Amedisys Warns That Floods, Tech Transition Will Hurt Earnings

Following a strong earnings report for the second quarter of 2016, Amedisys Inc. (Nasdaq: AMED) has released preliminary financial results from the third quarter to warn its investors that earnings are going to miss the mark due to high costs in the quarter ended September 30.

Amedisys, the nation’s second largest home health care provider, achieved planned operating efficiencies during the quarter but was hit by unexpected cost increases, according to a press release issued Thursday.

For the third quarter of 2016, the company anticipates revenue of approximately $362 million, according to the press release. This is slightly higher than average analyst expectations of $361 million, according to Yahoo Finance.

However, the company stands to take a hit on earnings per share. Amedisys is anticipating this will be in the $0.33 to $0.35 range, whereas analysts put that at $0.44 on average.

Health insurance expenses rose $2.5 million above seasonal levels, and bad debt expenses reached $1.2 million above recent trends. During the quarter, the company faced challenges when high floods devastated its base of Baton Rouge, Louisiana, and impacted employees.

“Our August growth results were disappointing as we worked through some challenging events in the organization, including the disastrous flooding in Baton Rouge,” Paul Kusserow, president and CEO of Amedisys, said in a press release. “Our corporate headquarters in Baton Rouge were closed for a week and over 30% of our employee’s homes in the area were flooded. Additionally, we faced the most challenging quarter of our Homecare Homebase implementation.”

Due to the conversion to Homecare Homebase, the company experienced a $37.5 million increase in net patient accounts receivable since December 31, 2015.

“During the quarter, home health care centers representing approximately 50% of our patient census were in some phase of the implementation [of Homecare Homebase],” Kusserow said. “As planned, the last group of 32 care centers will go live on the system next Monday, October 31. This project has been an extensive undertaking executed at a remarkably fast pace and will be completed on time.”

Amedisys’s transition to Homecare Homebase was announced in early 2015 after the company abandoned its home-grown software system, AMS3. The transition was expected to take 18-24 months.

“The extensive disruption in the third quarter and the winding down of the Homecare Homebase implementation in the fourth quarter will likely lead to some continued softness in home health volume,” Kusserow added. “However, we are excited about the foundation we are building and are confident in our 2017 plan.”

Amedisys will issue its earnings for the third quarter on November 3, after the market closes. The company’s share price was down 3.71% at the time of press, according to Yahoo Finance.

Written by Alana Stramowski