the Company’s future reported earnings per share by either increasing interest costs or by dilution to existing shareholders. There can be no assurance that such action may not be necessary to ensure appropriate liquidity for the operations of the Company.

In 1999, the Company discovered questionable conduct involving the former owner of one of its smaller agencies, which occurred between 1994 and 1997. The Company conducted an initial audit (using an independent auditor) and voluntarily disclosed the irregularities to the Department of Health and Human Services’ OIG. Thereafter, the government examined the disclosed activities; and during the second quarter of 2002, the Company conducted a further audit of relevant claims was initiated at the request of the OIG, which was completed during the third quarter of 2002. In February 2003, the OIG offered a settlement that included certain penalties not previously anticipated by the Company, as the Company self reported the matter. On August 8, 2003, the Company signed both a Settlement Agreement and a Corporate Integrity Agreement with the OIG and Department of Justice. The Settlement Agreement provides for payment of a financial settlement in three equal annual payments of $386,000, with the first payment made on the date of execution. This agreement also obligates the Company to amend previously filed cost reports to deduct costs incurred by the Company for audit and investigation of this matter. The Corporate Integrity Agreement, which is binding for a three-year period, requires that the Company maintain its existing Compliance Program and provides for enhanced training requirements, annual claims audits of the subject agency by an independent reviewer, and regular reporting to the OIG. This agreement provides for stipulated penalties in the event of non-compliance by the Company, including the possibility of exclusion from the Medicare program. The Company believes that these obligations will not materially affect the Company’s operations, or financial performance, over the period of the agreement, although no assurances can be provided that the ultimate cost will not be materially different.

INFLATION

The Company does not believe that inflation has had a material effect on its results of operations for the three or nine month periods ended September 30, 2003.

ARTHUR ANDERSEN LLP

Our financial statements for the year ended December 31, 2001 were audited by Arthur Andersen LLP (“Andersen”), our former independent accountants. On June 15, 2002, a jury convicted Andersen on obstruction of justice charges and Andersen ceased its public company audit practice at the end of August 2002. Should the Company seek access to the public capital markets in the future, SEC rules will require us to include or incorporate by reference in any prospectus three years of audited financial statements. Until our audited financial statements for the fiscal year ending December 31, 2004 become available in the first quarter of 2005, the SEC’s current rules would require us to present audited financial statements for one or more fiscal years audited by Andersen. Before then, the SEC may cease accepting financial statements audited by Andersen, in which case we would be unable to access the public capital market unless KPMG LLP, our current independent accounting firm, or another independent accounting firm, is able to audit the financial statements originally audited by Andersen. Although the SEC has indicated that in the interim it will continue to accept financial statements audited by Andersen, there is no assurance that the SEC will continue to do so in the future.

FORWARD LOOKING STATEMENTS

When included in the Quarterly Report on Form 10-Q or in documents incorporated herein by reference, the words “expects”, “intends”, “anticipates”, “believes”, “estimates”, and analogous expressions are intended to identify forward-looking statements. Such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, current cash flows and operating deficits, debt service needs, adverse changes in federal and state laws relating to the health care industry, competition, regulatory initiatives and compliance with governmental regulations, customer preferences and various other matters, many of which are beyond the Company’s control. These forward-looking statements speak only as of the date of the Quarterly Report on Form 10-Q. The Company expressly disclaims any obligation or undertaking to release publicly any updates or any changes in the Company’s expectations with regard thereto or any changes in events, conditions or circumstances on which any statement is based.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company does not engage in derivative financial instruments, other financial instruments, or derivative commodity instruments for speculative or trading/non-trading purposes.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls And Procedures

The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedure (as is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of a date within 90 days before the filing date of this quarterly report (the “Evaluation Date”). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic filings under the Exchange Act.

Changes In Internal Controls

Since the Evaluation Date, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect such controls.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None.

Item 2. CHANGES IN SECURITIES

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5. OTHER INFORMATION

RISK FACTORS

You should consider carefully the risks we describe below before buying any of our securities. Additional risks that are now unknown to us or that we now consider immaterial also may harm our business.

We depend on Medicare for substantially all of our revenues.

For the years ended December 31, 2002, 2001 and 2000, the percentage of our revenues derived from Medicare was 88%, 88% and 90%, respectively. Our revenues and profitability are affected by the continuing efforts of all third-party payors to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services, increasing case management review of services and negotiating reduced contract pricing. Any changes in reimbursement levels from these third-party payor sources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. Changes in the mix of patients among Medicare, Medicaid and other payor sources also may impact our revenues and profitability. We can provide no assurance that we will continue to maintain the current payor or revenue mix.

Our profitability depends principally on the level of Medicare payment rates and our ability to contain costs.

If our costs were to increase more rapidly than the payments we receive from Medicare and other third-party payors for our home care nursing services, our profitability could be negatively impacted.

Generally, we receive fixed payments for our services based on the level of care that we provide to patients. Accordingly, our profitability largely depends on our ability to manage costs of providing services. Although Medicare currently provides for an annual adjustment of the various payment rates based on the increase or decrease of the medical care expenditure category of the Consumer Price Index, these increases may be less than actual inflation. If these annual adjustments were eliminated or reduced, or if our cost of providing services, which consists primarily of labor costs, increased more than the annual Medicare adjustment, our profitability could be negatively impacted. Similarly, if copayments are mandated by Medicare by either increased write-offs if we are unable to collect the copayments or as a result of a decreased demand for our services.

Medicare liabilities may be classified as current or long-term liabilities on our balance sheet and may be payable by us in the future. Medicare liabilities may be subject to audit or review and we may owe additional amounts.

At September 30, 2003, we estimated an aggregate payable to Medicare of $11.5 million, of which we classified $8.4 million as current liabilities and $3.1 million as long-term Medicare liabilities. We also estimated aggregate overpayments by Medicare of $5.7 million for the fiscal year ended December 31, 2000. Of this amount, $4.5 million is attributable to aggregate overpayments and of that, $4.4 million was related to a one-time advance by Medicare. These amounts currently are being repaid to Medicare in thirty-six (36), forty-eight (48), or sixty (60) equal monthly installments pursuant to agreements we reached with CMS during 2002 and 2003, including interest of 12.625%. We may prepay the obligation, which is unsecured and contains no financial covenants, at any time without penalty. However, should we fail to pay an installment on the due date, CMS may withhold the full amount of principal due under the relevant agreement from any amounts otherwise due to us.

For the cost report years ended 1999 and prior, we have an estimated net payable of $4.5 million, all of which is reflected in current liabilities on our balance sheet. Of this amount, $3.5 million is related to a bankrupt subsidiary, Alliance Home Health, Inc. (“Alliance”), and to various providers that we closed prior to 1999. During the quarter ended September 30, 2003, we received $1.6 million related to the finalization of cost reports for fiscal year 1999. The fiscal intermediary, acting on behalf of CMS, has finalized cost reports for most, but not all, of our provider numbers for the fiscal years ended December 31, 1999 and 2000. However, the fiscal intermediary is entitled to reopen settled cost reports for up to three years after issuing final assessments. We reserved an additional $1.0 million during the fourth quarter of 2002 after receiving notice from the fiscal intermediary that it had reopened previously settled cost reports for fiscal year 1997. We also recorded a liability of $1.3 million to cover estimated additional settlement liabilities, and the possibility that the fiscal intermediary may reopen previously settled cost reports. As a result, our estimated liabilities may change and we may incur additional costs. These additional liabilities may be significant.

We operate in a highly regulated industry which subjects us to additional costs and may limit our growth. Any change in applicable federal, state or local laws or regulations may affect our business.

We are subject to numerous federal, state and local laws which may limit our operations and could result in significant fines for violations. Our business is subject to extensive federal and state regulations that govern, among other things:

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Medicare;

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Medicaid;

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other government-funded reimbursement programs;

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reporting requirements;

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certification and licensing standards for home health agencies; and

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in some cases, certificate-of-need.

These regulations may affect our participation in Medicare, Medicaid, and other federal health care programs from which we derive a substantial portion of our revenues. We also are subject to a variety of federal and state regulations that prohibit fraud and abuse in the delivery of health care services. These regulations include, among other matters, licensure and accreditation requirements, government healthcare program participation requirements, reimbursement for patient services, and Medicare and Medicaid fraud and abuse.

We are subject to numerous initiatives on both the federal and state levels for comprehensive reforms affecting the payment for and availability of health care services. Currently proposed or future health care legislation or other changes in the administration or interpretation of governmental health care programs may have a negative effect on our business. Concern about the potential effects of proposed reform measures has contributed to volatility in the price of securities of other companies in health care and related industries and may similarly affect the price of our common stock in the future.

We cannot assure you that we will not be affected adversely by possible future changes in medical and health regulations.

Our failure to comply with applicable federal and state regulations will subject us to fines, penalties or expulsion from participation in government programs.

As part of the extensive federal and state regulation of the home health care business, we are subject to increased periodic audits, examinations and investigations conducted by or at the direction of governmental investigatory and oversight agencies. Violations of fraud and abuse statutes and regulations could result in a provider’s expulsion from government healthcare programs as well as significant fines and penalties, and significant repayments for patient services previously billed. Our exclusion from any one of these government programs could have a material adverse effect on our business.

In 1999, we uncovered certain improprieties stemming from the unauthorized conduct of an agency director in our Monroe, Louisiana location. Following an internal investigation, we voluntarily disclosed the problems to the Office of the Inspector General (the “OIG”). Following an extensive series of audits, we and the OIG reached a settlement in August 2003, whereby we agreed to repay a total of $1.16 million to the government in three annualized payments that conclude in 2005. As part of the settlement, we also executed a three-year Corporate Integrity Agreement (“CIA”) which requires that we:

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maintain our current compliance program;

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specify additional training requirements;

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conduct annual, independent audits of the Monroe agency; and

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timely disclose and repay any overpayments or potential fraud or abuse of which we become aware.

There are stipulated penalties for various violations of the CIA. Egregious violations of the CIA could result in our exclusion from further participation in government-funded health programs. We have designated a Chief Compliance Officer to ensure ongoing compliance with the terms and conditions of the CIA as well as compliance with all other applicable laws, rules, and regulations. Any acquired business will be subject to the provisions of the CIA.

We believe that we are in compliance with all state and federal legal fraud and abuse provisions and all other applicable government laws and regulations. Our compliance with these laws and regulations may be subject to future government review and interpretation and possible regulatory actions currently unknown or unasserted. If we are found to be in violation of any of these provisions, it could have a material adverse effect on our business.

We operate our agencies under licenses issued and regulated by the respective states in which they are located. Each agency is subject to periodic surveys and complaint-based surveys. If a survey identifies violations of state standards, the agency typically is afforded a grace period in which to comply or otherwise lose its license to operate. We use a Clinical Operations Department staffed by regional personnel to prepare each agency for these surveys and respond when those surveys identify potential problems or when plans-of-correction are required to bring the agency back into compliance. If we are found to be in violation of any of these state standards, it could have a material adverse effect on our business.

Compliance with HIPAA requirements will require additional systems conversions and expense.

The Health Insurance Portability and Accountability Act (“HIPAA”) was enacted in 1996 to ensure health insurance portability, reduce health care fraud and abuse, guarantee security and privacy of health information and enforce standards for health information. As of April 14, 2003, organizations were required to comply with certain HIPAA provisions relating to security and privacy. We believe we have met this requirement. We are enhancing systems’ security and training all personnel, as required by HIPAA.

HIPAA covered health care providers were required to comply with the statute’s electronic health care Transactions and Code Set requirements by October 16, 2002, or secure automatic one-year extensions to the deadline. Prior to the regulatory deadline, we and our subsidiaries secured the automatic one year extension in accordance with the directives of CMS. This automatic extension expired on October 16, 2003. As permitted by CMS, this deadline has further been extended by both Palmetto GBA (the Company’s fiscal intermediary) and many of the state Medicaid agencies to which we submit billings. To date, we have completed the conversion process for a majority of our operating entities, and all remaining entities will be fully converted prior to the deadlines imposed by individual payors. To the extent that other state Medicaid agencies have notified us that they are ready to receive submissions pursuant to the new HIPAA standards, we have already converted accordingly.

We may be subject to malpractice or other similar claims.

The services we offer involve an inherent risk of professional liability and related substantial damage awards. Due to the nature of our business, we, and certain nurses who provide services on our behalf, may be the subject of medical malpractice claims. These nurses could be considered our agents in the practice of nursing and , as a result, we could be held liable for any of their medical negligence. We cannot predict the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business or reputation or on our ability to attract and retain patients and employees.

Our insurance liability coverage may not be sufficient for our business needs.

We maintain professional liability insurance for us and our subsidiaries. However, we cannot assure you that claims will not be made in the future in excess of the limits of such insurance, if any, nor can we assure you that any such claims, if successful and in excess of such limits, will not have a material adverse effect on our ability to conduct business or on our assets. Our insurance coverage currently includes fire, property damage and general liability with a $1,000,000 limit on each wrongful act and a $3,000,000 limit in aggregate. Although we maintain insurance consistent with industry practice, we cannot assure you that the insurance we currently maintain will satisfy claims made against us. In addition, we cannot assure you that insurance coverage will continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms.

Any claims made against us, regardless of their merit or eventual outcome, could damage our reputation and business. From December 31, 1998 to November 9, 2000, we were insured for risks associated with professional and general liability by an insurance company that currently is in liquidation and may not be able to pay or defend claims incurred by us during this period. We do not believe that the ultimate resolution of current claims will be materially different from reserves established for them or that any material claims will be made in the future based on occurrences during that period.

Our acquisition strategy entails many operating and integration risks and we may incur future liabilities related to our acquisitions.

Recently, our strategic focus has been on the acquisition of small to medium sized home health providers, or of certain of their assets, in targeted markets. These acquisitions involve significant risks and uncertainties, including:

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difficulties integrating acquired personnel and other corporate cultures into our business;

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the potential loss of key employees or customers of acquired companies;

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the assumption of liabilities and exposure to unforeseen liabilities of acquired companies;

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the acquisition of an agency with undisclosed compliance problems; and

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the diversion of management attention from existing operations.

We may not be able to fully integrate the operations of the acquired businesses with our current business structure in an efficient and cost-effective manner. The failure to integrate any of these businesses effectively could have a material adverse effect on us.

In previous acquisitions, we attempted to determine the nature and extent of any pre-existing liabilities, and have obtained indemnification rights from the previous owners for acts or omissions arising prior to the date of the acquisition. However, resolving issues of liability between the parties could involve a significant amount of time, manpower and expense. There is no assurance that we will be successful in securing indemnification. If we were unsuccessful in a claim for indemnity from a seller, the liability imposed could affect us adversely.

Our acquisitions may impose strains on our existing resources.

As a result of our past and current acquisition strategy, we have grown significantly over the last three years. This growth poses a number of difficulties and risks for us. As we continue to grow in both revenue and geographical scope, our growth could stretch our resources, including management, information systems, regulatory compliance, logistics and other controls. We cannot assure you that our resources will keep pace with our anticipated growth. If we do not maintain our expected pace of growth, our future prospects could be materially adversely affected

We face competition for attractive acquisition candidates.

We intend to grow significantly through the continued acquisition of additional home health care agencies. We face competition for acquisition candidates, which may limit the number of acquisition opportunities available to us and may lead to higher acquisition prices. We cannot assure you that we will be able to identify suitable acquisitions or available market share in the future or that any such opportunities, if identified, will be consummated on favorable terms, if at all. In the absence of such successful transactions, we cannot assure you that we will experience further growth, nor can we assure you that any such transactions, if consummated, will result in further growth.

We may require additional capital to pursue our acquisition strategy.

At September 30, 2003, we had cash and cash equivalents of $10,064,000. Based on our current plan of operations, including acquisitions we cannot assure you that this amount will be sufficient. We cannot readily predict the timing, size and success of our acquisition efforts and the associated capital commitments. If we do not have sufficient cash resources, our growth could be limited unless we obtain additional equity or debt financing.

Reimbursements for services may be delayed.

Our business may be characterized by delays in reimbursement from when we provide services to when we receive the reimbursement or payment for these services. If we have systems or other issues with Medicare, that may result in an even longer payment cycle. This timing delay may cause working capital shortages from time to time. As a result, working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity. We cannot assure you that trends in the industry will not further extend the collection period and impact adversely our working capital or that our working capital management procedures will successfully negate this risk. We are reviewing opportunities to secure a credit facility, although we cannot assure you that we will be successful in securing such a credit facility.

We continue to have a working capital deficit.

At September 30, 2003, we had a working capital deficit of $6.6 million. Included in this amount are $3.1 million owed by a subsidiary currently in bankruptcy, other estimates of amounts due to Medicare and other accruals which may not be necessary to be fully liquidated within twelve months. We are reviewing opportunities to secure a credit facility, although we cannot assure you that we will be successful in securing such a credit facility.

Our business is highly competitive.

We compete with hospitals, nursing homes, and other businesses that provide home health care services, some of

which are large and established companies that have significantly greater resources than we do, on the basis of availability of personnel, quality and expertise of services and the value and price of services. Increased competition in the future from existing competitors or new entrants may limit our ability to maintain or increase our market share.

Some of our existing and potential new competitors may enjoy greater name recognition, and greater financial, technical and marketing resources than we do. This may permit our competitors to devote greater resources than we can to the development and promotion of services. These competitors also may engage in more extensive research and development, undertake more far-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to existing and potential employees and clients.

We expect our competitors to develop new strategic relationships with providers, referral sources and payors, which could result in increased competition. The introduction of new and enhanced services, acquisitions and industry consolidation and the development of strategic relationships by our competitors could cause a decline in sales or loss of market acceptance of our services or price competition or make our services less attractive. Additionally, we compete with a number of tax-exempt nonprofit organizations that can finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to us.

We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse effect on our business, financial condition and results of operations.

We expect that industry forces will have an impact on us and our competitors. In recent years, the health care industry has undergone significant changes driven by efforts to reduce costs. The changes in our industry caused even greater competition among home healthcare and healthcare businesses generally. If we are unable to react competitively to new developments, our operating results may suffer.

We rely on our relationships with other organizations.

Our development and growth depends largely on our ability to establish close working relationships with hospitals, clinics, nursing homes, physician groups, health maintenance organizations, preferred provider organizations and other health care providers. Although we have established such relationships, we cannot assure you that we will improve and maintain these relationships or develop new relationships in existing and future markets. Our inability to maintain, improve and develop relationships in the future could have a material adverse effect on our business, financial condition and results of operations.

We rely significantly on attracting and retaining skilled workers.

We rely significantly on our ability to attract and retain caregivers who possess the skills, experience and licenses necessary to meet the requirements of our customers. We compete for home health care services personnel with other providers of home health care services. We must evaluate and expand our network of caregivers continually to keep pace with our customers’ needs. Currently, competition for nursing personnel is increasing and salaries and benefit costs have risen. Any inability to continue to increase the number of caregivers we recruit could adversely affect our potential for growth. Our ability to attract and retain caregivers depends on several factors, including our ability to provide such caregivers with attractive assignments and competitive benefits and salaries. We cannot assure you that we will succeed in any of these areas. The cost of attracting caregivers and providing them with attractive benefit packages may be higher than anticipated and, as a result, if we are unable to pass these costs on to customers, our profitability could decline. Moreover, if we are unable to attract and retain caregivers, the quality of our services may decline and, as a result, we could lose certain customers.

We depend on the continued services of our senior management.

Our success depends upon the continued employment of senior management officials, including our Chief Executive Officer, William F. Borne, our Chief Financial Officer, Gregory H. Browne and our Chief Operating Officer, Larry R. Graham. We maintain key employee life insurance of $4.5 million on Mr. Borne’s life and have entered into employment agreements with each of Mr. Borne, Mr. Browne and Mr. Graham. The departure of any of our senior management may materially adversely affect our operations.

We are dependant on information systems.

Our business is reliant on information systems and any disruption could impact our operations or profitability. These systems include software developed in-house, systems provided by external contractors, and other service providers.

We are defending class action lawsuits that may require us to pay substantial damage awards.

On August 23 and October 4, 2001, two class action lawsuits were filed, on behalf of all purchasers of our common stock between November 15, 2000 and June 13, 2001, against us and three of our executive officers. These suits, which were filed in the United States District Court for the Middle District of Louisiana, have now been consolidated and seek damages based on the decline in our stock price following an announced restatement of earnings for the fourth quarter of 2000 and first quarter of 2001. The suits allege that we knew or were reckless in not knowing

the facts giving rise to the restatement. We are vigorously defending these lawsuits. We have insurance coverage for an amount in excess of $100,000 up to a certain level. Although we believe our insurance coverage is sufficient in respect to any amounts which may be awarded, we cannot assure you that the final resolution will fall within our insurance coverage amounts. We cannot assure you that we may not be subject to additional litigation in the future as a result of adjustments in actual or changes in estimates for Medicare and other third-party reimbursements or arising in connection with other matters.

Our stock has low trading volume and a number of factors beyond our control may affect our stock price.

The average daily trading volume for our common stock historically has been low, with an average daily trading volume for the nine months ended September 30, 2003 of approximately 22,000 shares. As a result, our common stock may not be highly liquid. Moreover, the price and trading levels of our common stock may be affected negatively by a number of factors outside of our control, including:

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sales of stock by significant stockholders;

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announcements of changes in Medicare or other third party reimbursements;

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announcements of other legislative changes in the healthcare industry;

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quarterly fluctuations in our revenues or other financial results;

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announcements by our competitors; and

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investor perceptions about us and our business and financial results.

Our subsidiary, Alliance Home Health, Inc., filed a Chapter 7 bankruptcy petition.

Alliance, our wholly-owned subsidiary (which we acquired in 1998 and ceased operations in 1999), filed for Chapter 7 Federal bankruptcy protection with the United States Bankruptcy Court in the Northern District of Oklahoma on September 29, 2000. A trustee was appointed for Alliance in 2001. Until the contingencies associated with the liabilities are resolved, the consolidated financial statements incorporated by reference in this private placement memorandum will continue to consolidate Alliance, which has net liabilities of $4.2 million. It is possible that we will be held responsible for some of these liabilities.

Our Board of Directors may utilize anti-takeover provisions or issue stock to discourage control contests.

Our Certificate of Incorporation authorizes us to issue up to 30,000,000 shares of common stock and 5,000,000 shares of undesignated Preferred Stock. Our Board of Directors may cause us to issue additional stock to discourage an attempt to obtain control over us. For example, shares of stock could be sold to purchasers who might support the Board of Directors in a control contest or could be sold to dilute the voting or other rights of a person seeking to obtain control. In addition, the Board of Directors could cause us to issue Preferred Stock entitling holders to:

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vote separately on any proposed transaction;

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convert preferred stock into common stock;

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demand redemption at a specified price in connection with a change in control; or

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exercise other rights designed to impede a takeover.

In addition, the issuance of additional shares may, among other things, dilute earnings and equity per share of common stock and voting rights of the common stockholders.

We have implemented other anti-takeover provisions or provisions that could have an anti-takeover effect, including (1) advance notice requirements for director nominations and stockholder proposals and (2) a stockholder rights plan, colloquially known as a “poison pill.” These provisions, and others that the Board of Directors may adopt hereafter, may discourage offers to acquire us and may permit our Board of Directors to choose not to entertain offers to purchase us, even if such offers include a substantial premium to the market price of our stock. Therefore, our stockholders may be deprived of opportunities to profit from a sale of control.

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)

Exhibits

Exhibit No.		Identification of Exhibit

2.1(5) -		Asset purchase agreement by and among Amedisys LA Acquisitions, LLC, Amedisys, Inc., Standard Home Health Care, Inc., Cypress Health Services, LLC, David J. Martin, Jr., Charles Gregory Eckert, and Brandon J. Migliore.

3.1(4) -		Certificate of Incorporation

3.2(3) -		Bylaws

4.2(1) -		Common Stock Specimen

4.7(2) -		Shareholder Rights Agreement

10.1(6) -		Settlement Agreement between the Office of Inspector General of the Department of Health and Human Services and Amedisys Specialized Medical Services and Amedisys, Inc.


10.2	(6) -	Corporate Integrity Agreement between the Office of Inspector General of the Department of Health and Human Services and Amedisys, Inc. and Amedisys Specialized Medical Services, Inc.

21.1	(1) -	List of Subsidiaries

31.1	(6) -	Certification of William F. Borne, Chief Executive Officer

31.2	(6) -	Certification of Gregory H. Browne, Chief Financial Officer

32.1	(6) -	Certification of William F. Borne, Chief Executive Officer

32.2	(6) -	Certification of Gregory H. Browne, Chief Financial Officer

(1)	Previously filed as an exhibit to the Registration Statement on Form S-3 dated March 11, 1998.

(2)	Previously filed as an exhibit to the Current Report on Form 8-K dated June 16, 2000 and the Registration Statement on Form 8-A dated June 16, 2000.

(3)	Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2001.

(4)	Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the period ended March 31, 2002.

(5)	Previously filed as an exhibit to Form 8-K filed August 19, 2003.

(6)	Filed herewith

(b) Reports on Form 8-K

On August 7, 2003 the Company filed a Current Report on Form 8-K attaching a press release announcing the purchase of two home care agencies in southeast Louisiana.

On August 13, 2003 the Company filed a Current Report on Form 8-K with the SEC attaching a press release announcing operating results for the quarter ended June 30, 2003 and announcing a conference call to be hosted.

On August 19, 2003 the Company filed a Current Report on Form 8-K with the SEC attaching transcript of the teleconference call held on August 13, 2003 to discuss 2nd quarter 2003 earnings.

On August 19, 2003 the Company filed a Current Report on Form 8-K with the SEC to report the acquisition of assets of Standard Home Health Care, Inc and Cypress Health Services, LLC effective August 1, 2003.

On September 16, 2003 the Company filed a Current Report on Form 8-K with the SEC to furnish the text of slides that the Company’s management began using in presentations at investor conferences.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AMEDISYS, INC.

By: /s/ Gregory H. Browne

Gregory H. Browne

Chief Financial Officer

DATE: November 10, 2003

EX-10.1 3 dex101.htm SETTLEMENT AGREEMENT Settlement Agreement

Exhibit 10.1

SETTLEMENT AGREEMENT

I. PARTIES

This Settlement Agreement (“Settlement Agreement” or “Agreement”) is entered into between the United States of America, acting through the United States Attorney for the Western District of Louisiana and the United States Department of Justice, the Office of Inspector General of the Department of Health and Human Services (“OIG-HHS”) on behalf of the Department of Health and Human Services (“HHS”), (singularly and collectively, the “United States”), on the one side, and Amedisys Specialized Medical Services, Inc. and Amedisys, Inc. (collectively the “Company”), through its authorized representatives, on the other.

II. PREAMBLE

As a preamble to this Agreement, the Parties agree to the following:

1. Amedisys Specialized Medical Services, Inc. is a provider of home health care nursing services, located in Monroe, Louisiana. Amedisys Specialized Medical Services, Inc. provides home health services, inclusive of skilled nursing, physical therapy, speech therapy, occupational therapy, social work, and nurse aides to homebound Medicare recipients. Amedisys Specialized Medical Services, Inc. is a wholly-owned subsidiary of Amedisys, Inc. which operates sixty-four (64) home care facilities throughout the Southern and Southeastern United States.

2. The United States contends that Amedisys Specialized Medical Services, Inc. submitted or caused to be submitted claims for payment to the Medicare Program (“Medicare”), Title XVIII of the Social Security Act, 42 U.S.C. § 1395-1395ggg, between 1994 and 1999 in connection with services provided by its Monroe facility.

3. The United States contends that it has certain civil and administrative monetary claims and causes of action against Amedisys Specialized Medical Services, Inc. under the False Claims Act, 31 U.S.C. §§ 3729 et seq., as amended, under the Civil Monetary Penalties Law, 42 U.S.C. §§ 1320a-7a, under the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812, and under common law, for knowingly engaging in the following conduct during the period from 1994 to 1999 (the “Covered Conduct”):

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From 1994 - 1999, the Company’s Monroe, Louisiana, office which was acquired in 1994, billed for services not rendered and submitted invalid cost report deductions.

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The billing for services not rendered was facilitated by the agency’s alteration of records, falsification of physician/patient signatures and falsification of nurse’s notes. The invalid cost report deductions consisted of salaries deducted for individuals who did not perform work for the Company.

4. Amedisys Specialized Medical Services, Inc. and/or Amedisys, Inc. denies that the United States has any valid claims against it for the referenced Covered Conduct.

5. The United States and Amedisys Specialized Medical Services, Inc. desire to reach an agreement that would fully and finally settle, compromise, and resolve the civil and administrative monetary claims set forth below.

6. This Agreement does not constitute an admission by any party of any liability or wrongful conduct.

III. TERMS AND CONDITIONS

NOW, THEREFORE, in consideration of the mutual promises, covenants, and obligations set forth below, and for good and valuable consideration as stated herein, the parties have agreed as follows:

7. Amedisys Specialized Medical Services, Inc. further agrees to make payment of $1,156,587.90 (the “Settlement Amount”), by FedWire Electronic Funds Transfer (“EFT” or wire transfer) to the United States Department of Justice account in accordance with electronic funds transfer procedures, referencing “USAO File #2001V00712.” Payment of the settlement amount shall be made according to instructions to be provided to the Company by Ms. Vickie Eaves (318-676-3635) of the Financial Litigation Unit of the United States Attorney’s Office for the Western District of Louisiana. Specifically, at the time of execution of this Agreement, Amedisys Specialized Medical Services, Inc. shall deliver via EFT, an initial payment in the amount of no less than one/third (1/3) of the Settlement Amount, or $385,529.30. A second payment of an equal or greater amount will be made in the same manner on or before the one year anniversary date of the first payment. The third and final payment will be made in the same manner and will be due on or before the anniversary date of the second payment.

8. The provisions of this Agreement concerning release and non-exclusion from the federal programs are as follows:

(a) Subject only to the exceptions in Paragraph 20 below, and in consideration of the obligations of Amedisys Specialized Medical Services, Inc. set forth in this Agreement, and after the receipt of the entire Settlement Amount, the United States, for itself and on behalf of its officials, employees, agents, departments, and assigns, releases and forever discharges Amedisys Specialized Medical Services, Inc. and Amedisys, Inc. together with its current and former parent corporations, each of its direct and indirect subsidiaries, brother or sister corporations, divisions and the successors and assigns of any of them, as well as their respective officers, directors, and employees (including but not limited to the Estate of John M. Joffrion, Jr.) from any and all civil or administrative monetary claims, actions, demands, proceedings or causes of action for the Covered Conduct alleged in paragraph 3 above under the False Claims Act, 31 U.S.C. §§ 3729 et seq., as amended; the Civil Monetary Penalties Law, 42 U.S.C. §§ 1320a-7a; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; and common law for the Covered Conduct.

(b) In consideration of the obligations of Amedisys Specialized Medical Services, Inc. set forth in this Agreement, conditioned upon Amedisys’ full payment of the Settlement Amount, the OIG-HHS agrees to release and refrain from instituting, directing or maintaining any administrative action seeking exclusion from the Medicare,

Medicaid, or other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) against Amedisys Specialized Medical Services, Inc. and Amedisys, Inc. as well as their respective officers, directors, and employees with the exception of any former officers, directors, or employees under 42 U.S.C. § 1320a-7a (Civil Monetary Penalties Law), or 42 U.S.C. § 1320a-7(b)(7) (permissive exclusion for fraud, kickbacks and other prohibited activities), for the Covered Conduct, except as reserved in Paragraph 10, below, and as reserved in this Paragraph. The OIG-HHS expressly reserves all rights to comply with any statutory obligations to exclude the Company from the Medicare, Medicaid, or other Federal health care program under 42 U.S.C. Section 1320a-7(a)(mandatory exclusion) based upon the Covered Conduct. Nothing in this Paragraph precludes the OIG-HHS from taking action against entities or persons, or for conduct and practices, for which civil claims have been reserved in Paragraph 10, below.

9. Each party to this Agreement agrees to execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement.

10. Notwithstanding Paragraph 8, above, the United States does not release Amedisys, Inc. from: (1) any civil claims arising under Title 26 of the U.S. Code (Internal Revenue Code); (2) except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal health care programs; (3) any claims based upon such obligations as are created by this Agreement; (4) any warranty claims or claims resulting from injuries caused by defective or deficient products or services provided by Amedisys, Inc.; (5) any claims based on a failure to deliver items or services due; or (6) any liability to the United States (or its agencies) for any conduct other than the Covered Conduct.

11. The terms of this Agreement are not intended to, nor are they to be construed to, work a release of liability or in any way create a benefit in favor of any person or entity (including physicians or other individuals or entities that referred patients to Amedisys, Inc. or used Amedisys, Inc.’s services) other than for Amedisys Specialized Medical Services, Inc. and Amedisys, Inc. together with each of its direct and indirect subsidiaries, affiliates and divisions and the successors and assigns of any of them.

12. Amedisys, Inc. waives and will not assert any defenses Amedisys, Inc. may have to any criminal prosecution or administrative action based upon the Covered Conduct, which defenses may be based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the Constitution, this Agreement bars a remedy sought in such criminal prosecution or administrative action. Amedisys, Inc. agrees that this Agreement is not punitive in purpose or effect. Nothing in this Paragraph or any other provision of this Agreement constitutes an agreement by the United States concerning the characterization of the Settlement Amount for purposes of the Internal Revenue laws, Title 26 of the United States Code.

13. Amedisys Specialized Medical Services, Inc. fully and finally releases the United States, its agencies, employees, servants, and agents from any claims (including attorney’s fees, costs, and expenses of every kind and however denominated) which Amedisys, Inc. has asserted, could have asserted, or may assert in the future against the United States, its agencies, employees, servants, and agents, based upon the Covered Conduct and the United States’ investigation and prosecution thereof.

14. In the event of payment default by Amedisys Specialized Medical Services, Inc. (as defined in Paragraph 16, below), the United States may exercise, at its sole option, one or more of the following rights: (1) declare this Agreement breached, and avail itself of any and all claims against Amedisys Specialized Medical Services, Inc., including those to be released by this Agreement, recovering any of the Settlement Amount in default under this Agreement, and recovering any reasonable expenses, interest and legal fees incurred in collecting the amount due and payable under the Agreement; (2) file an action for specific performance of the terms of this Agreement; and (3) exercise any other right granted by law, or under the terms of this Agreement, or recognizable at common law or in equity. This Agreement does not waive or limit any right that Amedisys Specialized Medical Services, Inc. otherwise has to dispute the existence or extent of any payment default alleged by the United States.

15. The Settlement Amount shall not be decreased as a result of the denial of claims for payment now being withheld from payment by any Medicare carrier or intermediary or any State payer, based upon the Covered Conduct; and Amedisys Specialized Medical Services, Inc. shall not resubmit to any Medicare carrier or intermediary or any State payer any previously denied claims based upon the Covered Conduct, and shall not appeal any denials of such claims.

16. In the event of payment default by the Company, HHS may at any time and at its option exclude Amedisys Specialized Medical Services, Inc. from

participation in the Medicare and Medicaid Programs, pursuant to 42 U.S.C. §1320a-7(b) or the Civil Monetary Penalties law, 42 U.S.C. §1320a-7a, and 42 U.S.C. §1320a-7(h), until such time as Amedisys Specialized Medical Services, Inc. has fully cured the default. Amedisys Specialized Medical Services, Inc. agrees not to contest such exclusion either administratively or in any state or federal court. This provision does not affect the rights, obligations or causes of action which HHS or its Office of Inspector General may have under any authority other than that specifically referred to in this paragraph.

17. Amedisys Specialized Medical Services, Inc. is in payment default under this Agreement if it fails to pay as outlined in Paragraph 7 above. The United States shall provide written notice to Amedisys Specialized Medical Services, Inc. of its default in writing by certified mail.

18. In the event of payment default, the United States, through HHS or any other Department, Agency, or agent, may at any time and at its option, satisfy any part of the remaining unpaid balance by immediate offset of monies payable to Amedisys Specialized Medical Services, Inc. by any Department, Agency or agent of the United States. Further, Amedisys Specialized Medical Services, Inc. waives any rights it may have to assert that the United States is obligated to comply with the procedures established by any statute or regulation that may be applicable to such offset.

19. Amedisys Specialized Medical Services, Inc. agrees to the following:

(a) Unallowable Costs Defined: that all costs (as defined in the Federal Acquisition Regulations (FAR) § 31.205-47 and in Titles XVIII and XIX of the Social Security Act, 42 U.S.C. §§ 1395-1395ggg and 1396-1396v, and the regulations and official program directives promulgated thereunder) incurred by or on behalf of Amedisys Specialized Medical Services, Inc., its present or former officers, directors, employees, shareholders, and agents in connection with the following shall be “unallowable costs”:

(1) the matters covered by this Agreement,

(2) the United States’ audit and civil investigation of the matters covered by this Agreement,

(3) Amedisys’ investigation, defense, and corrective actions undertaken in response to the United States’ audits and civil investigation in connection with the matters covered by this Agreement (including attorney’s fees),

(4) the negotiation and performance of this Agreement,

(5) the payment Amedisys Specialized Medical Services, Inc. makes to the United States pursuant to this Agreement, including any costs and attorneys’ fees, and

(6) the negotiation of, and obligations undertaken pursuant to the Corporate Integrity Agreement (CIA) (as addressed in Paragraph 22 below and attached as Exhibit “A”) to:

(i) retain an independent review organization to perform annual reviews as described in Section III of the CIA; and

(ii) prepare and submit reports to the OIG-HHS, are unallowable costs on Government contracts and under the Medicare Program, Medicaid Program, TRICARE Program, and Federal Employees Health Benefits Program (FEHBP).

(b) Future Treatment of Unallowable Costs: These unallowable costs will be separately determined and accounted for in non-reimbursable cost centers by Amedisys Specialized Medical Services, Inc., and neither Amedisys Specialized Medical Services, Inc., nor Amedisys, Inc., will charge such unallowable costs directly or indirectly to any contracts with the United States or any State Medicaid Program, or seek payment for such unallowable costs through any cost report, cost statement, information statement, or payment request submitted by Amedisys, Inc., or any of its subsidiaries to the Medicare, Medicaid, TRICARE, or FEHBP Programs.

(c) Treatment of Unallowable Costs Previously Submitted for Payment: Amedisys, Inc. further agrees that within 180 days after the effective date of this Agreement, it will identify to applicable Medicare and TRICARE fiscal intermediaries, carriers, and/or contractors, and Medicaid, VA and FEHBP fiscal agents, any unallowable costs (as defined in this Paragraph) included in payments previously sought from the United States, or any State Medicaid Program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by Amedisys, Inc. or any of its subsidiaries or affiliates, and will request, and agree, that such cost reports, cost statements, information reports, or payment requests, even if already settled, be adjusted to account for the effect of the

inclusion of the unallowable costs. Amedisys, Inc. agrees that the United States, at a minimum, will be entitled to recoup from Amedisys, Inc. any overpayment plus applicable interest and penalties as a result of the inclusion of such unallowable costs on previously-submitted cost reports, information reports, cost statements, or requests for payment.

Any payments due after the adjustments have been made shall be paid to the United States pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States reserves its rights to disagree with any calculations submitted by Amedisys, Inc. or any of its subsidiaries on the effect of inclusion of unallowable costs (as defined in this Paragraph) on Amedisys, Inc.’s or any of its subsidiaries’ cost reports, cost statements, or information reports. Nothing in this Agreement shall constitute a waiver of the rights of the United States to examine or reexamine the unallowable costs described in this Paragraph.

20. Amedisys Specialized Medical Services, Inc. covenants to cooperate fully and truthfully, as set forth in this paragraph, with the United States’ investigation of individuals and entities not specifically released in this Agreement for conduct which is the subject of this Agreement. Upon reasonable notice, Amedisys Specialized Medical Services, Inc. shall make reasonable efforts to facilitate access to, and encourage the cooperation of, its directors, officers, and employees for interviews and testimony, consistent with the rights and privileges of such individuals, and shall furnish to the United States, upon reasonable request, all non-privileged documents and records in its possession, custody or control relating to the Covered Conduct.

21. Amedisys Specialized Medical Services, Inc. agrees that in the event that it defaults by failing to pay the Settlement Amount as outlined in Paragraph 7, all applicable statutes of limitations shall be considered tolled from the date of execution of this Settlement Agreement until one hundred eighty (180) calendar days after the default in order to provide time within which the United States may assert all claims it may have based upon the Covered Conduct.

22. Amedisys Specialized Medical Services, Inc. has entered into the Corporate Integrity Agreement with HHS, attached as Exhibit “A,” which is expressly incorporated into this Agreement by reference. Amedisys Specialized Medical Services, Inc. will immediately upon execution of this Agreement, implement its obligations under the CIA.

23. Amedisys Specialized Medical Services, Inc. waives and shall not seek payment for any of the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, legally responsible individuals, or third party payors based upon the Covered Conduct.

24. This Settlement Agreement shall not be construed as an admission of wrongdoing on the part of Amedisys, Inc., and Amedisys Specialized Medical Services, Inc.; the same being expressly denied by both Amedisys, Inc., and Amedisys Specialized Medical Services, Inc.

25. Each party to this agreement agrees to bear its own legal and other costs.

26. This Agreement shall be governed by the laws of the United States. The parties agree that the exclusive jurisdiction and venue for any dispute arising under this Agreement shall be the United States District Court for the Western District of Louisiana, Monroe Division, except that disputes arising under the CIA shall be resolved exclusively under the dispute resolution provisions in the CIA.

27. This Settlement Agreement and the Corporate Integrity Agreement which is incorporated herein by reference constitute the complete agreement between the parties, and cannot be amended, except in writing and signed by all signatories to this Agreement, except that only the Company and OIG-HHS must agree in writing to modification of the CIA.

28. The persons signing this Agreement represent that they are duly authorized to execute the Agreement on behalf of the parties listed.

29. This Agreement may be executed in counterparts, each of which shall constitute an original and all of which shall constitute one and the same agreement.

30. This Agreement is effective on the date of signature of the last signatory to the Agreement.

	THE UNITED STATES OF AMERICA

	DONALD W. WASHINGTON United States Attorney

DATED: November 10, 2003	BY:	/s/ A. G. “Alec” Alexander, III

		A. G. “Alec” Alexander, III Assistant United States Attorney


DATED: November 10, 2003	BY:	/s/ Larry J. Goldberg

		Larry J. Goldberg Assistant Inspector General For Legal Affairs Office of Inspector General United States Department of Health and Human Services

	AMEDISYS SPECIALIZED MEDICAL SERVICES, INC.

DATED: November 10, 2003	BY:	/s/ William F. Borne

		William F. Borne Vice President


DATED: November 10, 2003	BY:	/s/ Jeffrey D. Jeter, Esq.

		Jeffrey D. Jeter, Esq. Vice President of Corporate Compliance and Corporate Counsel

EX-10.2 4 dex102.htm CORPORATE INTEGRITY AGREEMENT Corporate Integrity Agreement

Exhibit 10.2

CORPORATE INTEGRITY AGREEMENT

BETWEEN THE

OFFICE OF INSPECTOR GENERAL

OF THE

DEPARTMENT OF HEALTH AND HUMAN SERVICES

AND

AMEDISYS, INC.

AND

AMEDISYS SPECIALIZED MEDICAL SERVICES, INC.

I.	PREAMBLE

Amedisys, Inc. and Amedisys Specialized Medical Services, Inc. (“Specialized”) (collectively “Amedisys”) hereby enter into this Corporate Integrity Agreement (“CIA”) with the Office of Inspector General (“OIG”) of the United States Department of Health and Human Services (“HHS”) to promote compliance by its officers, directors, employees, contractors, and agents with the statutes, regulations, and written directives of Medicare, Medicaid, and all other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) (“Federal health care program requirements”). Contemporaneously with this CIA, Amedisys is entering into a Settlement Agreement with the United States, and this CIA is incorporated by reference into the Settlement Agreement.

Prior to the execution of this CIA, Amedisys voluntarily established a Corporate Compliance Program (“CCP”) applicable to all its subsidiaries inclusive of Specialized. The CCP, among other things, includes written policies and procedures, staff training, mechanisms for individuals to report incidents of noncompliance, and oversight by a Corporate Compliance Officer and Corporate Compliance Committee. Amedisys and OIG agree that Amedisys has elements of its compliance program that may conform to the requirements of the CIA, and, if necessary, Amedisys may utilize and adapt any components of the CCP existing at the time of the execution of the CIA as necessary to be in compliance with the obligations assumed by Amedisys pursuant to this CIA. To the extent that Amedisys’ existing CCP cannot be adapted or maintained to meet the obligations of this CIA, Amedisys shall adopt new components to its CCP or create a new compliance program, so that Amedisys shall meet the obligations assumed pursuant to this CIA.

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II.

TERM AND SCOPE OF THE CIA

A. The period of the compliance obligations assumed by Amedisys under this CIA shall be three years from the effective date of this CIA (“Effective Date”). The Effective Date shall be the date on which the final signatory of this CIA executes this CIA. Each one-year period, beginning with the one-year period following the Effective Date, shall be referred to as a “Reporting Period.”

B. Sections VII, VIII, IX, X, and XI shall expire no later than 120 days after OIG’s receipt of: (1) Amedisys’ final annual report; or (2) any additional materials submitted by Amedisys pursuant to OIG’s request, whichever is later.

C. The scope of this CIA shall be governed by the following definitions:

“Covered Persons” includes:

a. all officers, directors, and employees of Amedisys; and

b. all contractors and agents that provide patient care items or services or that perform billing or coding functions on behalf of Amedisys;

“Relevant Covered Persons” includes all individuals who are directly involved in the billing or coding functions on behalf of Amedisys.

III.

CORPORATE INTEGRITY OBLIGATIONS

Amedisys shall maintain a Compliance Program that includes the following elements:

A. Compliance Officer and Committee.

1. Corporate Compliance Officer. Amedisys represents that it has appointed a Corporate Compliance Officer. The Corporate Compliance Officer shall be responsible for developing and implementing policies, procedures, and practices designed to ensure compliance with the requirements set forth in this CIA and with Federal health

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care program requirements. The Corporate Compliance Officer shall be a member of senior management of Amedisys, shall make periodic (at least quarterly) reports regarding compliance matters directly to the Board of Directors of Amedisys, and shall be authorized to report on such matters to the Board of Directors at any time. The Corporate Compliance Officer shall be responsible for monitoring the day-to-day compliance activities engaged in by Amedisys as well as for any reporting obligations created under this CIA.

Amedisys shall report to OIG, in writing, any changes in the identity or position description of the Corporate Compliance Officer, or any actions or changes that would affect the Corporate Compliance Officer’s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change.

2. Compliance Committee. Amedisys shall maintain its existing Compliance Committee. The Compliance Committee shall include the Corporate Compliance Officer and other members of senior management necessary to meet the requirements of this CIA (e.g., senior executives of relevant departments, such as billing, clinical, human resources, audit, and operations). The Corporate Compliance Officer shall chair the Compliance Committee and the Committee shall support the Corporate Compliance Officer in fulfilling his/her responsibilities (e.g., shall assist in the analysis of the organization’s risk areas and shall oversee monitoring of internal and external audits and investigations).

Amedisys shall report to OIG, in writing, any changes in the composition of the Compliance Committee, or any actions or changes that would affect the Compliance Committee’s ability to perform the duties necessary to meet the obligations in this CIA, within 15 days after such a change.

B. Written Standards.

1. Code of Conduct. Amedisys shall maintain its written “Standards of Conduct.” The “Standards of Conduct” shall be distributed to any Covered Persons within 90 days after the Effective Date. Amedisys shall make the promotion of, and adherence to, the “Standards of Conduct” an element in evaluating the performance of all employees. The “Standards of Conduct” shall, at a minimum, set forth:

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a. Amedisys’ commitment to full compliance with all Federal health care program requirements, including its commitment to prepare and submit accurate claims consistent with such requirements;

b. Amedisys’ requirement that all of its Covered Persons shall be expected to comply with all Federal health care program requirements and with Amedisys’ own Policies and Procedures as implemented pursuant to Section III.B.2 (including the requirements of this CIA);

c. the requirement that all of Amedisys’ Covered Persons shall be expected to report to the Compliance Officer, or other appropriate individual designated by Amedisys, suspected violations of any Federal health care program requirements or of Amedisys’ own Policies and Procedures;

d. the possible consequences to both Amedisys and Covered Persons of failure to comply with Federal health care program requirements and with Amedisys’ own Policies and Procedures and the failure to report such noncompliance; and

e. the right of all individuals to use the Disclosure Program described in Section III.E, and Amedisys’ commitment to maintain confidentiality, as appropriate, and nonretaliation with respect to such disclosures.

Within 90 days after the Effective Date, each Covered Person shall certify, in writing, that he or she has received, read, understood, and shall abide by Amedisys’ “Standards of Conduct.” New Covered Persons shall receive the “Standards of Conduct” and shall complete the required certification within 30 days after becoming a Covered Person or within 90 days after the Effective Date, whichever is later.

Amedisys shall periodically review the “Standards of Conduct” to determine if revisions are appropriate and shall make any necessary revisions based on such a review. Any such revised Code of Conduct shall be distributed within 30 days after finalizing such changes. Each Covered Person shall certify that he or she has received, read,

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understood, and shall abide by the revised “Standards of Conduct” within 30 days after the distribution of such revisions.

2. Policies and Procedures. Amedisys shall maintain, and update as necessary, its written Policies and Procedures regarding the operation of Amedisys’ compliance program and its compliance with Federal health care program requirements. At a minimum, the Policies and Procedures shall:

a. address the subjects relating to the Code of Conduct identified in Section III.B.1; and

b. require that all claims submitted for payment to any Federal health care program be properly supported by documentation, including, but not limited to:

i. documentation that the billed for services have been rendered;

ii. documentation that patients who received services were homebound;

iii. documentation supporting cost report deductions;

iv. valid physician and patient signatures; and

v. valid physician and nurses’ documentation regarding medical necessity and reasonableness of care, plans of care and actual care provided.

Within 90 days after the Effective Date, the relevant portions of the Policies and Procedures shall be distributed to all individuals whose job functions relate to those Policies and Procedures. Appropriate and knowledgeable staff shall be available to explain the Policies and Procedures.

At least annually (and more frequently, if appropriate), Amedisys shall assess and update as necessary the Policies and Procedures. Within 30 days after the effective date of any revisions, the relevant portions of any such revised Policies and Procedures shall

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be distributed to all individuals whose job functions relate to those Policies and Procedures.

C. Training and Education.

1. General Training. Withing 120 days after the Effective Date, Amedisys shall provide general compliance training to each Covered Person. This training, at a minimum, shall explain Amedisys’:

a. CIA requirements; and

b. Amedisys’ Compliance Program (including the Code of Conduct and the Policies and Procedures as they pertain to general compliance issues).

New Covered Persons shall receive the general training described above within 60 days after becoming a Covered Person or within 120 days after the Effective Date, whichever is later. After receiving the initial training described above, each Covered Person shall receive at least one hours of general compliance training annually.

2. Specific Training. Within 120 days after the Effective Date, each Relevant Covered Person shall receive at least two hours of specific training in addition to the general training required above. This specific training shall include a discussion of:

a. the submission of accurate claims for services rendered to Federal health care program beneficiaries;

b. policies, procedures, and other requirements applicable to the documentation of medical records;

c. the personal obligation of each individual involved in the claims submission process to ensure that such claims are accurate;

d. applicable reimbursement statutes, regulations, and program requirements and directives;

e. the legal sanctions for improper claims; and

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f. examples of proper and improper claims submission practices.

Persons providing the training shall be knowledgeable about the submission of claims for home health services.

Relevant Covered Persons shall receive this training within 30 days after the beginning of their employment or becoming Relevant Covered Persons, or within 120 days after the Effective Date, whichever is later. An Amedisys employee who has completed the specific training shall review a new Relevant Covered Person’s work, to the extent that the work relates to the delivery of patient care items or services preparation or to the submission of claims for reimbursement from any Federal health care program, until such time as the new Relevant Covered Person completes his or her applicable training.

After receiving the initial training described in this Section, each Relevant Covered Person shall receive at least two hours of specific training annually. Amedisys shall annually review the training, and, where appropriate, update the training to reflect changes in Federal health care program requirements, any issues discovered during internal audits or IRO audits, and any other relevant information.

3. Certification. Each individual who is required to attend training shall certify, in writing, that he or she has received the required training. The certification shall specify the type of training received and the date received. The Compliance Officer shall retain the certifications, along with all course materials. These shall be made available to OIG, upon request.

D. Review Procedures.

1. General Description.

a. Retention of Independent Review Organization. Within 90 days after the Effective Date, Amedisys shall retain an entity (or entities), such as an accounting, auditing, or consulting firm (hereinafter “Independent Review Organization” or “IRO”), to perform reviews at Specialized to assist Amedisys in assessing and evaluating its billing and coding practices and certain other obligations pursuant to

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this CIA and the Settlement Agreement. The OIG must approve Amedisys’ selection of each IRO prior to its engagement. Each IRO retained by Amedisys shall have expertise in the billing, coding, reporting, and other requirements of the home health care industry pertaining to this CIA and in the general requirements of the Federal health care program(s) from which Specialized seeks reimbursement. Each IRO shall assess, along with Amedisys, whether it can perform the IRO review in a professionally independent and/or objective fashion, as appropriate to the nature of the engagement, taking into account any other business relationships or engagements that may exist. The IRO(s) review shall address and analyze Specialized’s billing and coding to the Federal health care programs (“Claims Review”) and shall analyze whether Amedisys sought payment for certain unallowable costs (“Unallowable Cost Review”).

b. Frequency of Claims Review. The Claims Review shall be performed annually and shall cover each of the Reporting Periods. The IRO(s) shall perform all components of each annual Claims Review.

c. Frequency of Unallowable Cost Review. The IRO shall perform the Unallowable Cost Review for the first Reporting Period.

d. Retention of Records. The IRO and Amedisys shall retain and make available to OIG, upon request, all work papers, supporting documentation, correspondence, and draft reports (those exchanged between the IRO and Amedisys) related to the reviews.

2. Claims Review. The Claims Review shall include a Discovery Sample and, if necessary, a Full Sample. The applicable definitions, procedures, and reporting requirements are outlined in Appendix A to this CIA, which is incorporated by reference.

a. Discovery Sample. The IRO shall randomly select and review a sample of 50 Units (each unit shall consist of the file of a unique Medicare beneficiary as it represents a paid claim for services submitted under the Home Health Prospective Payment System). The claims shall be reviewed based on the supporting documentation

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available at Amedisys or under Amedisys’ control and applicable billing and coding regulations and guidance to determine whether the claim submitted was correctly coded, submitted, and reimbursed.

i. If the Error Rate (as defined in Appendix A) for the Discovery Sample is less than 5%, no additional sampling is required, nor is the Systems Review required. (Note: The threshold listed above does not imply that this is an acceptable error rate. Accordingly, Amedisys should, as appropriate, further analyze any errors identified in the Discovery Sample. Amedisys recognizes that OIG or other HHS component, in its discretion and as authorized by statute, regulation, or other appropriate authority, may also analyze or review Paid Claims included, or errors identified, in the Discovery Sample.)

ii. If the Discovery Sample indicates that the Error Rate is 5% or greater, the IRO shall perform a Full Sample and a Systems Review, as described below, for Amedisys’ Monroe, Louisiana facility.

b. Full Sample. If necessary, as determined by procedures set forth in Section III.D.2.a, the IRO shall perform an additional sample of Units for Specialized using commonly accepted sampling methods and in accordance with Appendix A. The Full Sample shall be designed to (i) estimate the actual Overpayment in the population with a 90% confidence level and with a maximum relative precision of 25% of the point estimate; and (ii) conform with the Centers for Medicare and Medicaid Services’ statistical sampling for overpayment estimation guidelines. The Paid Claims shall be reviewed based on supporting documentation available at Amedisys or under Amedisys’ control and applicable billing and coding regulations and guidance to determine whether the claim submitted was correctly coded, submitted, and reimbursed. For purposes of calculating the size of the Full Sample, the Discovery Sample may serve as the probe sample, if statistically appropriate. Additionally, Amedisys may use the Items sampled as part of the Discovery Sample, and the corresponding findings for those 50 Units, as part of

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its Full Sample. OIG, in its full discretion, may refer the findings of the Full Sample (and any related workpapers) received from Amedisys to the appropriate Federal health care program payor, including the Medicare contractor (e.g., carrier, fiscal intermediary, or DMERC), for appropriate follow-up by that payor.

c. Systems Review. If Amedisys’ Discovery Sample identifies an Error Rate of 5% or greater, Amedisys’ IRO shall also conduct a Systems Review. Specifically, for each claim in the Discovery Sample and Full Sample that resulted in an Overpayment, the IRO shall perform a “walk through” of the system(s) and process(es) that generated the claim to identify any problems or weaknesses that may have resulted in the identified Overpayments. The IRO shall provide its observations and recommendations on suggested improvements to the system(s) and process(es) that generated the claim.

d. Repayment of Identified Overpayments. In accordance with Section III.H.1, Amedisys shall repay any Overpayment(s) identified in the Discovery Sample or the Full Sample (if applicable), regardless of the Error Rate, to the appropriate payor and in accordance with payor refund policies. Amedisys shall make available to OIG any and all documentation that reflects the refund of the Overpayment(s) to the payor.

3. Claims Review Report. The IRO shall prepare a report based upon the Claims Review performed (the “Claims Review Report”). Information to be included in the Claims Review Report is detailed in Appendix A.

4. Unallowable Cost Review. The IRO shall conduct a review of compliance with the unallowable cost provisions of the Settlement Agreement for Amedisys’ Monroe, Louisiana facility. The IRO shall determine whether Amedisys has complied with its obligations not to charge to, or otherwise seek payment from, Federal or State payors for unallowable costs (as defined in the Settlement Agreement) and its obligation to identify to applicable Federal or State payors any unallowable costs included in payments previously sought from the United States, or any State Medicaid program. This unallowable cost analysis shall include, but not be limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted

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by Amedisys or any of its subsidiaries on behalf of its Monroe, Louisiana facility. To the extent that such cost reports, cost statements, information reports, or payment requests, even if already settled, have been adjusted to account for the effect of the inclusion of the unallowable costs, the IRO shall determine if such adjustments were proper. In making this determination, the IRO may need to review cost reports and/or financial statements from the year in which the Settlement Agreement was executed, as well as from previous years.

5. Unallowable Cost Review Report. The IRO shall prepare a report based upon the Unallowable Cost Review performed. The Unallowable Cost Review Report shall include the IRO’s findings and supporting rationale regarding the Unallowable Costs Review and whether Amedisys has complied with its obligation not to charge to, or otherwise seek payment from, Federal or State payors for unallowable costs (as defined in the Settlement Agreement) and its obligation to identify to applicable Federal or State payors any unallowable costs included in payments previously sought from such payor.

6. Validation Review. In the event OIG has reason to believe that: (a) Specialized’s Claims Review or Unallowable Cost Review fails to conform to the requirements of this CIA; or (b) the IRO’s findings or Claims Review results are inaccurate, OIG may, at its sole discretion, conduct its own review to determine whether the Claims Review or Unallowable Cost Review complied with the requirements of the CIA and/or the findings or Claims Review results are inaccurate (“Validation Review”).

Prior to initiating a Validation Review, OIG shall notify Amedisys of its intent to do so and provide a written explanation of why OIG believes such a review is necessary. To resolve any concerns raised by OIG, Amedisys may request a meeting with OIG to discuss the results of any Claims Review or Unallowable Cost Review submissions or findings; present any additional or relevant information to clarify the results of the Claims Review or Unallowable Cost Review or to correct the inaccuracy of the Claims Review; or propose alternatives to the proposed Validation Review. Amedisys shall provide any additional information as may be requested by OIG under this Section in an expedited manner. OIG will attempt in good faith to resolve any Claims Review or Unallowable Cost Review with Amedisys prior to conducting a Validation Review. However, the final determination as to whether or not to proceed with a Validation Review shall be made at the sole discretion of OIG. Amedisys shall pay for the reasonable cost of any such review performed by OIG or any of its designated agents so

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long as it is initiated within one year after Amedisys’ final submission (as described in Section II) is received by OIG.

7. Independence/Objectivity Certification. The IRO shall include in its report(s) to Amedisys a certification or sworn affidavit that it has evaluated its professional independence and/or objectivity, as appropriate to the nature of the engagement, with regard to the Claims Review or Unallowable Cost Review and that it has concluded that it is, in fact, independent and/or objective.

8. Internal Billing Review Option. Subject to approval from OIG and subject to the conditions set forth below, after the second complete Claims Review period in which the IRO has performed the Claims Review as required in section III.D.2, Amedisys may, at its option, conduct an internal review of its billings to the Federal health care programs for Claims Review the third Reporting Period in lieu of having the IRO conduct the Claims Review. This internal review shall comply with all of the requirements outlined herein and in section III.D.2 above.

Prior to conducting its internal billing review, Amedisys agrees: i) to develop and adopt a written formal internal audit work plan consistent with the terms of this CIA; ii) to devote sufficient resources and staff to enable it to accomplish an internal billing review based on its internal work plan; and iii) that its internal billing review staff shall at all times include persons qualified and experienced in accepted auditing and control processes, who possess expertise in billing, coding and Medicare program requirements. In addition, Amedisys agrees that its internal billing review staff shall not include persons who were involved in the submission of bills or claims to the Medicare programs during the period to be audited and shall not include persons who are presently involved in such submissions.

If, in its sole discretion, OIG determines that such internal review satisfactorily establishes the adequacy of Amedisys’ billing and compliance practices pursuant to this CIA, the OIG will allow Amedisys to perform an internal review in lieu of the IRO conducting the Claims review for the third Reporting Period. Consistent with the requirements of section III.D.2, the internal billing review shall include a Claims Review and the required respective reports of Amedisys’ findings.

In the event Amedisys is unable to satisfactorily implement an audit work plan, devote sufficient resources and appropriate qualified staff, or conduct a satisfactory

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internal review, Amedisys agrees, at OIG’s discretion, to engage the IRO to complete Claims Review during the third Reporting Period. To the extent that OIG permits Amedisys to perform internal billing reviews, Amedisys shall submit all the information required in section III.D.2 as well as the results of the IRO’s verification. If Amedisys decides not to exercise its internal review option, the requirements of the IRO Claims Review shall remain in effect for the term of this CIA.

E. Disclosure Program.

Amedisys shall maintain its existing Disclosure Program, including its toll-free compliance telephone line to enable individuals to disclose, to the Corporate Compliance Officer or some other person who is not in the disclosing individual’s chain of command, any identified issues or questions associated with Amedisys’ policies, conduct, practices, or procedures with respect to a Federal health care program, believed by the individual to be a potential violation of criminal, civil, or administrative law. Amedisys shall appropriately publicize the existence of the disclosure mechanism (e.g., via periodic e-mails to employees or by posting the information in prominent common areas) to all Covered Persons.

The Disclosure Program shall emphasize Amedisys’ nonretribution, nonretaliation policy, and shall include a reporting mechanism for anonymous communications for which appropriate confidentiality shall be maintained. Upon receipt of a disclosure, the Corporate Compliance Officer (or designee) shall gather all relevant information from the disclosing individual. The Corporate Compliance Officer (or designee) shall make a preliminary, good faith inquiry into the allegations set forth in every disclosure to ensure that he or she has obtained all of the information necessary to determine whether a further review should be conducted. For any disclosure that is sufficiently specific so that it reasonably: (1) permits a determination of the appropriateness of the alleged improper practice; and (2) provides an opportunity for taking corrective action, Amedisys shall conduct an internal review of the allegations set forth in such a disclosure and ensure that proper follow-up is conducted.

The Compliance Officer (or designee) shall maintain a disclosure log, which shall include a record and summary of each disclosure received (whether anonymous or not), the status of the respective internal reviews, and any corrective action taken in response to the internal reviews. The disclosure log shall be available to OIG, upon request.

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F. Ineligible Persons.

1. Definition. For purposes of this CIA, an “Ineligible Person” shall be an individual or entity who: (a) is currently excluded, debarred, suspended, or otherwise ineligible to participate in the Federal health care programs or in Federal procurement or nonprocurement programs; or (b) has been convicted of a criminal offense that falls within the ambit of 42 U.S.C. § 1320a-7(a), but has not yet been excluded, debarred, suspended, or otherwise declared ineligible.

2. Screening Requirements. Amedisys shall ensure that all owners, officers, directors, employees, contractors and agents of Amedisys are not Ineligible Persons. To ensure that such persons are not Ineligible Persons, Amedisys shall screen such persons prior to engaging their services by: (a) requiring such persons to disclose whether they are Ineligible Persons; and (b) appropriately querying the General Services Administration’s List of Parties Excluded from Federal Programs (available through the Internet at http://epls.arnet.gov) and the HHS/OIG List of Excluded Individuals/Entities (available through the Internet at http://oig.hhs.gov) (these lists shall hereinafter be referred to as the “Exclusion Lists”). Nothing in this Section affects the responsibility of (or liability for) Amedisys to refrain from billing Federal health care programs for services of the Ineligible Person.

3. Review and Removal Requirement. Within 120 days after the Effective Date, Amedisys shall review its list of the persons identified in Section F.2 against the Exclusion Lists. Thereafter, Amedisys shall review its list of such persons against the Exclusion Lists annually. In addition, Amedisys shall require such persons to disclose immediately any debarment, exclusion, suspension, or other event that makes such person an Ineligible Person.

If Amedisys has actual notice that such person has become an Ineligible Person, Amedisys shall remove such person from responsibility for, or involvement with, Amedisys’ business operations related to the Federal health care programs and shall remove such person from any position for which the person’s compensation or the items or services rendered, ordered, or prescribed by the person are paid in whole or part, directly or indirectly, by Federal health care programs or otherwise with Federal funds at least until such time as the person is reinstated into participation in the Federal health care programs.

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4. Pending Charges and Proposed Exclusions. If Amedisys has actual notice that a person identified in Section F.2 is charged with a criminal offense related to any Federal health care program, or is proposed for exclusion during his or her employment, involvement, or contract term, Amedisys shall take all appropriate actions to ensure that the responsibilities of that person have not and shall not adversely affect the quality of care rendered to any beneficiary, patient, or resident, or the accuracy of any claims submitted to any Federal health care program.

G. Notification of Government Investigation or Legal Proceedings.

Within 30 days after discovery, Amedisys shall notify OIG, in writing, of any ongoing investigation known to Amedisys or legal proceeding conducted or brought by a governmental entity or its agents involving an allegation that Amedisys has committed a crime or has engaged in fraudulent activities. This notification shall include a description of the allegation, the identity of the investigating or prosecuting agency, and the status of such investigation or legal proceeding. Amedisys shall also provide written notice to OIG within 30 days after the resolution of the matter, and shall provide OIG with a description of the findings and/or results of the proceedings, if any.

H. Reporting.

1. Overpayments

a. Definition of Overpayments. For purposes of this CIA, an “Overpayment” shall mean the amount of money Amedisys has received in excess of the amount due and payable under any Federal health care program requirements.

b. Reporting of Overpayments. If, at any time, Amedisys identifies or learns of any Overpayment, Amedisys shall notify the payor (e.g., Medicare fiscal intermediary or carrier) within 30 days after identification of the Overpayment and take remedial steps within 60 days after identification (or such additional time as may be agreed to by the payor) to correct the problem, including preventing the underlying problem and the Overpayment from recurring. Also, within 30 days after identification of the Overpayment, Amedisys shall repay the Overpayment to the appropriate payor to the extent

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such Overpayment has been quantified. If not yet quantified, within 30 days after identification, Amedisys shall notify the payor of its efforts to quantify the Overpayment amount along with a schedule of when such work is expected to be completed. Notification and repayment to the payor shall be done in accordance with the payor’s policies, and for Medicare contractors, shall include the information contained on the Overpayment Refund Form, provided as Appendix B to this CIA. Notwithstanding the above, notification and repayment of any Overpayment amount that routinely is reconciled or adjusted pursuant to policies and procedures established by the payor should be handled in accordance with such policies and procedures inclusive of repayment plans.

2. Material Deficiencies.

a. Definition of Material Deficiency. For purposes of this CIA, a “Material Deficiency” means anything that involves:

i. a substantial Overpayment; or

ii. a matter that a reasonable person would consider a probable violation of criminal, civil, or administrative laws applicable to any Federal health care program for which penalties or exclusion may be authorized.

A Material Deficiency may be the result of an isolated event or a series of occurrences.

b. Reporting of Material Deficiencies. If Amedisys determines through any means that there is a Material Deficiency, Amedisys shall notify OIG, in writing, within 30 days after making the determination that the Material Deficiency exists. The report to OIG shall include the following information:

i. If the Material Deficiency results in an Overpayment, the report to OIG shall be made at the same time as the notification to the payor required in Section III.H.1, and shall

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include all of the information on the Overpayment Refund Form, as well as:

(A) the payor’s name, address, and contact person to whom the Overpayment was sent; and

(B) the date of the check and identification number (or electronic transaction number) by which the Overpayment was repaid/refunded;

ii. a complete description of the Material Deficiency, including the relevant facts, persons involved, and legal and Federal health care program authorities implicated;

iii. a description of Amedisys’ actions taken to correct the Material Deficiency; and

iv. any further steps Amedisys plans to take to address the Material Deficiency and prevent it from recurring.

IV.

NEW BUSINESS UNITS OR LOCATIONS

In the event that, after the Effective Date, Amedisys changes locations or sells, closes, purchases, or establishes a new business unit or location related to the furnishing of items or services that may be reimbursed by Federal health care programs, Amedisys shall notify OIG of this fact as soon as possible, but no later than within 30 days after the date of change of location, sale, closure, purchase, or establishment. This notification shall include the address of the new business unit or location, phone number, fax number, Medicare provider number (if any), and the corresponding contractor’s name and address that has issued each Medicare provider number. All Covered Persons at each such business unit or location shall be subject to the applicable requirements in this CIA (e.g., completing certifications and undergoing training).

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V.	IMPLEMENTATION AND ANNUAL REPORTS

A. Implementation Report. Within 150 days after the Effective Date, Amedisys shall submit a written report to OIG summarizing the status of its implementation of the requirements of this CIA. This Implementation Report shall include:

1. the name, address, phone number, and position description of the Corporate Compliance Officer required by Section III.A, and a summary of other noncompliance job responsibilities the Corporate Compliance Officer may have;

2. the names and positions of the members of the Compliance Committee required by Section III.A;

3. a copy of Amedisys’ Code of Conduct required by Section III.B.1;

4. a copy of all Policies and Procedures required by Section III.B.2;

5. a copy of all training materials used for the training required by Section III.C, a description of such training, including a description of the targeted audiences, length of sessions, which sessions were mandatory and for whom, percentage of attendance, and a schedule of when the training sessions were held;

6. a certification by the Compliance Officer that:

a. the Policies and Procedures required by Section III.B have been developed, are being implemented, and have been distributed to all appropriate Covered Persons;

b. all Covered Persons have completed the Code of Conduct certification required by Section III.B.1; and

c. all Covered Persons have completed the applicable training and executed the certification(s) required by Section III.C.

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The documentation supporting this certification shall be available to OIG, upon request.

7. a description of the Disclosure Program required by Section III.E;

8. the identity of the IRO(s), a summary/description of all engagements between Amedisys and the IRO, including, but not limited to, any outside financial audits or reimbursement consulting, and the proposed start and completion dates of the Claims Review, Unallowable Cost Review, or Systems Review;

9. a certification from the IRO regarding its professional independence and/or objectivity with respect to Amedisys;

10. a summary of personnel actions (other than hiring) taken pursuant to Section III.F.;

11. a list of all of Amedisys’ locations (including locations and mailing addresses), the corresponding name under which each location is doing business, the corresponding phone numbers and fax numbers, each location’s Medicare provider identification number(s), and the name and address of the Medicare contractor to which Amedisys currently submits claims;

12. a description of Amedisys’ corporate structure, including identification of any parent and sister companies, subsidiaries, and their respective lines of business; and

13. the certification required by Section V.C.

B. Annual Reports. Amedisys shall submit to OIG Annual Reports with respect to the status of, and findings regarding, Amedisys’ compliance activities for each of the three Reporting Periods.

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Each Annual Report shall include:

1. any change in the identity, position description, or other noncompliance job responsibilities of the Compliance Officer and any change in the membership of the Compliance Committee described in Section III.A;

2. a certification by the Corporate Compliance Officer that:

a. all Covered Persons have completed any Code of Conduct certifications required by Section III.B.1;

b. all Covered Persons have completed the applicable training and executed the certification(s) required by Section III.C;

c. Amedisys has complied with its obligations under the Settlement Agreement: (i) not to resubmit to any Federal health care program payors any previously denied claims related to the Covered Conduct addressed in the Settlement Agreement, and not to appeal any such denials of claims; (ii) not to charge to or otherwise seek payment from Federal or State payors for unallowable costs (as defined in the Settlement Agreement); and (iii) to identify and adjust any past charges or claims for unallowable costs;

The documentation supporting this certification shall be available to OIG, upon request.

3. a summary of any significant changes or amendments to the Policies and Procedures required by Section III.B and the reasons for such changes (e.g., change in contractor policy) and copies of any compliance-related Policies and Procedures;

4. a copy of all training materials used for the training required by Section III.C (to the extent it has not already been provided as part of the Implementation Report), a description of such training conducted during the Reporting Period, including a description of the targeted audiences, length of sessions, which sessions were mandatory and for whom, percentage of attendance, and a schedule of when the training sessions were held;

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5. a complete copy of all reports prepared pursuant to the IRO or internal claims review, unallowable cost review, and systems review, if applicable, including a copy of the methodology used, along with a copy of the IRO’s engagement letter;

6. Amedisys and/or Specialized’s response and corrective action plan(s) related to any issues raised by the IRO(s);

7. a revised summary/description of all engagements between Amedisys and the IRO, including, but not limited to, any outside financial audits, compliance program engagements, or reimbursement consulting, if different from what was submitted as part of the Implementation Report;

8. a certification from the IRO regarding its professional independence and/or objectivity with respect to Amedisys;

9. a summary of Material Deficiencies (as defined in Section III.H) identified during the Reporting Period and the status of any corrective and preventative action relating to all such Material Deficiencies;

10. a report of the aggregate Overpayments that have been returned to the Federal health care programs. Overpayment amounts that are routinely reconciled or adjusted pursuant to policies and procedures established by the payor do not need to be included in this aggregate Overpayment report;

11. a summary of the disclosures in the disclosure log required by Section III.E that: (a) relate to Federal health care programs; or (b) allege abuse or neglect of patients;

12. a description of any personnel actions (other than hiring) taken by Amedisys as a result of the obligations in Section III.F, and the name, title, and responsibilities of any person who is determined to be an Ineligible Person under Section III.F., and the actions taken in response to the obligations set forth in that Section;

13. a summary describing any ongoing investigation or legal proceeding required to have been reported pursuant to Section III.G. The summary

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shall include a description of the allegation, the identity of the investigating or prosecuting agency, and the status of such investigation or legal proceeding;

14. a description of all changes to the most recently provided list (as updated) of Amedisys’ locations (including addresses) as required by Section V.A.11, the corresponding name under which each location is doing business, the corresponding phone numbers and fax numbers, each location’s Medicare provider identification number(s), and the contractor name and address that issued each Medicare provider number; and

15. the certification required by Section V.C.

The first Annual Report shall be received by OIG no later than 60 days after the end of the first Reporting Period. Subsequent Annual Reports shall be received by OIG no later than the anniversary date of the due date of the first Annual Report.

C. Certifications. The Implementation Report and Annual Reports shall include a certification by the Corporate Compliance Officer that: (1) to the best of his or her knowledge, except as otherwise described in the applicable report, Amedisys is in compliance with all of the requirements of this CIA; and (2) the Corporate Compliance Officer has reviewed the Report and has made reasonable inquiry regarding its content and believes that the information is accurate and truthful.

D. Designation of Information. Amedisys shall clearly identify any portions of its submissions that it believes are trade secrets, or information that is commercial or financial and privileged or confidential, and therefore potentially exempt from disclosure under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552. Amedisys shall refrain from identifying any information as exempt from disclosure if that information does not meet the criteria for exemption from disclosure under FOIA.

VI.

NOTIFICATIONS AND SUBMISSION OF REPORTS

Unless otherwise stated in writing after the Effective Date, all notifications and reports required under this CIA shall be submitted to the following entities:

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OIG:	Administrative and Civil Remedies Branch

Office of Counsel to the Inspector General

Office of Inspector General

U.S. Department of Health and Human Services

Cohen Building, Room 5527

330 Independence Avenue, S.W.

Washington, D.C. 20201

Telephone: 202.619.2078

Facsimile: 202.205.0604

Amedisys:

Corporate Compliance Officer

Amedisys, Inc.

11100 Mead Road, Suite 300

Baton Rouge, LA 70816

Telephone: 225-292-2031

Facsimile: 225-295-9624

Unless otherwise specified, all notifications and reports required by this CIA may be made by certified mail, overnight mail, hand delivery, or other means, provided that there is proof that such notification was received. For purposes of this requirement, internal facsimile confirmation sheets do not constitute proof of receipt.

VII.

OIG INSPECTION, AUDIT AND REVIEW RIGHTS

In addition to any other rights OIG may have by statute, regulation, or contract, OIG or its duly authorized representative(s) may examine or request copies of Amedisys’ books, records, and other documents and supporting materials and/or conduct on-site reviews of any of Amedisys’ locations for the purpose of verifying and evaluating: (a) Amedisys’ compliance with the terms of this CIA; and (b) Amedisys’ compliance with the requirements of the Federal health care programs in which it participates. This CIA does not require Amedisys to provide to the OIG or its duly authorized representative(s) or agents any legally-privileged documents nor shall this CIA be construed as constituting a present or future waiver by Amedisys of any legal privileges. Notwithstanding that fact, the existence of any such privilege shall not be used by Amedisys to avoid its obligations to comply with the provisions of this CIA. The documentation described above shall be made available by Amedisys to OIG or its duly authorized representative(s) at all reasonable times for inspection, audit, or reproduction. Furthermore, for purposes of this

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provision, OIG or its duly authorized representative(s) may interview any of Amedisys’ employees, contractors, or agents who consent to be interviewed at the individual’s place of business during normal business hours or at such other place and time as may be mutually agreed upon between the individual and OIG. Prior to exercising its rights under this Section, OIG shall notify the Corporate Compliance Officer. Amedisys shall assist OIG or its duly authorized representative(s) in contacting and arranging interviews with such individuals upon OIG’s request. Amedisys’ employees may elect to be interviewed with or without a representative of Amedisys present.

VIII.

DOCUMENT AND RECORD RETENTION

Amedisys shall maintain for inspection all documents and records relating to reimbursement from the Federal health care programs, or to compliance with this CIA, for four years (or longer if otherwise required by law).

IX.

DISCLOSURES

Consistent with HHS’s FOIA procedures, set forth in 45 C.F.R. Part 5, OIG shall make a reasonable effort to notify Amedisys prior to any release by OIG of information submitted by Amedisys pursuant to its obligations under this CIA and identified upon submission by Amedisys as trade secrets, or information that is commercial or financial and privileged or confidential, under the FOIA rules. With respect to such releases, Amedisys shall have the rights set forth at 45 C.F.R. § 5.65(d).

X.	BREACH AND DEFAULT PROVISIONS

Amedisys is expected to fully and timely comply with all of its CIA obligations.

A. Stipulated Penalties for Failure to Comply with Certain Obligations. As a contractual remedy, Amedisys and OIG hereby agree that failure to comply with certain obligations set forth in this CIA may lead to the imposition of the following monetary penalties (hereinafter referred to as “Stipulated Penalties”) in accordance with the following provisions.

1. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Amedisys fails to have in place any of the obligations described in Section III:

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a. a Compliance Officer;

b. a Compliance Committee;;

c. a written Code of Conduct;

d. written Policies and Procedures;

e. a requirement that Covered Persons be trained; and

f. a Disclosure Program.

2. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Amedisys fails to retain an IRO, as required in Section III.D.

3. A Stipulated Penalty of $2,500 (which shall begin to accrue on the day after the date the obligation became due) for each day Amedisys fails to meet any of the deadlines for the submission of the Implementation Report or the Annual Reports to OIG.

4. A Stipulated Penalty of $2,000 (which shall begin to accrue on the date the failure to comply began) for each day Amedisys employs or contracts with an Ineligible Person and that person: (a) has responsibility for, or involvement with, Amedisys’ business operations related to the Federal health care programs; or (b) is in a position for which the person’s salary or the items or services rendered, ordered, or prescribed by the person are paid in whole or part, directly or indirectly, by Federal health care programs or otherwise with Federal funds (the Stipulated Penalty described in this Subsection shall not be demanded for any time period during which Amedisys can demonstrate that it did not discover the person’s exclusion or other ineligibility after making a reasonable inquiry (as described in Section III.F) as to the status of the person).

5. A Stipulated Penalty of $1,500 for each day Amedisys fails to grant access to the information or documentation as required in Section VII. (This Stipulated Penalty shall begin to accrue on the date Amedisys fails to grant access.)

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6. A Stipulated Penalty of $5,000 for each false certification submitted by or on behalf of Amedisys as part of its Implementation Report, Annual Report, additional documentation to a report (as requested by the OIG) or otherwise required by this CIA.

7. A Stipulated Penalty of $1,000 for each day Amedisys fails to comply fully and adequately with any obligation of this CIA. In its notice to Amedisys, OIG shall state the specific grounds for its determination that Amedisys has failed to comply fully and adequately with the CIA obligation(s) at issue and steps Amedisys shall take to comply with the CIA. (This Stipulated Penalty shall begin to accrue 10 days after Amedisys receives notice from OIG of the failure to comply.) A Stipulated Penalty as described in this Subsection shall not be demanded for any violation for which OIG has sought a Stipulated Penalty under Subsections 1-6 of this Section.

B. Timely Written Requests for Extensions. Amedisys may, in advance of the due date, submit a timely written request for an extension of time to perform any act or file any notification or report required by this CIA. Notwithstanding any other provision in this Section, if OIG grants the timely written request with respect to an act, notification, or report, Stipulated Penalties for failure to perform the act or file the notification or report shall not begin to accrue until one day after Amedisys fails to meet the revised deadline set by OIG. Notwithstanding any other provision in this Section, if OIG denies such a timely written request, Stipulated Penalties for failure to perform the act or file the notification or report shall not begin to accrue until three business days after Amedisys receives OIG’s written denial of such request or the original due date, whichever is later. A “timely written request” is defined as a request in writing received by OIG at least five business days prior to the date by which any act is due to be performed or any notification or report is due to be filed.

C. Payment of Stipulated Penalties.

1. Demand Letter. Upon a finding that Amedisys has failed to comply with any of the obligations described in Section X.A and after determining that Stipulated Penalties are appropriate, OIG shall notify Amedisys of: (a) Amedisys’ failure to comply; and (b) OIG’s exercise of its contractual right to demand payment of the Stipulated Penalties (this notification is hereinafter referred to as the “Demand Letter”).

2. Response to Demand Letter. Within 10 days after the receipt of the Demand Letter, Amedisys shall either: (a) cure the breach to OIG’s satisfaction and pay

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the applicable Stipulated Penalties; or (b) request a hearing before an HHS administrative law judge (“ALJ”) to dispute OIG’s determination of noncompliance, pursuant to the agreed upon provisions set forth below in Section X.E. In the event Amedisys elects to request an ALJ hearing, the Stipulated Penalties shall continue to accrue until Amedisys cures, to OIG’s satisfaction, the alleged breach in dispute. Failure to respond to the Demand Letter in one of these two manners within the allowed time period shall be considered a material breach of this CIA and shall be grounds for exclusion under Section X.D.

3. Form of Payment. Payment of the Stipulated Penalties shall be made by certified or cashier’s check, payable to: “Secretary of the Department of Health and Human Services,” and submitted to OIG at the address set forth in Section VI.

4. Independence from Material Breach Determination. Except as set forth in Section X.D.1.c, these provisions for payment of Stipulated Penalties shall not affect or otherwise set a standard for OIG’s decision that Amedisys has materially breached this CIA, which decision shall be made at OIG’s discretion and shall be governed by the provisions in Section X.D, below.

D. Exclusion for Material Breach of this CIA.

1. Definition of Material Breach. A material breach of this CIA means:

a. a failure by Amedisys to report a Material Deficiency, take corrective action, and make the appropriate refunds, as required in Section III.H;

b. a repeated or flagrant violation of the obligations under this CIA, including, but not limited to, the obligations addressed in Section X.A;

c. a failure to respond to a Demand Letter concerning the payment of Stipulated Penalties in accordance with Section X.C; or

d. a failure to retain and use an IRO in accordance with Section III.D.

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Corporate Integrity Agreement

2. Notice of Material Breach and Intent to Exclude. The parties agree that a material breach of this CIA by Amedisys constitutes an independent basis for Amedisys’ exclusion from participation in the Federal health care programs. Upon a determination by OIG that Amedisys has materially breached this CIA and that exclusion is the appropriate remedy, OIG shall notify Amedisys of: (a) Amedisys’ material breach; and (b) OIG’s intent to exercise its contractual right to impose exclusion (this notification is hereinafter referred to as the “Notice of Material Breach and Intent to Exclude”).

3. Opportunity to Cure. Amedisys shall have 30 days from the date of receipt of the Notice of Material Breach and Intent to Exclude to demonstrate to OIG’s satisfaction that:

a. Amedisys is in compliance with the obligations of the CIA cited by OIG as being the basis for the material breach;

b. the alleged material breach has been cured; or

c. the alleged material breach cannot be cured within the 30-day period, but that: (i) Amedisys has begun to take action to cure the material breach; (ii) Amedisys is pursuing such action with due diligence; and (iii) Amedisys has provided to OIG a reasonable timetable for curing the material breach.

4. Exclusion Letter. If, at the conclusion of the 30-day period, Amedisys fails to satisfy the requirements of Section X.D.3, OIG may exclude Amedisys from participation in the Federal health care programs. OIG shall notify Amedisys in writing of its determination to exclude Amedisys (this letter shall be referred to hereinafter as the “Exclusion Letter”). Subject to the Dispute Resolution provisions in Section X.E, below, the exclusion shall go into effect 30 days after the date of the Exclusion Letter. The exclusion shall have national effect and shall also apply to all other Federal procurement and nonprocurement programs. Reinstatement to program participation is not automatic. After the end of the period of exclusion, Amedisys may apply for reinstatement by submitting a written request for reinstatement in accordance with the provisions at 42 C.F.R. §§ 1001.3001-.3004.

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Corporate Integrity Agreement

E. Dispute Resolution

1. Review Rights. Upon OIG’s delivery to Amedisys of its Demand Letter or of its Exclusion Letter, and as an agreed-upon contractual remedy for the resolution of disputes arising under this CIA, Amedisys shall be afforded certain review rights comparable to the ones that are provided in 42 U.S.C. § 1320a-7(f) and 42 C.F.R. Part 1005 as if they applied to the Stipulated Penalties or exclusion sought pursuant to this CIA. Specifically, OIG’s determination to demand payment of Stipulated Penalties or to seek exclusion shall be subject to review by an HHS ALJ and, in the event of an appeal, the HHS Departmental Appeals Board (“DAB”), in a manner consistent with the provisions in 42 C.F.R. §§ 1005.2-1005.21. Notwithstanding the language in 42 C.F.R. § 1005.2(c), the request for a hearing involving Stipulated Penalties shall be made within 10 days after receipt of the Demand Letter and the request for a hearing involving exclusion shall be made within 25 days after receipt of the Exclusion Letter.

2. Stipulated Penalties Review. Notwithstanding any provision of Title 42 of the United States Code or Chapter 42 of the Code of Federal Regulations, the only issues in a proceeding for Stipulated Penalties under this CIA shall be: (a) whether Amedisys was in full and timely compliance with the obligations of this CIA for which OIG demands payment; and (b) the period of noncompliance. Amedisys shall have the burden of proving its full and timely compliance and the steps taken to cure the noncompliance, if any. OIG shall not have the right to appeal to the DAB an adverse ALJ decision related to Stipulated Penalties. If the ALJ agrees with OIG with regard to a finding of a breach of this CIA and orders Amedisys to pay Stipulated Penalties, such Stipulated Penalties shall become due and payable 20 days after the ALJ issues such a decision unless Amedisys requests review of the ALJ decision by the DAB. If the ALJ decision is properly appealed to the DAB and the DAB upholds the determination of OIG, the Stipulated Penalties shall become due and payable 20 days after the DAB issues its decision.

3. Exclusion Review. Notwithstanding any provision of Title 42 of the United States Code or Chapter 42 of the Code of Federal Regulations, the only issues in a proceeding for exclusion based on a material breach of this CIA shall be:

a. whether Amedisys was in material breach of this CIA;

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Corporate Integrity Agreement

b. whether such breach was continuing on the date of the Exclusion Letter; and

c. whether the alleged material breach could not have been cured within the 30-day period, but that: (i) Amedisys had begun to take action to cure the material breach within that period; (ii) Amedisys has pursued and is pursuing such action with due diligence; and (iii) Amedisys provided to OIG within that period a reasonable timetable for curing the material breach and Amedisys has followed the timetable.

For purposes of the exclusion herein, exclusion shall take effect only after an ALJ decision favorable to OIG, or, if the ALJ rules for Amedisys, only after a DAB decision in favor of OIG. Amedisys’ election of its contractual right to appeal to the DAB shall not abrogate OIG’s authority to exclude Amedisys upon the issuance of an ALJ’s decision in favor of OIG. If the ALJ sustains the determination of OIG and determines that exclusion is authorized, such exclusion shall take effect 20 days after the ALJ issues such a decision, notwithstanding that Amedisys may request review of the ALJ decision by the DAB. If the DAB finds in favor of OIG after an ALJ decision adverse to OIG, the exclusion shall take effect 20 days after the DAB decision. Amedisys shall waive its right to any notice of such an exclusion if a decision upholding the exclusion is rendered by the ALJ or DAB. If the DAB finds in favor of Amedisys, Amedisys shall be reinstated effective on the date of the original exclusion.

XI.

EFFECTIVE AND BINDING AGREEMENT

Consistent with the provisions in the Settlement Agreement pursuant to which this CIA is entered, and into which this CIA is incorporated, Amedisys and OIG agree as follows:

A. This CIA in its entirety shall be binding on the successors, assigns, and transferees of Amedisys;

B. The specific obligations expressly imposed herein on Amedisys shall be binding on the successors, assigns and transferees of Amedisys.

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C. This CIA shall become final and binding on the date the final signature is obtained on the CIA;

D. Any modifications to this CIA shall be made with the prior written consent of the parties to this CIA;

E. OIG may agree to a suspension of Amedisys’ obligations under the CIA in the event of Amedisys’ cessation of participation in Federal health care programs. If Amedisys withdraws from participation in Federal health care programs and is relieved of its CIA obligations by OIG, Amedisys shall notify OIG at least 30 days in advance of Amedisys’ intent to reapply as a participating provider or supplier with the Federal health care programs. Upon receipt of such notification, OIG shall evaluate whether the CIA should be reactivated or modified.

F. The undersigned Amedisys signatories represent and warrant that they are authorized to execute this CIA. The undersigned OIG signatory represents that he is signing this CIA in his official capacity and that he is authorized to execute this CIA.

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ON BEHALF OF AMEDISYS, INC. AND

AMEDISYS SPECIALIZED MEDICAL SERVICES, INC.

/s/ William F. Borne		November 10, 2003
William F. Borne		DATE
Chief Executive Officer, Amedisys, Inc.
Vice-President, Amedisys Specialized Medical Services, Inc.

/s/ Jeffrey D. Jeter, Esq.		November 10, 2003
Jeffrey D. Jeter, Esq.		DATE
Vice President of Corporate Compliance and Corporate Counsel

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Corporate Integrity Agreement

ON BEHALF OF THE OFFICE OF INSPECTOR GENERAL

OF THE DEPARTMENT OF HEALTH AND HUMAN SERVICES


/s/ Larry J. Goldberg		November 10, 2003
Larry J. Goldberg		DATE
Assistant Inspector General for Legal Affairs Office of Inspector General U. S. Department of Health and Human Services

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EX-31.1 5 dex311.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER Certification of Chief Executive Officer

Exhibit 31.1

CERTIFICATION

I, William F. Borne, certify that:

I have reviewed this quarterly report on Form 10-Q of Amedisys, Inc.;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: November 10, 2003

/s/ William F. Borne

William F. Borne

Chief Executive Officer

EX-31.2 6 dex312.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER Certification of Chief Financial Officer

Exhibit 31.2

CERTIFICATION

I, Gregory H. Browne, certify that:

I have reviewed this quarterly report on Form 10-Q of Amedisys, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: November 10, 2003

/s/ Gregory H. Browne

Gregory H. Browne

Chief Financial Officer

EX-32.1 7 dex321.htm CERTIFICATION 906 OF CHIEF EXECUTIVE OFFICER Certification 906 of Chief Executive Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Amedisys, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2003 (the “Report”), I, William F. Borne, Chief Executive Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ William F. Borne

William F. Borne

Chief Executive Officer

November 10, 2003

EX-32.2 8 dex322.htm CERTIFICATION 906 OF CHIEF FINANCIAL OFFICER Certification 906 of Chief Financial Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Amedisys, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2003 (the “Report”), I, Gregory H. Browne, Chief Financial Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Gregory H. Browne

Gregory H. Browne

Chief Financial Officer

November 10, 2003

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