Amedisys Inc (AMED) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen. My name is Mia and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Amedisys first-quarter 2006 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS).

Thank you. It is now my pleasure to turn the floor over to your host, Brian Ritchie. Sir, you may begin your conference.

Good morning, and thank you for joining us today for Amedisys's investor conference call to discuss recent corporate developments relative to this morning's first-quarter 2006 earnings announcement. By now, you should have received the press release. If for some reason, you have not received the press release or are unable to log onto the webcast, please call me, Brian Ritchie, of Noonan Russo, at 212-845-4269, and I will be happy to assist you.

Speaking today, we have the Company's Chairman and Chief Executive Officer, Bill Borne; the Company's President and Chief Operating Officer, Larry Graham; and the Company's Chief Financial Officer, Greg Browne. Management will give you an overview of the quarter highlights and then open the call for questions and answers.

Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the Company, including, without limitation, statements regarding operating results in calendar 2006, earnings per share in 2006; growth opportunities, and other statements that refer to Amedisys' plans, prospects, expectations, strategies, intentions, and beliefs. These forward-looking statements are based on the information available to Amedisys today. The Company assumes no obligation to update these statements as circumstances change. For additional information, please see the cautionary statements included in Amedisys' most recent Form 10-Q or other public filings filed with the Securities and Exchange Commission.

At this time, I will turn the conference call over to Bill Borne. Please go ahead, Mr. Borne.

Thanks, Brian. Good morning, everyone. I want to welcome our shareholders, and we certainly appreciate the opportunity to share the Amedisys vision with a continually expanding group of investors. Management is committed to ensuring and maintaining its strategic direction while generating appropriate returns for all of our investors.

The future of home nursing is very bright, and Amedisys intends to take full advantage of all of our growth opportunities.

The Company continues to focus on our core strategic initiatives, which we have outlined over the previous year. Primarily, our efforts are focused on internal growth supplemented with acquisitions that meet our stated criteria. Our overall revenue growth for the first quarter of '06 is up 81% from the first quarter of '05. While we are pleased with our top-line revenue growth, we believe there are significant earning opportunities that will be fully realized as the year progresses.

We believe our gross margin can be improved, and in fact, the gross margin in our acquired agencies improved from 50% in the fourth quarter of '05 to 53% in the first quarter of '06. We expect to experience this improving trend throughout the remainder of the year.

Secondly, we expect the acquired agencies' contribution margin to continue to improve over the remainder of the year as well. Larry will comment on this significant operational trend and others in a moment.

Finally, we will continue to focus on achieving operational leverage by driving down our corporate costs.

Based on this information, we are optimistic about our earnings potential, particularly in the second half of this year. Last year, we experienced 60% top-line growth, 50% bottom-line growth, and nearly doubled our operating location, each of which went through a substantial operational integration process.

This year, we are contemplating completing that process with a focus on sales and site administration. We believe there is a high, unrealized potential in these markets that is evident in our record revenue.

It is also clear that the unrealized profit to date is related as to expense as previously discussed. Our initiatives are well underway to mitigate this impact.

When all acquisitions perform under our mature agency metric, the earnings realization will be significant, and will demonstrate our sound operational performance.

I would like to give a brief update on our CFO search. The Company has engaged Korn/Ferry to assist us with identifying qualified candidates. We are in the process of interviewing several candidates at this time in an effort to identify the appropriate successor to Greg. We will not rush this process, given the importance of hiring the right person for the long-term benefit of the Company.

I would be remiss if I close without welcoming the employees round new acquisitions to Amedisys. I would like to recognize all the employees of seven Oklahoma branches, ASAP Homecare, as well as the employees of Alliance Home Health in South Carolina.

Finally, I would like to welcome the therapists associated with Hulbert Therapy Services in Oklahoma as well.

We believe in the strategic approach we have outlined over a number of years, the key elements of which are -- to grow into the leading Medicare home nursing company; to emphasize outcome-driven patient care; to utilize technology where possible for efficiency; to build disease management capability; and to deliver appropriate returns to our shareholders. We are well on our way to this approach in 2006.

I am especially excited about the progress we have made in developing our call center, the purpose of which is to continue to track patients after discharge to ensure that outcome and patient satisfaction are consistent with the care we have provided. Our point of care initiatives providing laptops to caregivers is in the final trial stage, and limited rollout has already commenced. This project will bring substantial returns, particularly in 2007, but perhaps the most important aspect will be to materially assist us in our already strong compliance program.

We are pleased to announce that we have improvement in seven of ten outcomes from quarter three to quarter four, which is the most current data that CMS has posted. These also include our reduction in hospital and emergency care. We continue to focus on improving our outcomes, and as previously stated, we have better outcomes than our competition in all ten of these categories on a regional basis.

As I have said before, the enthusiasm and the commitment of our employees is by far our most strategic weapon, ensuring a competitive advantage in the markets we serve.

With that said, I would like to extend my heartfelt thanks to all of our Amedisys staff whose dedicated efforts have helped us every day to carry out our mission.

I will now pass this call to Greg for his financial overview, which will then be followed by Larry with a brief operational update. Following Larry's update, we will open the call to a Q&A session. Thank you.

Thanks, Bill. I will now discuss financial highlights for the three months ended March 31st, both with respect to the income statement and balance sheet, as well as comment on reimbursement and guidance.

For the quarter, our revenues of 127.2 million represent an increase of 81% on the first quarter of 2005 and reflects our strong internal growth as well as the 2005 acquisitions, particularly Housecall. All of the acquisitions completed since March 31st, 2005 accounted for 35.2 million of the increase in revenue.

Gross margin for the quarter reflected a percentage of approximately 56.2% of revenue, above the fourth-quarter number of 55.8, but well below the first-quarter number from 2005 of 59.6. The improvement in gross margin percentage since the fourth quarter is in part attributable to improvements of the recent large acquisitions, particularly Housecall, that reduced the number last quarter. The gross margin on acquisitions, including hospice, is now running at approximately 53% and for the home health agency acquisitions at closer to 55%.

While there is still room for improvement, particularly in the visits per episode at the Housecall agencies, the focus has now shifted more to G&A expenses.

The Company recorded revenue per episode of $2,649 in the first quarter, an increase of approximately 2.3% over the first-quarter number of 2005 of $2,587. It is important to note that although our base episode rate was frozen as a result of the Deficit Reduction Act, we have enjoyed a 5% rural add-on since January the 1st, which added approximately 0.8% to our average episode reimbursement.

We have also seen improvements in our recent acquisitions over the last quarter. For example, revenue per episode at Housecall improved by approximately 4% this quarter to almost $2600, and Spectracare improved by over 8% to approximately $2,550.

Amedisys now completes over 39,000 episodes of care each quarter, with relatively small variations in revenue per episode, and of course significant changes to revenue. These numbers will therefore vary from quarter to quarter.

With respect to general and administrative expenses, particularly salaries, benefits, and compensation expense, at 32.7 million were higher by some 3.9 million than the fourth quarter. Administrative headcount did not start to decline until February following an extensive review, and therefore, there was some momentum to these expenses. We expect to see significant improvements in this number in the subsequent quarters as a result of recent staff reductions.

The increases accounted for in part by severance costs of $600,000, principally recorded in March, and the increase in non-cash stock-compensation costs due to the implementation of SFAS 123(R) of approximately 500,000 and other increases in expenses associated with bonus accruals, higher 401(k) benefit, and payroll tax costs.

Our other general and administrative expenses at 23.6 million were essentially unchanged from the fourth quarter of 2005. G&A expenses were materially unchanged from the fourth quarter on a percentage of revenue basis at 46%, although higher than the 43% reported for the first quarter of last year. Our guidance implies that we expect this number to be at or below the 2005 number of 43% by the second half of the year.

Our operating income of 12.7 million is some 11% higher than the 11.5 million reported in the first quarter of 2005. Net income of 7.3 million after a tax provision of 38.8% is materially unchanged when compared with 7.1 million in the first quarter of 2005. Earnings per share of $0.45 per diluted share was comparable with the prior-year quarter.

With respect to the balance sheet, our cash balances totaled almost 9.5 million at March 31 after making 20 million in cash payments relating to deferred payroll and state taxes, 4.1 million on acquisitions, and 4.7 million on capital expenditure, all during the first quarter. In addition, we drew down 10 million on our revolving credit facility during the quarter and have since repaid 2 million of this.

The Company made total debt payments of 3.5 million during the quarter, and expect an amount of approximately 7 million for the remainder of 2006.

Days sales outstanding decreased significantly to approximately 55 days from the 62 days we reported at December. We have collected approximately $130 million of cash during the quarter compared with 127 million we booked in revenue and we hope to see further improvement in this metric in the current quarter.

The Company was able to defer federal tax payments during the first quarter, and expect that this will continue into the second quarter. And although there will be a catch-up in Q3, the payments would approximate the tax expense thereafter.

Routine capital expenses for the quarter totaled 2.3 million, approximately the same as in the previous quarter. Our current estimate for routine capital expenditure for fiscal 2006 remains at approximately 7 million, which includes amounts for startups, asset upgrades for acquisitions, and particularly IT spending and increasing productivity. Excluded from this total is 3.5 million related to the rollout of our point of care device that Bill referred to earlier and approximately 16 million for the refurbishment of the building to be used as our corporate office.

Cash flow was strong, with EBITDA at 15.4 million, an 8% improvement when compared with the fourth quarter and 16% higher than the first quarter of last year. Cash flow from operations was negative for the quarter at 6.5 million, although this reflects the 20 million paid in deferred taxes that I referred to earlier.

With respect to reimbursement, we had no material information regarding changes to the current reimbursement environment.

Guidance. We are reducing our annual EPS guidance for 2006 to $2.25 to $2.35 per diluted share on revenues of approximately 520 million, and our diluted shares will total approximately 16.4 million for the full 2006 year.

As mentioned in our press release, the combination of higher than expected stock compensation expense now expected to be $0.08, rather than the $0.05 discussed last year, and higher interest rates perhaps accounting for another $0.02 of the change, uncertainty regarding the timing of achieving margin goals for acquisitions, and the commencement date of startups, all dictate a slightly more cautious approach to guidance. Larry will now comment on operations.

Thank you, Greg. Our operational strategic plan continues to center around our internal and external growth strategies. Due in part to our strict adherence to these strategies, our first-quarter internal growth rate over last year in Medicare admissions is 17%. We are certainly pleased with this number, and based on a market growing at at least 7 to 9% annually, we are confident in our long-term ability to deliver at least 15% growth in Medicare admission.

Our total growth rate over the first quarter of last year in Medicare admission is 58%. We will continue to focus on growing our business through the implementation of a dual strategy centered on internal growth initiatives via same-store sales, startups, and external growth opportunities via acquisitions that meet our strategic criteria.

Startups continue to play a role in our expansion. In 2005, we opened 25 new locations. For the year, we plan on opening 35 to 45 new home health locations. This is a slightly more conservative goal for 2006 than we have discussed previously, reflecting certain delays we have been experiencing in the regulatory approval process, as well as a more tempered approach to expanding our reach into contiguous states. However, opening 35 locations would still be a 40% increase over 2005 startups.

In the first quarter, we opened seven new locations. Our plan is to continue with our strategic branch expansion based on local market opportunity.

On the acquisition front, as previously announced, we made two acquisitions in the first quarter. We acquired a seven home health agency business in the central Oklahoma area on January 1st. Additionally, we acquired a Oklahoma-based therapy staffing Company also on January 1st. More recently, on April 1st, we acquired a home health agency in the certificate of need state of South Carolina.

During the first quarter, we began implementing our cost reduction plan. We have looked at corporate as well as field expenses, and reduced expenses both in relation to salaries and wages and non-salary-related items. We believe these efforts will result in improved profitability beginning in quarter two.

While we are continuing our policy of not providing quarterly guidance, all things being equal, we believe a $0.05 to $0.06 improvement will be recognized in relation to the cost reduction efforts beginning in quarter two, with more significant improvements to be recognized as the fiscal year progresses. We have broken our revenue and contribution margin down in quarter one as follows -- contribution margin is pre-tax and pre-corporate overhead. Approximately 86 million in home care revenue related to agencies we have owned longer than 12 months with a contribution margin of 31%; approximately 28 million in home care acquisition revenue that we have acquired since April 2005 with a contribution margin of 18%; approximately 9 million hospice revenue, with a contribution margin of 23%. As a reminder, industry margins in hospice are generally lower than margins in home care by approximately 5%. Approximately 3.8 million in startup revenue related to the last 12 months, with a contribution margin of negative, 1%. Going forward, in an effort to help investors better gauge our progress and operational strength, we will be providing a similar breakdown following each quarter.

While we are pleased with the improvements in acquisition contribution margin from quarter four, which went from approximately 10% to 18%, we still have improvements to be made. Based on the cost reduction efforts and future improvements and acquisitions, we are on track to significantly improve margins for the remainder of 2006.

I certainly want to thank all of operations management for the results to date in improving the performance of these critical acquisitions and their commitment to meeting our strategic goals.

Also, while startups obviously produce at different levels depending on start date, we are pleased that startups are generating the appropriate revenue growth, and that combined startups for '05 and '06 are at slightly below breakeven.

We are pleased with the first-quarter growth rate and the opportunities that lie ahead in 2006. We continue to focus on being the premiere low-cost, high-quality provider in home health. We believe that focus, execution, and commitment to clinical outcomes will separate us from our competition.

I would like to express our appreciation for the continued support of our shareholders, customers, employees and vendors. At this time, we will open the call to your questions. Please limit yourselves to two questions so that we may allow question time for everyone. Time permitting, we will allow for follow-up questions. Thank you.

(OPERATOR INSTRUCTIONS). John Ransom, Raymond James.

Nice progress in the quarter. The G&A number that Greg talked about -- 46% in the first quarter, going to 43% -- was that for the entire back half of the year -- kind of 43% of revenue?

John, this is Larry. That is going to be gradual through the year, with hopefully the run rate by the end of the fourth quarter would be there.

So not for the entire back half, but run rate by the fourth quarter?

No, because it is not going to be a complete cliff drop off. It will be a little bit more gradual than that.

Okay, and then secondly, this is a little softer question, but could you talk about having tablet PCs and not having nurses having to drive back to the branches to manually input data, what could that mean for you in terms of productivity? And also, speaking of productivity, where are you now in terms of house call visits per episode versus where you might go?

I will start with the latter question. House call visits per episode are still in the 18.5 range. And we are in the 16.5 range on a macro basis. So Greg mentioned some room for some gross margin expansion, and that's in relation to the house call visits per episode improving over the next three quarters.

And the first part of your question is on tablet PCs. One of the biggest complaints in home care is the paperwork and having to fill that out -- not only at the patient's home, but later at night, and then bring it back into the office. Our tablet PCs will allow the clinicians to fill it out at the home, at the bedside and can be completely done when they leave that patient's home. And at their discretion, they can upload it wireless via the Internet. They can come home and plug it in or they can bring it to the office and plug it in and upload it. So obviously, it will decrease their travel time and their after hours paperwork, if you will.

And, John, there is big advantage as well -- it is standardization of documents. The smart edit that usually takes a couple of days to go back and forth from the outside vendors can now be done instantaneously on the patient's bedside so they could be locked in when the information is disseminated.

Also, it would allow us to prevent any inefficiencies from the application of any clinical documentation that may be inadvertently left out the first time and have to be circled back and adjusted or added. So the whole process will be more efficient, more effective, more timely, and would help us with maintaining our overall compliance oversight as well.

Art Henderson, Jefferies & Co.

I was wondering if you could go over the cost reductions that you did in Q1 and then what you expect to do in Q2?

This is Larry. The cost reductions in Q1 obviously were a lot of FTE-related cost reductions. Some were in the neighborhood of 200 FTEs field and corporate based on productivity standards. And Greg articulated the $600,000 of severance costs that we booked in March. And I further clarify that saying you will see a $0.05 to $0.06 improvement in quarter two related to strictly cost reductions in salaries and wages.

Also, we looked at -- over time, we looked at consulting. We looked at travel and training, all non-salary-related items. And some of those will take effect at the beginning of quarter two, and some more in quarter three and quarter four.

And were your cuts on the FTEs across the board in all departments?

I would not say it was equally across the board, but it did affect almost every single department. We went through all the corporate departments as well as the field. We had a staffing model based on census in the field. So we looked heavily at that. Obviously, the acquisition agencies were more heavily impacted than agencies we have owned for a while.

Did you make any reductions in your compliance department?

No, the only reductions in the compliance department were compliance people that we inherited from Housecall.

And how many are in your department now?

Four.

Four -- okay. One more question -- on the allowance for doubtful accounts, I noticed that it had declined since December, and I was just wondering -- is that indicative of -- was there a write-off there, or was it lower bad debt expense during the quarter?

Arthur, this is Greg Browne. We did make some write-offs during the quarter, somewhat more than where we had done in prior quarters, because we wanted to basically get everything dealt with prior to '05 so that the -- that probably had some impact in the days sales outstanding -- maybe a day, maybe a day and a half of the reduction was due to that. But in terms of the allowance and the expense during the quarter, we make no change.

Okay, so your bad debt expense for the quarter for Q1 and Q4 was what?

The bad debt expense for Q1 was right on 2 million. And for Q4, was somewhat less than that. It was about 1.5, if I recall correctly. I will have to go back and check. (multiple speakers)

Eric Gommel, Stifel Nicolaus.

I wanted to just -- if you could expand on the DSO decline -- at this point -- I think last quarter, you talked about having issues with rebilling Spectracare. Has everything acquisition-wise been fully billed at this date from --?

Eric, this is Larry. I am going to expand on Arthur's question as well as yours. As you know, DSO went from 62 to 55. We estimate about five days of that was through normal cash collection efforts, and two days of that was related to write-off. The allowance as a percentage of receivables is right under 14%. Those of you that followed it, at the end of last year, it was north of 15%. So we still feel comfortable with our allowance, but we did write off everything related to 2004 and earlier. So we just cleaned up some old receivables.

Then -- Eric, can you refresh me on your most current question?

Yes, I was curious -- last earnings call, you talked about delays in paperwork and billing related to Spectracare. And I think you were in the process of rebilling that stuff. And what I'm trying to understand is, are we all caught up on the billing as it relates to the acquisitions?

We have pretty much eliminated what we call our unbilled. We have less than $1 million in unbilled, so a lot of that has been pushed through on Spectracare as far as going out the door. And you will see some cash collections related to that in quarter two.

So we are no longer sitting on [chow] paperwork while waiting the process. That happened the end of quarter one.

Okay, and just on the corporate level cost -- at this point, have you eliminated all duplicate corporate costs? Is that what -- between the Housecall people and your people, are there still more to go?

At this point, we no longer have a corporate headquarters in Knoxville, Tennessee. So we eliminated the duplicate overhead, but you will not see that impact until quarter two -- as we mentioned earlier, because we had the severance costs -- a lot of the severance costs in quarter one.

Balaji Gandhi, Oppenheimer & Co.

I was just wondering if you could give me the episodes and visits for the quarter?

Greg mentioned we did a little over 39,000 completed episodes for the quarter. And our total episode -- visits per episode were actually about 16.9.

Okay. And then the hospice revenues were about 9 million? Was that right?

That's correct.

Okay. And the other question was CapEx -- you think you said 7 million was routine, and then you went through a couple of other items that were not included in your routine number. If you could just quantify that and go through what they were again?

Sure. There is $3.5 million of the tablet PCs that we expect to spend this year. There is about $15 million in cash related to the building -- that is the buildout. It's actually right down the road from where we are currently at.

Okay, and that will all be in the balance of the year -- the 16 million?

Yes, and if you were profiling out for the balance, just do it and prorate it evenly throughout the year every month.

Okay, great. And just on the DSO's, where can we expect those to be, because with the five-day improvement in this quarter, where do you think they could be at the end of this year, let's say?

Well, at the end of the second quarter, we are hopeful to be at the low 50. At the end of the year, we would love to break that 50 mark.

(OPERATOR INSTRUCTIONS). Sheryl Skolnick, CRT Capital.

I'm curious about the change in the stock-based compensation estimate, and why that expense is expected to be higher if the Company's performance was less than planned in the fourth quarter, and a little less solid than perhaps the street expected in the first quarter and the stock is not as high as it was certainly towards the end of the year, or even at the very beginning of this year. So why is the stock-based compensation expense going to be higher with lower headcount?

This is Greg Browne. The change in stock compensation expense from our previous estimate really relates to two items. One is on the stock options themselves, these are not new grants, but these are a slight change to the method by which we valued them and that increased it somewhat.

The other related to something that I missed last year related to the expensing of the discount that we give to our employees who have purchased shares under the employee stock purchase plan. And that is required to be accounted for there, as well. That will account for about perhaps 4 or $500,000 this year on a pretax basis. So that accounts for most of the changes.

You said 4 to 500,000 on a pretax basis?

Yes.

Okay. And to what extent has the Company now been able to implement its intensive case review and all that it involves in the Housecall facilities? And is that part of the reason why the revenue per episode has increased so nicely?

This is Larry. The case mix review that you are referring to is part of our just standard procedures that we do on all of our agencies as well as our acquisition agencies. The revenue per episode increase -- we do so many episodes a year -- now, 39,000, it is reasonable for us to expect that the acquisition revenues come in line with our agency revenue per episode, which is what you are seeing in Housecall and Spectracare. As well as you will see utilization come in line with our agencies because, as I have stated before, we do everything based on national standards of care, and we profile our patients based on clinically what's wrong with them in provide care [with] episode and desire to get the appropriate outcome. And in Bill's comments, you notice that we improved in seven of the ten outcomes on a national basis this quarter.

I understand that, but the price increase seems pretty significant and positive and clearly, your revenues benefited from that strength. But the last time you talked about those agencies, the volumes in those agencies were not especially robust given all of the management changes that you had done. I don't remember if you commented on pricing in those agencies. But clearly, you have been able to improve, it seems, on the revenue per episode there. So can you comment specifically? Is it as a result of having achieved some integration of those facilities into the AMED way of doing things? And also, has there been any improvement in the volumes in those facilities?

I think you asked two questions. The first question is -- the answer is yes, it's due to the integration. It is totally common in all of our acquisitions to see revenue per episode come in line with the revenue per episode average with Amedisys. So that is not uncommon. And typically, that happens with the integration of our system and our clinical protocol inside the agencies. The Housecall volume in the first quarter was similar to the Housecall volume in the fourth quarter. As I mentioned earlier, you put your systems in, you put your clinical protocols in, you add your salespeople, and then on the back half, you typically see admission growth, which we are looking forward to in quarter three and quarter four.

So the salespeople are there?

Yes.

(OPERATOR INSTRUCTIONS). John Ransom, Raymond James.

Housecall goes into the same-store in the fourth quarter. Is that going to have any meaningful effect as we model out same-store volumes? Do you think that will have any meaningful impact on the kind of run rate -- 17% that you had this quarter?

John, it actually goes into effect July 1 so it will be quarter three. And right now, if that were to have rolled in this month, it would decline that about 2 to 3 points. Obviously, our goal is to improve that between now and July. But as I stated earlier, the total number of admissions may be the same, but as that large chunk rolls in, it may impact your internal growth rate by a couple of percentage points.

So just a semantics question -- so you put it in -- most times, companies wait until they have it in for a full quarter. You closed that in the third quarter -- is it kind of midway through the third quarter? Am I remembering that right? Or was it you closed that on July 1?

On July 1.

Okay. My apology. And specifically, for Florida, which is not a CON state, has there -- when might you see some -- expect to see some improvement in your volume performance in Florida, which I understand was a challenge for kind of legacy Housecall?

I think beginning in quarter three, which is about two months away, we have got our sales force stabilized. We have got our staff stabilized. I think you actually visited some of the agencies. And we have been through a lot of the integration. So now it's business as usual, if you will. And we should start to see a pickup.

Okay. And then the other thing -- are you seeing anything -- going back to the tablet PCs, you said limited -- Bill mentioned limited rollout. Are you seeing any early returns on that in terms of productivity? Or is there any -- is it more of a retention tool and a morale tool, or do you think there is any meaningful productivity impact kind of '07 as we think about '07?

It is more than a retention and morale. It will allow us almost complete our electronic medical records, as well as interface with our referring physicians. It has a huge impact. This is a program that has been in development for four years now. We have finished an exhaustive beta. Our plan is to have this rolled out completely throughout '06 and into '07. You are going to see the primary result of the full impact in '07, although you start seeing something in probably the middle to the end of the third quarter and into the fourth quarter, but it is not something that will be measurable I think if you get into '07.

But it has a lot more of an impact than just the digitalization of data. It has a huge impact on compliance, where we can adhere to physicians' orders, and also relating to certain clinical issues. I think Arthur asked the question earlier in reference to compliance and about reduction and FTEs. And I want to comment -- Larry mentioned four full-time compliance people who are dedicated that report directly to the chief compliance officer. When we have 24 people in our clinical services that are full-time over clinical that also have a large role in compliance. So we feel the point of care through its technological application has a lot to do with allowing us to being out on more efficient, more effective, but more compliant as well.

We also talked about FTEs and reduction of FTEs. And we had to unfortunately lay off a couple hundred people. I think we made the mistake when we did the Housecall of duplicating some of the corporate initiatives through adding people. We identified in that transition that process improvement was a lot better. So although we have had a reduction in people, our process is across the board and our effectiveness and efficiencies from operational metrics all the way through clinical metrics and compliance metrics are more appropriate and more effective at this point in time. So we don't believe that we have sacrificed anything. As a matter of fact, we have improved a lot of our processes and our efficiencies through that reduction and focusing on the right things. So we think the point of care is a long-term strategy that will clearly separate us from the manual processes that many of our competitors are using.

And John, to put it in perspective, we have it in five agencies at the 240 right now. We have done the programming, we are rolling it out, and we haven't taken those five all the way into productivity gain. When we get to that point, we will start with a more aggressive rollout.

Art Henderson, Jefferies & Co.

I was wondering -- have you given any more thought to putting in a share repurchase authorization?

I'm sorry; can you expand upon that?

Well, I know that previously, there has been some concern that with the stock being valued where it is that a share repurchase plan being authorized and put in place might be of interest to not only you, but to your shareholders. I am curious to know what your thoughts are on putting a share repurchase plan in place at this time.

Thanks for your question. This is Bill. We have put some thought into it. As a matter of fact, our recent board meeting, which was only a couple or three weeks ago, we allocated a good bit of time for that, and we discussed it in general.

And while we think it's exciting to look at potentially repurchasing some of our stock, in order to repurchase enough of it to make a significant difference, we felt that we have to go to the market and possibly borrow some of that cash. And with the cash on hand, we think we have a better use for it. We have some good acquisitions that are out there. Our pipeline is semi full, with the smaller -- the 3 to 5, the $7 million deals. And we think that our focus should be growing externally versus going out and purchasing a few of our shares of stock back that could be looked at as a token action.

So we are expecting just to focus on what we are doing to operate and to use our cash and available proceeds to do some external deals, and continue to improve upon our margins and our earnings, and to put that power to the market. And we think that by the time the second quarter comes around and the proof is in the pudding] that all of that will be behind us, and we will use our money to go forward and do great things for the Company.

Okay, thanks for the thoughts on that. And one follow-up question on the compliance issue -- I notice this has been -- metrics have been scrutinized by lots of folks. And it sounds like you have made some improvements. Is there a point in time where you guys would consider putting out some independent numbers to support some of your metric improvements? It seems to me like the issue that's behind a lot of the short interest is that you are doing something aggressive on coating or things of that nature or clinical outcomes and what not. And I am just wondering -- is there anything that you guys have thought about in the way of putting out press releases that talk about outcomes, that talk about independent surveys that might be helpful to us?

Arthur, the best metric that we could put out is the outcomes. And as I mentioned earlier, we are measured by CMS now by ten outcomes. And if you look at the region that we provide services in, and it is important to look at the regional average first of all, because we are up against the same demographics in our own region, we beat the competitors on all ten outcomes. We have our outcomes that are above in performance on all ten competitors. On a national average, there are a couple of outcomes that we kind of measure up that we are below on, and we talked about those. Those are the hospitalization and the emergency care. I mentioned earlier that from quarter three to quarter four, we have improved on seven of those ten outcomes, including emergency care and hospitalization.

So we think that the outcomes are the best metrics that we can share with the market that really demonstrates the result of our clinical protocol and the best practices that we use.

OCS has something published. Anybody can pull up their website and drill down in reference to their review of outcomes. They are the largest data of clinical information that is out there, second to CMS, and they are more current. So that information is fully available. If somebody wants something specific from us, we are happy to provide that.

Okay, so just taking that data and just putting it out in a press release or something so that it is more obvious to lots of people beyond having to go search for it -- I mean, that is not something you really want to do?

Well, you know, it is something that we have talked about, and we have considered it and we have actually prepared some documents. But we think that is almost kind of reactionary to the market. And when we have concerns, we will refer them to the proper web sites so people can look at it. We think that an independent study that's out there -- we think that information that is available through CMS is more valid than us trying to regurgitate something and put it on the market. So it is kind of our position for now.

Gregory Macosko, Lord Abbett.

Just so I understand, I was not clear on the core growth on the sort of same-facility growth sort of X the acquisitions?

17% in Medicare admissions.

In Medicare, and that -- and relative to the overall, it would be a little lower?

When you say overall growth, the overall growth all in was 58%. And specifically to internal growth, which we define as same-store as well as startups, was 17%. And I will remind you that we are 93% Medicare, so that is a significant portion of it.

Okay. And then with regard to salaries and benefits, can you give us a sense of -- obviously, those went up based on the acquisitions and the like. What was your wage costs or your kind of salary cost increase, say, year-over-year sequentially?

Typically, our salaries and wages have increased about 3 to 4%. And that is excluding the onetime pop you will see because we did a lot of large acquisitions. But just year-over-year increase that we're modeling out.

And that includes -- as benefits as well?

That's correct.

Thank you. And now, I would like to turn the call floor back over to Mr. Borne for any closing remarks.

All right. Thank you, Mia. We appreciate everybody's comments, and we appreciate everyone's questions. We feel that the performance of the first quarter is indicative of the improving operational metrics, and we look forward to sharing the second quarter and certainly the remainder of the year.

It seems like some of the concerns, especially in reference to some of the short positions is oriented around our outcomes and our clinical services.

I just want to remind everybody that Amedisys has spent years perfecting its disease management programs and using best practices to put together care algorithms, which allow us to approach care on a very standard and structured applications that gives us the best outcomes. And when you get that outcome, you just so happen to get better financial improvements and your compliance is also better, and we are very proud of the achievements that the Company has achieved over the years. And we look forward to sharing more financial and clinical data with you over the year.

So thank you guys for calling in. We look forward to our second-quarter conference call.

This concludes today's Amedisys first-quarter 2006 conference call. You may now disconnect.