Amedisys Inc (AMED) 2007 Q3 法說會逐字稿

Good morning, my name is Lenny and I will be your conference operator today. At this time I would like to welcome everyone to the Amedisys third-quarter 2007 earnings teleconference 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 conference over to your host, Mr. Kevin LeBlanc. Sir, you may begin your conference.

Thank you. This is the Amedisys third-quarter conference call and my name is Kevin LeBlanc. Good morning and thank you for joining us today for the Amedisys investor conference call to discuss this morning's third-quarter 2007 earnings announcement and related matters.

By now you should've received a copy of our earnings press release. If for some reason you have not received the press release or are unable to log onto the webcast please contact me at 225-292-2031 and I will be happy to assist you.

Joining me on today's call from Amedisys are Bill Borne, Chairman and Chief Executive Officer; Larry Graham, President and Chief Operating Officer; and Dale Redman, Chief Financial Officer.

Before we get started with our call, I would like to remind everyone that any statements made on this conference call today or in our press releases that express a belief, expectation or intent as well as those that are not historical facts are considered forward-looking statements and are protected under the Safe Harbor of the Private Securities Litigation Reform Act. 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.

These forward-looking statements may involve a number of risks and uncertainties which may cause the Company's results to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings including our Forms 10-K and 10-Q. In addition as required by SEC Regulation G, a reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will be available on our website at www.amedisys.com on the investor relations page under link press releases.

Thank you and now I'll turn the call over to Bill Borne. Please go ahead, Mr. Borne.

Thank you Kevin and good morning. I want to welcome the participants on this call and I appreciate the opportunity to share the Amedisys spirit and vision with the investing public.

Our third-quarter results were very strong. We set record revenues of $181 million and record earnings of $0.61 per diluted share excluding the alliance matter. In addition, we continue to have significant linked liquidity with total cash of $73 million at quarter end. Our results for the third quarter continue to support our strategic objective of being the leading provider of high-quality, low-cost home health services in the market.

As reported in the media, a few weeks ago the first person of the baby boomer generation recently registered to receive early retirement benefits starting on January 1 of '08 from Social Security. Every day 11,500 seniors will turn 62 starting in '08 and they will only be three years away from entering into the Medicare system.

Beginning in 2011 estimates are that over 4 million people per year for the next 18 years will become eligible for Medicare services. These additions to the Medicare rolls along with the current population living longer will put increasing pressure on CMS to find lower-cost alternatives [while] providing care to our elderly population. We believe Amedisys is positioned well to leverage our homecare core competency foundation and take advantage of the growth opportunities being offered to us by aging Americans.

Our overall growth strategy continues to be a balance between internal and external growth and expansion through acquisitions. In addition to same-store admission growth, our internal growth in the third quarter was fueled by the opening of six new home health and one hospice agency.

Our external growth continued with the closing of the Integra Care acquisition on September 1. This acquisition will total 19 home health locations and 11 hospice locations in nine states including four West Virginia locations that are anticipated to close in the fourth quarter of this year. The delay of closing these four locations is due to West Virginia's CON regulatory issues.

This transaction expands our presence into eight new states including Alaska, Washington, Oregon, Idaho, Wyoming, Colorado, Kansas, and New Hampshire. Amedisys is now located in 30 states with a footprint that expands far beyond our Southeastern regional beginnings.

As I have done on previous conference calls, I would like to welcome all of the new employees of the Integra Care acquisition. We're very excited to have you in the Amedisys family.

As a result of acquisition and de novo growth we ended the quarter with 311 home health locations, 62 more agencies than the third quarter of '06. In addition we owned 27 hospice agencies at the end of the third quarter of '07, 14 more hospice agencies than the prior year.

Our point of care system rollout is nearing completion with only nine agencies remaining to be converted which includes the Integra Care agencies. We believe that our proprietary technologies inclusive of our point of care system coupled with our Encore nurse call center and our evidence based best practice clinical algorithms is the right prescription for providing complete care management to the chronic comorbid population. This infrastructure uniquely positioned us to continue our transition into being recognized as a successful, complex care coordination and disease management provider.

CMS reimbursement changes for the home health industry became final as of August 22 of '07 and Dale will discuss the expected impact of these changes on Amedisys in more detail. We believe these changes are likely to drive consolidation in the industry and Amedisys is poised to take advantage of this opportunity.

In addition to our strong balance sheet, and profitability we have a long track record of being able to successfully integrate acquisitions. During the quarter, we took steps that enhanced our financial flexibility with respect to acquisition opportunities. In August, we filed a shelf registration which permits us to sell up to $250 million of common or preferred stock.

Additionally, last week we announced a closing of a three-year $100 million unsecured revolving credit facility. The facility can be increased by up to an additional $100 million at the Company's election and customary conditions described in the credit agreement including lender approval.

Borrowings under this facility are available for general corporate purposes including acquisitions. With this increased financial flexibility and our strong balance sheet, we're well positioned to take advantage of opportunities that fit our profile and strategic direction.

In conclusion, I'm reminded that our greatest competitive strength lies in our employees who individually and collectively make it possible for us to carry out our mission of providing cost-effective quality health care services to the patients entrusted to our care. We believe our culture of hard work, and for service and commitment to our core values is the intangible that truly differentiates us from our competition. I will now pass this call to Dale for a financial overview. Thank you.

Thank you, Bill. As Bill stated we completed another excellent quarter. Our third-quarter revenues grew 32% over the third quarter of 2006 to $181 million. Acquisitions accounted for approximately $12.5 million of the increase over 2006. Our revenue for the nine months ended September '07 were $504 million representing an increase of 27% over the previous year.

Our net income of $16 million or $0.61 per share surpassed the $14.9 million for the second quarter of this year. This brings our earnings per share through September to $1.69 versus $1.23 last year. These amounts are exclusive of the alliance matter which added $4.2 million or $0.16 to the quarter ended September '07. In the rest of my comments I have excluded the impact of alliance.

Operating income increased 42% to $26 million or 14.2% of revenue for the quarter compared to $18 million or 13.3% of revenue for the third quarter of '06. Our G&A expense including depreciation and amortization as a percent of revenue decreased from 43% in the third quarter of '06 to 42% third quarter of '07.

For the nine-month period, our G&A expenses were 42% of revenue compared to 45% of revenue during the same period in '06. This significant decrease from the nine months in '06 is due to the revenue growth associated with our acquisition and startup activity in 2007 combined with the integration of the Housecall acquisition. Our gross margin was 56.2% of revenue for the third quarter compared to 56.3% for the same quarter of '06 and 55.9% for the second quarter of this year.

EBITDA for the quarter was $29.5 million, 16.3% of revenue versus $20.4 million or 14.9% of revenue during the third quarter of 2006. Bad debt expense for the quarter was $3.7 or 2% of revenue compared to $3.7 million or 2.7% of revenue for the third quarter of last year.

The increase in other income compared to the third quarter of 2006 is due to the reduction in outstanding debt and the increased interest income from approximately $90 million held in cash during the quarter. We generated cash flow from operations of $82 million for the nine-month period ended September of '07. We spent $20 million on capital expenditures and $79 million on acquisitions leaving us a net decrease in cash of about $17 million.

Cash flow from operations was up $55 million from prior year. Approximately $19 million of this increase is related to the payment of payroll taxes in 2006 which were deferred from 2005 because of Hurricane Katrina. Days revenue outstanding at quarter end was 49 days compared to 58 days at the end of the third quarter of '06 and up slightly from 47 days in the second quarter primarily because of the Integra Care acquisition.

Our cash position at the end of the quarter totaled $73 million. We continue to have a small amount of debt on the balance sheet totaling $24 million at quarter end consisting mainly of acquisition related notes payable. This morning we are raising our 2007 revenue guidance to the range of 675 to $690 million and earnings per share guidance to the range of $2.25 to $2.30 per share excluding any future acquisitions and the effect of alliance.

In addition, we're providing preliminary guidance for 2008. At this time we anticipate revenue for 2008 to be in the range of 800 to $825 million excluding acquisitions and earnings per share to be in the range of $2.50 to $2.60 based on an estimated 26.7 million shares outstanding. We also currently estimate that the implementation of the CMS final rule will reduce our revenue in 2008 by approximately 1%.

We have styled these statements as preliminary because they are significant assumptions inherent in the estimation process used to derive them that may change significantly in the future. These include but are not limited to changes in the market basket increase, or other additions and deletions to the final rule, future changes to our systems resulting from continuing programming, modeling and testing process and changes in our case mix next year.

Now I'd like to turn it over to Larry for operational comments.

Thank you, Dale. I'm also very pleased with our results in the third quarter. Our strategic focus on growing the business both internally and through acquisitions, becoming as efficient as possible and delivering high quality home health care continues to generate strong results for the Company.

This focus generated a third quarter internal growth rate over the last year in episodic based admissions of 11%. Our total growth rate over the third quarter of last year in episodic admissions was 20%. Longer term, our internal growth of episodic based admissions is expected to remain in the 10 to 15% range. To achieve this level of internal growth we will maintain our focus on same-store sales growth and startups.

As Bill mentioned, during the third quarter, we opened six new home health agencies and one new hospice agency. Year-to-date we have opened 28 home health agencies and two hospice agencies. For the full year we continue to target approximately 40 home health and five hospice startups. Our plan in 2008 is to continue with our strategic branch expansion based upon local, market opportunities and we will again target opening approximately 40 home health and five hospice startup locations.

Regarding acquisitions, we completed two acquisitions in the quarter. We acquired a permit of approval an Arkansas which gives us the right to provide home health services in eight counties in Central Arkansas. We also acquired Integra Care with annualized revenues of approximately $54 million of which $8 million is associated with unconsolidated joint ventures.

We now have locations in 30 states versus 17 states at the end of last year's third quarter. Regarding the Integra Care acquisition, while it is still early in the process, our integration of these agencies is going well. We've just started the conversion onto our operating system of the last four of the 15 agencies we acquired on September 1. We expect the four West Virginia agencies to close on December 1 and we will convert those agencies during the month of December pending regulatory approval.

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. As reminder, contribution margin is pretax and pre-corporate overhead. $151 million in home health revenue related to agencies we have owned longer than twelve months with a contribution margin of 32%; $8 million in home health startup revenue related to startups opened less than twelve months with an 8% contribution margin.

Also in the quarter, we incurred approximately $1.6 million in additional cost associated with agencies we plan to open in the future; $11 million in home health acquisition revenue associated with acquisitions completed during the last 12 months with a contribution margin of 4%; $11 million in hospice revenue with a contribution margin of 12%. As Bill mentioned, we continue to rollout our point of care system and will complete it by the end of the year.

During the quarter, we estimate that the point of care system had a positive impact on our results in excess of $1.5 million on a pretax basis. It is very important to us as we continue to grow that we stay focused on three very important areas -- our care coordination abilities, our clinical outcomes and most importantly our compliance controls.

The design of our point of care system was very purposeful in order to further enhance these areas. We are happy with the enhanced care coordination abilities, the care consistency reminders and our ability to electronically notify the physician as the patient care needs arise.

We have seen a significant increase in the number of perfect or deficiency free survey results for our locations. We will continue to stay committed to enhancing our care coordination abilities and our compliance controls each year.

We also anticipate the point of care system will allow us to better adjust to the CMS reimbursement changes that are slated to take effect January 1. Again, we're very pleased with our performance during the quarter and I certainly want to thank all of our operational management and staff for their efforts in achieving these results.

We remain focused 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 support our shareholders, customers, employees and vendors.

At this time we will open the call to your questions. Please limit yourself to two questions so that we may allow question time for everyone. Time permitting, we will allow for follow-up questions. I will now turn the call over to the operator.

(OPERATOR INSTRUCTIONS) John Ransom.

Hi, good morning. Thanks for the '08 guidance. I know you don't have all the pieces yet but I think that's very helpful. My question is just trying to get a little more granularity on 2008. Let's say that we get the market basket freeze and a rural add-on. How should the market think about the net impact of that from a revenue standpoint? Thanks.

Obviously, the market basket has assumed [is in the ruling is] 3%. We have about 25% rural so that would be roughly 1.25%. So that's pretty much where we are at this point. I think we're going to wait and see what happens at the end of the year when Congress finally decides what they are going to do and then we may have more to comment on at that the point.

Now if you guys -- my question is if you guys got a full market basket is there a difference in what sort of -- I know last time when you got the full market basket some of that went back to the employees. So would there be a difference in the net effect adjusted for what you give back to your employees or should we just think about this as 3% versus 1.25%?

Obviously if we do not get the market basket increase we will look at our salaries and wages and our cost of living increases. So I wouldn't think of it as a raw 3% offset by 1.25%. That's why Dale mentioned when we get some more clarity we will further update you on 2008.

So is it reasonable to thank maybe a 1% net difference between market basket and rural? Is that a reasonable assumption to think about?

That's a good try to get me to answer that in 2008 but we're going to hold off until we get more clarity.

Okay my other -- I know I'm limited to two. My other question -- this is just going back to your numbers. Did you say that $151 million that was 31%

32%.

I'm sorry, 32 -- I just wanted to run through those numbers again because you talk faster than I can type. 32% from $151 million, $8 million at 8%, $1.6 million of startup costs, $11 million in hospice at a 12% margin, $1.5 million contribution from point of care. What other number did we miss there?

Home health acquisition revenue was $11 million at a 4% cost contribution margin.

Home health acquisition -- how much of that was Integra Care versus other stuff that you bought during the year?

I don't have the precise number but between 3 and $4 million was probably Integra Care.

So is it fair to say you had more revenue -- or the acquisition revenue -- that's where it was different in our model. Were the acquisition revenues particularly strong or was that just something that we weren't modeling from a timing standpoint?

It's probably a timing standpoint. But the other thing I wanted to point out is you mentioned and I mentioned $8 million in startup revenue with an 8% contribution margin? (multiple speakers) That was stronger than originally anticipated and it's simply due because a lot of our startups in the second third quarter -- I don't have the precise number -- were what I call peel offs so they took census from a mature agency and started out the gate strong, if you will. Historically, that number has been negative.

Okay, I knew there was something from acquisitions in your numbers that was better. And is there any reason fourth quarter is going to be worse than third quarter from an earnings standpoint?

Well you can do the math on our guidance for '08 but keep in mind fourth quarter has four paid holidays, third quarter only had two and then obviously with the holidays you've got some adjustment in your growth.

Darren Lehrich.

Good morning everyone; real nice job of the quarter. I do have a couple of things. First I guess with regard to your 2008 outlook and the Medicare impact specifically. Obviously you guys can model your business much better than any of us can and the impact of these rules. But I guess what I was hoping to get from you is a sense for how that 1% squares with what a lot of us refer back to that the impact tables of the for-profit agencies and certainly on a regional basis a number that might suggest something worse than 1%. So, Larry or Bill, I guess the real question is can you help us think about the 1% and whether embedded in that is some changes or adjustments that you guys plan on making?

First of all, CMS put out some tables that I think had a company in our category at 2 or 2.5% negative. That data was based on 2005 data and it was average data which may or may not be comparable to ours. So obviously it's a difficult situation that you guys were in.

Secondly we have benefited from a systemwide rollout of our point of care system which has enabled our clinical assessment data to become more consistent when compared with a paper-based environment. Let me give you an example. Our care coordination dashboard used by our clinical management staff enables them to identify in real time if a clinical event has happened in a home as soon as that (inaudible) data is transmitted.

What that does is it reduces fragmentation in other words errors and things and is not available if you have a paper-based system. So these care consistency reminders that Larry referred to earlier they enhance our care coordination, they enhance our documentation ultimately, our compliance. But it also helps us make this system more effective in dealing with this new reimbursement scheme.

The last issue that I would mentioned is we're still testing, modeling, improving our systems the results of which may change our view. For instance CMS just like four or five days ago released their grouper to help companies deal with the new reimbursement scheme and that may end up producing different results than what we have. Where we are right now is we believe that the negative 1% that we are talking about here for 2008 revenue is a reasonable estimate and therefore that's what we based our 2008 guidance on.

Okay and then I guess my follow-up here is really just about the competitors in your market. It seems like you have put a lot of time in building a model to understand the impact of the final rule. Larry or Bill or Dale, maybe just give us a sense for whether you've taken a stab at modeling out competitors in your markets and what that looks like with regard to the overall landscape and where you think your competition might be headed relative to the impact of this rule.

The only thing we've done in that regard is if we have a potential acquisition candidate as part of our diligence we model out what we anticipate the case changes to impact that particular acquisition. But as far as doing it on a regional basis or anything of that nature we have not disclosed what we think the impact might be on a regional basis. But we do it with each acquisition that becomes available to us.

Eric Gommel.

Good morning. I wonder if you could just give us a little idea of what the acquisition environment looks like. You guys have certainly put yourselves in a position to make some significant acquisitions. I mean, if we were to look out over the next 12 to 18 months should we look at this as a larger acquisition like the 20 to $50 million home health agency or do you look at the potential to make a number of smaller acquisitions? I'm just curious on your thoughts and also maybe a little bit on what you're seeing with valuation given the final rule coming out in August.

I appreciate question. First of all with the valuation, that's on an acquisition specific basis. I will comment on a macro basis. We haven't seen acquisition candidates take into consideration the case mix when it comes to their anticipation of valuations. I expect that to happen more after Q1, Q2 and Q3 actual numbers get released.

As far as the size of acquisitions that hasn't changed. We have a pipeline that's full of acquisitions. We continue to look at the smaller acquisitions and the mid-size acquisitions. Periodically there might be a large one that we look at and obviously each acquisition stands alone -- CON versus non-CON, markets we want to be in as well as the case mix refinement and the impact on them. So we're still optimistic about our acquisition pipeline.

And then just my follow-up question. What's the potential that you would look at maybe acquiring a stand-alone hospice company?

We've only done that one time and it was a small -- I think it was about $1 million or $1.5 in revenue. The hospice acquisitions you've seen us do to date is related to they have home care. We'll probably continue on that focus. That's not to say that if an attractive hospice stand-alone opportunity came available we would certainly look at it and evaluate it. That's not our primary acquisition target at this point time but we are open to that.

David MacDonald.

Morning guys, Larry just one follow-up on the acquisition front. Can give us some sense of the reaction of the smaller players to the changes? Do they understand fully the impact? Again do you think it's going to be a quarter or two before you get a full sense? And then be if the acquisition opportunities significantly ramp as some of the smaller folks start to digest this is there a possibility that you maybe take your foot off the de novo pace in '08 and deploy some more assets toward acquisitions?

I'll answer the last part first. Our startup strategy doesn't change in relation to the acquisition strategy. Startups are extremely accretive to us and I gave you our anticipated target numbers -- 40 home health and five hospice in '08. So we will continue with that. I have articulated in the past our three-prong strategy -- growing aggressively through acquisitions, growing aggressively through same-store sale which includes startup and our disease management as well as becoming as efficient as we possibly can. So that doesn't change under this environment.

The first part of your question was whether the smaller acquisitions have realized the case mix refinement. The short answer is no, they do not fully understand. The ones that have come available for sale we have educated them on that obviously. There's outside vendors now that will help you run your data and give you an estimate of the case mix. But a lot of them haven't run that calculations until it's time to talk to someone they're potentially selling too.

I do anticipate it to heat up in the first half of next year as real data comes out and real numbers come out and they see that in their cash flow especially not-for-profit hospital-based agencies that are on the margin if you will as far as breakeven. I think that will present future opportunities for us.

And then just one other follow-up. I know you addressed this but my line was cutting out a little bit. I didn't get all of it. The contribution margin on both your startups and your acquired revenues improved dramatically sequentially. Can you just talk a little bit about that?

Sure; on the startup -- it's mainly due to some startups that what are a peel-off of an existing agency. So we took some census so they got off to a fast start and that's why you're seeing a positive contribution margin. If it was not a peel-off obviously that would be a negative contribution margin starting off. And then on the acquisition we do anticipate barring no further new acquisitions each quarter our contribution margins get progressively better as we begin to operate them.

Greg Williams.

Good morning guys. I guess this question might be towards Larry. If I look at the visit per episode they're creeping up the bit quarter over quarter for the past three quarters. Maybe I'm looking too much into it but is there a trend here towards taking care of more acute patients or again am I reading too much into this?

The short answer is you're probably reading too much into it. It does fluctuate 0.2 to 0.4 visit per episode. It's been in that 16.5 to 17 visit range. Obviously the acuity has something to do with it. But we're doing such a large volume we have articulated in the past you are going to see some slight fluctuation quarter to quarter.

Archer Henderson.

Hi, congratulations on a very nice quarter. Just a couple of questions here for you. Dale, do you guys have any acquisitions forecasted into your guidance for next year?

No, the guidance for next year has no acquisitions assumed in it obviously because we don't know exactly when those are going to occur.

Okay good. And then my follow-up is Larry are you guys doing any sort of new strategies out in the field to drive same-store growth? Obviously what we have seen so far has been great in terms of the percentage of growth but I was just curious if there's anything you're doing out there. Thanks.

Just continue to focus on our disease management programs whether that be women care, cardiac, orthopedic and more of a product launch with those programs if you will. We're getting better at executing the engagement level in that arena but it's more of the same.

Going forward just off of the disease management, is participation possibly in this Medicare Phase II pilot program if it comes about would that be something you guys would be interested in participating in?

Actually, also there's some other opportunities. You may be aware that the McCall report to Congress came out which evaluated Phase I and the results weren't as positive as I think everybody intended. There are multiple opportunities using our infrastructure to be able to leverage up. One of them to the medical home model that will be coming out for a demonstration in January of '08. But were being very cautious on how we approach that and we see multiple opportunities to leverage our network and infrastructure over the next year or two.

That makes sense. Bill, do you think you guys have enough sort of in-house infrastructure to be able to do that kind of stuff on your own or would you look to maybe partner up in a joint venture with someone?

We have a pretty good amount on our own but it makes sense to partner up in joint venture. As a matter of fact we have ongoing efforts to establish those relationships and it just crosses the gamut. One of the largest affiliates we see obviously is the physician side of it. But we are also communicating with disease management and especially providers such as our telemedicine, telehealth type activities as well. So we are not leaving any stone unturned in reference to the opportunity that is out there.

Donald Hooker.

Hey guys, thanks for taking my call. It looks like your tax rate was down a tad in the third quarter if I'm hitting the numbers right on my calculator. So is that -- can you kind of walk through kind of some of your tax assumptions going out? And I guess in particular in '08 are you extrapolating off of the third-quarter tax rate going to '08 or is there are more normalized rate we should use?

No, it's a fair question. The rate in the third quarter was lower primarily because of the alliance issue. There was couple of other things -- evaluation allowance that went the other way. But going into '08 we're anticipating a normalized tax rate which is unrelated to the third-quarter number.

Okay I was just curious about the moving parts there. So that would be sort of 38, 40% roughly, kind of ballpark?

Yes, that's correct.

I'll ask one more question and then I'm done with my questions. Regarding -- can you break down the CapEx number again? I know you've done that in the past between point of care investments, that 6.6? I know that's not normal number for you or is it?

In the third quarter we had about $1 million on our corporate headquarters. Point of care was about $2.5 million and sort of everything else was another $2.5 million.

Gotcha. So that's kind of -- the point of care -- it sounds like you're pretty much done with that going into Q4 in '08.

We will have a little more in Q4 but not very much and very little left on the corporate headquarters building. So it ought to be sort of a more normalized 2% is a number we have been talking about going forward. So that's probably a reasonable number to use for next year.

Operator we have time for one more call.

Thank you. Your final question is coming from Derrick Dagnan.

Good morning and congratulations on a good quarter. I wanted to ask a follow-up on Darrin's question about the guidance. One thing that wasn't clear to me from the press release and your comment was changes in case mix and the expectation for a minus 1% cut.

So I guess are you saying that if you took your 2006 or maybe 2007 patient base and ran it through your scenario and there's no real change in the case mix that that's where you come out with the minus 1% expectation?

We're not assuming at this point in anything. We're looking at that there is a case mix change next year from where we are today. But that could happen and we're just pointing that out.

But the short answer is yes, running it on 2007 data. We went all the way back to 2006 that 1% -- looking at historical data and what we assume the impact will be in '08.

We have been running that on a continuous basis since May both going back to '06 and running it on a monthly basis as to go forward.

That's very helpful. I guess one follow-up. Looking at your opportunity for acquisitions, you have plenty of financial flexibility. I guess the question I have is you've invested significantly in the corporate infrastructure in your operations infrastructure. If you were to start aggressively deploying capital at what point would you need to kind of step up again and increase the G&A cost infrastructure? How should we think about that going forward?

It's going to be acquisition specific. It depends on the geography that's covered. It depends on the size. We estimate that our G&A goes up about half of our current run rate for each acquisition just for modeling purposes to give you a little bit of color. Corporate G&A -- which is about 14%, so half of that number.

Thank you, thank you operator. This concludes our call for this morning. Again we want to express our appreciation for everybody that has an interest in Amedisys and called in. We certainly look forward to sharing our year-end numbers in the first quarter of next year and we hope everybody has a great day. Thank you all for calling in.

This concludes today's Amedisys teleconference call. You may now disconnect.