~~0001303313us-gaap:CommonStockMember2020-03-31~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, ~~2021~~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)


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 every Interactive Data File required to be submitted 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Table of Contents

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

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. ¨

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 August ~~2, 2021:~~ ~~31,669,540~~1, 2022: 31,028,822 shares.

Table of Contents

LHC GROUP, INC.

INDEX


Part I. Financial Information		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets — June 30, ~~2021~~2022 and December 31, ~~2020~~2021		4
Condensed Consolidated Statements of Income — Three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021		5
Condensed Consolidated Statements of ~~Changes in~~Stockholders' Equity — Three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021		6
Condensed Consolidated Statements of Cash Flows — Six months ended June 30, ~~2021~~2022 and ~~2020~~2021		8
Notes to Condensed Consolidated Financial Statements		10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2625
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
Part II. Other Information
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash	Cash	$	112,108	$	286,569	Cash	$	27,400	$	9,809
Receivables:	Receivables:					Receivables:
Patient accounts receivable	Patient accounts receivable	329,166		301,209		Patient accounts receivable	342,068		348,820
Other receivables	Other receivables	9,214		11,522		Other receivables	13,304		13,780
Amounts due from governmental entities	Amounts due from governmental entities	149		0		Amounts due from governmental entities	483		—
Total receivables	Total receivables	338,529		312,731		Total receivables	355,855		362,600

Prepaid income taxes	Prepaid income taxes	13,739		0		Prepaid income taxes	19,613		7,531
Prepaid expenses	Prepaid expenses	26,542		22,058		Prepaid expenses	20,556		28,401
Other current assets	Other current assets	18,749		25,664		Other current assets	36,166		24,801
Total current assets	Total current assets	509,667		647,022		Total current assets	459,590		433,142
Property, building and equipment, net of accumulated depreciation of $90,652 and $82,721, respectively		145,314		138,366
Property, building and equipment, net of accumulated depreciation of $106,541 and $98,394, respectively						Property, building and equipment, net of accumulated depreciation of $106,541 and $98,394, respectively	155,978		153,959
Goodwill	Goodwill	1,259,726		1,259,147		Goodwill	1,751,430		1,748,426
Intangible assets, net of accumulated amortization of $18,261 and $17,659, respectively		313,638		315,355
Assets held for sale		1,900		1,900
Intangible assets, net of accumulated amortization of $21,902 and $19,152, respectively						Intangible assets, net of accumulated amortization of $21,902 and $19,152, respectively	397,121		400,002
Operating lease right of use asset	Operating lease right of use asset	105,201		100,046		Operating lease right of use asset	109,925		113,399
Other assets	Other assets	31,679		21,518		Other assets	63,830		46,693
Total assets	Total assets	$	2,367,125	$	2,483,354	Total assets	$	2,937,874	$	2,895,621
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and other accrued liabilities	Accounts payable and other accrued liabilities	$	56,888	$	64,864	Accounts payable and other accrued liabilities	$	124,222	$	98,118
Salaries, wages, and benefits payable	Salaries, wages, and benefits payable	88,030		88,666		Salaries, wages, and benefits payable	94,432		100,532
Self-insurance reserves	Self-insurance reserves	31,140		35,103		Self-insurance reserves	41,302		33,784
Income tax payable		0		21,464
Government stimulus advance		0		93,257

Contract liabilities - deferred revenue	Contract liabilities - deferred revenue	252,936		317,962		Contract liabilities - deferred revenue	8,222		106,489
Current operating lease liabilities		33,081		32,676
Current operating lease payable						Current operating lease payable	36,929		37,630
Amounts due to governmental entities	Amounts due to governmental entities	1,608		1,516		Amounts due to governmental entities	3,034		5,447
Current liabilities - deferred employer payroll tax	Current liabilities - deferred employer payroll tax	25,928		25,928		Current liabilities - deferred employer payroll tax	26,790		26,790
Total current liabilities	Total current liabilities	489,611		681,436		Total current liabilities	334,931		408,790
Deferred income taxes	Deferred income taxes	66,726		47,237		Deferred income taxes	80,691		70,026
Income taxes payable	Income taxes payable	6,625		6,203		Income taxes payable	7,754		7,320
Revolving credit facility	Revolving credit facility	0		20,000		Revolving credit facility	759,000		661,197
Other long term liabilities		25,928		25,928
Long-term operating lease liabilities	Long-term operating lease liabilities	74,993		70,275		Long-term operating lease liabilities	75,971		78,688
Total liabilities	Total liabilities	663,883		851,079		Total liabilities	1,258,347		1,226,021
Noncontrolling interest — redeemable	Noncontrolling interest — redeemable	18,589		18,921		Noncontrolling interest — redeemable	17,210		17,501
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:	LHC Group, Inc. stockholders’ equity:					LHC Group, Inc. stockholders’ equity:
Preferred stock – $0.01 par value; 5,000,000 shares authorized; NaN issued or outstanding		0		0
Common stock — $0.01 par value; 60,000,000 shares authorized; 36,525,831 and 36,355,497 shares issued, and 31,252,929 and 31,139,840 shares outstanding, respectively		365		364
Treasury stock — 5,272,902 and 5,215,657 shares at cost, respectively		(79,765)		(69,011)
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; 36,703,550 and 36,549,524 shares issued, and 30,567,333 and 30,634,414 shares outstanding, respectively						Common stock — $0.01 par value; 60,000,000 shares authorized; 36,703,550 and 36,549,524 shares issued, and 30,567,333 and 30,634,414 shares outstanding, respectively	367		365
Treasury stock — 6,136,217 and 5,915,110 shares at cost, respectively						Treasury stock — 6,136,217 and 5,915,110 shares at cost, respectively	(194,390)		(164,790)
Additional paid-in capital	Additional paid-in capital	969,897		962,120		Additional paid-in capital	990,247		979,642
Retained earnings	Retained earnings	707,599		635,297		Retained earnings	781,063		751,025
Total LHC Group, Inc. stockholders’ equity	Total LHC Group, Inc. stockholders’ equity	1,598,096		1,528,770		Total LHC Group, Inc. stockholders’ equity	1,577,287		1,566,242
Noncontrolling interest — non-redeemable	Noncontrolling interest — non-redeemable	86,557		84,584		Noncontrolling interest — non-redeemable	85,030		85,857
Total stockholders' equity	Total stockholders' equity	1,684,653		1,613,354		Total stockholders' equity	1,662,317		1,652,099
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	2,367,125	$	2,483,354	Total liabilities and stockholders' equity	$	2,937,874	$	2,895,621

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)


		Three Months Ended June 30,				Six Months Ended June 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net service revenue	Net service revenue	$	545,907	$	487,320	$	1,070,742	$	1,000,191	Net service revenue	$	576,193	$	545,907	$	1,147,688	$	1,070,742
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	317,872		306,712		628,144		627,914		Cost of service revenue (excluding depreciation and amortization)	353,933		317,872		704,321		628,144
Gross margin	Gross margin	228,035		180,608		442,598		372,277		Gross margin	222,260		228,035		443,367		442,598
General and administrative expenses	General and administrative expenses	167,061		150,574		330,310		308,440		General and administrative expenses	196,390		167,061		380,749		330,310
Impairment of intangibles and other	Impairment of intangibles and other	760		600		937		600		Impairment of intangibles and other	842		760		2,071		937
Government stimulus income		0		(44,435)		0		(44,435)
Operating income	Operating income	60,214		73,869		111,351		107,672		Operating income	25,028		60,214		60,547		111,351
Interest expense	Interest expense	(143)		(841)		(406)		(3,609)		Interest expense	(6,407)		(143)		(10,578)		(406)

Income before income taxes and noncontrolling interest	Income before income taxes and noncontrolling interest	60,071		73,028		110,945		104,063		Income before income taxes and noncontrolling interest	18,621		60,071		49,969		110,945
Income tax expense	Income tax expense	13,318		15,227		22,759		18,586		Income tax expense	3,679		13,318		10,048		22,759
Net income	Net income	46,753		57,801		88,186		85,477		Net income	14,942		46,753		39,921		88,186
Less net income attributable to noncontrolling interests	Less net income attributable to noncontrolling interests	9,110		13,109		15,884		18,761		Less net income attributable to noncontrolling interests	4,358		9,110		9,883		15,884
Net income attributable to LHC Group, Inc.’s common stockholders	Net income attributable to LHC Group, Inc.’s common stockholders	$	37,643	$	44,692	$	72,302	$	66,716	Net income attributable to LHC Group, Inc.’s common stockholders	$	10,584	$	37,643	$	30,038	$	72,302

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.21	$	1.44	$	2.32	$	2.15	Basic	$	0.35	$	1.21	$	0.98	$	2.32
Diluted	Diluted	$	1.20	$	1.43	$	2.30	$	2.13	Diluted	$	0.35	$	1.20	$	0.98	$	2.30
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	31,225		31,104		31,188		31,060		Basic	30,543		31,225		30,508		31,188
Diluted	Diluted	31,430		31,324		31,423		31,301		Diluted	30,676		31,430		30,623		31,423

See accompanying Notes to the Condensed Consolidated Financial Statements.

Table of Contents

LHC GROUP, INC. AND SUBSIDIARIES

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

(Amounts in thousands, except share data)

(Unaudited)


		Six Months Ended June 30, 2021															Six months ended June 30, 2022
		Common Stock						Additional Paid-In Capital		Retained Earnings		Noncontrolling Interest Non Redeemable		Total Equity			Common Stock						Additional Paid-In Capital		Retained Earnings		Noncontrolling Interest Non Redeemable		Total Equity
		Issued			Treasury												Issued			Treasury
		Amount		Shares	Amount		Shares										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
Balance as of December 31, 2021																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)	Net income (1)	—		—	—		—	—		34,659		4,469		39,128		Net income (1)	—		—	—		—	—		19,454		2,760		22,214
Noncontrolling interest distributions	Noncontrolling interest distributions	—		—	—		—	—		—		(2,417)		(2,417)		Noncontrolling interest distributions	—		—	—		—	—		—		(2,970)		(2,970)
Purchase of additional controlling interest		—		—	—		—	(81)		—		(61)		(142)
Sale of noncontrolling interest		—		—	—		—	—		—		138		138
Nonvested stock compensation	Nonvested stock compensation	—		—	—		—	3,513		—		—		3,513		Nonvested stock compensation	—		—	—		—	4,376		—		—		4,376
Issuance of vested stock	Issuance of vested stock	1		148,447	—		—	—		—		—		1		Issuance of vested stock	2		132,651	—		—	—		—		—		2
Treasury shares redeemed to pay income tax	Treasury shares redeemed to pay income tax	—		—	(9,541)		51,221	—		—		—		(9,541)		Treasury shares redeemed to pay income tax	—		—	(3,208)		23,022	68		—		—		(3,140)
Repurchase of common stock																Repurchase of common stock	—		—	(25,472)		190,622	—		—		—		(25,472)
Issuance of common stock under Employee Stock Purchase Plan	Issuance of common stock under Employee Stock Purchase Plan	—		3,204	—		—	649		—		—		649		Issuance of common stock under Employee Stock Purchase Plan	—		5,353	—		—	698		—		—		698
Balance as of March 31, 2021		$	365	36,507,148	$	(78,552)	5,266,878	$	966,201	$	669,956	$	86,713	$	1,644,683
Balance as of March 31, 2022																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)	Net income (1)	—		—	—		—	—		37,643		5,232		42,875		Net income (1)	—		—	—		—	—		10,584		2,124		12,708
Acquired noncontrolling interest																Acquired noncontrolling interest	—		—	—		—	—		—		707		707
Noncontrolling interest distributions																Noncontrolling interest distributions	—		—	—		—	—		—		(3,281)		(3,281)

Noncontrolling interest distributions		—		—	—		—	—		—		(4,660)		(4,660)
Purchase of additional controlling interest	Purchase of additional controlling interest	—		—	—		—	(870)		—		(728)		(1,598)		Purchase of additional controlling interest	—		—	—		—	(209)		—		(167)		(376)
Nonvested stock compensation	Nonvested stock compensation	—		—	—		—	3,993		—		—		3,993		Nonvested stock compensation	—		—	—		—	4,943		—		—		4,943
Issuance of vested stock	Issuance of vested stock	—		15,531	—		—	—		—		—		—		Issuance of vested stock	—		7,556	—		—	—		—		—		—
Treasury shares redeemed to pay income tax	Treasury shares redeemed to pay income tax	—		—	(1,213)		6,024	—		—		—		(1,213)		Treasury shares redeemed to pay income tax	—		—	(852)		5,144	344		—		—		(508)
Exercise of options																Exercise of options	—		5,124	(68)		2,319	(150)		—		—		(218)

Issuance of common stock under Employee Stock Purchase Plan	Issuance of common stock under Employee Stock Purchase Plan	—		3,152	—		—	573		—		—		573		Issuance of common stock under Employee Stock Purchase Plan	—		3,342	—		—	535		—		—		535
Balance as of June 30, 2021		$	365	36,525,831	$	(79,765)	5,272,902	$	969,897	$	707,599	$	86,557	$	1,684,653
Balance as of June 30, 2022																Balance as of June 30, 2022	$	367	36,703,550	$	(194,390)	6,136,217	$	990,247	$	781,063	$	85,030	$	1,662,317

(1) Net income excludes net income attributable to noncontrolling interest-redeemable of $2.2 million and $5.0 million during the three and six months ended June 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


	Six months ended June 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

(1) Net income excludes net income attributable to noncontrolling interest-redeemable of $3.9 million and $6.2 million during the three and six months ended June 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 to Condensed Consolidated Financial Statements.

LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands) (Unaudited)


	Six months ended June 30,
	2022		2021
Operating activities:
Net income	$	39,921	$	88,186
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	11,723		9,541
Amortization of operating lease right of use asset	20,412		17,995
Stock-based compensation expense	9,319		7,506
Deferred income taxes	10,665		19,489
Loss on disposal of assets	221		19
Impairment of intangibles and other	2,071		937
Changes in operating assets and liabilities, net of acquisitions:
Receivables	5,686		(25,649)
Prepaid expenses	7,845		(4,484)
Other assets	(13,403)		6,170
Prepaid income taxes	(12,083)		(13,739)

Accounts payable and accrued expenses	31,358		(9,148)
Salaries, wages, and benefits payable	1,338		(4,560)

Contract liabilities - deferred revenue	(98,267)		(65,026)

Operating lease liabilities	(20,286)		(17,962)
Income taxes payable	434		(21,042)
Net amounts due to/from governmental entities	758		(57)
Net cash used in operating activities	(2,288)		(11,824)
Investing activities:
Purchases of property, building and equipment	(11,138)		(15,619)
Proceeds from sale of property, building and equipment	—		150
Cash paid for acquisitions, net of cash acquired	(2,570)		(649)
Proceeds from sale of an entity	—		1,531
Minority interest investments	(15,100)		(10,100)
Net cash used in investing activities	(28,808)		(24,687)
Financing activities:
Proceeds from line of credit	597,250		—
Payments on line of credit	(499,447)		(20,000)
Government stimulus advance	—		(93,257)
Proceeds from employee stock purchase plan	1,233		1,222

Payments on repurchasing common stock	(34,565)		—

Noncontrolling interest distributions	(11,541)		(13,332)
Withholding taxes paid on stock-based compensation	(3,867)		(10,754)
Purchase of additional controlling interest	(376)		(2,113)

Sale of noncontrolling interest	—		284
Net cash provided by (used in) financing activities	48,687		(137,950)
Change in cash	17,591		(174,461)
Cash at beginning of period	9,809		286,569
Cash at end of period	$	27,400	$	112,108

Table of Contents

Six Months Ended June 30, 2020
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, 2019 $ 361 36,129,280 $ (60,060) 5,136,890 $ 949,321 $ 523,701 $ 93,928 $ 1,507,251
Net income (1) — — — — — 22,024 2,099 24,123
Acquired noncontrolling interest — — — — — — 2,880 2,880
Noncontrolling interest distributions — — — — — — (2,093) (2,093)
Purchase of additional controlling interest — — — — (2,470) — (21,105) (23,575)
Nonvested stock compensation — — — — 3,680 — — 3,680
Issuance of vested stock 2 163,163 — — — — — 2
Treasury shares redeemed to pay income tax — — (7,122) 59,390 189 — — (6,933)
Issuance of common stock under Employee Stock Purchase Plan — 4,663 — — 610 — — 610
Balance as of March 31, 2020 $ 363 36,297,106 $ (67,182) 5,196,280 $ 951,330 $ 545,725 $ 75,709 $ 1,505,945
Net income (1) — — — — — 44,692 7,058 51,750
Noncontrolling interest distributions — — — — — — (1,909) (1,909)
Nonvested stock compensation — — — — 3,263 — — 3,263
Issuance of vested stock — 19,846 — — — — — —
Treasury shares redeemed to pay income tax — — (950) 6,256 (189) — — (1,139)
Exercise of options — 7,137 (522) 3,315 218 — — (304)
Issuance of common stock under Employee Stock Purchase Plan — 3,730 — — 497 — — 497
Balance as of June 30, 2020 $ 363 36,327,819 $ (68,654) 5,205,851 $ 955,119 $ 590,417 $ 80,858 $ 1,558,103



Non-Cash Financing Activity:

Supplemental disclosures of cash flow information:
Interest paid	$	9,321	$	1,322
Income taxes paid	$	11,191	$	38,103
Non-Cash Operating Activity:
Operating right of use assets in exchange for lease obligations	$	18,633	$	25,656
Reduction to right of use assets and liabilities	$	(1,695)	$	—
Non-Cash Investing Activity:
Net working capital adjustment	$	1,440	$	—
Accrued capital expenditures	$	74	$	1,108

(1) Net income excludes net income attributable to noncontrolling interest-redeemable of $3.5 million and $9.6 million during the three and six months ended June 30, 2020. 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 to Condensed Consolidated Financial Statements.

~~LHC GROUP, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Amounts in thousands) (Unaudited)~~

Six Months Ended
June 30,
2021 2020
Operating activities:
Net income $ 88,186 $ 85,477
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 9,541 10,385
Amortization of operating lease right of use asset 17,995 17,090
Stock-based compensation expense 7,506 6,943
Deferred income taxes 19,489 10,461
Loss on disposal of assets 19 154
Impairment of intangibles and other 937 600
Changes in operating assets and liabilities, net of acquisitions:
Receivables (25,649) (38,186)
Prepaid expenses (4,484) (2,436)
Other assets 6,170 (4,169)
Prepaid income taxes (13,739) 3,322
Accounts payable and accrued expenses (9,148) (16,354)
Salaries, wages, and benefits payable (4,560) 3,850
Government stimulus advance 0 44,273
Contract liabilities - deferred revenue (65,026) 310,712
Other long term liabilities 0 17,818
Operating lease liabilities (17,962) (16,876)
Income taxes payable (21,042) 2,506
Net amounts due to/from governmental entities (57) 306
Net cash provided by (used in) operating activities (11,824) 435,876
Investing activities:
Purchases of property, building and equipment (15,619) (40,944)
Proceeds from sale of property, building and equipment 150 7,142
Cash received (paid) for acquisitions (649) 3,125
Proceeds from sale of an entity 1,531 0
Minority interest investments (10,100) 0
Net cash used in investing activities (24,687) (30,677)
Financing activities:
Proceeds from line of credit 0 256,230
Payments on line of credit (20,000) (479,230)
Government stimulus advance (93,257) 0
Proceeds from employee stock purchase plan 1,222 1,107
Noncontrolling interest distributions (13,332) (10,267)
Withholding taxes paid on stock-based compensation (10,754) (8,602)
Purchase of additional controlling interest (2,113) (23,575)
Exercise of vested awards and stock options 0 218
Sale of noncontrolling interest 284 0
Net cash used in financing activities (137,950) (264,119)
Change in cash (174,461) 141,080
Cash at beginning of period 286,569 31,672
Cash at end of period $ 112,108 $ 172,752
Supplemental disclosures of cash flow information:
Interest paid $ 1,322 $ 4,083
Income taxes paid $ 38,103 $ 2,375
Non-Cash Operating Activity:
Operating right of use assets in exchange for lease obligations $ 25,656 $ 18,690
Non-Cash Investing Activity:
Accrued capital expenditures $ 1,108 $ 2,348
~~See accompanying Notes to Condensed Consolidated Financial Statements.~~

Table of Contents

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 5 segments: home health, hospice, home and community-based services, facility-based services, the latter primarily through long-term acute care hospitals (“LTACHs”), and healthcare innovations services ("HCI").

As of June 30, ~~2021,~~2022, the Company, through its wholly- and majority-owned subsidiaries, equity joint ventures, controlled affiliates, and management agreements operated ~~833~~953 service locations in 3537 states within the continental United States and the District of Columbia.

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. The consummation of the Merger, which is subject to customary conditions set forth in the Merger Agreement, is expected to occur during the second half of 2022.

COVID-19 Update

SARS-CoV-2 ("COVID-19") continues to ~~spread~~cause disruption in the economy, in terms of increased costs and ~~various responses related to stay-at-home restrictions, travel restrictions, and other public health and safety measures~~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 ~~evolve. We communicate with our clinicians and other employees all updated policies and procedures as we monitor changes related~~see periodic increases in the number of cases due to the ~~pandemic. Policies and procedures related to social distancing and cleaning procedures remain in place as the safety~~spread of ~~our patients and employees are vital.~~COVID-19 variants. The effects of COVID-19 continue to materially impact our business. As a result, operating results for the three and six months ended June 30, ~~2021~~2022 may not be indicative of the results that may be expected for the year ending December 31, ~~2021,~~2022, and operating results for the three and six months ended June 30, ~~2021~~2022 may not be directly comparable to operating results for the three and six months ended June 30, ~~2020~~.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 was passed to provide $100 billion of Provider Relief Funds for distribution to eligible providers who provided diagnoses, testing, or care for individuals with a possible or actual case of COVID-19, specifically to reimburse providers for health care related expenses related to the prevention of the spread of COVID-19, preparations for treating cases of COVID-19 positive patients, and for lost revenues attributable to COVID-19. 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 beginning July ~~7, 2021,~~1, 2022 had a 2% sequestration adjustment. On July 15, 2022, the U.S. Department of Health and Human Services extended the PHE until October ~~17, 2021.~~

~~Provider Relief Fund~~

During the twelve months ended December 31, 2020, the Company received $93.3 million in payments from the Provider Relief Fund, which was recorded as a short-term liability in government stimulus advance in our condensed consolidated balance sheets. The Company recognized $44.4 million of these funds during the six months ended June 30, 2020, which was recorded in government stimulus income in our condensed consolidated statements of income. The amount recognized of $44.4 million was subsequently reversed during the third quarter of 2020, such that the Company recognized no income from the Provider Relief Fund. The Company returned all Provider Relief Funds received of $93.3 million to the government du~~ring the six months ended June 30, 2021.~~13, 2022.

CAAP

As of December 31, ~~2020,~~2021, the Company had ~~$318.0~~$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

~~Table of Contents~~

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

Table of Contents

Company. During the six months ended June 30, ~~2021, $65.0~~2022, $98.3 million was recouped by CMS and ~~$252.9~~$8.2 million of contract liabilities - deferred revenue remains on our condensed consolidated balance sheets as of June 30, ~~2021.~~2022.

If any amount of CAAP funds that we received from CMS remain unpaid after the initial 11 month period, CMS ~~will recoup~~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.

Other

~~During the three and six months ended June 30, 2~~
~~021, the~~

The Company recognized ~~$6.4 million and $12.9 million~~the following amounts of net service revenue ~~respectively,~~ due to the suspension of the 2% sequestration payment ~~adjustment.~~ ~~During the three~~adjustment and ~~six months ended June 30, 2021, the Company recognized $6.9 million and $12.5 million of net service revenue, respectively, due to the~~ suspension of LTACH site-neutral ~~payments.~~ payments (amounts in thousands):


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Suspension of 2% sequestration payment adjustment	$	3,441	$	6,414	$	9,952	$	12,854
Suspension of LTACH site-neutral payment	5,607		6,890		12,154		12,481

As of June 30, ~~2021,~~2022, the Company deferred ~~$51.8~~$26.8 million of employer social security taxes, ~~$25.9 million of~~ which was recorded in current liabilities - deferred employer payroll tax ~~and $25.9 million of which was recorded in other long term liabilities~~ on our condensed consolidated balance sheets.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated balance sheets as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the related unaudited condensed consolidated statements of income for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the unaudited condensed consolidated statements of ~~changes in~~stockholders' equity for the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the unaudited condensed consolidated statements of cash flows for the six months ended June 30, ~~2021~~2022 and ~~2020,~~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 six months ended June 30, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~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, ~~2020~~2021 (the ~~"2020~~"2021 Form 10-K")~~. The 2020 Form 10-K~~, which was filed with the Securities and Exchange Commission (the “SEC”) on February ~~26,~~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~~

~~The Company’s most critical accounting policies relate to revenue recognition.~~

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

Table of Contents

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 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 performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. The Company's unsatisfied or partially unsatisfied performance obligations are primarily completed when the patients are discharged and typically occur within days or weeks of the end of the period.

The Company determines the transaction price based on gross charges for services provided, reduced by estimates for explicit and 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 estimate of the transaction price are recorded as adjustments to net service revenue in the period of change. Subsequent changes that are determined to be the result of an adverse change in the patient's ability to pay (i.e., change in credit risk) are recorded as a provision for 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 verification of the patient's insurance coverage under Medicare, Medicaid, and other commercial or managed care insurance 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 claim appeals and adjudication process. Revenue is recorded at amounts estimated to be realizable for services provided.

The following table sets forth the percentage of net service revenue earned by category of payor for the three and six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Table of Contents


		Three Months Ended June 30,				Six Months Ended June 30,					Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Home health:	Home health:									Home health:
Medicare	Medicare	62.2	%	66.4	%	63.1	%	67.3	%	Medicare	58.9	%	62.2	%	59.3	%	63.1	%
Managed Care, Commercial, and Other	Managed Care, Commercial, and Other	37.8		33.6		36.9		32.7		Managed Care, Commercial, and Other	41.1		37.8		40.7		36.9
		100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%
Hospice:	Hospice:									Hospice:
Medicare	Medicare	93.8	%	92.9	%	94.0	%	92.4	%	Medicare	92.8	%	93.8	%	92.9	%	94.0	%
Managed Care, Commercial, and Other	Managed Care, Commercial, and Other	6.2		7.1		6.0		7.6		Managed Care, Commercial, and Other	7.2		6.2		7.1		6.0
		100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%
Home and community-based services:	Home and community-based services:									Home and community-based services:
Medicaid	Medicaid	32.1	%	20.9	%	30.7	%	20.7	%	Medicaid	35.5	%	32.1	%	36.0	%	30.7	%
Managed Care, Commercial, and Other	Managed Care, Commercial, and Other	67.9		79.1		69.3		79.3		Managed Care, Commercial, and Other	64.5		67.9		64.0		69.3
		100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%
Facility-based services:	Facility-based services:									Facility-based services:
Medicare	Medicare	50.1	%	56.6	%	51.4	%	55.8	%	Medicare	53.6	%	50.1	%	53.0	%	51.4	%
Managed Care, Commercial, and Other	Managed Care, Commercial, and Other	49.9		43.4		48.6		44.2		Managed Care, Commercial, and Other	46.4		49.9		47.0		48.6
		100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%
HCI:	HCI:									HCI:
Medicare	Medicare	17.8	%	30.7	%	19.5	%	27.3	%	Medicare	11.1	%	17.8	%	10.4	%	19.5	%
Managed Care, Commercial, and Other	Managed Care, Commercial, and Other	82.2		69.3		80.5		72.7		Managed Care, Commercial, and Other	88.9		82.2		89.6		80.5
		100.0	%	100.0	%	100.0	%	100.0	%		100.0	%	100.0	%	100.0	%	100.0	%

Medicare

The following describes the payment models in effect during the six months ended June 30, ~~2021.~~2022. Such payment models ~~have been~~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 ~~that began May~~through March 31, 2022. Medicare patient claims with dates of service between April 1 ~~2020~~ through ~~December 31, 2021.~~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 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 432 home health resource groups prior to receiving services. Each 30-day period is placed into a subgroup falling under the following categories: (i) timing being early or late, (ii) admission source being community or institutional, (iii) one of 12 clinical groupings based on the patient's principal diagnosis, (iv) functional impairment level of low, medium, or high, and (v) a co-morbidity adjustment of none, low, or high based on the patient's secondary diagnoses.

Each 30-day period payment from Medicare reflects base payment adjustments for case-mix and geographic wage differences. In addition, payments may reflect one of ~~three~~3 retroactive adjustments to the total reimbursement: (a) an outlier payment if the patient’s care was unusually costly; (b) a low utilization adjustment whereby the number of visits 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. The retroactive adjustments outlined above are recognized in net service revenue when 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

The Company records revenue based upon the date of service at amounts equal to the estimated payment rates. The Company receives 1 of 4 predetermined daily rates based upon the level of care provided by the Company, which can be routine care, general inpatient care, continuous home care, and respite care. There are ~~two~~2 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

Table of Contents

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.

~~Table of Contents~~

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 estimates the impact of these adjustments based on 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 their total Medicare reimbursement from inpatient care services, and the overall Medicare payment cap relates to individual programs receiving reimbursements in excess of a “cap amount,” determined by Medicare to be payment equal to 12 months of hospice care for the aggregate base of hospice patients, indexed for inflation. The determination for each cap is made annually based on the 12-month period ending on 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, if any, in the reporting period.

Facility-Based Services

Gross revenue is 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 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. Net service revenue adjustments resulting from reviews and audits of Medicare cost report settlements are considered implicit price concessions for LTACHs and are measured at expected value.

Non-Medicare Revenues

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

Patient Accounts Receivable

The Company reports patient accounts receivable from services rendered at their estimated transaction price, which includes price concessions based on the amounts expected from payors. The Company's patient accounts receivable is uncollateralized and primarily consist of amounts due from Medicare, Medicaid, other third-party payors, and to a lesser degree patients. The credit risk from other payors is limited due to the significance of Medicare as the primary payor. The Company believes the credit risk associated with its Medicare accounts is limited due to (i) the historical collection rate from Medicare and (ii) the fact that Medicare is a U.S. government payor. The Company does not believe that there are any other significant concentrations from any particular payor that would subject it to any significant credit risk in the collection of patient accounts receivable.

Earnings Per Share

Table of Contents

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

~~Table of Contents~~

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 and, with respect to the data provided for the three and six months ended June ~~30,~~31, 2022 and 2021 ~~and 2020~~ (amounts in thousands):

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Weighted average number of shares outstanding for basic per share calculation 31,225 31,104 31,188 31,060
Effect of dilutive potential shares:
Nonvested stock 205 220 235 241
Adjusted weighted average shares for diluted per share calculation 31,430 31,324 31,423 31,301
Anti-dilutive shares 0 5 119 122

~~Assets Held for Sale~~

As of June 30, 2021, the Company's assets held for sale was $1.9 million, which consisted of 1 hospice facility in Knoxville, Tennessee. The sale of the property is expected to close during the latter part of 2021.


	Three months ended June 30,		Six months ended June 30,
	2022	2021	2022	2021
Weighted average number of shares outstanding for basic per share calculation	30,543	31,225	30,508	31,188
Effect of dilutive potential shares:
Nonvested stock	133	205	115	235
Adjusted weighted average shares for diluted per share calculation	30,676	31,430	30,623	31,423
Anti-dilutive shares	91	—	281	119

Investments

During the six months ended June 30, 2022, the Company invested $15.0 million and became a minority owner in a post-acute management services company. During the six months ended June 30, 2021, the Company invested $10.0 million and became a minority owner in a healthcare analytics company and invested $0.1 million in Jumpstart Nova Fund, ~~LP, which was~~LP. These investments are recorded in other assets in our condensed consolidated balance sheets. These investments were accounted for under the cost method of accounting as the Company does not have the ability to exercise significant influence in connection with its minority ownership positions.

~~Recently Adopted Accounting Pronouncements~~3. Acquisitions

~~In December 2019,~~On September 1, 2021, the ~~FASB issued ASU 2019-12, Simplifications~~Company purchased Heart of Hospice. During the six months ended June 30, 2022, the Company recorded a decrease in patient accounts receivable of $1.5 million due to ~~accounting for income taxes, which removes certain exceptions~~information obtained that related to facts and circumstances that existed at the time of acquisition; therefore, it was an adjustment to the ~~general principles of Topic 740 and adds guidance to reduce complexity in accounting for income taxes. The~~provisional amounts previously recognized.

On November 1, 2021, the Company ~~adopted~~purchased Brookdale Health Care Services' agencies from the ~~new guidance effective January 1, 2021. The adoption of the new guidance did not have a material impact to the Company.~~

~~Recently Issued Accounting Pronouncements~~

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. The pronouncement is effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022. The Company is currently evaluating the impact of this standard on the Company's consolidated financial statements.

~~3. Acquisitions, Divestiture and Joint Venture Activities~~

~~Acquisitions~~

~~The Company acquired the majority-ownership of 1~~recently formed home health, ~~agency~~hospice, and ~~1 home~~outpatient therapy venture between HCA Healthcare and ~~community-based agency~~Brookdale Senior Living. The Company's net working capital adjustment was finalized during the six months ended June 30, ~~2021. The total aggregate purchase price~~2022 for ~~these transactions~~$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 ~~$0.7~~reduced by $3.2 million to reflect payments made for prior years' hospice cap liability.

On May 1, 2022, the Company purchased the majority ownership of a home health agency from Archbold Medical Center, which included 2 locations in Georgia. Total consideration for the acquisition was $3.7 million. The purchase ~~prices were~~price was determined based on the Company's analysis of comparable acquisitions and the target 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 preliminary amounts of the assets acquired and liabilities assumed at their acquisition ~~dates,~~date, as well as their fair value at the acquisition ~~dates~~date and the noncontrolling interest acquired during the six months ended June 30, ~~2021~~2022 (amounts in thousands):

Table of Contents

~~(amounts in thousands):~~


Consideration
Cash	$	2,570
Fair value of total consideration transferred
Recognized amounts of identifiable assets acquired and liabilities assumed:
Trade ~~names~~name	$	26453
Certificates of need/licenses	~~129~~ 357
Other ~~assets and (liabilities), net~~liabilities	9(227)
Total identifiable assets and liabilities	$	~~164~~583

Noncontrolling interest	$	~~113~~707
Goodwill, including noncontrolling interest of ~~$78~~$504	$	~~599~~2,694

Trade names and 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 place, the licenses are valued using the multi-period excess earnings method. Noncontrolling interest is recorded at fair value.

~~Divestiture~~

During the six months ended June 30, 2021, the Company sold its controlling membership interests in a home health agency previously operated as an equity joint venture and sold its pharmacy location which was wholly-owned. The total consideration for these controlling interest sales was $1.5 million and resulted in a loss of $0.1 million, which was accounted for as a loss on the sale of entities and recorded in general and administrative expenses.

~~Joint Venture Activities~~

During the six months ended June 30, 2021, the Company purchased the noncontrolling membership interest in 4 of our equity joint venture partnerships, whereby the agencies became wholly-owned subsidiaries of the Company. The total consideration for these noncontrolling interest purchases was $2.1 million. The transactions were accounted for as equity transactions.

During the six months ended June 30, 2021, the Company sold noncontrolling membership interest in a home health agency previously operated as an equity joint venture. The total consideration for this noncontrolling interest sale was $0.3 million. The transactions were accounted for as equity transactions.

4. Goodwill and Intangibles

The changes in recorded goodwill and intangible assets by reporting unit for the six months ended June 30, ~~2021~~2022 were as follows (amounts in thousands):

~~Table of Contents~~


		Home health reporting unit		Hospice reporting unit		Home and community-based services reporting unit		Facility-based reporting unit		HCI reporting unit		Total			Home health reporting unit		Hospice reporting unit		Home and community-based services reporting unit		Facility-based reporting unit		HCI reporting unit		Total
Goodwill:	Goodwill:													Goodwill:
Balance as of December 31, 2020		$	884,000	$	151,742	$	166,773	$	15,770	$	40,862	$	1,259,147
Balance as of December 31, 2021														Balance as of December 31, 2021	$	968,435	$	556,332	$	167,027	$	15,770	$	40,862	$	1,748,426
Net working capital adjustments														Net working capital adjustments	—		1,440		—		—		—		1,440
Acquisitions	Acquisitions	267		0		254		0		0		521		Acquisitions	2,190		—		—		—		—		2,190
Noncontrolling interests	Noncontrolling interests	78		0		0		0		0		78		Noncontrolling interests	504		—		—		—		—		504
Disposals	Disposals	(20)		0		0		0		0		(20)		Disposals	(440)		(690)		—		—		—		(1,130)
Balance as of June 30, 2021		$	884,325	$	151,742	$	167,027	$	15,770	$	40,862	$	1,259,726
Balance as of June 30, 2022														Balance as of June 30, 2022	$	970,689	$	557,082	$	167,027	$	15,770	$	40,862	$	1,751,430
Intangible assets:	Intangible assets:													Intangible assets:
Balance as of December 31, 2020		$	226,004	$	44,732	$	24,208	$	5,311	$	15,100	$	315,355
Balance as of December 31, 2021														Balance as of December 31, 2021	$	237,979	$	117,340	$	24,245	$	5,919	$	14,519	$	400,002
Acquisitions	Acquisitions	118		0		46		0		0		164		Acquisitions	810		—		—		—		—		810
Amortization	Amortization	(232)		(72)		(4)		(4)		(290)		(602)		Amortization	(1,193)		(985)		(6)		(275)		(291)		(2,750)
Disposals	Disposals	(1,279)		0		0		0		0		(1,279)		Disposals	(490)		(397)		(54)		—		—		(941)
Balance as of June 30, 2021		$	224,611	$	44,660	$	24,250	$	5,307	$	14,810	$	313,638
Balance as of June 30, 2022														Balance as of June 30, 2022	$	237,106	$	115,958	$	24,185	$	5,644	$	14,228	$	397,121

The Company did record impairments of goodwill and intangible assets related to the closure of underperforming locations. Goodwill impairment of $1.1 million and Medicare licenses impairment of $0.9 million was recorded during the six months ended June 30, 2022. Goodwill impairment of $0.02 million and Medicare licenses impairment of $0.9 million was recorded during the six months ended June 30, 2021. This was recorded in impairment of intangibles and other on the ~~company's~~Company's condensed consolidated statements of income. The amount of disposal of goodwill was determined using prices of comparable businesses in the ~~market and the~~market. The amount of disposal of the Medicare licenses was its carrying value at the time of closure. ~~In addition, the Company divested a certificate~~

Table of ~~need of $0.4 million, which was accounted for as a loss on the sale of an entity and recorded in general and administrative expenses.~~Contents

The following tables summarize the changes in intangible assets during the six months ended June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (amounts in thousands):

~~Table of Contents~~


		2021		2020			2022		2021
Indefinite-lived intangible assets:	Indefinite-lived intangible assets:					Indefinite-lived intangible assets:
Trade names	Trade names	$	168,700	$	168,700	Trade names	$	208,233	$	207,780
Certificates of Need/Licenses		133,863		135,013
Certificates of need/licenses						Certificates of need/licenses	173,371		173,955
Net total	Net total	$	302,563	$	303,713	Net total	$	381,604	$	381,735

Definite-lived intangible assets:	Definite-lived intangible assets:					Definite-lived intangible assets:
Trade names	Trade names					Trade names
Gross carrying amount	Gross carrying amount	$	10,238	$	10,212	Gross carrying amount	$	11,073	$	11,073
Accumulated amortization	Accumulated amortization	(9,543)		(9,480)		Accumulated amortization	(10,410)		(9,606)
Net total	Net total	$	695	$	732	Net total	$	663	$	1,467
Non-compete agreements	Non-compete agreements					Non-compete agreements
Gross carrying amount	Gross carrying amount	$	7,276	$	7,267	Gross carrying amount	$	14,524	$	14,524
Accumulated amortization	Accumulated amortization	(6,634)		(6,387)		Accumulated amortization	(8,828)		(7,172)
Net total	Net total	$	642	$	880	Net total	$	5,696	$	7,352
Customer relationships	Customer relationships					Customer relationships
Gross carrying amount	Gross carrying amount	$	11,822	$	11,822	Gross carrying amount	$	11,822	$	11,822
Accumulated amortization	Accumulated amortization	(2,084)		(1,792)		Accumulated amortization	(2,664)		(2,374)
Net total	Net total	$	9,738	$	10,030	Net total	$	9,158	$	9,448
Total definite-lived intangible assets	Total definite-lived intangible assets					Total definite-lived intangible assets
Gross carrying amount	Gross carrying amount	$	29,336	$	29,301	Gross carrying amount	$	37,419	$	37,419
Accumulated amortization	Accumulated amortization	(18,261)		(17,659)		Accumulated amortization	(21,902)		(19,152)
Net total	Net total	$	11,075	$	11,642	Net total	$	15,517	$	18,267

Total intangible assets:	Total intangible assets:					Total intangible assets:
Gross carrying amount	Gross carrying amount	$	331,899	$	333,014	Gross carrying amount	$	419,023	$	419,154
Accumulated amortization	Accumulated amortization	(18,261)		(17,659)		Accumulated amortization	(21,902)		(19,152)
Net total	Net total	$	313,638	$	315,355	Net total	$	397,121	$	400,002

Remaining useful lives for trade names, customer relationships, and non-compete ~~agreemen~~tsagreements were ~~8.3, 16.8,~~7.3, 15.8, and ~~2.8~~4.4 years, respectively, at June 30, ~~2021.~~2022. Similar periods at December 31, ~~2020~~2021 were ~~8.8, 17.3,~~7.8, 16.3, and ~~2.9~~4.9 years for trade names, customer relationships, and non-compete agreements, respectively. Amortization expense was ~~$0.3~~$1.1 million forand $0.3 million for the three months ended June 30, 2022 and 2021 and ~~2020~~$2.8 million and $0.6 million for the six months ended June 30, ~~2021~~2022 and ~~2020.~~2021. Amortization expense was recorded in general and administrative expenses.

5. Debt

Credit Facility

On ~~March 30, 2018,~~August 3, 2021, the Company entered into aan Amended and Restated Senior Credit ~~Agreement with JPMorgan Chase Bank, N.A.~~Facility (the "2021 Amended Credit Agreement"), which ~~was effective on April 2, 2018 (the "Credit Agreement"). The Credit Agreement provides~~provided a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of ~~$500.0~~$800.0 million, which ~~includes~~included an additional ~~$200.0~~$500.0 million accordion expansion, ~~feature,~~ and a letter of credit sub-limit equal to ~~$50.0~~$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 ~~March 30, 2023.~~ 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

Table of Contents

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 (i) the prevailing London Interbank Offered Rate ("LIBOR") (with interest periods of one, three or six months at the Company's option) plus a ~~(a) Base Rate, which is defined as a fluctuating rate per annum equal~~spread of 1.25% to 2.0% based on the ~~highest of (1)~~Company's quarterly consolidated Leverage Ratio or (ii) the ~~Federal Funds Rate in effect on such day plus 0.5% (2) the Prime Rate in effect on such day and (3) the Eurodollar Rate for a one month interest period on such day plus 1.5%, plus~~

~~Table of Contents~~

~~a margin ranging from 0.50% to 1.25% per annum~~prevailing prime or ~~(b) Eurodollar~~base rate plus a ~~margin ranging from 1.50%~~spread of 0.25% to ~~2.25% per annum, with pricing varying~~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 any time. The Company is required to pay a commitment fee for the unused commitments at rates ranging from ~~0.20%~~0.15% to ~~0.35%~~0.30% per annum depending upon the Company’s quarterly consolidated Leverage Ratio. The Base Rate as of June 30, ~~2021~~2022 was ~~4.50%~~5.75% and the LIBOR rate was ~~1.88%~~3.39%. As of June 30, 2022, the effective interest rate on outstanding borrowings under the 2021 Amended Credit Agreement was 3.24%.

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 ~~announcement did not identify any successor administrator.~~CSA used by JPMorgan Chase Bank, N.A. is based on the average of the differences between LIBOR and SOFR over a 12-month period and will be added to SOFR.

As of June 30, ~~2021,~~2022, the Company had $759.0 million drawn, letters of credit issued in the amount of ~~$25.4~~$24.3 million, and ~~$474.6~~$216.7 million of remaining borrowing capacity available under the 2021 Amended Credit Agreement. At December 31, ~~2020,~~2021, the Company had ~~$20.0~~$661.2 million drawn and letters of credit issued in the amount of ~~$25.4~~$24.3 million under the 2021 Amended Credit ~~Facility.~~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 stock, within certain parameters, provided the Company maintains compliance with 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 June 30, ~~2021.~~2022.

6. Stockholder’s Equity

Equity Based Awards

The 2018 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors. The total number of shares of the Company's common stock originally reserved were 2,210,544 shares and a total of ~~1,754,464~~1,544,799 shares are currently available for issuance. A variety of discretionary awards for employees, officers, directors, and consultants are authorized under the 2018 Incentive Plan, including incentive or non-qualified stock options and 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 stock 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 six months ended June 30, 2021, the Company~~Independent directors are granted ~~7,200 nonvested~~ shares of common stock ~~to independent directors~~ under the Second Amended and Restated 2005 Non-Employee Directors Compensation Plan. ~~The~~During the six months ended June 30, 2022, the Company granted 8,800 nonvested shares of common stock to independent directors, which shares will vest 100% on the one year anniversary date.

During the six months ended June 30, ~~2021,~~2022, employees and a consultant were granted ~~105,800~~182,245 and ~~5,735~~10,935 shares, respectively, of nonvested shares of common stock pursuant to the 2018 Incentive Plan. The shares vest over a period of five years, conditioned on continued 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 following table represents the share grants activity for the six months ended June 30, ~~2021:~~2022:

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, 2020 469,631 $ 89.69 74,235 $ 42.07
Granted 118,735 185.05 0 0
Vested or exercised (163,978) 186.82 0 0
Share grants outstanding as of June 30, 2021 424,388 $ 120.11 74,235 $ 42.07

Table of Contents


	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	201,980	139.64		—	—
Vested or exercised	(140,207)	104.63		(5,124)	28.77
Share grants outstanding as of June 30, 2022	477,589	$	134.50	69,111	$	41.73

As of June 30, ~~2021,~~2022, there was ~~$44.1~~$55.6 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 ~~3.18~~3.41 years. 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 basis for shares of common stock that vest over time. The Company estimates forfeitures at the time of grant and revises the estimate in subsequent periods if actual forfeitures differ to ensure that

~~Table of Contents~~

total compensation expense recognized is at least equal to the value of vested awards. The Company recorded ~~$7.5~~$9.3 million and ~~$6.9~~$7.5 million of compensation expense related to nonvested stock grants for the six months ended June 30, ~~2021~~2022 and ~~2020,~~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 ~~2021:~~2022:

Number of
shares Per share
price
Shares available as of December 31, 2020 118,136
Shares issued during the three months ended March 31, 2021 3,204 $ 202.66
Shares issued during the three months ended June 30, 2021 3,152 $ 181.65
Shares available as of June 30, 2021 111,780


	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 available as of June 30, 2022	95,649

Treasury Stock

In conjunction with the vesting of the nonvested shares of common stock or the exercise of stock options, recipients incur personal income tax obligations. The Company allows the recipients to turn in shares of common stock to satisfy minimum tax obligations. During the six months ended June 30, ~~2021,~~2022, the Company redeemed ~~57,245~~25,555 shares of common stock valued at ~~$10.8~~$4.1 million, related to share vesting tax obligations. Such shares are held as treasury stock and are available for reissuance by the Company. Additionally, 2,611 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 2,319 shares of common stock valued at $0.1 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 six months ended June 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.

Table of Contents

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. These audits and investigations have caused and could potentially continue to cause delays in collections, recoupments from governmental payors. ~~Currently, the~~The Company ~~has~~ recorded $12.0 million and $16.9 million in its condensed consolidated balance sheets in other assets as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, which are due from government payors 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.

We are involved in various legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, we believe the outcome of pending litigation will not have a material adverse effect, after considering the effect of our insurance coverage, on 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

~~Table of Contents~~

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 interests

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 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

Table of Contents

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 ventures that 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, which are defined as 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 redeemable equity joint venture, since the triggering of a repurchase obligation for any one redeemable noncontrolling interest in an equity joint venture does not 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 based upon a valuation methodology set forth in the applicable joint venture agreement.

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 June 30, ~~2021,~~2022, the Company 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 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

~~Table of Contents~~

income (loss) of the joint venture’s operations, (b) dividends paid to the noncontrolling interest partner, and (c) any other transactions that increase or decrease the Company’s ownership interest in each joint venture, as a result of which the Company retains its controlling interest. If the 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 redeemable noncontrolling 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 six months ended June 30, ~~2021~~2022 is not less than the initial amount reported for each instrument.

The following table summarizes the activity of noncontrolling interest-redeemable for the six months ended June 30, ~~2021~~2022 (amounts in thousands):


Balance as of December 31, ~~2020~~2021	$	~~18,921~~17,501
Net income attributable to noncontrolling interest-redeemable	~~6,183~~4,999
Noncontrolling interest-redeemable distributions	~~(6,255)~~(5,290)
~~Acquired noncontrolling interest-redeemable~~	~~113~~
~~Purchase of controlling interest~~	~~(373)~~
Balance as of June 30, ~~2021~~2022	$	~~18,589~~17,210

9. Leases

The Company determines if a contract contains a lease at inception date. The Company's leases are operating leases, primarily for 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.

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

Table of Contents

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 June 30, ~~2021,~~2022, the weighted-average remaining lease term was ~~4.09~~3.74 years and weighted-average discount rate was ~~4.33%~~4.13%.

The following table summarizes the operating lease right of use assets and related lease payables in our condensed consolidated balance sheets atas of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (amounts in thousands):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Operating lease right of use asset	Operating lease right of use asset	$	105,201	$	100,046	Operating lease right of use asset	$	109,925	$	113,399
Current operating lease liabilities	Current operating lease liabilities	33,081		32,676		Current operating lease liabilities	36,929		37,630
Long-term operating lease liabilities	Long-term operating lease liabilities	74,993		70,275		Long-term operating lease liabilities	75,971		78,688

The components of lease costs for operating leases for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 were as follows (amounts in thousands):

Three months ended June 30, Six months ended June 30,
2021 2020 2021 2020
Operating lease cost $ 12,091 $ 11,599 $ 24,281 $ 22,946
Short-term lease cost 914 730 1,770 1,490
Variable lease cost 1,071 888 2,084 1,870
Total lease costs $ 14,076 $ 13,217 $ 28,135 $ 26,306

~~Table of Contents~~


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Operating lease cost	$	14,420	$	12,091	$	28,767	$	24,281
Short-term lease cost	874		914		1,803		1,770
Variable lease cost	1,283		1,071		2,104		2,084
Total lease costs	$	16,577	$	14,076	$	32,674	$	28,135

Maturities of operating lease liabilities as of June 30, ~~2021~~2022 were as follows (amounts in thousands):


Month ending June 30,	Month ending June 30,			Month ending June 30,
2021		$	19,441
2022	2022	33,088		2022	$	21,552
2023	2023	25,036		2023	35,912
2024	2024	17,196		2024	26,911
2025				2025	18,879
Thereafter	Thereafter	22,995		Thereafter	18,435
Total future minimum lease payments	Total future minimum lease payments	117,756		Total future minimum lease payments	121,689
Less: Imputed interest	Less: Imputed interest	(9,682)		Less: Imputed interest	(8,789)
Total	Total	$	108,074	Total	$	112,900

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.

11. Segment Information

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

Table of ~~the segments are the same as those described in the summary of significant accounting policies, as described in Note 2 of the Notes to Condensed Consolidated Financial Statements.~~Contents

Reportable segments have been identified based upon how management has organized the business by services provided to customers and how the chief operating decision maker manages the business and allocates resources, consistent with the criteria in ASC 280, Segment Reporting.

The following tables summarize the Company’s segment information for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (amounts in thousands):


	Three months ended June 30, 2022
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	392,782	$	102,617	$	44,718	$	30,709	$	5,367	$	576,193
Cost of service revenue (excluding depreciation and amortization)	228,511		67,848		31,788		22,830		2,956		353,933
General and administrative expenses	134,623		33,423		12,444		12,211		3,689		196,390
Impairment of intangibles and other	481		361		—		—		—		842
Operating income (loss)	29,167		985		486		(4,332)		(1,278)		25,028
Interest expense	(4,488)		(949)		(564)		(281)		(125)		(6,407)
Income (loss) before income taxes and noncontrolling interest	24,679		36		(78)		(4,613)		(1,403)		18,621
Income tax expense (benefit)	6,565		(160)		(1,413)		(960)		(353)		3,679
Net income (loss)	18,114		196		1,335		(3,653)		(1,050)		14,942
Less net income (loss) attributable to non controlling interests	4,324		888		(34)		(817)		(3)		4,358
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	13,790	$	(692)	$	1,369	$	(2,836)	$	(1,047)	$	10,584
Total assets	$	1,746,161	$	807,100	$	240,481	$	80,617	$	63,515	$	2,937,874


	Three months ended June 30, 2021
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	396,534	$	63,804	$	48,407	$	31,030	$	6,132	$	545,907
Cost of service revenue (excluding depreciation and amortization)	219,925		39,647		34,683		20,460		3,157		317,872
General and administrative expenses	123,245		18,114		11,923		10,906		2,873		167,061
Impairment of intangibles and other	760		—		—		—		—		760

Operating income (loss)	52,604		6,043		1,801		(336)		102		60,214
Interest expense	(106)		(20)		(10)		(5)		(2)		(143)
Income (loss) before income taxes and noncontrolling interest	52,498		6,023		1,791		(341)		100		60,071
Income tax expense (benefit)	11,706		1,280		470		(152)		14		13,318
Net income (loss)	40,792		4,743		1,321		(189)		86		46,753
Less net income (loss) attributable to noncontrolling interests	7,500		1,208		85		322		(5)		9,110
Net income (loss) attributable to LHC Group, Inc.'s common stockholders	$	33,292	$	3,535	$	1,236	$	(511)	$	91	$	37,643
Total assets	$	1,681,871	$	288,985	$	245,071	$	85,520	$	65,678	$	2,367,125

Table of Contents


		Three Months Ended June 30, 2021													Six months ended June 30, 2022
		Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total			Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	Net service revenue	$	396,534	$	63,804	$	48,407	$	31,030	$	6,132	$	545,907	Net service revenue	$	780,674	$	204,523	$	89,058	$	62,848	$	10,585	$	1,147,688
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	219,925		39,647		34,683		20,460		3,157		317,872		Cost of service revenue (excluding depreciation and amortization)	456,718		133,913		60,743		47,035		5,912		704,321
General and administrative expenses	General and administrative expenses	123,245		18,114		11,923		10,906		2,873		167,061		General and administrative expenses	261,430		64,768		23,862		23,639		7,050		380,749
Impairment of intangibles and other	Impairment of intangibles and other	760		0		0		0		0		760		Impairment of intangibles and other	930		1,087		54		—		—		2,071

Operating income (loss)	Operating income (loss)	52,604		6,043		1,801		(336)		102		60,214		Operating income (loss)	61,596		4,755		4,399		(7,826)		(2,377)		60,547
Interest expense	Interest expense	(106)		(20)		(10)		(5)		(2)		(143)		Interest expense	(7,458)		(1,447)		(977)		(489)		(207)		(10,578)
Income (loss) before income taxes and noncontrolling interest	Income (loss) before income taxes and noncontrolling interest	52,498		6,023		1,791		(341)		100		60,071		Income (loss) before income taxes and noncontrolling interest	54,138		3,308		3,422		(8,315)		(2,584)		49,969
Income tax expense (benefit)	Income tax expense (benefit)	11,706		1,280		470		(152)		14		13,318		Income tax expense (benefit)	11,334		436		845		(1,922)		(645)		10,048
Net income (loss)	Net income (loss)	40,792		4,743		1,321		(189)		86		46,753		Net income (loss)	42,804		2,872		2,577		(6,393)		(1,939)		39,921
Less net income (loss) attributable to non controlling interests	Less net income (loss) attributable to non controlling interests	7,500		1,208		85		322		(5)		9,110		Less net income (loss) attributable to non controlling interests	8,920		1,568		51		(646)		(10)		9,883
Net income (loss) attributable to LHC Group, Inc.'s common stockholder	Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	33,292	$	3,535	$	1,236	$	(511)	$	91	$	37,643	Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	33,884	$	1,304	$	2,526	$	(5,747)	$	(1,929)	$	30,038
Total assets		$	1,681,871	$	288,985	$	245,071	$	85,520	$	65,678	$	2,367,125

Three Months Ended June 30, 2020
Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue $ 339,872 $ 61,055 $ 47,675 $ 33,639 $ 5,079 $ 487,320
Cost of service revenue (excluding depreciation and amortization) 205,146 37,271 38,747 21,785 3,763 306,712
General and administrative expenses 110,209 16,266 11,124 10,165 2,810 150,574
Impairment of intangibles and other 0 600 0 0 0 600
Government stimulus income (35,019) (4,731) (2,865) (1,656) (164) (44,435)
Operating income (loss) 59,536 11,649 669 3,345 (1,330) 73,869
Interest expense (594) (97) (79) (47) (24) (841)
Income (loss) before income taxes and noncontrolling interest 58,942 11,552 590 3,298 (1,354) 73,028
Income tax expense (benefit) 12,807 2,439 (12) 373 (380) 15,227
Net income (loss) 46,135 9,113 602 2,925 (974) 57,801
Less net income (loss) attributable to noncontrolling interests 9,922 2,164 33 997 (7) 13,109
Net income (loss) attributable to LHC Group, Inc.'s common stockholders $ 36,213 $ 6,949 $ 569 $ 1,928 $ (967) $ 44,692
Total assets $ 1,656,022 $ 268,771 $ 259,742 $ 101,258 $ 71,306 $ 2,357,099

~~Table of Contents~~

Six Months Ended June 30, 2021
Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue $ 770,362 $ 126,538 $ 97,532 $ 64,399 $ 11,911 $ 1,070,742
Cost of service revenue (excluding depreciation and amortization) 432,298 78,217 69,555 41,635 6,439 628,144
General and administrative expenses 242,642 36,241 23,452 22,163 5,812 330,310
Impairment of intangibles and other 937 0 0 0 0 937
Operating income (loss) 94,485 12,080 4,525 601 (340) 111,351
Interest expense (288) (56) (34) (19) (9) (406)
Income (loss) before income taxes and noncontrolling interest 94,197 12,024 4,491 582 (349) 110,945
Income tax expense (benefit) 19,596 2,347 988 (95) (77) 22,759
Net income (loss) 74,601 9,677 3,503 677 (272) 88,186
Less net income (loss) attributable to non controlling interests 12,349 2,223 364 979 (31) 15,884
Net income (loss) attributable to LHC Group, Inc.'s common stockholder $ 62,252 $ 7,454 $ 3,139 $ (302) $ (241) $ 72,302


		Six Months Ended June 30, 2020													Six months ended June 30, 2021
		Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total			Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	Net service revenue	$	707,693	$	121,586	$	96,139	$	63,320	$	11,453	$	1,000,191	Net service revenue	$	770,362	$	126,538	$	97,532	$	64,399	$	11,911	$	1,070,742
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	425,586		75,305		77,200		42,127		7,696		627,914		Cost of service revenue (excluding depreciation and amortization)	432,298		78,217		69,555		41,635		6,439		628,144
General and administrative expenses	General and administrative expenses	226,232		32,892		22,583		20,545		6,188		308,440		General and administrative expenses	242,642		36,241		23,452		22,163		5,812		330,310
Impairment of intangibles and other	Impairment of intangibles and other	0		600		0		0		0		600		Impairment of intangibles and other	937		—		—		—		—		937
Government stimulus income		(35,019)		(4,731)		(2,865)		(1,656)		(164)		(44,435)
Operating income (loss)	Operating income (loss)	90,894		17,520		(779)		2,304		(2,267)		107,672		Operating income (loss)	94,485		12,080		4,525		601		(340)		111,351
Interest expense	Interest expense	(2,494)		(400)		(345)		(266)		(104)		(3,609)		Interest expense	(288)		(56)		(34)		(19)		(9)		(406)
Income (loss) before income taxes and noncontrolling interest	Income (loss) before income taxes and noncontrolling interest	88,400		17,120		(1,124)		2,038		(2,371)		104,063		Income (loss) before income taxes and noncontrolling interest	94,197		12,024		4,491		582		(349)		110,945
Income tax expense (benefit)	Income tax expense (benefit)	16,096		3,047		(218)		174		(513)		18,586		Income tax expense (benefit)	19,596		2,347		988		(95)		(77)		22,759
Net income (loss)	Net income (loss)	72,304		14,073		(906)		1,864		(1,858)		85,477		Net income (loss)	74,601		9,677		3,503		677		(272)		88,186
Less net income (loss) attributable to noncontrolling interests		14,528		3,131		(122)		1,240		(16)		18,761
Net income (loss) attributable to LHC Group, Inc.'s common stockholders		$	57,776	$	10,942	$	(784)	$	624	$	(1,842)	$	66,716

Less net income (loss) attributable to non controlling interests														Less net income (loss) attributable to non controlling interests	12,349		2,223		364		979		(31)		15,884
Net income (loss) attributable to LHC Group, Inc.'s common stockholder														Net income (loss) attributable to LHC Group, Inc.'s common stockholder	$	62,252	$	7,454	$	3,139	$	(302)	$	(241)	$	72,302

12. Income Taxes

The effective tax rate for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 benefited from ~~$2.2~~$0.5 million and ~~$1.6~~$2.2 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

Table of Contents

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

~~Table of Contents~~

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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company recognized ~~$6.6~~$7.8 million and ~~$6.2~~$7.3 million, respectively, in unrecognized tax benefits.

~~13. Subsequent Events~~

On July 1, 2021, the Company purchased Heart 'n Home Hospice, which included six wholly-owned hospice locations in Idaho and four wholly-owned hospice locations in Oregon. In addition, the Company purchased Casa de la Luz on July 1, 2021, which included one wholly-owned hospice and palliative care location in Arizona. Total consideration for both acquisitions was $96.0 million, which was funded on July 1, 2021.

On August 3, 2021, the Company entered into an Amended and Restated Credit Agreement ("Amended Agreement") with JPMorgan Chase Bank, N.A. The aggregate commitment in the Amended Agreement is $800.0 million, which includes an additional $500.0 million accordion expansion feature, and a letter of credit sub-limit equal to $75.0 million. The expiration date of the Amended Agreement is August 3, 2026.

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 contains certain statements, including 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:

•our expectations regarding financial condition or results of operations for periods after June 30, ~~2021;~~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, 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 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;

~~Table of Contents~~

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

•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;

Table of Contents

•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 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 ~~2020~~2021 Form 10-K, as updated by our subsequent filings with the SEC. This report should be read in conjunction with the ~~2020~~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.

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.

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.

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

Table of Contents

OVERVIEW

General

We provide quality, cost-effective post-acute health care services to our patients. As of June 30, ~~2021,~~2022, we have ~~833~~953 service providers in 3537 states within the continental United States and the District of Columbia. Our services are classified into five segments: (1) home health services, (2) hospice services, (3) home and community-based services, (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 segments that we operate through continued acquisitions, joint ventures, and organic development.

Our home health service locations offer a wide range of services, including skilled nursing, medically-oriented social services, and physical, occupational, and speech therapy. As of June 30, ~~2021,~~2022, we operated ~~531~~543 home health services locations, of which

~~Table of Contents~~

~~319~~ 333 are wholly-owned, ~~208~~206 are majority-owned through equity joint ventures, two are under license lease arrangements, and the operations of the remaining two locations are only managed by us.

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 June 30, ~~2021,~~2022, we operated ~~120~~169 hospice locations, of which 57103 are wholly-owned, 6164 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 June 30, ~~2021,~~2022, we operated ~~133~~135 home and community-based services locations, of which ~~119~~121 are wholly-owned and 14 are majority-owned through equity joint ventures.

We provide facility-based services principally through our LTACHs. As of June 30, ~~2021,~~2022, we operated 11 LTACHs with 12 locations, all but three of which are located within host hospitals. We also operate two skilled nursing facilities, a family health center, atwo rural health ~~clinic, one physician practice,~~clinics, and 1975 therapy clinics. Of these 3692 facility-based services locations, 2581 are wholly-owned, and 11 are majority-owned through equity joint 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 (c) certain assets operated by 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 have 1314 HCI locations, of which 1213 are wholly-owned and one is majority-owned through an equity joint venture.

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 June 30, ~~2021,~~2022, the Joint Commission had accredited ~~522~~523 of ~~our 531~~our 543 home health services locations and ~~110~~111 of our ~~120 hospice~~169 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 six months ended June 30, ~~2021~~2022 and ~~2020~~2021 was as follows:

Three Months Ended June 30, Six Months Ended
June 30,
Reporting segment 2021 2020 2021 2020
Home health services 72.6 % 69.8 % 72.0 % 70.8 %
Hospice services 11.7 12.5 11.8 12.2
Home and community-based services 8.9 9.8 9.1 9.6
Facility-based services 5.7 6.9 6.0 6.3
Healthcare innovations services 1.1 1.0 1.1 1.1
100.0 % 100.0 % 100.0 % 100.0 %

Table of Contents


	Three months ended June 30,				Six months ended June 30,
Reporting segment	2022		2021		2022		2021
Home health services	68.2	%	72.6	%	68.0	%	72.0	%
Hospice services	17.8		11.7		17.8		11.8
Home and community-based services	7.8		8.9		7.8		9.1
Facility-based services	5.3		5.7		5.5		6.0
HCI	0.9		1.1		0.9		1.1
	100.0	%	100.0	%	100.0	%	100.0	%

Recent Developments

The reader is encouraged to review our detailed discussion of health care legislation and Medicare regulations in the similarly titled section in Part II, Item 7, ~~“Management��s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” along with the discussions in Part I, Item 1, “Business; Government Regulation” and in Part I, Item 1A, “Risk Factors” in our ~~2020~~2021 Form 10-K.

Coronavirus and Coronavirus Aid, Relief, and Economic Security Act

~~Table of Contents~~

The following portions of the CARES Act impacted us during the six months ended June 30, ~~2021:~~

•~~Provider Relief Fund: During 2020, we received $93.3 million in payments from the Provider Relief Fund. We returned all funds to the government during the three months ended June 30, 2021.~~2022:

•CAAP: ~~During 2020, we received $318.0~~CMS recouped $98.3 million of ~~accelerated payments under the CAAP,~~CAAP. As of ~~which $65.0 million was recouped by CMS during the three months ended~~ June 30, ~~2021.~~2022, $8.2 million of contract liabilities - deferred revenue remains on our condensed consolidated balance sheets.

•Suspension of the 2% sequestration payment adjustment: CMS suspended the 2% sequestration payment adjustment for patient claims with dates of services from May 1, 2020 through December 31, 2020, which was subsequently amended to continue through December 31, 2021. During the three and six months ended June 30, ~~2021,~~2022, we recognized ~~$6.4~~$3.4 million and ~~$12.9~~$10.0 million ~~respectively,~~ of net service revenue, respectively, due to the suspension of the 2% sequestration payment adjustment.We recognized $6.4 million and $12.9 million of net service revenue, respectively, during the three and six months ended June 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 updated to pay all LTACH cases admitted during the COVID-19 PHE period at the ~~LTACH PPS~~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 six months ended June 30, ~~202~~1,2022, we recognized $5.6 million and $12.2 million of net service revenue, respectively, due to the suspension of LTACH site-neutral payments. We recognized $6.9 million and $12.5 million ~~respectively,~~ of net service revenue, ~~due to~~respectively, during the ~~suspension of site-neutral payments.~~

~~While during the~~three and six months ended June 30, ~~2021~~2021.,

During the three and six months ended June 30, 2022, we did ~~not~~ experience ~~a material disruption~~higher costs related to higher contract labor utilization due to an increase in our ~~ability to continue to provide services to our patients, there~~clinicians being on quarantine from COVID-19 exposure or potential exposure. There is no guarantee that we won’t experience ~~such service disruption~~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 predict the ultimate impact of COVID-19 on our business and operations. Nevertheless, COVID-19 presents a material uncertainty which could materially impact our business and results of operations in the future.

Home Health

On June ~~28, 2021,~~17, 2022, CMS released the proposed rule for fiscal year ~~2022~~2023. The proposed rule states the Medicare base payments would decrease by 4.2%. The decrease reflects the effects of a proposed 2.9% home health payment update, a 6.9% decrease from the effects of the proposed prospective, permanent behavioral assumption adjustment of 7.69%, and 0.2% decrease to ~~update base payment rates by 1.7%, which is based on a 2.4% market basket~~the fixed-dollar loss ratio used in determining outlier payments. The proposed prospective, permanent behavior assumption adjustment ~~reduced by 0.6% productivity adjustment, and reduced by 0.1% decrease in payments due~~ to ~~reductions made in~~ the ~~rural add-on percentages mandated by the Bipartisan Budget Act of 2018. The base 30 day~~home health 30-day period payment rate is ~~increased from $1,901.12~~ to ~~$2,013.43.~~account for any increases or decreases in the aggregate expenditures as a result of the difference between assumed behavior changes and actual behavior changes due to the implementation of the PDGM and 30-day unit of payment. CMS is also proposing a permanent 5% cap on negative wage index changes regardless of the underlying reason for the decrease.

CMS is proposing to require home health agencies to submit all-payer OASIS data for purposes of the Home Health Quality Reporting Program, beginning with the calendar year 2025 program year. For the Expanded Home Health Value-Based Purchasing Model, CMS is proposing to change the Model and home health agencies baseline years.

Hospice

Table of Contents

On July ~~29, 2021,~~27, 2022, CMS released the final rule for fiscal year ~~2022~~2023 to update payment rates and the wage index. The final ~~hospice~~rule states the following:

•A payment ~~update is~~rate increase of 3.8%, which applies a ~~2.0% increase to the payment rates. The final rule will apply a 2.7%~~4.1% market basket update and a ~~0.7~~0.3 percentage point ~~cut~~reduction for productivity. ~~In addition,~~

•Hospice agencies that fail to meet quality reporting requirements will receive a two percentage point reduction to the ~~final rule increases~~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, as compared to $30,683.93~~2022.

•A permanent cap on negative wage index changes greater than a 5% decrease from the prior year, regardless of the underlying reason for ~~fiscal year 2021.~~the decrease.

The following are the final fiscal year 2023 base payment rates for various levels of care, which will begin on October 1, 2022 and will end September 30, 2023 and the final fiscal year 2022 base payment rates for various levels of care, which ~~will begin~~began on October 1, 2021 and will end September 30, 2022 ~~and final fiscal year 2021 base payment rates for various levels of care, which began on October 1, 2020 and will end September 30, 2021~~ (payment rates for hospice providers not complying with the hospice quality reporting requirements will be 2% lower than the values referenced below):


Description	Description	Final Fiscal Year 2022 Rate per patient day		Fiscal Year 2021 Rate per patient day		Description	Final Fiscal Year 2023 Rate per patient day		Fiscal Year 2022 Rate per patient day
Routine Home Care days 1-60	Routine Home Care days 1-60	$	203.40	$	199.25	Routine Home Care days 1-60	$	211.34	$	203.40
Routine Home Care days 60+	Routine Home Care days 60+	$	160.74	$	157.49	Routine Home Care days 60+	$	167.00	$	160.74
Continuous Home Care	Continuous Home Care	$	1,462.52	$	1,432.41	Continuous Home Care	$	1,522.04	$	1,462.52
Full rate = 24 hours of care	Full rate = 24 hours of care					Full rate = 24 hours of care
$59.68 = hourly rate for 2021 $60.94 = hourly rate for 2022
$60.94 = hourly rate for 2022 $63.42 = hourly rate for 2023						$60.94 = hourly rate for 2022 $63.42 = hourly rate for 2023
Inpatient Respite Care	Inpatient Respite Care	$	473.75	$	461.09	Inpatient Respite Care	$	492.10	$	473.75
General Inpatient Care	General Inpatient Care	$	1,068.28	$	1,045.66	General Inpatient Care	$	1,110.76	$	1,068.28

Facility-based

On April 18, 2022, CMS issued a proposed rule for the fiscal year 2023 Long-Term Care Hospital Prospective Payment System. CMS proposed to update payments by a net 0.7%, which includes a 3.1% market basket update that would be offset by a statutorily mandated cut of 0.4% for productivity, a 1.7% for high-cost outlier payments and other adjustments.

Table of Contents

On August 2, 2021, CMS issued a final rule for the fiscal year 2022 Long-Term Care Hospital Prospective Payment System ("LTACH-PPS"), which described that LTACH-PPS payments for fiscal year 2022 will increase by 1.1%. LTACH-PPS payments for fiscal year 2022 for discharges paid using the standard LTACH payment rate will increase by 0.9% due primarily to the annual standard Federal rate update for fiscal year 2022 of 1.9% and 0.8% decrease in high cost outlier payments. LTACH-PPS payments for fiscal year 2022 for discharges paid using the site neutral payment rate will increase by 3%.

RESULTS OF OPERATIONS

Three months ended June 30, ~~2021~~2022 compared to three months ended June 30, ~~2020~~2021

Summary consolidated financial information

The following table summarizes our consolidated results of operations for the three months ended June 30, ~~2021~~2022 and ~~2020~~2021 (amounts in thousands, except percentages, which are percentages of consolidated net service revenue, unless indicated otherwise):


		2021					2020					Increase (Decrease)			2022					2021					Increase (Decrease)
Net service revenue	Net service revenue	$	545,907				$	487,320				$	58,587	Net service revenue	$	576,193				$	545,907				$	30,286
Cost of service revenue (excluding depreciation and amortization)	Cost of service revenue (excluding depreciation and amortization)	317,872		58.2	%		306,712		62.9	%		11,160		Cost of service revenue (excluding depreciation and amortization)	353,933		61.4	%		317,872		58.2	%		36,061
General and administrative expenses	General and administrative expenses	167,061		30.6			150,574		30.9			16,487		General and administrative expenses	196,390		34.1			167,061		30.6			29,329
Impairment of intangibles and other	Impairment of intangibles and other	760					600					160		Impairment of intangibles and other	842		0.1			760		0.1			82
Government stimulus (income)		—					(44,435)					(44,435)
Interest expense	Interest expense	(143)					(841)					(698)		Interest expense	(6,407)		(1.1)			(143)		—			6,264

Income tax expense	Income tax expense	13,318		26.2		(1)	15,227		26.0		(1)	(1,909)		Income tax expense	3,679		27.1		(1)	13,318		26.2		(1)	(9,639)
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	9,110					13,109					(3,999)		Net income attributable to noncontrolling interests	4,358		0.8			9,110		1.7			(4,752)
Net income attributable to LHC Group, Inc.’s common stockholders	Net income attributable to LHC Group, Inc.’s common stockholders	$	37,643				$	44,692				$	(7,049)	Net income attributable to LHC Group, Inc.’s common stockholders	$	10,584				$	37,643				$	(27,059)

(1) Effective tax rate as a percentage of income from continuing operations attributable to our common stockholders, excluding the excess tax benefits realized of ~~$0.04~~ $0.2 million a~~nd $0.3~~and $0.4 million during the three months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

~~Net service revenue~~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 three months ended June 30, ~~2021~~2022 and the related change from the same period in ~~2020~~2021 (amounts in thousands, except admissions, census, episode data, patient days and billable hours, which are actual amounts; ~~net service~~ revenue excludes implicit price concessions):

Table of Contents


The below data for the three months ended June 30, 2021 was impacted by the COVID-19 pandemic.
The below data for the three months ended June 30, 2022 was impacted by the COVID-19 pandemic.												The below data for the three months ended June 30, 2022 was impacted by the COVID-19 pandemic.
		Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %			Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %
Home health services
Home health services:												Home health services:
Revenue	Revenue	$	390,048	16.4	%	$	11,489	$	401,537	16.8	%	Revenue	$	382,704	(3.4)	%	$	15,309	$	398,013	(0.9)	%
Revenue Medicare	Revenue Medicare	$	241,375	10.3		$	6,936	$	248,311	10.3		Revenue Medicare	$	222,588	(9.2)		$	9,940	$	232,528	(6.4)
Admissions	Admissions	108,076		16.4		1,006		109,082		16.7		Admissions	103,025		(4.3)		4,243		107,268		(1.7)
Medicare Admissions	Medicare Admissions	54,399		8.8		591		54,990		8.8		Medicare Admissions	48,561		(10.5)		2,172		50,733		(7.7)
Average Census	Average Census	83,297		10.3		2,257		85,554		10.3		Average Census	81,506		(3.5)		2,814		84,320		(1.4)
Average Medicare Census	Average Medicare Census	43,902		0.9		1,232		45,134		0.7		Average Medicare Census	39,562		(11.2)		1,516		41,078		(9.0)
Home Health Episodes	Home Health Episodes	83,318		6.2		2,345		85,663		5.5		Home Health Episodes	100,176		(3.7)		3,877		104,053		(1.3)
Hospice services						—
Hospice services:												Hospice services:
Revenue	Revenue	$	61,094	1.1		$	3,167	$	64,261	4.9		Revenue	$	68,112	5.2		$	36,233	$	104,345	62.4
Revenue Medicare	Revenue Medicare	$	56,888	1.9		$	3,072	$	59,960	6.1		Revenue Medicare	$	62,389	3.4		$	33,440	$	95,829	59.8
Admissions	Admissions	4,798		1.1		169		4,967		2.0		Admissions	5,211		5.5		2,159		7,370		48.4
Medicare Admissions	Medicare Admissions	4,297		2.6		178		4,475		4.8		Medicare Admissions	4,655		4.4		1,858		6,513		45.5
Average Census	Average Census	4,192		(3.0)		262		4,454		1.8		Average Census	4,587		3.7		2,536		7,123		59.9
Average Medicare Census	Average Medicare Census	3,953		(1.6)		220		4,173		2.6		Average Medicare Census	4,255		2.4		2,309		6,564		57.3
Patient days	Patient days	381,508		(3.0)		23,831		405,339		1.8		Patient days	415,766		3.5		232,450		648,216		59.9
Home and community-based services
Home and community-based services:												Home and community-based services:
Revenue	Revenue	$	46,203	(6.1)		$	2,399	$	48,602	(2.6)		Revenue	$	45,692	(5.6)		$	451	$	46,143	(5.1)
Billable hours	Billable hours	1,744,932		(7.8)		133,206		1,878,138		(2.3)		Billable hours	1,689,187		(9.7)		5,807		1,694,994		(9.8)
Facility-based services
Facility-based services:												Facility-based services:
LTACHs	LTACHs											LTACHs
Revenue	Revenue	$	30,635	(3.8)		$	—	$	30,635	(6.5)		Revenue	$	25,963	(15.3)		$	—	$	25,963	(15.3)
Patient days	Patient days	18,557		(19.1)		1,642		20,199		(14.6)		Patient days	17,550		(13.1)		—		17,550		(13.1)
Other facility-based services	Other facility-based services											Other facility-based services
Revenue	Revenue	$	1,595	(20.4)		$	—	$	1,595	(20.4)		Revenue	$	1,261	(20.9)		$	4,164	$	5,425	240.1
HCI
HCI:												HCI:
Revenue	Revenue	$	6,285	7.4		$	—	$	6,285	7.4		Revenue	$	5,459	(13.1)		$	—	$	5,459	(13.1)
Consolidated
Consolidated:												Consolidated:
Revenue	Revenue	$	535,860	12.7		$	17,055	$	552,915	11.6		Revenue	$	529,191	(2.3)		$	56,157	$	585,348	5.9

(1) Organic - combination of same store, a location that has been in service with us for greater than 12 months, and de novo, an internally developed location that has been in service for 12 months or less.

(2) Acquired - purchased location that has been in service with us 12 months or less.

~~Our~~During the three months ended June 30, 2022, our home health ~~and~~segment, hospice segment, and our LTACH locations were impacted by the 1% sequestration payment adjustment for Medicare patient claims with dates of services between April 1, 2022 through June 30, 2022. During the three months ended June 30, 2021, our home health segment, hospice segment, and our LTACH locations received the benefit of the suspension of the 2% sequestration payment adjustment for Medicare ~~claims and the~~claims. Our LTACHs received the benefit of ~~the suspension of the 2% sequestration payment adjustment and~~ the waiver of site-neutral payments for LTACH Medicare ~~claims.~~claims in 2022 and 2021.

We continue to be impacted by the challenging labor dynamics of limited supply, higher than normal turnover, and elevated labor costs, which created capacity limitations in many of our agencies and led to a decline in organic revenue. More specifically, these challenges resulted in decreased home health census, decreased billable hours in our home and community-based locations, and decreased patient days in our LTACH locations. In addition, the return of the sequestration payment adjustment for Medicare patient claims resulted in a 1% Medicare revenue reduction in our home health, hospice, and LTACH locations.

Table of Contents

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):

~~Table of Contents~~


		Three Months Ended June 30,									Three Months Ended June 30,
		2021				2020					2022				2021
Home health services
Home health services:										Home health services:
Salaries, wages and benefits	Salaries, wages and benefits	$	199,789	50.4	%	$	177,533	52.2	%	Salaries, wages and benefits	$	207,587	52.9	%	$	199,789	50.4	%
Transportation	Transportation	9,230		2.3		8,730		2.6		Transportation	10,258		2.6		9,230		2.3
Supplies and services	Supplies and services	10,906		2.8		18,883		5.6		Supplies and services	10,666		2.7		10,906		2.8
Total	Total	$	219,925	55.5	%	$	205,146	60.4	%	Total	$	228,511	58.2	%	$	219,925	55.5	%
Hospice services
Hospice services:										Hospice services:
Salaries, wages and benefits	Salaries, wages and benefits	$	28,453	44.6	%	$	26,749	43.8	%	Salaries, wages and benefits	$	50,055	48.8	%	$	28,453	44.6	%
Transportation	Transportation	1,967		3.1		1,799		2.9		Transportation	3,291		3.2		1,967		3.1
Supplies and services	Supplies and services	9,227		14.5		8,723		14.3		Supplies and services	14,502		14.1		9,227		14.5
Total	Total	$	39,647	62.2	%	$	37,271	61.0	%	Total	$	67,848	66.1	%	$	39,647	62.2	%
Home and community-based services
Home and community-based services:										Home and community-based services:
Salaries, wages and benefits	Salaries, wages and benefits	$	33,925	70.1	%	$	36,081	75.7	%	Salaries, wages and benefits	$	31,058	69.5	%	$	33,925	70.1	%
Transportation	Transportation	414		0.9		451		0.9		Transportation	456		1.0		414		0.9
Supplies and services	Supplies and services	344		0.7		2,215		4.6		Supplies and services	274		0.6		344		0.7
Total	Total	$	34,683	71.7	%	$	38,747	81.2	%	Total	$	31,788	71.1	%	$	34,683	71.7	%
Facility-based services
Facility-based services:										Facility-based services:
Salaries, wages and benefits	Salaries, wages and benefits	$	14,887	48.0	%	$	15,926	47.3	%	Salaries, wages and benefits	$	17,940	58.4	%	$	14,887	48.0	%
Transportation	Transportation	7		—		44		0.1		Transportation	68		0.2		7		—
Supplies and services	Supplies and services	5,566		17.9		5,815		17.3		Supplies and services	4,822		15.7		5,566		17.9
Total	Total	$	20,460	65.9	%	$	21,785	64.7	%	Total	$	22,830	74.3	%	$	20,460	65.9	%
HCI
HCI:										HCI:
Salaries, wages and benefits	Salaries, wages and benefits	$	3,108	50.7	%	$	3,666	72.2	%	Salaries, wages and benefits	$	2,903	54.1	%	$	3,108	50.7	%
Transportation	Transportation	65		1.1		56		1.1		Transportation	48		0.9		65		1.1
Supplies and services	Supplies and services	(16)		(0.3)		41		0.8		Supplies and services	5		0.1		(16)		(0.3)
Total	Total	$	3,157	51.5	%	$	3,763	74.1	%	Total	$	2,956	55.1	%	$	3,157	51.5	%
Consolidated
Consolidated:										Consolidated:
Salaries, wages and benefits	Salaries, wages and benefits	$	280,162	51.3	%	$	259,955	53.3	%	Salaries, wages and benefits	$	309,543	53.7	%	$	280,162	51.3	%
Transportation	Transportation	11,683		2.1		11,080		2.3		Transportation	14,121		2.4		11,683		2.1
Supplies and services	Supplies and services	26,027		4.8		35,677		7.4		Supplies and services	30,269		5.3		26,027		4.8
Total	Total	$	317,872	58.2	%	$	306,712	63.0	%	Total	$	353,933	61.4	%	$	317,872	58.2	%

During ~~2021,~~2022, cost of service revenue in our home health, ~~segment was~~hospice, and facility-based segments were impacted by the ~~effective cost mitigation strategies~~continued labor market challenges. These challenges are, but not limited to, consistent utilization of nursing contract labor at a higher cost-per-visit rate, payments of sign-on and retention bonuses, increased clinician wages, and labor costs associated with acquisitions purchased during the ~~implementation~~latter half of ~~PDGM.~~ 2021.

Cost of service revenue in our home and community-based segment declined due to ~~the~~our lower patient volumes resulting in a decrease in billable hours and a decrease in total costs. ~~Supplies associated with~~In addition, we received the benefit of $0.8 million from various state Medicaid programs in response to COVID-19 ~~decreased in all segments in 2021 as compared~~relief funds to 2020 as we incurred substantial costs in 2020 to acquire needed personal protective equipment to protect our clinicians during the start of the global pandemic. We continue to purchase additional personal protective equipment; however, we are observing an overall decline in utilization and an overall price per unit decline for these supplies.offset higher labor costs.

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):

Table of Contents


		Three Months Ended June 30,									Three months ended June 30,
		2021				2020					2022				2021
Home health services
Home health services:										Home health services:
General and administrative	General and administrative	$	120,610	30.4	%	$	107,121	31.5	%	General and administrative	$	131,278	33.4	%	$	120,610	30.4	%
Depreciation and amortization	Depreciation and amortization	2,635		0.7		3,088		0.9		Depreciation and amortization	3,345		0.9		2,635		0.7
Total	Total	$	123,245	31.1	%	$	110,209	32.4	%	Total	$	134,623	34.3	%	$	123,245	31.1	%
Hospice services
Hospice services:										Hospice services:
General and administrative	General and administrative	$	17,589	27.6	%	$	15,745	25.8	%	General and administrative	$	32,150	31.3	%	$	17,589	27.6	%
Depreciation and amortization	Depreciation and amortization	525		0.8		521		0.9		Depreciation and amortization	1,273		1.2		525		0.8
Total	Total	$	18,114	28.4	%	$	16,266	26.7	%	Total	$	33,423	32.5	%	$	18,114	28.4	%
Home and community-based services
Home and community-based services:										Home and community-based services:
General and administrative	General and administrative	$	11,548	23.9	%	$	10,716	22.5	%	General and administrative	$	12,104	27.1	%	$	11,548	23.9	%
Depreciation and amortization	Depreciation and amortization	375		0.8		408		0.9		Depreciation and amortization	340		0.8		375		0.8
Total	Total	$	11,923	24.7	%	$	11,124	23.4	%	Total	$	12,444	27.9	%	$	11,923	24.7	%
Facility-based services
Facility-based services:										Facility-based services:
General and administrative	General and administrative	$	10,119	32.6	%	$	9,230	27.4	%	General and administrative	$	11,307	36.8	%	$	10,119	32.6	%
Depreciation and amortization	Depreciation and amortization	787		2.5		935		2.8		Depreciation and amortization	904		2.9		787		2.5
Total	Total	$	10,906	35.1	%	$	10,165	30.2	%	Total	$	12,211	39.7	%	$	10,906	35.1	%
HCI
HCI:										HCI:
General and administrative	General and administrative	$	2,653	43.3	%	$	2,510	49.4	%	General and administrative	$	3,445	64.2	%	$	2,653	43.3	%
Depreciation and amortization	Depreciation and amortization	220		3.6		300		5.9		Depreciation and amortization	244		4.5		220		3.6
Total	Total	$	2,873	46.9	%	$	2,810	55.3	%	Total	$	3,689	68.7	%	$	2,873	46.9	%
Consolidated
Consolidated:										Consolidated:
General and administrative	General and administrative	$	162,519	29.8	%	$	145,322	29.8	%	General and administrative	$	190,284	33.0	%	$	162,519	29.8	%
Depreciation and amortization	Depreciation and amortization	4,542		0.8		5,252		1.1		Depreciation and amortization	6,106		1.1		4,542		0.8
Total	Total	$	167,061	30.6	%	$	150,574	30.9	%	Total	$	196,390	34.1	%	$	167,061	30.6	%

~~Consolidated general and administrative expenses~~ ~~increased $16.5 million in 2021 as compared to 2020; however,~~During 2022, consolidated general and administrative expenses ~~decreased~~increased as a percentage of ~~net service~~ revenue from ~~30.9%~~30.6% to ~~30.6%~~34.1%. ~~Revenue in our home health segment increased 16.8% in~~We incurred $6.9 million related to acquisition expenses and expenses associated with the ~~second quarter of 2021 as compared to the second quarter of 2020 due to the increase in average daily census. This increase in revenue improved our percentage of general and administrative expenses as~~Merger. In addition, we ~~leveraged~~incurred higher administrative costs inrelated to acquisitions purchased during the latter half of 2021.

Six months ended June 30, ~~2021~~2022 compared to six months ended June 30, ~~2020~~2021

Summary consolidated financial information

The following table summarizes our consolidated results of operations for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (amounts in thousands, except percentages, which are percentages of consolidated net service revenue, unless indicated otherwise):

Table of Contents

2021 2020 Increase
(Decrease)
Net service revenue $ 1,070,742 $ 1,000,191 $ 70,551
Cost of service revenue (excluding depreciation and amortization) 628,144 58.7 % 627,914 62.8 % 230
General and administrative expenses 330,310 30.8 308,440 30.8 21,870
Impairment of intangibles and other 937 600 337
Government stimulus (income) — (44,435) (44,435)
Interest expense (406) (3,609) (3,203)
Income tax expense 22,759 26.2 (1) 18,586 26.4 (1) 4,173
Net income attributable to noncontrolling interests 15,884 18,761 (2,877)
Net income attributable to LHC Group, Inc.’s common stockholders $ 72,302 $ 66,716 $ 5,586


	2022					2021					Increase (Decrease)
Net service revenue	$	1,147,688				$	1,070,742				$	76,946
Cost of service revenue (excluding depreciation and amortization)	704,321		61.4	%		628,144		58.7	%		76,177
General and administrative expenses	380,749		33.2			330,310		30.8			50,439
Impairment of intangibles and other	2,071		0.2			937		0.1			1,134
Interest expense	(10,578)		(0.9)			(406)		—			10,172
Income tax expense	10,048		26.4		(1)	22,759		26.2		(1)	(12,711)
Net income attributable to noncontrolling interests	9,883		0.9			15,884		1.5			(6,001)
Net income attributable to LHC Group, Inc.’s common stockholders	$	30,038				$	72,302				$	(42,264)

(1) Effective tax rate as a percentage of income from continuing operations attributable to our common stockholders, excluding the excess tax benefits realized of ~~$2.2~~$0.5 million and ~~$1.6~~$2.2 million during the six months ended June 30, 2022 and 2021, ~~and 2020,~~ respectively. ~~The effective tax rate for the six months ended June 30, 2020 also benefited from a $2.2 million impact from the enactment of the CARES Act.~~

~~Net service revenue~~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 six months ended June 30, ~~2021~~2022 and the related change from the same period in ~~2020~~2021 (amounts in thousands, except admissions, census, episode data, patient days and billable hours, which are actual amounts; ~~net service~~ revenue excludes implicit price concessions):

Table of Contents


The below data for the six months ended June 30, 2021 was impacted by the COVID-19 pandemic.
The below data for the six months ended June 30, 2022 was impacted by the COVID-19 pandemic.												The below data for the six months ended June 30, 2022 was impacted by the COVID-19 pandemic.
		Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %			Organic (1)		Organic Growth (Loss) %		Acquired (2)		Total		Total Growth (Loss) %
Home health services
Home health services:												Home health services:
Revenue	Revenue	$	767,792	9.4	%	$	15,470	$	783,262	9.2	%	Revenue	$	761,626	(1.5)	%	$	31,665	$	793,291	1.3	%
Revenue Medicare	Revenue Medicare	$	480,780	3.2		$	9,697	$	490,477	2.7		Revenue Medicare	$	445,783	(7.9)		$	21,072	$	466,855	(4.8)
Admissions	Admissions	215,218		7.4		1,786		217,004		7.6		Admissions	211,457		(1.4)		8,933		220,390		1.6
Medicare Admissions	Medicare Admissions	108,378		(0.9)		1,025		109,403		(0.9)		Medicare Admissions	98,658		(8.8)		4,669		103,327		(5.6)
Average Census	Average Census	83,216		10.2		1,529		84,745		9.7		Average Census	81,932		(2.2)		2,901		84,833		0.1
Average Medicare Census	Average Medicare Census	44,336		—		850		45,186		(0.6)		Average Medicare Census	726		(29.9)		3		729		(31.1)
Home Health Episodes	Home Health Episodes	167,013		0.5		3,260		170,273		(0.7)		Home Health Episodes	197,444		(3.5)		7,136		204,580		(1.2)
Hospice services
Hospice services:												Hospice services:
Revenue	Revenue	$	121,525	1.9		$	7,000	$	128,525	5.8		Revenue	$	133,310	2.8		$	74,698	$	208,008	61.8
Revenue Medicare	Revenue Medicare	$	112,565	2.4		$	6,819	$	119,384	6.7		Revenue Medicare	$	122,527	1.9		$	68,553	$	191,080	60.1
Admissions	Admissions	10,140		4.4		404		10,544		6.2		Admissions	11,114		7.1		4,632		15,746		51.1
Medicare Admissions	Medicare Admissions	9,031		5.2		354		9,385		6.7		Medicare Admissions	9,847		5.6		4,045		13,892		48.6
Average Census	Average Census	4,188		(1.9)		268		4,456		3.6		Average Census	4,488		1.8		2,605		7,093		60.0
Average Medicare Census	Average Medicare Census	3,926		(1.2)		242		4,168		4.1		Average Medicare Census	4,163		0.7		2,374		6,537		57.5
Patient days	Patient days	757,927		(2.5)		48,531		806,458		2.3		Patient days	—		—		—		—		—
Home and community-based services
Home and community-based services:												Home and community-based services:
Revenue	Revenue	$	95,163	(3.6)		$	2,940	$	98,103	(2.1)		Revenue	$	90,371	(7.4)		$	1,210	$	91,581	(6.6)
Billable hours	Billable hours	3,617,773		(5.8)		161,646		3,779,419		(3.3)		Billable hours	3,337,242		(11.2)		31,444		3,368,686		(10.9)
Facility-based services
Facility-based services:												Facility-based services:
LTACHs	LTACHs											LTACHs
Revenue	Revenue	$	63,666	7.6		$	—	$	63,666	7.6		Revenue	$	54,896	(12.5)		$	—	$	54,896	(12.5)
Patient days	Patient days	39,717		(7.9)		1,642		41,359		7.9		Patient days	38,063		(8.0)		—		38,063		(8.0)
Other facility-based services	Other facility-based services											Other facility-based services
Revenue	Revenue	$	2,592	(47.9)		$	—	$	2,592	(47.9)		Revenue	$	1,475	(57.8)		$	8,231	$	9,706	177.6
HCI
HCI:												HCI:
Revenue	Revenue	$	12,224	(2.3)		$	—	$	12,224	(2.3)		Revenue	$	10,817	(11.5)		$	—	$	10,817	(11.5)
Consolidated
Consolidated:												Consolidated:
Revenue	Revenue	$	1,062,962	9.4		$	25,410	$	1,088,372	7.1		Revenue	$	1,052,495	(1.4)		$	115,804	$	1,168,299	7.3

(2) Acquired - purchased location that has been in service with us 12 months or less.

~~Our~~During the six months ended June 30, 2022, our home health ~~and~~segment, hospice segment, and LTACH locations were impacted by the suspension of the sequestration payment adjustment through March 31, 2022 and a 1% sequestration payment adjustment for Medicare patient claims with dates of services between April 1, 2022 through June 30, 2022. During the six months ended June 30, 2021, our home health segment, hospice segment, and LTACH locations received the benefit of the suspension of the 2% sequestration payment adjustment for Medicare ~~claims and the~~claims. Our LTACHs received the benefit of ~~the suspension of the 2% sequestration payment adjustment and~~ the waiver of site-neutral payments for LTACH Medicare ~~claims.~~claims in 2022 and 2021.

Table of Contents

adjustment for Medicare patient claims resulted in a 1% Medicare revenue reduction in our home health, hospice, and LTACH locations.

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):

~~Table of Contents~~


		Six months ended June 30,									Six months ended June 30,
		2021				2020					2022				2021
Home health services
Home health services:										Home health services:
Salaries, wages and benefits	Salaries, wages and benefits	$	392,026	50.9	%	$	377,139	53.3	%	Salaries, wages and benefits	$	417,030	53.4	%	$	392,026	50.9	%
Transportation	Transportation	18,050		2.3		18,535		2.6		Transportation	19,465		2.5		18,050		2.3
Supplies and services	Supplies and services	22,222		2.9		29,912		4.2		Supplies and services	20,223		2.6		22,222		2.9
Total	Total	$	432,298	56.1	%	$	425,586	60.1	%	Total	$	456,718	58.5	%	$	432,298	56.1	%
Hospice services
Hospice services:										Hospice services:
Salaries, wages and benefits	Salaries, wages and benefits	$	56,465	44.6	%	$	53,762	44.2	%	Salaries, wages and benefits	$	99,289	48.5	%	$	56,465	44.6	%
Transportation	Transportation	3,797		3.0		3,739		3.1		Transportation	6,090		3.0		3,797		3.0
Supplies and services	Supplies and services	17,955		14.2		17,804		14.6		Supplies and services	28,534		14.0		17,955		14.2
Total	Total	$	78,217	61.8	%	$	75,305	61.9	%	Total	$	133,913	65.5	%	$	78,217	61.8	%
Home and community-based services
Home and community-based services:										Home and community-based services:
Salaries, wages and benefits	Salaries, wages and benefits	$	68,079	69.8	%	$	73,574	76.5	%	Salaries, wages and benefits	$	59,756	67.1	%	$	68,079	69.8	%
Transportation	Transportation	830		0.9		941		1.0		Transportation	845		0.9		830		0.9
Supplies and services	Supplies and services	646		0.7		2,685		2.8		Supplies and services	142		0.2		646		0.7
Total	Total	$	69,555	71.4	%	$	77,200	80.3	%	Total	$	60,743	68.2	%	$	69,555	71.4	%
Facility-based services
Facility-based services:										Facility-based services:
Salaries, wages and benefits	Salaries, wages and benefits	$	30,921	48.0	%	$	30,304	47.9	%	Salaries, wages and benefits	$	36,644	58.3	%	$	30,921	48.0	%
Transportation	Transportation	17		—		80		0.1		Transportation	114		0.2		17		—
Supplies and services	Supplies and services	10,697		16.6		11,743		18.5		Supplies and services	10,277		16.4		10,697		16.6
Total	Total	$	41,635	64.6	%	$	42,127	66.5	%	Total	$	47,035	74.9	%	$	41,635	64.6	%
HCI
HCI:										HCI:
Salaries, wages and benefits	Salaries, wages and benefits	$	6,313	53.0	%	$	7,409	64.7	%	Salaries, wages and benefits	$	5,808	54.9	%	$	6,313	53.0	%
Transportation	Transportation	116		1.0		148		1.3		Transportation	91		0.9		116		1.0	%
Supplies and services	Supplies and services	10		0.1		139		1.2		Supplies and services	13		0.1		10		0.1	%
Total	Total	$	6,439	54.1	%	$	7,696	67.2	%	Total	$	5,912	55.9	%	$	6,439	54.1	%
Consolidated
Consolidated:										Consolidated:
Salaries, wages and benefits	Salaries, wages and benefits	$	553,804	51.7	%	$	542,188	54.2	%	Salaries, wages and benefits	$	618,527	53.9	%	553,804		51.7	%
Transportation	Transportation	22,810		2.1		23,443		2.3		Transportation	26,605		2.3		22,810		2.1
Supplies and services	Supplies and services	51,530		4.9		62,283		6.3		Supplies and services	59,189		5.2		51,530		4.9
Total	Total	$	628,144	58.7	%	$	627,914	62.8	%	Total	$	704,321	61.4	%	$	628,144	58.7	%

Cost of service revenue in our home and community-based segment declined due to ~~the~~our lower patient volumes resulting in a decrease in billable hours and a decrease in total costs. ~~Supplies associated with~~In addition, we received the benefit of $3.7 million from various state Medicaid programs in response to COVID-19 ~~decreased in all segments in 2021 as compared~~relief funds to 2020 as we incurred substantial costs in 2020 to acquire needed personal protective equipment to protect our clinicians during the start of the global pandemic. We continue to purchase additional personal protective equipment; however, we are observing an overall decline in utilization and an overall price per unit decline for these supplies..offset higher labor costs.

General and administrative expenses

Table of Contents

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

~~Table of Contents~~


		Six months ended June 30,									Six months ended June 30,
		2021				2020					2022				2021
Home health services
Home health services:										Home health services:
General and administrative	General and administrative	$	237,071	30.8	%	$	220,143	31.1	%	General and administrative	$	255,113	32.7	%	$	237,071	30.8	%
Depreciation and amortization	Depreciation and amortization	5,571		0.7		6,089		0.9		Depreciation and amortization	6,317		0.8		5,571		0.7
Total	Total	$	242,642	31.5	%	$	226,232	32.0	%	Total	$	261,430	33.5	%	$	242,642	31.5	%
Hospice services
Hospice services:										Hospice services:
General and administrative	General and administrative	$	35,164	27.8	%	$	31,856	26.2	%	General and administrative	$	62,261	30.4	%	$	35,164	27.8	%
Depreciation and amortization	Depreciation and amortization	1,077		0.9		1,036		0.9		Depreciation and amortization	2,507		1.2		1,077		0.9
Total	Total	$	36,241	28.7	%	$	32,892	27.0	%	Total	$	64,768	31.8	%	$	36,241	28.7	%
Home and community-based services
Home and community-based services:										Home and community-based services:
General and administrative	General and administrative	$	22,681	23.3	%	$	21,784	22.7	%	General and administrative	$	23,245	26.1	%	$	22,681	23.3	%
Depreciation and amortization	Depreciation and amortization	771		0.8		799		0.8		Depreciation and amortization	617		0.7		771		0.8
Total	Total	$	23,452	24.1	%	$	22,583	23.5	%	Total	$	23,862	26.8	%	$	23,452	24.1	%
Facility-based services
Facility-based services:										Facility-based services:
General and administrative	General and administrative	$	20,535	31.9	%	$	18,679	29.5	%	General and administrative	$	21,825	34.7	%	$	20,535	31.9	%
Depreciation and amortization	Depreciation and amortization	1,628		2.5		1,866		2.9		Depreciation and amortization	1,814		2.9		1,628		2.5
Total	Total	$	22,163	34.4	%	$	20,545	32.4	%	Total	$	23,639	37.6	%	$	22,163	34.4	%
HCI
HCI:										HCI:
General and administrative	General and administrative	$	5,318	44.6	%	$	5,593	48.8	%	General and administrative	$	6,582	62.2	%	$	5,318	44.6	%
Depreciation and amortization	Depreciation and amortization	494		4.1		595		5.2		Depreciation and amortization	468		4.4		494		4.1
Total	Total	$	5,812	48.7	%	$	6,188	54.0	%	Total	$	7,050	66.6	%	$	5,812	48.7	%
Consolidated
Consolidated:										Consolidated:
General and administrative	General and administrative	$	320,769	30.0	%	$	298,055	29.8	%	General and administrative	$	369,026	32.2	%	$	320,769	30.0	%
Depreciation and amortization	Depreciation and amortization	9,541		0.8		10,385		1.0		Depreciation and amortization	11,723		1.0		9,541		0.8
Total	Total	$	330,310	30.8	%	$	308,440	30.8	%	Total	$	380,749	33.2	%	$	330,310	30.8	%

~~Consolidated general and administrative expenses~~ ~~increased $21.9 million in 2021 as compared to 2020; however,~~During 2022, consolidated general and administrative expenses ~~remained flat~~increased as a percentage of ~~net service revenue. Revenue in our home health segment increased 9.2% in 2021 as compared~~revenue from 30.8% to ~~2020 due~~33.2%. We incurred $6.9 million related to acquisition expenses and expenses associated with the ~~increase in average daily census. This increase in revenue maintained our percentage of general and administrative expenses as~~Merger. In addition, we ~~leveraged~~incurred higher administrative costs inrelated to acquisitions purchased during the latter half of 2021.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our cash balance at June 30, ~~2021~~2022 was ~~$112.1~~$27.4 million and we have ~~$333.8~~$235.9 million of available liquidity from cash and our revolving credit facility, net of ~~$252.9~~$8.2 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, ~~and amounts available under our revolving credit facility~~ 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 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.

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

Table of Contents


		Six months ended June 30,					Three months ended June 30,
		2021		2020			2022		2021
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	$	(11,824)	$	435,876	Operating activities	$	(2,288)	$	(11,824)
Investing activities	Investing activities	(24,687)		(30,677)		Investing activities	(28,808)		(24,687)
Financing activities	Financing activities	(137,950)		(264,119)		Financing activities	48,687		(137,950)
Change in cash	Change in cash	$	(174,461)	$	141,080	Change in cash	$	17,591	$	(174,461)
Cash at beginning of period	Cash at beginning of period	286,569		31,672		Cash at beginning of period	9,809		286,569
Cash at end of period	Cash at end of period	$	112,108	$	172,752	Cash at end of period	$	27,400	$	112,108

~~The CARES Act provided additional cash~~We experienced a decline in net income during the ~~three~~six months ended June 30, ~~2020~~2022 as compared to the six months ended June 30, 2021. The decline was related to decreased census, increased labor costs, and increased ~~our net cash provided by operating activities by $310.7 million of Accelerated~~general and Advance Payments, $44.4 million of Provider Relief Funds, and $17.8 million payment deferral of our portion of social security payroll tax. The initial impact of COVID-19 in 2020 also increased our prepaid medical supplies dueadministrative costs related to the ~~need~~Merger and acquisitions purchased during the latter part of ~~obtaining personal protective equipment to~~2021. This decrease was reflected in less cash disbursements for income taxes. In addition, our ~~clinicians~~accounts payables and accrued expenses increased ~~our salaries, wages~~as we implemented a new enterprise system and ~~benefits associated with~~utilized payment management strategies incorporated within the ~~increased staffing demands associated with our response to COVID-19.~~

~~In 2021,~~new system. During the six months ended June 30, 2022, CMS recouped ~~$65.0~~$98.3 million of the ~~Accelerated~~CAAP, as compared to $65.0 million during the six months ended June 30, 2021.

In addition, we utilized our credit agreement for funding of the share repurchase plan and ~~Advance Payments and we~~recoupments of the CAAP during the six months ended June 30, 2022. We returned $93.3 million of Provider Relief Funds back to the ~~government. We paid $38.1 million in income taxes, of which $17.3 million related to~~government during the CARES Act legislation. These cash outflows were offset by a reduction in our days sales outstanding and stabilized costs for needed personal protective equipment. We did not utilize any proceeds in our credit agreement during 2021 as compared to 2020, which caused the increase in cash used in our financing activities.six months ended June 30, 2021.

Indebtedness

On ~~March 30, 2018,~~August 3, 2021, we entered into aan Amended and Restated Senior Credit ~~Agreement with JPMorgan Chase Bank, N.A.~~Facility (the "2021 Amended Credit Agreement"), which ~~was effective on April 2, 2018 (the "Credit Agreement"). The Credit Agreement provides~~provided a senior, secured revolving line of credit commitment with a maximum principal borrowing limit of ~~$500.0~~$800.0 million, which ~~includes~~included an additional ~~$200.0~~$500.0 million accordion expansion, ~~feature,~~ and a letter of credit sub-limit equal to ~~$50.0~~$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 ~~March 30, 2023.~~ August 3, 2026.

Our obligations under the 2021 Amended Credit Agreement are secured by substantially all of ~~the~~our assets ~~of the Company~~ and ~~its~~our wholly-owned subsidiaries (subject to customary exclusions), which assets include ~~the Company’s~~our equity ownership of ~~its~~our wholly-owned subsidiaries and ~~its~~our equity ownership in joint venture entities. Our 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 us, at either ~~a (a) Base~~(i) the prevailing London Interbank Offered Rate ~~which is defined as a fluctuating rate per annum equal to the highest~~("LIBOR") (with interest periods of ~~(1) the Federal Funds Rate in effect on such day plus 0.5%, (2) the Prime Rate in effect on such day, and (3) the Eurodollar Rate for a~~ one, ~~month interest period on such day plus 1.5%,~~three or six months at our option) plus a ~~margin ranging from 0.50%~~spread of 1.25% to ~~1.25% per annum~~2.0% based on our quarterly consolidated Leverage Ratio or ~~(b) Eurodollar~~(ii) the prevailing prime or base rate plus a ~~margin ranging from 1.50%~~spread of 0.25% to ~~2.25% per annum.~~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 ~~the same~~any time. We are required to pay a commitment fee for the unused commitments at rates ranging from ~~0.20%~~0.15% to ~~0.35%~~0.30% per annum depending upon our quarterly consolidated Leverage ~~Ratio, as defined in the Credit Agreement.~~Ratio. The Base Rate as of June 30, ~~2021~~2022 was ~~4.50%~~5.75% and the LIBOR rate was ~~1.88%~~3.39%. As of June 30, 2022, the effective interest rate on outstanding borrowings under the 2021 Amended Credit Agreement was 3.24%.

Table of Contents

As of June 30, ~~2021,~~2022, we had $759.0 million drawn, letters of credit ~~outstanding~~issued in the amount of ~~$25.4~~$24.3 million, ~~under the Credit Agreement,~~ and ~~had approximately $474.6~~$216.7 million of remaining borrowing capacity available under the 2021 Amended Credit Agreement. At December 31, ~~2020,~~2021, we had ~~$20.0~~$661.2 million drawn and letters of credit ~~outstanding~~issued in the amount of ~~$25.4~~$24.3 million under the 2021 Amended Credit Facility.

Under the 2021 Amended Credit Agreement with JPMorgan Chase Bank, N.A., a letter of credit fee shall be equal to the applicable Eurodollar rate on the average daily amount of the letter of credit 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	%

~~Table of Contents~~

Leverage Ratio Eurodollar
Margin Base
Rate
Margin Commitment
Fee Rate
≤1.00:1.00 1.50 % 0.50 % 0.200 %
>1.00:1.00 ≤ 2.00:1.00 1.75 % 0.75 % 0.250 %
>2.00:1.00 ≤ 3.00:1.00 2.00 % 1.00 % 0.300 %
>3.00:1.00 2.25 % 1.25 % 0.350 %

Our 2021 Amended Credit Agreement contains customary affirmative, negative and financial 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 repurchasing shares of its stock, so long as such repurchases are within certain specified baskets.

Our 2021 Amended Credit Agreement also contains customary events of 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 June 30, ~~2021,~~2022, we were in compliance with all 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~~Part II. Item 7 of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference. For a full description of the Company's other critical accounting policies, see Note 2 of the Notes to Consolidated Financial Statements in the 2020our 2021 Form 10-K.

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 ~~not~~ have increased our interest expense by $3.8 million for the six months ended June 30, ~~2021.~~2022.

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

Evaluation of Disclosure Controls and Procedures

Table of Contents

We established disclosure controls and procedures which are designed to provide reasonable assurance of achieving their objectives and to ensure that information required to be disclosed in its reports filed 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. This information is also accumulated and communicated to our management and Board of Directors to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report on Form 10-Q, as of June 30, ~~2021,~~2022, under the supervision and with the participation of management, including the principal executive officer and principal financial officer, management conducted an evaluation of the effectiveness of the disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act.

~~Table of Contents~~

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 June 30, ~~2021,~~2022, the end of the period covered by this Quarterly Report.

Changes in Internal Controls Over Financial Reporting

We, including the principal executive officer and principal financial officer, do not expect that our disclosure controls or our internal controls over financial reporting 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 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 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 June 30, ~~2021,~~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 those in Part I, Item 1A, “Risk Factors” of our ~~2020~~2021 Form 10-K.

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

On December 6, 2021, our Board of Directors approved a share repurchase program authorizing management to repurchase

up to $250.0 million of our common stock. We 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 following table provides information regarding shares of our common stock, $0.01 par value per share, purchased in accordance with the stock repurchase plan during the three months ended March 31, 2022:


Period	(a) Total number of shares repurchased	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs	(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
January 1, 2022 - January 31, 2022	190,622	$	133.63	190,622	$	140,791,831
February 1, 2022 - February 28, 2022	—	$	—	—	$	140,791,831
March 1, 2022 - March 31, 2022	—	$	—	—	$	140,791,831
Total	190,622	$	133.63	190,622	$	140,791,831

We did not repurchase any shares during the three months ended June 30, 2022.

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 LHC Group’s Form 8-K filed on April 2, 2018).

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

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

~~10.1~~			~~Amended and Restated Employment Agreement between Bruce D. Greenstein and LHC Group, Inc., effective July 1, 2021~~

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 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.SCH			XBRL Schema Document

101.CAL			XBRL Calculation Linkbase Document

101.DEF			XBRL Definition Linkbase Document

101.LAB			XBRL Label Linkbase Document

101.PRE			XBRL Presentation Linkbase 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” 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: August ~~5, 2021~~4, 2022						/s/ Dale G. Mackel
						Dale G. Mackel
						Chief Financial Officer (Principal financial officer)


	Number of shares	Per share price
Shares available as of December 31, 2020	118,136
Shares issued during the three months ended March 31, 2021	3,204	$	202.66
Shares issued during the three months ended June 30, 2021	3,152	$	181.65




Shares available as of June 30, 2021	111,780


	Three Months Ended June 30, 2020
	Home health services		Hospice services		Home and community-based services		Facility-based services		HCI		Total
Net service revenue	$	339,872	$	61,055	$	47,675	$	33,639	$	5,079	$	487,320
Cost of service revenue (excluding depreciation and amortization)	205,146		37,271		38,747		21,785		3,763		306,712
General and administrative expenses	110,209		16,266		11,124		10,165		2,810		150,574
Impairment of intangibles and other	0		600		0		0		0		600
Government stimulus income	(35,019)		(4,731)		(2,865)		(1,656)		(164)		(44,435)
Operating income (loss)	59,536		11,649		669		3,345		(1,330)		73,869
Interest expense	(594)		(97)		(79)		(47)		(24)		(841)
Income (loss) before income taxes and noncontrolling interest	58,942		11,552		590		3,298		(1,354)		73,028
Income tax expense (benefit)	12,807		2,439		(12)		373		(380)		15,227
Net income (loss)	46,135		9,113		602		2,925		(974)		57,801
Less net income (loss) attributable to noncontrolling interests	9,922		2,164		33		997		(7)		13,109
Net income (loss) attributable to LHC Group, Inc.'s common stockholders	$	36,213	$	6,949	$	569	$	1,928	$	(967)	$	44,692
Total assets	$	1,656,022	$	268,771	$	259,742	$	101,258	$	71,306	$	2,357,099