Amedisys Inc (AMED) 2013 Q1 法說會逐字稿

Good morning. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the Amedisys first quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. (Operator Instructions). Thank you. Tom Dolan, Senior Vice President of Finance and Treasurer, you may begin your conference.

Thank you, Tiffany. Good morning and welcome to the Amedisys investor conference call to discuss the results of the first quarter ended March 31, 2013. A copy of our press release is on the investors relations page on our website. Speaking at today's call from Amedisys will be Bill Borne, Chairman and Chief Executive Officer, and Ronnie LaBorde, President and 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 and in our press releases that express the belief, estimation, projection, expectation, anticipation, intent, or similar expression, as well as those that are not limited to historical facts, are considered forward-looking statements, and are protected under the Safe Harbor under the Private Securities Litigation Reform Act. These forward-looking statements are based on 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 or actual outcomes to differ materially from such statements. These risks and uncertainties include factors detailed in our SEC filings, including our Form 10-K, 10-Q, and 8-K. The Company disclaims any obligation to update information provided during this call other than as required under applicable securities law.

Our Company website address is Amedisys.com. We use our website as a channel of distribution for important information, including press releases, analysts presentations, and financial information regarding the Company. We may use our website to expedite public access to time-critical information regarding the Company in advance of, or in lieu of, distributing a press release of filing with the SEC disclosing the same information.

In addition, as required by SEC Regulation G, our reconciliation of any non-GAAP measures mentioned during our call today to the most comparable GAAP measures will be available on our website on the investor relations page under the tab Financial Reports non-GAAP.

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

Thank you, Tom. Good morning, and welcome to our first quarter earnings call. For the quarter, Amedisys earned $0.09 per share on a GAAP basis. While we don't provide quarterly guidance, we anticipated better performance during the first quarter and improving performance throughout the year to offset sequestration. Instead, volume pressure in both our business units drove lower results than expected. In our Home Health division, a drop in our re-cert rate negatively impacted volume, while our Hospice division saw a drop in the average daily census.

Our growth metrics were more positive, with total Home Health Medicare admissions up 2% compared to the prior year's first quarter, and up 3% when adjusted for the additional leap day in 2012. Hospice total admissions were up 2% on a year-over-year basis and 3% leap year adjusted.

Costs for the quarter were generally in line with our expectations, as Ronnie will discuss in more detail. While pleased with our cost control, clearly our efforts have not been enough in the face of declining overall volume and the impact of sequestration. Therefore we are moving forward rapidly on three initiatives to improve results on a short-term basis and better position the Company for long-term success.

The first initiative is to reduce the number of nonperforming care centers. While we have gone through similar prunings in the past with additional reimbursement cuts and volume pressures, we find ourselves continuing to carry too many unprofitable care centers in our portfolio. Therefore, we have made the decision to consolidate or divest 50 care centers. In the first quarter on an annualized basis, these care centers generated $50 million in revenue and negatively impacted our results by $10 million. We expect to realize some of this improvement in earnings in the second quarter and most of the improvement by the end of the third quarter.

The second initiative is a reduction in our corporate infrastructure. This action, which has already occurred, will generate $5 million dollars in annualized savings. We will realize about half of the savings in the second quarter and achieve the full run rate in the third quarter.

The third initiative is to accelerate our strategy of patient care management, which is directed at yielding positive clinical results and consistency of care at lower costs. We're focused on delivering the optimum level of care to drive improved clinical outcomes and consistently deliver that across all of our operations. We have been refining our care protocols to satisfy utilization criteria in some of our managed care markets and to position the Company to participate in bundles and ACO initiatives.

We have implemented these new patient care oversight processes in certain markets. The results of these efforts have shown that greater oversight and consistency in care can deliver both better outcomes and greater efficiency. Patient care management is an ongoing process and will continue to change as we gain experience from our managed care portfolio, bundles, and ACO initiatives. This process will continue to evolve as we make operational changes associated with the rollout of our shared service center model as mentioned in the last earnings call, and migrate to our next generation operating system. While we're not providing specific efficiency targets associated with improved patient care management, we're confident that they will be meaningful over time.

To conclude my prepared remarks, I would like to shift my comments to our employees. Many of them will be directly impacted by the initiatives we have announced today. I would like to thank all of our employees for all their hard work and commitment to Amedisys, but most of all for the services which they provide to our patients, and the passion in which they do it. We're a company of caregivers an providing care is what drives us.

I'll now turn the call over to Ronnie for his comments.

Thanks, Bill. In my comments to follow, I'll be comparing first quarter results both year-over-year and sequentially on an adjusted basis.

For the first quarter of 2013, we generated revenue of $339 million. This was a decrease of $32 million over the prior year and $24 million sequentially, on revenue declines on both our Home Health and Hospice divisions. Adjusted net income for the quarter was $4 million, or $0.13 per share, compared to $8.6 million, or $0.29 per share, in the prior year, and $7.2 million, or $0.23 per share, sequentially.

Home Health revenue declined $29 million year-over-year. While same store Medicare admissions were up 2%, our re-cert rate dropped almost 6 percentage points to 38%. Sequestration negatively impacted Home Health revenue with a 2% cut to episodes in progress at quarter end. Medicare revenue per episode, at $2,782 was down 3.5% from last year. Non-Medicare revenue at $51 million was down $8 million.

Hospice revenue declined $2.5 million year-over-year, or 3.6%, mainly on lower average daily census. On a same store basis, Hospice admissions were down 1% on a year-over-year basis, or flat when adjusted for leap year.

Our total gross margin for the quarter was 43.2%, only slightly reduced from the 43.8% earned in the prior year. As I mentioned previously, revenue per episode dropped $100 from last year. However, this decline in revenue was substantially offset by lower costs per episode. All other operating expenses decreased approximately $7 million compared to the prior year. However, this was not enough to offset the decline in revenue, resulting in an overall decrease in operating profit margins.

Adjusted EBITDA for the quarter was $17 million, or 5.1% of revenue, compared to $27 million, or 7.3%, in the prior year. Home Health revenue declined $18 million sequentially. In addition to the impact from our re-cert rate, which was down 2 percentage points, sequestration and revenue per episode negatively impacted the sequential comparison. Additionally, non-Medicare revenue was down $6 million.

Sequentially, our total gross margin was unchanged at 43.2%. Other operating expenses declined approximately $4 million. However, similar to year-over-year results, our overall operating profit margin compressed on lower revenue. Our adjusted EBITDA margin for the quarter was 5.1% compared to 6.4% in the fourth quarter.

Now turning to our balance sheet and liquidity. We generated cash from operations for the quarter of $32 million. We reduced accounts receivable outstanding by almost $25 million and DSO came down over 4 days to 37 days. Capital expenditures for the quarter were $10 million and we paid down $24 million-dollars in debt. We ended the quarter with debt of $79 million and a leverage ratio of 0.95 times EBITDA.

Finally, I'll turn to guidance. With the decline in revenue we experienced in the first quarter, and our initiative to exit certain markets, we now expect revenue for the year from continuing operations to be in the range of $1.280 billion to $1.320 billion. We expect earnings from continuing ops to be in the range of $0.45 to $0.55 per share on an estimated 31.5 million fully diluted shares outstanding. This guidance does not include any one-time costs we may incur associated with our announced market exit activity or corporate expense initiatives. We continue to project capital expenditures to be approximately $50 million during 2013.

Finally, this guidance includes an estimate of legal costs associated with our ongoing investigation at a similar level to the $8.5 million incurred in 2012.

This concludes our prepared remarks. Operator, please open up the call for questions.

(Operator Instructions). Our first question comes from the line of Kevin Campbell with Avondale Partners. Your line is open.

Good morning. Thanks for taking my questions. I was hoping you guys could start with additional commentary on your re-cert rate, maybe what trends were like during the quarter. Did it continue to decline over the course of the quarter, and therefore, maybe you have an even worse run rate for Q2? Or was it pretty stable throughout the period? And then secondly, how do your numbers compare with industry averages?

Thank you for your comments, Kevin. Again, re-cert rates are specific to patients. We're seeing some volatility in that. We talked about patient care management earlier. We have several markets that are under patient care management, most of our Humana heavy markets as well as other managed care that we're implementing this process on a Company-wide basis and in those markets we see a little less volatility.

We can't give you a prediction on what they're going to look like. In reference to the other markets and averages, we think our case mix is slightly higher than what we see on a national basis, and our re-certs are probably at this point slightly below average. So hopefully there's room for improvement if we get some consistency across all of our markets through our patient care management process.

What was the trend like during the quarter? Was it pretty consistent?

It bounced up and down quarter by quarter by a point.

Okay.

Month by month by a point.

Yes. I wanted to just get a little bit more color on this accelerating your strategy of patient care management. Can you maybe give us more details on what that means, and how that will impact you financially?

Well, you know again, we started with patient care management, probably about nine months ago. Also we indicated in the last earnings call that we're rolling out our shared service centers, and we have kind of aligned that with the initiatives of bundles that we're looking at, an we're aggregating multiple agencies in markets that are close together in a single unit and we call that kind of regional oversight.

So patient care management is really working on a market by market level, working in markets where we have regional oversight where we have the shared service center. For instance, by the end of June, we'll have 50% of our markets in these shared service centers. As a reminder, by the end of the year, we'll have between 70 and 72 shared service centers nationwide. In those centers, what we do is we centralize things like intake, some of the coding that we use our managers to provide, which takes some of the burred off of the individual care centers, and it helps us with the oversight of patient care management which is really reviewing every patient that we care for and putting another set of eyes that's not in the operations to better provide care for these patients.

And what we've seen in the markets that we've put it in, which have been significant amount of the markets, that the consistency across the markets has been kind of the same. The cost is actually going down and the outcomes have improved. So we're using the combination of the regional oversights, some central oversight to make sure that we get a look at every patient by exception on a central basis, and that way we educate the individual care centers to be more consistent in the way that they provide care.

We think this is important, one, to not only manage the managed care portfolio of the business, but more importantly, to manage the bundles and the ACOs because remember, as we move forward in those initiatives and we become partners with hospitals with bundles and ACOs, they're going to want to see a more effective and efficient utilization in the first place to make sure that the outcomes are improving, and we're seeing that across the board.

We're excited about that initiative and accelerating it as we roll out our shared service centers. And of course our new system, AMS-3, when that begins to be deployed at the end of the fourth quarter, we'll provide additional capabilities to give us a much earlier view into the patient care -- actually before the episode has started versus until waiting until after the episode begins. So we're excited about that as well.

And then lastly on the guidance. Does that include the impact of these 50 care centers at all or are they taken out starting April 1 and there's no impact from those 50 care centers where there will be closures, or will they be reduced radically over the period of the actual closures happening?

Kevin, this is Ronnie. We have certainly divestiture plans that we'll continue to work on, so we expect to see it over the course of the year. And our guidance does reflect some anticipation of success in our divestiture plan at some level.

In other words, it assumes the revenues and EBITDA is in the numbers until they're actually divested in your guidance?

Yes.

Okay.

And Kevin, of the 50, 11 are going to be consolidated and the other 39 will be positioned for divestiture.

Okay. All right, thank you.

Your next question comes from the line of Darren Lehrich from Deutsche Bank. Your line is open.

Good morning, this is Dana Nentin for Darren. Thanks for taking my call. On your debt covenants -- do those allow for restructuring add-backs and would there be any need to seek waivers?

There is some provision for structurally to accommodate, but I'd say generally speaking, we certainly are carrying and have plans to spend a relatively high level of CapEx, which the facility contemplated. Performance will help that before we have to ask for any waivers, of course.

Okay, great. And then can you talk to how many discharges you had in Hospice?

How many discharges? We had -- well, our net census declined by 160 in the quarter. We had 4,992 admits and 5,152 discharges.

Okay, great. And could you talk to what your live discharge rate was in Hospice?

It was a little bit lower this quarter. We're still in the low 20s, which is it has been there, and a bit lower in the first quarter of 2013.

Okay, great. Thanks a lot.

Sure.

Your next question comes from the line of John Ransom with Raymond James. Your line is open.

Hi. What are you guys hearing about rebasing, if anything, from CMS? And what do you think the industry's position is on that, just given that MedPAC think they're double digit margins, although current financials show financial deterioration more than the MedPAC would have shown?

John, as you now know, through the partnership, there's been a lot of activities with policy makers as well as the regulators. And we've shown some comparison of the public companies against MedPAC reports. We've also shown an impact analysis if they do no further cuts in the industry -- and you have several states underwater in 2017 with no cuts, just due to the lack of market basket and the productivity decreases that we'll see. So, from the policy makers, I can tell you I was there last week, and met both senators and representatives on both sides, and there's a concern, there's a gridlock. And we get attention of several of them that are listening and paying attention to the impact that a significant rebasing will make on the industry.

As far as CMS is concerned, it's been kind of close-lipped. The partnership met with them about three weeks ago. They didn't share a lot of information, but the industry has clearly taken a position that hospital agencies should obviously be included. We should use a GAAP method of accounting versus the cost base that MedPAC uses from the cost reports, that we need to rebase the positive margin versus zero margin, and we also need to include other expenses like we don't think they consider, like face-to-face and FAs.

We're having meaningful dialogue across the board. We think that even when the proposed rule comes out, we'll have an opportunity to make comments then and possibly influence that. As you said earlier, when you compare with MedPAC anticipates the 2012 margins are for the industry and what the public company analysis show, there's a huge disparity, about 9% to 10% to be actual. We are thinking we're getting the attention, but it will be a battle to the finish line.

I guess my other question is, if you step back and look at your revenue performance and your volume performance, after years of leading the industry, you've been lagging the industry. Why do you think that is? How long -- do you have any crystal ball as to when you might cycle through the negative revenue comparisons?

Yes. I think we're going to cycle through by year-end, John, I feel pretty good about that. I think the reason why we became first to last, couple of, three reasons. One, we've been a little bumpy with management and just general operational oversight. We have that in place now. We feel really good about our team. As a matter of fact, I feel the best I've ever felt, not only from the core business, but from the strategy moving forward and moving into new relationships with many hospitals as it relates to the Care Transitions and the bundled initiatives.

The other thing is I think the DNA of the Company to start with. At one point, we were buying anything anywhere what we thought for a reasonable price. If you take a look at the return on investment in the years 2007, 2008, and 2009, we didn't do as well with acquisitions that we did in earlier years. And then we had the pressure of all the cuts and reimbursement and our strategy was more diverse.

Currently we identified 70, 72 markets we want to be deep in. We've identified anchors which will be a large hospital, health center, large position portfolios, as well as managed care plays that we can align ourselves with to move in some kind of risk, no matter what that looks like, what form it looks like, and we feel our portfolio is naturally pruning to go us a go-deep strategy and less markets, markets that we're consolidating.

Part of it is we arrived buying anything, anywhere, distributed all over, a lot of start-ups, that used to have a six months to a couple-year return on investment that got stretched out with the reductions in reimbursements on that. And as with this last pruning, we got to the realization that we can't grow past these cuts in those certain markets, so we're going to divest those. And then put more resources in the markets that we do really well in. I think the Company will emerge much stronger towards the end of the year and with the strategy that's best positioned to take advantage of the trends with the ACA.

I realize you made comments about the acquisitions that maybe the strategy has changed. Is there anything in hindsight looking back on that maybe you wish you had done differently? In hindsight, did you react maybe too aggressively to the rule change and some of the change in certification is just a correction, maybe pushing that a little bit? How do you feel about that?

Well, I think, John, in hindsight you could always do things better. And I think what we're looking at is the proper way to really manage these care centers, to create that consistency. What we realized it can't be top-down or bottoms-up. You really have to have a combination of ongoing education and training in the field because that's where it really happens, and you've got to have the right structure to make sure that you can provide all of the care that's needed for the patients, but only the care that's needs and make sure you get the right outcomes, which we've seen with our patient care management.

The other piece is that our regional oversight is going to provide tremendous efficiencies and the ability to provide a lot of resources more locally, and allow also to provide that additional oversight as well as education. From the corporate prospective, what we're making sure is we catch the outlier -- so if they flip through stretch local and regional, we catch the outlier, we send it back through the regional, that's an opportunity to educate the care centers.

That's why I'm telling you at the end of the year we feel really comfortable with that because it will be in place by June 1 of this year, and I think we'll benefit with more consistency and better care for the patients, which just so happens to have the side effects of lowering our costs as well.

Thanks so much.

Thank you.

(Operator Instructions). Tour next question comes from the line of Brian Tanquilut of Jeffries. Your line is open.

Good morning, guys. Bill, I hate to go back to the re-certs, but I want to ask you, now that you're probably at the low of the end of the spectrum in industry in re-certs, is there anything proactively that you can do to arrest the slide?

Yes, Brian. Actually, as I mentioned earlier, we see less volatility in patient care management agencies, and again, we started that about nine months ago to take care of the volume concerns that Humana had. What we noticed is that we got much better consistency, we saw that throughout everything, not only utilization but recertifying indications.

We also saw better outcomes, so what we've done is we've accelerated this process of which we were doing already for the bundles that we have in many markets that we'll come to the market with as soon as we sign-off on those. But we need the same process for the managed care as we need for the bundles as we need for the ACOs. And we think that greater oversight both on a local, regional, as well as looking at it on an obligation to outlier basis from the corporate side will create less volatility in that recertification measurement.

We're hoping because of where we sit as compared to the average that we'll move more into the average and it will be a positive for the Company and a positive for the patients that we're caring for.

Got it. Bill, I noticed in one of your comments -- you said something about talking to CMS and making the argument not to rebase to zero and rebase to a positive margin. Is it your expectation that rebase will be to zero without your efforts?

Brian, we don't really have an expectation at this time. I think the process is unpredictable. I think what's happening is that everybody -- the regulators and the policy makers alike -- are dealing snapshots and they really need to look at the whole industry from kind of a panoramic prospective.

The bottom line is that there's a lot of information and the industry is getting cut in a bunch of different ways. I think our mission is to make sure that the policy makers and regulators are educated exactly what the reality in today's time is, not talking about 2011 numbers or 2010, but fast forward to 2013 and aligning the impact of all of the industry initiatives.

On top of that, I think also educating them that we can surgically really address some of the outlier and some of the fraud and abuse issues. As we know, most of that activity is in five states. A significant portion of it is in several counties. We've already addressed that with the outliers, and we think that the amount of recertifications that are going on in some markets, and amount of providers that are in some markets, are beyond a level that really positions us to provide the right care.

We think the fight for the first message, don't use a blunt instrument. Let us show you the full impact in today's real-time. Let's underscore the fact that the Home Health industry is where we need to move towards to drive the costs down and these chronic complex patients that spend far too much time towards the end of their life in facilities that cost a lot more care. You don't want to destroy the industry that is perfectly positioned to really help with the fiscal challenges that the country has faced.

We're giving all of that message together and there's a pretty significant effort in Washington, both on policy and regulatory side to do that, through ourselves, and our partners, and the partnership.

Thanks for that, Bill. Last question. Just wanted to hear your thoughts on the President's budget proposal, specifically on bundling. As you look down the road, how do you think you need to change your business or change the way you do things or the structure of your business as we prepare for eventuality that, that will happen?

I think the budget proposal is going to be a challenge to get through. I think, again, being on the Hill last week, you could tell everything is in gridlock. By the way, you have a great deal of frustration on both sides. My thoughts are is that the Democrats would like to open up the ACA and make some refinements to it, but they feel if they do that, the Republicans will get in and try to kill it. So they're at a stalemate.

I don't think the budget will get passed. There's some issues about copayments there. MedPAC has issues about copayments. If you take MedPAC's proposal, it would affect about a third of our patients that would have co-payments, so we're looking at that closely.

But more than anything, I think it's very clear where healthcare has to go. It's moving outside of the facilities for these complex patients, and you have a lot of hospitals right now that are getting sensitized to the readmissions. We're having that dialogue every day with hospitals across the nation. Our the care program that has taken and produced a lot of value for us.

The bundles, we have 40 hospitals that want to partner with us in our bundled initiative, and as a reminder, we're looking at that doing that in about 60 markets. That's not final. We have to see the final numbers from Medicare. CMS has postponed a bundle initiative until I think October of this year, which would give with us more time to prepare, more time to get our shared service centers standing, more time to get PCM in place, and we feel comfortable once we put it in place that we'll be successful on bundles.

But remember, if you're an ACA partner or a bundle partner, what your partners want to see is you providing as little care as possible to achieve the best outcomes, and our outcomes have to improve at the lowest costs. It's not the same way we are moving forward with the industry historically, and I think Amedisys is well-positioned to take advantage of a lot of the initiatives in the ACA.

Got it. Thanks, Bill.

Thank you, Brian.

Your next question comes from the line of Sheryl Skolnick with CRT Capital. Your line is open.

Good morning, everyone. I'm forced to ask this. You know, Bill, there have been a number of times when companies face challenges with respect to its results in which you've given a very optimistic outlook. Unfortunately, that optimism has not resulted in better performance, but instead the performance continues to deteriorate, and I would argue pretty dangerously with a 17% decline in re-certs year-over-year with an increase in cost per visit and with the shifts to the lower margin business.

I'm very concerned that perhaps we might be hearing more of the optimism and not enough of the caution in the Company's approach to the future. Especially as it seems it's been reactive to the changes in reimbursement, which clearly have been external and not of your own making, and with more to come.

So my question is this -- I hear you when you say you have confidence in the management and operating team you have in place. It sounds a little bit like blaming the past of these people where, with all due respect, they were the choice of you and the board. At what point does senior management become responsive in a sense to the board, to the shareholders, and actually begin to make necessary changes in this business, which I would argue might be very difficult to make and might result in the kind of cost reductions that would perhaps lead to more than just a $5 million cost savings, maybe each as much as 20% or 30% of the infrastructure might have to come out of this, at what point do you all bite this bullet rather than taking small bites, shrinking the business, then finding when you wake up nine months from now that rates are down again and business is oversized for the volume you're receiving?

Thank you for your question, Sheryl. I'll start off I think with reactive. We're not reactive. I asked my team not to even use that word. We use the word responsive. We think we have responded well to what the ACA will bring and how we're positioning our portfolio to take advantage of the new trend, which is absolutely going to happen. As I mentioned, forty hospitals stepped up to the plate and want to have a different relationship with Amedisys and our bundled program alone.

In addition, we have about 500 care transition coordinators that are distributed all over our market and we're working closely in hospitals to transition patients to help prevent that readmission. Those relationships are established in a different way.

I know the admissions increases that we've seen in the first quarter, in home care, while not impressive, are in a positive directions. Also, if you would look at recertification, eliminate some of the variation that's there, and you look at as we move forward, making sure the patients get the right care is important. We're working on making sure the clinical care is also provided.

The cuts that we've made recently in reference to the share centers I think is significant. We wanted to keep as many of them open as possible to be able to service as many markets, but we recognize that we can't be deep in every market. Now, we still have underperforming care centers, but we think these care centers, whether a revenue issue or expense issue, have an opportunity to be very successful, and they're also in markets that we intended to be deep in association with many partners and continuing to provide care in.

So we're going to prune this tree a couple, three, four branches at a time, and I think as I mentioned to John earlier, we're going to see a pretty positive trend by the end of the year. If we don't see that, then we have to take another hard look at the Company in the infrastructure that's there.

We've been criticized and I think by you, Sheryl, in reference to the capital costs that we've put forward in this organization. As a reminder, we have proprietary system now, we've not had an opportunity to upgrade that system over the last three years. This new system will absolutely put us at the forefront of technology and Point of Care technology and managing information, and being able to analyze data of any post-acute care system that's there.

Amedisys is expecting to move beyond just home care and Hospice. We're looking to be a portal of post-acute care. Any hospitals at the forefront, as well as managed care, of managing a population less expensive, we would hope that we would have the opportunity to manage that post-acute care space using our technology do that, continuing to provide services to Hospice and through home care, but also seeing patients in a much longer trajectory.

Said another way, Sheryl? My expectation is that in the future when patients are admitted to us, we literally keep oversight on them for years and not an episode of care or less than six months to the point of the end of life. We think that will be a real valuable partner to any hospital, health system, managed care payer, or physician ACOs that want to move in the business. I don't know if you've noticed, but the physician ACOs in the country have surpassed the hospitals for the first time in the recent couple months.

So I think the Company's strategically well-positioned. We don't want to prune more than we have to. At the end of the year, if we're not where we think we should be, we'll take another look at it.

I appreciate all of that insight into your thinking about the business. I guess I would clarify one thing, one thing I've not criticized you for is the capital investments in the business or the system. Perhaps that's another opportunity for analysis, especially given the fact that the basic scale of the business at this point seems to be having trouble keeping up with the cost structure.

But beyond that, I guess where I am concerned here is, and it's a very real question -- I appreciate the value that your vision would bring to the healthcare business, but who is going pay for that? Is the hospital going to pay for that? Is the ACO going to pay for that? Is the managed care payer going to pay for that? It gets to the classic question but very a specific one, because while you may be bringing value that's absolutely needed, I'm concerned with the compression of revenue on your base businesses coupled with the other issues that Amedisys seems to be having in finding its footing since the first collapse of the re-certs in June of 2010, that this new business endeavor may be ideally appealing, but in practice not very remunerative?

Well, Sheryl, I think if you take a look at the market trends and to answer your question in reference to who's paying for it, it's the providers stepping out there and willing to look at providing care, not in the old fee for service system, but in some type of global system.

And I think the payers will be the managed care Advantage companies, as well as the commercial plans that we're contracted with. There will be hospitals who want to step to the plate and take risks. It will be physicians. I think a lot of people are willing to pay for value. And it's pretty clear that we have to move away from volume to value and that's what the Company is doing.

Amedisys believes that we will continue to grow our core business. We believe that we will see tremendous opportunities not only in future acquisitions, but with partnerships of hospitals and health systems, as well as physicians, and we think our Hospice will grow as well as a result of our home care foot print. We think when we admit patients we'll keep them for long periods of time, not for direct care, but oversight and care to be needed and we're moving along with the intentions of the new ACA.

We are going to keep an eye on the core business and our expectations and if we're not there at the year-end, we'll take another hard look at the portfolio, but I feel pretty comfortable that everything will be moving in the right direction at that point in time.

Okay, thanks you.

Thank you for your questions. That was the last call. I thank everybody for calling in today and we look forward to sharing our results of our next earnings call for the second quarter. Everybody, have a great day.

This concludes today's conference call. You may now disconnect.