Amedisys Inc (AMED) 2006 Q3 法說會逐字稿

At this time, I would like to welcome everyone to the Amedisys third-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).

It is now my pleasure to turn the floor over to [Dennis Motz]. Sir, you may begin the conference.

Thank you. Good morning and thank you for joining us today for Amedisys' investor conference call to discuss recent corporate developments relative to this morning's third-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 on to the webcast, please call Brian Ritchie of Newton Russo at 718-496-9623 or Larry Graham at 225-292-2031, and they 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 Principal Accounting Officer and Treasurer, Don Loverich. Management will give you an overview of the quarter's highlights; John Giblin, the Company's new Chief Financial Officer, will provide some brief introductory remarks, and then we will 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's plans, prospects, expectations, strategies, intentions and beliefs. These forward-looking statements are based on the information available to Amedisys today, and the Company assumes no obligation to update these statements as circumstances change.

For additional information, please see the cautionary statements included in Amedisys's 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.

Thank you, Dennis, and good morning. We want to welcome our shareholders, and we appreciate the opportunity to share the Amedisys vision with the investing public. Management will continue its commitment to ensuring and maintaining its strategic direction while generating appropriate returns for our investors.

The future of home nursing is very bright, and we at Amedisys intend to take full advantage of future growth opportunities.

The Company continues to focus on our core strategic initiatives, which we have outlined over the previous years. Internal growth is our primary focus followed closely by expansion through our discipline start-up and acquisition strategies. Our position as the market leader in home health nursing industry, servicing the elderly population in a community-based setting, is clearly a solid strategy which is continually enhanced by significantly growing demographics.

The use of our point-of-care technology, local market-driven care coordination sites and disease management call center clearly separates us from our competitors in caring for our target population.

Quarter over quarter, revenue is up 22% and earnings per share are up 33%. The improvement in our earnings growth is a direct reflection of our successful integration of the July 1, 2005 Housecall and August 1 2005 SpectraCare acquisitions. I believe it is appropriate at this time to extend my gratitude to the extraordinary commitment and exhaustive efforts provided by our local management and staff to accomplish this transition.

I would like to welcome to Amedisys John Giblin, our recently appointed CFO. John's experience and skills are an excellent addition to our executive team, as we continue to take advantage of accelerated growth. John's 17 years of experience at Crawford & Co., of which he served the last eight years as their CFO, gives us great confidence in his abilities to oversee our financial division. John has a wealth of experience in relation to M&A and routine public market activities from both the national and international perspectives.

Following an exhaustive search and evaluation process, John best met the qualifying criteria Amedisys was seeking. We are pleased to have John on board.

We are also pleased to welcome research coverage from BBT Capital Markets on Amedisys, which expands the analysts following us to a total of eight. We will continue the strategic approach we have outlined over a number of years, of which the key elements are as follows -- to grow into the leading Medicare home nursing company; to emphasize outcome-driven patient care; to utilize technology where possible for efficiencies; to build disease management capabilities and to deliver appropriate returns to our shareholders and we will continue this approach in 2007.

I would like to take a minute to expand on our point-of-care technology. In addition to reducing costs, which Larry will comment on later, this technology will provide Amedisys with the capabilities to collect and document patient care information in a consistent format in all 249 locations. This standard documentation process and built-in clinical [smart edits] will mandate consistency with patient assessments, and allow our best practice-based clinical algorithms to be applied appropriately, virtually eliminating variations in care protocol.

These initiatives will allow Amedisys to capture patient-specific data in a format conducive for continuing to improve patient outcomes. Upon completion of our point-of-care rollout, Amedisys will virtually become a paperless company from a clinical perspective. We will be capable of instantaneously disseminating information electronically from the patient's bedside to the attending physician, the payor source, local care coordination sites as well as our disease management center with the push of a button.

Finally, our point-of-care implementation will enhance our compliance efforts by mandating and standardizing documentation while validating clinical necessity for all care provided. We believe our point-of-care system, combined with our ability to disseminate health-care personnel to any of our patients' homes within one hour across our service markets, anchored by our care coordination site and our disease management center, clearly places Amedisys at the forefront of providing cost-effective, standardized, outcome-driven safe health care to our target population.

Needless to say, we are excited about the capabilities to our point-of-care technology brings to Amedisys.

We currently have approximately 7,000 employees working at Amedisys, most of whom provide clinical services. I would like to welcome the new employees we hire every quarter. In addition, I would like to publicly welcome employees of our recent acquisitions to Amedisys. I want to recognize all the employees of our Fayetteville, North Carolina acquisition, which, as a reminder, is a Certificate of Need state, as well as the employees of Patient Care Services, with two locations in Missouri. This acquisition brings the total served states in which we service to 18.

In conclusion, I would like to re-emphasize that the enthusiasm and commitment of our Amedisys employees is by far our greatest asset in ensuring our competitive advantage in the markets we serve. Because of this, I would like to extend my heartfelt thanks to all of our Amedisys staff whose dedicated efforts have helped us each and every day to carry out our mission.

I will now pass this call to Don for his financial overview, which Larry will then follow with a brief operational update. I will then ask John Giblin to address the market, and following John's introduction, we will open the call to the Q&A session.

Thanks, Bill. I will now discuss the financial highlights for the three- and nine-month periods ended September 30, 2006, both with respect to the income statement and the balance sheet.

Our revenues for the quarter of $137 million represented an increase of 22% over 2005, and reflect both internal growth and the impact of our acquisitions. Acquisitions accounted for approximately $3.5 million of the $24.8 million increase in revenue over 2005, with the balance coming from internal growth, including start-ups.

For the nine-month period, our revenues of $397.1 million represent an increase of 51% over the previous year and, again, are reflective of both internal growth and acquisitions. Of the $134.4 million increase, acquisitions totaled $71.8 million.

For the third quarter, our reported gross margin of $77.2 million is 56.3% of revenue, which is comparable to the same period last year, and slightly down from the 57.4% margin obtained in the second quarter of this year. The decrease in gross margin from Q2 relates primarily to our start-up activity, which included the opening of 14 new home health nursing agencies and one hospice agency in the third quarter. Our overall revenue per episode was $2,627 in the third quarter, as compared to $2,652 in the second quarter, and up from $2,542 in the third quarter of last year.

Amedisys completed over 44,000 episodes of care in the third quarter, compared with 43,000 in Q2 and 35,000 in Q3 of last year.

For the quarter, our general and administrative salaries and benefits of $33.2 million were lower than the second quarter of $34.6 million, and our G&A other expense of $23.3 million was comparable for both periods. On a percentage of revenue basis, G&A salaries, benefits and other expenses, inclusive of depreciation and amortization in Q3 were 43.1% of revenue -- a marked improvement over Q2's 45.6%.

For the quarter, operating income of $18.2 million was 16% higher than the $15.7 million reported in Q2. In the nine-month period, income of $46.6 million was 22% higher than the $38.3 million reported for the comparable period in 2005. For the quarter, we recorded net other expense of $900,000, which is consistent with Q2 and Q1. For the quarter, our net income of $10.6 million or $0.64 per diluted share is after a tax provision of 38.8%, and compares favorably to $7.8 million or $0.48 per share in Q3 of last year.

For the nine-month period, our net income was $26.9 million or $1.65 per diluted share, as compared to net income of $22.8 million or $1.44 per diluted share for the comparable period of 2005.

With reference to the balance sheet, cash balances totaled approximately $10 million at September 30th. As you recall, we advised you last quarter that Medicare would not make any payments to home health or hospice agencies for the period September 22nd to the 30th, due to a provision in the Deficit Reduction Act.

On October 2nd, we received a $13.6 million payment for this period. This amount is not reflected in our $10 million cash balance. Additionally during the quarter, we spent a total of $7.8 million in capital expenditures, including $3.8 million on our new corporate headquarters, $1.3 million on our point-of-care system and $2.7 million for other routine items, primarily related to start-ups. We anticipate spending $11.7 million in the fourth quarter in total CapEx.

At September 30th, we had full availability of our revolver and owed $43.1 million on our senior. We made a payment of $1.9 million during the quarter and have an additional installment of $1.9 million due on December 31st.

Primarily as a result of our cash slowdown for Medicare, which adversely affected our days sales outstanding by nine days, our days sales outstanding as of September 30th grew to 58.4 days. During this quarter, we increased our provision by $3.7 million, of which $800,000 related to Medicare Advantage Plantations, where the patients were originally admitted as fee-for-service Medicare and later converted to a different payor in mid-episode. We believe that we have identified all such accounts as a result of the detailed review of our Medicare receivables. We anticipate that our bad debt expense will run at about 1.8% to 2% of revenues on a go-forward basis, and our days sales outstanding will be reduced to under 50 days.

Cash flow is strong, with EBITDA at $20.4 million, as compared to $18.2 million in Q2 and $15.2 million in Q1. Cash flow from operations in Q3 was $11.6 million, prior to taking into consideration the $13.6 million Medicare payment delay.

As I had discussed during our last quarterly call, CMS has issued draft proposals regarding 2007 home health Medicare reimbursement that provides for a 3.1% market basket update to home health agencies. This would set the base 60-day episode payment to approximately $2,334. Congress may review the proposed change and either modify or rescind it, and [MedPac] has already recommended that Congress not increase the rate.

In closing, we are pleased to increase our earnings per share guidance for 2006 to be in the range of $2.30 to $2.35 per share on revenues of approximately $530 million to $540 million. This guidance is based on approximately 16.5 million diluted shares.

With that said, I turned the call over to Larry for a discussion of our operations.

Thank you, Don. Our operational strategic plan continues to center around our internal and external growth strategy. This plan generated a third-quarter and total growth rate over last year's Medicare admissions of 11%. Our total growth rate over the third quarter of last year in Medicare admissions is 15%. For the remainder of 2006, we continue to expect double-digit internal growth in Medicare admissions.

As discussed previously, the Housecall acquisition became included in internal growth this quarter, and resulted in a short-term drag on internal growth of approximately 4%. We expect internal growth to improve by the beginning of 2007, as we start to generate growth from the Housecall agency, and believe that longer-term, our internal growth should settle in at the 10% to 15% range.

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, start-ups and external growth opportunities via acquisitions that meet our strategic criteria.

During the third quarter, we opened 14 new Home Health locations, and year-to-date, we have opened 27 new Home Health locations. In quarter four, we expect to open another eight new locations for a total of 35 for the year. In addition, we opened a new hospice location in the third quarter, for a total of 13 locations. We expect to open an additional location in the fourth quarter.

Our plan is to continue with our strategic branch expansion based upon local market opportunities, and are targeting 40 Home Health start-ups in 2007. Historically, we have invested an average of approximately $250,000 in each start-up before reaching breakeven results. Normally, we expect a location to recoup this investment by month 18, and to be generating approximately $1.5 million in revenue by the end of the second year.

Most of our start-ups in the past have been branches of existing locations. As we take advantage of opportunities in new territories, more of our start-ups will be parent locations. Mainly associated with regulatory requirements, parent start-ups require a higher level of investment of about $350,000 per location, but are expected to achieve $1.5 million to $2 million in revenue by the end of the second year and spawn additional growth opportunities.

As we have done in the last two quarters, in an effort to allow investors to more easily gauge our progress and operational strength, we have broken our quarterly revenue and contribution margin down as follows. The contribution margin is pretax and pre-corporate overhead. $121 million in Home Health revenue related to agencies we have owned longer than 12 months, with a contribution margin of 31%. $3 million in Home Health acquisition revenue that we have acquired since October of 2005, with a contribution margin of 16%. $9 million in hospice revenue, with a contribution margin of 18%. As a reminder, industry margins and hospice are generally lower than margins in home care. $5 million in Home Health start-up revenue related to start-ups open since October 2005, with a contribution margin of -15%.

Also, in the quarter, we incurred approximately $1.5 million in additional costs associated with agencies we plan to open in the fourth quarter of 2006, or later.

As Housecall was acquired on July 1, 2005, it is now included in agencies owned more than 12 months. The addition of Housecall to this grouping resulted in the slight deterioration in that grouping's contribution margin compared to the second quarter. However, Housecall continued to show improvement quarter over quarter, yielding a 25% contribution margin in the third quarter, compared to 23% in the second quarter, 21% in the first quarter, and 11% in the fourth quarter of 2005. We expect further improvements in contribution margin associated with this acquisition.

In the third quarter, we began rolling out a point-of-care system for our agencies. The system consists of tablet PCs that are used by our visiting staff to document visit information which is then electronically uploaded into our operating system. We expect this system to improve the quality and documentation compliance of our visiting staff, and eliminate numerous back-office functions at the agency level. We made the decision to roll out the system after three years of strategic development and an extended test at five agencies earlier in the year.

In total, the system requires $9 to $10 million in capital expenditures, primarily associated with the cost of [the talent]. We spent $2 million year-to-date, and expect to spend $2 million in the fourth quarter and approximately $6 million in 2007. Currently, we have 72 sites, and by year end, we will have approximately 90 locations on point-of-care, which represents about one-third of our total agencies.

When fully rolled out in the third quarter of 2007, we anticipate $1 million to $1.5 million in quarterly savings, largely associated with reduced overhead at our agencies.

I certainly want to thank all of the operations management and staff for the results to date in improving the performance of our operations and their commitment to meeting our strategic goals. In particular, the transition to point-of-care is expected to result in a more efficient and productive company, and one requiring less paperwork for our employees. We are pleased with our third-quarter growth any opportunities that lie ahead. We continue to focus on being the premier low-cost, high-quality provider in home health. We believe that focus, execution, and commitment to clinical [outcomes] will continue to 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, I will now turn the call to John.

Thanks, Larry. I am very excited about joining the Amedisys leadership team. I think my 17 years at Crawford, a service provider in the insurance industry, and my 10 years in the audit group at Arthur Andersen have prepared me well for the role of CFO at Amedisys.

I specialized in the health care industry at Andersen, and was looking for an opportunity to return to the sector. During the recruiting process, I was really sold on Bill's strategic vision for the Company and impressed by the strength of the management team. I feel very fortunate to have been selected to join this talented group.

We would now like to open the call to questions. Please do limit yourself to two questions, so that we can allow question time for everyone. If time permits, we will allow follow-up questions.

Sharona, would you please explain the process for taking questions to our audience?

(OPERATOR INSTRUCTIONS). John Ransom, Raymond James.

I don't know who wants to take this question, but I guess you mentioned in the third quarter you had $1.5 million of start-up losses for agencies that were not part of that roll-out. Maybe you could tell us what the start-up losses were in total for the third quarter, compared to the second quarter, if you have that number and what you might think that number would be in the fourth quarter?

In the second quarter, the start-up losses related to agencies we have not opened yet was about $1 million. In the third quarter, as you stated, it was about $1.5 million. In the fourth quarter, a little less than $1 million is what we're anticipating.

As just an add onto that, the $1 million -- what was the total start-up loss? Would that be captured in the $5 million at 15% --? (multiple speakers)

In my narrative, I talk about the start-ups that we've opened since October 2005; and I articulate the revenue that those start-ups have generated, which is approximately $5 million. I said that they cumulatively had a negative contribution margin of 15%, which is about $750,000. Then, over and above that, we have a pipeline of start-ups that we have not opened yet that were incurring costs on and they added about $1.5 million of additional costs in the quarter.

So, if we added that up cumulatively, about $0.08, then? You are observing about $0.08 to grow this organically, and that would not be reflected in your earnings?

$0.08 to $0.10, that is correct.

Could you talk a little more -- I know that you are, obviously, from the numbers you gave, making good progress from Housecall. I know the first up was to consolidate the corporate costs. The second step was to get the field costs in line, and then the third step is to grow the business. It looks like Housecall is still not producing a lot of organic growth, but you are kind of almost there on the cost side.

Could you talk about when you might expect some organic growth out of Housecall? And if you ever expect that, just given the Florida mix, to ever approach where Amedisys is as a whole?

Internally, I talk about the Housecall acquisitions as the Florida acquisition and the non-Florida acquisition -- non-Florida being primarily Tennessee. Non-Florida is producing very well, both top line and bottom line. Florida, as I have articulated in the past, was basically a bunch of small agencies that had a lot of managed care business that we have unwound. I believe towards the back half of this year and more specifically in the first quarter of 2007, we will start experiencing growth in Florida and that growth rate -- and you'll notice in my narrative I said longer-term, 10% to 15% internal growth rate with the size of our Company makes sense. Obviously, I would like to go north of the 11% reproduced in the third quarter. So, I think by the first quarter of 2007, you will start seeing some growth out of the Housecall location.

But you mentioned in your narrative about the growth we have seen in bottom-line. I am pleased that we have gone from about 10% contribution margin to 25% in totality during this year with the Housecall acquisition.

Newton Juhng, BB&T Capital Markets.

I just wanted to ask a question of Bill. It's kind of a two-parter right now on disease management. We have been hearing a little bit of scuttlebutt about the Medicare pilot projects going a little bit slower than expected. I was wondering if the difficulty of some of these other vendors in these pilot projects tempers your enthusiasm for that side of the business, one. And then, two, considering your troops-on-the-ground model, do you think that that trumps the more standardized nurse call center model that a lot of these other disease management companies use, in terms of its effectiveness in affecting behavioral change in the patient population?

Good questions. I think, first of all, I am actually more excited about the struggles that they are having in some of the demonstration applications. If you look at the total cost of the Medicare population, we spend about 85% of the total dollars on 15% of the population. I don't think we have learned yet how to properly care for that very chronic and co-morbid population. Part of it has to be hands-on, because changing conditioning and changing behavior of that population requires more effort than the nurse call center. So we think that our ability to have troops on the ground into an extensive hand-on evaluation and assessment, and come up with some care protocol that are clinically driven to address the acute phase of the patient, as well to address the ongoing disease management challenges, to allow the patient to manage their illness more effectively in their home with their support mechanism is the right way to address this population.

To be candid, we only see one of the demonstration companies that actually have something close to that model. We think that eventually that the whole care coordination process will transition to the home nursing industry.

I guess the other question is really more for Don. It is just that $1 million to $1.5 million of cost savings from the point-of-care solution -- where will we be seeing that recognized in the model? Will that be mostly in the G&A side, or could there be some baked up in the cogs?

Most of it is in the general and administrative side. There is a slight bit of it in the gross margin side also, but most of it in G&A.

Eric Gommel, Stifel Nicolaus.

Can you just clarify what your acquisition expenditure for the quarter was?

Sure. I think we spent about $5 million in acquisitions in total for quarter three.

And my second and bigger-picture question related to reimbursement. We are hearing that it could be the end of the year where we might hear some proposed regs on changes to the home health reimbursement system or the refinement. I am curious how you guys look at the impact of refinement on your operation, and what might be the potential opportunity for, for example, from consolidation or might be the potential pitfalls? I am just curious how you are looking at it, and say -- I know it is a long way out, but 2008.

First thing, I was looking at the second quarter. The second quarter, we spent $5 million on acquisitions. In the third quarter, we spent almost $2 million -- $1.5 million, to clarify that.

Our philosophy has always been, with changes in reimbursement, while it may have an effect on the industry in total, we think the longer-term picture for a consolidator such as Amedisys is really positive, meaning more people will be looking to exit the industry. As they struggle, some of the smaller providers and hospital-based providers or not-for-profit providers may be looking to exit as we have difficulty in reimbursement. So, we will take advantage of that through our acquisition strategy. So, that is kind of our philosophy, and what we have been relying on going forward.

So, either way, if it is a favorable reimbursement environment, obviously that is good for us in the short-term. If there are some unfavorable things in the industry, we feel like we are best-positioned to make adjustments as well as take advantage of that opportunity.

Brian Tanquilut, Jefferies & Co.

First, Don, I guess, just wondering what your thoughts are on SG&A. You showed some good improvement in the quarter. Where do you think should we -- going forward, where should that go? Is there still a lot of opportunity to squeeze the SG&A line, and how should we look at gross margins going forward, considering that we saw a jump in Q3 because of the acquisitions?

We believe that our G&A will run somewhere in the 43% to 44% range on a go forward basis, and I would look for gross margin to continue to be in the 56% to 57% range, given our start-up activity.

Then, just a question on the therapy statistics -- is that something you can give out to us today?

When you say therapy -- ?

Yes, like you know how normally you give out what percentage of your patients go beyond the 10 therapy visits, and all that stuff?

Yes, about 35% of the total episodes that we care for extend beyond the 10-visit threshold. Again, about 55% to 65% of our patients have therapy inside their episode which means less than 10 visits in total. Those have been relatively constant.

Balaji Gandhi, Oppenheimer.

Larry, I thought I heard you say Medicare admissions growth was 15% a quarter?

You heard two stats. You heard the internal growth rate in Medicare admissions was 11%, and the total growth rate in Medicare admissions was 15%.

Okay, so do you have Medicare admissions number for the quarter, then?

The actual number of Medicare admissions?

Yes, I think you guys usually put it in the 10-Q. I just was wondering if you had it.

Yes that's no problem. Give me a second. I am looking up the specific number.

I'll just ask my other question then which was, Don, I thought I heard you say $11.7 million in CapEx for the fourth quarter?

Yes, I did.

So, could you maybe give us a little breakout, as you did for this quarter, between maintenance and point-of-care, and corporate headquarters, et cetera?

Sure, I would be happy to. We think we're going to spend about $7 million on the building, about $1.7 million on the point-of-care and $3 million in routine capital.

And you will be getting -- obviously, be getting a boost of cash flow from getting paid for Medicare, right?

Well, we did pick up the $13.6 million in the fourth quarter, which was a nice pop.

What would be left on the corporate headquarters, then, after the $7 million?

That is it.

And your number was right at 26.5 -- 26,500 Medicare admissions in the quarter, which is above the second quarter of 25.7.

(OPERATOR INSTRUCTIONS). John Ransom, Raymond James.

My other question relates to acquisitions. Now that you guys have kept some promises on the two acquisitions where we struggled a little bit earlier in the year, as you look kind of intermediate-term, should be look at kind of little bite-size acquisitions quarterly? Is there an elephant or two out there you're thinking about? Then, secondly, where is pricing now? I know that you paid about one times revenue for Housecall, which looks like four times contribution margin. But your cousins in New York paid about eight times EBITDA for Health Field, and I'm just wondering where you think the market is, as particularly it's differentiated between large and small?

In the short-term between now and year-end, the smaller bite-size acquisitions make sense for us -- medium acquisitions in the $20 million to $40 million range, we certainly are looking at. Larger acquisitions, we discuss them from time to time, but we have nothing imminent being in the next six months that we would think about there, but obviously, we are open to any and all of those acquisitions that meet our criteria.

On the valuation side, on the smaller acquisitions, we are still in that four to five times range. Anything Housecall size is getting north of the four to five times range, based on what you have talked about in the market. But we believe that is a one-time opportunity, strategic acquisition that brought that valuation. We don't think that is going to repeat itself.

I guess my other question -- obviously, we had a shakeout in the industry in the early 2000s, with the reimbursement drama, but do you see a driver going forward? Is it going to become more and more of a technology arms race? Is that going to be one of the things that drives more consolidation, in your view?

Well, certainly in the service industry, and in an industry where reimbursement, we believe, will stabilize or come down in the long-term, we think the low cost efficient provider is going to be the major consolidator; and we also believe that technology is going to play a huge role in that. So, the companies that have invested in technology early on and are moving to what we call [best] technologies we think will be in the forefront of the consolidation opportunity. But yes, we believe technology is a big driver and becoming more efficient.

Darren Lehrich, Deutsche Bank.

Two questions here. One, just with regard to Housecall, can you just talk a little bit more about Florida, and now that you are well into some of the changes you have made, obviously, with the managed care contract unwinds, anything else strategically that you are looking at in Florida to get that group of Home Health programs to perform better for you?

Then, second question, just as it relates to the point-of-care rollout, I guess just wondering, if you look at the challenges that you are seeing in that rollout, if you can just talk a little bit more about any challenges specifically, and whether you have seen any change at all in retention of staff with the integration?

I will address the first part of your question first, on Housecall, which I believe was, is there any future changes? We went through the technology and put all the technology and our systems in place there. We turned over management that we felt we were not going to move forward with it, as well as putting in individual management in the individual locations. We are in the process now of educating the clinical staff on our clinical protocol as well as going out with our sales force that we feel like we have stabilized and marketing to the community.

Now, Florida, of all of our regions, is more seasonal than from what you would expect from snowbirds. So that is why I am articulating the back half of this year and the first quarter of next year, we feel like there's nothing on a macro basis that we feel like we have to implement, that we have it already begun or in the process of it in Florida, now that we have stabilized. And again, if the Housecall acquisition was just the state of Florida, we probably would not have acquired Housecall. (multiple speakers) Tennessee is a Certificate of Need state. They were based in Knoxville. They were very strong in those areas, as well as they had nine hospice locations.

It accelerated our start-up strategy in Florida, gave us a lot of locations very quickly, so it was an accelerated start-up strategy. That being said, I am optimistic about the opportunities that lie ahead in Florida.

On the point-of-care, it is the normal challenges you would expect, putting tablet PCs in clinicians' hands, you have a variety of levels, of comfort level with that. But we have a very strategic roll-out plan where we educate the sites prior to them getting the tablet PCs. And as we get further and further into our sites, it's becoming a little easier, because they have sites that they can look to that have already been through it. But nothing out of the ordinary that you would not expect through the technology deployment.

I think at this time, Operator, we would like to close the Q&A session. I would like to again thank everyone for calling in this morning. We are extraordinarily excited about the third-quarter results and look forward to the fourth quarter.

I would like just to maybe touch for a quick second, as a follow-up to John Ransom's comment in reference to consolidation. Although Larry spoke about it, John, I do think that technology is going to drive consolidation, and it's in our ability to provide a higher level of acute care in the community in the home-based setting that is going to drive a lot of population from the facility-based setting to the community-based setting, which we think would create a huge opportunity. We think there is a significant amount of the chronic and co-morbid population that should be more appropriately and effectively cared for at home versus in those facilities, at a lot higher cost and to be honest, in our opinion, at a lot higher risk.

So, it is really going to be technology combined with clinical capabilities that will drive consolidation, and we feel that Amedisys is clearly positioned to take advantage of that.

With that being said, I hope everybody has a wonderful day, and I look forward to our next quarterly which will be our year-and conference call, and to hopefully see people in the near term and future. Thank you all.

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