UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~FORM 10-Q~~



ý☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2022



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-33989

LHC Group, Inc.

(Exact name of registrant as specified in its charter)

~~LHC GROUP, INC.~~

~~(Exact name of registrant as specified in its charter)~~



Delaware						71-0918189
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

901 Hugh Wallis Road South

Lafayette, LA 70508

(Address of principal executive offices including zip code)

(337) 233-1307

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value of $0.01

LHCG

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~and~~ “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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Large accelerated filer

¨ý

Accelerated filer

ý☐

Non-accelerated filer

¨ ~~(Do not check if a smaller reporting company)~~

☐

Smaller reporting company

¨☐

Emerging growth company

¨
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

~~Table of Contents~~

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý

Number of shares of common stock, par value $0.01, outstanding as of November 1, ~~2017: 18,279,658~~2022: 31,033,002 shares.

Table of Contents

LHC GROUP, INC.

INDEX



			~~Page~~
Part I. Financial Information		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets — September 30, ~~2017~~2022 and December 31, ~~2016~~2021				4
Condensed Consolidated Statements of Income — Three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021				5
Condensed Consolidated ~~Statement~~Statements of ~~Changes in~~Stockholders' Equity — ~~Nine~~Three and nine months ended September 30, ~~2017~~2022 and 2021				6
Condensed Consolidated Statements of Cash Flows — Nine months ended September 30, ~~2017~~2022 and ~~2016~~2021				78
Notes to Condensed Consolidated Financial Statements				810
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			2025
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			3536
Item 4.	Controls and Procedures			3536
Part II. Other Information
Item 1.	Legal Proceedings			3638
Item 1A.	Risk Factors			3638
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			3638
Item 3.	Defaults Upon Senior Securities			38
Item 4.	Mine Safety Disclosures			38
Item 5.	Other Information			38
Item 6.	Exhibits			3739
Signatures				3840

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PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL ~~STATEMENTS.~~STATEMENTS

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data) (Unaudited)


	September 30, 2017			December 31, 2016
	(Unaudited)							September 30, 2022		December 31, 2021
ASSETS							ASSETS
Current assets:							Current assets:
Cash	$	16,922		$	3,264		Cash	$	10,522	$	9,809
Receivables:							Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $26,089 and $29,036, respectively	145,508			124,803
Patient accounts receivable							Patient accounts receivable	331,524		348,820
Other receivables	4,705			5,115			Other receivables	30,217		13,780
Amounts due from governmental entities	830			942
Total receivables, net	151,043			130,860

Total receivables							Total receivables	361,741		362,600

Prepaid income taxes	4,879			—			Prepaid income taxes	19,303		7,531
Prepaid expenses	11,437			9,821			Prepaid expenses	23,128		28,401
Other current assets	7,331			5,796			Other current assets	25,687		24,801
Total current assets	191,612			149,741			Total current assets	440,381		433,142
Property, building and equipment, net of accumulated depreciation of $41,876 and $35,226, respectively	47,562			43,251
Property, building and equipment, net of accumulated depreciation of $110,600 and $98,394, respectively							Property, building and equipment, net of accumulated depreciation of $110,600 and $98,394, respectively	153,806		153,959
Goodwill	392,689			307,317			Goodwill	1,750,420		1,748,426
Intangible assets, net of accumulated amortization of $12,607 and $10,968, respectively	130,779			102,006
Intangible assets, net of accumulated amortization of $22,865 and $19,152, respectively							Intangible assets, net of accumulated amortization of $22,865 and $19,152, respectively	395,309		400,002
Operating lease right of use asset							Operating lease right of use asset	108,975		113,399
Other assets	2,411			11,756			Other assets	65,263		46,693
Total assets	$	765,053		$	614,071		Total assets	$	2,914,154	$	2,895,621
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable and other accrued liabilities	$	40,355		$	26,805		Accounts payable and other accrued liabilities	$	108,748	$	98,118
Salaries, wages, and benefits payable	53,289			34,265			Salaries, wages, and benefits payable	84,412		100,532
Self-insurance reserve	9,524			10,691
Current portion of long-term debt	261			252
Self-insurance reserves							Self-insurance reserves	38,734		33,784

Contract liabilities - deferred revenue							Contract liabilities - deferred revenue	4,840		106,489
Current operating lease payable							Current operating lease payable	36,998		37,630
Amounts due to governmental entities	4,564			4,955			Amounts due to governmental entities	2,499		5,447
Income tax payable	—			3,499
Current liabilities - deferred employer payroll tax							Current liabilities - deferred employer payroll tax	26,790		26,790
Total current liabilities	107,993			80,467			Total current liabilities	303,021		408,790
Deferred income taxes	38,186			31,941			Deferred income taxes	87,661		70,026
Income taxes payable							Income taxes payable	7,988		7,320
Revolving credit facility	119,000			87,000			Revolving credit facility	738,000		661,197
Long-term debt, less current portion	93			544
Long-term operating lease liabilities							Long-term operating lease liabilities	74,992		78,688
Total liabilities	265,272			199,952			Total liabilities	1,211,662		1,226,021
Noncontrolling interest — redeemable	13,206			12,567			Noncontrolling interest — redeemable	16,978		17,501
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity:							Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:							LHC Group, Inc. stockholders’ equity:
Common stock — $0.01 par value; 40,000,000 shares authorized; 22,635,322 and 22,429,041 shares issued in 2017 and 2016, respectively	226			224
Treasury stock — 4,890,181 and 4,828,679 shares at cost, respectively	(42,226		)	(39,135		)
Preferred stock – $0.01 par value; 5,000,000 shares authorized; none issued or outstanding							Preferred stock – $0.01 par value; 5,000,000 shares authorized; none issued or outstanding	—		—
Common stock — $0.01 par value; 60,000,000 shares authorized; 36,733,790 and 36,549,524 shares issued, and 30,587,735 and 30,634,414 shares outstanding, respectively							Common stock — $0.01 par value; 60,000,000 shares authorized; 36,733,790 and 36,549,524 shares issued, and 30,587,735 and 30,634,414 shares outstanding, respectively	367		365
Treasury stock — 6,146,055 and 5,915,110 shares at cost, respectively							Treasury stock — 6,146,055 and 5,915,110 shares at cost, respectively	(195,447)		(164,790)
Additional paid-in capital	125,208			119,748			Additional paid-in capital	997,115		979,642
Retained earnings	345,967			314,289			Retained earnings	798,372		751,025
Total LHC Group, Inc. stockholders’ equity	429,175			395,126			Total LHC Group, Inc. stockholders’ equity	1,600,407		1,566,242
Noncontrolling interest — non-redeemable	57,400			6,426			Noncontrolling interest — non-redeemable	85,107		85,857
Total equity	486,575			401,552
Total liabilities and equity	$	765,053		$	614,071
Total stockholders' equity							Total stockholders' equity	1,685,514		1,652,099
Total liabilities and stockholders' equity							Total liabilities and stockholders' equity	$	2,914,154	$	2,895,621

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except ~~share and~~ per share data)

(Unaudited)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net service revenue	$	576,913	$	565,451	$	1,724,601	$	1,636,193
Cost of service revenue (excluding depreciation and amortization)	347,772		343,862		1,052,093		972,006
Gross margin	229,141		221,589		672,508		664,187
General and administrative expenses	189,051		176,444		569,800		506,754
Impairment of intangibles and other	2,059		—		4,130		937
Operating income	38,031		45,145		98,578		156,496
Interest expense	(9,053)		(1,135)		(19,631)		(1,541)

Income before income taxes and noncontrolling interest	28,978		44,010		78,947		154,955
Income tax expense	6,966		10,150		17,014		32,909
Net income	22,012		33,860		61,933		122,046
Less net income attributable to noncontrolling interests	4,703		6,126		14,586		22,010
Net income attributable to LHC Group, Inc.’s common stockholders	$	17,309	$	27,734	$	47,347	$	100,036

Earnings per share:
Basic	$	0.57	$	0.89	$	1.55	$	3.21
Diluted	$	0.56	$	0.88	$	1.55	$	3.18
Weighted average shares outstanding:
Basic	30,565		31,238		30,527		31,205
Diluted	30,706		31,434		30,639		31,422

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net service revenue $ 272,872
$ 230,797
$ 779,700
$ 679,380
Cost of service revenue 172,856
140,832
488,384
413,561
Gross margin 100,016
89,965
291,316
265,819
Provision for bad debts 3,194
3,275
8,238
11,658
General and administrative expenses 75,669
66,999
221,077
201,296
(Gain) loss on disposal of assets (177 ) 142
(23 ) 1,389
Operating income 21,330
19,549
62,024
51,476
Interest expense (995 ) (816 ) (2,615 ) (2,167 )
Income before income taxes and noncontrolling interest 20,335
18,733
59,409
49,309
Income tax expense 7,445
6,562
20,410
15,500
Net income 12,890
12,171
38,999
33,809
Less net income attributable to noncontrolling interests 1,984
2,555
7,321
7,043
Net income attributable to LHC Group, Inc.’s common stockholders $ 10,906
$ 9,616
$ 31,678
$ 26,766
Earnings per share attributable to LHC Group, Inc.'s common stockholders:
Basic $ 0.61
$ 0.55
$ 1.79
$ 1.53
Diluted $ 0.61
$ 0.54
$ 1.77
$ 1.52
Weighted average shares outstanding:
Basic 17,740,818
17,588,163
17,704,561
17,546,773
Diluted 18,010,522
17,719,473
17,931,700
17,664,284

See accompanying ~~notes~~Notes to the ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Table of Contents

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~CHANGES IN~~STOCKHOLDERS' EQUITY

(Amounts in thousands, except share data)

(Unaudited)


	Nine months ended September 30, 2022
	Common Stock						Additional Paid-In Capital		Retained Earnings		Noncontrolling Interest Non Redeemable		Total Equity
	Issued			Treasury
	Amount		Shares	Amount		Shares
Balance as of December 31, 2021	$	365	36,549,524	$	(164,790)	5,915,110	$	979,642	$	751,025	$	85,857	$	1,652,099
Net income (1)	—		—	—		—	—		19,454		2,760		22,214
Noncontrolling interest distributions	—		—	—		—	—		—		(2,970)		(2,970)
Nonvested stock compensation	—		—	—		—	4,376		—		—		4,376
Issuance of vested stock	2		132,651	—		—	—		—		—		2
Treasury shares redeemed to pay income tax	—		—	(3,208)		23,022	68		—		—		(3,140)
Repurchase of common stock	—		—	(25,472)		190,622	—		—		—		(25,472)
Issuance of common stock under Employee Stock Purchase Plan	—		5,353	—		—	698		—		—		698
Balance as of March 31, 2022	$	367	36,687,528	$	(193,470)	6,128,754	$	984,784	$	770,479	$	85,647	$	1,647,807
Net income (1)	—		—	—		—	—		10,584		2,124		12,708
Acquired noncontrolling interest	—		—	—		—	—		—		707		707
Noncontrolling interest distributions	—		—	—		—	—		—		(3,281)		(3,281)
Purchase of additional controlling interest	—		—	—		—	(209)		—		(167)		(376)
Nonvested stock compensation	—		—	—		—	4,943		—		—		4,943
Issuance of vested stock	—		7,556	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	—		—	(852)		5,144	344		—		—		(508)
Exercise of options	—		5,124	(68)		2,319	(150)		—		—		(218)
Issuance of common stock under Employee Stock Purchase Plan	—		3,342	—		—	535		—		—		535
Balance as of June 30, 2022	$	367	36,703,550	$	(194,390)	6,136,217	$	990,247	$	781,063	$	85,030	$	1,662,317
Net income (1)	—		—	—		—	—		17,309		2,711		20,020

Noncontrolling interest distributions	—		—	—		—	—		—		(2,581)		(2,581)
Purchase of additional controlling interest	—		—	—		—	(4)		—		(53)		(57)
Nonvested stock compensation	—		—	—		—	5,971		—		—		5,971
Issuance of vested stock	—		17,274	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	—		—	(927)		5,908	512		—		—		(415)
Exercise of options	—		8,862	(130)		3,930	(218)		—		—		(348)

Issuance of common stock under Employee Stock Purchase Plan	—		4,104	—		—	607		—		—		607
Balance as of September 30, 2022	$	367	36,733,790	$	(195,447)	6,146,055	$	997,115	$	798,372	$	85,107	$	1,685,514

(1) Net income excludes net income attributable to noncontrolling interest-redeemable of $2.0 million and $7.0 million during the three and nine months ended September 30, 2022. Noncontrolling interest-redeemable is reflected outside of permanent equity on the condensed consolidated balance sheets. See Note 8 of the Notes to Condensed Consolidated Financial Statements.

Table of Contents

Common Stock Additional
Paid-In
Capital Retained
Earnings Noncontrolling
Interest Non
Redeemable Total
Equity
Issued Treasury
Amount Shares Amount Shares
Balance as of December 31, 2016 $ 224
22,429,041
$ (39,135 ) (4,828,679 ) $ 119,748
$ 314,289
$ 6,426
$ 401,552
Net income (1)
—
—
—
—
—
31,678
(328 ) 31,350
Acquired noncontrolling interest —
—
—
—
—
—
52,492
52,492
Noncontrolling interest distributions —
—
—
—
—
—
(1,472 ) (1,472 )
Sale of noncontrolling interest —
—
—
—
348
—
282
630
Purchase of additional controlling interest —
—
—
—
(184 ) —
—
(184 )
Nonvested stock compensation —
—
—
—
4,522
—
—
4,522
Issuance of vested stock 2
191,463
—
—
(2 ) —
—
—
Treasury shares redeemed to pay income tax —
—
(3,091 ) (61,502 ) —
—
—
(3,091 )
Issuance of common stock under Employee Stock Purchase Plan —
14,818
—
—
776
—
—
776
Balance as of September 30, 2017 $ 226
22,635,322
$ (42,226 ) (4,890,181 ) $ 125,208
$ 345,967
$ 57,400
$ 486,575


	Nine months ended September 30, 2021
	Common Stock						Additional Paid-In Capital		Retained Earnings		Noncontrolling Interest Non Redeemable		Total Equity
	Issued			Treasury
	Amount		Shares	Amount		Shares
Balance as of December 31, 2020	$	364	36,355,497	$	(69,011)	5,215,657	$	962,120	$	635,297	$	84,584	$	1,613,354
Net income (1)	—		—	—		—	—		34,659		4,469		39,128

Noncontrolling interest distributions	—		—	—		—	—		—		(2,417)		(2,417)
Purchase of additional controlling interest	—		—	—		—	(81)		—		(61)		(142)
Sale of noncontrolling interest	—		—	—		—	—		—		138		138
Nonvested stock compensation	—		—	—		—	3,513		—		—		3,513
Issuance of vested stock	1		148,447	—		—	—		—		—		1
Treasury shares redeemed to pay income tax	—		—	(9,541)		51,221	—		—		—		(9,541)

Issuance of common stock under Employee Stock Purchase Plan	—		3,204	—		—	649		—		—		649
Balance as of March 31, 2021	$	365	36,507,148	$	(78,552)	5,266,878	$	966,201	$	669,956	$	86,713	$	1,644,683
Net income (1)	—		—	—		—	—		37,643		5,232		42,875

Noncontrolling interest distributions	—		—	—		—	—		—		(4,660)		(4,660)
Purchase of additional controlling interest	—		—	—		—	(870)		—		(728)		(1,598)
Nonvested stock compensation	—		—	—		—	3,993		—		—		3,993
Issuance of vested stock	—		15,531	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	—		—	(1,213)		6,024	—		—		—		(1,213)

Issuance of common stock under Employee Stock Purchase Plan	—		3,152	—		—	573		—		—		573
Balance as of June 30, 2021	$	365	36,525,831	$	(79,765)	5,272,902	$	969,897	$	707,599	$	86,557	$	1,684,653
Net income (1)	—		—	—		—	—		27,734		3,182		30,916

Noncontrolling interest distributions	—		—	—		—	—		—		(5,052)		(5,052)

Sale of noncontrolling interest	—		—	—		—	(83)		—		1,733		1,650
Nonvested stock compensation	—		—	—		—	4,211		—		—		4,211
Issuance of vested stock	—		10,943	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	—		—	(840)		3,932	—		—		—		(840)

Issuance of common stock under Employee Stock Purchase Plan	—		3,445	—		—	655		—		—		655
Balance as of September 30, 2021	$	365	36,540,219	$	(80,605)	5,276,834	$	974,680	$	735,333	$	86,420	$	1,716,193

~~(1)~~

~~Net income excludes net income attributable to noncontrolling interest-redeemable of $7.6 million during the nine months ending September 30, 2017.~~

(1) Net income excludes net income attributable to noncontrolling interest-redeemable of $2.9 million and $9.1 million during the three and nine months ended September 30, 2021. Noncontrolling interest-redeemable is reflected outside of permanent equity on the condensed consolidated balance sheets. See Note 8 of the Notes to Condensed Consolidated Financial Statements.

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Nine months ended September 30,
	2022		2021
Operating activities:
Net income	$	61,933	$	122,046
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	17,483		14,899
Amortization of operating lease right of use asset	30,769		27,526
Stock-based compensation expense	15,290		11,717
Deferred income taxes	17,635		23,356
Loss (gain) on disposal of assets	484		(1,190)
Impairment of intangibles and other	4,130		937
Changes in operating assets and liabilities, net of acquisitions:
Receivables	(684)		(27,038)
Prepaid expenses	5,273		397
Other assets	(4,208)		(6,368)
Prepaid income taxes	(11,772)		(11,575)

Prepaid taxes	—		(12,509)
Accounts payable and accrued expenses	16,282		6,626
Salaries, wages, and benefits payable	(11,251)		(9,687)

Contract liabilities - deferred revenue	(101,649)		(141,629)

Operating lease liabilities	(30,568)		(27,472)
Income taxes payable	668		(20,819)
Net amounts due to/from governmental entities	223		(833)
Net cash provided by (used in) operating activities	10,038		(51,616)
Investing activities:
Purchases of property, building and equipment	(14,074)		(23,548)
Proceeds from sale of property, building and equipment	—		3,350
Cash paid for acquisitions, net of cash acquired	(2,570)		(383,475)
Purchase of intangible assets	(100)		—
Proceeds from sale of an entity	—		1,531
Minority interest investments	(15,250)		(10,100)
Net cash used in investing activities	(31,994)		(412,242)
Financing activities:
Proceeds from line of credit	815,155		544,056
Payments on line of credit	(738,352)		(209,056)
Government stimulus advance	—		(93,257)
Proceeds from employee stock purchase plan	1,840		1,877
Payments on deferred financing fees	—		(2,855)
Payments on repurchasing common stock	(34,565)		—

Noncontrolling interest distributions	(16,346)		(22,187)
Withholding taxes paid on stock-based compensation	(4,630)		(11,594)
Purchase of additional controlling interest	(433)		(2,113)

Sale of noncontrolling interest	—		1,934
Net cash provided by financing activities	22,669		206,805
Change in cash	713		(257,053)
Cash at beginning of period	9,809		286,569
Cash at end of period	$	10,522	$	29,516

Table of Contents

Nine Months Ended
September 30,
2017 2016
Operating activities:
Net income $ 38,999
$ 33,809
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 9,680
9,024
Provision for bad debts 8,238
11,658
Stock-based compensation expense 4,522
3,518
Deferred income taxes 6,245
6,062
Gain (loss) on disposal of assets (23 ) 1,389
Impairment of intangibles and other 81
—
Changes in operating assets and liabilities, net of acquisitions:
Receivables (19,569 ) (21,175 )
Prepaid expenses and other assets (3,859 ) 450
Prepaid income taxes (4,879 ) (2,482 )
Accounts payable and accrued expenses 26,038
17,633
Income taxes payable (3,499 ) —
Net amounts due to/from governmental entities (279 ) (2,043 )
Net cash provided by operating activities 61,695
57,843
Investing activities:
Purchases of property, building and equipment (7,944 ) (14,576 )
Cash paid for acquisitions, primarily goodwill and intangible assets (61,247 ) (20,332 )
Other —
273
Net cash used in investing activities (69,191 ) (34,635 )
Financing activities:
Proceeds from line of credit 63,000
38,000
Payments on line of credit (31,000 ) (44,000 )
Proceeds from employee stock purchase plan 776
663
Payments on debt (192 ) (156 )
Noncontrolling interest distributions (8,406 ) (6,859 )
Excess tax benefits from vesting of stock awards —
1,293
Withholding taxes paid on stock-based compensation (3,091 ) (1,931 )
Purchase of additional controlling interest (184 ) —
Sale of noncontrolling interest 251
52
Proceeds from exercise of stock options —
109
Net cash (used in) provided by financing activities 21,154
(12,829 )
Change in cash 13,658
10,379
Cash at beginning of period 3,264
6,139
Cash at end of period $ 16,922
$ 16,518
Supplemental disclosures of cash flow information:
Interest paid $ 2,694
$ 2,329
Income taxes paid $ 22,376
$ 11,390




Supplemental disclosures of cash flow information:
Interest paid	$	18,049	$	1,532
Income taxes paid	$	10,701	$	42,036
Non-Cash Operating Activity:
Operating right of use assets in exchange for lease obligations	$	28,435	$	41,776
Reduction to right of use assets and liabilities	$	2,089	$	2,746
Non-Cash Investing Activity:
Net working capital adjustment	$	1,440	$	—
Accrued capital expenditures	$	126	$	1,807

See accompanying ~~notes~~Notes to ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

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LHC GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Events

Organization

LHC Group, Inc. (the “Company”) is a health care provider specializing in the post-acute continuum of care. The Company provides services through five segments: home health, ~~services,~~ hospice, ~~services,~~home and community-based services, ~~and~~ facility-based services, the latter primarily through long-term acute care hospitals (“LTACHs”), and healthcare innovations services ("HCI").

As of September 30, ~~2017,~~2022, the Company, through its wholly- and majority-owned subsidiaries, equity joint ventures, controlled affiliates, and management agreements operated ~~449~~942 service ~~providers~~locations in 2737 states within the continental United ~~States.~~States and the District of Columbia.

~~Unaudited Interim Financial Information~~LHC Group, Inc. and UnitedHealth Group Incorporated Merger

On March 28, 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with UnitedHealth Group Incorporated ("Parent") and Lightning Merger Sub Inc., a wholly owned subsidiary of Parent ("Merger Sub"), pursuant to which Merger Sub will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent. At a Special Meeting of Stockholders held on June 21, 2022, the stockholders of the Company approved the Merger. The parties to the Merger continue to work toward the expected consummation of the Merger prior to the end of 2022; however, such consummation remains subject to the satisfaction of the remaining closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

COVID-19 Update

SARS-CoV-2 ("COVID-19") continues to cause disruption in the economy, in terms of increased costs and disruptions in the labor market. The impact of COVID-19 is lessened as vaccines have become available in the United States; however, we continue to see periodic increases in the number of cases due to the spread of COVID-19 variants. The effects of COVID-19 continue to materially impact our business. As a result, operating results for the three and nine months ended September 30, 2022 may not be indicative of the results that may be expected for the year ending December 31, 2022, and operating results for the three and nine months ended September 30, 2022 may not be directly comparable to operating results for the three and nine months ended September 30, 2021.

CARES Act

In response to COVID-19, the U.S. Government enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") on March 27, 2020. The CARES Act also provided financial hardship relief to Medicare providers impacted by the COVID-19 pandemic in order to provide necessary funds when there is a disruption in Medicare claims submission and/or Medicare claims processing by distributing funds through the Accelerated and Advanced Payments Program ("CAAP").

In addition, the CARES Act suspended the 2% sequestration payment adjustments on Medicare patient claims with dates of service from May 1 through December 31, 2020, suspended the application of site-neutral payment for LTACH admissions that were admitted during the Public Health Emergency ("PHE"), and delayed payment of the employer portion of social security tax. On April 14, 2021, Congress passed legislation to continue the suspension of the 2% sequestration payment adjustments on Medicare patient claims with dates of service through December 31, 2021. On December 10, 2021, the Protecting Medicare and American Farmers from Sequester Cut Act legislation passed, which continued the suspension of the sequestration payment adjustments for Medicare patient claims with dates of service through March 31, 2022. Medicare patient claims with dates of service between April 1 through June 30, 2022 had a 1% sequestration adjustment and Medicare patient claims with dates of service that began on July 1, 2022 had a 2% sequestration adjustment. On October 13, 2022, the U.S. Department of Health and Human Services extended the PHE until January 11, 2023.

CAAP

As of December 31, 2021, the Company had $106.5 million of accelerated payments under the CAAP, which was recorded in contract liabilities - deferred revenue in our condensed consolidated balance sheets in accordance with Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("Topic 606"). On October 1, 2020, the repayment and recoupment terms for CAAP funds were amended by the Continuing Appropriations Act, 2021 and Other Extensions Act, which provides that recoupment will begin one year from the date the CAAP funds were received. Under these revised terms,

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recoupment of CAAP will occur under a tiered approach. The repayment terms began one year starting from the date the CAAP funds were issued and continued for 11 months, with CMS recouping the initial 25% of Medicare payments otherwise owed to the Company.

If any amount of CAAP funds that we received from CMS remains unpaid after the initial 11 month period, CMS recoups 50% of Medicare payments otherwise owed to the Company during the following six months. Interest will begin accruing on any amount of the CAAP funds that we received from CMS that remain unpaid following those recoupment periods. CMS will issue a repayment letter to the Company for any such outstanding amounts, which must be paid in full within 30 days from the date of the letter. The Company intends to repay the full amount before any interest accrues. During the nine months ended September 30, 2022, $101.6 million was recouped by CMS and $4.8 million of contract liabilities - deferred revenue remains on our condensed consolidated balance sheets as of September 30, ~~2017~~2022.

Other

The Company recognized the following amounts of net service revenue due to the suspension of the 2% sequestration payment adjustment and suspension of LTACH site-neutral payments (amounts in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Suspension of 2% sequestration payment adjustment	$	—	$	6,811	$	9,952	$	19,665
Suspension of LTACH site-neutral payment	4,918		5,749		17,070		18,230

As of September 30, 2022, the Company deferred $26.8 million of employer social security taxes, which was recorded in current liabilities - deferred employer payroll tax on our condensed consolidated balance sheets.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated balance sheets as of September 30, 2022 and December 31, ~~2016, and~~2021, the related unaudited condensed consolidated statements of income for the three and nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, the unaudited condensed consolidated ~~statement~~statements of ~~changes in~~stockholders' equity for the three and nine months ended September 30, ~~2017,~~2022 and 2021, the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021, and related notes (collectively, these financial statements are referred to as the "interim financial statements" and together with the related notes are referred to herein as the “interim financial information”) have been prepared by the Company. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been included. Operating results for the three and nine months ended September 30, ~~2017~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2022.

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 the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016. The report~~2021 (the "2021 Form 10-K"), which was filed with the Securities and Exchange Commission (the “SEC”) on ~~March 9, 2017,~~February 24, 2022, as amended by Amendment No. 1 filed on Form 10-K/A filed by the Company on April 27, 2022 (the "Form 10-K Amendment"). The 2021 Form 10-K and ~~includes~~Form 10-K Amendment include information and disclosures not included herein.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenue and expenses during the reporting period. Actual results could differ from those estimates.

~~Critical Accounting Policies~~Net Service Revenue

Net service revenue from contracts with customers is recognized in the period the performance obligations are satisfied under the Company's contracts by transferring the requested services to patients in amounts that reflect the consideration to which is

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expected to be received in exchange for providing patient care, which is the transaction price allocated to the services provided in accordance with Topic 606andASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (collectively, "ASC 606").

Net service revenue is recognized as performance obligations are satisfied, which can vary depending on the type of services provided. The performance obligation is the delivery of patient care in accordance with the requested services outlined in physicians' orders, which are based on specific goals for each patient.

The ~~Company’s most critical accounting policies relate~~performance obligations are associated with contracts in duration of less than one year; therefore, the optional exemption provided by ASC 606 was elected resulting in the Company not being required to disclose the aggregate amount of the transaction price allocated to the ~~principles~~performance obligations that are unsatisfied or partially unsatisfied as of ~~consolidation, revenue recognition,~~the end of the reporting period. The Company's unsatisfied or partially unsatisfied performance obligations are primarily completed when the patients are discharged and ~~accounts receivable and allowances for uncollectible accounts.~~

~~Principles~~typically occur within days or weeks of ~~Consolidation~~the end of the period.

The ~~interim financial information includes all subsidiaries~~Company determines the transaction price based on gross charges for services provided, reduced by estimates for explicit and ~~entities controlled by~~implicit price concessions. Explicit price concessions include contractual adjustments provided to patients and third-party payors. Implicit price concessions include discounts provided to self-pay, uninsured patients or other payors, adjustments resulting from regulatory reviews, audits, billing reviews and other matters. Subsequent changes to the ~~Company through direct ownership~~estimate of ~~majority interest or controlling member ownership of such entities. Third party equity interests in~~ the ~~consolidated joint ventures~~transaction price are ~~reflected~~recorded as ~~noncontrolling interests in the Company’s interim financial information.~~

~~The following table summarizes the percentage of~~adjustments to net service revenue ~~earned by type of ownership or relationship the Company had with the operating entity:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
Ownership type 2017 2016 2017 2016
Wholly-owned subsidiaries 50.6 % 57.6 % 52.1 % 57.3 %
Equity joint ventures 47.5
40.7
46.1
41.0
Other 1.9
1.7
1.8
1.7
100.0 % 100.0 % 100.0 % 100.0 %

~~All significant intercompany accounts and transactions have been eliminated~~ in the ~~Company’s accompanying interim financial information. Business combinations accounted for under~~period of change. Subsequent changes that are determined to be the ~~acquisition method have been included~~result of an adverse change in ~~the interim financial information from the respective dates of acquisition.~~

The Company consolidates equity joint venture entities as the Company has controlling interests in the entities, has voting control over these entities, or has ability to exercise significant influence in the entities. The members of the Company's equity joint ventures participate in profits and losses in proportion to their equity interests. The Company also consolidates entities which have license leasing arrangements as the Company owns 100% of the equity of these subsidiaries.

The Company has various management services agreements under which the Company manages certain operations of agencies. The Company does not consolidate these agencies because the Company does not have an ownership interest in, nor does it have an obligation to absorb losses of, or right to receive benefits from the entities that own the agencies.

~~Revenue Recognition~~

~~The Company reports net service revenue at the estimated net realizable amount due from Medicare, Medicaid, and others for services rendered. The Company assesses~~ the patient's ability to pay (i.e., change in credit risk) are recorded as a provision for ~~their~~doubtful accounts within general and administrative expenses.

Explicit price concessions are recorded for the difference between our standard rates and the contracted rates to be realized from patients, third-party payors and others for services provided.

Implicit price concessions are recorded for self-pay, uninsured patients and other payors by major payor class based on historical collection experience and current economic conditions, representing the difference between amounts billed and amounts expected to be collected. The Company assesses the ability to collect for the healthcare services provided at the time of patient admission based on the ~~Company's~~ verification of the patient's insurance coverage under ~~the~~ Medicare, Medicaid, and other commercial or managed care insurance ~~program. Medicare contributes~~programs.

Amounts due from third-party payors, primarily commercial health insurers and government programs (Medicare and Medicaid), include variable consideration for retroactive revenue adjustments due to settlements of audits and reviews. The Company has determined estimates for price concessions related to regulatory reviews based on historical experience and success rates in the ~~net service revenue of the Company’s home health~~claim appeals and adjudication process. Revenue is recorded at amounts estimated to be realizable for services ~~hospice services, and facility-based services. Medicaid and other payors contribute to the net service revenue of all Company's services.~~provided.

The following table sets forth the percentage of net service revenue earned by category of payor for the three and nine months ended September 30, ~~2017~~2022 and ~~2016:~~2021:

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										Three months ended September 30,				Nine months ended September 30,
	Three Months Ended September 30,				Nine Months Ended September 30,					2022		2021		2022		2021
Payor:	2017		2016		2017		2016
Home health:									Home health:
Medicare	71.0	%	74.3	%	71.5	%	74.7	%	Medicare	59.7	%	62.1	%	59.4	%	62.8	%
Managed Care, Commercial, and Other									Managed Care, Commercial, and Other	40.3		37.9		40.6		37.2
										100.0	%	100.0	%	100.0	%	100.0	%
Hospice:									Hospice:
Medicare									Medicare	92.7	%	94.6	%	92.8	%	94.3	%
Managed Care, Commercial, and Other									Managed Care, Commercial, and Other	7.3		5.4		7.2		5.7
										100.0	%	100.0	%	100.0	%	100.0	%
Home and community-based services:									Home and community-based services:
Medicaid	1.8		1.9		1.8		1.8		Medicaid	38.3	%	32.1	%	36.8	%	31.1	%
Managed Care, Commercial, and Other	27.2		23.8		26.7		23.5		Managed Care, Commercial, and Other	61.7		67.9		63.2		68.9
	100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%
Facility-based services:									Facility-based services:
Medicare									Medicare	53.0	%	45.8	%	53.0	%	49.5	%
Managed Care, Commercial, and Other									Managed Care, Commercial, and Other	47.0		54.2		47.0		50.5
										100.0	%	100.0	%	100.0	%	100.0	%
HCI:									HCI:
Medicare									Medicare	2.8	%	6.0	%	5.4	%	11.4	%
Managed Care, Commercial, and Other									Managed Care, Commercial, and Other	97.2		94.0		94.6		88.6
										100.0	%	100.0	%	100.0	%	100.0	%

Medicare

The following describes the payment models in effect during the nine months ended September 30, 2022. Such payment models were subject to temporary adjustments made by CMS in response to COVID-19 pandemic as described elsewhere in this Quarterly Report on Form 10-Q. The 2% sequestration reduction adjustment was suspended for patient claims with dates of service through March 31, 2022. Medicare patient claims with dates of service between April 1 through June 30, 2022 had a 1% sequestration payment adjustment. Medicare patient claims with dates of service beginning July 1, 2022 had the full 2% sequestration payment adjustment.

Home Health Services

The ~~Company’s home nursing Medicare patients~~Company records revenue as services are provided under the Patient Driven Groupings Model ("PDGM"). For each 30-day period, the patient is classified into one of ~~153~~432 home health resource groups prior to receiving services. ~~Based on~~Each 30-day period is placed into a subgroup falling under the patient’s home health resource group, the Company is entitled to receive a standard prospective Medicare payment for delivering care over a 60-day period referred to as an episode. The Company recognizes revenuefollowing categories: (i) timing being early or late, (ii) admission source being community or institutional, (iii) one of 12 clinical groupings based on the ~~number~~patient's principal diagnosis, (iv) functional impairment level of ~~days elapsed during an episode~~low, medium, or high, and (v) a co-morbidity adjustment of ~~care within~~none, low, or high based on the ~~reporting period.~~patient's secondary diagnoses.

~~Final payments~~Each 30-day period payment from Medicare ~~will reflect~~reflects base payment adjustments for case-mix and geographic wage ~~differences and 2% sequestration reduction for episodes beginning after March 31, 2013.~~differences. In addition, ~~final~~ payments may reflect one of ~~four~~three retroactive adjustments to ~~ensure the adequacy and effectiveness of~~ the total reimbursement: (a) an outlier payment if the patient’s care was unusually costly; (b) a low utilization adjustment ifwhereby the number of visits ~~was fewer than five;~~is dependent on the clinical grouping; and/or (c) a partial payment if the patient transferred to another provider or from another provider before completing the ~~episode; or (d) a payment adjustment based upon the level of therapy services required. Adjustments~~episode. The retroactive adjustments outlined above are ~~automatically~~ recognized in net service revenue when

~~changes occur~~ the event causing the adjustment occurs and during the period in which the services are provided to the patient. The Company reviews these adjustments to ensure that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the retroactive adjustments is subsequently resolved. Net service revenue and related patient accounts receivable are recorded at amounts estimated to be realized from Medicare for services rendered.

Hospice ~~Services~~

~~Hospice services provided by~~The Company records revenue based upon the ~~Company are paid by Medicare under a per diem~~date of service at amounts equal to the estimated payment ~~system.~~rates. The Company receives one of four predetermined daily rates based upon the level of care provided by the Company, ~~furnishes.~~which can be routine care, general inpatient care, continuous home care, and respite care. There are two separate payment rates for routine care: payment for the first 60 days of care and care beyond 60 days. In addition to the two routine rates, the Company may also

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receive a service intensity add-on ("SIA"). The SIA is based on visits made in the last seven days of life by a registered nurse or medical social worker for patients in a routine level of care.

The performance obligation is the delivery of hospice services to the patient, as determined by a physician, each day the patient is on hospice care.

Adjustments to Medicare revenue are made from regulatory reviews, audits, billing reviews and other matters. The Company ~~records net service revenue from hospice services~~estimates the impact of these adjustments based on ~~the daily or hourly rate and recognizes revenue as hospice services are provided.~~our historical experience.

Hospice payments are subject to variable consideration through an inpatient cap and an overall Medicare payment cap. The inpatient cap relates to individual programs receiving more than 20% of ~~its~~their total Medicare reimbursement from inpatient care services, and the overall Medicare payment cap relates to individual ~~providers~~programs receiving reimbursements in excess of a “cap amount,” ~~calculated~~determined by ~~multiplying~~Medicare to be payment equal to 12 months of hospice care for the ~~number~~aggregate base of ~~beneficiaries during the period by a statutory amount that is~~hospice patients, indexed for inflation. The determination for each cap is made annually based on the 12-month period ending on ~~October 31~~September 30 of each year. The Company monitors its limits on a provider-by-provider basis and records an estimate of its liability for reimbursements received in excess of the cap ~~amount. Beginning with~~amount, if any, in the cap year October 1, 2014, Center for Medicare and Medicaid Services ("CMS") implemented a new process requiring hospice providers to self-report their cap liabilities and remit applicable payment by March 31 of the following year.reporting period.

Facility-Based Services

~~The Company~~Gross revenue is ~~reimbursed by Medicare for~~recorded as services are provided under the LTACH prospective payment system. Each patient is assigned a long-term care diagnosis-related group. The Company is paid a predetermined fixed amount intended to reflect the average cost of treating a Medicare LTACH patient classified in that particular long-term care diagnosis-related group. For selected LTACH patients, the amount may be further adjusted based on ~~length of stay~~length-of-stay and facility-specific costs, as well as in instances where a patient is discharged and subsequently re-admitted, among other factors. The Company calculates the adjustment based on a historical average of these types of adjustments for LTACH claims paid. Similar to other Medicare prospective payment systems, the rate is also adjusted for geographic wage differences. ~~Revenue is recognized~~Net service revenue adjustments resulting from reviews and audits of Medicare cost report settlements are considered implicit price concessions for ~~the Company’s~~ LTACHs ~~as services~~and are ~~provided.~~measured at expected value.

Non-Medicare Revenues

Other sources of net service revenue for all segments fall into Medicaid, managed care ~~and~~or other payors

~~The Company’s~~ of the Company's services. Medicaid reimbursement is based on a predetermined fee schedule applied to each service provided. Therefore, revenue is recognized for Medicaid services as services are provided based on this fee schedule. The ~~Company’s~~Company's managed care and other payors reimburse the Company based upon a predetermined fee schedule or an episodic basis, depending on the terms of the applicable contract. Accordingly, the Company recognizes revenue from managed care and other payors as services are provided, such costs are incurred, and estimates of expected payments are known for each different payor, thus the Company's revenue is recorded at the estimated transaction price.

Contingent Service Revenues

The HCI segment provides strategic health management services to Accountable Care Organizations ("ACOs") that have been approved to participate in the ~~same manner as~~Medicare Shared Savings Program ("MSSP"). The HCI segment has service agreements with ACOs that provide for sharing of MSSP payments received by the ACO, if any. ACOs are legal entities that contract with CMS to provide services to the Medicare fee-for-service population for a specified annual period with the goal of providing better care for the individual, improving health for populations and lowering costs. ACOs share savings with CMS to the extent that the actual costs of serving assigned beneficiaries are below certain trended benchmarks of such beneficiaries and certain quality performance measures are achieved. The generation of shared savings is the performance obligation of each ACO, which only become certain upon the final issuance of unembargoed calculations by CMS, generally in the third quarter of each year. During the nine months ended September 30, 2022 and 2021, the Company ~~recognizes revenue~~recorded in its HCI segment $15.6 million and $12.1 million, respectively, related to 2021 and 2020 ACO respective service periods, as certain ACOs served by the HCI segment received a MSSP payment from ~~Medicare or Medicaid.~~CMS confirming the performance obligation has been met.

Patient Accounts Receivable ~~and Allowances for Uncollectible Accounts~~

The Company reports patient accounts receivable ~~net of~~from services rendered at their estimated ~~allowances for uncollectible~~transaction price, which includes price concessions based on the amounts expected from payors. The Company's patient accounts ~~and adjustments. Accounts~~ receivable ~~are~~is uncollateralized and primarily consist of amounts due from Medicare, Medicaid, other third-party payors, and ~~patients. To provide for accounts receivable that could become uncollectible in the future, the Company establishes an allowance for uncollectible accounts~~ to ~~reduce the carrying amount of such receivables to their estimated net realizable value.~~a lesser degree patients. The credit risk ~~for~~from other ~~concentrations of receivables~~payors is limited due to the significance of Medicare as the primary payor. The Company believes the credit risk associated with its Medicare accounts ~~which have historically exceeded 50% of its patient accounts receivable,~~ is limited due to (i) the historical collection rate from Medicare and (ii) the fact

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that Medicare is a U.S. government payor. The Company does not believe that there are any other significant concentrations ~~of receivables~~ from any particular payor that would subject it to any significant credit risk in the collection of patient accounts receivable.

The amount of the provision for bad debts is based upon the Company’s assessment of historical and expected net collections, business and economic conditions, and trends in government reimbursement. Uncollectible accounts are written off when the Company has determined the account will not be collected.

A portion of the estimated Medicare prospective payment system reimbursement from each submitted home nursing episode is received in the form of a request for anticipated payment (“RAP”). The Company submits a RAP for 60% of the

estimated reimbursement for the initial episode at the start of care. The full amount of the episode is billed after the episode has been completed. The RAP received for that particular episode is deducted from the 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 RAP received for that episode will be recouped by Medicare from any other Medicare claims in process for that particular provider. The RAP and final claim must then be resubmitted. For subsequent episodes of care contiguous with the first episode for a particular patient, the Company submits a RAP for 50% instead of 60% of the estimated reimbursement.

The Company’s Medicare population is paid at prospectively set amounts that can be determined at the time services are rendered. The Company’s Medicaid reimbursement is based on a predetermined fee schedule applied to each individual service it provides. The Company’s managed care contracts are structured similar to either the Medicare or Medicaid payment methodologies. The Company is able to calculate its actual amount due at the patient level and adjust the gross charges down to the actual amount at the time of billing. This negates the need to record an estimated contractual allowance when reporting net service revenue for each reporting period.

~~Other Significant Accounting Policies~~

Earnings Per Share

Basic per share information is computed by dividing the relevant amounts from the condensed consolidated statements of income by the weighted-average number of shares outstanding during the period, under the treasury stock method. Diluted per share information is also computed using the treasury stock method, by dividing the relevant amounts from the condensed consolidated statements of income by the weighted-average number of shares outstanding plus potentially dilutive shares.

The following table sets forth shares used in the computation of basic and diluted per share ~~information:~~information and, with respect to the data provided for the three and nine months ended September 30, 2022 and 2021 (amounts in thousands):


	Three months ended September 30,		Nine months ended September 30,
	2022	2021	2022	2021
Weighted average number of shares outstanding for basic per share calculation	30,565	31,238	30,527	31,205
Effect of dilutive potential shares:
Nonvested stock	141	196	112	217
Adjusted weighted average shares for diluted per share calculation	30,706	31,434	30,639	31,422
Anti-dilutive shares	87	6	264	118

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Weighted average number of shares outstanding for basic per share calculation 17,740,818
17,588,163
17,704,561
17,546,773
Effect of dilutive potential shares:
Options —
—
—
1,146
Nonvested stock 269,704
131,310
227,139
116,365
Adjusted weighted average shares for diluted per share calculation 18,010,522
17,719,473
17,931,700
17,664,284
Anti-dilutive shares —
20,001
137,400
214,856
Investments

~~Recently Adopted Accounting Pronouncements~~

~~In March 2016, as part of its Simplification Initiative, the FASB issued ASU No. 2016-09,~~ ~~Compensation - Stock Compensation~~ ("ASU 2016-09"), which seeks to reduce complexity in accounting standards. The areas for simplification in ASU 2016-09, involve several aspects of the accounting for share-based payment transaction, including (1) accounting for income taxes, (2) classification of excess tax benefits on the statement of cash flow, (3) forfeitures, (4) minimum statutory tax withholding requirements, (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes, (6) the practical expedient for estimating the expected term, and (7) intrinsic value. The Company adopted the new standard on its effective date on January 1, 2017 and elected to apply this adoption prospectively.

All excess tax benefits and deficiencies in the current and future periods will be recognized as income tax expense in the Company's consolidated financial statements in the reporting period in which they occur. The Company recorded excess tax benefits of $1.0 million in income tax expense forDuring the nine months ended September 30, ~~2017. Additionally,~~2022, the Company ~~elected to continue to apply an estimated rate of forfeiture to its compensation expense for share-based awards.~~

~~Recently Issued Accounting Pronouncements~~

~~On May 28, 2014,~~invested $15.0 million and became a minority owner in a post-acute management services company, invested $0.1 million in Jumpstart Nova Fund, LP, and invested $0.2 million in LHCC Aging Innovations Fund I, LP. During the ~~FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~, ("ASU 2014-09") which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for reporting periods beginning after December 15, 2017. The standard permits the use of either the full retrospective or cumulative effect transition method. Asnine months ended September 30, 2021, the Company ~~progresses with evaluating~~invested $10.0 million and became a minority owner in a healthcare analytics company and invested $0.1 million in Jumpstart Nova Fund, LP. These investments are recorded in other assets in our condensed consolidated balance sheets. These investments were accounted for under the ~~effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures,~~cost method of accounting as the Company does not ~~expect a material impact on~~have the ability to exercise significant influence in connection with its ~~consolidated financial statements upon implementation on January~~minority ownership positions.

3. Acquisitions

On September 1, ~~2018. Currently,~~2021, the Company ~~anticipates adopting~~purchased Heart of Hospice. During the ~~new standard using~~nine months ended September 30, 2022, the ~~full retrospective method for all periods presented.~~

~~In February 2016,~~Company recorded a decrease in patient accounts receivable of $1.5 million due to information obtained that related to facts and circumstances that existed at the ~~FASB issued ASU No. 2016-02,~~ ~~Leases, ("ASU 2016-02") which requires lessees~~time of acquisition; therefore, it was an adjustment to ~~recognize qualifying leases on~~ the statement of financial position. Qualifying leases will be classified as right-of-use assets and lease liabilities. The new standard is effective on January 1, 2019. Early adoption is permitted. ASU 2016-02 mandates a modified retrospective transition method for all entities. The Company anticipates that the adoption of ASU 2016-02 will result in a material increase in total assets and total liabilities. The Company continues to evaluate the effect that ASU 2016-02 will have on its related disclosures.

~~3. Acquisitions and Joint Ventures~~

provisional amounts previously recognized.

On ~~January~~November 1, ~~2017,~~2021, the Company ~~formed a joint venture with LifePoint~~purchased Brookdale Health ~~Inc. ("LifePoint"). LifePoint contributed 28~~Care Services' agencies from the recently formed home health, ~~agencies, 12~~ hospice, ~~agencies,~~ and ~~one inpatient hospice unit to the joint~~outpatient therapy venture between HCA Healthcare and Brookdale Senior Living. The Company's net working capital adjustment was finalized during the nine months ended September 30, ~~2017. The~~2022 for $3.1 million and recorded in accordance with ASC Topic 805, Business Combinations, as an increase to the consideration transferred. In addition, amounts due to government entities was reduced by $3.2 million to reflect payments made for prior years' hospice cap liability.

On May 1, 2022, the Company ~~acquired~~purchased the majority ownership of ~~the membership interests of these agencies. These providers conduct~~a home health ~~operations~~agency from Archbold Medical Center, which included two locations in ~~Arizona, Colorado, Louisiana, Michigan, North Carolina, Pennsylvania, Tennessee, Texas, and Virginia; and hospice operations in Michigan, North Carolina, Pennsylvania, Tennessee, and Virginia.~~

~~On June 1, 2017,~~Georgia. Total consideration for the Company formed a joint venture with Baptist Memorial Health Care ("Baptist"). Baptist contributed three home health agencies and six hospice agencies to the joint venture during the nine months ended September 30, 2017.acquisition was $3.7 million. The ~~Company acquired majority ownership of the membership interests of these agencies. These providers conduct home health and hospice operations in Mississippi and Tennessee.~~

On September 1, 2017, the Company formed a joint venture with Christus Continuing Care (“Christus”). Christus contributed seven home health agencies, five hospice agencies, one inpatient hospice unit, one community-based agency, and six LTACH agencies to the joint venture during the nine months ended September 30, 2017. The Company acquired majority ownership of the membership interests of these agencies. These providers conduct home health, hospice, and community-based operations in Louisiana and Texas; and LTACH operations in Arkansas, Louisiana, and Texas.

~~In separate transactions, the Company acquired two home health agencies, two hospice agencies, one inpatient hospice unit, and one pharmacy during the nine months ended September 30, 2017.~~

~~The total aggregate~~ purchase price ~~for these transactions~~ was ~~$76.7 million, of which $10.4 million was paid in December 2016 and $61.2 million was primarily paid in cash during the nine months ended September 30, 2017. The purchase prices were~~ determined based on the ~~Company’s~~Company's analysis of comparable acquisitions and the target ~~market’s~~market's potential future cash flows.

Goodwill generated from the acquisitions was recognized based on the expected contributions of each acquisition to the overall corporate strategy. The Company expects its portion of goodwill to be fully tax deductible. The acquisitions were accounted for under the acquisition method of accounting. Accordingly, the accompanying ~~interim~~ financial information includes the results of operations of the acquired entities from the date of acquisition.

The following table summarizes the ~~aggregate consideration paid for the acquisitions and the~~preliminary amounts of the assets acquired and liabilities assumed at ~~the~~their acquisition ~~dates,~~date, as well as their fair value at the acquisition ~~dates~~date and the noncontrolling interest acquired during the nine months ended September 30, ~~2017~~2022 (amounts in thousands):

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Consideration
  Cash $ 71,677
Fair value of total consideration transferred
Recognized amounts of identifiable assets acquired and liabilities assumed:
  Patient accounts receivable 6,532
  Trade name 13,953
  Certificates of need/licenses 16,447
  Other identifiable intangible assets 6
  Other assets and (liabilities), net 2,121
Total identifiable assets 39,059
Noncontrolling interest 52,492
Goodwill, including noncontrolling interest of $34,313 $ 85,110


Consideration
Cash	$	2,570
Fair value of total consideration transferred
Recognized amounts of identifiable assets acquired and liabilities assumed:
Trade name	$	453
Certificates of need/licenses	357
Other liabilities	(227)
Total identifiable assets and liabilities	$	583

Noncontrolling interest	$	707
Goodwill, including noncontrolling interest of $504	$	2,694

~~The Company conducted preliminary assessments~~Trade names and ~~recognized provisional amounts~~certificates of need/licenses are indefinite-lived assets and, therefore, not subject to amortization. Acquired trade names that are not being used actively are amortized over the estimated useful life on the straight line basis. Trade names are valued using the relief from royalty method, a form of the income approach. Certificates of need are valued using the replacement cost approach based on registration fees and opportunity costs. Licenses are valued based on the estimated direct costs associated with recreating the asset, including opportunity costs based on an income approach. In the case of states with a moratorium in ~~its initial accounting for~~place, the ~~acquisitions of majority ownership of three joint venture partnerships for all identified assets in accordance with~~licenses are valued using the ~~requirements of ASC Topic 805. The Company~~multi-period excess earnings method. Noncontrolling interest is ~~continuing its review of these matters during the measurement period. If new information about facts and circumstances that existed~~recorded at ~~the acquisition date is obtained and indicates adjustments are necessary, the acquisition accounting will be revised to adjust to the provisional amounts initially recognized.~~fair value.

4. Goodwill and Intangibles

The changes in recorded goodwill and intangible assets by reporting unit for the nine months ended September 30, ~~2017~~2022 were as follows (amounts in thousands):


	Home health reporting unit		Hospice reporting unit		Home and community-based services reporting unit		Facility-based reporting unit		HCI reporting unit		Total
Goodwill:
Balance as of December 31, 2021	$	968,435	$	556,332	$	167,027	$	15,770	$	40,862	$	1,748,426
Net working capital adjustments	—		1,440		—		—		—		1,440
Acquisitions	2,190		—		—		—		—		2,190
Noncontrolling interests	504		—		—		—		—		504
Disposals	(440)		(1,460)		(240)		—		—		(2,140)
Balance as of September 30, 2022	$	970,689	$	556,312	$	166,787	$	15,770	$	40,862	$	1,750,420
Intangible assets:
Balance as of December 31, 2021	$	237,979	$	117,340	$	24,245	$	5,919	$	14,519	$	400,002
Acquisitions	1,010		—		—		—		—		1,010
Amortization	(1,589)		(1,346)		(8)		(334)		(436)		(3,713)
Disposals	(491)		(1,217)		(282)		—		—		(1,990)
Balance as of September 30, 2022	$	236,909	$	114,777	$	23,955	$	5,585	$	14,083	$	395,309

Home health reporting unit
Hospice
reporting unit

Community -
based
reporting unit

Facility-based
reporting unit
Total
Balance as of December 31, 2016 $ 210,839
$ 64,234
$ 18,820
$ 13,424
$ 307,317
Goodwill from acquisitions 29,448
15,188
4,285
1,876
50,797
Goodwill related to noncontrolling interests 20,781
9,674
2,856
1,002
34,313
Goodwill related to disposals (80 ) —
—
—
(80 )
Goodwill related to prior period net working capital adjustments............................................ (5 ) —
—
347
342
Balance as of September 30, 2017 $ 260,983
$ 89,096
$ 25,961
$ 16,649
$ 392,689

~~Intangible~~The Company did record impairments of goodwill and intangible assets ~~consisted of the following as of September 30, 2017 and December 31, 2016 (amounts in thousands):~~

September 30, 2017
Remaining useful life
Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount
Indefinite-lived assets:

Trade names Indefinite $ 78,590
$ —
$ 78,590
Certificates of need/licenses Indefinite 49,773
—
49,773
Total $ 128,363
$ —
$ 128,363
Definite-lived assets:
Trade names 2 months — 9 years $ 9,291
$ (7,184 ) $ 2,107
Non-compete agreements 2 month — 2 years 5,732
(5,423 ) 309
Total $ 15,023
$ (12,607 ) $ 2,416
Balance as of September 30, 2017 $ 143,386
$ (12,607 ) $ 130,779

December 31, 2016
Remaining useful life
Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount
Indefinite-lived assets:

Trade names Indefinite $ 64,672
$ —
$ 64,672
Certificates of need/licenses Indefinite 33,327
—
$ 33,327
Total $ 97,999
$ —
$ 97,999
Definite-lived assets:
Trade names 8 months — 9 years $ 9,294
$ (5,991 ) $ 3,303
Non-compete agreements 2 months — 3 years 5,681
(4,977 ) 704
Total $ 14,975
$ (10,968 ) $ 4,007
Balance as of December 31, 2016 $ 112,974
$ (10,968 ) $ 102,006

~~Intangible assets of $87.8 million, net of accumulated amortization, were~~ related to the ~~home health services segment, $31.8~~closure of underperforming locations. Goodwill impairment of $2.1 million and Medicare licenses/Certificate of need impairment of $2.0 million were related to the hospice services segment, $9.0 million were related to the community-based services segment, and $2.2 million were related to the facility-based services segment as of September 30, 2017. The Company recorded ~~$1.6 million and $1.8 million of amortization expense~~ during the nine months ended September 30, ~~2017~~2022. Goodwill impairment of $0.02 million and ~~2016,~~Medicare licenses impairment of $0.9 million were recorded during the nine months ended September 30, 2021. This was recorded in impairment of intangibles and other on the Company's condensed consolidated statements of income. The amount of disposal of goodwill was determined using prices of comparable businesses in the market. The amount of disposal of the Medicare licenses/Certificate of need was its carrying value at the time of closure.

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The following tables summarize the changes in intangible assets during the nine months ended September 30, 2022 and December 31, 2021 (amounts in thousands):


	2022		2021
Indefinite-lived intangible assets:
Trade names	$	208,160	$	207,780
Certificates of need/licenses	172,395		173,955
Net total	$	380,555	$	381,735

Definite-lived intangible assets:
Trade names
Gross carrying amount	$	11,273	$	11,073
Accumulated amortization	(10,559)		(9,606)
Net total	$	714	$	1,467
Non-compete agreements
Gross carrying amount	$	14,524	$	14,524
Accumulated amortization	(9,495)		(7,172)
Net total	$	5,029	$	7,352
Customer relationships
Gross carrying amount	$	11,822	$	11,822
Accumulated amortization	(2,811)		(2,374)
Net total	$	9,011	$	9,448
Total definite-lived intangible assets
Gross carrying amount	$	37,619	$	37,419
Accumulated amortization	(22,865)		(19,152)
Net total	$	14,754	$	18,267

Total intangible assets:
Gross carrying amount	$	418,174	$	419,154
Accumulated amortization	(22,865)		(19,152)
Net total	$	395,309	$	400,002

Remaining useful lives for trade names, customer relationships, and non-compete agreements were 7.0, 15.5, and 4.2 years, respectively, at September 30, 2022. Similar periods at December 31, 2021 were 7.8, 16.3, and 4.9 years for trade names, customer relationships, and non-compete agreements, respectively. ~~This~~Amortization expense was $1.0 million and $0.4 million for the three months ended September 30, 2022 and 2021 and $3.7 million and $1.0 million for the nine months ended September 30, 2022 and 2021. Amortization expense was recorded in general and administrative expenses.

5. Debt

Credit Facility

On ~~June 18, 2014,~~August 3, 2021, the Company entered into aan Amended and Restated Senior Credit ~~Agreement~~Facility (the ~~“Credit Agreement”~~"2021 Amended Credit Agreement") ~~with Capital One, National Association,~~, which ~~provides~~provided a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of ~~$225.0~~$800.0 million, which included an additional $500.0 million accordion expansion, and a letter of credit sub-limit equal to ~~$15.0~~$75.0 million. On December 31, 2021, the aggregate commitment was increased to a maximum borrowing limit of $1.0 billion, with an additional $300.0 million accordion expansion. The expiration date of the 2021 Amended Credit Agreement is ~~June 18, 2019.~~ August 3, 2026.

The Company’s obligations under the 2021 Amended Credit Agreement are secured by substantially all of the assets of the Company and its wholly-owned subsidiaries (subject to customary exclusions), which assets include the Company’s equity

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ownership of its wholly-owned subsidiaries and its equity ownership in joint venture entities. The Company’s wholly-owned subsidiaries also guarantee the obligations of the Company under the 2021 Amended Credit Agreement.

Revolving loans under the 2021 Amended Credit Agreement bear interest, ~~at,~~ as selected by the Company, at either ~~a (1) Base~~(i) the prevailing London Interbank Offered Rate ~~which is defined as a fluctuating rate per annum equal to~~("LIBOR") (with interest periods of one, three or six months at the ~~highest of (a) the Federal Funds Rate in effect on such day plus 0.5% (b) the Prime Rate in effect on such day and (c) the Eurodollar Rate for a one month interest period on such day plus 1.0%,~~Company's option) plus a ~~margin ranging from 0.75%~~spread of 1.25% to ~~1.5% per annum~~2.0% based on the Company's quarterly consolidated Leverage Ratio or ~~(2) Eurodollar~~(ii) the prevailing prime or base rate plus a ~~margin ranging from 1.75%~~spread of 0.25% to ~~2.5% per annum.~~1.00% based on the Company's quarterly consolidated Leverage Ratio. Swing line loans bear interest at the Base Rate. The Company is limited to 15 Eurodollar borrowings outstanding at ~~the same~~any time. The Company is required to pay a commitment fee for the unused commitments at rates ranging from ~~0.225%~~0.15% to ~~0.375%~~0.30% per annum depending upon the Company’s quarterly consolidated Leverage ~~Ratio,~~Ratio. The Base Rate as ~~defined~~of September 30, 2022 was 7.25% and the LIBOR rate was 5.13%. As of September 30, 2022, the effective interest rate on outstanding borrowings under the 2021 Amended Credit Agreement was 4.98%.

On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease the publication of LIBOR settings for 1-month, 3-month, 6-month, and 12-month LIBOR borrowings immediately on June 30, 2023. JPMorgan Chase Bank, N.A will transition our 2021 Amended Credit Agreement to an alternate rate to CME Term SOFR Reference Rate ("SOFR"), which is administered by CME Group Benchmark Administration Ltd ("CME"). Due to the differences observed between LIBOR rates and SOFR published rates, JPMorgan Chase Bank, N.A. will use a credit spread adjustment ("CSA") in order to minimize value transfer and leave the existing margin applicable to our 2021 Amended Credit Agreement. The ~~Base Rate at September 30, 2017 was 5.25%~~CSA used by JPMorgan Chase Bank, N.A. is based on the average of the differences between LIBOR and ~~the Eurodollar rate was 3.24%.~~SOFR over a 12-month period and will be added to SOFR.

As of September 30, ~~2017 and December 31, 2016, respectively,~~2022, the Company had ~~$119.0~~$738.0 million drawn, letters of credit issued in the amount of $24.3 million, and ~~$87.0~~$237.7 million of remaining borrowing capacity available under the 2021 Amended Credit Agreement. At December 31, 2021, the Company had $661.2 million drawn and letters of credit ~~totaling $11.0~~issued in the amount of $24.3 million ~~outstanding~~ under the 2021 Amended Credit Agreement.

Under the terms of the 2021 Amended Credit Agreement, the Company is required to maintain certain financial ratios and comply with certain financial covenants. The 2021 Amended Credit Agreement permits the Company to make certain restricted payments, such as purchasing shares of its ~~credit facilities~~stock, within certain parameters, provided the Company maintains compliance with ~~Capital One, National Association.~~

~~As of~~those financial ratios and covenants after giving effect to such restricted payments. The Company was in compliance with its debt covenants under the 2021 Amended Credit Agreement at September 30, ~~2017, the Company had $95.0 million available for borrowing under the Credit Agreement with Capital One, National Association.~~2022.

6. Stockholder’s Equity

Equity Based Awards

The ~~2010 Long Term~~2018 Incentive Plan ~~(the “2010 Incentive Plan”)~~ is administered by the Compensation Committee of the Company’s Board of Directors. AThe total number of ~~1,500,000~~ shares of the ~~Company’s~~Company's common stock originally reserved were ~~reserved~~2,210,544 shares and ~~391,414 shares~~a total of 1,544,734 shares are currently available for ~~issuance pursuant to awards granted under the 2010 Incentive Plan.~~issuance. A variety of discretionary awards for employees, officers, directors, and consultants are authorized under the ~~2010~~2018 Incentive Plan, including incentive or non-qualified ~~statutory~~ stock options and ~~nonvested stock.~~restricted stock, restricted stock units and performance-based awards. All awards must be evidenced by a written award certificate which will include the provisions specified by the Compensation Committee of the Board of Directors. The Compensation Committee determines the exercise price for ~~non-statutory~~ stock ~~options. The exercise price for any option~~options, which cannot be less than the fair market value of the Company’s common stock as of the date of grant.

Share Based Compensation

Nonvested Stock

~~During the nine months ended September 30, 2017, the Company’s independent~~Independent directors ~~were~~are granted ~~11,700 nonvested~~ shares of common stock under the Second Amended and Restated 2005 Non-Employee Directors Compensation Plan. ~~The shares were drawn from~~During the ~~1,500,000~~nine months ended September 30, 2022, the Company granted 8,800 nonvested shares of common stock ~~reserved for issuance under the 2010 Incentive Plan. The~~to independent directors, which shares will vest 100% on the one year anniversary date.

During the nine months ended September 30, ~~2017,~~2022, employees and a consultant were granted ~~139,310~~182,310 and 10,935 shares, respectively, of nonvested shares of common stock pursuant to the ~~2010~~2018 Incentive Plan. The shares vest over a ~~period~~period of five years, conditioned on continued ~~employment.~~employment and in accordance with the consulting agreement. The fair value of nonvested shares of common stock is determined based on the closing trading price of the Company’s common stock on the grant date. ~~The weighted average grant date fair value of nonvested shares of common stock granted during the nine months ended September 30, 2017 was $48.52.~~

The following table represents the ~~nonvested stock~~share grants activity for the nine months ended September 30, ~~2017:~~

2022:

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Number of
shares

Weighted
average grant
date fair value
Nonvested shares outstanding as of December 31, 2016 574,711
$ 31.61
Granted 151,010
$ 48.52
Vested (191,463 ) $ 28.91
Forfeited (3,793 ) $ 39.30
Nonvested shares outstanding as of September 30, 2017 530,465
$ 37.35


	Restricted stock			Options
	Number of shares	Weighted average grant date fair value		Number of shares	Weighted average grant date fair value
Share grants outstanding as of December 31, 2021	415,816	$	122.40	74,235	$	42.07
Granted	202,045	139.64		—	—
Vested or exercised	(162,749)	143.35		(13,986)	31.27
Share grants outstanding as of September 30, 2022	455,112	$	134.44	60,249	$	43.05

As of September 30, ~~2017,~~2022, there was ~~$14.9~~ $49.6 million of total unrecognized compensation cost related to nonvested shares of common stock granted. That cost is expected to be recognized over the weighted average period of ~~3.13~~3.25 years. ~~The total fair value of shares of common stock vested during the nine months ended September 30, 2017 was $5.5 million.~~ The Company records compensation expense related to nonvested stock awards at the grant date for shares of common stock that are awarded fully vested, and over the vesting term on a ~~straight line~~straight-line basis for shares of common stock that vest over time. The Company ~~recorded $4.5~~estimates forfeitures at the time of grant and revises the estimate in subsequent periods if actual forfeitures differ to ensure that total compensation expense recognized is at least equal to the value of vested awards. The Company recorded $15.3 million and ~~$3.5~~$11.7 million of compensation expense related to nonvested stock grants infor the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

Employee Stock Purchase Plan

In 2006, the Company adopted the Employee Stock Purchase Plan whereby eligible employees may purchase the Company’s common stock at 95% of the market price on the last day of the calendar quarter. There were 250,000 shares of common stock initially reserved for the plan. In 2013, the Company adopted the Amended and Restated Employee Stock Purchase Plan, which reserved an additional 250,000 shares of common stock to the plan.

The table below details the shares of common stock issued during ~~2017:~~2022:

Number of
shares

Per share
price
Shares available as of December 31, 2016 189,611

Shares issued during the three months ended March 31, 2017 5,891
$ 43.42
Shares issued during the three months ended June 30, 2017 4,152
$ 51.21
Shares issued during the three months ended September 30, 2017.......................................................... 4,775
$ 64.49
Shares available as of September 30, 2017 174,793


	Number of shares	Per share price
Shares available as of December 31, 2021	104,344
Shares issued during the three months ended March 31, 2022	5,353	$	130.37
Shares issued during the three months ended June 30, 2022	3,342	$	160.17
Shares issued during the three months ended September 30, 2022	4,104	$	147.95

Shares available as of September 30, 2022	91,545

Treasury Stock

In conjunction with the vesting of the nonvested shares of common stock or the exercise of stock options, recipients incur ~~personal~~personal income tax obligations. The Company allows the recipients to turn in shares of common stock to satisfy minimum tax obligations. During the nine months ended September 30, ~~2017,~~2022, the Company redeemed ~~61,502~~28,802 shares of common stock valued at ~~$3.1~~$5.0 million, related to ~~these~~share vesting tax obligations. Such shares are held as treasury stock and are available for reissuance by the Company. Additionally, 5,268 shares were forfeited for terminated employees. Such shares are held in treasury stock and are available for reissuance by the Company.

In addition, the Company redeemed 6,249 shares of common stock valued at $0.2 million, related to the exercise of options.

Stock Repurchase

On December 6, 2021, the Company's Board of Directors approved a share repurchase program authorizing purchases up to $250.0 million of the Company's common stock. The Company may purchase common stock in open market transactions, block or privately negotiated transactions, and may from time to time purchase shares pursuant to a trading plan in accordance with Rule 10b5-1 and Rule 10b-18 under the Exchange Act or by any combination of such methods, in each case subject to compliance with all SEC rules and other legal requirements. The number of shares to be purchased and the timing of the purchases are based on a variety of factors, including, but not limited to, the level of cash balances, credit availability, debt covenant restrictions, general business conditions, the market price of our stock and the availability of alternative investment opportunities. No time limit was set for completion of repurchases under the new authorization, and the program may be suspended or discontinued at any time.

The Company uses the cost method to account for the repurchase of common stock. During the nine months ended September 30, 2022, the Company repurchased 190,622 shares from the open market under its Stock Repurchase plan at an aggregate cost of $25.5 million.

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7. Commitments and Contingencies

Contingencies

The Company provides services in a highly regulated industry and is a party to various proceedings and regulatory and other governmental and internal audits and investigations in the ordinary course of business (including audits by Zone Program Integrity Contractors ("ZPICs"), Unified Program Integrity Contractors ("UPICs"), and Recovery Audit Contractors ("RACs") and investigations resulting from the Company's obligation to self-report suspected violations of law). Management cannot predict the ultimate outcome of any regulatory and other governmental and internal audits and investigations. While such audits and investigations are the subject of administrative appeals, the appeals process, even if successful, may take several years to resolve. The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company's ~~businesses in the future.~~businesses. These audits and investigations have caused and could potentially continue to cause delays in collections, ~~and~~ recoupments from governmental payors. The Company recorded $12.0 million and $16.9 million in its condensed consolidated balance sheets in other assets as of September 30, 2022 and December 31, 2021, respectively, which are due from government payors ~~and~~related to the disputed finding of pending appeals of ZPIC audits. Additionally, these audits may subject the Company to sanctions, damages, extrapolation of damage findings, additional recoupments, fines, and other penalties (some of which may not be covered by insurance), which may, either individually or in the aggregate, have a material adverse effect on the Company's business and financial condition.

~~The Company is~~We are involved in various legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, ~~management believes~~we believe the outcome of pending litigation will not have a material adverse effect, after considering the effect of ~~the Company’s~~our insurance coverage, on ~~the Company’s interim~~our consolidated financial information.

Legal fees related to all legal matters are expensed as incurred.

Joint Venture Buy/Sell Provisions

Most of the Company’s joint ventures include a buy/sell option that grants to the Company and its joint venture partners the right to require the other joint venture party to either purchase all of the exercising member’s membership interests or sell to the exercising member all of the non-exercising member’s membership interest, at the non-exercising member’s option, within 30 days of the receipt of notice of the exercise of the buy/sell option. In some instances, the purchase price is based on a multiple of the historical or future earnings before income taxes and depreciation and amortization of the equity joint venture at the time the buy/sell option is exercised. In other instances, the buy/sell purchase price will be negotiated by the partners and subject to a fair market valuation process. The Company has not received notice from any joint venture partners of their intent to exercise the terms of the buy/sell agreement nor has the Company notified any joint venture partners of its intent to exercise the terms of the buy/sell agreement.

Compliance

The laws and regulations governing the Company’s operations, along with the terms of participation in various government programs, regulate how the Company does business, the services offered and its interactions with patients and the public. These laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws or regulations, or their interpretations, or the enactment of new laws or regulations could materially and adversely affect the Company’s operations and financial condition.

The Company is subject to various routine and non-routine governmental reviews, audits and investigations. In recent years, federal and state civil and criminal enforcement agencies have heightened and coordinated their oversight efforts related to the health care industry, including referral practices, cost reporting, billing practices, joint ventures and other financial relationships among health care providers. Violation of the laws governing the Company’s operations, or changes in the interpretation of those laws, could result in the imposition of fines, civil or criminal penalties and/or termination of the Company’s rights to participate in federal and state-sponsored programs and suspension or revocation of the Company’s licenses. The Company believes that it is in material compliance with all applicable laws and regulations.

8. Noncontrolling ~~interest~~interests

~~Noncontrolling Interest-Redeemable~~

~~A majority~~The Company classifies noncontrolling interests of its joint venture parties based upon a review of the legal provisions governing the redemption of such interests. In each of the Company’s joint ventures, those provisions are embodied within the joint venture’s operating agreement. For joint ventures with operating agreement provisions that establish an obligation for the

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Company to purchase the third-party partners’ noncontrolling interests other than as a result of events that lead to a liquidation of the joint venture, such noncontrolling interests are classified as redeemable noncontrolling interests in temporary equity. For joint ventures with operating agreement provisions that establish an obligation that the Company purchase the third party partners’ noncontrolling interests, but which obligation is triggered by events that lead to a liquidation of the joint venture, such noncontrolling interests are classified as nonredeemable noncontrolling interests in permanent equity. Additionally, for joint ventures with operating agreement provisions that do not establish an obligation for the Company to purchase the third-party partners’ noncontrolling interests (e.g., where the Company has the option, but not the obligation, to purchase the third-party partners’ noncontrolling interests), such noncontrolling interests are classified as nonredeemable noncontrolling interests in permanent equity.

The Company’s equity joint ~~venture agreements include a provision~~ventures that ~~requires~~are classified as redeemable noncontrolling interests are subject to operating agreement provisions that require the Company to purchase the noncontrolling partner’s interest upon the occurrence of certain triggering events, ~~such~~which are defined as ~~death or~~the bankruptcy of the partner or the partner’s exclusion from the Medicare or Medicaid programs. These triggering events and the related repurchase provisions are specific to each ~~individual equity joint venture; if the repurchase provision is triggered in any one~~redeemable equity joint venture, since the ~~remaining~~triggering of a repurchase obligation for any one redeemable noncontrolling interest in an equity joint ~~ventures would~~venture does not ~~be impacted.~~necessarily impact any of the other redeemable noncontrolling interests in other equity joint ventures. Upon the occurrence of a triggering event requiring the purchase of a redeemable noncontrolling interest, the Company would be required to purchase the noncontrolling partner’s interest ~~at either the fair value or the book value at the time of purchase, as stated~~based upon a valuation methodology set forth in the applicable joint venture agreement. ~~The~~

Redeemable noncontrolling interests and nonredeemable noncontrolling interests are initially recorded at their fair value as of the closing date of the transaction establishing the joint venture. Such fair values are determined using various accepted valuation methods, including the income approach, the market approach, the cost approach, and a combination of one or more of these approaches. A number of facts and circumstances concerning the operation of the joint venture are evaluated for each transaction, including (but not limited to) the ability to choose management, control over acquiring or liquidating assets, and controlling the joint venture’s strategy and direction, in order to determine the fair value of the noncontrolling interest.

Based upon the Company’s evaluation of the redemption provisions concerning redeemable noncontrolling interests as of September 30, 2022, the Company ~~has never been required~~determined in accordance with authoritative accounting guidance that it was not probable that an event otherwise requiring redemption of any redeemable noncontrolling interest would occur (i.e., the date for such event was not set or such event is not certain to ~~purchase~~occur). Therefore, none of the redeemable noncontrolling interests were identified as mandatorily redeemable interests at such times, and the Company did not record any values in respect of any mandatorily redeemable interests.

Subsequent to the closing date of the transaction establishing the joint venture, the Company records adjustments to the carrying amounts of noncontrolling interests during each reporting period to reflect (a) comprehensive income (loss) attributed to each noncontrolling interest, which is calculated by multiplying the noncontrolling interest percentage by the comprehensive income (loss) of the joint venture’s operations, (b) dividends paid to the noncontrolling interest partner, and (c) any ~~of its equity~~other transactions that increase or decrease the Company’s ownership interest in each joint venture, ~~partners, and~~as a result of which the Company ~~believes~~retains its controlling interest. If the ~~likelihood~~Company determines that, based upon its analysis as of the end of each reporting period in accordance with authoritative accounting guidance, that it is not probable that an event would occur to otherwise require the redemption of a ~~triggering event occurring is remote. According to authoritative guidance,~~ redeemable noncontrolling ~~interests must be~~interest (i.e., the date for such event is not set or such event is not certain to occur), then the Company does not adjust the recorded amount of such redeemable noncontrolling interest.

The carrying amount of each redeemable equity instrument presented in temporary equity for the nine months ended September 30, 2022 is not less than the initial amount reported ~~outside of permanent equity on the consolidated balance sheet in instances where there is a repurchase provision with a triggering event that is outside the control of the Company.~~for each instrument.

The following table summarizes the activity of noncontrolling interest-redeemable for the nine months ended September 30, ~~2017~~2022 (amounts in thousands):


Balance as of December 31, 2021	$	17,501
Net income attributable to noncontrolling interest-redeemable	6,991
Noncontrolling interest-redeemable distributions	(7,514)


Balance as of September 30, 2022	$	16,978

Balance as of December 31, 2016 $ 12,567
Net income attributable to noncontrolling interest-redeemable 7,649
Noncontrolling interest-redeemable distributions (6,933 )
Sale of noncontrolling interest-redeemable (77 )
Balance as of September 30, 2017 $ 13,206

9. ~~Allowance~~Leases

The Company determines if a contract contains a lease at inception date. The Company's leases are operating leases, primarily for ~~Uncollectible Accounts~~office and office equipment, that expire at various dates over the next five years. The facility-based leases have renewal options for periods ranging from one to nine years. As it is not reasonably certain these renewal options will be exercised, the options were not considered in the lease term, and payments associated with the option years are excluded from lease payments.

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Payments due under operating leases include fixed and variable payments. These variable payments for the Company's office leases can include operating expenses, utilities, property taxes, insurance, common area maintenance, and other facility-related expense. Additionally, any leases with terms less than one year were not recognized as operating lease right of use assets or payables for short term leases in accordance with the election of ‘package of practical expedient’ under ASU 2016-02.

The Company recognizes operating lease right of use assets and operating lease payable based on the present value of the future minimum lease payments at the lease commencement date. The Company's leases do not provide implicit rates. Therefore, the Company used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments. As of September 30, 2022, the weighted-average remaining lease term was 3.63 years and weighted-average discount rate was 4.11%.

The following table summarizes the ~~activity~~operating lease right of use assets and related lease payables in ~~the allowance~~our condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021 (amounts in thousands):


	September 30, 2022		December 31, 2021
Operating lease right of use asset	$	108,975	$	113,399
Current operating lease liabilities	36,998		37,630
Long-term operating lease liabilities	74,992		78,688

The components of lease costs for ~~uncollectible accounts~~operating leases for the three and nine months ended September 30, ~~2017~~2022 and 2021 were as follows (amounts in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Operating lease cost	$	14,033	$	12,791	$	42,800	$	37,096
Short-term lease cost	908		927		2,712		2,697
Variable lease cost	1,246		997		3,350		3,058
Total lease costs	$	16,187	$	14,715	$	48,862	$	42,851

Balance as of December 31, 2016 $ 29,036
Additions 8,238
Deductions (11,185 )
Balance as of September 30, 2017 $ 26,089

~~The allowance for uncollectible accounts declined to 15.2% from 18.9%~~Maturities of ~~patient accounts receivable over the nine months ended~~operating lease liabilities as of September 30, ~~2017. This was due to a reduction~~2022 were as follows (amounts in provision of bad debts due to more timely cash collections and an increase in amounts collected. Patient accounts receivable over 180 days decreased 17% during the nine months ended September 30, 2017 due to the Company's continued process improvements. The maturity of the Company's back office and field operations, the use of the point-of-care platform, and the use of other technology advancements in reporting and analytics were the drivers of improved collections.thousands):


Month ending September 30,
2022	$	11,073
2023	38,472
2024	29,629
2025	21,006
Thereafter	20,224
Total future minimum lease payments	120,404
Less: Imputed interest	(8,414)
Total	$	111,990

10. Fair Value of Financial Instruments

The carrying amounts of the Company’s cash, receivables, accounts payable and accrued liabilities approximate their fair values because of their short maturity. ~~The estimated fair value of intangible assets acquired was calculated using level 3 inputs~~

based on the present value of anticipated future benefits. For the nine months ended September 30, 2017, the carrying value of the Company’s long-term debt approximates fair value as the interest rates approximate current rates.

11. Segment Information

The ~~Company’s reportable~~Company's reporting segments ~~consist of~~include (1) home health services, (2) hospice services, (3) home and community-based services, (4) facility-based services, and ~~facility-based services. The accounting policies~~(5) HCI.

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Reportable segments have been identified based upon how management has organized the ~~segments are~~business by services provided to customers and how the ~~same as those described~~chief operating decision maker manages the business and allocates resources, consistent with the criteria in ~~the summary of significant accounting policies, as described in Note 2 of the Notes to Condensed Consolidated Financial Statements.~~ASC 280, Segment Reporting.

The following tables summarize the Company’s segment information for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 (amounts in thousands):


	Three months ended September 30, 2022
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	373,335	$	103,799	$	47,978	$	31,441	$	20,360	$	576,913
Cost of service revenue (excluding depreciation and amortization)	217,790		68,951		35,727		22,549		2,755		347,772
General and administrative expenses	126,052		32,384		11,893		12,098		6,624		189,051
Impairment of intangibles and other	—		1,590		469		—		—		2,059
Operating income (loss)	29,493		874		(111)		(3,206)		10,981		38,031
Interest expense	(6,347)		(1,356)		(808)		(362)		(180)		(9,053)
Income (loss) before income taxes and noncontrolling interest	23,146		(482)		(919)		(3,568)		10,801		28,978
Income tax expense (benefit)	5,723		(439)		(165)		(927)		2,774		6,966
Net income (loss)	17,423		(43)		(754)		(2,641)		8,027		22,012
Less net income (loss) attributable to non controlling interests	3,838		1,269		(125)		(439)		160		4,703
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	13,585	$	(1,312)	$	(629)	$	(2,202)	$	7,867	$	17,309
Total assets	$	1,717,209	$	798,668	$	238,082	$	80,223	$	79,972	$	2,914,154


	Three months ended September 30, 2021
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	386,699	$	82,653	$	45,800	$	32,415	$	17,884	$	565,451
Cost of service revenue (excluding depreciation and amortization)	230,839		51,631		34,386		23,725		3,281		343,862
General and administrative expenses	126,695		22,548		11,764		11,050		4,387		176,444


Operating income (loss)	29,165		8,474		(350)		(2,360)		10,216		45,145
Interest expense	(811)		(139)		(109)		(54)		(22)		(1,135)
Income (loss) before income taxes and noncontrolling interest	28,354		8,335		(459)		(2,414)		10,194		44,010
Income tax expense (benefit)	6,407		1,874		(99)		(554)		2,522		10,150
Net income (loss)	21,947		6,461		(360)		(1,860)		7,672		33,860
Less net income (loss) attributable to noncontrolling interests	5,157		1,085		77		(187)		(6)		6,126
Net income (loss) attributable to LHC Group, Inc.'s common stockholders	$	16,790	$	5,376	$	(437)	$	(1,673)	$	7,678	$	27,734
Total assets	$	1,632,670	$	681,954	$	239,452	$	83,276	$	75,334	$	2,712,686

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Three Months Ended September 30, 2017
Home health services Hospice services Community-based services Facility-based services Total
Net service revenue $ 198,978
$ 41,291
12,146
$ 20,457
$ 272,872
Cost of service revenue 123,204
27,441
8,971
13,240
172,856
Provision for bad debts 2,661
234
30
269
3,194
General and administrative expenses 55,980
11,263
2,387
6,039
75,669
(Gain) loss on disposal of assets 20
13
—
(210 ) (177 )
Operating income 17,113
2,340
758
1,119
21,330
Interest expense (746 ) (149 ) (50 ) (50 ) (995 )
Income before income taxes and noncontrolling interest 16,367
2,191
708
1,069
20,335
Income tax expense 5,703
931
338
473
7,445
Net income 10,664
1,260
370
596
12,890
Less net income (loss) attributable to noncontrolling interests 1,759
273
(21 ) (27 ) 1,984
Net income attributable to LHC Group, Inc.’s common stockholders $ 8,905
$ 987
$ 391
$ 623
$ 10,906
Total assets $ 515,562
$ 156,296
$ 44,621
$ 48,574
$ 765,053



	Nine months ended September 30, 2022
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	1,154,009	$	308,322	$	137,036	$	94,289	$	30,945	$	1,724,601
Cost of service revenue (excluding depreciation and amortization)	674,508		202,864		96,470		69,584		8,667		1,052,093
General and administrative expenses	387,482		97,152		35,755		35,737		13,674		569,800
Impairment of intangibles and other	930		2,677		523		—		—		4,130
Operating income (loss)	91,089		5,629		4,288		(11,032)		8,604		98,578
Interest expense	(13,805)		(2,803)		(1,785)		(851)		(387)		(19,631)
Income (loss) before income taxes and noncontrolling interest	77,284		2,826		2,503		(11,883)		8,217		78,947
Income tax expense (benefit)	17,057		(3)		680		(2,849)		2,129		17,014
Net income (loss)	60,227		2,829		1,823		(9,034)		6,088		61,933
Less net income (loss) attributable to non controlling interests	12,758		2,837		(74)		(1,085)		150		14,586
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	47,469	$	(8)	$	1,897	$	(7,949)	$	5,938	$	47,347



	Nine months ended September 30, 2021
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	1,157,061	$	209,191	$	143,332	$	96,814	$	29,795	$	1,636,193
Cost of service revenue (excluding depreciation and amortization)	663,137		129,848		103,941		65,360		9,720		972,006
General and administrative expenses	369,337		58,789		35,216		33,213		10,199		506,754
Impairment of intangibles and other	937		—		—		—		—		937
Operating income (loss)	123,650		20,554		4,175		(1,759)		9,876		156,496
Interest expense	(1,099)		(195)		(143)		(73)		(31)		(1,541)
Income (loss) before income taxes and noncontrolling interest	122,551		20,359		4,032		(1,832)		9,845		154,955
Income tax expense (benefit)	26,003		4,221		889		(649)		2,445		32,909
Net income (loss)	96,548		16,138		3,143		(1,183)		7,400		122,046
Less net income (loss) attributable to non controlling interests	17,506		3,308		441		792		(37)		22,010
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	79,042	$	12,830	$	2,702	$	(1,975)	$	7,437	$	100,036

12. Income Taxes

The effective tax rate for the nine months ended September 30, 2022 and 2021 benefited from $0.9 million and $2.4 million, respectively, of excess tax benefits associated with stock-based compensation arrangements.

U.S. GAAP prescribes a recognition threshold and measurement attribute for the accounting and financial statement disclosure of tax positions taken or expected to be taken in a tax return. The evaluation of a tax position is a two-step process. The first step requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. The second step requires the Company to recognize in the financial statements

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Three Months Ended September 30, 2016
Home health services Hospice services Community-based services Facility-based services Total
Net service revenue $ 167,529
$ 35,322
$ 11,793
$ 16,153
$ 230,797
Cost of service revenue 100,057
21,243
9,100
10,432
140,832
Provision for bad debts 2,049
797
190
239
3,275
General and administrative expenses 50,293
9,491
2,263
4,952
66,999
Loss on disposal of assets 20
5
—
117
142
Operating income 15,110
3,786
240
413
19,549
Interest expense (612 ) (90 ) (41 ) (73 ) (816 )
Income before income taxes and noncontrolling interest 14,498
3,696
199
340
18,733
Income tax expense 5,133
1,275
83
71
6,562
Net income 9,365
2,421
116
269
12,171
Less net income attributable to noncontrolling interests 1,853
553
—
149
2,555
Net income attributable to LHC Group, Inc.’s common stockholders $ 7,512
$ 1,868
$ 116
$ 120
$ 9,616
Total assets $ 425,923
$ 119,906
$ 33,549
$ 34,075
$ 613,453
each tax position that meets the more likely than not criteria, measured at the amount of benefit that has a greater than 50% likelihood of being realized. The Company’s unrecognized tax benefits would affect the tax rate, if recognized. The Company includes the full amount of unrecognized tax benefits in income taxes payable in noncurrent liabilities in the Company's condensed consolidated balance sheets. The Company anticipates it is reasonably possible an increase or decrease in the amount of unrecognized tax benefits could be made in the next twelve months. However, the Company does not presently anticipate that any increase or decrease in unrecognized tax benefits will be material to the consolidated financial statements. As of September 30, 2022 and December 31, 2021, the Company recognized $8.0 million and $7.3 million, respectively, in unrecognized tax benefits.

13. Subsequent Event

On October 1, 2022, the Company purchased three wholly-owned home health agencies. Total consideration for the acquisition was $18.5 million.

Nine Months Ended September 30, 2017
Home health services Hospice services Community-based services Facility-based services Total
Net service revenue $ 575,180
$ 116,249
$ 33,807
$ 54,464
$ 779,700
Cost of service revenue 352,896
75,187
24,905
35,396
488,384
Provision for bad debts 5,796
1,393
404
645
8,238
General and administrative expenses 165,153
32,404
6,957
16,563
221,077
(Gain) loss on disposal of assets 39
21
—
(83 ) (23 )
Operating income 51,296
7,244
1,541
1,943
62,024
Interest expense (1,961 ) (393 ) (130 ) (131 ) (2,615 )
Income before income taxes and noncontrolling interest 49,335
6,851
1,411
1,812
59,409
Income tax expense 16,712
2,439
602
657
20,410
Net income 32,623
4,412
809
1,155
38,999
Less net income (loss) attributable to noncontrolling interests 6,053
1,038
(7 ) 237
7,321
Net income attributable to LHC Group, Inc.’s common stockholders $ 26,570
$ 3,374
$ 816
$ 918
$ 31,678

Nine Months Ended September 30, 2016
Home health services Hospice services Community-based services Facility-based services Total
Net service revenue $ 492,090
$ 100,051
$ 32,823
$ 54,416
$ 679,380
Cost of service revenue 294,359
61,836
24,656
32,710
413,561
Provision for bad debts 8,122
2,364
488
684
11,658
General and administrative expenses 150,948
27,787
6,557
16,004
201,296
Loss on disposal of assets 811
329
46
203
1,389
Operating income 37,850
7,735
1,076
4,815
51,476
Interest expense (1,640 ) (232 ) (106 ) (189 ) (2,167 )
Income before income taxes and noncontrolling interest 36,210
7,503
970
4,626
49,309
Income tax expense 11,026
2,484
413
1,577
15,500
Net income 25,184
5,019
557
3,049
33,809
Less net income (loss) attributable to noncontrolling interests 5,002
1,368
(57 ) 730
7,043
Net income attributable to LHC Group, Inc.’s common stockholders $ 20,182
$ 3,651
$ 614
$ 2,319
$ 26,766

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~Quarterly Report on Form 10-Q contains certain statements, including the anticipated timing of the consummation of the Merger, the potential future impact of COVID-19 on our results of operations and liquidity, the potential impact of actions we have taken to mitigate the impact of COVID-19, the potential impact on supply chain disruptions and increased costs associated with obtaining personal protective equipment, the expected benefit of the CARES Act on our liquidity, and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to future plans and strategies, anticipated events or trends, future financial performance, and expectations and beliefs concerning matters that are not historical facts or that necessarily depend upon future events. The words “may,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” and similar expressions are intended to identify forward-looking statements. Specifically, this report contains, among others, forward-looking statements about:

•the anticipated timing of the consummation of the Merger and our ability to satisfy the closing condition to the Merger, including receipt of the required regulatory approvals thereto;

•our expectations regarding financial condition or results of operations for periods after September 30, ~~2017;~~2022;

•our critical accounting policies;

•our business strategies and our ability to grow our business;

•our participation in the Medicare and Medicaid programs;

•the reimbursement levels of Medicare and other third-party ~~payors;~~payors, including changes in reimbursement resulting from regulatory changes;

•the prompt receipt of payments from Medicare and other third-party payors;

•our future sources of and needs for liquidity and capital resources;

•the effect of any regulatory changes ~~under the new presidential administration;~~or anticipated regulatory changes;

•the effect of any changes in market rates on our operations and cash flows;

•our ability to obtain financing;

•our ability to make payments as they become due;

•the outcomes of various routine and non-routine governmental reviews, audits and investigations;

•our expansion strategy, the successful integration of recent acquisitions and, if necessary, the ability to relocate or restructure our current facilities;

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•the value of our proprietary technology;

•the impact of legal proceedings;

•our insurance coverage;

•our competitors and our competitive advantages;

•our ability to attract and retain valuable employees;

•the price of our stock;

•our compliance with environmental, health and safety laws and regulations;

•our compliance with health care laws and regulations;

•our compliance with ~~SEC~~Securities and Exchange Commission laws and regulations and Sarbanes-Oxley requirements;

•the impact of federal and state government regulation on our business; and

•the impact of changes in future interpretations of fraud, anti-kickback, or other laws.

The forward-looking statements included in this report reflect our current views about future events, are based on assumptions, and are subject to known and unknown risks and uncertainties. Many important factors could cause actual results or achievements to differ materially from any future results or achievements expressed in or implied by our forward-looking statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. Important factors that could cause actual results or achievements to differ materially from the results or achievements reflected in our forward-looking statements include, among other things, the factors discussed in the Part II, Item 1A. “Risk Factors,” included in this report and in our other filings with the SEC, including our ~~Annual Report on~~2021 Form 10-K, ~~for the year ended December 31, 2016 (the “2016 Form 10-K”),~~ as updated by our subsequent filings with the SEC. This report should be read in conjunction with the ~~2016~~2021 Form 10-K and Form 10-K Amendment, and all of our other filings made with the SEC through the date of this report, including quarterly reports on Form 10-Q and current reports on Form 8-K.

You should read this report, the information incorporated by reference into this report, and the documents filed as exhibits to this report completely and with the understanding that our actual future results or achievements may differ materially from what we expect or anticipate.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is filed with the SEC. Except as required by law, we assume no responsibility for updating any forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Unless the context otherwise requires, “we,” “us,” “our,” and the “Company” refer to LHC Group, Inc. and its consolidated subsidiaries.

OVERVIEW

General

We provide quality, cost-effective post-acute health care services to our patients. As of September 30, ~~2017,~~2022, we have ~~449~~ 942 service ~~providers~~providers in ~~27 states.~~37 states within the continental United States and the District of Columbia. Our services are classified into ~~four~~five segments: (1) home health services, (2) hospice services, (3) home and community-based services, ~~and~~ (4) facility-based services primarily offered through our long-term acute care hospitals (“LTACHs”), and (5) healthcare innovations services ("HCI"). We intend to increase the number of service providers within each of our ~~four~~ segments that we operate through continued acquisitions, joint ventures, and organic development.

~~Through our~~Our home health ~~services segment, we~~service locations offer a wide range of services, including skilled nursing, medically-oriented social services, and physical, occupational, and speech therapy. As of September 30, ~~2017,~~2022, we operated ~~324~~543 home health services locations, of which ~~166~~333 are wholly-owned, ~~152~~206 are majority-owned through equity joint ventures, ~~three~~two are under license lease arrangements, and the operations of the remaining ~~three~~two locations are only managed by us.

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~~Through our hospice services segment, we~~Our hospices provide end-of-life care to patients with terminal illnesses through interdisciplinary teams of physicians, nurses, home health aides, counselors, and volunteers. We offer a wide range of services, including pain and symptom management, emotional and spiritual support, inpatient and respite care, homemaker services, and counseling. As of September 30, ~~2017,~~2022, we ~~operated 92~~operated 163 hospice locations, of which 4697 are wholly-owned, 4464 are majority-owned through equity joint ventures, and two are under license lease arrangements.

Through our home and community-based services segment, services are performed by skilled nursing and paraprofessional personnel, and include assistance with activities of daily living to the elderly, chronically ill, and disabled patients. As of September 30, ~~2017,~~2022, we ~~operated 12~~operated 133 home and community-based services ~~locations: 10~~locations, of which 120 are wholly-owned and ~~two~~13 are majority-owned through an equity joint ~~venture.~~ventures.

We provide facility-based services principally through our LTACHs. As of September 30, ~~2017,~~2022, we operated 11 LTACHs with 1512 locations, ~~of which~~ all but ~~one~~three of which are located within host hospitals. We also operate two skilled nursing facilities, two family health centers, two rural health clinics, and 76 therapy clinics. Of these 94 facility-based services locations, ~~three~~83 are wholly-owned, and 11 are majority-owned through equity joint ~~ventures,~~ventures.

Our HCI segment reports on our developmental activities outside its other business segments. The HCI segment includes (a) Imperium Health Management, LLC, an ACO enablement company, (b) Long Term Solutions, Inc., an in-home assessment company serving the long-term care insurance industry, and ~~one location is managed~~(c) certain assets operated by ~~us.~~Advanced Care House Calls, which provides primary medical care for patients with chronic and acute illnesses who have difficulty traveling to a doctor’s office. These activities are intended ultimately, whether directly or indirectly, to benefit our patients and/or payors through the enhanced provision of services in our other segments. The activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. They include, but are not limited to, items such as: technology, information, population health management, risk-sharing, care-coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision and technology enabled in-home clinical assessments. We ~~also wholly-own and operate~~have 9 HCI locations, of which all a ~~family health center, two pharmacies, a rural health clinic, and two physical therapy clinics.~~re wholly-owned.

The Joint Commission is a nationwide commission that establishes standards relating to the physical plant, administration, quality of patient care, and operation of medical staffs of health care organizations. Currently, Joint Commission accreditation of home nursing and hospice agencies is voluntary. However, some managed care organizations use Joint Commission accreditation as a credentialing standard for regional and state contracts. As of September 30, ~~2017,~~2022, the Joint Commission had ~~accredited 299~~accredited 521 of our ~~324 home~~543 home health services locations and 61110 of our 92163 hospice agencies. Those not yet accredited are working towards achieving this accreditation. As we acquire companies, we apply for accreditation 12 to 18 months after completing the acquisition.

The percentage of net service revenue contributed from each reporting segment for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,					Three months ended September 30,				Nine months ended September 30,
Reporting segment	2017		2016		2017		2016		Reporting segment	2022		2021		2022		2021
Home health services	72.9	%	72.6	%	73.8	%	72.5	%	Home health services	64.7	%	68.4	%	66.9	%	70.7	%
Hospice services	15.1		15.3		14.9		14.7		Hospice services	18.0		14.6		17.9		12.8
Community-based services	4.5		5.1		4.3		4.8
Home and community-based services									Home and community-based services	8.3		8.1		7.9		8.8
Facility-based services	7.5		7.0		7.0		8.0		Facility-based services	5.5		5.7		5.5		5.9
HCI									HCI	3.5		3.2		1.8		1.8
	100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%

Recent Developments

~~Home Health Services~~Coronavirus and Coronavirus Aid, Relief, and Economic Security Act

~~On April 14, 2015, legislation~~The following portions of the CARES Act impacted us during the nine months ended September 30, 2022:

•CAAP: CMS recouped $101.6 million of CAAP. As of September 30, 2022, $4.8 million of contract liabilities - deferred revenue remains on our condensed consolidated balance sheets.

•Suspension of the 2% sequestration payment adjustment: During the nine months ended September 30, 2022, we recognized $10.0 million of net service revenue, respectively, due to the suspension of the 2% sequestration payment

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adjustment.We recognized $6.8 million and $19.7 million of net service revenue, respectively, during the three and nine months ended September 30, 2021.

•Waiver of the application of site-neutral payment: Under Section 1886(m)(6)(A)(i) of the Act, the claims processing systems was ~~passed which limits any~~updated to pay all LTACH cases admitted during the COVID-19 PHE period at the LTACH-PPS standard federal rate, effective for claims with an admission date occurring on or after January 27, 2020 through the end of the PHE period. During the three and nine months ended September 30, 2022, we recognized $4.9 million and $17.1 million of net service revenue, respectively, due to the suspension of LTACH site-neutral payments. We recognized $5.7 million and $18.2 million of net service revenue, respectively, during the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2022, we did experience higher costs related to higher contract labor utilization due to an increase in ~~home health payments~~our clinicians being on quarantine from COVID-19 exposure or potential exposure. There is no guarantee that we won’t experience similar impacts in the future or experience a decrease in demand for our services as a result of COVID-19. The rapid development and fluidity of this situation makes it difficult to ~~1% for fiscal year 2018~~predict the ultimate impact of COVID-19 on our business and ~~extended~~operations. Nevertheless, COVID-19 presents a material uncertainty which could materially impact our business and results of operations in the ~~3% rural home health safeguard for two years through December 31, 2017.~~future.

Home Health

On October 31, 2016, CMS released a Final Rule (effective January 1, 2017) regarding payment rates for home health services provided during calendar year 2017. The national, standardized 60-day episode payment rate increased to $2,989.97 for 2017. The rural rate is $3,079.67. The Final Rule implements the final year of the four year phase-in of the rebasing adjustments to the national, standardized 60-day episode payment rate and the decrease of 0.97% to account for nominal case-mix growth between calendar year 2012 and calendar year 2014, which was not accounted for in the rebasing adjustments finalized in calendar year 2014. The Final Rule also contains minor adjustments to the Home Health Value-Based Purchasing ("HHVBP") program and to the home health quality reporting program. CMS estimates the overall economic impact of the proposed rule's policy changes and payment rate update is an estimated aggregate decrease of 0.7% in payments to home health agencies, which decrease will vary based on each agency's wage index and patient mix weight.

In addition, CMS finalized its proposal to implement a HHVBP program that is intended to incentivize the delivery of high-quality patient care. The HHVBP program would withhold 3% to 8% of Medicare payments, which would be redistributed to participating home health agencies depending on their performance relative to specified measures. The HHVBP would apply

~~to all home health agencies in Arizona, Florida, Iowa, Massachusetts, Maryland, Nebraska, North Carolina, Tennessee, and Washington, effective January 1, 2018.~~

~~On November 1, 2017,~~2022, CMS released the ~~Final Rule (effective January 1, 2018) regarding payment rates~~final rule for ~~home health services provided during calendar~~fiscal year ~~2018.~~2023. The ~~national, standardized 60-day episode payment rate~~final rule states the Medicare base payments will increase ~~to $3,039.64 in 2018.~~by 0.7%. The ~~Final Rule estimates an impact of 0.5% reduction in payments due to~~increase reflects the ~~expiration~~effects of the ~~rural add-on provision, a 1%~~4.0% home health payment update, ~~percentage,~~a 3.5% decrease from the effects of the prospective permanent behavioral assumption adjustment of -3.925% that is being phased-in, and ~~0.97% adjustment for case mix (the third year~~0.2% increase from the effects of ~~a three year adjustment). CMS also estimates a reduction in regulatory reporting due~~an update to the ~~removal of a number of quality measures and OASIS items. CMS estimates the overall economic~~fixed-dollar ratio used in determining outlier payments. The impact of the ~~Final Rule's changes and~~-3.925% permanent behavioral assumption adjustment is -3.5%, as the permanent adjustment is only made to the 30-day payment rate ~~update is an estimated decrease~~and not the Low Utilization Payment Adjustment per visit payment rates. CMS also finalized a permanent 5% cap on negative wage index changes regardless of ~~0.4% in payments to home health agencies. In addition, CMS decided not to finalize its rule on~~ the ~~Home Health Groupings Model ("HHGM") as was proposed, but instead will take additional time to further engage with stakeholders to move towards a system that shifts~~underlying reason for the ~~focus from volume of services to a more patient-centered model.~~decrease.

Hospice ~~Services~~

On July ~~29, 2016,~~27, 2022, CMS ~~issued a Final Rule updating Medicare~~released the final rule for fiscal year 2023 to update payment rates and the wage ~~index for hospices for fiscal year 2017,~~index. The final rule states the following:

•A payment rate increase of 3.8%, which ~~resulted in~~applies a ~~2.1% increase in payment rates. The 2.1% increase is based on 2.7% inpatient hospital~~4.1% market basket update ~~reduced by a 0.3% productivity adjustment,~~ and a ~~0.3% adjustment set by the Patient Protection and Affordable Care Act ("PPACA"). The hospice cap amount~~0.3 percentage point reduction for ~~the 2017 hospice cap year will be $28,404.99. The following table shows the hospice Medicare payment rates for fiscal year 2017, which began on October 1, 2016 and ended September 30, 2017:~~productivity.

Description Rate per patient day
Routine Home Care days 1-60 $ 190.55
Routine Home Care days 60+ $ 149.82
Continuous Home Care $ 964.63
Full Rate = 24 hours of care
$40.19 = hourly rate
Inpatient Respite Care $ 170.97
General Inpatient Care $ 734.94

On August 1, 2017, CMS issued a Final Rule updating Medicare payment rates and the wage index for hospices for fiscal year 2018. The result will be in a 1.0% increase in payment rates due to the provisions of Section 411 (d) of the Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L. 114-10) ("MACRA"). The hospice cap will be $28,689.04, which is a 1% increase. The Final Rule finalizes eight measures from Consumer Assessment of Healthcare Providers and Systems ("CAHPS") •Hospice Survey data already submitted by hospices. The rule also finalizes the extension of the exception for quality reporting purposes from 30 calendar days to 90 calendar days after the date that an extraordinary circumstance occurred. CMS will begin public reporting Hospice Quality Reporting Program ("HQRP") data via a Hospice Compare Site in August 2017 to help customers make informed choices. Hospicesagencies that fail to meet quality reporting requirements will receive a two percentage point reduction to ~~their payments.~~the annual market basket update.

•An increase of the aggregate cap value of $32,486.92, as compared to $31,297.61 for fiscal year 2022.

•A permanent cap on negative wage index changes greater than a 5% decrease from the prior year, regardless of the underlying reason for the decrease.

The following ~~table shows~~are the ~~hospice Medicare~~final fiscal year 2023 base payment rates for ~~fiscal year 2018,~~various levels of care, which began on October 1, ~~2017~~2022 and will end September 30, ~~2018:~~

Description Rate per patient day
Routine Home Care days 1-60 $ 192.78
Routine Home Care days 60+ $ 151.41
Continuous Home Care $ 976.42
Full Rate = 24 hours of care
$40.68 = hourly rate
Inpatient Respite Care $ 172.78
General Inpatient Care $ 743.55

~~Community-Based Services~~

~~Community-based services are in-home~~2023 and the final fiscal year 2022 base payment rates for various levels of care, ~~services,~~ which ~~are primarily performed by skilled nursing~~began on October 1, 2021 and paraprofessional personnel, and include assistance with activities of daily living to the elderly, chronically ill, and disabled patients. Revenue is generated on an hourly basis and our current primary payors are TennCare Managed Care Organization and Medicaid. Approximately 70% of our net service revenue in this segment was generated in Tennessee for the nine months ended September 30, ~~2017.~~

~~Facility-Based Services~~

~~On December 26, 2013, President Obama signed into law~~2022 (payment rates for hospice providers not complying with the Bipartisan Budget Act of 2013 (Public Law 113-67). This law prevents a scheduled payment reduction for physicians and other practitioners who treat Medicare patients from taking effect on January 1, 2014. Included in the legislation are the following changes to LTACH reimbursement:

~~Medicare discharges from LTACHs will continue to be paid at full LTACH PPS rates if:~~

~~the patient spent at least three days in a short-term care hospital (“STCH”) intensive care unit (“ICU”) during a STCH stay that immediately preceded the LTACH stay, or~~

~~the patient was on a ventilator for more than 96 hours in the LTACH (based on the MS-LTACH DRG assigned) and had a STCH stay immediately preceding the LTACH stay.~~

~~Also, the LTACH discharge cannot have a principal diagnosis that is psychiatric or rehabilitation.~~

~~All other Medicare discharges from LTACHs~~hospice quality reporting requirements will be ~~paid at a new “site neutral” rate, which is~~2% lower than the ~~lesser~~values referenced below):

Table of the ("IPPS") comparable per diem amount determined using the formula in the short-stay outlier regulation at 42 C.F.R. § 412.529(d)(4) plus applicable outlier payments, or 100% of the estimated cost of the services involved.Contents

~~The above new payment policy will be effective for LTACH cost reporting periods beginning on or after October 1, 2015, and the site neutral payment rate will be phased-in over two years.~~


Description	Final Fiscal Year 2023 Rate per patient day		Fiscal Year 2022 Rate per patient day
Routine Home Care days 1-60	$	211.34	$	203.40
Routine Home Care days 60+	$	167.00	$	160.74
Continuous Home Care	$	1,522.04	$	1,462.52
Full rate = 24 hours of care
$60.94 = hourly rate for 2022 $63.42 = hourly rate for 2023
Inpatient Respite Care	$	492.10	$	473.75
General Inpatient Care	$	1,110.76	$	1,068.28

For cost reporting periods beginning on or after October 1, 2015, discharges paid at the site neutral payment rate or by a Medicare Advantage plan (Part C) will be excluded from the LTACH average length-of-stay (“ALOS”) calculation.Facility-based

For cost reporting periods beginning in fiscal year 2016 and later, CMS will notify LTACHs of their “LTACH discharge payment percentage” (i.e., the number of discharges not paid at the site neutral payment rate divided by the total number of discharges).

For cost reporting periods beginning in fiscal year 2020 and later, LTACHs with less than 50% of their discharges paid at the full LTACH PPS rates will be switched to payment under the IPPS for all discharges in subsequent cost reporting periods. However, CMS will set up a process for LTACHs to seek reinstatement of LTACH PPS rates for applicable discharges.

MedPAC will study the impact of the above changes on quality of care, use of hospice and other post-acute care settings, different types of LTACHs and growth in Medicare spending on LTACHs. MedPAC is to submit a report to Congress with any recommendations by June 30, 2019. The report is to also include MedPAC’s assessment of whether the 25 Percent rule should continue to be applied.

On August ~~2, 2016,~~1, 2022, CMS ~~released~~issued the final rule to update fiscal year 2017 LTACH reimbursement and policies under the LTACH PPS, which affects discharges occurring in cost reporting periods beginning on or after October 1, 2016. CMS projects that overall LTACH PPS spending would decrease by 7.1% compared to fiscal year 2016 payments. This estimated decrease is attributable to the statutory decrease in payment rates for site neutral LTACH PPS cases that do not meet the clinical criteria to qualify for higher LTACH rates in cost reporting years beginning on or after October 1, 2016. Cases that do qualify for higher LTACH PPS rates will see a payment rate increase of 0.7% (including a market basket update of 2.8% reduced by a multi-factor productivity adjustment of 0.3%, minus an additional adjustment of 0.75 percentage point in accordance with the PPACA, for a net market basket of 1.75%). The LTACH PPS standard federal payment rate for fiscal year 2017 is $42,476.41 (increased from $41,762.85 in fiscal year 2016). Site-neutral discharges will have a 23% reduction in payments. CMS also proposes to begin enforcement of the 25 Percent rule which will cap the number of patients treated at an LTACH who have been referred from all locations of a hospital. Grandfathered LTACH facilities are exempt from the 25 Percent rule, while rural LTACHs will have a threshold of 50% and MSA-dominant hospitals will have a threshold between 25% and 50%. The 25 Percent rule will apply to discharges occurring after October 1, 2016. CMS will have two separate outlier pools and thresholds

for LTACH-appropriate patients and for site-neutral patients. For 2017, CMS finalized an increase of its fixed-loss threshold to $21,943 from 2016’s $16,423, to limit outlier spending at no more than 8% of total LTACH spending (2016 outlier payments may reach 9.0%). CMS is applying the proposed inpatient fixed-loss threshold of $23,570 for site neutral patients. CMS also finalized four new measures for the LTACH Quality Reporting Program to meet the requirements of the Improving Medicare Post-Acute Care Transformation (IMPACT) Act. For the fiscal year 2018 LTACH Quality Reporting Program, CMS added quality measures for Medicare spending per beneficiary, discharge to community and potentially-preventable 30-day post-discharge readmissions. For the fiscal year 2020 LTACH Quality Reporting Program, CMS adopted a new drug regimen review measure.

On December 7, 2016, Congress passed the 21st Century Cures Act ("Cures"), which boosts funding for medical research, eases the development and approval of experimental treatments and reforms federal policy on mental health care. Included in the bill was relief for LTACHs under a one year moratorium on the 25 Percent Rule, which would otherwise penalize LTACHs that admit more than 25% of their patients from a particular acute care hospital. As modified by Cures, implementation of the 25 Percent Rule will be suspended during federal fiscal year 2017 (October 1, 2016 through September 30, 2017).

~~On August 2, 2017, CMS posted a display copy of its~~ final rule for the ~~annual update~~fiscal year 2023 Long-Term Care Hospital Prospective Payment System ("LTCH PPS"). LTCH PPS payments will increase 2.3% due primarily to ~~Medicare payment rates and policies for~~ the ~~Fiscal Year 2018 inpatient hospitals prospective payment system and the LTACH PPS. CMS estimates the impact of the proposed rule will result in a 2.4% overall reduction in LTACH spending. The LTACH~~annual standard federal rate ~~is reduced to $41,430.56 from $42,476.41. CMS is also proposing~~update (the productivity-adjusted market basket increase) of 3.8% and a 12 month administrative moratorium on application of the 25 Percent Rule beginning with the expiration of the statutory moratorium after September 30, 2017. The 25 Percent Rule will not be applied to LTACHs for discharges occurring on or before September 30, 2018. CMS also adopted certain adjustments todecrease in high cost outlier and short stay outlier policies. CMS finalized its proposal for a new severe wound exception to be paid at standard Federal LTACH rates instead of site neutral payments for grandfathered LTACHs. CMS changed the separateness and control restrictions for certain co-located IPPS-exempt hospitals. The Final Rule also adds three new quality measures and discontinues two quality measures. CMS also finalized its proposal to implement collection of standardized patient assessment data under the IMPACT Act on functional status, cognitive function, cancer treatments, respiratory treatments, transfusions and other special services effective for admissions on/after April 1, 2019.payments.

None of the aforementioned estimated changes to Medicare payments for home health, hospice, and LTACHs include the deficit reduction sequester cuts to Medicare that began on April 1, 2013, which reduced Medicare payments by 2% for patients whose service dates ended on or after April 1, 2013.

RESULTS OF OPERATIONS

Three months ended September 30, ~~2017~~2022 compared to three months ended September 30, ~~2016~~2021

~~Consolidated~~Summary consolidated financial ~~statements~~information

The following table summarizes our consolidated results of operations for the three months ended September 30, ~~2017~~2022 and ~~2016~~2021 (amounts in thousands, except percentages, which are percentages of consolidated net service revenue, unless indicated otherwise):


	2022					2021					Increase (Decrease)
Net service revenue	$	576,913				$	565,451				$	11,462
Cost of service revenue (excluding depreciation and amortization)	347,772		60.3	%		343,862		60.8	%		3,910
General and administrative expenses	189,051		32.8			176,444		31.2			12,607
Impairment of intangibles and other	2,059		0.4			—		—			2,059
Interest expense	(9,053)		(1.6)			(1,135)		(0.2)			7,918
Income tax expense	6,966		30.1		(1)	10,150		27.5		(1)	(3,184)
Net income attributable to noncontrolling interests	4,703		0.8			6,126		1.1			(1,423)
Net income attributable to LHC Group, Inc.’s common stockholders	$	17,309				$	27,734				$	(10,425)

2017 2016
Increase
(Decrease)
Net service revenue $ 272,872
$ 230,797
$ 42,075
Cost of service revenue 172,856
63.3 % 140,832
61.0 % 32,024
Provision for bad debts 3,194
1.2
3,275
1.4
(81 )
General and administrative expenses 75,669
27.7
66,999
29.0
8,670
(Gain) loss on disposal of assets (177 ) (0.1 ) 142
0.1
319
Interest expense (995 ) (816 ) 179
Income tax expense 7,445
41.1
(1 ) 6,562
40.6
(2) 883
Noncontrolling interest 1,984
2,555
(571 )
Net income attributable to LHC Group, Inc.’s common stockholders $ 10,906
$ 9,616
$ 1,290


~~(1)~~	Effective tax rate as a percentage of income from continuing operations attributable to LHC Group, Inc.’s common stockholders, excluding the excess tax benefits realized during the three months ended September 30, 2017 of $0.09 million. For a discussion on the excess tax benefits, see Note 2 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.


~~(2)~~	~~Effective tax rate as a percentage of income from continuing operations attributable to LHC Group, Inc.'s common stockholders.~~

~~Net service revenue~~

~~The following table sets forth~~(1) Effective tax rate as a percentage of income from continuing operations attributable to our common stockholders, excluding the excess tax benefits realized of $0.3 million during each of ~~our segment’s revenue growth or loss, admissions, census, episodes, patient days, and billable hours for~~ the three months ended September 30, ~~2017~~2022 and ~~the related change from the same period in 2016 (amounts in thousands, except admissions, census, episode data, patient days and billable hours):~~2021.

Table of Contents

Same
Store(1)

De
Novo(2)
Organic(3)
Organic
Growth
(Loss) %
Acquired(4) Total
Total
Growth
(Loss) %
Home health services
Revenue $ 184,467
$ 327
$ 184,794
10.3 % $ 14,184
$ 198,978
18.8 %
Revenue Medicare $ 133,597
$ 283
$ 133,880
4.9
$ 9,267
$ 143,147
12.1
Admissions 43,122
73
43,195
6.2
4,646
47,841
17.7
Medicare Admissions 27,207
61
27,268
1.7
2,696
29,964
11.8
Average Census 39,893
50
39,943
3.7
3,507
43,450
12.8
Average Medicare Census 27,599
40
27,639
(1.2 ) 2,052
29,691
6.1
Home Health Episodes 50,123
75
50,198
2.0
3,805
54,003
9.7
Hospice services
Revenue $ 33,581
$ 517
$ 34,098
(3.5 ) $ 7,193
$ 41,291
16.9
Revenue Medicare $ 31,680
$ 451
$ 32,131
(2.9 ) $ 5,785
$ 37,916
14.6
Admissions 2,451
47
2,498
(2.2 ) 940
3,438
34.6
Medicare Admissions 2,140
40
2,180
(3.8 ) 787
2,967
30.9
Average Census 2,651
37
2,688
(1.8 ) 420
3,108
13.6
Average Medicare Census 2,466
34
2,500
(1.9 ) 388
2,888
13.4
Patient days 244,061
3,307
247,368
(1.7 ) 38,603
285,971
13.6
Community-based services
Revenue $ 11,338
$ —
$ 11,338
(3.9 ) $ 808
$ 12,146
3.0
Billable hours 339,569
—
339,569
(1.4 ) 30,131
369,700
7.3
Facility-based services
LTACHs
Revenue $ 15,712
$ —
$ 15,712
4.5
2,561
$ 18,273
21.6
Patient days 12,506
—
12,506
(7.4 ) 2,093
14,599
8.1


~~(1)~~	~~Same store — location that has been in service with us for greater than 12 months.~~


~~(2)~~	~~De Novo — internally developed location that has been in service with us for 12 months or less.~~


~~(3)~~	~~Organic — combination of same store and de novo.~~


~~(4)~~	~~Acquired — purchased location that has been in service with us for 12 months or less.~~

Total organic revenue and patient metrics increased in our home health services segment due to the successful execution of same store growth strategies. Total organic revenue and patient metrics decreased in our hospice services segment due to the lower admissions during the third quarter of 2017. Total organic revenue increased in the facility-based services segment due to patients that meet the new LTACH criteria payment model.

growth in admissions and average census in the first 24 months after acquisition, and have the highest contribution to organic growth, measured as a percentage of growth, in the second full year of operation after the acquisition.

Cost of service revenue

The following table summarizes cost of service revenue (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):


	Three months ended September 30,
	2022				2021
Home health services:
Salaries, wages and benefits	$	196,715	52.7	%	$	209,972	54.3	%
Transportation	10,044		2.7		9,358		2.4
Supplies and services	11,031		3.0		11,509		3.0
Total	$	217,790	58.3	%	$	230,839	59.7	%
Hospice services:
Salaries, wages and benefits	$	50,051	48.2	%	$	37,485	45.4	%
Transportation	3,400		3.3		2,354		2.8
Supplies and services	15,500		14.9		11,792		14.3
Total	$	68,951	66.4	%	$	51,631	62.5	%
Home and community-based services:
Salaries, wages and benefits	$	34,894	72.7	%	$	33,632	73.4	%
Transportation	455		0.9		429		0.9
Supplies and services	378		0.8		325		0.7
Total	$	35,727	74.5	%	$	34,386	75.0	%
Facility-based services:
Salaries, wages and benefits	$	18,111	57.6	%	$	17,499	54.0	%
Transportation	66		0.2		12		—
Supplies and services	4,372		13.9		6,214		19.2
Total	$	22,549	71.7	%	$	23,725	73.2	%
HCI:
Salaries, wages and benefits	$	2,694	13.2	%	$	3,214	18.0	%
Transportation	49		0.2		50		0.3
Supplies and services	12		0.1		17		0.1
Total	$	2,755	13.5	%	$	3,281	18.4	%
Consolidated:
Salaries, wages and benefits	$	302,465	52.4	%	$	301,802	53.4	%
Transportation	14,014		2.4		12,203		2.1
Supplies and services	31,293		5.4		29,857		5.3
Total	$	347,772	60.3	%	$	343,862	60.8	%

Three Months Ended
September 30,
2017 2016
Home health services
Salaries, wages and benefits $ 112,117
56.3 % $ 90,393
53.9 %
Transportation 6,271
3.2
5,624
3.4
Supplies and services 4,816
2.4
4,040
2.4
Total $ 123,204
61.9 % $ 100,057
59.7 %
Hospice services
Salaries, wages and benefits $ 19,523
47.3 % $ 14,695
41.5 %
Transportation 1,588
3.8
1,329
3.8
Supplies and services 6,330
15.3
5,219
14.8
Total $ 27,441
66.5 % $ 21,243
60.1 %
Community-based services
Salaries, wages and benefits $ 8,820
72.6 % $ 8,967
76.1 %
Transportation 92
0.8
69
0.6
Supplies and services 59
0.5
64
0.5
Total $ 8,971
73.9 % $ 9,100
77.2 %
Facility-based services
Salaries, wages and benefits $ 9,644
47.1 % $ 6,987
43.2 %
Transportation 81
0.4
60
0.4
Supplies and services 3,515
17.2
3,385
21.0
Total $ 13,240
64.7 % $ 10,432
64.6 %

~~Consolidated~~During 2022, cost of service revenue for the three months ended September 30, 2017 was $172.9 million, or 63.3% of net service revenue, compared to $140.8 million, or 61.0% of net service revenue, for the same period in 2016. Consolidated cost of service revenue variances were as follows:

•Home Health Segment -- Cost of service revenue increased as a percentage of net service revenue due in part to 2.0% Medicare reimbursement cuts recognized in 2017. Additionally, acquisitions accounted for $11.9 million of the $23.1 million increase, with the remaining difference caused by the growth in our same store agencies.

•Hospice Segment -- Acquisitions accounted for $5.6 million of the $6.2 million increase, with the remaining difference caused by the growth in our same store agencies. Cost of service increased as a percentage of net service revenue due to the decline in admissions associated with our same store agencies.

•~~Community-Based Services Segment: Cost~~ of service revenue decreased as a percentage of net service revenue ~~due~~from 60.8% to ~~the utilization of contract labor in the prior year, which was used to service a higher level of care in our 2016 patient mix.~~

•~~Facility-Based Segment -- Acquisitions accounted for $2.7 million of the $2.8 million increase. Cost~~60.3%. Our cost of service ~~- salaries, wages,~~revenue was impacted by decreased employee medical insurance claim costs as we experienced decreased COVID-19 claims, decreased pharmaceutical costs, and ~~benefits increased~~less catastrophic claims as ~~a percentage of net service revenue due~~compared to ~~lower revenue per patient day for the period caused by patient criteria changes that went into effect September 2016.~~

~~Provision for bad debts~~

~~Consolidated provision for bad debts for~~ the three months ended September 30, ~~2017 was $3.2 million, or 1.2%~~2021.

Cost of ~~net~~ service revenue ~~compared~~in our hospice segment increased due to ~~$3.3 million, or 1.4%~~acquisitions purchased during the latter half of ~~net~~2021.

Cost of service revenue ~~for~~in our home and community-based segment received the ~~same period~~benefit of $2.7 million from various state Medicaid programs in ~~2016. The Company continues~~response to ~~have more timely cash collections and an increase in amounts collected. The continued maturity~~COVID-19 relief funds to offset higher labor costs.

Table of ~~our back office and field operations, use of our point-of-care platform, and use of other technology advancements in reporting and analytics are drivers of collection improvements.~~Contents

General and administrative expenses

The following table summarizes general and administrative expenses (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):


	Three months ended September 30,
	2022				2021
Home health services:
General and administrative	$	122,857	32.9	%	$	123,656	32.0	%
Depreciation and amortization	3,195		0.9		3,039		0.8
Total	$	126,052	33.8	%	$	126,695	32.8	%
Hospice services:
General and administrative	$	31,196	30.1	%	$	21,710	26.3	%
Depreciation and amortization	1,188		1.1		838		1.0
Total	$	32,384	31.2	%	$	22,548	27.3	%
Home and community-based services:
General and administrative	$	11,561	24.1	%	$	11,335	24.7	%
Depreciation and amortization	332		0.7		429		0.9
Total	$	11,893	24.8	%	$	11,764	25.6	%
Facility-based services:
General and administrative	$	11,296	35.9	%	$	10,230	31.6	%
Depreciation and amortization	802		2.6		820		2.5
Total	$	12,098	38.5	%	$	11,050	34.1	%
HCI:
General and administrative	$	6,381	31.3	%	$	4,155	23.2	%
Depreciation and amortization	243		1.2		232		1.3
Total	$	6,624	32.5	%	$	4,387	24.5	%
Consolidated:
General and administrative	$	183,291	31.8	%	$	171,086	30.3	%
Depreciation and amortization	5,760		1.0		5,358		0.9
Total	$	189,051	32.8	%	$	176,444	31.2	%

Three Months Ended September 30,
2017 2016
Home health services
General and administrative $ 53,753
27.0 % $ 48,282
28.8 %
Depreciation and amortization 2,227
1.1
2,011
1.2
Total $ 55,980
28.1 % $ 50,293
30.0 %
Hospice services
General and administrative $ 10,697
25.9 % $ 8,941
25.3 %
Depreciation and amortization 566
1.4
550
1.6
Total $ 11,263
27.3 % $ 9,491
26.9 %
Community-based services
General and administrative $ 2,275
18.7 % $ 2,158
18.3 %
Depreciation and amortization 112
0.9
105
0.9
Total $ 2,387
19.6 % $ 2,263
19.2 %
Facility-based services
General and administrative $ 5,613
27.4 % $ 4,506
27.9 %
Depreciation and amortization 427
2.1
446
2.8
Total $ 6,040
29.5 % $ 4,952
30.7 %

Consolidated general and administrative expenses for the three months ended September 30, 2017 were $75.7 million, or 27.7% of net service revenue, compared to $67.0 million, or 29.0% of net service revenue, for the same period in 2016~~. Although~~During 2022, consolidated general and administrative expenses increased ~~in total over the same period in 2016, they decreased~~ as a percentage of net service revenue ~~by 1.3%. We continue~~from 31.2% to ~~leverage efficiencies found in our back office that allow us to maintain general and~~32.8% as we incurred higher administrative costs ~~without increasing costs in proportion~~related to acquisitions purchased during the ~~growth~~latter half of ~~our company.~~2021.

Table of Contents

Nine months ended September 30, ~~2017~~2022 compared to nine months ended September 30, ~~2016~~2021

~~Consolidated~~Summary consolidated financial ~~statements~~information

The following table summarizes our consolidated results of operations for the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 (amounts in thousands, except percentages, which are percentages of consolidated net service revenue, unless indicated otherwise):


	2022					2021					Increase (Decrease)
Net service revenue	$	1,724,601				$	1,636,193				$	88,408
Cost of service revenue (excluding depreciation and amortization)	1,052,093		61.0	%		972,006		59.4	%		80,087
General and administrative expenses	569,800		33.0			506,754		31.0			63,046
Impairment of intangibles and other	4,130		0.2			937		0.1			3,193
Interest expense	(19,631)		(1.1)			(1,541)		(0.1)			18,090
Income tax expense	17,014		27.8		(1)	32,909		26.6		(1)	(15,895)
Net income attributable to noncontrolling interests	14,586		0.8			22,010		1.3			(7,424)
Net income attributable to LHC Group, Inc.’s common stockholders	$	47,347				$	100,036				$	(52,689)

2017 2016
Increase
(Decrease)
Net service revenue $ 779,700
$ 679,380
$ 100,320
Cost of service revenue 488,384
62.6 % 413,561
60.9 % 74,823
Provision for bad debts 8,238
1.1
11,658
1.7
(3,420 )
General and administrative expenses 221,077
28.4
201,296
29.6
19,781
(Gain) loss on disposal of assets (23 ) —
1,389
0.2
1,412
Interest expense (2,615 ) (2,167 ) 448
Income tax expense 20,410
41.0
(1 ) 15,500
40.5
(2) 4,910
Noncontrolling interest 7,321
7,043
278
Net income attributable to LHC Group, Inc.’s common stockholders $ 31,678
$ 26,766
$ 4,912

~~(1)~~

~~Effective tax rate as a percentage of income from continuing operations attributable to LHC Group, Inc.’s~~(1) Effective tax rate as a percentage of income from continuing operations attributable to our common stockholders, excluding the excess tax benefits realized of $0.9 million and $2.4 million during the nine months ended September 30, 2017 of $1.0 million. For a discussion on the excess tax benefits, see Note 2 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.


~~(2)~~	Effective tax rate as a percentage of income from continuing operations attributable to LHC Group, Inc.’s common stockholders, excluding the changes in measurement realized in 2016 of the unrecognized tax position of $1.6 million and related interest expense of $0.4 million.

~~Net service revenue~~

~~The following table sets forth each of our segment’s revenue growth or loss, admissions, census, episodes, patient days, and billable hours for~~ the nine months ended September 30, ~~2017~~2022 and ~~the related change from the same period in 2016 (amounts in thousands, except admissions, census, episode data, patient days and billable hours):~~2021, respectively.

Same
Store(1)

De
Novo(2)
Organic(3)
Organic
Growth
(Loss) %
Acquired(4) Total
Total
Growth
(Loss) %
Home health services
Revenue $ 541,918
$ 990
$ 542,908
10.3 % $ 32,272
$ 575,180
16.9 %
Revenue Medicare $ 394,756
$ 826
$ 395,582
5.6
$ 19,973
$ 415,555
10.9
Admissions 130,012
219
130,231
9.7
12,610
142,841
20.3
Medicare Admissions 82,898
176
83,074
5.5
6,715
89,789
14.0
Average Census 39,819
47
39,866
4.0
2,996
42,862
11.9
Average Medicare Census 27,829
38
27,867
(0.7 ) 1,660
29,527
5.2
Home Health Episodes 149,670
234
149,904
1.2
9,241
159,145
7.4
Hospice services
Revenue $ 99,410
$ 1,001
$ 100,411
0.4
$ 15,838
$ 116,249
16.2
Revenue Medicare $ 93,073
$ 892
$ 93,965
0.9
$ 13,609
$ 107,574
15.6
Admissions 7,729
1
7,730
2.5
1,987
9,717
28.9
Medicare Admissions 6,663
1
6,664
—
1,696
8,360
25.4
Average Census 2,533
24
2,557
(1.4 ) 431
2,988
15.2
Average Medicare Census 2,341
22
2,363
(1.9 ) 406
2,769
14.9
Patient days 716,644
6,504
723,148
1.8
92,607
815,755
14.8
Community-based services
Revenue $ 32,125
$ —
$ 32,125
(2.1 ) $ 1,682
$ 33,807
3.0
Billable hours 1,014,930
—
1,014,930
3.6
41,292
1,056,222
7.8
Facility-based services
LTACHs
Revenue $ 44,330
$ —
$ 44,330
(13.2 ) 2,561
$ 46,891
(8.2 )
Patient days 39,313
—
39,313
(8.5 ) 2,093
41,406
(3.6 )


~~(1)~~	~~Same store — location that has been in service with us for greater than 12 months.~~


~~(2)~~	~~De Novo — internally developed location that has been in service with us for 12 months or less.~~


~~(3)~~	~~Organic — combination of same store and de novo.~~


~~(4)~~	~~Acquired — purchased location that has been in service with us for 12 months or less.~~

~~Total organic revenue and patient metrics increased in our home health services segment and hospice services segment due to the successful execution~~Table of same store growth strategies. Total organic revenue and patient days decreased in the facility-based services segment due to the negative impact from the reduction of LTACH beds and lower revenue per patient day caused by patient criteria changes that went into effect in June 2016 and September 2016.Contents

Organic growth is primarily generated by population growth in areas covered by mature agencies, agencies five years old or older, and by increased market share in acquired and developing agencies. Historically, acquired agencies have the highest growth in admissions and average census in the first 24 months after acquisition, and have the highest contribution to organic growth, measured as a percentage of growth, in the second full year of operation after the acquisition.

Cost of service revenue

The following table summarizes cost of service revenue (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):


	Nine months ended September 30,
	2022				2021
Home health services:
Salaries, wages and benefits	$	613,745	53.2	%	$	601,998	52.0	%
Transportation	29,509		2.6		27,408		2.4
Supplies and services	31,254		2.7		33,731		2.9
Total	$	674,508	58.4	%	$	663,137	57.3	%
Hospice services:
Salaries, wages and benefits	$	149,340	48.4	%	$	93,950	44.9	%
Transportation	9,490		3.1		6,151		2.9
Supplies and services	44,034		14.3		29,747		14.2
Total	$	202,864	65.8	%	$	129,848	62.0	%
Home and community-based services:
Salaries, wages and benefits	$	94,650	69.1	%	$	101,711	71.0	%
Transportation	1,300		0.9		1,259		0.9
Supplies and services	520		0.4		971		0.7
Total	$	96,470	70.4	%	$	103,941	72.6	%
Facility-based services:
Salaries, wages and benefits	$	54,755	58.1	%	$	48,420	50.0	%
Transportation	180		0.2		29		—
Supplies and services	14,649		15.5		16,911		17.5
Total	$	69,584	73.8	%	$	65,360	67.5	%
HCI:
Salaries, wages and benefits	$	8,502	27.5	%	$	9,527	32.0	%
Transportation	140		0.5		166		0.6
Supplies and services	25		0.1		27		0.1
Total	$	8,667	28.0	%	$	9,720	32.7	%
Consolidated:
Salaries, wages and benefits	$	920,992	53.4	%	$	855,606	52.3	%
Transportation	40,619		2.4		35,013		2.1
Supplies and services	90,482		5.2		81,387		5.0
Total	$	1,052,093	61.0	%	$	972,006	59.4	%

Nine Months Ended September 30,
2017 2016
Home health services
Salaries, wages and benefits $ 320,933
55.8 % $ 266,170
54.1 %
Transportation 18,064
3.1
16,648
3.4
Supplies and services 13,899
2.4
11,541
2.3
Total $ 352,896
61.3 % $ 294,359
59.8 %
Hospice services
Salaries, wages and benefits $ 52,800
45.4 % $ 43,319
43.3 %
Transportation 4,555
3.9
4,005
4.0
Supplies and services 17,832
15.3
14,512
14.5
Total $ 75,187
64.6 % $ 61,836
61.8 %
Community-based services
Salaries, wages and benefits $ 24,514
72.5 % $ 24,256
73.9 %
Transportation 231
0.7
197
0.6
Supplies and services 160
0.5
203
0.6
Total $ 24,905
73.7 % $ 24,656
75.1 %
Facility-based services
Salaries, wages and benefits $ 24,959
45.8 % $ 21,626
39.7 %
Transportation 199
0.4
190
0.3
Supplies and services 10,238
18.8
10,894
20.0
Total $ 35,396
65.0 % $ 32,710
60.0 %

~~Consolidated~~During 2022, cost of service revenue for the nine months ended September 30, 2017 was $488.4 million, or 62.6% of net service revenue, compared to $413.6 million, or 60.9% of net service revenue, for the same period in 2016. Consolidated cost of service revenue variances were as follows:

•Home Health Segment -- Cost of service revenue increased as a percentage of net service revenue due in part to 2.0% Medicare reimbursement cuts recognized in 2017. Additionally, acquisitions accounted for $32.5 million of the $58.5 million increase, with the remaining difference caused by growth in our ~~same store agencies.~~

•~~Hospice Segment -- Acquisitions accounted for $6.6 million~~home health, hospice, and facility-based segments were impacted by the continued labor market challenges. These challenges are, but not limited to, consistent utilization of ~~the $13.4 million increase in cost~~nursing contract labor at a higher cost-per-visit rate, payments of ~~service revenue,~~sign-on and retention bonuses, increased clinician wages, and labor costs associated with ~~the remaining difference caused by growth in our same store agencies. Cost of service increased as a percentage of net service revenue due to the decline in same store admissions~~acquisitions purchased during the ~~third quarter~~latter half of ~~2017.~~2021.

•~~Community-Based Services Segment: Cost~~

Table of ~~service revenue decreased as a percentage of net service revenue due to the utilization of contract labor in the prior year, which was used to service a higher level of care in our 2016 patient mix.~~Contents

•Facility-Based Services Segment -- Acquisitions accounted for $3.0 million of the $2.7 million increase in cost of service revenue, which was offset by decrease in cost of service for one LTACH location that had a reduction of beds during 2016. Cost of service revenue increased as a percentage of net service revenue due to lower revenue per patient day for the period caused by patient criteria changes that went into effect in June 2016 and September 2016.

~~Provision for bad debts~~

Consolidated provision for bad debts for the nine months ended September 30, 2017 was $8.2 million, or 1.1% of net service revenue, compared to $11.7 million, or 1.7% of net service revenue, for the same period in 2016. The decrease in provision for bad debts was primarily due to continued process improvements implemented in our revenue cycle department. These improvements also contributed to the significant decrease in patient accounts receivable that are over 180 days. The Company continues to have more timely cash collections and an increase in amounts collected. The continued maturity of our

~~back office and field operations, use of our point-of-care platform, and use of other technology advancements in reporting and analytics are drivers of collection improvements.~~

General and administrative expenses

The following table summarizes general and administrative expenses (amounts in thousands, except percentages, which are percentages of the segment’s respective net service revenue):


	Nine months ended September 30,
	2022				2021
Home health services:
General and administrative	$	377,970	32.8	%	$	360,727	31.2	%
Depreciation and amortization	9,512		0.8		8,610		0.7
Total	$	387,482	33.6	%	$	369,337	31.9	%
Hospice services:
General and administrative	$	93,457	30.3	%	$	56,874	27.2	%
Depreciation and amortization	3,695		1.2		1,915		0.9
Total	$	97,152	31.5	%	$	58,789	28.1	%
Home and community-based services:
General and administrative	$	34,806	25.4	%	$	34,016	23.7	%
Depreciation and amortization	949		0.7		1,200		0.8
Total	$	35,755	26.1	%	$	35,216	24.5	%
Facility-based services:
General and administrative	$	33,121	35.1	%	$	30,765	31.8	%
Depreciation and amortization	2,616		2.8		2,448		2.5
Total	$	35,737	37.9	%	$	33,213	34.3	%
HCI:
General and administrative	$	12,963	41.9	%	$	9,473	31.8	%
Depreciation and amortization	711		2.3		726		2.4
Total	$	13,674	44.2	%	$	10,199	34.2	%
Consolidated:
General and administrative	$	552,317	32.0	%	$	491,855	30.1	%
Depreciation and amortization	17,483		1.0		14,899		0.9
Total	$	569,800	33.0	%	$	506,754	31.0	%

Nine Months Ended September 30,
2017 2016
Home health services
General and administrative $ 158,713
27.6 % $ 145,166
29.5 %
Depreciation and amortization 6,440
1.1
5,782
1.2
Total $ 165,153
28.7 % $ 150,948
30.7 %
Hospice services
General and administrative $ 30,675
26.4 % $ 26,175
26.2 %
Depreciation and amortization 1,729
1.5
1,612
1.6
Total $ 32,404
27.9 % $ 27,787
27.8 %
Community-based services
General and administrative $ 6,621
19.6 % $ 6,260
19.1 %
Depreciation and amortization 336
1.0
297
0.9
Total $ 6,957
20.6 % $ 6,557
20.0 %
Facility-based services
General and administrative $ 15,388
28.3 % $ 14,672
27.0 %
Depreciation and amortization 1,175
2.2
1,332
2.4
Total $ 16,563
30.5 % $ 16,004
29.4 %

Consolidated general and administrative expenses for the nine months ended September 30, 2017 were $221.1 million, or 28.4% of net service revenue, compared to $201.3 million, or 29.6% of net service revenue, for the same period in 2016. AlthoughDuring 2022, consolidated general and administrative expenses increased ~~in total over the same period in 2016, they decreased~~ as a percentage of ~~net service~~ revenue ~~by 1.2%~~from 31.0% to 33.0%. We ~~continue to leverage efficiencies found in our back office that allows us to maintain general and~~incurred higher administrative costs ~~without increasing costs in proportion~~related to ~~the growth of our company.~~

~~Loss on disposal of assets~~

~~The loss on disposal of assets increased~~acquisitions purchased during the ~~nine months ended September 30, 2016 primarily due to the sale~~latter half of an aircraft. The aircraft incurred damage and was subsequently sold at a price below the aircraft's net book value. The sale generated a loss of $0.9 million, which was realized during the nine months ended September 30, 2016.2021.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our cash balance at September 30, 2022 was $10.5 million and we have $243.4 million of available liquidity from cash and our revolving credit facility, net of $4.8 million liabilities associated with the CAAP. We have additional capacity in our revolving credit facility of $300.0 million per our accordion expansion. Based on our current plan of operations, including acquisitions, we believe this amount, when combined with expected cash flows from operations, will be sufficient to fund our growth strategy and to meet our anticipated operating expenses, capital expenditures, and debt service obligations for at least the next 12 months.

Our principal source of liquidity for operating activities is the collection of patient accounts receivable, most of which are collected from governmental and ~~third party~~third-party commercial payors. We also have the ability to obtain additional liquidity, if necessary, through our credit facility, which provides for aggregate borrowings, including outstanding letters of ~~credit, up to $225 million. As of September 30, 2017, we had $95.0 million available for borrowing under our credit facility.~~credit.

The following table summarizes changes in cash (amounts in thousands):

Table of Contents


	Nine Months Ended September 30,							Nine months ended September 30,
	2017			2016				2022		2021
Net cash provided by (used in):							Net cash provided by (used in):
Operating activities	$	61,695		$	57,843		Operating activities	$	10,038	$	(51,616)
Investing activities	(69,191		)	(34,635		)	Investing activities	(31,994)		(412,242)
Financing activities	21,154			(12,829		)	Financing activities	22,669		206,805
Change in cash							Change in cash	$	713	$	(257,053)
Cash at beginning of period							Cash at beginning of period	9,809		286,569
Cash at end of period							Cash at end of period	$	10,522	$	29,516

~~Cash provided by operating activities changed primarily due~~

We experienced a decline in net income during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The decline was related to decreased census, increased ~~collections in patient accounts receivable, accretion of~~labor costs, and increased general and administrative costs related to the Merger and acquisitions purchased during the latter part of 2021. Our accounts payables and accrued expenses increased as we implemented a new enterprise system and utilized payment management strategies incorporated within the new system. During the nine months ended September 30, 2022, CMS recouped $101.6 million of the CAAP, as compared to $141.6 million during the nine months ended September 30, 2021.

We acquired $2.6 million in ~~2016,~~business combinations during the nine months ended September 30, 2022 as compared to $383.5 million of business combinations during the nine months ended September 30, 2021.

In addition, we utilized our credit agreement for funding of the share repurchase plan and ~~accretion~~recoupments of the CAAP during the months ended September 30, 2022. We returned $93.3 million of Provider Relief Funds back to the government during the nine months ended September 30, 2021.

Indebtedness

On August 3, 2021, we entered into an Amended and Restated Senior Credit Facility (the "2021 Amended Credit Agreement"), which provided a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of $800.0 million, which included an additional $500.0 million accordion expansion, and a letter of credit sub-limit equal to $75.0 million. On December 31, 2021, the aggregate commitment was increased to a maximum borrowing limit of $1.0 billion, with an additional $300.0 million accordion expansion. The expiration date of the 2021 Amended Credit Agreement is August 3, 2026.

Our obligations under the 2021 Amended Credit Agreement are secured by substantially all of our ~~same store agencies.~~assets and our wholly-owned subsidiaries (subject to customary exclusions), which assets include our equity ownership of our wholly-owned subsidiaries and our equity ownership in joint venture entities. Our wholly-owned subsidiaries also guarantee the obligations of the Company under the 2021 Amended Credit Agreement.

~~Accounts Receivable and Allowance for Uncollectible Accounts~~

~~For home health services, hospice services, and community-based services, we calculate~~Revolving loans under the ~~allowance for uncollectible accounts~~2021 Amended Credit Agreement bear interest, as selected us, at either (i) the prevailing London Interbank Offered Rate ("LIBOR") (with interest periods of one, three or six months at our option) plus a ~~percentage~~spread of total patient receivables. The percentage changes depending on the payor and increases as the patient receivables age. For facility-based services, we calculate the allowance for uncollectible accounts1.25% to 2.0% based on our quarterly consolidated Leverage Ratio or (ii) the prevailing prime or base rate plus a ~~claim by claim review.~~

spread of 0.25% to 1.00% based on our quarterly consolidated Leverage Ratio. Swing line loans bear interest at the Base Rate. We are limited to 15 Eurodollar borrowings outstanding at any time. We are required to pay a commitment fee for the unused commitments at rates ranging from 0.15% to 0.30% per annum depending upon our quarterly consolidated Leverage Ratio. The Base Rate as of September 30, 2022 was 7.25% and the LIBOR rate was 5.13%. As of September 30, ~~2017,~~2022, the effective interest rate on outstanding borrowings under the 2021 Amended Credit Agreement was 4.98%.

On March 5, 2021, the ICE Benchmark Administration, the administrator of LIBOR, announced its intention to cease the publication of LIBOR settings for 1-month, 3-month, 6-month, and 12-month LIBOR borrowings immediately on June 30, 2023. JPMorgan Chase Bank, N.A will transition our ~~allowance for uncollectible accounts, as~~2021 Amended Credit Agreement to an alternate rate to CME Term SOFR Reference Rate ("SOFR"), which is administered by CME Group Benchmark Administration Ltd ("CME"). Due to the differences observed between LIBOR rates and SOFR published rates, JPMorgan Chase Bank, N.A. will use a ~~percentage~~credit spread adjustment ("CSA") in order to minimize value transfer and leave the existing margin applicable to our 2021 Amended Credit Agreement. The CSA used by JPMorgan Chase Bank, N.A. is based on the average of ~~patient accounts receivable, was approximately 15.2%, or $26.1 million, compared~~the differences between LIBOR and SOFR over a 12-month period and will be added to ~~18.9% or $29.0 million at December 31, 2016. Days sales outstanding was 49 days for September 30, 2017 and December 31, 2016.~~

~~The following table sets forth as of September 30, 2017, the aging of accounts receivable (amounts in thousands):~~

SOFR.

Table of Contents

Payor 0-90 91-180 181-365 Over 365 Total
Medicare $ 78,600
$ 14,145
$ 2,725
$ 6,196
$ 101,666
Medicaid 5,507
2,588
614
1,393
10,102
Other 38,804
8,860
6,557
5,608
59,829
Total $ 122,911
$ 25,593
$ 9,896
$ 13,197
$ 171,597

~~The following table sets forth as of December 31, 2016, the aging of accounts receivable (amounts in thousands):~~

Payor 0-90 91-180 181-365 Over 365 Total
Medicare $ 71,386
$ 9,590
$ 5,547
$ 5,720
$ 92,243
Medicaid 4,600
1,470
1,380
268
7,718
Other 33,084
5,943
7,179
7,672
53,878
Total $ 109,070
$ 17,003
$ 14,106
$ 13,660
$ 153,839

~~Indebtedness~~

As of September 30, ~~2017,~~2022, we had ~~$95.0~~$738.0 million ~~available for borrowing under our credit facility with $119.0 million~~ drawn, ~~under our credit facility and $11.0 million of~~ letters of credit ~~outstanding.~~issued in the amount of $24.3 million, and $237.7 million of remaining borrowing capacity available under the 2021 Amended Credit Agreement. At December 31, ~~2016,~~2021, we had ~~$87.0~~$661.2 million drawn and ~~$11.0 million of~~ letters of credit ~~outstanding~~issued in the amount of $24.3 million under ~~our credit facility.~~the 2021 Amended Credit Facility.

~~For a discussion on our~~Under the 2021 Amended Credit Agreement with ~~Capital One National Association, see Note 5 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.~~

AJPMorgan Chase Bank, N.A., a letter of credit fee shall be equal to the applicable Eurodollar rate ~~multiplied-by~~on the ~~face~~average daily amount of the letter of credit ~~is charged upon the issuance and on each anniversary date while the letter of credit is outstanding.~~exposure. The agent’s standard up-front fee and other customary administrative charges will also be due upon issuance of the letter of credit along with a renewal fee on each anniversary date of such issuance while the letter of credit is outstanding. Borrowings accrue interest under the 2021 Amended Credit Agreement at either the Base Rate or the Eurodollar rate, and are subject to the applicable margins set forth below:


Leverage Ratio	Eurodollar Margin		Base Rate Margin		Commitment Fee Rate
≤1.00:1.00	1.25	%	0.25	%	0.15	%
>1.00:1.00 ≤ 2.00:1.00	1.50	%	0.50	%	0.20	%
>2.00:1.00 ≤ 3.00:1.00	1.75	%	0.75	%	0.25	%
>3.00:1.00	2.00	%	1.00	%	0.30	%

Leverage Ratio
Eurodollar
Margin

Base
Rate
Margin

Commitment
Fee Rate
≤1.00:1.00 1.75 % 0.75 % 0.225 %
>1.00:1.00 ≤ 1.50:1.00 2.00 % 1.00 % 0.250 %
>1.50:1.00 ≤ 2.00:1.00 2.25 % 1.25 % 0.300 %
>2.00:1.00 2.50 % 1.50 % 0.375 %

Our 2021 Amended Credit Agreement contains customary affirmative, negative and financial ~~covenants. For example, without prior approval~~covenants, which are subject to customary carve-outs, thresholds, and materiality qualifiers. The Credit Facility allows us to make certain restricted payments within certain parameters provided we maintain compliance with those financial ratios and covenants after giving effect to such restricted payments or, in the case of ~~our bank group, we~~repurchasing shares of its stock, so long as such repurchases are ~~materially restricted in incurring additional debt, disposing of assets, making investments, allowing fundamental changes to our business or organization, and making~~within certain payments in respect of stock or other ownership interests, such as dividends and stock repurchases, up to $50 million. Under our Credit Agreement, we are also required to meet certain financial covenants with respect to minimum fixed charge coverage and leverage ratios.specified baskets.

Our 2021 Amended Credit Agreement also contains customary events of ~~default.~~default, which are subject to customary carve-outs, thresholds, and materiality qualifiers. These include bankruptcy and other insolvency events, cross-defaults to other debt agreements, a change in control involving us or any subsidiary guarantor, and the failure to comply with certain covenants.

At September 30, ~~2017,~~2022, we were in compliance with all ~~covenants contained in the Credit Agreement governing our credit facility.~~debt covenants.

Contingencies

For a discussion of contingencies, see Note 7 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market, or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies

For a discussion of critical accounting policies, see ~~Note 2 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.~~

~~Accounts Receivable and Allowances for Uncollectible Accounts~~

We report accounts receivable net of estimated allowances for uncollectible accounts and adjustments. Accounts receivable are uncollateralized and consist of amounts due from Medicare, Medicaid, other third-party payors, and patients. To provide for accounts receivable that could become uncollectible in the future, we establish an allowance for uncollectible accounts to reduce the carrying amount of such receivables to their estimated net realizable value.

The collection of outstanding receivables is our primary source of cash collections and is critical to our operating performance. Because Medicare is our primary payor, the credit risk associated with receivables from other payors is limited. We believe the credit risk associated with our Medicare accounts, which historically exceeds 50%Part II. Item 7 of our patient accounts receivable as of September 30, 2017 and December 31, 2016, respectively, is limited due to (i) the historical collections from Medicare and (ii) the fact that Medicare is a U.S. government payor. We do not believe that there are any other significant concentrations of receivables from any particular payor that would subject us to any significant credit risk in the collection of accounts receivable.2021 Form 10-K.

The amount of the provision for bad debts is based upon our assessment of historical and expected net collections, business and economic conditions and trends in government reimbursement. Quarterly, we perform a detailed review of historical writeoffs and recoveries as well as recent collection trends. Uncollectible accounts are written off when we have exhausted collection efforts and concluded the account will not be collected.

Although our estimated reserves for uncollectible accounts are based on historical experience and the most current collection trends, this process requires significant judgment and interpretation of the observed trends and the actual collections could differ from our estimates.

~~Insurance~~

We retain significant exposure for our employee health insurance, workers compensation, employment practices, and professional liability insurance programs. Our insurance programs require us to estimate potential payments on filed claims and/or claims incurred but not reported. Our estimates are based on information provided by the third-party plan administrators, historical claim experience, expected costs of claims incurred but not paid and expected costs associated with settling claims. Each month, we review the insurance-related recoveries and liabilities to determine if any adjustments are required.

Our employee health insurance program is self-funded, with stop-loss coverage on claims that exceed $0.2 million for any individually covered employee or employee family member. We are responsible for workers’ compensation claims up to $0.5 million per individual incident.

Malpractice, employment practices, and general liability claims for incidents which may give rise to litigation have been asserted against us by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. We are aware of incidents that have occurred through September 30, 2017 that may result in the assertion of additional claims. We currently carry professional, general liability and employment practices insurance coverage (on a claims made basis) for this exposure. We also carry D&O coverage (also on a claims made basis) for potential claims against our directors and officers, including securities actions, with a deductible of $1.0 million per security claim and $0.5 million on other claims.

We estimate our liabilities related to these programs using the most current information available. As claims develop, we may need to change the recorded liabilities and change our estimates. These changes and adjustments could be material to our financial statements, results of operations and financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK.~~RISK

Our exposure to market risk relates to changes in interest rates for borrowings under our credit facility. Our letter of credit fees and interest accrued on our debt borrowings are subject to the applicable Eurodollar or Base Rate. A hypothetical basis point increase in interest rates on the average daily amounts outstanding under the credit facility would have increased our interest expense by ~~$0.7~~$5.8 million for the nine months ended September 30, ~~2017.~~2022.

ITEM 4. CONTROLS AND ~~PROCEDURES.~~PROCEDURES

Evaluation of Disclosure Controls and Procedures

Table of Contents

We ~~maintain~~established disclosure controls and procedures ~~(as defined in Rule 13a-15(e)~~which are designed to provide reasonable assurance of ~~the Exchange Act) that are designed~~achieving their objectives and to ensure that information ~~that we are~~ required to ~~disclose~~be disclosed in ~~our~~its reports filed ~~or submitted~~ under the Securities Exchange Act of 1934 as amended (the “Exchange Act”) is recorded, processed, summarized, disclosed and reported within the time periods specified in the SEC’s rules and ~~forms and that such~~forms. This information is also accumulated and communicated to our management ~~including our Chief Executive Officer~~ and ~~Chief Financial Officer, as appropriate,~~Board of Directors to allow timely decisions regarding required disclosure. ~~Our management,~~

In connection with the preparation of this Quarterly Report on Form 10-Q, as of September 30, 2022, under the supervision and with the participation of ~~our Chief Executive Officer~~management, including the principal executive officer and ~~Chief Financial Officer, evaluated~~principal financial officer, management conducted an evaluation of the effectiveness of the ~~design~~disclosure controls and ~~operation of~~procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.

Based on this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022, the end of the period covered by this ~~report.~~

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective as of September 30, 2017.Quarterly Report.

Changes in Internal Controls Over Financial Reporting

~~There have~~We, including the principal executive officer and principal financial officer, do not ~~been any changes in~~expect that our disclosure controls or our internal ~~control~~controls over financial reporting ~~as such term is defined in Rule 13a-15(f)~~will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the ~~Exchange Act, during~~inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the ~~quarterly period ended~~realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls’ effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and, based on an evaluation of the controls and procedures, the principal executive officer and principal financial officer concluded the disclosure controls and procedures were effective at a reasonable assurance level as of September 30, ~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~2022, the end of the period covered by this Quarterly Report.

Table of Contents

PART II — OTHER INFORMATION

ITEM 1. LEGAL ~~PROCEEDINGS.~~PROCEEDINGS

For a discussion of legal proceedings, see Note 7 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.

ITEM 1A. RISK ~~FACTORS.~~FACTORS

There have been no material changes in the Company’s risk factors from ~~the information included~~those in Part I, Item ~~1A.~~1A, “Risk Factors” of ~~the Company’s 2016~~our 2021 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS.~~PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

Table of Contents

ITEM 6. ~~EXHIBITS.~~EXHIBITS



3.1		Amended and Restated Certificate of Incorporation of LHC Group, Inc. (previously filed as an Exhibit 3.1 to ~~the~~LHC Group’s Form ~~S-1/A (File No. 333-120792)~~8-K filed on ~~February 14, 2005)~~April 2, 2018).

3.2	Bylaws of LHC Group, Inc. as amended on December 31, 2007 (previously filed as Exhibit 3.2 to ~~the~~LHC Group’s Form 10-Q filed on May 9, 2008).

~~4.1~~31.1	~~Specimen Stock Certificate of LHC Group’s Common Stock, par value $0.01 per share (previously filed as Exhibit 4.1 to the Form S-1/ A (File No. 333-120792) on February 14, 2005).~~

~~10.1~~	~~Amendment to LHC Group, Inc. Second Amended and Restated 2005 Non-Employee Directors Compensation Plan, effective January 20, 2015.~~

~~31.1~~	Certification of Keith G. Myers, Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of ~~Joshua L. Proffitt,~~Dale G. Mackel, Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*	Certification of Chief Executive Officer and Chief Financial Officer of LHC Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
~~101.INS~~101.SCH		~~XBRL Instance Document~~

~~101.SCH~~	XBRL Schema Document
101.CAL
~~101.CAL~~	XBRL Calculation Linkbase Document
101.DEF
~~101.DEF~~	XBRL Definition Linkbase Document
101.LAB
~~101.LAB~~	XBRL Label Linkbase Document
101.PRE
~~101.PRE~~	XBRL Presentation Linkbase Document
104		Cover Page Interactive Date File (embedded within the Inline XBRL document).

Attached as Exhibit 101 to this report are documents formatted in XBRL (Extensible Business Reporting Language). Users of this data are advised pursuant to Rule 406T of Regulation S-T that the interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of section 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, and otherwise not subject to liability under these sections. The financial information contained in the XBRL-related documents is “unaudited” or “unreviewed.”

*This exhibit is furnished to the SEC as an accompanying document and is not deemed to be ~~��filed”~~“filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, and the document will not be deemed incorporated by reference into any filing under the Securities Act of 1933.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



						LHC GROUP, INC.
						(Registrant)

Date: November ~~6, 2017~~3, 2022						/s/ ~~Joshua L. Proffitt~~Dale G. Mackel
						~~Joshua L. Proffitt~~Dale G. Mackel
						~~Executive Vice President and~~ Chief Financial Officer (Principal financial officer)



	Three Months Ended September 30,				Nine Months Ended September 30,
Ownership type	2017		2016		2017		2016
Wholly-owned subsidiaries	50.6	%	57.6	%	52.1	%	57.3	%
Equity joint ventures	47.5		40.7		46.1		41.0
Other	1.9		1.7		1.8		1.7
	100.0	%	100.0	%	100.0	%	100.0	%



Consideration
Cash	$	71,677
Fair value of total consideration transferred
Recognized amounts of identifiable assets acquired and liabilities assumed:
Patient accounts receivable	6,532
Trade name	13,953
Certificates of need/licenses	16,447
Other identifiable intangible assets	6
Other assets and (liabilities), net	2,121
Total identifiable assets	39,059
Noncontrolling interest	52,492
Goodwill, including noncontrolling interest of $34,313	$	85,110



	Home health reporting unit			Hospice reporting unit		Community - based reporting unit		Facility-based reporting unit		Total
Balance as of December 31, 2016	$	210,839		$	64,234	$	18,820	$	13,424	$	307,317
Goodwill from acquisitions	29,448			15,188		4,285		1,876		50,797
Goodwill related to noncontrolling interests	20,781			9,674		2,856		1,002		34,313
Goodwill related to disposals	(80		)	—		—		—		(80		)
Goodwill related to prior period net working capital adjustments............................................	(5		)	—		—		347		342
Balance as of September 30, 2017	$	260,983		$	89,096	$	25,961	$	16,649	$	392,689



	September 30, 2017
	Remaining useful life	Gross carrying amount		Accumulated amortization			Net carrying amount
Indefinite-lived assets:
Trade names	Indefinite	$	78,590	$	—		$	78,590
Certificates of need/licenses	Indefinite	49,773		—			49,773
Total		$	128,363	$	—		$	128,363
Definite-lived assets:
Trade names	2 months — 9 years	$	9,291	$	(7,184	)	$	2,107
Non-compete agreements	2 month — 2 years	5,732		(5,423		)	309
Total		$	15,023	$	(12,607	)	$	2,416
Balance as of September 30, 2017		$	143,386	$	(12,607	)	$	130,779



	December 31, 2016
	Remaining useful life	Gross carrying amount		Accumulated amortization			Net carrying amount
Indefinite-lived assets:
Trade names	Indefinite	$	64,672	$	—		$	64,672
Certificates of need/licenses	Indefinite	33,327		—			$	33,327
Total		$	97,999	$	—		$	97,999
Definite-lived assets:
Trade names	8 months — 9 years	$	9,294	$	(5,991	)	$	3,303
Non-compete agreements	2 months — 3 years	5,681		(4,977		)	704
Total		$	14,975	$	(10,968	)	$	4,007
Balance as of December 31, 2016		$	112,974	$	(10,968	)	$	102,006



	Number of shares		Weighted average grant date fair value
Nonvested shares outstanding as of December 31, 2016	574,711		$	31.61
Granted	151,010		$	48.52
Vested	(191,463	)	$	28.91
Forfeited	(3,793	)	$	39.30
Nonvested shares outstanding as of September 30, 2017	530,465		$	37.35



	Number of shares	Per share price
Shares available as of December 31, 2016	189,611
Shares issued during the three months ended March 31, 2017	5,891	$	43.42
Shares issued during the three months ended June 30, 2017	4,152	$	51.21
Shares issued during the three months ended September 30, 2017..........................................................	4,775	$	64.49
Shares available as of September 30, 2017	174,793



Balance as of December 31, 2016	$	29,036
Additions	8,238
Deductions	(11,185		)
Balance as of September 30, 2017	$	26,089



	Three Months Ended September 30, 2017
	Home health services			Hospice services			Community-based services			Facility-based services			Total
Net service revenue	$	198,978		$	41,291		12,146			$	20,457		$	272,872
Cost of service revenue	123,204			27,441			8,971			13,240			172,856
Provision for bad debts	2,661			234			30			269			3,194
General and administrative expenses	55,980			11,263			2,387			6,039			75,669
(Gain) loss on disposal of assets	20			13			—			(210		)	(177		)
Operating income	17,113			2,340			758			1,119			21,330
Interest expense	(746		)	(149		)	(50		)	(50		)	(995		)
Income before income taxes and noncontrolling interest	16,367			2,191			708			1,069			20,335
Income tax expense	5,703			931			338			473			7,445
Net income	10,664			1,260			370			596			12,890
Less net income (loss) attributable to noncontrolling interests	1,759			273			(21		)	(27		)	1,984
Net income attributable to LHC Group, Inc.’s common stockholders	$	8,905		$	987		$	391		$	623		$	10,906
Total assets	$	515,562		$	156,296		$	44,621		$	48,574		$	765,053



	Three Months Ended September 30, 2016
	Home health services			Hospice services			Community-based services			Facility-based services			Total
Net service revenue	$	167,529		$	35,322		$	11,793		$	16,153		$	230,797
Cost of service revenue	100,057			21,243			9,100			10,432			140,832
Provision for bad debts	2,049			797			190			239			3,275
General and administrative expenses	50,293			9,491			2,263			4,952			66,999
Loss on disposal of assets	20			5			—			117			142
Operating income	15,110			3,786			240			413			19,549
Interest expense	(612		)	(90		)	(41		)	(73		)	(816		)
Income before income taxes and noncontrolling interest	14,498			3,696			199			340			18,733
Income tax expense	5,133			1,275			83			71			6,562
Net income	9,365			2,421			116			269			12,171
Less net income attributable to noncontrolling interests	1,853			553			—			149			2,555
Net income attributable to LHC Group, Inc.’s common stockholders	$	7,512		$	1,868		$	116		$	120		$	9,616
Total assets	$	425,923		$	119,906		$	33,549		$	34,075		$	613,453



	Nine Months Ended September 30, 2017
	Home health services			Hospice services			Community-based services			Facility-based services			Total
Net service revenue	$	575,180		$	116,249		$	33,807		$	54,464		$	779,700
Cost of service revenue	352,896			75,187			24,905			35,396			488,384
Provision for bad debts	5,796			1,393			404			645			8,238
General and administrative expenses	165,153			32,404			6,957			16,563			221,077
(Gain) loss on disposal of assets	39			21			—			(83		)	(23		)
Operating income	51,296			7,244			1,541			1,943			62,024
Interest expense	(1,961		)	(393		)	(130		)	(131		)	(2,615		)
Income before income taxes and noncontrolling interest	49,335			6,851			1,411			1,812			59,409
Income tax expense	16,712			2,439			602			657			20,410
Net income	32,623			4,412			809			1,155			38,999
Less net income (loss) attributable to noncontrolling interests	6,053			1,038			(7		)	237			7,321
Net income attributable to LHC Group, Inc.’s common stockholders	$	26,570		$	3,374		$	816		$	918		$	31,678



	Nine Months Ended September 30, 2016
	Home health services			Hospice services			Community-based services			Facility-based services			Total
Net service revenue	$	492,090		$	100,051		$	32,823		$	54,416		$	679,380
Cost of service revenue	294,359			61,836			24,656			32,710			413,561
Provision for bad debts	8,122			2,364			488			684			11,658
General and administrative expenses	150,948			27,787			6,557			16,004			201,296
Loss on disposal of assets	811			329			46			203			1,389
Operating income	37,850			7,735			1,076			4,815			51,476
Interest expense	(1,640		)	(232		)	(106		)	(189		)	(2,167		)
Income before income taxes and noncontrolling interest	36,210			7,503			970			4,626			49,309
Income tax expense	11,026			2,484			413			1,577			15,500
Net income	25,184			5,019			557			3,049			33,809
Less net income (loss) attributable to noncontrolling interests	5,002			1,368			(57		)	730			7,043
Net income attributable to LHC Group, Inc.’s common stockholders	$	20,182		$	3,651		$	614		$	2,319		$	26,766



Description	Rate per patient day
Routine Home Care days 1-60	$	190.55
Routine Home Care days 60+	$	149.82
Continuous Home Care	$	964.63
Full Rate = 24 hours of care
$40.19 = hourly rate
Inpatient Respite Care	$	170.97
General Inpatient Care	$	734.94



	Same Store(1)		De Novo(2)		Organic(3)		Organic Growth (Loss) %		Acquired(4)		Total		Total Growth (Loss) %
Home health services
Revenue	$	184,467	$	327	$	184,794	10.3	%	$	14,184	$	198,978	18.8	%
Revenue Medicare	$	133,597	$	283	$	133,880	4.9		$	9,267	$	143,147	12.1
Admissions	43,122		73		43,195		6.2		4,646		47,841		17.7
Medicare Admissions	27,207		61		27,268		1.7		2,696		29,964		11.8
Average Census	39,893		50		39,943		3.7		3,507		43,450		12.8
Average Medicare Census	27,599		40		27,639		(1.2	)	2,052		29,691		6.1
Home Health Episodes	50,123		75		50,198		2.0		3,805		54,003		9.7
Hospice services
Revenue	$	33,581	$	517	$	34,098	(3.5	)	$	7,193	$	41,291	16.9
Revenue Medicare	$	31,680	$	451	$	32,131	(2.9	)	$	5,785	$	37,916	14.6
Admissions	2,451		47		2,498		(2.2	)	940		3,438		34.6
Medicare Admissions	2,140		40		2,180		(3.8	)	787		2,967		30.9
Average Census	2,651		37		2,688		(1.8	)	420		3,108		13.6
Average Medicare Census	2,466		34		2,500		(1.9	)	388		2,888		13.4
Patient days	244,061		3,307		247,368		(1.7	)	38,603		285,971		13.6
Community-based services
Revenue	$	11,338	$	—	$	11,338	(3.9	)	$	808	$	12,146	3.0
Billable hours	339,569		—		339,569		(1.4	)	30,131		369,700		7.3
Facility-based services
LTACHs
Revenue	$	15,712	$	—	$	15,712	4.5		2,561		$	18,273	21.6
Patient days	12,506		—		12,506		(7.4	)	2,093		14,599		8.1



Payor	0-90		91-180		181-365		Over 365		Total
Medicare	$	78,600	$	14,145	$	2,725	$	6,196	$	101,666
Medicaid	5,507		2,588		614		1,393		10,102
Other	38,804		8,860		6,557		5,608		59,829
Total	$	122,911	$	25,593	$	9,896	$	13,197	$	171,597