-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WMjwu7Zw72uhYlKY8fX52Nn7ULwJ/QfbF2M08f1pwirjDGHoYXeHrKysnnYv1i/x CI99N/B6a85PRnUlSm6iiQ== 0001193125-08-219984.txt : 20081030 0001193125-08-219984.hdr.sgml : 20081030 20081030121859 ACCESSION NUMBER: 0001193125-08-219984 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20081030 ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20081030 DATE AS OF CHANGE: 20081030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMEDISYS INC CENTRAL INDEX KEY: 0000896262 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOME HEALTH CARE SERVICES [8082] IRS NUMBER: 113131700 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-24260 FILM NUMBER: 081150122 BUSINESS ADDRESS: STREET 1: 5959 S SHERWOOD FOREST BLVD CITY: BATON ROUGE STATE: LA ZIP: 70816 BUSINESS PHONE: 2252922031 MAIL ADDRESS: STREET 1: 5959 S SHERWOOD FOREST BLVD CITY: BATON ROUGE STATE: LA ZIP: 70816 FORMER COMPANY: FORMER CONFORMED NAME: ANALYTICAL NURSING MANAGEMENT CORP DATE OF NAME CHANGE: 19940819 FORMER COMPANY: FORMER CONFORMED NAME: M&N CAPITAL CORP DATE OF NAME CHANGE: 19930125 8-K 1 d8k.htm FORM 8-K Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 30, 2008

Commission File Number: 0-24260

 

 

LOGO

Amedisys, Inc.

(Exact Name of Registrant as specified in its Charter)

 

 

 

Delaware   11-3131700

(State or other jurisdiction of

incorporation or organization)

  

(I.R.S. Employer

Identification No.)

5959 S. Sherwood Forest Blvd., Baton Rouge, LA 70816

(Address of principal executive offices, including zip code)

(225) 292-2031 or (800) 467-2662

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Section 8 — Other Events

 

Item 8.01. Other Events.

We have furnished as Exhibit 100 to this Current Report on Form 8-K (the “Form 8-K”) the following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed with the Securities and Exchange Commission on October 28, 2008, formatted in eXtensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007; (ii) Condensed Consolidated Income Statements for the Three and Nine-Month Periods Ended September 30, 2008 and 2007, respectively; (iii) Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2008 and 2007, respectively; and (iv) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text. Users of this data are advised pursuant to Rule 401 of Regulation S-T that the financial and other information contained in the XBRL documents is unaudited and these are not our official publicly filed financial statements. The purpose of submitting these XBRL formatted documents is to test the related format and technology and, as a result, investors should continue to rely on the official filed version of the furnished documents and not rely on the information in this Form 8-K, including the information attached as Exhibit 100, in making investment decisions.

In accordance with Rule 402 of Regulation S-T, the information in this Form 8-K, including Exhibit 100, shall not be deemed to be “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference to this Form 8-K in such filing.

Section 9 — Financial Statements and Exhibits

 

Item 9.01. Financial Statements and Exhibits.

(a) Financial statements of business acquired.

Not applicable

(b) Pro forma financial information.

Not applicable

(c) Shell company transactions.

Not applicable

(d) Exhibits.

 

Exhibit No.

   

Description

100    The following materials from Amedisys, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on October 28, 2008, formatted in eXtensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007; (ii) Condensed Consolidated Income Statements for the Three and Nine-Month Periods Ended September 30, 2008 and 2007, respectively; (iii) Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2008 and 2007, respectively; and (iv) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.

 

2

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

AMEDISYS, INC.

(Registrant)

By:  

/s/ Dale E. Redman

  Dale E. Redman
  Chief Financial Officer and Duly Authorized Officer

DATE: October 30, 2008

 

3

Exhibit Index

 

Exhibit No.

   

Description

100    The following materials from Amedisys, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on October 28, 2008, formatted in eXtensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007; (ii) Condensed Consolidated Income Statements for the Three and Nine-Month Periods Ended September 30, 2008 and 2007, respectively; (iii) Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2008 and 2007, respectively; and (iv) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.

 

4

EX-100.INS 2 amed-20080930.xml XBRL INSTANCE DOCUMENT 1050723000 7529000 0 27000 -92000 5852000 15535000 318957000 179768000 121497000 200463000 701113000 44480000 521657000 1050723000 192908000 316015000 43716000 778000 7872000 24280000 6882000 0 7159000 80387000 209911000 528288000 515000 4631000 5664000 6688000 0.88 0.87 1923000 151122000 5885000 38619000 15144000 5033000 200000 72124000 -18000 23493000 0 -5019000 43638000 40641000 -186000 6228000 321561000 27018000 26556000 277923000 -50526000 17939000 187000 2764000 -611000 557000 18783000 -13501000 54829000 36661000 211000 -1963000 10406000 331480000 -468840000 86834000 2126000 0 8124000 447082000 20610000 0 4542000 412000000 0 13000 2757000 2665000 85124000 4244000 813000 3223000 0 0 600000 406000 8726000 1761000 21700000 21700000 2.29 2.25 4244000 400644000 15728000 99551000 39253000 11607000 938000 190823000 -43000 60341000 0 -10678000 110229000 110146000 -9000 15505000 847319000 26835000 26363000 737090000 587111000 6771000 0 26000 10000 18495000 14438000 297802000 96309000 66667000 164513000 332534000 14301000 139291000 587111000 101736000 12991000 11049000 849000 5991000 7450000 6069000 0 6023000 68313000 149570000 446971000 437000 2811000 56190000 66592000 15892000 0.78 0.77 828000 84460000 3853000 30597000 10391000 209000 965000 38078000 -10000 20216000 4212000 4861000 25736000 24299000 -107000 3656000 180910000 26332000 25899000 155174000 -17629000 3755000 0 1134000 -301000 -43000 17455000 -1215000 19442000 22811000 -1458000 260000 260000 2152000 -101543000 81762000 5501000 4212000 0 79154000 23087000 89000000 0 0 89000000 3091000 2138000 1896000 3016000 2359000 0 -4189000 -216000 1136000 698000 0 4627000 1955000 0 0 1.88 1.85 2359000 235798000 9624000 76571000 28183000 476000 3120000 108902000 -10000 48398000 4212000 6102000 70469000 67764000 -754000 9032000 503948000 26192000 25768000 433479000 84221000 1. Nature of Operations and Summary of Significant Accounting Policies Amedisys, Inc., a Delaware corporation, and its consolidated subsidiaries ("Amedisys," "we," "us," or "our") is a multi-state provider of home health and hospice services with approximately 87% of our net service revenue derived from Medicare for both the three and nine-month periods ended September 30, 2008. As of September 30, 2008, we were located in 35 states within the United States, the District of Columbia and Puerto Rico with the following number of agencies. The agencies that were closed in 2008 were consolidated with agencies servicing the same areas. Owned and Operated Agencies Managed Agencies Home health Hospice Home health Hospice At December 31, 2007 325 29 4 2 Acquisitions 122 11 - - Start-ups 20 4 - - Closed (6 ) - - - At September 30, 2008 461 44 4 2 Basis of Presentation In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly our financial position at September 30, 2008 and December 31, 2007, and our results of operations for the three and nine-month periods ended September 30, 2008 and 2007 and our cash flows for the nine-month periods ended September 30, 2008 and 2007 in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). Our results of operations for the interim periods presented are not necessarily indicative of results of our operations for the entire year and have not been audited by our independent auditors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from the interim financial information presented. This report should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission ("SEC") on February 27, 2008, which includes information and disclosures not included herein. Use of Estimates Our accounting and reporting policies conform with U.S. GAAP. In preparing the condensed consolidated financial statements, we are required to make estimates and assumptions that impact the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates. Reclassifications and Comparability Certain reclassifications have been made to prior periods' financial statements in order to conform to the current periods' presentation. For instance, we have reclassified $5.2 million and $14.8 million from our general and administrative expenses to our cost of service for health care insurance costs and other miscellaneous expenses, which are associated with our direct care employees for the three and nine-month periods ended September 30, 2007, respectively. Finally, as a result of our rapid growth, primarily through acquisitions, including the TLC Health Care Services, Inc. ('TLC') acquisition, our operating results are not comparable for the periods that are presented. Principles of Consolidation These condensed consolidated financial statements include the accounts of Amedisys, Inc. and our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in our accompanying condensed consolidated financial statements, and business combinations accounted for as purchases have been included in our condensed consolidated financial statements from their respective dates of acquisition. In addition to our wholly owned subsidiaries, we also have certain equity investments that are accounted for as set forth below. Equity Investments We consolidate subsidiaries and/or joint ventures when the entity is a variable interest entity and we are the primary beneficiary, as defined in the Financial Accounting Standards Board Interpretation No. 46R, Consolidation of Variable Interest Entities ('FIN 46R'), or if we have controlling interests in the entity, which is generally ownership in excess of 50%. Third party equity interests in our consolidated joint ventures are reflected as minority interests in our condensed consolidated financial statements. For subsidiaries or joint ventures in which we do not have a controlling interest or for which we are not the primary beneficiary as defined by FIN 46R, we record such investments under the equity method of accounting. Revenue Recognition We earn net service revenue through our home health and hospice agencies by providing a variety of services almost exclusively in the homes of our patients. This net service revenue is earned and billed either on an episode of care basis (on a 60-day episode of care basis for home health services and on a 90-day episode of care basis for the first two hospice episodes of care and on a 60-day episode of care basis for any subsequent hospice episodes), on a per visit basis or on a daily basis depending upon the reimbursement terms and conditions established with each payor for services provided. We refer to home health revenue earned and billed on a 60-day episode of care as episodic-based revenue. For the services we provide, Medicare is our largest payor, representing 87% of our net service revenue during the three and nine-month periods ended September 30, 2008. When we record our service revenue, we record it net of estimated revenue adjustments and contractual adjustments to reflect amounts we estimate to be realizable for services provided, as discussed below. We believe, based on information currently available to us and based on our judgment, that changes to one or more factors that impact the accounting estimates (such as our estimates related to revenue adjustments, contractual adjustments and episodes in progress) we make in determining net service revenue, which changes are likely to occur from period to period, will not materially impact our reported financial results, our liquidity or our future financial results. Home Health Revenue Recognition We primarily earn our net service revenue for home health services from Medicare. The remainder of our net service revenue for home health services comes from Medicaid and other insurance carriers, including Medicare Advantage programs for patients who have chosen these plans rather than traditional Medicare benefits. The revenue earned from these other insurance carriers can either be reimbursed on episodic-based rates or per visit rates depending upon the reimbursement terms and conditions established with these payors. Medicare Revenue Medicare reimburses us at rates based on the severity of the patient's condition, his or her service needs and other factors relating to the cost of providing services and supplies, bundled into 60-day episodes of home health care. An episode of home health care spans a 60-day period, starting with the first day a billable visit is furnished and ending 60 days later or upon discharge, if earlier. If a patient is still in treatment on the 60th day, an assessment is made to determine if the patient would benefit from an additional episode of care; and if so, a recertification occurs and a new episode begins on the 61st day, regardless of whether a billable visit is rendered on that day and ends 60 days later. The first day of a consecutive episode, therefore, is not necessarily the new episode's first billable visit. A base episode payment is established by the Medicare Program through federal legislation for all episodes of care, as follows: Base episode Period payment (1) January 1, 2007 through December 31, 2007 $ 2,339 January 1, 2008 (2) 2,337 January 1, 2008 through December 31, 2008 (2) 2,270 (1) The actual base episode payment rates, as presented in the table, vary depending on the home health resource groups ('HHRGs') to which Medicare patients are assigned; the per episode payment is typically reduced or increased by such factors as our patient's clinical, functional, and services utilization characteristics. (2) On August 22, 2007, the Office of the Actuary of the Center for Medicare and Medicaid Services ('CMS') issued its final rule to redefine and update the Home Health Prospective Payment System ('PPS') for calendar year 2008 ('final rule'). The final rule provides more precise coding for morbidities and the differing health characteristics of longer-stay patients by increasing the number of HHRGs from 80 to 153, accounts more appropriately for the impact of rehabilitation services on resource use, and replaces the single threshold (10 visits per episode) with three thresholds (at 6, 14 and 20 visits). The final rule also establishes a system based on severity between each threshold and imposes new quality of care data collection requirements, among other requirements. As it relates to the system of payment based on severity between each episode of care, the final rule has differentiated base episodic payment amounts to provide funding for care that demands more in service needs, by basing the amount paid to each home health provider on the number of consecutive episodes of care (recertifications) that have been provided to each patient and the number of therapy visits that have been provided in each episode of care. For instance, a patient who is in episode one or two is considered to be in an early episode and patients in episodes three or greater are considered to be in late episodes. In addition to the differentiation, discussed above, of each episode of care as an early or late episode, the final rule also calculates the payment made by Medicare to the home health provider by considering the number of therapy visits completed within each episode of care, with different threshold ranges, discussed above. Thus, if the home health provider has a census with a higher acuity mix and multiple co-morbidities that require more intensive services, then the provider could experience an increase in their revenues. On the other hand, providers who service patients with lower acuity and less functional impairments, who require less intensive services, could experience reduced revenue as payment is linked more closely to the comprehensive condition of the patient under the final rule. As a result of the final rule changes, episodes that began prior to December 31, 2007, but concluded after January 1, 2008 were reimbursed at the base rate of $2,337 and episodes that began on or after January 1, 2008 and conclude prior to December 31, 2008, will be reimbursed at the base rate of $2,270. Net service revenue is recorded under the Medicare reimbursement program (PPS) based on a 60-day episode reimbursement rate that is subject to adjustment based on certain variables including, but not limited, to: (a) an outlier payment if our patient's care was unusually costly; (b) a low utilization adjustment ('LUPA') if the number of visits was fewer than five; (c) a partial payment if our patient transferred to another provider or we received a patient from another provider before completing the episode; (d) a payment adjustment based upon the level of therapy services required (thresholds set at 6, 14 and 20 visits); (e) the number of episodes of care provided to our patient, regardless of whether the same home health provider provided care for the entire series of episodes; (f) changes in the base episode payments established by the Medicare Program; (g) adjustments to the base episode payments for case mix, geographic wages and low utilization; and (h) recoveries of overpayments. Prior to the implementation of the final rule, revenue was also subject to adjustment if there were significant changes in our patient's condition during the treatment period; however, this adjustment is no longer available under the final rule. We make adjustments to Medicare revenue on completed episodes to reflect differences between estimated and actual reimbursement amounts, an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. We estimate the impact of such payment adjustments based on our historical experience, which primarily includes a historical collection rate of over 99% on Medicare claims, and record this estimate during the period in which services are rendered as an estimated revenue adjustment and a corresponding reduction to patient accounts receivable. Therefore, we believe that our reported net service revenue and patient accounts receivable will be the net amounts to be realized from Medicare for services rendered. For the three and nine-month periods ended September 30, 2008, we recorded $2.0 million and $4.1 million, respectively, in estimated revenue adjustments to Medicare revenue as compared to $0.9 million and $2.5 million during the three and nine-month periods ended September 30, 2007, respectively. In addition to revenue recognized on completed episodes, we also recognize a portion of revenue associated with episodes in progress. Episodes in progress are 60-day episodes of care that begin during the reporting period, but were not completed as of the end of the period. We estimate this revenue on a monthly basis based upon historical trends. The primary factors underlying this estimate are the number of episodes in progress at the end of the reporting period, expected Medicare revenue per episode and our estimate of the average percentage complete based on visits performed. As of September 30, 2008 and December 31, 2007, the difference between the funds received from Medicare for a request for anticipated payment ('RAP') on episodes in progress and the associated estimated revenue was included as a reduction to our outstanding patient accounts receivable in our condensed consolidated balance sheets for such periods, since only a nominal amount represents cash collected in advance of providing services. Non-Medicare Based Revenue We earn our net service revenue for home health services through episodic-based rates or through per visit rates (non-episodic based) from Medicaid and other insurance carriers, including Medicare Advantage programs, for patients who have chosen these plans rather than traditional Medicare benefits. Episodic-based Revenue. We recognize revenue in a similar manner as we recognize Medicare reimbursed revenue for episodic-based rates that are reimbursed by Medicaid and other insurance carriers, including Medicare Advantage programs; however, these rates can vary based upon the terms and conditions set with these various payors. Non-episodic Based Revenue. We receive non-episodic based revenue from other sources for home health services, which primarily consist of private insurance companies, Medicare Advantage programs and private payors. We have entered into agreements with such third party payors that provide payments, generally on a per visit basis, for services rendered at amounts different from established rates. Gross revenue is recorded on an accrual basis based upon the date of service at amounts equal to our established rates or estimated reimbursement rates, as applicable. Contractual adjustments are recorded for the difference between our standard rates and the contracted rates to be realizable from patients, third parties and others for services provided and are deducted from gross revenue to determine net service revenue and as a reduction to our outstanding patient accounts receivable. In addition, we receive a minimal amount of our net service revenue from patients who are either self-insured or are obligated for an insurance co-payment. Hospice Revenue Recognition We recognize net service revenue for hospice-related services based on the payor type. Hospice Medicare Revenue Hospice services are generally billed to Medicare on a monthly basis for all patients. Medicare pays hospice agencies a daily rate for each day a beneficiary is enrolled in the hospice benefit and has established payment amounts for specific categories of covered hospice care, including routine home care days, continuous home care days, inpatient respite care days and general inpatient care days. The Medicare hospice benefit includes two fixed annual caps on payment, both of which are assessed on a provider number basis. One cap limits the number of days of payment at the inpatient (i.e. in a hospital or other medical facility) care rate; the other cap is an absolute dollar amount payment cap per provider number. Inpatient Cap. The inpatient cap limits the number of days of inpatient care (both respite and general) provided under a particular hospice provider number to not more than twenty percent of the total number of days of hospice care (both inpatient and in-home) furnished to all patients served under that provider number. The daily reimbursement rate for any inpatient days of service in excess of the cap amount are calculated at the routine home care rate. Any amounts received in excess must be refunded to Medicare by the hospice provider. Overall Payment Cap. In addition, overall Medicare reimbursement is also subject to a cap amount calculated by the Medicare fiscal intermediary at the end of each hospice cap period to determine the maximum allowable payments per provider number. On a monthly and quarterly basis, we estimate our potential cap exposure using information available for both inpatient day limits as well as per beneficiary cap amounts. The total cap amount for each provider is calculated by multiplying the number of beneficiaries electing hospice care during the period by a statutory amount that is indexed for inflation. The per beneficiary cap amount is $22,386 for the twelve-month period ending October 31, 2008 and $21,410 for the twelve month period ending October 31, 2007. Any amounts received in excess of the beneficiary cap must be refunded to Medicare. We have settled our Medicare hospice reimbursements for all fiscal years through October 31, 2006 without exceeding any of the cap limits except for one provider number for which we have not received notification for the October 31, 2006 fiscal year. We do not believe we have exceeded the 2006 cap limits for that provider number. For the fiscal year ended October 31, 2007, we believe that we did not exceed any of the cap limits and will have no amounts due to the fiscal intermediary with the exception of one provider for which we have currently recorded $0.1 million in other accrued liabilities in our accompanying condensed consolidated balance sheets as of September 30, 2008 and December 31, 2007 for potential cap limit exposure related specifically to the October 31, 2007 cap year. For the fiscal year ended October 31, 2008, we believe that we will not materially exceed any of the cap limits. In addition to the payment caps discussed above, adjustments to Medicare revenue could result from differences between estimated and actual reimbursement amounts, an inability to obtain appropriate billing documentation or authorizations acceptable to the payor and other reasons unrelated to credit risk. We estimate the impact of such payment adjustments based on our historical experience, which primarily includes our historical collection rate on Medicare claims, and record this estimate during the period services are rendered as an estimated revenue adjustment and as a reduction to our outstanding patient accounts receivable. Therefore, net service revenue and patient accounts receivable are recorded at the estimated net amounts to be realized from Medicare for services rendered. Hospice Non-Medicare Revenue We have entered into agreements with third party payors, including Medicaid, which provide payments for services rendered at amounts different from established rates for hospice services. For these payors, we record gross revenue on an accrual basis based upon the date of service at amounts equal to our established rates or estimated reimbursement rates, as applicable. Contractual adjustments are recorded for the difference between our established rates and the amounts estimated to be realizable from patients, third parties and others for services provided and are deducted from gross revenue to determine our net service revenue and patient accounts receivable. Patient Accounts Receivable, Estimate of Allowance for Doubtful Accounts and Billing Practices Our patient accounts receivable are uncollateralized and primarily consist of amounts due from Medicare, other third-party payors and patients. We believe there is a certain level of credit risk associated with non-Medicare payors. To provide for our non-Medicare patient accounts receivable that could become uncollectible in the future, we establish an allowance for doubtful accounts to reduce the carrying amount to its estimated net realizable value. We believe the credit risk associated with our Medicare accounts is limited due to (i) our historical collection rate of over 99% from Medicare and (ii) the fact that Medicare is a U.S. government payor, which represents 67% and 69% of our gross patient accounts receivable at September 30, 2008 and December 31, 2007, respectively. Accordingly, we do not record an allowance for doubtful accounts for our Medicare patient accounts receivable which are recorded at net realizable value after recording estimated revenue adjustments as discussed above. Finally, other than Medicare, there is no other single payor that accounts for more than 10% of our total outstanding patient receivable. We believe there are no other significant concentrations of receivables that would subject us to any significant credit risk in the collection of our patient accounts receivable. We believe the amounts reflected in our patient accounts receivable net of estimated revenue adjustments and allowance for doubtful accounts represents the amount we will be reimbursed by Medicare and other third-party payors. In instances where we determine that receivables are uncollectible due to such things as expiration of timely filing requirements or credit risks associated with third-party payors, we will typically write off such claims. Our process for writing-off outstanding patient accounts receivable includes both identifying those accounts that should be considered for write off and analyzing each of these individual claims identified to determine their ultimate collectibility. Medicare Home Health Our Medicare billing process begins with a concerted effort to ensure that our billings are accurate through the utilization of an electronic Medicare claim review. We submit a RAP for 60% of our estimated reimbursement for the initial episode at the start of care or 50% of the estimated reimbursement for any subsequent episodes of care contiguous with the first episode for a particular patient. The full amount of the episode is billed after the episode has been completed ('final billed'). The RAP received for that particular episode is then deducted from our final payment. If a final bill is not submitted within the greater of 120 days from the start of the episode, or 60 days from the date the RAP was paid, any RAPs received for that episode will be recouped by Medicare from any other claims in process for that particular provider number. The RAP and final claim must then be re-submitted. Medicare Hospice For our hospice patients, our pre-billing process includes the keying of each patient's notice of election form to ensure that we are eligible for payment from Medicare for the services that we provide. Once each patient has been confirmed for eligibility, we will bill Medicare for the services provided to the patient on a monthly basis. Non-Medicare Home Health and Hospice For our non-Medicare patients, our pre-billing process begins with verifying a patient's eligibility for services with the applicable payor. Once the patient has been confirmed for eligibility, we will provide services to the patient and bill the applicable payor based on either the contracted rates or expected reimbursement rates, which are based on our historical experience. We estimate an allowance for doubtful accounts to reduce the carrying amount of the receivables to the amounts we estimate will be ultimately collected. Our review and evaluation of non-Medicare accounts includes a detailed review of outstanding balances and special consideration to concentrations of receivables from particular payors or groups of payors with similar characteristics that would subject us to any significant credit risk. Where such groups have been identified, we have given special consideration to both the billing methodology and evaluation of the ultimate collectibility of the accounts. In addition, the amount of the allowance for doubtful accounts is based upon our assessment of historical and expected net collections, business and economic conditions, trends in reimbursement and an evaluation of collectibility based upon the date that the service was provided. Based upon our best judgment, we believe the allowance for doubtful accounts adequately provides for accounts that will not be collected due to credit risk. Weighted-Average Shares Outstanding Net income per common share, calculated on the treasury stock method, is based on the weighted average number of shares outstanding during the period. The following table sets forth, for the periods indicated, shares used in our computation of the weighted-average shares outstanding, which are used to calculate our basic and diluted net income per common share (amounts in thousands): For the three-month periods For the nine-month periods ended September 30, ended September 30, 2008 2007 2008 2007 Weighted average number of shares outstanding - basic 26,556 25,899 26,363 25,768 Effect of dilutive securities: Stock options 303 346 330 342 Warrants 38 36 39 35 Non-vested stock and stock units 121 51 103 47 Weighted average number of shares outstanding - diluted 27,018 26,332 26,835 26,192 The following table sets forth shares that were anti-dilutive to the computation of diluted net income per common share (amounts in thousands): For the three-month periods For the nine-month periods ended September 30, ended September 30, 2008 2007 2008 2007 Anti-dilutive securities - 23 15 26 Warrants During the three and nine-month periods ended September 30, 2008, we received approximately $0.5 million in cash proceeds related to the exercise of 50,667 outstanding warrants with an exercise price of $10.80 per share. The warrants had been issued in connection with a November 2003 private placement by us of our common stock. Recently Issued Accounting Pronouncements In March 2008, the Financial Accounting Standards Board ('FASB') issued Statement of Financial Accounting Standards ('SFAS') No. 161, Disclosures about Derivative Instruments and Hedging Activities ('SFAS 161'), which provides expanded disclosure requirements for derivative instruments and hedging activities. SFAS 161 requires expanded disclosure including, the fair value of derivative instruments and their gains or losses in a tabular format, information about credit risk, and strategies and objectives for using derivative instruments. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. As of September 30, 2008, we did not have any derivative or hedging activities; however if we do in the future, SFAS 161 will have an impact on our condensed consolidated financial statements. 2. Acquisitions Each of the following acquisitions was completed in order to pursue our strategy of increasing our market presence by expanding our service base and enhancing our position in certain geographic areas as a leading provider of home health and hospice services. The purchase price of each acquisition was determined based on our analysis of, among other things, comparable acquisitions and expected cash flows. Each of the following acquisitions was accounted for as a purchase and is included in our financial statements from the respective acquisition date. Goodwill generated from the acquisitions was recognized for the excess of the purchase price over tangible and identifiable intangible assets because of the expected contributions of each acquisition to our overall corporate strategy. Summary of 2008 Acquisitions On May 9, 2008, we acquired certain assets and certain liabilities of Health Management Associates, Inc., a home health provider with five agencies in Mississippi, South Carolina and Missouri for a total cash purchase price of $6.7 million. In connection with the acquisition, the preliminary allocation of the purchase price primarily includes $6.1 million in goodwill and $1.0 million in other intangibles and $0.4 million in other liabilities. On March 26, 2008, we acquired 100% of the stock of TLC, a privately-held provider of home nursing and hospice services with 92 home health and 11 hospice agencies located in 22 states and the District of Columbia for a total purchase price of $396.4 million (subject to certain adjustments), of which $16.7 million was placed in escrow with $15.8 million for indemnification purposes and working capital price adjustments and $0.9 million for the delayed acquisition of TLC's West Virginia agencies, discussed below. As of September 30, 2008, $3.0 million has been released from escrow and paid to the selling stockholders under the working capital price adjustment provisions of the acquisition agreement. In addition, we incurred approximately $2.5 million in closing costs associated with the acquisition. The purchase price was financed with cash on hand on the date of the transaction and proceeds from new indebtedness incurred by us as described in Note 6. As of September 30, 2008, we allocated the aggregate purchase price to the assets acquired and liabilities assumed based upon a preliminary estimate of their fair values, which is subject to adjustment as we finalize our purchase accounting. We anticipate that our valuation of the related assets and liabilities will be finalized during the fourth quarter of 2008. The $327.9 million excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired at the date of acquisition plus the closing costs incurred were allocated to goodwill, of which $181.4 million is presently expected to be deductible for income tax purposes over approximately 15 years. On June 20, 2008, we closed on our acquisition of the TLC West Virginia agencies, which included the assets of three home health agencies and three hospice agencies, which had been delayed due to necessary regulatory approvals associated with West Virginia Certificates of Need ('CON') requirements. As a result, $0.9 million that had been placed into escrow was released and paid to the selling stockholders. As part of the TLC transaction, we became obligated under certain licensing agreements to allow six different unaffiliated companies to operate within designated territories utilizing our resources. The number of licensees was reduced to five following our June 1, 2008 purchase from the Indianapolis, Indiana licensee. Our resources that are utilized include, but are not limited to, our operating licenses, our trade names, our policies and procedures, our accounting and office systems and other administrative support. Under these agreements, the unaffiliated companies share with us the gross profit generated by the associated agencies, which is based on a defined formula. We believe that the TLC acquisition provided a market presence complementary to the geographic markets that existed for our home health and hospice businesses as of the date of the acquisition. The following table summarizes, as of September 30, 2008, our estimated preliminary fair values of the TLC assets acquired and liabilities assumed on March 26, 2008 (amounts in thousands), which estimates are subject to change as we finalize our purchase accounting, which is primarily related to our finalization of the fair value of the intangible assets associated with the acquisition. Patient accounts receivable, net $ 38,754 Property and equipment 5,296 Goodwill 327,916 Intangible assets 22,200 Deferred taxes 31,809 Other current assets 1,039 Other assets 1,548 Current liabilities (32,208 ) $ 396,354 The intangible assets in the table above include a preliminary value of $7.2 million for certificates of need, $13.5 million for Medicare licenses and $1.5 million for non-compete agreements. The non-compete agreements have a remaining amortization period of 1.5 years. The following table contains pro forma condensed consolidated income statement information assuming that the TLC transaction closed on January 1, 2007, for the nine-month periods ended September 30, 2008 and 2007 (amounts in thousands except per share data). 2008 2007 Net service revenue $ 927,533 $ 720,549 Operating income 118,900 91,356 Net income 62,827 51,009 Basic earnings per share $ 2.38 $ 1.98 Diluted earnings per share $ 2.34 $ 1.95 The pro forma disclosures in the table above include adjustments for interest expense, amortization of intangible assets and amortization of deferred debt issuance costs to reflect results that are more representative of the combined results of the transaction if it had occurred on January 1, 2007. This pro forma information excludes all other acquisitions as they are not considered significant for pro forma disclosure. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred had the TLC transaction occurred as presented. In addition, future results may vary significantly from the results reflected in the pro forma information. On February 28, 2008, we acquired the stock of Family Home Health Care, Inc. and Comprehensive Home Healthcare Services, Inc. ('HMA'), a home health provider with 24 agencies in Tennessee and Kentucky for a total purchase price of $47.5 million ($41.0 million in cash and a promissory note of $6.5 million). In connection with the acquisition, we have preliminarily allocated the purchase price as follows: $41.4 million in goodwill, $5.2 million in other intangibles, $5.5 million in patient accounts receivable $0.1 million in other current assets, $0.2 million in property and equipment, $2.0 million in deferred tax liability, $1.1 million in accounts payable and $1.8 million in other liabilities. On January 1, 2008, we acquired certain assets and certain liabilities of a home health agency in Carolina, Puerto Rico for a total purchase price of $1.2 million ($1.0 million in cash and a promissory note of $0.2 million). In connection with the acquisition, we recorded substantially the entire purchase price as goodwill ($1.0 million) and other intangibles ($0.2 million). 3. Details of Certain Balance Sheet Accounts Additional information regarding certain balance sheet accounts is presented below (amounts in thousands): September 30, 2008 December 31, 2007 Other current assets: Payroll tax escrow $ 940 $ 3,113 Medicare withholds 3,920 - Other 3,012 2,878 $ 7,872 $ 5,991 Property and equipment: Land $ 3,159 $ 3,119 Building and leasehold improvements 22,542 21,447 Equipment and furniture 71,280 54,515 Computer software 18,326 13,998 115,307 93,079 Less: accumulated depreciation (34,920 ) (24,766 ) $ 80,387 $ 68,313 Other assets: Workers' compensation deposits $ 2,520 $ 2,550 Health insurance deposits 940 801 Other miscellaneous deposits 2,145 967 Deferred financing fees 7,336 448 Investment in unconsolidated joint ventures 7,504 423 Other 3,835 2,261 $ 24,280 $ 7,450 Accrued expenses: Payroll and payroll taxes $ 81,322 $ 43,322 Self insurance 16,234 11,418 Legal and other settlements 1,445 876 Income taxes payable 2,202 2,392 Charity care 5,839 1,032 Other 14,455 7,627 $ 121,497 $ 66,667 As of September 30, 2008, our other current assets included $3.9 million in Medicare withholds. These amounts are related to the filing of cost reports for recent acquisitions. Additionally, our deferred financing fees increased $6.9 million from December 31, 2007 primarily as a result of $8.1 million recorded in deferred debt issuance costs that were incurred in connection with our debt associated with our TLC acquisition (see Note 6 for more details on this debt). Finally, the increase in our investment in unconsolidated joint ventures was the result of our finalization of the purchase accounting for the IntegriCare, Inc. acquisition. As a result of this finalization, we allocated an additional $7.1 million to our investment in unconsolidated joint ventures and recorded an offsetting decrease in the recorded goodwill (see Note 4 for additional details on the purchase accounting adjustment to goodwill). As of September 30, 2008, our accrued expenses included a $4.8 million increase in charity care. This amount includes a reserve for amounts owned to the State of Georgia for the difference between charity care commitments and the actual amount of charity care provided. The increase was primarily due to the addition of TLC's agencies and our growth in revenue. The 2007 liability has not been paid. 4. Goodwill and Other Intangible Assets, Net The following table summarizes the activity related to our goodwill and our other intangible assets, net as of and for the nine-month period ended September 30, 2008 (amounts in thousands): Other Intangible Assets, Net Certificates Acquired of Need and Name of Non-Compete Goodwill Licenses Business Agreements (1) Total Balances at December 31, 2007 $ 332,534 $ 8,680 $ 3,300 $ 2,321 $ 14,301 Additions 378,397 26,666 - 2,097 28,763 Adjustments related to acquisitions (9,818 ) 3,060 - (205 ) 2,855 Amortization - - - (1,439 ) (1,439 ) Balances at September 30, 2008 $ 701,113 $ 38,406 $ 3,300 $ 2,774 $ 44,480 (1) The weighted-average amortization period of our non-compete agreements is 1.9 years. During the nine-month period ended September 30, 2008, we adjusted goodwill by $9.8 million in association with our completion of purchase accounting adjustments for 2007 acquisitions. Of the $9.8 million in adjustments, $10.0 million relates to the finalization of the IntegriCare, Inc. acquisition, where we allocated an additional $7.1 million in value to our investment in unconsolidated joint ventures and $2.9 million was allocated to certificates of need and licenses during the three-month period ended June 30, 2008. 5. Commitments and Contingencies Legal Proceedings We are involved in legal actions in the normal course of business, some of which seek monetary damages, including claims for punitive damages. We do not believe that these actions, when finally concluded and determined, will have a material adverse impact on our financial position, results of operations or cash flows. Alliance Home Health, Inc. Alliance Home Health, Inc. ('Alliance'), one of our wholly owned subsidiaries (which was acquired in 1998 and ceased operations in 1999), filed for Chapter 7 federal bankruptcy protection with the United States Bankruptcy Court in the Northern District of Oklahoma in September 2000. A trustee was appointed for Alliance in 2001. We have continued to include $4.2 million of liabilities of Alliance in our consolidated financial statements because, until the conclusion of the Alliance bankruptcy proceeds (described below, we were (i) unable to conclude that neither we nor any of our affiliates (other than Alliance) had any direct obligation for these liabilities and (ii) uncertain regarding the ultimate outcome of the Alliance bankruptcy proceedings and the effect of the outcome on us and our affiliates (other than Alliance). On September 28, 2007, a federal judge from the United States Bankruptcy Court in the Northern District of Oklahoma ('bankruptcy court') overseeing the Chapter 7 federal bankruptcy proceedings for Alliance finalized its order on the distribution of funds to creditors. As a result of the ruling by the bankruptcy court, the liabilities of $4.2 million attributable to Alliance now will not be paid because Alliance has insufficient assets to discharge the liabilities, and we thereupon concluded that neither we nor any of our affiliates (other than Alliance) has any direct obligation for these liabilities and that we do not believe there is any basis for asserting that there is an indirect obligation on our part of any of our affiliates for these liabilities. Accordingly, upon completion of the Alliance bankruptcy, we reversed the accrued for these liabilities that appeared in our condensed consolidated financial statements and recognized a gain of $4.2 million as other income in our accompanying condensed consolidated income statement during the three and nine-month periods ended September 30, 2007. The discharge of the liabilities was a non-taxable event. Insurance We are obligated for certain costs associated with our insurance programs, including employee health, workers' compensation and professional liability. While we maintain various insurance programs to cover these risks, we are self-insured for a substantial portion of our potential claims, as described in the table below. We recognize our obligations associated with these costs in the period in which a claim is incurred, including with respect to both reported claims and claims incurred but not reported, up to specified deductible limits. These costs have generally been estimated based on historical data of our claims experience. Such estimates, and the resulting reserves, are reviewed and updated by us on a quarterly basis. The following table presents details of our insurance programs, including amounts accrued for the periods indicated (amounts in thousands) in accrued expenses in our accompanying balance sheets. The amounts accrued below represent our total estimated liability for individual claims that are less than our noted insurance coverage amounts, which can include outstanding claims and claims incurred but not reported. Type of Insurance September 30, 2008 December 31, 2007 Health Insurance $ 4,544 $ 3,064 Workers' Compensation 12,347 9,688 Professional Liability 2,120 1,499 19,011 14,251 Less: current portion (2,777 ) (2,833 ) $ 16,234 $ 11,418 Both our health insurance and workers' compensation insurance have retention limits of $250,000 and our professional liability insurance has a retention limit of $100,000. 6. Long-Term Obligations Long-term debt, including capital lease obligations, consisted of the following for the periods indicated (amounts in thousands): September 30, 2008 December 31, 2007 Senior Notes: $35.0 million Series A Notes; semi-annual interest only payments; interest rate at 6.07% per annum; due March 25, 2013 $ 35,000 $ - $30.0 million Series B Notes; semi-annual interest only payments; interest rate at 6.28% per annum; due March 25, 2014 30,000 - $35.0 million Series C Notes; semi-annual interest only payments; interest rate at 6.49% per annum; due March 25, 2015 35,000 - $150.0 million Term Loan; $7.5 million principal payments plus accrued interest payable quarterly; interest rate at ABR Rate plus applicable percentage or Eurodollar Rate plus the applicable percentage (5.21% at September 30, 2008); due March 26, 2013 135,000 - $250.0 million Revolving Credit Facility; interest only quarterly payments; interest rate at ABR Rate plus applicable percentage or Eurodollar Rate plus the applicable percentage (5.21% at September 30, 2008); due March 26, 2013 102,000 - Promissory notes 22,463 23,645 Capital leases 268 395 359,731 24,040 Current portion of long-term obligations (43,716 ) (11,049 ) Total $ 316,015 $ 12,991 Senior Notes, Term Loan and Revolving Credit Facility In connection with our March 2008 acquisition of TLC, we incurred additional indebtedness by (i) issuing $100.0 million in senior notes and (ii) entering into a $400.0 million credit agreement that provided for a $150.0 million term loan and a $250.0 million revolving credit facility, all of which are described in detail below. See Note 2 for more information regarding the TLC acquisition. On March 25, 2008, we entered into a new $100.0 million Note Purchase Agreement (the 'Note Purchase Agreement'), pursuant to which we issued and sold on March 26, 2008, three series of Senior Notes (the 'Senior Notes') in an aggregate principal amount of $100.0 million. Interest on the Senior Notes is payable at the prescribed rates semi-annually on March 25 and September 25 of each year beginning September 25, 2008. The Senior Notes are unsecured, but are guaranteed by all of our material subsidiaries. On March 26, 2008, we entered into a new $400.0 million Credit Agreement (the 'Credit Agreement'), which consists of: (i) a $150.0 million, five-year Term Loan (the 'Term Loan') and (ii) a $250.0 million, five-year Revolving Credit Facility (the 'Revolving Credit Facility'). The Revolving Credit Facility provides for and includes within its $250.0 million limit a $15.0 million swingline facility and commitments for up to $25.0 million in letters of credit. The Revolving Credit Facility may be utilized by us to provide ongoing working capital and for other general corporate purposes. The Term Loan and Revolving Credit Facility are unsecured, but are guaranteed by all of our material subsidiaries. The proceeds of the Term Loan, our initial draw of $145.0 million under the Revolving Credit Facility, and the proceeds from the issuance of the Senior Notes were utilized by us (a) to fund the purchase price of the TLC acquisition; (b) to pay transaction and other expenses associated with the TLC acquisition and the closings contemplated by the Credit Agreement and the Note Purchase Agreement; and (c) for other general corporate purposes. In addition, in connection with incurring this new debt, we recorded $8.1 million in deferred debt issuance costs as other assets in our condensed consolidated balance sheet, which are being amortized over the term of the debt. The Term Loan is repayable in 20 equal quarterly installments of $7.5 million each plus accrued interest beginning on June 30, 2008, with any remaining balance due at maturity on March 26, 2013. Upon occurrence of certain events, including our issuance of capital stock if our leverage ratio at the time of issuance is equal to or in excess of 2.50 and certain asset sales by us where the cash proceeds are not reinvested within a specified time period, mandatory prepayments are required in the amounts specified in the Credit Agreement and Note Purchase Agreement. Mandatory prepayments are paid ratably to the lenders under the Credit Agreement and the holders of Senior Notes, based upon the respective indebtedness outstanding. Amounts paid to the lenders under the Credit Agreement are applied first to the Term Loan, with excess, if any, applied to amounts outstanding under the Revolving Credit Facility, without reduction in the commitments to make revolving loans under the Revolving Credit Facility. Borrowings under the Term Loan and Revolving Credit Facility, which are not within the swingline facility or letters of credit, are subject to classification as either ABR loans or Eurodollar rate (i.e. LIBOR) loans, as selected by us. Outstanding principal balances of ABR loans are subject to an interest rate based on the ABR Rate, which is set as the greater of the Prime Rate or the Federal Funds Rate plus 0.50% per annum plus an applicable margin, and outstanding principal balances of Eurodollar rate loans are subject to an interest rate as determined by reference to the Adjusted Eurodollar Rate (as defined in the Credit Agreement) plus an applicable margin. The applicable margin since the inception of the debt through June 30, 2008 was set at 1.75% per the terms of the Credit Agreement and all subsequent quarters are determined based upon our total leverage ratio, as presented in the table below, for both the Term Loan and the Revolving Credit Facility. Overdue amounts bear interest at 2% per annum above the applicable rate. We are also subject to a commitment fee under the terms of the Revolving Credit Facility, payable quarterly in arrears, as presented in the table below. Margin for Margin for Commitment Total Leverage Ratio ABR Loans Eurodollar Loans Fee >= 3.00 1.00% 2.00% 0.40% < 3.00 and >= 2.50 0.75% 1.75% 0.35% < 2.50 and >= 2.00 0.50% 1.50% 0.30% < 2.00 and >= 1.50 0.25% 1.25% 0.25% < 1.50 and >= 1.00 0.00% 1.00% 0.20% < 1.00 0.00% 0.75% 0.15% Our weighted-average interest rate for both the Term Loan and the Revolving Credit Facility were 4.1% and 4.3% for the three and nine-month periods ended September 30, 2008, respectively. The Credit Agreement and the Note Purchase Agreement require us to meet two financial covenants which are calculated on a rolling four quarter basis. One is a total leverage ratio of debt to earnings before interest, taxes, depreciation and amortization ('EBITDA') and the second is a fixed charge coverage ratio of adjusted EBITDA plus rent expense to certain fixed charges (i.e. interest expense, required principal payments, capital expenditures, etc). The Credit Agreement also contains customary covenants, including, but not limited to, restrictions on (a) incurrence of liens; (b) incurrence of additional debt; (c) sales of assets or other fundamental corporate changes; (d) investments; (e) declarations of dividends; and (f) capital expenditures. These covenants contain customary exclusions and baskets. As of September 30, 2008, our leverage ratio was less than 2.00 but greater than 1.50, and we were in compliance with the covenants in the Credit Agreement and the Note Purchase Agreement. The following table presents our availability under our $250.0 million Revolving Credit Facility as of September 30, 2008 (amounts in millions): Total Revolving Credit Facility $ 250,000 Less: outstanding revolving credit loans (102,000 ) Less: outstanding swingline loans - Less: outstanding letters of credit (9,192 ) Remaining availability under the Revolving Credit Facility $ 138,808 Concurrently with the execution of the Term Loan, Revolving Credit Agreement and Senior Notes described above, we terminated our existing $100.0 million three-year, revolving credit facility that we had entered into on October 24, 2007, and expensed $0.4 million of unamortized deferred debt issuance costs during the nine-month period ended September 30, 2008. Promissory Notes Our promissory notes outstanding as of September 30, 2008 were generally issued for three-year periods, range in amounts between $0.2 million and $9.9 million and bear interest in a range of 2.66% to 10.25%. These promissory notes include notes issued in conjunction with our acquisitions for a portion of the purchase price as well as promissory notes issued for software licenses, unrelated to acquisitions. Capital Leases We have acquired certain equipment under capital leases for which the related liabilities have been recorded at the present value of future minimum lease payments due under the leases. 7. Subsequent Events Subsequent to September 30, 2008, we acquired certain assets and assumed certain liabilities of six home health agencies located in Pennsylvania, Maryland and Delaware for approximately $26.3 million, one home health and hospice agency located in Washington for approximately $0.3 million and opened one home health, start-up agency in the State of New Mexico. As a result of these acquisitions and start-up, we now have a presence in 37 states. These agencies are not included in our results of operations or in the number of agencies we acquired for the three and nine-month periods ended September 30, 2008. The President signed the Emergency Economic Stabilization Act of 2008 on October 3, 2008. As part of the legislation Work Opportunity Tax Credits related to Hurricane Katrina new hires were extended to August 2009 from the original expiration of August 2007. 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