About Amedisys, a Home Health Provider That Sparked a Bidding War

COMPANY BACKGROUND AND SERVICES

Founded in 1982 by Bill Borne, Amedisys is a home healthcare company that provides a wide range of services, including skilled nursing, hospice care, and hospital-level acute care at home.

Partnering with more than 3,000 hospitals and 102,000 physicians, the company cares for more than 465,000 patients annually. In comparison, one of its competitors, BAYADA Home Health Care, includes 29,000 employees and serves around 152,000 patients per year.

Amedisys' services fall into four categories: home healthcare, hospice care, palliative care, and hospital-level and skilled nursing care at home.

Home healthcare encompasses services related to surgical procedure, injury or illness recovery, and chronic disease management. The team, which includes skilled nursing staff, home health aides, and physical, occupational, or other therapists, visits patients at home to provide customized services. They also coordinate with the patient's physicians to develop a plan for medication management and patient education.

Amedisys' hospice services provide care for patients with terminal illnesses or injuries that severely limit an individual's ability to live their life. The hospice care team includes a physician, nurse, social worker, chaplain, bereavement counselor, hospice aide, and volunteers. The team creates personalized care plans for patients based on their needs and goals.

Palliative care services focus on improving the lives of seriously ill patients through symptom and stress relief. These services include creating personalized care goals, care coordination among various clinical teams and settings, and access to self-care tools.

Finally, Amedisys' hospital-level and skilled nursing care at home are provided through Contessa, which offers three at-home care models. These are Recovery Care at Home, Rehabilitation Care at Home, and Palliative Care at Home. The first provides an alternative to traditional inpatient hospital stays, the second an alternative to skilled nursing facility stays, and the third a longer-term care option for patients in the advanced stages of complex illnesses.

Amedisys acquired Contessa in 2021. Contessa has numerous health system partners, including Virginia Mason Franciscan Health, Penn State Health and Highmark Health, and Memorial Hermann Health System.

CARE QUALITY HIGHLIGHTS

With accreditations from the Accreditation Commission for Health Care and Community Health Accreditation Partner, Amedisys' services have received high care quality scores. Its home health agency has a five-star rating out of five per Centers for Medicare and Medicaid Services' (CMS) Care Compare tool. A four-or five-star rating means that the agency performed better than other agencies on seven measured care practices and outcomes.

But its patient survey scores are lower. Amedisys received a three-star rating out of five, with only 67 percent of patients saying they would recommend the home health agency to friends and family.

Similarly, Amedisys' hospice agency has a two-star rating out of five for family caregiver experience, according to CMS' Care Compare tool. About 73 percent of caregivers said in a survey that they would recommend the agency.

Some of its quality of patient care scores for hospice services are higher, however, with 94 percent of patients receiving an assessment on all seven Hospice Item Set (HIS) quality measures at the beginning of hospice care. Amedisys also achieved a ten out of ten on its Hospice Care Index score. On the other hand, only 56.7 percent of patients received visits from a registered nurse or medical social worker on at least two of the three final days of their life.

SIGNIFICANT MOVES

Since its launch in 1982, Amedisys has experienced several corporate ups and downs.

The company went public in 1993 through a merger with M & N Capital, a New York corporation. It has completed two other public offerings of its common stock. One was completed on Sept. 28, 2004, when 2.46 million shares were sold at a per common share price of $27.50, and the other was completed on Nov. 22, 2006, when 3 million shares were sold at a per common share price of $41.50.

The company has also completed numerous acquisitions in its 40-year run. In 2020, Amedisys acquired Asana Hospice and AseraCare Hospice. Prior to that, significant purchases included RoseRock Healthcare, Visiting Nurse Association of Long Island, and Tenet Healthcare's home health and hospice operations in Arizona, Illinois, Massachusetts, and Texas.

Last year, Amedisys closed a joint venture with the University of Arkansas for Medical Sciences to provide home health services in Searcy and Little Rock.

But the company has faced some tough calls. In February, Amedisys signed a definitive agreement to divest its personal care division to HouseWorks, LLC, which provides personal care services in Massachusetts, New Hampshire, Maine, and Pennsylvania. This followed a drop in revenue from its personal care business, totaling $61.4 million in 2022, down from $65 million the previous year.

Additionally, Amedisys has been accused of submitting false home healthcare claims to Medicare. In 2014, the company agreed to pay $150 million to the federal government to resolve allegations that it violated the False Claims Act.

Between 2008 and 2010, certain Amedisys offices allegedly improperly billed Medicare for ineligible patients and services and nursing and therapy services that were medically unnecessary or provided to patients who were not homebound. They also reportedly misrepresented patient conditions to increase Medicare payments. These allegations were resolved with the payment.

THE FINANCIAL PICTURE

According to the company's most recent financial statement, net service revenue increased $11.1 million to $556.4 million in the first quarter of fiscal year 2023 compared to $545.3 million in Q1 2022.

Enhabit Home Health & Hospice, a competitor, reported net service revenue of $265.1 million in Q1 2023 versus $274.3 million in the same quarter the year prior. Meanwhile, another competitor, Aveanna Healthcare, reported a 3.5 percent jump in revenue to $466.4 million in Q1 2023 compared to Q1 2022. But it also reported a $32 million net loss.

Net income attributable to Amedisys totaled $25.2 million in Q1 2023 compared to $31.7 million in 2022. The company also reported adjusted EBITDA of $57.8 million in Q1 2023 compared to $66.3 million in the same quarter the previous year.

Amedisys' home health and high-acuity care segments experienced significant net service revenue increases. Home health net service revenue jumped from $335.7 million in Q1 2022 to $343.3 million in Q1 2023, while high-acuity care net service revenue increased from $2.5 million to $4.7 million.

Per its updated 2023 guidance, Amedisys expects adjusted net service revenue to be in the range of $2.25 billion to $2.27 billion and adjusted EBITDA to range from $235 million to $245 million.

These figures are a slight increase from FY 2022, when net service revenue reached $2.22 billion, and adjusted EBITDA totaled $262.1 million.

LOOKING AHEAD

Amedisys is bound by the terms of the merger agreement with Option Care Health, which does not allow the company to opt out of the agreement for another transaction or enter into any other agreement with another entity.

The merger with Amedisys would enable Option Care Health, an infusion therapy provider, to expand into the home healthcare market and grow alternate site infusion services. The combined company would span 46 states, include more than 16,500 healthcare professionals, and serve over 720,000 patients annually.

The enterprise value of the combined entity is anticipated to be $9.7 billion, with a market capitalization of $8.4 billion. The merger was expected to be completed in the second half of the year.

Following Optum's unsolicited bid last week, Option Care Health reiterated the short-and long-term value that it believes the merger with Amedisys will deliver to stockholders of both companies.

Amedisys has entered into a confidentiality agreement with Optum – permitted by the terms of its merger agreement with Option – and is engaging in exploratory discussions.

If Optum wins the bidding war, Amedisys would be its second major home health acquisition this year. In February, its merger with LHC Group closed. LHC Group provides home health and community-based services to more than 500,000 patients annually.

But, before closing, the Optum-LHC deal came under Federal Trade Commission scrutiny, with the agency requesting additional information and documentary materials last June.

A potential Optum-Amedisys merger could draw similar scrutiny.

Currently, the board has not determined if Optum's bid would result in a superior proposal, and the merger with Option Care Health continues to be in effect.