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Amedisys: clarity on cuts could ease share pain

By Kavyanjali Kaushik

(Reuters) - Amedisys Inc and other home healthcare providers would rather the U.S. government make the industry swallow a bitter pill of reimbursement cuts today than spread the pain over the next few years.

The sector faces a 3.35 percent cut in reimbursement rates over five years -- a prospect that has battered Amedisys shares and recalled a similar situation in the late 1990s when the Baton Rouge, Louisiana-based company was pushed close to bankruptcy.

"There's no fun waking up in the morning and seeing your stock continue to tumble because of the uncertainty in Washington," Chief Executive William Borne said in an interview.

"(The Center for Medicare and Medicaid Services) has to realize they are cutting into flesh now," Borne said, referring to the agency that reimburses provider costs for the elderly and poor covered by the government's insurance plans.

Instead, the Alliance for Home Health Quality and Innovation, which includes Amedisys and peers such as Gentiva Health Inc, Almost Family and LHC Group Inc, is lobbying Washington to accelerate the 2012 cuts that are spread out until 2017.

"Bring it forward and deal with it now so we can move forward and be more proactive versus reactive," said Borne, who has been chairman and CEO since founding the company in 1982.

If accelerated, the group believes this will help lift an overhang on the stocks, which would otherwise be under pressure for the next 5 years.

Amedisys, currently worth $393 million, has lost more than three-quarters of its market value in 18 months on the reimbursement cuts and government investigations into the industry's billing practices.

SEEKING CLARITY

Borne said that in the first half of next year, Amedisys would look for acquisitions targeting about 53 percent of the healthcare agencies that are going to lose money because of the cuts. With the exception of hospital-based agencies, these are not typically well capitalized firms.

"If we get clarity (on the cuts), it makes those consolidations easy, but if we don't have clarity ... on rebasing in 2012, then we're going to be a little more skeptical to go out there and stretch our balance sheets," said Borne.

Rebasing, which will reset the baseline of the cuts to present Medicare spending rather than 1996 rates, is due to begin in 2014 and continue through 2017. The industry wants the rebasing brought forward to 2012 and completed by 2013.

"(The government) wants the industry to consolidate and have less players with more market share," said Borne, who is a registered nurse.

Like its peers, Amedisys is looking to diversify into the hospice industry, which saw a 2.5 percent increase in reimbursement for 2012. In April, Amedisys acquired privately-held Beacon Hospice for $125 million.

Borne said he can comfortably spend $330 million of capital next year for acquisitions, and remains hopeful that, despite the cuts, next year will see a long-delayed industry consolidation. (Reporting by Kavyanjali Kaushik in Bangalore, Editing by Anthony Kurian and Ian Geoghegan)

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