Settlement Brings Previously Announced Government Inquiry to a Close

LAFAYETTE, La. – LHC Group Inc. has reached a settlement agreement with the government that resolves a previously announced civil inquiry involving Medicare reimbursement for home health services for the period of 2006 to 2008.

While LHC Group cooperated fully, the settlement agreement reflects that the company disputes the government’s claims and includes no admission or determination of wrongdoing. The government did not question LHC Group’s quality of patient care, and there were no findings that the company billed or received payments for services not rendered.

Under the terms of the settlement agreement, the company will pay $65 million. The inquiry primarily centered on whether certain medical records contained sufficient documentation to support the subjective determination of medical necessity. LHC Group chose to settle to avoid the disruption and expense of a multi-year legal dispute with the government, which is both a regulator and the primary payer for healthcare services provided to elderly and disabled patients. The settlement includes a release from the government for any claims for the period of 2006 to 2008 related to home health services, including skilled nursing visits, therapy visits and home health aide visits.

“At LHC Group, we are fully focused on our core mission of providing high-quality, cost-effective care to the nearly 80,000 patients we serve across 19 states each year,” said Keith G. Myers, LHC Group chairman and CEO. “We deliver care to sick, elderly patients. These are men and women with an average age of 80 — people who are confined to their homes and 97 percent of whom have one or more chronic conditions.

“We stand behind the skill, compassion and quality of care provided by the local physicians and nurses involved in the evaluation and determination of services delivered to meet the specific needs of every patient we serve.”

LHC Group’s operational and compliance systems have always been designed to ensure patients meet Medicare home health eligibility criteria. In 2009, the company partnered with two nationally recognized healthcare consulting firms to further enhance its corporate compliance program. Key elements of the company’s commitment to compliance include:

• an ongoing auditing and monitoring program;
• a robust training program to educate clinical staff on all applicable laws and regulations,patient eligibility criteria and medical documentation requirements;
• an internal compliance department that is integrated into all aspects of LHC Group’s business, including strategic sales and operations meetings;
• a business model that integrates newly acquired agencies into the compliance program; and
• an employee evaluation program linking performance reviews to compliance.

“Since 2008, we have made significant investments in our people, infrastructure and technology,” said Donald Stelly, a registered nurse and the company’s president and COO. “Our company is well positioned to successfully fulfill our mission by providing high-quality care to the growing number of patients and communities we serve.

“Because of the conservative way we manage our business, LHC Group has one of the strongest balance sheets in the industry with no outstanding indebtedness and significant cash on hand. Therefore, this settlement will not impact our ability to fund our operational initiatives or future growth.”

As part of the settlement, LHC Group has entered into a corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services, a common requirement of settlements of this nature. The corporate integrity agreement incorporates the company’s existing corporate compliance program and reinforces long-standing policies and practices at LHC Group.

Today’s settlement is related to a complaint that has been pending in the U.S. District Court for the Western District of Louisiana. The claim was not filed by a current or former LHC Group employee. The claim was filed by an individual who worked for a regional consulting firm LHC Group previously used to support the company’s quality initiatives.

Financial information related to the settlement:
LHC Group has no outstanding indebtedness under its $75 million line of credit. The company has executed an amendment to its credit agreement, which revises the calculation of the covenants to remove the settlement from those calculations. The company intends to fund the settlement by applying approximately $25 million of existing cash, with the balance being drawn under its line of credit.

“Since going public in June 2005, LHC Group has grown from 85 locations in five states to 312 locations in 19 states,” said Peter J. Roman, chief financial officer. “Throughout this period of growth, we have never had an outstanding balance under our credit agreements in excess of $22.4 million. And that amount, issued in April 2009, was paid down to less than $6 million by December 2009.

“Going forward, we expect to have the outstanding balance related to the settlement– which will be about $40 million on the date of payment – paid below approximately $20 million by the end of 2011.”

The charge associated with the settlement will be recognized in the third quarter, along with associated expenses incurred in the third quarter. LHC Group anticipates the settlement amount and related expenses to be fully tax deductible. Accordingly, the company anticipates a reduction to net income of approximately $41.3 million, after tax, or approximately $2.25 per share.

About LHC Group Inc.
LHC Group Inc. is one of the nation’s largest providers of home health and hospice services with 312 locations in 19 states. The company provides a comprehensive array of post-acute healthcare services through home health, hospice and private duty locations in its home-based division and longterm acute care hospitals in its facility-based division. LHC Group serves nearly 80,000 patients annually and is the only national home health provider pursuing 100 percent Joint Commission accreditation.

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the Company’s future financial performance and the strength of the Company’s operations. Such forward-looking statements may be identified by words such as “continue,” “expect,” and similar expressions. Forwardlooking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, including changes in reimbursement, changes in government regulations, changes in LHC Group’s relationships with referral sources, increased competition for LHC Group’s services, increased competition for joint venture and acquisition candidates, changes in the interpretation of government regulations, and other risks set forth in Item 1A. Risk Factors in LHC Group’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission. LHC Group undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.