Amedisys, Inc.

Thank you, Lisa. Good morning, and welcome to the Amedisys Investor Conference Call to discuss the result of the fourth quarter and year ended December 31, 2011.

A copy of our press release is accessible on the Investor Relations page on our website.

Speaking on 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 or in our press releases that express a 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 of 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 Forms 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 laws.

Our company website address is amedisys.com. We use our website as a channel of distribution for important information, including press releases, analyst 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 or a filing with the Securities and Exchange Commission disclosing the same information.

In addition, as required by SEC Regulation G, a reconciliation of any non-GAAP measures mentioned during our call today to 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 Mr.

Bill Borne.

Thanks, Kevin. Good morning, and welcome to our fourth quarter earnings call.

We appreciate the opportunity to update you regarding the company's performance. 2011 was a challenging year for the home health industry and the company.

To begin the year, our Home Health division received a 5.2% reimbursement cut on Medicare revenue. Starting in the second quarter, our volumes and costs were negatively impacted by new regulatory requirements, including face-to-face and functional assessments.

As a result, we experienced declining revenues and margins on a year-over-year basis. However, we believe our focus on enhancing operational efficiency, cost containment and growth initiatives started to show positive results towards the end of the year.

Our fourth quarter results are $0.49 per share in earnings, on an adjusted basis, exceeded our expectations with costs less than anticipated and a small uptick in volume from what we expected, providing positive momentum as we move into the New Year. Looking ahead to 2012, our Home Health division will experience further Medicare reimbursement cuts.

For the industry as a whole, reimbursement has been cut 2.4%. For Amedisys, given the therapy and acuity mix of our patients, we estimate the impact to us will be approximately a negative 4%.

However, the initiatives we undertook in the third and fourth quarter of last year will help us address the 2012 reimbursement cuts. By year-end, we completed the closure and consolidations of the underperforming care centers that we announced on our last conference call.

We expect this to have a positive $10 million impact on profitability in 2012, as compared to the 2011 results.

Additionally, during the fourth quarter, we carefully reviewed our overhead costs. Based on this review, we implemented numerous cost-savings initiatives that we expect to have a further $10 million improvement to our 2012 results.

During 2011, we made a significant investment in our Hospice operations with the acquisition of Beacon. This acquisition added approximately $80 million in annualized revenues to our Hospice division, creating the fourth largest hospice business in the nation.

We're very pleased with this acquisition, our integration efforts and its operational performance. We are sharing best practices between Beacon and our legacy agencies, benefiting both operations.

Also, the geographic overlay with our existing home health care centers is allowing us to bring a more robust continuum of care to our patients in the Northeast.

As we announced last year, growing our Managed Care business is a priority for the company. I am pleased to report that we concluded 2011 with 240 plans under contract, an increase of 40% since the beginning of the year.

Same-store non-episodic admission growth grew 12% for the quarter on a year-over-year basis. Based on our fourth quarter results, non-Medicare revenue now comprises about 17% of the total Home Health revenue.

We continue to make progress on managed care business in 2012, with 2 major contracts signed to-date. We are now an in-network provider with UnitedHealthcare in 6 southeastern states covering an incremental 4.9 million commercial and Medicare Advantage plan participants.

The second contract is with Blue Cross and Blue Shield of Georgia, covering more than 3.2 million commercial and Medicare Advantage plan participants in the state of Georgia. This should benefit our relationships with referral sources as we will be able to substantially expand the number of their patients we can service on an in-network basis.

We also continue to invest in our IT infrastructure. Over the last 18 months, we have made significant upgrades to our accounting, human resource and patient information security systems.

Our operations are supported by a proprietary operating system which we refer to as AMS. This system is undergoing significant upgrades, including the rollout of a medical supply module that started in 2011, and adding Hospice to our point of care technology in 2012, and to our Mercury Doc physician portal in 2013.

As a reminder, we have over 9,000 physicians on our Mercury Doc system and our Home Health division.

Additionally, we've begun a process to upgrade our billing functionality and our clinical management architecture for implementation in 2013. These investments are necessary to support our strategy, compliance, growth, operational improvement and clinical excellence that will drive our business forward in the continuously evolving health care environment.

compelling demographics; patients' reference for home care when clinically appropriate; low cost of care delivery; increasing public acceptance of hospice; payors focused on cost savings opportunities when they look across provider silos; and readmission penalties driving more intense hospital interest in post-acute care services. With our scale, focus on clinical excellence and IT infrastructure, we think Amedisys is well-positioned to benefit from these favorable home care trends.

I would now like to turn the call over to Ronnie, who will comment more specifically on our 2011 financial results. After his comments, I will conclude our formal remarks with an update on activities in Washington, and the initiatives we are undertaking in 2012.

Thank you, Bill. During the fourth quarter and full year for both 2010 and 2011, we recorded a number of one-time items.

These items, as detailed in our earnings release, include goodwill and other intangible impairment charges, costs associated with agency closures and consolidation, legal expenses associated with governmental inquiries and certain other costs. Additionally, during 2010 and 2011, we closed 23 and 29 care centers respectively.

The results of operations for these care centers are presented in discontinued operations in our financial statements.

During 2010 and 2011, we also consolidated 62 and 32 care centers respectively. By consolidated, we mean closing a care center and consolidating its operations into another care center that operates in the same market area.

Consolidated care centers are included in continuous operations, but exit-related costs are considered one-time items. From my comments on this call, I will discuss our results on an adjusted basis and excluding discontinued operations.

During the fourth quarter, we generated revenue of $371 million compared to $389 million in the fourth quarter of 2010, and net income of $14 million or $0.49 per share compared to net income of $29 million or $1.03 per share during the fourth quarter of 2010. Our Home Health division experienced a decline in revenue of $49 million or 14% for the quarter versus the prior year.

Most of the decline is attributed to a 9% reduction in revenue per episode. This reduction, in turn, is due to the combination of the 5% reimbursement cut we experienced in 2011 and 4% due to the revenue impact associated with functional assessment -- the functional assessment requirement.

A reduction in volume drove most of the remainder, with same-store episodic admissions down 5% for the quarter. Our recertification rate remained fairly constant for the quarter at 44%.

Our Hospice division experienced an increase in revenue of $31 million or 81% for the quarter versus 2010. Most of this growth came from the Beacon acquisition.

Additionally, we saw an 18% same-store revenue growth which resulted from a 15% growth in same-store average daily census, and a 2% increase in revenue per day, reflecting the Hospice Medicare reimbursement increase. Same-store admissions were relatively flat.

Our gross margin was 45.5% for the quarter, a 410-basis-point decrease from the fourth quarter of 2010. Our Hospice gross margin was relatively flat at 46.8%, while our Home Health gross margin declined by 460 basis points to 45.2%, mainly due to the reimbursement cut.

Negative revenue impacts from face-to-face and functional assessment and general cost inflation also contributed to the decline in the gross margin. Our Home Health same-store cost per visit in the quarter was 1.4% higher than in the fourth quarter of 2010.

General and administrative expenses for the quarter were relatively flat at $143 million compared to the fourth quarter 2010, with cost reductions in our Home Health division offset by increases in our Hospice division, mainly associated with the Beacon acquisition. As a percentage of revenue, our expenses increased 190 basis points to 38.5%.

EBITDA for the quarter totaled $36 million or 9.6% of revenue compared to $58 million or 15% for the same period last year.

Turning to our fourth quarter results on a sequential basis. Our earnings per share of $0.49 compared favorably to the $0.41 we earned from continuous operations during the third quarter.

We also had a net loss during the third quarter of $0.05 on discontinued operations.

Our revenue on a sequential basis was essentially flat at $371 million. Hospice revenue increased $4 million to $68 million due to the Medicare reimbursement increase effective October 1, and an increase in average daily census of 3%.

The Home Health division saw a decrease in revenue associated with lower volume and the impact of the 2012 reimbursement cut on episode in progress at year-end. This was partially offset by an improvement in the revenue impact from functional assessments.

During the fourth quarter, the negative impact to revenue from functional assessments was $1.5 million versus $5 million in the third quarter. Our gross margin on a sequential basis was essentially flat at 45.5%, as our normally higher fourth quarter costs were offset by the reduced negative impact of functional assessments.

With essentially flat revenue and gross margins on a sequential basis, lower G&A costs of almost $4 million drove the quarter improvement and bottom line results.

For the year, we generated revenue of $1.47 billion compared to $1.6 billion in 2010, and net income of $66 million from continuing operations or $2.27 per share compared to net income of $131 million or $4.61 per share during 2010. Our Home Health division experienced a decline in revenue of $210 million for the year or roughly 14% for largely the same reasons as discussed in my fourth quarter year-over-year comments, which included the 5% reimbursement cut, impacts from face-to-face, the functional assessment requirement and a reduction in same-store admissions.

Our Hospice division experienced an increase in revenue of $79 million for the year or 57% growth. Most of this growth came from the Beacon Hospice acquisition.

Additionally, we saw 20% same-store revenue growth, with same-store admissions up 12% for the year.

Our gross margin was 46.6% for the year, a decline of 350 basis points from 2010. Our Hospice gross margin was relatively flat at 46.4%, while our Home Health gross margin declined 380 basis points to 46.9% from a combination of reimbursement cuts, the revenue impact of face-to-face and functional assessment.

Our same-store cost per visit was relatively flat compared to 2010.

General and administrative expenses for the year fell by almost $12 million as we adjusted our cost structure to the lower revenue level. EBITDA for the year totaled $156 million or 10.7% of revenue compared to $256 million or 16% for 2010.

Turning to our balance sheet. We ended the year with $48 million in cash, $145 million in debt, a leverage ratio of 1, and $231 million in availability under our revolving credit facility.

We generated $142 million in cash flow from operations during the year. Capital expenditures were $44 million, debt principal payments were $37 million, and we also funded $132 million in acquisitions during the year with cash on hand.

This morning, we are issuing revenue and earnings guidance for 2012. We anticipate revenue to be in the range of $1,475,000,000 to $1,525,000,000, and earnings to be in the range of $0.95 to $1.10 per share from continuing operations.

This is on an estimated 30.2 million fully diluted shares outstanding. In this guidance, we are assuming low single-digit episodic admission growth for the year.

And for income taxes, we are assuming a rate of 41.5%. Our guidance in 2012 includes an estimate of expenses associated with ongoing regulatory inquiries.

Of note, these expenses were approximately $7 million in 2011, and we are expecting a similar level of expense in 2012. In prior years, these costs were not included in our guidance.

And now I'll turn the call back to Bill.

Thanks, Ronnie. I will start with a brief regulatory update.

We're continuing to be very active in Washington. The 2013 budget process is underway with the release of the President's proposal earlier in the month.

Sequestration will result in an incremental 2% cut to both our Home Health and Hospice Medicare reimbursement in 2013, unless Congress acts to change this law. We're hopeful that CMS will focus and provide some clarity on rebasing, given its scheduled rollout beginning in 2014.

We believe the appropriate approach for Home Health to deliver savings to the Medicare system is to target fraud and abuse within the sector. There are a number of ways to do this selectively without negatively impacting the patients we serve or the providers that are operating appropriately.

Amedisys and other leaders in this space are engaging with policymakers to discuss reforms that will continue to ensure patient access and provide better operating environment for the industry. We will continue to have this dialogue with CMS, MedPAC and our elected officials.

Internally, we are focused on being the best Home Health and Hospice company in the industry. I am pleased with the regional and management realignment we implemented in the third quarter of last year.

Our leaders are working together collectively to improve the overall performance of the company.

First and foremost, that means delivering excellent clinical care. In the latest CMS outcome scores, we again achieved very good results, meeting or exceeding the average outcomes of our competitors and our footprint in each of the 8 categories currently being reported.

We are particularly focused on readmissions to hospitals, and believe telemonitoring can play a significant role in improving this metric. In 2011, we increased the number of telemonitors deployed by almost 50% to 2,800 units and expect this growth to continue.

We made additional investments in our clinical leadership, adding a Chief Medical Director for the company, a Chief Clinical Officer for Home Health and a Chief Clinical Officer for Hospice.

Our second business fundamental is growth. We struggled with internal growth in 2011, and we are very focused on regaining a positive internal growth.

The main focus for us is growth in managed care, as discussed in my opening comments; expand value-added relationships with hospitals and health systems; enhance sales training and cross training between Home Health and Hospice; and implementation of market-specific sales plans that utilize the new CRM 2 we rolled out to our sales staff in 2011.

As mentioned, compared to our expectations, we saw slightly better volume results in the fourth quarter, and we are pleased with our admission performance for January and February.

Our third focus is operational efficiency. While we closed or consolidated 61 underperforming care centers in 2011, we continue to add care centers with negative contribution.

The reimbursement cuts we have experienced in 2011 and '12 have raised the breakeven point at which agencies can operate profitably. We are focused on improving the performance of these care centers.

We will continue to reduce operating costs which are not detrimental to our growth and/or quality. We have seen an improving trend over the last few months in lost revenue associated with therapy functional assessments.

We anticipate further improvement in this metric throughout 2012.

In closing, our fourth quarter results were better than expected. We are optimistic as it relates to our organic growth based on recent trends.

I believe our 3-part focus will well position the company to capitalize on the long-term, favorable trends in our sector. I look forward to the opportunities that 2012 will bring.

We have great dedicated employees who understand their first job is to provide outstanding care to the patients we serve. I want to thank them for their commitment to the company and their hard work.

With their efforts, we can make this year a successful one.

Now we will open the call up for questions.

Bill, maybe we could start off with the managed care contracts that you guys recently announced. I guess, what's changed in the environment?

Has this always been a big focus for the company? And I guess, maybe you can provide a little color behind what drove these contracts with Blue Cross Blue Shield of Georgia, and UnitedHealthcare now?

And then how does that -- the managed care pipeline look? Do you have contracts in place of the other big commercial payors like Aetna and Cigna?

Well, thanks, Kevin. I mean, one thing that's changed is that Managed Care Advantage now has what historically was 25% now of the Medicare population.

And we're finding that our clients right now are referral sources from hospitals, discharge planners, as well as physicians, don't want to separate managed care from Medicare population. So we really feel that by accepting more managed care, it will offer us opportunities, obviously increase our referral sources for Medicare as well.

We're also finding favorable pricing and it's able to offset some of our incremental costs. And we're looking at cost structures and how we actually service managed care.

In some of the commercial plans, the patients are younger, less complex and the assessments that we use for these patients are less costly, so it has less overhead. So our overall focus there is to reduce our costs on a continual basis because we think we'll continue to find pressure from Medicare, and we'll have to drive our cost there as well.

So when you look at the products that we signed just recently, cumulatively, between United and Blue Cross, it's around 8 million patients and probably a little over 1.2 million Medicare Advantage, and the reimbursement changes and the program changes. So what we're doing is becoming very efficient on being able to bill and collect for those services.

And as I indicated, we had a 40% increase in managed care contracts last year. We expect to continue to see that trend.

All large national managed care players, we believe, are targets. We're starting with basically either episodic or pay-per-visit type of relationships.

But ultimately, we'd like to move up to a higher value and actually manage these complex patients and look at on unique ways to get reimbursed for those services. So we're excited about that.

Understood. And then are the commercial rates on those contracts, are they similar to what Medicare pays?

They are not equal, but they're better than they were years ago, Kevin. So we're pleased with the ability.

We have Bob Young and Todd Roscoe who have extensive managed care backgrounds. So they know the industry.

Right now, we're working with Milliman and Robinson, and really looking at adding value. So we're starting in many instances with a pay per visit or episodic, in some instances if it's Medicare Advantage, but we expect to move up the value chain with Managed Care.

So we're just beginning. We see some huge opportunities there.

As a reminder, it's not far from bundling when you collectively roll value together. So we see this as a first step to where the whole industry is going, not just our segment but health care in hospitals and managed care are going to all have to move in that direction.

Got it. And then just switching over to Hospice really quick.

Obviously, very good growth there with the acquisitions. But do you think the same-store revenue growth of about 18%, is that sustainable?

What's driving that strength? And then on Hospice as well, average length of stay ticked up about 8 days on a same-store basis year-over-year.

What's driving the increase in length of stay? Is it lower acuity patients?

Well, the Beacon Hospice acquisition had a higher percentage of patients that were in nursing homes. They have a longer length of stay.

We had very few in our legacy agencies, a lot lower percentage so when you blend them together, that trend tends to increase the length of stay. Again, the length of stay is just over the acceptable benefit of 180.

I think we're running in the 95, 98 length of stay range. So that's kind of what's driving that.

Hospice is -- we see a lot of opportunities there. The pricing is on the high end right now, of Hospice.

So we're being very selective in reference to acquisitions, so we see opportunities there. But what we really see by rolling our Home Care and Hospice divisions together, market by market, we see a lot of synergies with our sales force and local marketing activities, and we're actually enjoying a lot of growth and success from our Home Health footprint.

So as I mentioned earlier, even years ago, due to Amedisys' footprint and distribution in Home Care, I think we're very well-positioned to grow Hospice on the organic perspective. So we think that the growth is sustainable and depending on what acquisition opportunities come available, we might see some excitement in that area throughout this year as well.

This is Brian Zimmerman in for Darren. Can you dig in a little bit more into your cost reductions you made in the quarter, maybe provide some specific examples of what you were able to do to drive down the G&A costs?

This is Ronnie. The main issue there is we just -- in G&A, and overhead, we've driven down the cost there.

We did, for the quarter, see a little bit. We weren't quite probably as high in cost on an operating basis as we had anticipated.

So that was a little bit improvement there with the -- a little bit better volume than expected. But the costs we've taken out are overhead-targeted.

Okay. And then what sort of opportunities do you see for Beacon in 2012, to continue the integration and -- both from an operational and organizational standpoint?

Well, most of the integration with Beacon is complete. One of the things we talked about earlier is the point of care that we will be rolling out in all of our Hospice division, that includes Beacon.

Right now, they actually have a point of care system. We have provided some synergies, but we see some opportunities, again, to work and not only create savings but also grow.

And most importantly, it's the clinical strategy in the Northeast, of our Home Care, which existed up there. And as I mentioned in my opening comments, it provides more of a continuum.

It allows us to care for a patient from the home care to the Hospice should they fit in that category of patient, but it just allows us a better and more robust offering and more visibility. So we see that as a result, going to result in better market awareness and better internal growth.

And then we see some of the unique programs that Beacon has, helping us with our legacy agencies as well.

Bill, just going back to the managed care question that Kevin asked earlier. Several years back, 5 to 8 years ago, managed care was not really a big utilizer of home health.

So what has changed or what are you -- what do you have to do as a provider to increase adoption among the managed care plans and their beneficiaries?

Well, Brian, it's a good question. If you look at Medicare reimbursement to start with, on Medicare Advantage, about 5 years ago, the government put in an incentive for managed care companies to accept more higher acuity and more complex patients, and they paid them a higher reimbursement.

And so while the reimbursement increased to managed care, there wasn't a lot of activities to help drive the cost of that care down. And what managed care is realizing now with now reimbursement pressure, is they have to find ways different ways to approach the care of these very complex patients.

And I think they recognize home care is not only an extension to help reduce acute-care hospitalization, reduce LTACs or a SNF stay, but in some instances, it may actually be an alternative. So I think it's just the complexity of the patients that managed care is currently taking care of.

And I think over a period of time, they're recognizing with technology and advancements in care protocol, that home care can do a lot more. So it's all converging.

And again, as I mentioned, the Affordable Care Act and all the activities that are going around bundling in ACOs, pushing everybody to look dynamically at how to approach care different. And it's undisputed that the Home Care venue is the least cost of all the venues that are out there.

So all those together, emerging.

But Bill, what do you need to do as a company to really take advantage of that opportunity and capture that flow?

Right. Brian, we've been doing it.

Our proprietary technology, having all of the information electronically available. As a reminder, last year, we went wireless for all of our systems.

Our new AMS/3 system will allow us to have realtime access to communicate not only with the physicians, but also the managed care companies. So collectively, we're creating information system that will allow us to communicate with all the providers and share information with managed care.

So that's a big part of it. The second part of it is at some point in time, in specific markets, identifying these complex patients that are challenging for these managed care companies to manage and provide more than just care management, which is kind of what they do, but in home care, quick access and ready access to these patients, early recognitions if they decompensate and to be able to provide some intervention to the patient in the home before they show up in the emergency room, which will ultimately result in a readmission.

So it's just taking what we've been building over the years and collectively offering a better product that moves up the value continuum from the managed care perspective.

Got it. And then my follow-up question for Ronnie.

So SG&A, is this a good run rate to start thinking about the Q4 run rate? And also, I just want to clarify that the litigation expenses or the regulatory expenses that you had been excluding is now included in the guidance?

I'll answer the latter first, yes. Those expenses are now included in the guidance and that we won't consider them one-time items.

And all -- the G&A, we're getting to a good run rate. I think that's a good spot to fit it from, on the fourth quarter there.

I wanted to start just with sort of your general thoughts on M&A in the home health side and what you think needs to happen before you would feel more comfortable getting very acquisitive there?

Well, Kevin, we still have some uncertainty. On file -- one of the issues we're dealing with is the sellers' expectations haven't come down again with 2011 adjustments, in my opinion, much less 2012.

So there's some gap, reality gap, that needs to happen. The other issue is we still got some uncertainty, uncertainty of 2012, '13, what's going to happen with sequestration.

We also need some clarity on rebasing. I think as a result, some of the case mix adjustments that we see in '11 and '12, and then a sequestration, maybe most of that rebasing is done.

However, we don't have enough color on that. So a little more color and then we need to have some certainty with reimbursement, as well as the expectations need to be reset.

I will tell you that as we look forward on M&A activity, we're looking to go very deep in markets. So we're looking for agencies that have critical mass in markets that we want to have a strong presence in.

We are probably not going to look at an agency that has distribution in small areas, maybe a lot of rural sites. We're looking really to increase our concentration in those markets.

And we're starting to see some activity. And we have an interest but not quite there yet with the uncertainty that we see in the home care side.

Okay, great. And then Ronnie, on the G&A, the stock option expense in the quarter was $28,000, it looks like.

So: A, why was it so low and maybe what should we assume for that number going forward?

Yes, that's -- from the face of the statements, you can't really see what's going on. We completely -- you picked up part of it, obviously, and we beat our guidance on the top side, about $0.14.

And I would -- there's a lot of moving parts, but it basically distills down into a couple of issues, compensation being one of them. That one line item, you see the non-cash comp is part of it, there were lower incentive compensation accruals also in the quarter.

And that was a big piece of the improvement from guidance. But the other part on kind of a go-forward basis, we did experience much better results on functional assessment in the fourth quarter.

Our run rate was lower. So that's probably from what we anticipated.

That was probably about $0.03 better than what we expected but we also benefited in the fourth quarter from an over accrual that existed third quarter. We fairly conservatively applied it close to requirements and we found many episodes that we could go back and bill based on clarification of that interpretation.

So there was a benefit of that in the fourth quarter. So going forward, we think we have a much lower run rate on functional assessment going into next year.

And so that non-cash comp number, should that go back up to a $2.5 million number or so per quarter going forward?

Yes.

Okay. And then if I could, just one quick question.

On the Medicare Advantage sort of contract, are the rates there tied to your Medicare rate in general or are they independent of that?

Some are and some are independent. It's really a mix.

In any plan, you can have as many as 6, 8 variables. But some are tied and some are not, independent.

Can you give us maybe an approximate breakdown?

We're not going to give you that color. But ultimately, I think you'll see it reflected in the volume.

And again, we feel good about the rates and we've negotiated them and we feel very successful and it's a win-win for both us and the managed care companies.

I guess, first, I'm just trying to figure out how you guys are coming up with an estimate for a 4% rate cut in 2012. And I mean, the average for-profit provider in your geographies is going to see at least a 4% cut and then your therapy mix is higher than the average and within the therapy, you clearly, from analyzing your claims data, have a lot more than 20-plus visit level.

And those are just facts. So I can't see your budget obviously, but how do we make sense of how you get to a 4% rate cut?

I guess, what am I missing?

All right. Whit, just offhand, it's hard for me to comment on other organizations and how they calculate.

But what we've done is taken the new rate, reimbursement rates, we've taken our mix, we've looked at it historically and those are where the numbers are. So we feel pretty comfortable with that number and we spent a lot of time.

We've had this question, obviously, for 6 months now. So we spent a lot of time evaluating that and that's the number that we're comfortable with and we think that's a pretty good number.

Okay. And Ronnie, how much out-of-period EBITDA did you book in the fourth quarter from rebilling those unbillable visits?

We had -- let's see, that was $1 million.

Is there an opportunity to pick up more from those unbillable visits, as you go through 2012, or have you captured the majority of what you can rebill?

I wouldn't want to say we have more there. We continue to work on the issue and work through those episodes.

So I wouldn't bank on anything yet but certainly, that's an area that gets close scrutiny and an area of intense focus.

Okay. And I guess I was just curious, it seems that the RACs are now beginning to submit sort of test claims to provide -- or submitting requested test claims from the providers and clearly, they're going to roll out a much larger elevated claims review over the next year.

And then on the other hand, you've got Palmetto GBA doing their prepayment reviews. I guess, any impact there, how should we think about the challenges?

Or whatever, however you want to comment on that?

Whit, we've seen a couple of issues on the DPICs and I think we've disclosed those. We're challenging both of those.

With the RACs, we've had one inquiry that involved one patient that was a LUPA, and that's all we've seen to this extent. And we've been prepared.

If you could remember back in 2012, heavy education with our staff down to the care center in the clinical level. And we are -- believe that we're in good shape to be able to manage through issues.

But they're designed to come out and review these issues. If you take a look at something advance and sets our functional assessments, we're very conservative on how we approach that.

So for instance, if they come in and look at us there, we feel very comfortable. Even without technology, we're struggling to get functional assessment exactly right.

And I don't know how other companies are approaching that without the use of technology. But I guess, we will see when the RACs come out.

Okay. I guess, one of the questions I'm asking is just with, maybe, the MACs and I guess, specifically, Palmetto and the prepayment reviews.

Is that driving any increase in denial rates and/or has your ability to overturn those in sort of a review period, has that changed at all either?

I think we're seeing a little bit more activity on some focus headers, but it hasn't changed anything dynamically, Whit. I mean, we still have probably about 18 companies that are out there at any given time that are under some kind of focused review.

But we see a little more activity. But nothing that substantial, and really, it's all pretty insignificant stuff.

And it's just checks and balances that they're looking for, which I actually think is good. It keeps us on our toes and it keeps it in small sound bites.

Okay. And maybe one last one here is just maybe looking at guidance.

Just philosophically, how should we sort of look at the conservatism or is this realistic? Is this more aggressive?

I guess we'd like to get a sense for how you construct the guidance that Ronnie is new in the CFO role. So just want to know if anything changed there and I'll hop off?

Well, there is built in, as we said, for the year, we have low single-digit admission growth. And that's -- we can sort of try to be efficient with cost and we'll be focused on that.

But coming out of the blocks for the year, we're pleased with admissions. That will be -- while we'll see that for the year, we'll see the year-over-year growth kind of present itself in the latter part of the year.

So we think we're on a good platform. We think we can get there with low single-digit growth.

There's market growth out there that we feel strong about participating in and we're off to a reasonable start.

Got a couple of quick sort of modeling questions. I was hoping you guys could -- first off, what your CapEx was in the quarter, maybe what we think it should be in 2012, as well as your cash flow from ops in 2012?

Kevin, I don't have cash flow from ops right here. Let me see if I can -- see if I have that here in my notes.

CapEx for the quarter was $5.8 million. And projected for -- let me see, bear with me one second here and I'm going to look through my notes.

And CapEx for next year is $42 million, projected.

Okay. And maybe while you're looking for the cash flow from ops too, any thoughts on the breakdown of Home Health versus Hospice revenues in 2012, from your guidance, either percentage-wise or dollar-wise?

All right. Right now, Kevin, I think our Home -- our Hospice is running about -- 17% of our revenue is in Hospice.

And I think we will continue see Hospice grow. So I think that number will continue to increase, although we are expecting and hopeful that our Home Health revenue will grow as well.

Okay. And then in the exit activities and the certain costs, can you tell us which line items we should back those out of on the income statement if we're trying to get to your $0.49 number?

Is that all G&A?

It's not all in G&A. There are some -- let me see if there's anything that where it would otherwise fall.

I think it is all G&A. So take it out of that line and go back, cash flow from ops for the fourth quarter was $37.4 million.

And do you have a projection for 2012?

Our guidance would imply roughly $105 million.

Okay, great. So on the G&A, if we're looking at sort of a run rate, we should back those exit activities and certain costs out actually, and then add the $7 million because now your guidance going forward includes that and then add the non-cash comp number and that will get us to a more normalized number?

Is there anything else I'm missing?

The $7 million, just to make sure I understand your question. That's -- go back through that for me again, please.

Yes. So if we're looking at the fourth quarter G&A, we should sort of take that number and we can back out these exit activities and the certain costs, and then that would be a run rate, we can add the $2.5 million from the non-cash comp and then add whatever portion of the $7 million that is related to the SEC's and the finance committee investigations?

Oh, okay. Yes.

Thank you, Lisa. We appreciate everyone calling in to listen to our Fourth Quarter and Year-end Conference Call.

We feel that we're in a great position to capitalize in the long term, favorable trends in our sector. Again, we want to thank our employees for the effort that they provide to deliver outstanding care to our patients that we serve every day.

We look forward to our First Quarter 2012 Conference Call, and hope that you will be on the call again. Again, thanks, everybody, for calling in, and you all have a great day.