UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 3029, ~~2016~~2017

☐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 001-09848

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ALMOST FAMILY, INC.

(Exact name of Registrant as specified in its charter)


Delaware		06-1153720
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

9510 Ormsby Station Road, Suite 300, Louisville, Kentucky 40223

(Address of principal executive offices)

(502) 891-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class		Name of each exchange on which registered
Common Stock, par value $0.10 per share		NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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

Large accelerated filer ☐☒ Accelerated filer ☒☐ Non-accelerated filer ☐ Smaller reporting company ☐ (Do not check if a 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 ☒

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last day of the second fiscal quarter ended ~~July 1~~June 30, ~~2016~~2017 was $~~397~~789,~~065~~578,~~392~~553 based on the last sale price of a share of the common stock as of ~~July 1~~June 30, ~~2016~~2017 ($4361.0365), as reported by the NASDAQ Global Market.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at ~~March~~February 9,23 ~~2017~~2018
Common Stock, $0.10 par value per share		13,~~880~~992,~~299~~729 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2017 definitive proxy statement relating to the registrant’s Annual Meeting of Stockholders are incorporated by reference in Part III to the extent described therein.

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TABLE OF CONTENTS

PART I		4
Item 1.	Business	4
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	32
Item 2.	Properties	32
Item 3.	Legal Proceedings	32
Item 4.	Mine Safety Disclosures	3233
PART II		3334
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3334
Item 6.	Selected Financial Data	3536
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3637
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	5361
Item 8.	Financial Statements and Supplementary Data	5462
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	8091
Item 9A.	Controls and Procedures	8091
Item 9B.	Other Information	8091
PART III		8091
Item 10.	Directors, Executive Officers and Corporate Governance	8091
Items 11, 12, 13 and 14. Executive Compensation; Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters; Certain Relationships and Related Transactions; and Director Independence; and Principal Accountant Fees and Services		8292
PART IV		8394
Item 15.	Exhibits and Financial Statement Schedules	8394
Item 16.	Form 10-K Summary	99

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In this report, the terms “Company,” “we,” “us” or “our” mean Almost Family, Inc. and all subsidiaries included in our consolidated financial statements.

Special Caution Regarding Forward-Looking Statements

Certain statements contained in this annual report on Form 10-K, including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” “assumes,” “trends” and similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the Company’s current plans, expectations and projections about future events. However, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following:

general economic and business conditions;

demographic changes;

changes in, or failure to comply with, existing governmental regulations;

legislative proposals for healthcare reform;

changes in Medicare and Medicaid reimbursement levels;

changes in laws and regulations with respect to Accountable Care Organizations;

effects of competition in the markets in which the Company operates;

liability and other claims asserted against the Company;

potential audits and investigations by government and regulatory agencies, including the impact of any negative publicity or litigation;

ability to attract and retain qualified personnel;

availability and terms of capital;

loss of significant contracts or reduction in revenues associated with major payor sources;

ability of customers to pay for services;

business disruption due to natural disasters or terrorist acts;

ability to successfully integrate the operations of acquired businesses and achieve expected synergies and operating efficiencies from the acquisition, in each case within expected time-frames or at all;

ability to successfully develop investments made by our healthcare innovations segment, in light of the highly speculative nature of these early stage investments;

significant deterioration in economic conditions and significant market volatility;

· effect on liquidity of the Company’s financing arrangements; ~~and~~

· changes in estimates and judgments associated with critical accounting policies and estimates.;

the risk that the merger with LHC Group, Inc. (“LHC Group”) may be delayed or not completed; and

the risk that the anticipated benefits of the merger with LHC Group may not be fully realized,

For a detailed discussion of these and other factors that could cause the Company’s actual results to differ materially from the results contemplated by the forward-looking statements, please refer to Item 1A. “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this report. The reader should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Except as required by law, the Company does not intend to publicly release any revisions to forward-looking statements to reflect unforeseen or other events after the date of this report. The Company has provided a detailed discussion of risk factors within this annual report on Form 10-K and various filings with the Securities and Exchange Commission (“SEC”). The reader is encouraged to review these risk factors and filings.

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PART I

ITEM 1. BUSINESS

Introduction

Almost Family, Inc. TM and subsidiaries (collectively “Almost Family” or the “Company”) is a leading provider of cost efficient, high quality home healthcare services and related innovations to drive savings for payors and improve patient outcomes and experience. Our Company, founded in 1976, operates over ~~340~~330 locations across 26 states. ~~Unless~~ ~~otherwise indicated, the financial information included in Part I is for continuing operations.~~

~~Website~~LHC ~~Access~~Group, toInc. ~~Our~~and ~~Reports~~Almost Family, Inc. Merger

~~Our~~On ~~annual~~November ~~reports~~15, on2017, ~~Form 10-K~~our Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with LHC Group, ~~quarterly~~Inc., ~~reports~~a onDelaware ~~Form 10-Q~~corporation (“LHC Group”), ~~current~~and ~~reports~~Hammer onMerger ~~Form 8~~Sub, Inc., a newly-Kformed Delaware corporation and a wholly owned subsidiary of LHC Group (“Merger Sub”), providing for a “merger of equals” business combination of our Company and ~~all~~LHC ~~amendments~~Group. The Merger Agreement provides that, if the conditions to ~~those~~the ~~reports~~Merger are ~~available~~satisfied ~~free~~or waived and the Merger is consummated, stockholders of ~~charge~~our onCompany will receive 0.9150 shares of LHC Group common stock for each share of our ~~website~~Company’s atcommon ~~www~~stock, plus the cash equivalent of any fractional share.~~almostfamily.com~~ The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, at the closing Merger Sub will be merged with and into our Company (the “Merger”), with our Company continuing as ~~soon~~the surviving corporation and as ~~reasonably~~a ~~practicable~~wholly ~~after~~owned ~~such~~subsidiary ~~material~~of isLHC ~~electronically~~Group. ~~filed~~The ~~with~~parties’ orobligations ~~furnished~~to complete the Merger are subject to several conditions, including, among others, (i) the ~~SEC. Information~~adoption ~~contained~~of onthe ~~Almost~~Merger ~~Family~~Agreement by the affirmative vote of the holders of at least a majority of the outstanding shares of the Company’s ~~website~~common isstock; ~~not~~(ii) ~~part~~the approval of ~~this~~the ~~annual~~issuance ~~report~~of onshares ~~Form 10~~of LHC Group’s common stock to be issued to our stockholders in the merger by the affirmative vote of a majority of the shares of LHC Group’s common stock present in person or represented by proxy at LHC Group’s special meeting; (iii) the expiration or termination of the required waiting periods under the Hart-KScott ~~and~~Rodino isAct ~~not~~(which ~~incorporated~~occurred on February 21, 2018); (iv) the absence of any order or law prohibiting the Merger or the other transactions contemplated by ~~reference~~the Merger Agreement; (v) the receipt of certain tax opinions; and (vi) the absence of a material adverse effect with respect to either LHC Group or our Company (as defined in ~~this~~the ~~document~~Merger Agreement).

~~How~~The WeMerger ~~Are~~Agreement ~~Currently~~contains ~~Organized~~certain termination rights for both our Company and ~~Operate~~LHC Group, including if the Merger is not consummated on or before July 1, 2018 (subject to extension to October 1, 2018 in certain circumstances) and if the required approval of the stockholders of either our Company or LHC Group is not obtained. The Merger Agreement further provides that, upon termination of the Merger Agreement under specified circumstances, including the termination of the Merger Agreement by our Company or LHC Group as a result of an adverse change in the recommendation of the other party’s board of directors, our Company may be required to pay to LHC Group, or LHC Group may be required to pay to our Company, as applicable, a termination fee of $30 million. Further, if the Merger Agreement is terminated as a result of the stockholders of either our Company or LHC Group failing to approve the transaction, our Company may be required to reimburse to LHC Group, or LHC Group may be required to reimburse to our Company, the other party’s expenses in connection with the proposed transaction, up to a maximum of $5 million.

~~The~~In ~~Company~~the ~~has~~absence ~~two divisions, Home Health and Healthcare Innovations. The Home Health division is comprised~~ of ~~two~~a ~~reportable~~completed ~~segments~~merger, we ~~Visiting~~will ~~Nurse~~continue ~~Services~~to ~~(“VN”~~operate oron ~~“Visiting Nurse”) and Personal Care Services (“PC” or “Personal Care”). Healthcare Innovations is also~~ a ~~reporting~~stand-alone ~~segment~~basis. Reportable segments have been identified based upon how management has organized the business by services provided to customers and the criteria in Accounting Standards Codification (ASC) Topic 280, Segment Reporting. All references ~~herein~~within ~~for~~this ~~the~~Form ~~years~~10-K ~~2016,~~assumes ~~2015~~Almost ~~and 2014 represent the fiscal years ended December 30~~Family, ~~2016~~Inc. ~~and~~operating ~~January~~on 1,a ~~2016,~~stand-alone ~~and the calendar year ended December 31, 2014~~basis.

Our VN segment provides a comprehensive range of Medicare-certified home health nursing services to patients in need of recuperative care, typically following a period of hospitalization or care in another type of inpatient facility. Our services are often provided to patients in lieu of additional care in other settings, such as long term acute care hospitals, inpatient rehabilitation hospitals or skilled nursing facilities. Our nurses, therapists, medical social workers and home health aides work closely with patients and their families to design and implement an individualized treatment response to a physician-prescribed plan of care. Under the umbrella of our “Senior Advocacy” mission, we offer special clinically-based protocols customized to meet the needs of the increasingly medically complex, chronic and co-morbid patient populations we serve. Examples include Optimum Balance, Silver Steps, Cardiocare, Orthopedic and Conjestive Heart Failure in the Home. VN Medicare revenues are generated on a per episode basis rather than a fee per visit or hourly basis. Approximately 95% of the VN segment revenues are generated from the Medicare program while the balance is generated from Medicaid and private insurance programs.

Our PC segment provides services in patients’ homes primarily on an as-needed, hourly basis. These services include personal care, medication management, meal preparation, caregiver respite and homemaking. Our services are often provided to patients who would otherwise be admitted to skilled nursing facilities for long term custodial care. PC revenues are generated on an hourly basis. Approximately 83% of the PC segment revenues are generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients.

The Healthcare Innovations (“HCI”) segment includes our developmental activity outside of the traditional home health business platform.

Additional financial information about our segments can be found in Part II, Item 8, “Notes to Consolidated Financial Statements” and related notes included elsewhere in this Form 10-K.

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Our View on Reimbursement and Diversification of Risk

Our Company is highly dependent on government reimbursement programs which pay for the majority of the services we provide to our patients and customers. Reimbursement under these programs, primarily Medicare and Medicaid, is subject to frequent changes as policy makers balance constituents’ needs for health care services within the constraints of the specific government’s fiscal budget. Medicare and Medicaid, respectively, are consuming a greater percentage of federal and states’ budgets, which is exacerbated in times of economic downturn. We believe that these financial issues are cyclical in nature rather than indicative of the long-term prospect for Medicare and Medicaid funding of health care services. Additionally, we believe our services offer the lowest cost alternative to institutional care and are a part of the solution to the federal government’s Medicare and states’ Medicaid financing problems.

We believe that an important key to our historical success and to our future success is our ability to adapt our operations to meet changes in reimbursement as they occur. One important way in which we have achieved this adaptability in the past, and in which we plan to achieve it in the future, is to maintain some level of diversification in our business mix.

The execution of our business plan will place primary emphasis on the development of our home health operations. As our business grows, we may evaluate opportunities for the provision of other health care services in patients’ homes that would be consistent with our Senior Advocacy mission.

Our Business Plan

Our future success depends on our ability to execute our business plan. Over the next three to five years we will try to accomplish the following:

Generate meaningful same store sales growth through the focused provision of high quality services and attending to the needs of our patients;

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Drive our costs down, while continuing to provide high quality patient care, by improving the productivity of our work force through improved monitoring, tighter controls, workflow automation, use of technology and other opportunities for efficiency gains;

Expand the significance of our home health services by selectively acquiring other quality providers, through the startup of new agencies and potentially by providing new services in patients’ homes consistent with our Senior Advocacy mission;

Make additional strategic investments which expand our Healthcare Innovation segment in its mission to find solutions for more effective, efficient and appropriate delivery of homecare; and

Expand our capital base through both earnings performance and by seeking additional capital investments in our Company.

~~Overview~~Website ofAccess to Our ~~Services~~Reports

~~Home~~Our ~~Health~~annual ~~Division~~reports ~~Services~~on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on our website at www.almostfamily.com as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Information contained on Almost Family’s website is not part of this annual report on Form 10-K and is not incorporated by reference in this document.

~~Acquisition~~How ofWe ~~Home~~Are ~~Health~~Currently Organized and ~~Hospice Segment of Community Health Systems~~Operate

OnThe ~~December 31,~~Company ~~2016,~~has ~~the~~three ~~first~~reportable ~~day~~segments: ~~after~~a) ~~our~~Home ~~2016 fiscal year end, we completed the acquisition of the home health segment of Community~~ Health ~~Systems, Inc.~~ (“~~CHS~~HH” ~~and “CHS JV Transaction”~~)~~. Community Health Systems~~, ~~Inc.~~ ~~(NYSE: CYH~~b) isOther ~~one of the largest publicly~~Home-~~traded~~Based ~~hospital~~Services ~~companies~~(“OHBS”) ~~in the United States and a leading operator of general acute care hospitals in communities across the country. CHS Home Health,~~ which includes ~~the~~all ~~former~~other home ~~health~~care ~~and~~services ~~hospice~~outside ~~operations~~ of ~~CHS,~~Home ~~provides~~Health ~~in-home outpatient care~~ services, ~~including skilled nursing~~ and ~~acute~~c) ~~care.~~the ~~CHS~~Healthcare ~~Home~~Innovations ~~Health's~~(“HCI”) ~~operations~~segment. Reportable ~~are~~segments ~~located~~have ~~primarily~~been inidentified ~~the~~based ~~Midwest~~upon ~~and~~how ~~Southern~~management ~~United~~has ~~States~~organized ~~with~~the abusiness ~~major~~by ~~presence~~services inprovided ~~Tennessee,~~to ~~Florida~~customers and ~~Texas~~the ~~near~~criteria ~~existing~~in ~~CHS~~Accounting ~~hospitals. The~~Standards ~~home~~Codification ~~health~~(“ASC”) ~~business~~Topic ~~consists~~280, ofSegment ~~74 separate~~ Reporting.

Our HH segment provides a comprehensive range of Medicare-certified home health nursing services to patients in need of recuperative care, typically following a period of hospitalization or care in another type of inpatient facility. Our services are often provided to patients in lieu of additional care in other settings, such as long term acute care hospitals, inpatient rehabilitation hospitals or skilled nursing facilities. Our nurses, therapists, medical social workers and home health aides work closely with patients and their families to design and implement an individualized treatment response to a physician-prescribed plan of care. Under the umbrella of our “Senior Advocacy” mission, we offer special clinically-based protocols customized to meet the needs of the increasingly medically complex, chronic and co-morbid patient populations we serve. Examples include Optimum Balance, Silver Steps, Cardiocare, Orthopedic and Congestive Heart Failure in the Home. HH Medicare revenues are generated on a per episode basis rather than a fee per visit or hourly basis. Approximately 95% of the HH segment revenues are generated from the Medicare program while the balance is generated from Medicaid and private insurance programs.

Our OHBS segment includes traditional personal care (“PC”) services (generally provided by paraprofessional staff such as home health aides) which are generally of a custodial rather than skilled nature, as well as hospice services. PC provides services in patients’ homes primarily on an as-needed, hourly basis. These services include personal care, medication management, meal preparation, caregiver respite and homemaking. Our services are often provided to patients who would otherwise be admitted to skilled nursing facilities for long term custodial care. PC revenues are generated on an hourly basis. PC segment revenues are generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients (approximately 80% of personal care revenues). Hospice services are largely provided in patients’ homes and generally require specialized hospice nursing skills. Hospice revenues are generated on a per diem basis and are primarily from Medicare (approximately 93% of hospice revenues).

Our HCI business segment is used to report on our developmental activities outside our HH and OHBS businesses. The HCI segment includes: a) an ACO enablement company; b) an in-home assessment company serving the long-term care insurance industry and managed care organizations; and c) an investment in a population-health analytics company.

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~~home~~ Additional ~~health~~financial ~~agencies~~information ~~across~~about 22our ~~states~~segments ~~and~~can ~~the~~be ~~hospice~~found ~~business~~in ~~consists~~Part II, Item of8, 15“Notes ~~separate~~to ~~hospice~~Consolidated ~~agencies~~Financial ~~across~~Statements” 7and ~~states. We~~related ~~currently~~notes ~~anticipate~~included ~~reporting~~elsewhere ~~the~~in ~~results~~this ofForm ~~the JV as part of our Home Health division~~10-K.

~~The~~Our ~~CHS~~View ~~Home~~on ~~Health~~Reimbursement ~~transaction is structured as a joint venture (the "JV") with Almost Family owning 80%~~ and ~~CHS~~Diversification retaining a 20% stake. The JV is maintained and managed by Almost Family as a separate legal entity with a separate line-management organization, led by CHS' former home health management team. Almost Family provides a full-range of home office management services under an ever-green management services agreement and, in return, receives a management fee of 5% of the JV's annual revenue. The JV operations management team remains in-place in Franklin, TN, in order to provide continuity. With the exception of the separate management team that runs day-to-day operations, the JV will receive the support and integration of our home office functions.Risk

InOur ~~addition~~Company tois highly dependent on government reimbursement programs which pay for the JVmajority ~~operating~~of ~~agreement~~the ~~between~~services ~~CHS~~we provide to our patients and ~~Almost~~customers. Reimbursement ~~Family,~~under ~~CHS~~these ~~entered~~programs, ~~into~~primarily ~~affiliation~~Medicare and ~~license~~Medicaid, ~~agreements~~is ~~with~~subject ~~the~~to ~~JV.~~frequent ~~The~~changes ~~affiliation~~as ~~agreement~~policy ~~provides~~makers balance constituents’ needs for ~~continued~~health ~~affiliation~~care ~~between~~services within the ~~CHS~~constraints ~~hospitals~~of ~~and~~ the ~~home~~specific ~~health~~government’s ~~agencies~~fiscal ~~with~~budget. Medicare aand ~~particular~~Medicaid, ~~focus~~respectively, onare ~~care-coordination~~consuming ~~for~~a ~~the~~greater ~~benefit~~percentage of ~~patients~~federal and ~~referral~~states’ ~~sources~~budgets, ~~who~~which ~~choose~~is toexacerbated ~~use~~in ~~the~~times JVof ~~agencies~~economic ~~for~~downturn. We ~~their~~believe ~~home~~that ~~health~~these ~~and~~financial ~~hospice~~issues ~~needs.~~are ~~The~~cyclical ~~license~~in ~~agreement~~nature ~~permits~~rather ~~each~~than ~~home~~indicative ~~health~~of ~~agency~~the tolong-term ~~continue~~prospect tofor ~~operate~~Medicare ~~under~~and ~~the~~Medicaid ~~CHS~~funding ~~hospital~~of ~~tradenames~~health tocare ~~maintain~~services. Additionally, ~~cohesive~~we ~~presentation~~believe toour services offer the ~~marketplace~~lowest ascost alternative to institutional care and are a part of the ~~hospitals'~~solution ~~post-acute~~to ~~care~~the ~~continuum~~federal government’s Medicare and states’ Medicaid financing problems.

~~CHS~~We ~~Home~~believe ~~Health~~that ~~has~~an aimportant ~~board~~key ofto ~~five~~our ~~managers,~~historical ~~four~~success ~~appointed by Almost Family~~ and ~~one~~to ~~appointed~~our byfuture ~~CHS.~~success ~~Certain~~is ~~matters,~~our ~~including~~ability ~~the~~to ~~sale~~adapt ofour ~~the~~operations ~~business,~~to ~~acquisitions~~meet bychanges ~~CHS~~in ~~Home~~reimbursement ~~Health,~~as ~~change~~they ofoccur. One ~~business~~important ~~lines~~way ~~and~~in ~~annual~~which ~~operating~~we ~~budgets,~~have ~~among~~achieved ~~others,~~this ~~will~~adaptability ~~require~~in ~~"super-majority"~~the ~~approval. CHS Home Health's Operating Agreement includes a dispute resolution process~~past, ~~ending~~and in ~~binding~~which ~~arbitration~~we ifplan ~~necessary~~ to ~~break~~achieve ~~deadlocks.~~it ~~Almost~~in ~~Family will fund~~ the ~~working~~future, ~~capital~~is ~~(subject~~ to ~~certain~~maintain ~~limits)~~some ~~needs~~level of ~~CHS~~diversification ~~Home~~in ~~Health,~~our ~~and~~business ~~any amounts outstanding at CHS Home Health or intercompany loans must be repaid before any distributions to owners can be made~~mix.

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Overview of Our Services

Home Health Division Services

Operating Locations

Our current operating locations for our ~~VN and PC segments in our~~ Home Health ~~division~~and ~~after~~Other ~~the~~Home-based ~~2017~~Services ~~CHS~~segments ~~JV Transaction and~~ as of our last two fiscal years were as follows:

	2017		2016		~~2015~~
	Branches (1)		Branches		Branches
	Branches		Branches
	Visiting	Personal	Visiting	Personal	Visiting	Personal
	Home	Other Home-	Home	Other Home-
States	~~Nurse~~Health	~~Care~~Based Services	~~Nurse~~Health	~~Care~~Based Services	~~Nurse~~	~~Care~~
Alabama	6	—	1	—	1	—
Alaska	1	—1	—	—	—	—
Arizona	21	—	—	—	—	—
Arkansas	5	—	—	—	—	—
Connecticut	56	1614	5	16	4	8
Florida	56	89	48	8	48	7
Georgia	1011	—1	9	—	9	—
Illinois	109	—1	3	—	3	—
Indiana	1312	—	9	—	9	—
Kentucky	2724	4	21	4	21	4
Massachusetts	6	—	6	—	5	—
Mississippi	3	—	2	—	2	—
Missouri	4	—	4	—	4	—
New Jersey	7	—	7	—	6	—
New Mexico	1	—	—	—	—	—
New York	56	7	5	7	5	7
North Carolina	1	—	—	—	—	—
Ohio	1415	2721	14	2722	16	38
Oklahoma	5	—	—	—	—	—
Pennsylvania	2117	39	6	3	6	2
South Carolina	53	—2	—	—	—	—
Tennessee	3530	610	22	6	23	8
Texas	64	—	—	—	—	—
Virginia	3	—	—	—	—	—
Washington	12	—1	—	—	—	—
Wisconsin	6	11	6	11	—	—
West Virginia	1	—	—	—
Total	258	82	168	82	162	74
Wisconsin	3	11	6	11
Total	242	91	168	77

~~(1)~~ The ~~2017~~increase ~~columns~~in ~~include~~branch ~~operating~~ locations ~~acquired~~in on2017 ~~December~~was ~~31,~~largely ~~2016,~~ the ~~first~~result ~~day~~of the acquisition of ~~our~~an ~~2017~~80% ~~fiscal~~controlling ~~year,~~interest in ~~conjunction~~the ~~with~~entity holding the home health and hospice assets of Community Health Systems, Inc. (NYSE: CYH) (referred to herein as “CHS JVHome ~~Transaction~~Health”). CHS Home Health, a provider of skilled home health and hospice services, operated 74 home health and 15 hospice branch locations in 22 states.

~~During~~Home ~~2016,~~Health weServices ~~acquired locations in New Jersey, Wisconsin, Connecticut and Kentucky, while also strategically consolidating certain locations in Ohio into larger service offices.~~ Segment

~~Visiting~~Our ~~Nurse~~HH ~~Services~~ segment provides a comprehensive range of Medicare-certified home health nursing services to patients in need of recuperative health care, typically following a period of hospitalization or care in another type of inpatient facility. Our patients are referred to us by their physicians or upon discharge from a hospital or other type of in-patient facility.

Our VN segment provides a comprehensive range of Medicare-certified home health nursing services to patients in need of recuperative health care, typically following a period of hospitalization or care in another type of inpatient facility. Our patients are referred to us by their physicians or upon discharge from a hospital or other type of in-patient facility. After the CHS JV Transaction, our VN segment operates 242 Medicare-certified home health agencies and 16 hospice branches for a total of 258 locations. This segment generated 70% of our revenues for 2016, of which approximately 95% were derived from the Medicare program.

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Our ~~Visiting~~HH ~~Nurse~~ segment ~~provides~~operates a242 ~~comprehensive range of~~ Medicare-certified home health ~~nursing services~~agencies. We This ~~receive~~segment ~~payment~~generated ~~from~~74% ~~Medicare,~~of ~~Medicaid~~our ~~and~~revenues ~~private~~for ~~insurance companies. Our professional staff includes registered nurses~~2017, ~~licensed~~of ~~practical~~which ~~nurses,~~approximately ~~physical,~~95% ~~speech~~were ~~and~~derived ~~occupational~~from ~~therapists, and medical social workers. They fulfill medical treatment plans prescribed by physicians. Our professional staff is subject to state licensing requirements in~~ the ~~particular~~Medicare ~~states in which they practice~~program. ~~Para-professional staff members (primarily home health aides) also provide care to these patients.~~

~~Our~~We ~~Visiting~~receive ~~Nurse~~payment ~~segment~~from ~~operations~~Medicare, ~~located~~Medicaid inand ~~Florida~~private ~~normally~~insurance ~~experience~~companies. Our ~~higher~~professional ~~admissions~~staff ~~during~~includes ~~the~~registered ~~first~~nurses, ~~quarter~~licensed ~~and~~practical ~~lower~~nurses, ~~admissions~~physical, ~~during~~speech ~~the~~and ~~third~~occupational ~~quarter~~therapists, ~~than~~and inmedical ~~the~~social ~~other~~workers. They ~~quarters~~fulfill ~~due~~medical totreatment ~~seasonal~~plans ~~population~~prescribed ~~fluctuations~~by physicians. VNOur ~~segment~~professional ~~operations~~staff ~~located~~are subject to state licensing requirements in ~~Florida~~the ~~generated~~particular ~~approximately~~states ~~26%~~in ofwhich ~~our~~they ~~revenue~~practice. Para-professional ~~for~~staff ~~2016~~members (primarily home health aides) also provide care to these patients.

~~Personal~~Our ~~Care~~HH ~~Services~~segment operations located in Florida normally experience higher admissions during the first quarter and lower admissions during the third quarter than in the other quarters due to seasonal population fluctuations. HH segment operations located in Florida generated approximately 20% of our revenue for 2017.

~~Our~~Other PC segment services are also provided in patients’ homes on an as needed hourly basis, including personal care, medication management, meal preparation, caregiver respite and homemaking. These services (generally provided by paraHome-~~professional~~Based ~~staff~~Services such as home health aides) are generally of a custodial rather than skilled nature. Generally, PC revenues are generated on an hourly basis. We currently operate 82 Personal Care locations. This segment generated 26% of our revenues for 2016, of which approximately 83% were derived from the Medicaid program. Segment

Personal care services are also provided in patients’ homes on an as needed hourly basis, including personal care, medication management, meal preparation, caregiver respite and homemaking. These services (generally provided by para-professional staff such as home health aides) are generally of a custodial rather than skilled nature. Generally, PC revenues are generated on an hourly basis, of which approximately 80% were derived from the Medicaid program. We currently operate 75 Personal Care locations. Hospice services are largely provided in patients’ homes and generally require specialized hospice nursing skills. Hospice revenues are generated on a per diem basis and are primarily from Medicare (approximately 93% of hospice revenues). We operate 16 Hospice locations. Our OHBS segment generated 23% of our revenues for 2017.

Healthcare Innovations Segment

Our HCI business segment was created to house and separately report on our developmental activities outside our traditional home health business platform. These activities are intended ultimately, whether directly or indirectly, to benefit our patients and payers through the enhanced provision of home health services. HCI activities all share a common goal of improving patient experiences and quality outcomes, while lowering costs. These include, but are not limited to: technology, information, population health management, risk-sharing, assessments, care coordination and transitions, clinical advancements, enhanced patient engagement and informed clinical decision making. We believe these activities help us discover valuable insight and experiences that would not otherwise be gained in the routine operation of our core home health business segments. Further, we believe these innovation activities will play an important role in collaborating with policy makers, payers, providers, and anyone who assumes financial risk for managing patient populations, to seek to reduce costs, and improve quality by providing increasingly more care for more patients in their homes than ever before. This segment generated approximately 43% of our revenue for ~~2016~~2017.

As discussed further below, the HCI segment currently includes: a) Imperium Health Management, LLC ("Imperium"), an ACO enablement company, b) anLong ~~investment~~Term ~~in NavHealth~~Solutions, Inc. ("~~NavHealth~~LTS"), aan ~~population~~in-~~health~~home ~~analytics~~assessment company serving the long-term care insurance industry, c) Ingenios Health Co. ("Ingenios"), a Nurse-Practitioner-oriented and mobile technology-enabled health risk assessment company primarily serving managed care organizations; and d) ~~Long~~ ~~Term~~an ~~Solutions~~investment in Care Journey (formerly NavHealth, Inc. ~~("LTS"~~), ana inpopulation-~~home~~health ~~assessment~~analytics company, ~~serving the long-term care insurance industry.~~

Some of these initiatives are highly speculative and have been made in development stage enterprises. There can be no assurance that we will receive any return on, or of, the capital we invest in these ventures. However, we believe these activities already have, and will continue to help us, discover valuable insights and experiences we would not otherwise gain in the routine operation of our core home health business segments. These endeavors are part of a growing number of care-related innovations and reforms. We expect more will be attempted over the next several years.

Imperium

Imperium's purpose is to assist health care systems and independent primary care physician practices in establishing and successfully operating Accountable Care Organizations ("ACOs") first made possible by 2010's Affordable Care Act. Through improved care management, in a coordinated effort led by primary care physicians, with nurses and home health agencies using evidence-based clinical standards, we seek to reduce avoidable hospitalizations, emergent care, and non-impactful health care services. We seek to work together with primary care physicians to manage high-cost patients in lower-cost settings, with a goal of generating, and sharing in, savings to the Medicare program. By linking physicians with home health care through the ACO vehicle we seek to deliver meaningful savings to the healthcare system and participate in a

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Through improved care management, in a coordinated effort led by primary care physicians, with nurses and home health agencies using evidence-based clinical standards, we seek to reduce avoidable hospitalizations, emergent care, and non-impactful health care services. We seek to work together with primary care physicians to manage high-cost patients in lower-cost settings, with a goal of generating, and sharing in, savings to the Medicare program. By linking physicians with home health care through the ACO vehicle we seek to deliver meaningful savings to the healthcare system and participate in a share of those savings under the Medicare Shared Savings Program ("MSSP") and such other similar models as may evolve in the future.

Imperium has rapidly expanded its customer base growing from 3 ACOs under contract in 2013, to 7 in 2014, 11 in 2015, 14 in 2016, ~~and~~ 15 in 2017 and 30 in 2018. In terms of covered Medicare beneficiaries, Imperium has grown from 23,000 in 2013, to 45,000 in 2014 and 85,000 in 2015, 124,000 in 2016, ~~and~~142,000 ~~now~~in ~~has~~2017 and ~~142~~405,000 in ~~2017~~2018. While we intend to work together toward the development of additional ACO relationships in markets in which Almost Family also provides home health services, Imperium also currently has, and will continue to seek, ACO customers in other service territories. We own 72% of Imperium and consolidate its result in our financial statements. We report a provision for noncontrolling interests (“NCI”) to reflect the income or losses attributable to the 28% interest that we do not own.

CMS announced the first year financial reconciliation and quality performance results for ACOs in September of 2014, in which, fifty-three ACOs generated shared savings during their first performance year ended December 31, 2013. ACOs that generated savings earned a performance payment, if they met the quality standard. CMS announced the ~~third~~fourth year results in August of ~~2016~~2017. Imperium serviced ACOs have received an MSSP payments in the first, second, third and ~~third~~fourth CMS results. Imperium received its share of $2.3 million in 2017 for 2016 services, $4.3 million in 2016 for 2015 services, $1.4 million in 2015 for 2014 services and $1.6 million in 2014 for 2013 services. There can be no assurance that future payments will be made by CMS, the structure of MSSP payments will remain as currently deployed, or that an MSSP payment will be received in ~~2017~~2018 related to our ~~2016~~2017 services or any future period.

Long Term Solutions

~~On January 5, 2016, we acquired Long Term Solutions, Inc. See "Acquisitions" for additional information.~~ LTS performs in-home nursing assessments for the long-term care insurance industry. LTS also provides a suite of planning and support services to insurance companies, employers and direct to individuals and families throughout the United States. LTS, through its network of thousands of assessment service partners provides assessments in all 50 U.S. states and a number of foreign countries. LTS estimates that the majority of its assessments result in the patient ultimately receiving home health, assisted living or skilled nursing care in accordance with their long-term care insurance benefits.

The American Association for Long-Term Care Insurance ("AALTCI") estimates that the industry paid over $7.5 billion in claims covering 273,000 beneficiaries across the US in its most recently studied year and that over two-thirds of all newly-opened long term care insurance claims paid for care in the home or in an assisted living community setting. The AALTCI also reported total benefit payments increased by 13 percent and the number of long term care insurance policyholders on claim grew 3.4 percent. According to the National Association of Insurance Commissioners ("NAIC") the top 100 plans in the US cover 7.2 million lives.

Ingenios Health Co.

Ingenios is a provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives ~~in four states and Washington, D~~.C. We believe ~~new~~ health assessment capabilities provide the key element in the evolution of improved care planning and delivery as healthcare delivery and reimbursement models evolve.

Care Journey (formerly NavHealth)

~~NavHealth~~Care Journey is a development-stage enterprise whose business plan is focused on the development of technology-based tools designed to help health systems anticipate and inform a patient’s journey through the health care system. Among its other objectives, ~~NavHealth~~Care Journey seeks to develop and market a software platform designed to assist health care providers, managed care organizations and insurers in their efforts to aggregate patient data from various sources, improve patient engagement, satisfaction and outcomes and lower the overall cost of healthcare delivery. We are co-invested ~~in NavHealth~~ with founders Aneesh Chopra and Hunch Analytics which Chopra co-founded with Sanju Bansal. Mr. Bansal is the co-founder and former COO of MicroStrategy (MSTR), a worldwide provider of enterprise software for cloud business intelligence and big data services. We made an initial $1 million noncontrolling investment in Care Journey on January 29, 2015 and may, at our option, invest another $1 million. We account for this non-controlling investment under the cost method.

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NavHealth on January 29, 2015 and may, at our option, invest another $1 million. We account for this non-controlling investment under the cost method.

Compensation for Home Health Services

We are compensated for our home health services by (i) Medicare ~~(Visiting Nurse segment only)~~, (ii) Medicaid, (iii) other third party payors (e.g., insurance companies and other sources), and (iv) private pay (paid by personal funds). The rates of reimbursement we receive from Medicare, Medicaid and other government programs are generally dictated by those programs. In determining charge rates for goods and services provided to our other customers, we evaluate several factors including cost and market competition. We sometimes negotiate contract rates with third party providers such as insurance companies.

Our reliance on government sponsored reimbursement programs makes us vulnerable to possible legislative and administrative regulation changes and budget cut-backs that could adversely affect the number of persons eligible for such programs, the amount of allowed reimbursements or other aspects of the programs, any of which could materially affect us. In addition, loss of certification or qualification under Medicare or Medicaid programs could materially affect our ability to effectively market our services.

The following table sets forth our revenues from operations derived from each major payor class during the indicated periods (by percentage of net revenues) for the following years:

Payor Group	~~2016~~2017		~~2015~~2016		~~2014~~2015
Medicare	6875.21	%	7168.42	%	7271.4	%
Medicaid and Other Government Programs	2319.28	%	2223.52	%	1922.65	%
Insurance and private pay	85.61	%	68.16	%	86.01	%

Medicare revenues ~~are earned in our VN segment, where they~~ account for 95% of HH segment revenues. Historical changes in payment sources are primarily a result of changes in the types of customers we attract.

See “Government Regulation” and “Risk Factors.” We will monitor the effects of such items and may consider modifications to our expansion and development strategy when and if necessary.

Acquisitions

The Company has completed several acquisitions over the past few years and will continue to seek to acquire other quality providers of Medicare-certified home health and/or personal care services, along with making investments in healthcare innovators through our Healthcare Innovations segment.

Factors which may affect future acquisition decisions include, but are not limited to, the quality and potential profitability of the business under consideration, and our profitability and ability to finance the transaction.

2017 ~~Acquisition~~Acquisitions

On ~~December 31~~November 20, ~~2016~~2017, ~~the first day after~~ our ~~2016~~CHS-JV ~~fiscal~~purchased ~~year end, we acquired an 80% controlling interest in the entity holding the home health and hospice~~ assets of ~~Community Health Systems, Inc. (NYSE: CYH) (referred to herein as “CHS Home Health”). CHS Home Health,~~ a ~~provider~~Medicare-certified ~~of skilled~~ home health ~~and~~agency ~~hospice services, currently operates 74 home health and 15 hospice branch locations~~ in 22Fort ~~states. With the completion of this transaction~~Myers, ~~Almost Family now operates 340 branches across 26 states~~Florida. ~~The~~Post-acquisition ~~purchase~~operating ~~price~~results ofare ~~$128 million~~reported ~~was~~in ~~funded~~our ~~through~~HH ~~borrowings on the Company's revolving credit facility~~segment.

On July 14, 2017, our CHS-JV purchased assets of a Medicare-certified home health agency and related private duty company in Key West, Florida. Post-acquisition operating results are reported in our HH and OHBS segments.

On December 31, 2016, the first day of our 2017 fiscal year, we acquired an 80% controlling interest in the entity holding the home health and hospice assets of Community Health Systems, Inc. (NYSE: CYH) (referred to herein as “CHS Home Health”). CHS Home Health, a provider of skilled home health and hospice services, operated 74 home health and 15 hospice branch locations in 22 states. The purchase price of $128 million was funded through borrowings on the Company’s revolving credit facility.

2016 Acquisitions

During the third quarter of 2016, one of our HCI subsidiaries redeemed certain outstanding shares increasing our ownership percentage to 72.04% from 61.50%.

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On June 18, 2016, we acquired certain home health agency assets primarily in Wisconsin, but also in Connecticut and Kentucky (collectively, the Wisconsin acquisition) for a purchase price of $6.1 million, funded through borrowings on the Company’s bank credit facility. The post-acquisition operating results of these agencies are primarily reported in our PC segment.

On January 5, 2016, we acquired 100% of the equity of LTS for a purchase price of $37 million, funded through borrowings on the Company's bank credit facility, seller notes and issuance of the Company's common stock. LTS's post acquisition operating results are reported in our HCI segment.

On January 5, 2016, we purchased the assets of a Medicare-certified home health agency owned by Bayonne Visiting Nurse Association (“Bayonne”) located in New Jersey. Bayonne’s post acquisition operating results are reported in our VNHH segment.

2015 Acquisitions

On November 5, 2015, we acquired the stock of Black Stone Operations, LLC (“Black Stone”). Black Stone is a provider of in-home personal care and skilled home health services in western Ohio and operates under the name “Home Care by Black Stone.” The purchase price of $40 million was funded through borrowings on the Company’s bank credit facility, seller notes and issuance of the Company’s common stock. Black Stone’s post acquisition operating results are reported in our VNHH and PC segments.

On July 22, 2015, we acquired 100% of the equity of Ingenios for approximately $11.4 million of the Company’s common stock plus $2 million in cash. Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in four states and Washington, D.C. The post acquisition operating results of Ingenios are reported in our HCI segment.

On August 29, 2015, we acquired 100% of the equity of Bracor, Inc. (dba “WillCare”). WillCare, based in Buffalo, NY, owned and operated VNHH and PC branch locations in New York (12) and Connecticut (1). The purchase price was approximately $50.8 million. The transaction was funded by borrowings under the Company’s bank credit facility. WillCare’s New York and Connecticut post acquisition operating results are reported in our VNHH and PC segments.

On March 1, 2015, we acquired the stock of WillCare’s Ohio operations for $3.0 million. WillCare’s Ohio post acquisition operating results are reported in our VNHH and PC segments.

On January 29, 2015, we acquired a noncontrolling interest in a development stage analytics and software company, ~~NavHealth~~Care Journey. The investment is an asset of our Healthcare Innovations segment.

Competition, Marketing and Customers

The ~~visiting~~home ~~nurse~~health industry is highly competitive and fragmented. Competitors include larger publicly held companies such as Amedisys, Inc. (NasdaqGS: AMED), Kindred Healthcare, Inc. (NYSE: KND), and LHC Group, Inc. (NasdaqGS: LHCG), and numerous privately held multi-site home care companies, privately held single-site agencies and a significant number of hospital-based agencies. Competition for customers at the local market level is very fragmented and market specific. Generally, each local market has its own competitive profile and no one competitor has significant market share across all our markets. To the best of our knowledge, no individual provider has more than 7% share of the national Medicare home health market.

We believe the primary competitive factors are quality of service and reputation among referral sources. We market our services through our site managers and marketing staff. These individuals contact referral sources in their areas to market our services. Major referral sources include: physicians, hospital discharge planners, Offices on Aging, social workers, and group living facilities. We also utilize, to a lesser degree, consumer-direct sales, marketing and advertising programs designed to attract customers.

The personal care industry is likewise highly competitive and fragmented. Competitors include home health providers, senior adult associations, and the private hiring of caregivers. We market our services primarily through our site

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The personal care and hospice industries are likewise highly competitive and fragmented. Competitors include home health providers, senior adult associations, and the private hiring of caregivers. We market our services primarily through our site managers, and we compete by offering a high quality of care and by helping families identify and access solutions for care. Major referral sources include case managers, physicians and hospital discharge planners.

Our HCI segment competes in new industries, some of which were created by the Patient Protection and Affordable Care Act (the “ACA”), signed into law in ~~March~~ 2010. In certain cases, we operate in relatively new and unproven markets which include new competitors that are identified regularly and which range in size from start-up companies to larger publicly held companies like Universal American Corp., now owned by WellCare Health Plans, Inc. (NYSE: ~~UAM~~WCG). We market our services directly to our customers.

Government Regulation

Medicare Home Health Program

Payment Methodology

As shown in “Compensation for Home Health Services” above, approximately 6875% of our ~~2016~~2017 consolidated net service revenues were derived from the Medicare Home Health Program. Medicare reimburses home health care providers under the Prospective Payment System (“PPS”), which pays a fixed, predetermined rate for services and supplies under an episode of care. An episode of home health care spans a 60-day period, starting with the first day a billable visit is furnished to a Medicare beneficiary and ending 60 days later. If a patient is still in treatment on the 60th day, a new episode begins on the 61st day, commonly referred to as a recertification episode, regardless of whether a billable visit is rendered on that day and ends 60 days later.

Payment rates are subject to adjustment based on certain variables including, but not limited to: (a) a case-mix adjustment, which drives the home health resource group (“HHRG”) to which the Medicare patient is assigned based on such factors as the patient’s clinical, functional, and services utilization characteristics; (b) geographic wage adjustment, including rural rate add-ons, if any; (c) a payment adjustment based upon the level of therapy services required (thresholds set at 6, 14 and 20 visits); (d) a low utilization payment adjustment (“LUPA”) if the number of visits was fewer than five; (e) an outlier payment if our patient’s care was unusually costly (capped at 10% of total reimbursement at the agency level); (f) a partial payment if our patient transferred to another provider or we received a patient from another provider before completing the episode; (g) the number of episodes of care provided to a patient; and (h) sequestration, a 2% legislated reduction pursuant to the Budget Control Act (“BCA”) signed into law on August 2, 2011, which was effective for episodes ended after March 31, 2013.

In establishing payment rates for the last three years, the Medicare Program recalibrated the national average case-mix levels and maintained budget neutrality by making a corresponding adjustment to the National, Standardized 60-Day Episode Payment Rate (“Base Episode Payment Rate”). These nominal case-mix and payment rate recalibrations result in a lower case mix and higher base rates and are intended to have no effect on payments actually made. We have presented the Base Episode Payment Rate established by the Medicare Program for all episodes of care ended on or after the applicable time periods, along with the Base Episode Payment Rate for each period as if the case-mix resets were in effect for all prior periods below:

			Base Episode Payment Rate
	Base Episode		Adjusted for Case-mix
Period	Payment Rate (1)		Recalibrations (2)
January 1, 2017 through December 31, 2017	$	2,990	$	2,990
January 1, 2018 through December 31, 2018	$	3,040	$	3,040
January 1, 2016 through December 31, 2016		2,965		3,028
January 1, 2017 through December 31, 2017		2,990		3,038
January 1, 2015 through December 31, 2015		2,961		3,081
January 1, 2016 through December 31, 2016		2,965		3,077
January 1, 2014 through December 31, 2014		2,869		3,094
January 1, 2015 through December 31, 2015		2,961		3,130

(1)

Reflects the payment rates as published by the Medicare Program.

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(2) Presents the payment rates on a consistent basis as if the case-mix recalibrations had been in effect for all periods presented. As applicable, adjusted payment rates for each of the years 2015-2017 were calculated by multiplying the actual Base Episode Payment by 1.~~0366~~0187 (2015 Final Rule), then by 1.~~0187~~0214 (2016 Final Rule) and then by 1.~~0214~~0160 (2017 Final Rule).

After determining the appropriate PPS payment rate, we record net revenues as services are rendered to patients over the 60-day episode period. At the end of each month, a portion of our revenue is estimated for episodes that have not yet been completed, which are generally referred to as episodes in progress. As a result, net service revenues recorded for an episode in progress is subject to change if the actual number of visits differs from the number anticipated at the start of care. Our revenue recognition under the Medicare reimbursement program is discussed in greater detail in Part II, Item 7 “Critical Accounting Policies” and Item 8, “Notes to Consolidated Financial Statements”.

~~Rebasing~~2018 ~~and~~CMS ~~Other~~Related ~~Statutory Rate Reductions~~Updates

The ~~Patient~~Bipartisan ~~Protection~~Budget ~~and Affordable Care~~ Act ~~(the~~of ~~“ACA”)~~2018, ~~signed~~enacted ~~into law~~ in ~~March 2010,~~February 2018 has ~~adversely~~the ~~impacted~~following ~~our~~provisions ~~business~~impacting ~~and~~health itcare isservices ~~reasonable~~provided toat ~~expect it to have an impact on our business in the future. Specifically, the ACA provisions~~home:

· ~~Outlined~~Restores ~~annual~~the 3% home health rate ~~reductions~~add-on ~~from~~for ~~2011~~patients ~~through~~who ~~2017~~reside ~~for~~in ~~Medicare~~rural ~~reimbursement~~geographies, ~~rates~~effective ~~for~~January ~~home~~1, ~~health~~2018. ~~care~~The ~~services~~add-on werate ~~provide~~will tobe ~~our~~phased ~~patients;~~downward over a five year period following a formula specified in the legislation.

· ~~Established~~Mandates ~~statutory~~the ~~reductions~~development toof a new case mix model for home health services using a 30 day payment period, through a transparent process including the ~~annual~~home ~~inflationary~~health ~~rate~~industry ~~adjustments~~and weCongressional ~~would~~committees ~~have~~of ~~otherwise~~Medicare ~~received;~~jurisdiction. The law requires any new case mix model to be implemented in 2020 in a budget neutral manner.

· ~~Established~~Face-to-face ~~certain~~documentation ~~“productivity”~~improvements ~~adjustments~~allowing ~~reducing~~ the ~~reimbursement~~home ~~rates~~health wemedical ~~would~~record ~~have~~in ~~otherwise~~its ~~received;~~entirety to be used to support the physician’s attestation of medical necessity.

· ~~Required~~A ~~Centers~~study ~~for~~to ~~Medicare~~be ~~and~~conducted ~~Medicaid~~by ~~Services~~the GAO (~~“CMS”~~Government Accounting Office) on Medicare improvements to ~~recalculate~~address orthe ~~“rebase”~~needs of the chronically ill including the provision of services provided at home, including interdisciplinary care management, tele-health ~~reimbursement~~and tele-monitoring for managed care plans, requiring states to ~~more~~better ~~closely~~integrate ~~align~~Medicare ~~with~~and Medicaid services for the ~~costs~~dually eligible and extension of ~~providing~~the ~~care;~~Independence at Home Demonstration Program.

· ~~Limited~~A ~~any~~specific ~~reduction~~home inhealth ~~reimbursement~~market ~~rates~~basket ~~resulting~~annual ~~from~~inflationary ~~“rebasing”~~update topercentage ~~a maximum~~ of 31.5% ~~per~~for ~~year~~FY2020, inleaving ~~each~~intact of the ~~four~~full ~~phase-in~~market ~~years;~~basket update (generally expected to be between 2% and 3%) for FY2019.

· On ~~Required~~November 1, 2017, the Centers for Medicare ~~Payment~~and ~~Advisory~~Medicaid ~~Commission~~Services (“~~MedPac~~CMS”) ~~and~~released the USfinal ~~Department~~rule for FY2018 home health reimbursement, which includes a 0.4% rate cut consisting of a 1.0% market basket update, a 0.97% case mix adjustment and sunset of the rural add-on provision. Among other things, the rule finalizes proposals for the Home Health Value Based Purchasing (“HHVBP”) Model and ~~Human~~the ~~Services~~Home Health Quality Reporting Program (“~~HHS~~HH QRP”). CMS ~~Secretary~~did not finalize the Home Health Groupings Model but instead elected to ~~assess~~“further ~~and~~engage ~~report~~with onstakeholders to move towards a system that shifts the ~~impact~~focus from volume of ~~rebasing~~services onto a more patient –centered model”. On September 25, 2017, the Company submitted a comment letter to CMS which provides an alternative course of action that we believe better protects Medicare beneficiaries and their right to access appropriate and ~~quality~~necessary home health service. The comment letter to CMS entitled “CY 2018 Home Health Prospective Payment System Rate Update – September 2017” can be found on the Company’s website, along with a series of ~~care~~responses to various other stakeholder requests from the Senate Finance Committee, the House Ways and Means Committee and CMS dating to 2013 and including the Company’s executive testimony before the Congress.

In January of 2017, CMS ~~Related~~released ~~Updates~~a final rule revising the conditions of participation (“CoPs”) for home health agencies to participate in the Medicare and Medicaid programs. The rule, originally effective July 13, 2017, and deferred through the end of 2017, focuses on, among other things, care delivered to patients, an interdisciplinary view of patient care, greater flexibility in meeting quality of care standards and the elimination of certain unneeded procedural burdens on providers. This new rule is not expected to have a significant impact on our result of operations or financial position.

On ~~October~~June 318, 2016, CMS ~~issued~~announced ~~its~~the ~~CY2017~~“Pre-Claim ~~Home~~Review ~~Health~~Demonstration ~~Prospective~~of ~~Payment~~Home ~~System~~Health ~~Rate~~Services” ~~Update,~~ which ~~includes~~seeks ato ~~0.7%~~demonstrate ~~rate~~that ~~cut consisting of~~ a ~~2.8%~~review ~~market basket update minus a 0.3% productivity adjustment, a 2.3% rebasing cut, and a 0.97% case mix adjustment. Based on our initial analysis~~ of ~~the~~selected ~~2017~~documentation ~~rule,~~prior ~~we estimate it will reduce our Medicare reimbursement rates for 2017 in the range of 1%~~ to ~~2%. The~~payment ~~impact~~ of ~~recalibration~~claims ofcan ~~the~~decrease ~~case-mix~~“improper ~~model~~payments on the Company results in 2017 will depend upon the Company’s actual patient mix in that period. Investors are encouraged to read the rule in its entirety at https://www.federalregister.gov/documents/2016/11/03/2016-26290/medicare-and-medicaid-programs-cy-2017-home-health-prospective-payment-system-rate-update-home.

On June 8, 2016, CMS announced the “Pre-Claim Review Demonstration of Home Health Services” which seeks to demonstrate that a review of selected documentation prior to payment of claims can decrease “improper payments because of insufficient documentation”. According to the CMS announcement, the pre-claim review demonstration will help educate Home Health Agencies (“HHA”) on what documentation is required and encourage them to submit the correct documentation, while still allowing the HHA to begin providing services and receive initial payments prior to the pre-claim review decision. The pre-claim review demonstration began in Illinois in 2016, Florida is expected to begin April 1, 2017 and Texas, Michigan and Massachusetts will phase in over 2017. The Company is currently unable to predict what impact, if any, this demonstration program may have on its result of operations or financial position.

In January of 2017, CMS released a final rule revising the conditions of participation (“CoPs”) for home health agencies to participate in the Medicare and Medicaid programs. The rule is effective July 13, 2017 and focuses on, among other things, care delivered to patients, an interdisciplinary view of patient care, greater flexibility in meeting quality of care standards and the elimination of certain unneeded procedural burdens on providers. We are currently unable to predict what impact, if any, this new rule may have on our result of operations or financial position.

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because of insufficient documentation.” According to CMS, the pre-claim review demonstration was designed to help educate Home Health Agencies on what documentation is required and encourage them to submit the correct documentation, while still allowing the HHA to begin providing services and receive initial payments prior to the pre-claim review decision. The pre-claim review demonstration began in Illinois in 2016, but currently has been suspended. Further expansion to Florida, Texas, Michigan and Massachusetts has also been delayed. Currently, it is unclear as to when this demonstration program will be resumed, if ever.

Potential Future Developments in Medicare Home Health

While there have been many changes enacted over the past several years, the Congress and/or CMS may take future actions which could have an adverse impact on our business, including possible:

Extension of the rebasing period to a period longer than the currently legislated 2014-2017 four-year phase in;

Changes in cost sharing between the Medicare program (“Program”) and beneficiaries (i.e., co-pays);

Removal of or changes to codes in the case-mix system or recalibration of the case-mix system including further case-mix creep coding adjustments, all of which could result in changes to rates under the national standardized 60-day episodic payment;

Post-acute care bundling;

Removal or reductions to established statutory reductions to the annual inflationary rate adjustments we would have otherwise received;

“Productivity” payment reductions to reimbursement rates we would have otherwise received;

Changes that put providers “at risk” for patient outcomes;

Addition of new pre-authorization requirements for home health services;

Implementation and/or expansion of Value-based pricing programs could result in reduction of reimbursement rates we would otherwise receive or could impact our reimbursement in ways we do not currently anticipate, and

Other types of changes of which we may not currently be aware.

We are unable to predict when or whether any of these types of changes may be enacted or what impact, if any, they may have on our business.

Medicaid Reimbursement

As shown in “Compensation for Home Health Services” above, approximately 2320% of our ~~2016~~2017 consolidated net service revenues were derived from state Medicaid and Other Government Programs, with approximately 97.65%, 53.04%, 43.01%, 21.39% and 1.01% generated from Medicaid reimbursement programs in the states of Ohio, Connecticut, New York, Tennessee and Kentucky, respectively. Net service revenues under such state programs are derived from services provided under a per visit, per hour or unit basis (as opposed to episodic). Revenues are calculated and recorded using payor-specific or patient-specific fee schedules based on the contracted rates.

The financial condition of the Medicaid programs in each of the states in which we operate is cyclical with some currently facing significant budget issues. States may be expected from time to time to take actions or evaluate taking actions to control the rate of growth of Medicaid expenditures. Among these actions are the following:

redefining eligibility standards for Medicaid coverage,

redefining coverage criteria for home and community based care services,

slowing payments to providers by increasing the minimum time in which payments are made,

limiting reimbursement rate increases or implementing rate cuts,

increased utilization of self-directed care alternatives,

shifting beneficiaries from traditional coverage to Medicaid managed care providers, and

changing regulations under which providers must operate.

Medicaid programs, while partially federally funded, are administered by the individual states under the broad supervision of CMS. Accordingly, developments typically occur on a state-by-state basis. Specific programs and changes are enacted regularly. Any such changes, if enacted, could adversely impact our operations.

Medicare and Medicaid Reimbursement Summary

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~~industry~~ Medicaid toprograms, ~~significant~~while ~~reform. Health~~partially ~~care~~federally ~~reforms~~funded, ~~have~~are ~~been~~administered ~~enacted~~by asthe ~~discussed~~individual ~~elsewhere~~states inunder ~~this~~the ~~document~~broad ~~and~~supervision ~~proposals~~of ~~for~~CMS. Accordingly, ~~additional~~developments ~~changes~~typically ~~are~~occur ~~continuously~~on ~~formulated~~a state-by ~~departments of the Federal government, Congress, and~~ -state ~~legislatures~~basis. ~~Such~~Specific ~~governmental~~programs ~~payors~~and ~~provide~~changes ~~for~~are ~~approximately~~enacted ~~91%~~regularly. Any ofsuch ~~our~~changes, ~~consolidated~~if ~~net service revenues~~enacted, ~~including~~could ~~Medicare~~adversely ~~Advantage~~impact ~~plans~~our ~~run by private insurers which are also dependent on federal funding~~operations.

Medicare and Medicaid Reimbursement Summary

We expect legislators and government officials to continuously review and assess alternative health care delivery systems and payment methodologies. Changes in the law or new interpretations of existing laws may have a dramatic effect on the definition of permissible or impermissible activities, the relative cost of doing business, and the methods and amounts of payments for medical care by both governmental and other payors. We expect legislative changes intended to “balance the budget” and slow the annual rate of growth of Medicare and Medicaid to continue. Such future changes may further impact reimbursement for our services. There can be no assurance that future legislation or regulatory changes will not have a material adverse effect on our results of operations.

Governments might take or consider taking further actions because the number of Medicare and Medicaid beneficiaries and their related expenditures are growing at a faster rate than the governments’ revenue. Medicare and Medicaid are consuming increasing percentages of budgets and may expand further driven by state based exchanges resulting from the ACA and implementing regulations. Health care financing issues are exacerbated when revenues slow in a down economy. We believe that these financing issues are cyclical in nature rather than indicative of the long-term prospect for Medicare and Medicaid funding of health care services for the populations we serve. Additionally, we believe our services offer the lowest cost alternative to institutional care and are a critical part of the solution to our nation’s health care financing problems.

Given the broad and far reaching implications of all the changes in the rapidly evolving environment in which we operate, the incomplete nature of these changes, the pace at which the changes are taking place and the prospects for future changes to be made, we cannot predict the ultimate impact, which may be material and adverse, that health care reform efforts and resulting Medicare and Medicaid reimbursement rates will have on our liquidity, our results of operations, the realizability of the carrying amounts of our intangible assets, including goodwill, or our financial condition. Further, we are unable to predict what effect, if any, such material adverse effect, if it were to occur, might have on our ability to continue to comply with the financial covenants of our revolving credit facility and our ability to continue to access debt capital through that facility.

Permits and Licensure

Many states require companies providing certain health care services to be licensed as home health agencies. In addition, certain health care practitioners employed by us require state licensure and/or registration and must comply with laws and regulations governing standards of practice. The failure to obtain, renew or maintain any of the required regulatory approvals or licenses could adversely affect our business. We believe we are currently licensed appropriately where required by the laws of the states in which we operate. There can be no assurance that either the states or the federal government will not impose additional regulations upon our activities which might adversely affect our results of operations, financial condition, or liquidity.

Certificates of Need

Certain states require companies providing health care services to obtain a certificate of need issued by a state health-planning agency. Where required by law, we have obtained certificates of need from those states. There can be no assurance that we will be able to obtain any certificates of need which may be required in the future, if we expand the ~~scope of our services or if state laws change to impose additional certificate of need requirements, and any attempt to obtain additional certificates of need will cause us to incur certain expenses.~~

Medicare and Medicaid Participation

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~~increases. For~~scope ~~Medicare, there are three categories~~ of ~~providers~~our ~~i.e.,~~services ~~“limited,” “moderate,”~~ or ~~“high”~~if risk, and CMS has placed newly enrolling home health agencies in the “high risk” category, with existing enrolled home health agencies categorized as “moderate risk.” In addition to the low risk provider screening procedures, providers in the moderate risk category will be subject to unannounced site visits. For high risk providers, any individual with a 5% or more ownership interest will be subject to fingerprint-based criminal history record checks. Additionally, the new regulations authorize Medicare and state ~~Medicaid~~laws ~~agencies~~change to impose ~~temporary~~additional ~~enrollment~~certificate ~~moratoria for a particular type~~ of ~~provider~~need ~~if determined to be necessary to combat fraud~~requirements, ~~waste,~~and orany ~~abuse. To~~attempt ~~the extent that home health agencies are subject~~ to aobtain ~~moratorium,~~additional ~~any~~certificates ~~newly enrolling home health agency, including any change~~ of ~~ownership~~need ~~subject~~will tocause ~~the~~us ~~36 month rule, and any expansion~~ to ~~add~~incur acertain ~~branch would be affected by the moratorium~~expenses.

Medicare and Medicaid Participation

Effective March 25, 2011, CMS implemented new enrollment regulations which were a response to aspects of the ACA designed to enhance enrollment procedures to protect against fraud. The regulations authorize the establishment of risk categories with risk level dictating the enrollment screening activities, i.e., more rigorous screening as the perceived risk increases. For Medicare, there are three categories of providers i.e., “limited,” “moderate,” or “high” risk, and CMS has placed newly enrolling home health agencies in the “high risk” category, with existing enrolled home health agencies categorized as “moderate risk.” In addition to the low risk provider screening procedures, providers in the moderate risk category will be subject to unannounced site visits. For high risk providers, any individual with a 5% or more ownership interest will be subject to fingerprint-based criminal history record checks. Additionally, the new regulations authorize Medicare and state Medicaid agencies to impose temporary enrollment moratoria for a particular type of provider if determined to be necessary to combat fraud, waste, or abuse. To the extent that home health agencies are subject to a moratorium, any newly enrolling home health agency, including any change of ownership subject to the 36 month rule, and any expansion to add a branch would be affected by the moratorium.

Other Regulations

A series of laws and regulations dating back to the Omnibus Budget Reconciliation Act of 1987 (“OBRA 1987”) and through the ACA and related subsequent legislation have been enacted and apply to us. Changes in applicable laws and regulations have occurred from time to time since OBRA 1987 including reimbursement reductions and changes to payment rules. Changes are also expected to occur continuously for the foreseeable future.

As a provider of services under Medicare and Medicaid programs, we are subject to the Medicare and Medicaid anti-kickback statute and other “fraud and abuse laws.” The anti-kickback statute prohibits any bribe, kickback, rebate or remuneration of any kind in return for, or as an inducement for, the referral of Medicare or Medicaid patients. We may also be affected by the ~~Federal~~federal physician self-referral prohibition, known as the “Stark” law, which, with certain exceptions, prohibits physicians from referring patients to entities in which they have a financial interest or from which they receive financial benefit. Penalties for violations of the federal Stark law include payment sanctions, civil monetary penalties, and/or program exclusion. Many states in which we operate have adopted similar self-referral laws, as well as laws that prohibit certain direct or indirect payments or fee-splitting arrangements between health care providers, if such arrangements are designed to induce or to encourage the referral of patients to a particular provider.

As a result of the Health Insurance Portability and Accountability Act of 1996 and other legislative and administrative initiatives, ~~Federal~~federal and state enforcement efforts against the health care industry have increased dramatically, subjecting all health care providers to increased risk of scrutiny and increased compliance costs.

We are subject to routine and periodic surveys, audits and investigations by various governmental agencies. In addition to surveys to determine compliance with the conditions of participation, CMS has engaged a number of contractors (including Fiscal Intermediaries, Recovery Audit Contractors, Program Safeguard Contractors, Zone Program Integrity Contractors, and Medicaid Integrity Contributors) to conduct audits to evaluate billing practices and identify overpayments. In addition to audits by CMS contractors, individual states are implementing similar programs such as using Medicaid Recovery Audit Contractors. We believe that we are in material compliance with applicable laws. However, we are unable to predict what additional government regulations, if any, affecting our business may be enacted in the future, how existing or future laws and regulations might be interpreted or whether we will be able to comply with such laws and regulations either in the markets in which we presently conduct, or wish to commence, business.

Medicare Accountable Care Organizations (ACOs)

The ACA also established ACOs as a tool to improve quality and lower costs through increased care coordination in the Medicare fee-for-service (“FFS”) program, also known as “Original Medicare.” The Medicare FFS program covers approximately 70% of the Medicare recipients or approximately 36 million eligible Medicare beneficiaries. ACOs are groups of doctors and other healthcare providers working together to provide high quality services and care for their patients. Provider and beneficiary participation in an ACO is purely voluntary and Medicare beneficiaries retain their current ability to seek treatment from any provider they wish. ACOs are legal entities that contract with CMS for three-year periods. Beneficiaries are assigned to ACOs using an “attribution” model based on a plurality of services provided by the primary care physician. Beneficiaries still have the right to use any doctor or hospital who accepts Medicare, at any time. In order to receive revenues from CMS under the MSSP, the ACO must meet certain minimum savings rates (i.e. save the federal government money) and meet certain quality measures. More specifically, the ACOs costs of

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groups of doctors and other healthcare providers working together to provide high quality services and care for their patients. Provider and beneficiary participation in an ACO is purely voluntary and Medicare beneficiaries retain their current ability to seek treatment from any provider they wish. ACOs are legal entities that contract with CMS for three-year periods. Beneficiaries are assigned to ACOs using an “attribution” model based on a plurality of services provided by the primary care physician. Beneficiaries still have the right to use any doctor or hospital who accepts Medicare, at any time. In order to receive revenues from CMS under the MSSP, the ACO must meet certain minimum savings rates (i.e. save the federal government money) and meet certain quality measures. More specifically, the ACOs costs of medical expenses for its members during a relevant measurement year must be below the ~~ACOs~~ACO’s benchmark by a minimum amount as established by CMS for such ACO.

CMS established the MSSP to facilitate coordination and cooperation among providers to improve the quality of care for Medicare FFS beneficiaries and reduce unnecessary costs. Eligible providers, hospitals, and suppliers may participate in the MSSP by creating, participating in or contracting with an ACO. The MSSP is designed to improve beneficiary outcomes and increase value of care by (1) promoting accountability for the care of Medicare FFS beneficiaries; (2) requiring coordinated care for all services provided under Medicare FFS; and (3) encouraging investment in infrastructure and redesigned care processes. The MSSP will reward ACOs that reduce health care costs below their benchmark while also meeting performance standards on quality of care. Under the final MSSP rules, Medicare will continue to pay individual providers and suppliers for specific items and services as it currently does under the FFS payment methodologies. MSSP rules require CMS to develop a benchmark for savings to be achieved by each ACO, if the ACO is to receive shared savings or for ACOs that have elected to accept responsibility for losses. An ACO that meets the program’s quality performance standards will be eligible to receive a share of the savings to the extent its assigned beneficiary medical expenditures are below its own medical expenditure benchmark provided by CMS.

Insurance Programs and Costs

We purchase stop-loss insurance for the employee health plan that places a specific limit, generally $300,000, on our exposure for any individual covered life. The ACA also includes regulatory changes related to employer sponsored health insurance benefit plans, the most significant of which was initially effective for the Company January 1, 2015. However, certain components continue to evolve, be delayed or have additional developments. Management has implemented portions of its procedures and is currently working to evaluate the implications of these changes and to develop appropriate courses of action for the Company. At this time, we are unable to predict the full impact of such changes on our health insurance benefit programs or the costs of such programs to the Company.

Malpractice and general patient liability claims for incidents which may give rise to litigation have been asserted against us by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. We are aware of incidents that have occurred through December 3029, ~~2016~~2017, that may result in the assertion of additional claims. We currently carry professional and general liability insurance coverage (on a claims made basis) for this exposure with no deductible.

We also carry D&O coverage for potential claims against our directors and officers, including securities actions, with deductibles ranging from $175,000 to $500,000 per claim.

Total premiums, excluding estimated exposure to claims and deductibles, for all our non-health insurance programs were approximately $2.25 million for the contract year ended May 31, ~~2016~~2017.

We record estimated liabilities for our insurance programs based on information provided by the third-party plan administrators, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. We monitor our estimated insurance-related liabilities and related insurance recoveries on a monthly basis and have recorded amounts due under insurance policies in other current assets, while recording the estimated carrier liability in other current liabilities in our consolidated balance sheets. As facts change, it may become necessary to make adjustments that could be material to our results of operations and financial condition.

We believe that our present insurance coverage is adequate. As part of our on-going risk management, regulatory compliance and cost control efforts, we continually seek alternatives that might provide a different balance of cost and risk, including potentially accepting additional self-insurance risk in lieu of higher premium costs.

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recording the estimated carrier liability in other current liabilities in our consolidated balance sheets. As facts change, it may become necessary to make adjustments that could be material to our results of operations and financial condition.

Executive Officers of the Registrant

See Part III, Item 10 of this Form 10-K for information about the Company’s executive officers.

Employees and Labor Relations

As of December 3029, ~~2016~~2017, we had approximately 1517,~~500~~100 employees. None of our employees are represented by a labor organization. We believe our relationship with our employees is satisfactory.

ITEM 1A. RISK FACTORS

Described below and elsewhere in this report are risks, uncertainties and other factors that can adversely affect our business, results of operations, cash flow, liquidity or financial condition. Investing in our common stock involves a degree of risk. You should consider carefully the following risks, as well as other information in this filing and the incorporated documents before investing in our common stock.

~~Risks~~Risk ~~Related~~Factors Relating to the ~~CHS~~Merger JVwith ~~Transaction~~LHC Group

WeThe consummation of the Merger is contingent upon the satisfaction of a number of conditions, including stockholder and regulatory approvals, that are outside of the Company’s control and that the Company and LHC Group may ~~fail~~be unable to ~~realize~~satisfy or obtain or which may delay the ~~benefits~~consummation ~~anticipated~~of asthe aMerger or result in the imposition of conditions that could reduce the ~~CHS~~anticipated JVbenefits ~~Transaction~~from the Merger or cause the parties to abandon the Merger.

~~There~~Consummation ~~are~~of the Merger (as described in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) is contingent upon the satisfaction of a number of ~~risks~~conditions, some of which are beyond the Company’s control, including, among others: (i) the adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of the outstanding shares of the Company’s common stock; (ii) the approval of the issuance of shares of LHC Group’s common stock to be issued to the Company’s stockholders in the merger by the affirmative vote of a majority of the shares of LHC Group’s common stock present in person or represented by proxy at LHC Group’s special meeting; (iii) the expiration or termination of the required waiting periods under the Hart-Scott Rodino Act (which occurred on February 21, 2018); (iv) the absence of any order or law prohibiting the Merger or the other transactions contemplated by the Merger Agreement; (v) the receipt of certain tax opinions; and ~~uncertainties~~(vi) the ~~relating~~absence of a material adverse effect with respect to either LHC Group or the ~~CHS~~Company JV(as ~~Transaction~~defined in the Merger Agreement). The Company and LHC Group may be unable to obtain the regulatory approvals required for the Merger or the required regulatory approvals may delay the Merger or result in the imposition of conditions, possibly including: imposition of conditions that may require certain operations to be divested, that could reduce the anticipated benefits from the Merger or cause the parties to abandon the Merger. Any delay in completing the Merger could cause the combined company not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the Merger is successfully completed within its expected time frame.

· The ~~the~~Merger ~~possibility~~Agreement also requires that wethe ~~will~~Company ~~fail~~and LHC Group use reasonable best efforts to ~~implement~~obtain ~~our~~all ~~business~~necessary ~~plans~~or ~~for~~advisable approvals from governmental authorities, including those from a number of the ~~integration~~federal, state and ~~expansion~~municipal authorities that regulate the businesses of the ~~CHS~~Company ~~Home~~and ~~Health~~LHC ~~operations~~Group, including asin aNew ~~result~~York state, which accounts for approximately 7% of ~~new~~the ~~legislation~~Company’s annual revenues. There can be no assurances that these regulatory approvals will be obtained or ~~regulation~~what inconditions ~~the~~may ~~healthcare~~be ~~industry~~imposed ~~affecting~~on the ~~timing~~companies orin ~~costs~~order ~~associated~~to ~~with~~obtain such approvals. While these regulatory approvals are not a condition to closing the ~~home~~Merger, ~~health~~the ~~and~~failure ~~hospice~~to ~~operations;~~obtain any of these regulatory

· the possibility that we may have failed to discover liabilities of CHS Home Health during our due diligence investigation as part of the CHS JV Transaction which could decrease the value of our investment in CHS Home Health;

· the possibility of loss of relationships between CHS and CHS Home Health as a result of CHS owning a minority JV interest rather than the entirety of CHS Home Health

· the increased scope and complexity of our operations;

· the possibility of unanticipated delays, costs or inefficiencies associated with the integration of the CHS Home Health operations with our operations;

· other unidentified or unforeseeable liabilities and costs; and

· the diversion of management's attention from our existing operations.

If these risks or other unanticipated liabilities were to materialize, any desired benefits of the CHS JV Transaction may not be fully realized, if at all, and our future financial performance and results of operations could be negatively impacted. We cannot assure you that we will realize value from the CHS JV Transaction that equals or exceeds the consideration paid.

We have incurred transaction related costs, and will continue to incur substantial transition-related costs in connection with the CHS JV Transaction.

We have incurred a number of non-recurring transaction-related costs in initiating and completing the CHS JV Transaction, and expect to continue to incur costs related to integrating the operations of CHS Home Health and achieving desired synergies. These fees and costs have been, and will continue to be, substantial. Non-recurring transaction costs include, but are not limited to, fees paid to legal and accounting advisors, filing fees and printing costs. Additional unanticipated costs may be incurred in the integration and transition process. These costs may be higher than expected and could have a material adverse effect on our business, financial condition, results of operations, and stock price.

The integration of CHS JV Transaction could impact or cause disruptions in our and CHS Home Health’s operations that could have an adverse effect on our business, financial condition or results of operations.

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~~The~~approvals ~~integration~~could impose additional material costs on or materially limit the revenue of ~~CHS~~the ~~Home~~combined ~~Health~~company ~~into~~following ~~our~~the ~~business~~Merger, ~~could~~including ~~impact~~ceasing operations or ~~cause~~divesting ~~disruptions~~assets in ~~our~~certain ~~and~~jurisdictions, ~~CHS~~including ~~Home~~New ~~Health’s~~York ~~businesses,~~State. ~~including:~~

· While ~~our~~the ~~and~~Merger ~~CHS~~is ~~Home~~pending, ~~Health’s current and prospective customers and suppliers may experience uncertainty associated with~~ the ~~CHS~~Company JVwill ~~Transaction,~~be ~~including~~subject ~~with respect~~ to ~~current or future~~ business ~~relationships~~uncertainties ~~with~~that ~~us,~~could ~~CHS~~adversely ~~Home~~affect ~~Health~~its orbusinesses ~~the combined business~~ and ~~may attempt to negotiate changes in existing business;~~operations.

· Uncertainty ~~our~~about the effect of the Merger on employees, joint venture partners, third party payors, customers and ~~CHS~~other ~~Home~~persons ~~Health~~with whom the Company has a business relationship may have an adverse effect on the Company’s business, operations and stock price. In connection with the pendency of the Merger, existing customers or partners could decide to no longer do business with the Company. In addition, certain projects may be delayed or ceased and business decisions could be deferred. Persons with whom the Company has a business relationship, such as joint venture partners and third party payors, could also decide to terminate, modify or renegotiate their relationships with the Company or take other actions as a result of the Merger that could negatively affect the Company’s revenue, earnings and cash flows. Employee retention may be challenging during the pendency of the Merger, as certain employees may experience uncertainty about their future roles. ~~with~~If uskey employees depart, ~~which~~the ~~may~~businesses ~~adversely~~of ~~affect~~the ~~our~~Company and ~~CHS~~LHC ~~Home~~Group ~~Health~~before the Merger, and the business of the combined company following the merger, could be materially harmed. In addition, stockholders and market analysts could also have a negative perception of the merger, which could cause a material reduction in the Company’s ~~ability~~and LHC Group’s stock prices and could also result in (i) LHC Group not achieving the requisite vote to ~~retain~~approve the issuance of LHC Group’s shares in the merger and/or ~~hire~~(ii) the ~~key~~Company ~~employees;~~not achieving the requisite vote to adopt the Merger.

· Legal proceedings in connection with the ~~CHS~~merger JVcould ~~Transaction~~delay ~~may~~or ~~give~~prevent ~~rise~~the tocompletion ~~potential~~of ~~liabilities;~~the ~~and~~merger.

· If either the ~~attention~~Company or LHC Group is the subject of ~~our~~litigation ~~management~~that is related to the Merger, it could cause either company to incur substantial expenditures, generate adverse publicity and ~~that~~could delay or prevent the Merger. As described in Part I, Item 3 “Legal Proceedings,” several lawsuits have been filed against LHC Group, Merger Sub, the Company and/or the Company’s board of ~~CHS~~directors ~~Home~~challenging ~~Health~~the adequacy of public disclosures related to the Merger and an adverse ruling may beprevent ~~directed~~the ~~toward~~Merger from being completed. LHC Group, Merger Sub, the ~~integration~~Company and/or the members of ~~CHS~~the ~~Home~~Company’s ~~Health~~board ~~into~~of ~~our~~directors ~~operations~~were ~~and~~named ~~other~~as ~~transaction-~~defendants in three lawsuits brought by alleged stockholders of the Company challenging the adequacy of public disclosures related ~~considerations~~to the Merger and ~~may~~seeking, beamong ~~diverted~~other things, injunctive relief to enjoin the defendants from completing the ~~day-~~Merger pursuant to~~-day~~ these disclosures. Additional lawsuits may be filed against LHC Group, Merger Sub, the Company and/or their respective directors or officers in connection with the Merger. Defense of these or any other lawsuit, even if successful, could require substantial time and attention of the Company’s management and could require the expenditure of significant amounts for legal fees and other related costs, which could have a material adverse effect on the business, financial condition and results of operations of the ~~respective~~Company ~~companies~~or the combined company.

InFailure ~~connection~~to ~~with~~complete the ~~CHS~~Merger ~~JV Transaction, we~~ could ~~also~~negatively ~~encounter~~impact ~~additional~~the ~~integration-related~~stock ~~costs~~prices orand ~~other factors such as~~ the ~~failure~~future tobusiness ~~realize~~and ~~all~~financial results of the ~~benefits anticipated in the CHS JV Transaction, as described in more detail above~~Company.

~~The~~Completion ~~CHS~~of JVthe ~~Transaction~~Merger ~~may~~is ~~expose~~not usassured. toIf ~~unknown~~the orMerger ~~contingent~~is ~~liabilities~~not ~~for~~completed, ~~which~~the weongoing ~~have~~businesses noand ~~indemnification~~financial ~~rights,~~results orof wethe Company may be ~~subject~~adversely toaffected ~~liabilities~~and ~~substantially~~the inCompany ~~excess~~will ofbe ~~amounts~~subject ~~covered~~to ~~through~~several ~~any indemnification rights~~risks, orincluding ~~experience~~the ~~difficulty enforcing such indemnification rights.~~following:

We• ~~have indemnification rights with respect to breaches of representations and warranties, breaches of covenants and~~ the ~~failure~~price of CHS to satisfy any liabilities that are excluded. Governmental agencies and other third parties bringing claims against CHS with respect to such matters, including claims brought against CHS pursuant to Medicare and Medicaid regulations or under the ~~False~~Company’s ~~Claims~~common ~~Act,~~stock may ~~seek~~decline to ~~impose liability on~~ the ~~Company~~extent ~~despite the fact~~ that weits ~~did~~current ~~not~~market ~~assume~~prices ~~such~~reflect ~~liabilities~~a ~~from~~market ~~CHS. Claims~~assumption ~~relating~~that ~~to such matters may exceed~~ the ~~limit~~Merger ~~on our indemnification rights. CHS Home Health may also have other unknown liabilities which we~~ will be responsible for. If we are held responsible for liabilities not covered by indemnification rights or substantially in excess of amounts covered through any indemnification rights, or if we experience difficulty enforcing such indemnification rights, we could suffer severe consequences that would substantially reduce our revenues, earnings and cash flows. Furthermore, the indemnity does not cover loss of our future revenue or income or loss of business reputation or opportunity that may arise as a consequence of the indemnified liabilities. The indemnified liabilities may, therefore, result in reputational damage to our business that could adversely affect our financial condition. completed;

~~Failure~~• having to ~~retain~~pay ~~key~~significant ~~employees~~costs ofrelating ~~CHS~~to ~~Home~~the ~~Health,~~merger ~~and~~without receiving the ~~loss~~benefits of ~~key~~the ~~personnel~~merger, orincluding, ~~the~~in ~~transition~~certain circumstances, a termination fee of ~~key~~$30 ~~personnel,~~million ~~could~~or ~~diminish~~an ~~the~~expense ~~benefits~~reimbursement of ~~the~~up ~~CHS~~to JV$5 ~~Transaction.~~ million;

~~The~~• ~~successful~~negative ~~integration~~reactions ~~of CHS Home Health will depend in part on the retention of key personnel~~ from ~~CHS Home Health~~customers, ~~including~~stockholders ~~senior management,~~ and ~~the~~market continued contributions of our senior management. There can be no assurances that we will be able to retain CHS Home Health’s key personnel. Although we intend to make this transition as smooth as possible, leadership change may result in disruptions to our business or operations or otherwise limit the ability of our management team to effectively execute on our business plan, which could have an adverse effect on our business, financial condition, results of operations, and stock price. analysts;

In• ~~addition, no assurance can be given that after~~ the ~~CHS~~possible JVloss ~~Transaction~~of weemployees ~~will~~necessary ~~be able~~ to ~~attract~~operate ~~or retain key management personnel and other key employees to~~ the ~~same~~Company’s ~~extent that we have been previously able to attract or retain employees.~~ business;

~~Risks~~• ~~Related~~the Company will have been subject to ~~Our~~certain ~~Industry~~ restrictions on the conduct of its business, which may have prevented us from making certain acquisitions or dispositions or pursuing certain business opportunities while the Merger was pending; and

The new administration of President Trump, recent changes in members and leadership of the US Congress and related changes in leadership and key individuals in Federal regulatory agencies could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us.

Future actions by the new Trump Administration and the U.S. Congress including, but not limited to, repeal or

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~~replacement~~• of the ~~Affordable~~diversion ~~Care Act (ACA, see below) could have a material adverse impact on our results~~ of ~~operations~~the orfocus ~~financial condition. Additionally, all or a portion~~ of the ~~ACA~~Company’s ~~and~~management ~~related~~to subsequent legislation may be modified, repealed or otherwise invalidated through judicial challenge. Our Imperium subsidiary, an ACO-enablement company, generates substantially all its revenues from the ~~Medicare~~merger ~~Shared~~instead ~~Savings Program which was enacted with the ACA, and any legislative and regulatory changes could adversely affect its operations. We can provide you with no assurance that the ultimate outcome~~ of ~~the ACA, health care reform efforts and/or the federal budget and resulting Medicare reimbursement rates will not have a material adverse effect~~ on ~~our~~pursuing ~~liquidity,~~other ~~our~~opportunities ~~results~~that ofcould operation, the realizability of the carrying amounts of our intangible assets, including goodwill, or our financial condition. Further, we are unable to predict what effect, if any, such material adverse effect, if it were to occur, might have onbeen ~~our~~beneficial ~~ability~~ to ~~continue to comply with~~ the ~~financial covenants of our revolving credit facility and our ability to continue to access debt capital through that facility~~Company.

If the Merger is not completed, the Company cannot assure you that these risks will not materialize and will not materially adversely affect the Company’s business, financial results and stock price.

The Company expects to incur substantial transaction-related costs in connection with the Merger.

The Company has incurred and expects to incur significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger. In addition, the Merger could result in additional costs and expenses that were not expected or anticipated, and such costs and expenses could have a material adverse effect on the Company’s financial condition and results of operation before the Merger and of the combined company thereafter.

Risks Related to Our Industry

The Trump administration, recent changes in members and leadership of the US Congress and related changes in leadership and key individuals in federal regulatory agencies could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us.

Future actions by the Trump Administration and the U.S. Congress including, but not limited to, repeal or replacement of the Affordable Care Act (ACA, see below) could have a material adverse impact on our results of operations or financial condition. Additionally, all or a portion of the ACA and related subsequent legislation may be modified, repealed or otherwise invalidated through judicial challenge. Our Imperium subsidiary, an ACO-enablement company, generates substantially all its revenues from the Medicare Shared Savings Program which was enacted with the ACA, and any legislative and regulatory changes could adversely affect its operations. We can provide you with no assurance that the ultimate outcome of the ACA, health care reform efforts and/or the federal budget and resulting Medicare reimbursement rates will not have a material adverse effect on our liquidity, our results of operation, the realizability of the carrying amounts of our intangible assets, including goodwill, or our financial condition. Further, we are unable to predict what effect, if any, such material adverse effect, if it were to occur, might have on our ability to continue to comply with the financial covenants of our revolving credit facility and our ability to continue to access debt capital through that facility.

Complying with health care reform legislation and the implementing regulations and programmatic guidelines could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us.

The health care industry has experienced, and is expected to continue to experience, extensive and dynamic periods of change. In addition to economic forces and regulatory influences, continuing political debate subjects the health care industry to significant reform. Very often, sweeping new legislation is followed by subsequent legislation to address previously unanticipated consequences, or to further define provisions that were too vague to implement based on the language of the original legislation and by legal actions to challenge its constitutionality. In our view, it is reasonable to expect this to occur over the next few years. The Patient Protection and Affordable Care Act (the “ACA”), signed into law in March 2010, has adversely impacted our business and it is reasonable to expect this law and future health care reform law to have an impact on our business in the future. As a result of the broad scope of the ACA and related legislation, the significant changes it will effect in the healthcare industry and society generally, and the complexity of the technical issues it addresses, we are unable to predict, at this time, all the ramifications the ACA, its implementing regulations and future health care reform legislation may have on our business as a health care provider or a sponsor of an employee health insurance benefit plan. The ACA, its implementing regulations and programmatic guidelines and future health care reform legislation could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us.

Additionally, we may be unable to take actions to mitigate any or all of the negative implications of the ACA, its implementing regulations or programmatic guidelines and future health care regulation which may result in unfavorable earnings, losses, or impairment charges.

The current status of Federal and State budgets may have a material adverse effect on our future results of operations and financial condition, as well as our ability to access credit and capital.

There can be no assurance that Federal and State governments will be able to operate balanced budgets. While the ultimate outcome of these events cannot be predicted, they may have a material adverse effect on the Company. Historic economic conditions, stimulus efforts by the Federal government and costly new programs created by the ACA have placed significant strain on Federal and state budgets, many of which are in a deficit position. Efforts to reduce spending at the Federal and/or state levels may result in reductions in reimbursement by Medicare, Medicaid and other third-party payors along with tax increases, which may in turn result in decreased revenue growth and a decrease in our profitability. Our contractors and suppliers may also be negatively impacted by these conditions and our ability to provide patient care at a lower cost may diminish and reduce our profitability. Future disruptions in the credit and capital markets, if any, may restrict our access to capital. As a result, our ability to incur additional indebtedness to fund acquisitions and operations may be constrained. If the Federal and State budgets’ conditions deteriorate or do not improve, our results of operations or financial condition could be materially and adversely affected.

Our profitability depends principally on the level of government-mandated payment rates. Reductions in rates, or rate increases that do not cover cost increases, may adversely affect our business.

We generally receive fixed payments from Medicare and Medicaid for our services based on the level of care that we

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~~provide~~ The ~~patients. Consequently, our profitability largely depends upon our ability to manage the cost of providing services. Although~~ current ~~Medicare~~status ~~legislation provides for an annual adjustment~~ of ~~the~~federal ~~payment~~and ~~rates~~state ~~based~~budgets ~~on the increase or decrease of the medical care expenditure category of the Consumer Price Index, these Medicare payment rate increases~~ may behave ~~less~~a ~~than~~material ~~actual~~adverse ~~inflation~~effect oron could be eliminated or reduced in any given year. Since April 1, 2013, Medicare reimbursement has been reduced an additional 2% through sequestration as mandated by Federal legislation. Consequently, if our ~~cost~~future ofresults ~~providing services, which consists primarily~~ of ~~labor~~operations ~~costs,~~and isfinancial ~~greater than the respective Medicare or Medicaid payment rate~~condition, ~~our~~as ~~profitability~~well ~~would~~as ~~be negatively impacted. Based on~~ our ~~analysis~~ability ~~of Medicare’s final regulations for the home health prospective payment system, we expect our Medicare reimbursement rates for home health services provided in 2017~~ to beaccess ~~between~~credit 1% and ~~2% lower than in 2016~~capital.

There can be no assurance that federal and state governments will be able to operate balanced budgets. While the ultimate outcome of these events cannot be predicted, they may have a material adverse effect on the Company. Historic economic conditions, stimulus efforts by the federal government and costly new programs created by the ACA have placed significant strain on federal and state budgets, many of which are in a deficit position. Efforts to reduce spending at the federal and/or state levels may result in reductions in reimbursement by Medicare, Medicaid and other third-party payors along with tax increases, which may in turn result in decreased revenue growth and a decrease in our profitability. Our contractors and suppliers may also be negatively impacted by these conditions and our ability to provide patient care at a lower cost may diminish and reduce our profitability. Future disruptions in the credit and capital markets, if any, may restrict our access to capital. As a result, our ability to incur additional indebtedness to fund acquisitions and operations may be constrained. If the federal and state budgets’ conditions deteriorate or do not improve, our results of operations or financial condition could be materially and adversely affected.

Our profitability depends principally on the level of government-mandated payment rates. Reductions in rates, or rate increases that do not cover cost increases, may adversely affect our business.

We generally receive fixed payments from Medicare and Medicaid for our services based on the level of care that we provide patients. Consequently, our profitability largely depends upon our ability to manage the cost of providing services. Although current Medicare legislation provides for an annual adjustment of the payment rates based on the increase or decrease of the medical care expenditure category of the Consumer Price Index, these Medicare payment rate increases may be less than actual inflation or could be eliminated or reduced in any given year. Since April 1, 2013, Medicare reimbursement has been reduced an additional 2% through sequestration as mandated by federal legislation. Consequently, if our cost of providing services, which consists primarily of labor costs, is greater than the respective Medicare or Medicaid payment rate, our profitability would be negatively impacted. Based on our analysis of Medicare’s final regulations for the home health prospective payment system, we expect our Medicare reimbursement rates for home health services provided in 2018 to be about 1% lower than in 2017.

Any changes to the laws and regulations governing our business, or the interpretation and enforcement of those laws or regulations, could cause us to modify our operations and could negatively impact our operating results.

The ~~Federal~~federal government and the states in which we operate regulate our industry extensively, including payment, coding and billing for services; financial relationships with physicians and referral sources; certification of agencies; licensure and certificates of need; and maintenance and protection of patient health information. The laws and regulations governing our operations, along with the terms of participation in various government programs, regulate how we do business, the services we offer, and our interactions with patients and the public. These laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws and regulations, or their interpretations, or the enactment of new laws or regulations could reduce our profitability by:

increasing our liability;

increasing our administrative and other costs;

increasing or decreasing mandated services;

forcing us to restructure our relationships with referral sources, providers or joint venture partners; or

requiring us to implement additional or different programs and systems.

Violation of the laws governing our operations, or changes in interpretations of those laws, could result in the imposition of fines, civil or criminal penalties, the termination of our rights to participate in federal and state-sponsored programs, the suspension or revocation of our licenses, or claims for damages. If we become subject to material fines or if other sanctions or other corrective actions are imposed on us, we might suffer a substantial reduction in profitability.

We have been, and could become, the subject of governmental investigations, claims and litigation that could have a material adverse effect on our financial position, results of operation and liquidity.

Over the years, we have been the subject of civil investigations, and qui tam or “whistleblower” suits relating to our Medicare-reimbursed operations. We may become, or unknown to us may already be, the subject of investigations, qui tams, or lawsuits that could have a material adverse effect on our financial position, results of operation and liquidity.

Governmental agencies and their agents, such as the Medicare Administrative Contractors (“MACs”), fiscal intermediaries and carriers, as well as the US Office of Inspector General (“OIG”), CMS and state Medicaid programs, conduct audits, reviews and investigations of our health care operations. These include audits conducted through recovery audit contractor programs and zone program integrity contractor programs, in which third party firms engaged by CMS conduct extensive reviews of claims data and records to identify potential improper payments under the Medicare program. In addition, in 2016 CMS initiated the Pre-Claim Review Demonstration for Home Health Services, which requires home health agencies in certain states to submit a request for pre-claim review for each episode of care, along with documentation that supports the medical necessity of the care. This Demonstration will expand to Florida for home health services that begin on or after April 1, 2017. In recent years, federal and state civil and criminal enforcement agencies have heighted and coordinated their oversight efforts related to the healthcare industry, including with respect to referral practices, cost reporting, billing practices, joint ventures and other financial relationships among health care providers. Depending on the nature of the conduct found in such audits, reviews and investigation and whether the underlying conduct could be considered systemic, the resolution of these matters could have a material adverse effect on our financial position, results of operation and liquidity.

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Governmental agencies and their agents, such as the Medicare Administrative Contractors (“MACs”), fiscal intermediaries and carriers, as well as the US Office of Inspector General (“OIG”), CMS and state Medicaid programs, conduct audits, reviews and investigations of our health care operations. These include audits conducted through recovery audit contractor programs and zone program integrity contractor programs, in which third party firms engaged by CMS conduct extensive reviews of claims data and records to identify potential improper payments under the Medicare program. In addition, in 2016 CMS initiated the Pre-Claim Review Demonstration for Home Health Services, which requires home health agencies in certain states to submit a request for pre-claim review for each episode of care, along with documentation that supports the medical necessity of the care. This Demonstration was put on hold with no clear resumption date. In recent years, federal and state civil and criminal enforcement agencies have heighted and coordinated their oversight efforts related to the healthcare industry, including with respect to referral practices, cost reporting, billing practices, joint ventures and other financial relationships among health care providers. Depending on the nature of the conduct found in such audits, reviews and investigation and whether the underlying conduct could be considered systemic, the resolution of these matters could have a material adverse effect on our financial position, results of operation and liquidity.

For example, home health providers, including the Company, have received pre-pay Additional Development Requests (“ADR”) in addition to Recovery Audit Contractor audits (“RAC”) from the Palmetto Government Benefits Administration (“PGBA”) as a result of additional CMS funding allocations to MACs to conduct pre-payment reviews. ADR and RAC audits are both general and focused in nature. The PGBA acts as one of our four fiscal intermediaries, but processes the majority of our claims. We would expect ADR and RAC audits to continue in the future. If such ADR or RAC audits result in reimbursement adjustments, we may suffer reduced profitability. Further, our appeal rights related to such audits may lead to cash flow delays due to significant backlog at the Administrative Law Judge level.

If we are unable to maintain relationships with existing patient referral sources, including but not limited to the hospitals of CHS, or to establish new referral sources, our growth and profitability could be adversely affected.

Our success depends significantly on referrals from physicians, hospitals, case managers and other patient referral sources in the communities that our home care agencies serve, as well as on our ability to maintain good relationships with these referral sources. Our referral sources are not contractually obligated to refer home care patients to us and may refer their patients to other providers. Our growth and profitability depend on our ability to establish and maintain close working relationships with these patient referral sources and to increase awareness and acceptance of the benefits of home care by our referral sources and their patients. We cannot assure you that we will be able to maintain our existing referral source relationships or that we will be able to develop and maintain new relationships in existing or new markets. Our loss of, or failure to maintain, existing relationships or our failure to develop new relationships could adversely affect our ability to expand our operations and operate profitably. As described further below, our relationships with referral sources are heavily regulated and failure to comply with applicable regulations could have a material adverse effect on our financial position or results of operation.

We are subject to federal and state laws that govern our operations and financial relationships with physicians, hospitals and other healthcare providers and entities, potential or current referral sources, including specifically the hospitals of CHS.

Our operations are subject to extensive federal, state and local government laws and regulations, all of which are subject to change, including those relating to billing practices, healthcare fraud and abuse, and financial relationships with physicians, hospitals and other healthcare providers and entities. These government laws and regulations currently include, among others, the federal Anti-Kickback Statute, the Physician Self-Referral Law, also known as the Stark Law, the federal False Claims Act (“FCA”), the Civil Monetary Penalties Law, and similar state laws. Significant areas of ~~regulations include:~~

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regulations include:

the federal Anti-Kickback Statute, which prohibits persons from knowingly and willfully soliciting, receiving, offering or providing remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any goods or service for which payment may be made under governmental payor programs such as Medicare and Medicaid;

the federal Stark Law, which place restrictions on physicians who refer patients to entities in which they have a financial relationship, and also prohibits the submission of any claim by such entities for reimbursement for designated health services furnished pursuant to a prohibited referral;

the federal FCA, which prohibits individuals or entities from knowingly presenting to, or causing to be presented to, the federal government, claims for payment that are false or fraudulent and allows a private individual to bring actions on behalf of the federal government alleging that the defendant has defrauded the federal government by submitting a false claim to the federal government and permits such individuals to share in any amounts paid by the entity to the government in fines or settlement;

the federal Civil Monetary Penalty Law, which prohibits providers from various forms of improper billing and from offering remuneration or other inducements to beneficiaries of federal health care programs to influence the beneficiaries’ decisions to seek specific governmentally reimbursable items or services or to choose particular providers; and

in addition to the federal laws, some of the states in which we operate have enacted laws prohibiting certain business relationships between physicians and other providers of healthcare services and enacted similar state anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers.

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We currently have contractual relationships with current and potential referral sources, including certain physicians who provide medical director and consulting services to our Company and joint ventures with hospitals. Many of these physicians and hospitals are current or potential referral sources. Although we believe our arrangements currently comply with state and federal anti-kickback and Stark laws, we cannot assure you that courts or regulatory agencies will not interpret these laws in ways that will implicate our arrangements. Violations of any existing or future laws and regulations could lead to fines, civil or criminal penalties, or sanctions, including under the False Claims Act, the termination of our rights to participate in federal and state-sponsored programs that may have a material adverse effect on our operations.

If our joint ventures, particularly our relationship with CHS violate the law, our business could be adversely affected.

The structures and operations of our joint ventures and our arrangements with hospitals, including CHS, and physicians are required to comply with government laws and regulations, including federal and state anti-kickback and referral laws. While we have structured our joint ventures to comply with many of the criteria for safe harbor protection under the Federal Anti-Kickback Statute, our investments in these joint venture arrangements may not satisfy all elements of the safe harbor requirements. If any of our joint ventures were found to be in violation of federal or state anti-kickback or referral laws, we could be required to restructure or terminate them. We also could be required to repay damages to Medicare and Medicaid based on the amounts we have received pursuant to any prohibited referrals, and we could suffer civil or criminal fines and penalties, including the loss of our licenses to operate and our ability to participate in federal and state health care programs. The imposition of any of these penalties could have a material adverse effect on our business, financial condition and results of operations.

If any of our agencies fail to comply with the conditions of participation in the Medicare program, that agency could be terminated from the Medicare program, which would adversely affect our net service revenue and profitability.

Each of our home care and hospice agencies must comply with the extensive conditions of participation in the Medicare program. If any of our agencies fail to meet any of the Medicare conditions of participation, that agency may receive a notice of deficiency from the applicable state surveyor. If that agency then fails to institute a plan of correction to correct the deficiency within the correction period provided by the state surveyor, that agency could be terminated from the Medicare program. Additionally, failure to comply with the conditions of participation related to enrollment could result in a deactivation or revocation of billing privileges. To the extent that billing privileges are revoked, there is a mandated one to three-year bar to re-enrollment. The failure to pass a site verification visit, for example, could result in a revocation of billing privileges with a mandated two-year bar to re-enrollment. Although the revocation would only immediately affect the particular enrollment subject to the revocation, the Centers for Medicare and Medicaid Services (“CMS”) has indicated that following a revocation it will review the enrollment files for providers under common ownership or control to determine if a similar sanction is warranted for any of the other related providers. Similarly, we could face liability under the False Claims Act if we submit claims to Medicare or Medicaid while not in compliance with certain conditions of participation that would cause the government to refuse payment. Any termination of one or more of our home care agencies from the Medicare program for failure to satisfy the program’s conditions of participation, including proposed and future amendments could adversely affect our net service revenue and profitability.

We may be subject to substantial malpractice or other similar claims.

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~~settlement~~one ~~amounts~~to orthree-year ~~penalties~~bar ~~arising~~to ~~from~~re-enrollment. The ~~these~~failure ~~legal~~to ~~proceedings. We~~pass ~~cannot~~a ~~predict~~site ~~the~~verification ~~effect~~visit, ~~that~~for ~~any~~example, ~~claims~~could ofresult ~~this~~in ~~nature,~~a ~~regardless~~revocation of ~~their~~billing ~~ultimate~~privileges ~~outcome,~~with ~~could~~a ~~have~~mandated ontwo-year ~~our~~bar ~~business,~~to ~~reputation,~~re-enrollment. Although orthe onrevocation ~~our~~would ~~ability~~only immediately affect the particular enrollment subject to ~~attract~~the ~~and~~revocation, ~~retain~~the ~~patients~~Centers for Medicare and ~~employees. We~~Medicaid ~~maintain~~Services ~~malpractice~~(“CMS”) ~~and~~has ~~various~~indicated ~~other~~that ~~liability~~following ~~insurance~~a revocation it will review the enrollment files for providers under common ownership or ~~re-insurance~~control ~~policies~~to ~~and~~determine ~~are~~if ~~responsible~~a similar sanction is warranted for ~~deductibles~~any ~~and,~~of asthe ~~applicable~~other related providers. Similarly, ~~amounts~~we could face liability under the False Claims Act if we submit claims to Medicare or Medicaid while not in ~~excess~~compliance with certain conditions of participation that would cause the ~~limits~~government to refuse payment. Any termination of one or more of our ~~coverage. Although~~home wecare ~~contract~~agencies ~~with~~from ~~highly~~the ~~rated~~Medicare ~~carriers,~~program wefor ~~cannot~~failure ~~guarantee~~to ~~collection~~satisfy the program’s conditions of ~~amounts~~participation, ~~expected~~including toproposed beand ~~recovered~~future ~~under~~amendments ~~various~~could ~~insurance~~adversely oraffect ~~reinsurance~~our ~~policies~~net service revenue and profitability.

We may be subject to substantial malpractice or other similar claims.

The services we offer involve an inherent risk of professional liability and related substantial damage awards. On any given day, we have thousands of nurses, therapists and other direct care personnel driving to and from patients’ homes where they deliver medical and other care. Due to the nature of our business, we and the caregivers who provide services on our behalf may be the subject of medical malpractice claims. These caregivers could be considered our agents, and, as a result, we could be held liable for their medical negligence. We are also subject to claims against us for negligence and intentional misconduct and violations of applicable law, and claims alleging personal injury, assault, abuse, wrongful death, and other charges. Regulatory agencies may initiate administrative proceedings alleging that our services, employees or agents violate applicable laws and seek to impose monetary penalties on us or ask for recoupment of amounts paid. We could be required to incur significant costs to respond to regulatory investigations or defend against lawsuits and, if we do not prevail, we could be required to pay substantial amounts of money in damages, settlement amounts or penalties arising from these legal proceedings. We cannot predict the effect that any claims of this nature, regardless of their ultimate outcome, could have on our business, reputation, or on our ability to attract and retain patients and employees. We maintain malpractice and various other liability insurance or re-insurance policies and are responsible for deductibles and, as applicable, amounts in excess of the limits of our coverage. Although we contract with highly rated carriers, we cannot guarantee collection of amounts expected to be recovered under various insurance or reinsurance policies.

Delays in reimbursement may cause liquidity problems.

Our business is characterized by delays in reimbursement from the time we provide services to the time we receive reimbursement or payment for these services. Data submission requirements change from time to time for payors, payments to us may be delayed pending additional data or documentation requests by the fiscal intermediary, or our ability to effectively respond to such requirements may delay our payment cycle. If we have information system problems or issues that arise with Medicare or Medicaid, we may encounter delays in our payment cycle. Such a timing delay may cause working capital shortages. Working capital management, including prompt and diligent billing and collection, is an important factor in our results of operations and liquidity. System problems, Medicare or Medicaid issues or industry trends may extend our collection period, adversely impact our working capital. Our working capital management procedures may not successfully negate this risk. There are often timing delays when attempting to collect funds from Medicaid programs. Delays in receiving reimbursement or payments from these programs may adversely impact our working capital.

On June 8, 2016, CMS announced the “Pre-Claim Review Demonstration of Home Health Services” which seeks to demonstrate that a review of selected documentation prior to payment of claims can decrease “improper payments because of insufficient documentation.” According to the CMS announcement, the pre-claim review demonstration will help educate Home Health Agencies (HHA) on what documentation is required and encourage them to submit the correct documentation, while still allowing the HHA to begin providing services and receive initial payments prior to the pre-claim review decision. The pre-claim review demonstration began in Illinois in late 2016~~, Florida is expected to begin April 1, 2017~~ and ~~Texas,~~was ~~Michigan~~put ~~and~~on ~~Massachusetts~~indefinite ~~will phase in over 2017~~hold. The Company is currently unable to predict if or when the demonstration program may be resumed or what impact, if any, this ~~demonstration~~ program may have on its result of operations or financial position when and if resumed.

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The home health care and hospice industry is highly competitive.

Our agencies compete with local and regional home health care and hospice companies, hospitals, nursing homes, and other businesses that provide home nursing services, some of which are large established companies that have significantly greater resources than we do. Our primary competition comes from local companies in each of our markets, and these privately-owned or hospital-owned health care providers vary by region and market. We compete based on the availability of personnel; the quality, expertise, and value of our services; and in select instances, on the price of our services. Increased competition in the future from existing competitors or new entrants may limit our ability to maintain or increase our market share. We cannot assure you that we will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse impact on our business, financial condition, or results of operations.

Some of our existing and potential new competitors may enjoy greater name recognition and greater financial, technical, and marketing resources than we do. This may permit our competitors to devote greater resources than we can to the development and promotion of services. These competitors may undertake more far-reaching and effective marketing campaigns and may offer more attractive opportunities to existing and potential employees and services to referral sources.

We expect our competitors to develop new strategic relationships with providers, referral sources, and payors, which could result in increased competition. The introduction of new and enhanced service offerings, in combination with industry consolidation and the development of strategic relationships by our competitors, could cause a decline in revenue or loss of market acceptance of our services or make our services less attractive. Additionally, we compete with a number of non-profit organizations that can finance acquisitions and capital expenditures on a tax-exempt basis or receive charitable contributions that are unavailable to us.

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We expect that industry forces will continue to have an impact on our business and that of our competitors. In recent years, the health care industry has undergone significant changes driven by efforts to reduce costs, and we expect these cost containment measures to continue in the future. Frequent regulatory changes in our industry, including reductions in reimbursement rates and changes in services covered, have increased competition among home health care providers. If we are unable to react competitively to new developments, our operating results may suffer.

Portions of our Healthcare Innovations segment compete in relatively new and developing markets, face larger more well-capitalized competitors and rely on small numbers of relatively large customers.

Portions of our Healthcare Innovations segment compete in new and developing markets with new competitors or solutions developed and introduced to the market regularly. Such new products may capture market share more quickly or may have access to more capital than the capital we have allocated for such projects. Our efforts to bring new solutions to the market may prove unsuccessful, may prove to be unprofitable or may prove to be costlier to bring to market than anticipated. Our investments in these activities are highly speculative in nature and subject to loss. Specifically, our Ingenios assessment subsidiary competes with larger, better capitalized competitors and our LTS assessment subsidiary is particularly reliant on a small number of large customers, the loss of which could significantly and adversely impact its results.

A shortage of qualified registered nursing staff, physical therapists, occupational therapists and other caregivers could adversely affect our ability to attract, train and retain qualified personnel and could increase operating costs.

We rely significantly on our ability to attract and retain caregivers who possess the skills, experience, and licenses necessary to meet the requirements of our patients. We compete for personnel with other providers of health care services. Our ability to attract and retain caregivers depends on several factors, including our ability to provide these caregivers with attractive assignments and competitive benefits and salaries. We cannot assure you that we will succeed in any of these areas. In addition, there are occasional shortages of qualified healthcare personnel in some of the markets in which we operate. As a result, we may face higher costs of attracting caregivers and providing them with attractive benefit packages than we originally anticipated, and if that occurs, our profitability could decline. Finally, although this is currently not a significant factor in our existing markets, if we expand our operations into geographic areas where healthcare providers have historically unionized, we cannot assure you that the negotiation of collective bargaining agreements will not have a negative effect on our ability to timely and successfully recruit qualified personnel. Generally, if we are unable to attract and retain caregivers, the quality of our services may decline, and we could lose patients and referral sources.

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healthcare providers have historically unionized, we cannot assure you that the negotiation of collective bargaining agreements will not have a negative effect on our ability to timely and successfully recruit qualified personnel. Generally, if we are unable to attract and retain caregivers, the quality of our services may decline, and we could lose patients and referral sources.

Risks Related to Our Business

We depend on government sponsored reimbursement programs with Medicare accounting for the largest portion of our revenues.

For the years ended December 30 29, ~~2016~~ 2017, ~~January 1~~ December 30, 2016 and ~~December~~January 311, ~~2014~~2016, we received 6875%, 71 68% and 7271%, respectively, of our revenue from Medicare. Reductions in Medicare reimbursement have historically and may continue to adversely impact our profitability. Such reductions in payments to us could be caused by:

administrative or legislative changes to the base episode rate;

the elimination or reduction of annual rate increases based on medical inflation;

the imposition by Medicare of co-payments or other mechanisms shifting responsibility for a portion of payment to beneficiaries;

adjustments to the relative components of the wage index;

changes to or imposition of regulations impacting our case-mix or therapy thresholds; or

other adverse changes to the way we are paid for delivering our services.

Our non-Medicare revenues and profitability also are affected by the continuing efforts of third-party payors to contain or reduce the costs of health care by lowering reimbursement rates, narrowing the scope of covered services, increasing case management review of services, and negotiating reduced contract pricing. Any changes in reimbursement levels from these third-party payor sources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. We can provide no assurance that we will continue to maintain the current payor or revenue mix.

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case management review of services, and negotiating reduced contract pricing. Any changes in reimbursement levels from these third-party payor sources and any changes in applicable government regulations could have a material adverse effect on our revenues and profitability. We can provide no assurance that we will continue to maintain the current payor or revenue mix.

Our reliance on government sponsored reimbursement programs such as Medicare and Medicaid makes us vulnerable to possible legislative and administrative regulations and budget cut-backs that could adversely affect the number of persons eligible for such programs, the amount of allowed reimbursements or other aspects of the programs, any of which could materially affect us. In addition, loss of certification or qualification under Medicare or Medicaid programs could materially affect our ability to effectively market our services.

We have a significant dependence on state Medicaid reimbursement programs.

Approximately 2320%, 22 23% and 2023% of our ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 revenues, respectively, were derived from state Medicaid and other government programs, many of which currently face significant budget issues. Further, the acquisitions completed by us in 2016, 2015 and 2013 increased our dependence on Medicaid reimbursement. Our largest Medicaid reimbursement is concentrated in the states of Ohio, Connecticut, New York, Tennessee and Kentucky. See Part II, Item 8, Note 1, “Summary of Significant Accounting Policies,” elsewhere in this Form 10-K for further details.

The financial condition of the Medicaid programs in each of the states in which we operate is cyclical and many may be expected from time to time to take actions or evaluate taking actions to control the rate of growth of Medicaid expenditures. Among these actions are the following:

redefining eligibility standards for Medicaid coverage,

redefining coverage criteria for home and community based care services,

slowing payments to providers by increasing the minimum time in which payments are made,

limiting reimbursement rate increases,

increasing utilization of self-directed care alternatives,

shifting beneficiaries from traditional coverage to Medicaid managed care providers, and

changing regulations under which providers must operate.

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States may be expected to address these issues because the number of Medicaid beneficiaries and their related expenditures are growing at a faster rate than the government’s revenue. Medicaid is consuming a greater percentage of states’ budgets. This issue is exacerbated when revenues slow in a slowing economy. It is possible that the actions taken by the federal government or state Medicaid programs in the future could have a significant unfavorable impact on our results of operations, financial condition and liquidity.

Migration of our Medicare beneficiary patients to Medicare managed care providers could negatively impact our operating results.

Historically, we have generated a substantial portion of our revenue from the Medicare fee-for-service market. The Congress continues to allocate significant additional funds and other incentives to Medicare managed care providers in order to promote greater participation in those plans by Medicare beneficiaries. If these increased funding levels have the intended result, the size of the potential Medicare fee-for-service market could decline, thereby reducing the size of our potential patient population, which could cause our operating results to suffer.

Our growth strategy depends on our ability to manage growing and changing operations.

Our business plan calls for significant growth in our business over the next several years. This growth will place significant demands on our management and information technology systems, internal controls, and financial and professional resources. In addition, we will need to further develop our financial controls and reporting systems to accommodate future growth. This could require us to incur expenses for hiring additional qualified personnel, retaining professionals to assist in developing the appropriate control systems, and expanding our information technology infrastructure. Our inability to manage growth effectively could have a material adverse effect on our financial results.

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Our home health growth strategy depends on our ability to develop and to acquire additional agencies on favorable terms and to integrate and operate these agencies effectively. If we are unable to do so, our future growth and operating results could be negatively impacted.

With regard to development, we expect to continue to open agencies in our existing and new markets. Our new agency growth, however, will depend on several factors, including our ability to:

obtain locations for agencies in markets where need exists;

identify and hire a sufficient number of sales personnel and appropriately trained home care and other health care professionals;

obtain adequate financing to fund growth; and

operate successfully under applicable government regulations.

With regard to acquisitions, we are focusing significant time and resources on the acquisition of home healthcare providers, or of certain of their assets, in targeted markets. We may be unable to identify, negotiate, and complete suitable acquisition opportunities on reasonable terms. We may incur future liabilities related to acquisitions. Should any of the following problems, or others, occur as a result of our acquisition strategy, the impact could be material:

difficulties integrating personnel from acquired entities and other corporate cultures into our business;

difficulties integrating information systems;

the potential loss of key employees or referral sources of acquired companies or a reduction in patient referrals by hospitals from which we have acquired home health care agencies;

the assumption of liabilities and exposure to undisclosed liabilities of acquired companies;

the acquisition of an agency with undisclosed compliance problems;

the diversion of management attention from existing operations;

difficulties in recouping partial episode payments and other types of misdirected payments for services from the previous owners; or

an unsuccessful claim for indemnification rights from previous owners for acts or omissions arising prior to the date of acquisition.

CMS has placed certain limitations on the sale or transfer of the Medicare Provider Agreement for any Medicare-certified home health agency that has been in existence for less than 36 months or that has undergone a change of ownership in the last 36 months. This limitation may reduce the number of home health agencies that otherwise would have been available for acquisition and may limit our ability to successfully pursue our acquisition strategy.

We have invested in development stage companies which may require further funding to support their respective business plans, which may ultimately prove unsuccessful.

Through our Imperium acquisition in 2013, we provide strategic health management services to ACOs that have been approved to participate in the Medicare Shared Savings Program (“MSSP”). In addition to our ownership interests in ACOs, we also have service agreements with ACOs that provide for sharing of MSSPs received by the ACO, if any. During 2013, we invested $5.8 million in our Imperium acquisition of which $3 million went to fund operations in pursuit of its business plan. In 2015, we also invested $1.0 million for a noncontrolling interest in NavHealth, Inc., a development stage analytics and software company, and $13.1 million in Ingenios Health Co. a provider of in-home technology enabled in-home clinical assessments. On January 5, 2016, we acquired Long Term Solutions, Inc. (“LTS”), a provider of in-home nursing assessments for the long-term care insurance industry for a purchase price of $37 million. These investments are highly speculative and are at risk and we may choose to make further investments, all of which may ultimately provide no return and could lead to a total loss of our investment.

ACOs, created with the Affordable Care Act, are entities that contract with CMS to serve the Medicare fee-for-service population with the goal of better care for individuals, improved health for populations and lower 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.

Notwithstanding our efforts, our ACOs may be unable to meet the required savings rates or may not satisfy the quality

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~~measures~~certified ~~and~~home ~~efforts~~health toagency ~~drive~~that ~~other~~has ~~revenue~~been ~~may~~in ~~not~~existence ~~cover~~for ~~operating~~less ~~costs~~than of36 ~~these~~months ~~investments. In~~or ~~addition,~~that ashas ~~the~~undergone ~~MSSP~~a ischange aof ~~new~~ownership ~~program,~~in itthe ~~presents~~last ~~challenges~~36 ~~and~~months. This ~~risks~~limitation ~~associated~~may ~~with~~reduce the ~~timeliness~~number ~~and accuracy~~ of ~~data~~home ~~and~~health ~~interpretation~~agencies ofthat ~~complex~~otherwise ~~rules,~~would ~~which~~have ~~may~~been ~~have~~available afor ~~material~~acquisition ~~adverse~~and ~~effect~~may onlimit our ability to ~~recoup~~successfully ~~any~~pursue of our ~~investments. Further,~~acquisition ~~there can be no assurance that we will maintain positive relations with our ACO partners or significant customers, which could result in a loss of our investment~~strategy.

We have invested in development stage companies which may require further funding to support their respective business plans, which may ultimately prove unsuccessful.

Our HCI segment provides strategic health management services to ACOs that have been approved to participate in the Medicare Shared Savings Program (“MSSP”). In addition to our ownership interests in ACOs, we also have service agreements with ACOs that provide for sharing of MSSPs received by the ACO, if any. During 2013, we invested $5.8 million in our Imperium acquisition of which $3 million went to fund operations in pursuit of its business plan. In 2015, we also invested $1.0 million for a noncontrolling interest in Care Journey (formerly NavHealth, Inc.), a development stage analytics and software company, and $13.1 million in Ingenios Health Co. a provider of in-home technology enabled in-home clinical assessments. On January 5, 2016, we acquired Long Term Solutions, Inc. (“LTS”), a provider of in-home nursing assessments for the long-term care insurance industry for a purchase price of $37 million. These investments are highly speculative and are at risk and we may choose to make further investments, all of which may ultimately provide no return and could lead to a total loss of our investment.

Notwithstanding our efforts, our ACOs may be unable to meet the required savings rates or may not satisfy the quality measures and efforts to drive other revenue may not cover operating costs of these investments. In addition, as the MSSP is a new program, it presents challenges and risks associated with the timeliness and accuracy of data and interpretation of complex rules, which may have a material adverse effect on our ability to recoup any of our investments. Further, there can be no assurance that we will maintain positive relations with our ACO partners or significant customers, which could result in a loss of our investment.

In addition, CMS, the OIG, the Internal Revenue Service, the Federal Trade Commission, US Department of Justice, and various states have adopted or are considering adopting new legislation, rules, regulations and guidance relating to formation and operation of ACOs. Such laws may, among other things, require ACOs to become subject to financial regulation such as maintaining deposits of assets with the states in which they operate, the filing of periodic reports with the insurance department and/or department of health, or holding certain licenses or certifications in the jurisdictions in which the ACOs operate. Failure to comply with legal or regulatory restrictions may result in CMS terminating the ACOs agreement with CMS and/or subjecting the ACO to loss of the right to engage in some or all business in a state, payments fines or penalties, or may implicate federal and state fraud and abuse laws relating to anti-trust, physician fee-sharing arrangements, anti-kickback prohibitions, prohibited referrals, any of which may adversely affect our operations and/or profitability.

We may require additional capital to pursue our acquisition strategy.

We cannot assure you that cash flows from operations combined with borrowings available under our revolving credit facility will be sufficient, nor continue to be fully available, to support our current growth strategies. We cannot readily predict the timing, size, and success of our acquisition efforts and the associated capital commitments. If we do not have sufficient cash resources, our growth could be limited unless we obtain additional equity or debt financing.

At some future point, we may elect to issue additional equity or debt securities in conjunction with raising capital or completing an acquisition. We cannot assure you that such issuances will not be dilutive to existing shareholders. Conversely, our board may approve stock repurchase programs in the future, which may use funds previously otherwise available for the pursuit of growth. We cannot predict the effect that future sales of our common stock, or the perception that these sales may occur, or other equity-related securities would have on the market price of our common stock.

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Our business depends on our information systems. Our inability to effectively integrate, manage, and keep secure our information systems could disrupt our operations.

Our business depends on effective and secure information systems that assist us in, among other things, monitoring utilization and other cost factors, processing claims, reporting financial results, measuring outcomes and quality of care, managing regulatory compliance controls, and maintaining operational efficiencies. These systems include software developed in-house and systems provided by external contractors and other service providers. To the extent that these external contractors or other service providers become insolvent or fail to support the software or systems, our operations could be negatively affected. Our agencies also depend upon our information systems for accounting, billing, collections, risk management, quality assurance, payroll, learning management and other information. If we experience a reduction in the performance, reliability, or availability of our information systems, our operations and ability to process transactions and produce timely and accurate reports could be adversely affected.

Our information systems and applications require continual maintenance, upgrading, and enhancement to meet our operational needs. Our acquisitions require transitions and integration of various information systems. We regularly upgrade and expand our information systems’ capabilities. If we experience difficulties with the transition and integration of information systems or are unable to implement, maintain, or expand our systems properly, we could suffer from, among other things, operational disruptions, regulatory problems, working capital disruptions and increases in administrative expenses.

Our business requires the secure transmission of confidential information over public networks. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of our security systems and patient data stored in our information systems. Anyone who circumvents our security measures could misappropriate our confidential information or cause interruptions in our services or operations. The Internet is a public network, and data is sent over this network from many sources. In the past, computer viruses or software programs that disable or impair computers have been distributed and have rapidly spread over the Internet. Computer viruses could be introduced into our systems, or those of our providers or regulators, which could disrupt our operations or make our systems inaccessible to our providers or regulators. We may be required to expend significant capital and other resources, to implement physical, technical and administrative safeguards to protect against the threat of security breaches or to alleviate problems caused by breaches. Our security measures may be inadequate to prevent security breaches, and our business operations would be negatively impacted by cancellation of contracts and loss of patients if security breaches are not prevented.

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The Internet is a public network, and data is sent over this network from many sources. In the past, computer viruses or software programs that disable or impair computers have been distributed and have rapidly spread over the Internet. Computer viruses could be introduced into our systems, or those of our providers or regulators, which could disrupt our operations or make our systems inaccessible to our providers or regulators. We may be required to expend significant capital and other resources, to implement physical, technical and administrative safeguards to protect against the threat of security breaches or to alleviate problems caused by breaches. Our security measures may be inadequate to prevent security breaches, and our business operations would be negatively impacted by cancellation of contracts and loss of patients if security breaches are not prevented.

Further, our information systems are vulnerable to damage or interruption from fire, flood, natural disaster, power loss, telecommunications failure, break-ins and similar events. A failure to implement our disaster recovery plans or ultimately restore our information systems after the occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

Because of the confidential health information we store and transmit, loss or theft of patient health information for any reason could expose us to a risk of regulatory action, litigation, reputation damage, possible liability and loss.

We face additional federal and state requirements in the transmission and retention and protection of health information.

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) was enacted to ensure that employees can retain and at times transfer their health insurance when they change jobs and to simplify healthcare administrative processes. The enactment of HIPAA expanded protection of the privacy and security of personal medical data and required the adoption of standards for the exchange of electronic health information. Among the standards that the Secretary of the U.S. Department of Health and Human Services has adopted pursuant to HIPAA are standards for electronic transactions and code sets, unique identifiers for providers, employers, health plans and individuals, security and electronic signatures, privacy and enforcement. We are subject to HIPAA as a covered entity.

HIPAA was amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH Act”), which set forth health information security breach notification requirements. The HITECH Act requires patient notification for all breaches related to Protected Health Information, media notification of breaches of over 500 patients and at least annual reporting of all breaches to the Secretary of HHS. The HITECH Act, as amended by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, provides for sanctions for violations of HIPAA and HITECH of up to $1,650,300 per year for each violation. A single breach incident can result in violation of multiple standards, resulting in maximum possible penalties in excess of $1,650,300. HIPAA mandates that the Secretary of HHS conduct periodic compliance audits, which could result in penalties if we become subject to an audit and are found not to be in compliance with our obligations. Failure to comply with HIPAA, HITECH, and state privacy and security laws could result in fines and penalties or civil liability that could have a material adverse effect on us.

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notification for all breaches related to Protected Health Information, media notification of breaches of over 500 patients and at least annual reporting of all breaches to the Secretary of HHS. The HITECH Act, as amended by the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015, provides for sanctions for violations of HIPAA and HITECH of up to $1,650,300 per year for each violation. A single breach incident can result in violation of multiple standards, resulting in maximum possible penalties in excess of $1,650,300. HIPAA mandates that the Secretary of HHS conduct periodic compliance audits, which could result in penalties if we become subject to an audit and are found not to be in compliance with our obligations. Failure to comply with HIPAA, HITECH, and state privacy and security laws could result in fines and penalties or civil liability that could have a material adverse effect on us.

We develop portions of our clinical software system in-house. Failure of, or problems with, our system could harm our business and operating results.

We develop and utilize a proprietary clinical software system to collect assessment data, log patient visits, generate medical orders, and monitor treatments and outcomes in accordance with established medical standards. The system integrates billing and collections functionality as well as accounting, human resource, payroll, and employee benefits programs provided by third parties. Problems with, or the failure of, our technology and systems could negatively impact data capture, billing, collections, and management and reporting capabilities. Any such problems or failures could adversely affect our operations and reputation, result in significant costs to us, and impair our ability to provide our services in the future. The costs incurred in correcting any errors or problems may be substantial and could adversely affect our profitability.

We depend on outside software providers.

In operating our business, we depend on the proper functioning and availability of our information systems, some of which are provided and/or hosted by outside software providers. These information systems and applications require continual maintenance, upgrading, and enhancement to meet our operational needs. If our providers are unable to maintain or expand our information systems properly, we could suffer from operational disruptions and an increase in administrative expenses, among other things. The regulatory environment related to information security and privacy is evolving and increasingly demanding. Furthermore, we also rely on cloud computing and other similar hosted technologies that result in third parties holding significant amounts of customer or employee information on our behalf. If our security and information systems, or those of outsourced third party providers, we use to store or process such information are compromised or if we, or such third parties, otherwise fail to comply with applicable laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance. Our reputation as a brand or as an employer could also be adversely affected from security breaches or regulatory violations, which could impair our sales or ability to attract and keep qualified employees.

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which are provided and/or hosted by outside software providers. These information systems and applications require continual maintenance, upgrading, and enhancement to meet our operational needs. If our providers are unable to maintain or expand our information systems properly, we could suffer from operational disruptions and an increase in administrative expenses, among other things. The regulatory environment related to information security and privacy is evolving and increasingly demanding. Furthermore, we also rely on cloud computing and other similar hosted technologies that result in third parties holding significant amounts of customer or employee information on our behalf. If our security and information systems, or those of outsourced third party providers, we use to store or process such information are compromised or if we, or such third parties, otherwise fail to comply with applicable laws and regulations, we could face litigation and the imposition of penalties that could adversely affect our financial performance. Our reputation as a brand or as an employer could also be adversely affected from security breaches or regulatory violations, which could impair our sales or ability to attract and keep qualified employees.

Our insurance coverage may not be sufficient for our business needs and/or the cost of such coverage may adversely impact our results of operations.

We bear significant insurance risk under our large-deductible workers’ compensation insurance program and our self-insured employee health program. We also carry D&O coverage for potential claims against our directors and officers, including securities actions. Claims made to date or in the future may exceed the limits of such insurance, if any. Such claims, if successful and in excess of such limits, could have a material adverse effect on our ability to conduct business or on our assets. Benefits provided by our employer sponsored health insurance plan may require changes as a result of the ACA or other regulatory action. Such changes may have an adverse impact on our operating results.

Our insurance coverage also includes fire, property damage, and general liability with varying limits. Although we maintain insurance consistent with industry practice, we cannot assure you that the insurance we maintain will satisfy claims made against us. In addition, as a result of operating in the home healthcare industry, our business entails an inherent risk of claims, losses, and potential lawsuits alleging employee accidents that may occur in a patient’s home. Finally, insurance coverage may not continue to be available to us at commercially reasonable rates, in adequate amounts or on satisfactory terms. Any claims made against us, regardless of their merit or eventual outcome, could damage our reputation and business.

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We estimate Medicare and Medicaid liabilities that may be payable by us in the future. These liabilities may be subject to audit or further review, and we may owe additional amounts beyond what we expect and have reserved.

The Company is paid for its services primarily by federal and state third-party reimbursement programs, commercial insurance companies, and patients. Revenues are recorded at established rates in the period during which the services are rendered. Appropriate allowances are recorded when the services are rendered, if necessary, to give recognition to third party payment arrangements.

Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. It is common for issues to arise related to: (1) medical coding, particularly with respect to Medicare, (2) patient eligibility, particularly related to Medicaid, and (3) other reasons unrelated to credit risk, all of which may result in adjustments to recorded revenue amounts. Management continuously evaluates the potential for revenue adjustments and when appropriate provides allowances for losses based upon the best available information. There is at least a reasonable possibility that recorded estimates could change by material amounts in the near term.

We depend on the services of our executive officers and other key employees.

Our success depends upon the continued employment of certain members of our senior management team, including our Chairman and Chief Executive Officer, William B. Yarmuth, and our other named executive officers. We also depend upon the continued employment of the individuals that manage several of our key functional areas, including operations, business development, accounting, finance, human resources, marketing, information systems, contracting and compliance. The departure of any member of our senior management team or our inability to appropriately implement succession plans may materially affect our operations.

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Our operations could be affected by natural disasters.

A substantial number of our agencies are located in Florida or coastal regions in the northeast, increasing our exposure to hurricanes and other natural disasters. The occurrence of natural disasters in the markets in which we operate could not only affect the day-to-day operations of our agencies but also could disrupt our relationships with patients, employees and referral sources located in the affected areas. In addition, any episode of care that is not completed due to the impact of a natural disaster will generally result in lower revenue for the episode. We cannot assure you that hurricanes or other natural disasters will not have a material adverse impact on our business, financial condition or results of operations in the future.

Risks Related to Ownership of Our Common Stock

The price of our common stock may be volatile and this may adversely affect our stockholders.

The price at which our common stock trades may be volatile. The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities, particularly securities of health care companies. The market price of our common stock may be influenced by many factors, including:

our operating and financial performance;

variances in our quarterly financial results compared to expectations;

the depth and liquidity of the market for our common stock;

future sales of common stock or the perception that sales could occur;

investor perception of our business and our prospects;

developments relating to litigation or governmental investigations;

changes or proposed changes in health care laws or regulations or enforcement of these laws and regulations, or announcements relating to these matters; or

general industry, economic and stock market conditions.

In addition, the stock market in general has experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of health care provider companies. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In the past, securities class-action litigation has often been brought against companies following periods of volatility in the market price of their respective securities. We may become involved in this type of litigation in the future. Litigation of this type is often expensive to defend and may divert our management team’s attention as well as resources from the operation of our business.

Sales of substantial amounts of our common stock, or the availability of those shares for future sale, could adversely affect our stock price and limit our ability to raise capital.

At December 30, 2016, outstanding shares of our common stock totaled 10,387,005. On January 25, 2017, we sold 3,450,000 additional shares. In 2013, we established the 2013 Stock and Incentive Compensation Plan for the benefit of employees and directors providing for the issuance of up to 700,000 shares of common stock. As of December 30, 2016, shares of our common stock remained reserved for issuance pursuant to our incentive compensation plans totaled 213,565 and shares of our common stock reserved for issuance pursuant to our employee stock purchase plan totaled 300,000. The market price of our common stock could decline as a result of sales of substantial amounts of our common stock to the public or the perception that substantial sales could occur. These sales also may make it more difficult for us to sell common stock in the future to raise capital.

We do not regularly pay dividends on our common stock and you should not expect to receive dividends on shares of our common stock.

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~~foreseeable~~factors ~~future. Any~~may ~~future~~materially ~~payment~~reduce the market price of ~~cash~~our ~~dividends~~common ~~will~~stock, ~~depend~~regardless ~~upon~~of our ~~financial~~operating ~~condition,~~performance. In ~~capital~~the ~~requirements~~past, ~~earnings,~~securities ~~and~~class-action ~~other~~litigation ~~factors~~has ~~deemed~~often ~~relevant~~been bybrought against companies following periods of volatility in the market price of their respective securities. We may become involved in this type of litigation in the future. Litigation of this type is often expensive to defend and may divert our ~~board~~management team’s attention as well as resources from the operation of ~~directors~~our business.

Sales of substantial amounts of our common stock, or the availability of those shares for future sale, could adversely affect our stock price and limit our ability to raise capital.

At December 29, 2017, outstanding shares of our common stock totaled 13,991,414. In 2017, we established the 2017 Stock and Incentive Compensation Plan for the benefit of employees and directors providing for the issuance of up to 997,465 shares of common stock. As of December 29, 2017, shares of our common stock remained reserved for issuance pursuant to our incentive compensation plans totaled 983,965 and shares of our common stock reserved for issuance pursuant to our employee stock purchase plan totaled 300,000. The market price of our common stock could decline as a result of sales of substantial amounts of our common stock to the public or the perception that substantial sales could occur. These sales also may make it more difficult for us to sell common stock in the future to raise capital.

We do not regularly pay dividends on our common stock and you should not expect to receive dividends on shares of our common stock.

We do not regularly pay dividends and intend to retain all future earnings to finance the continued growth and development of our business. In addition, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Any future payment of cash dividends will depend upon our financial condition, capital requirements, earnings, and other factors deemed relevant by our board of directors

Our Board of Directors may use anti-takeover provisions or issue stock to discourage control contests.

We have implemented anti-takeover provisions or provisions that could have an anti-takeover effect, including advance notice requirements for director nominations and stockholder proposals. These provisions, and others that the Board of Directors may adopt hereafter, may discourage offers to acquire us and may permit our Board of Directors to choose not to entertain offers to purchase us, even if such offers include a substantial premium to the market price of our stock. Therefore, our stockholders may be deprived of opportunities to profit from a sale of control.

ITEM 1B. UNRESOLVED STAFF COMMENTS

NONE.

ITEM 2. PROPERTIES

Our executive offices are located in Louisville, Kentucky, in approximately 54,000 square feet of space leased from an unaffiliated party.

As of December 3029, ~~2016~~2017, we had ~~285~~367 real estate location leases ranging from approximately 100 to 54,000 square feet of space in their respective locations. We also own the land and buildings for two properties located in Tennessee and Florida. See Part I, Item 1, “Business - Operating Segments” and Part II, Item 8, “Notes to Consolidated Financial Statements.” We believe that our facilities are adequate to meet our current needs, and that additional or substitute facilities will be available if needed.

ITEM 3. LEGAL PROCEEDINGS

~~From~~On ~~time~~January to18, ~~time~~2018, weJordan ~~are~~Rosenblatt, ~~subject~~a topurported ~~various~~stockholder ~~legal actions arising in the ordinary course~~ of our ~~business~~Company, ~~including~~filed ~~claims~~a ~~for~~class ~~damages~~action ~~for~~complaint ~~personal~~alleging ~~injuries. In~~violations ~~our~~of ~~opinion,~~the ~~after~~Securities ~~discussion~~Exchange ~~with~~Act ~~legal~~of ~~counsel,~~1934 in the ~~ultimate~~United ~~resolution~~States ofDistrict ~~any~~Court offor ~~these~~the ~~pending~~Western ~~ordinary~~District ~~course~~of ~~claims~~Kentucky, ~~and~~styled ~~legal~~Rosenblatt ~~proceedings~~v. ~~will~~Almost ~~not~~Family, ~~have~~Inc., aet ~~material~~al., ~~effect~~Case onNo. ~~our~~3:18-cv-40-TBR ~~financial~~(the ~~position~~“Rosenblatt orClass ~~results~~Action”), ~~of operations.~~

The Company has complied with a civil subpoena from the United States Department of Justice received in January of 2016 related to two locations acquired along with SunCrest in late 2013. SunCrest had previously acquired the locations in its merger with Omni Home Health in 2011. The subpoena seeks the production of various pre-acquisition business records limited to certain Omni operations in Sarasota and Tampa, Florida for the years 2007-2011. The Company is cooperating fully with this investigation. The subject operations generated less than 1% of the Company’s consolidated revenues.32

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against our Company, our board of directors, LHC Group and Merger Sub. The complaint in the Rosenblatt Class Action alleges that the Form S-4 Registration Statement filed on December 21, 2017 omitted material information with respect to the proposed transaction, rendering the Registration Statement false and misleading. The complaint in the Rosenblatt Action asserts claims against our Company and our board of directors for violations of Section 14(a) of the 1934 Act in connection with the dissemination of the Registration Statement, and asserts claims against the our board of directors and LHC Group for violations of Section 20(a) of the 1934 Act as controlling persons of our Company. The Rosenblatt Class Action seeks, among other things, an injunction enjoining the proposed transaction from closing, and an award of attorneys’ fees and costs.

On January 23, 2018, Leonard Stein, a purported stockholder of our Company, filed a class action complaint alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 in the United States District Court for the District of Delaware, styled Stein v. Almost Family, Inc., et al., Case No. 1:18-cv-00126-UNA(the “Stein Class Action”), against our Company and our board of directors. The complaint in the Stein Class Action alleges that the Form S-4 Registration Statement filed on December 21, 2017 omitted material information with respect to the proposed transaction, rendering the Registration Statement false and misleading. The complaint in the Stein Class Action asserts claims against our Company and our board of directors for violations of Section 14(a) of the 1934 Act, SEC Regulation G, and SEC Rule 14a-9, and asserts claims against our board of directors for violations of Section 20(a) of the 1934 Act as controlling persons of our Company. The Stein Class Action seeks, among other things, an injunction enjoining both the shareholder vote and the proposed transaction from closing, monetary damages to a class of shareholders, and an award of attorneys’ fees and costs.

On January 23, 2018, Shiva Stein, a purported stockholder of our Company, filed a complaint alleging violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 in the United States District Court for the District of Delaware, styled Stein v. Almost Family, Inc., et al., Case No. 1:18-cv-000127-UNA (the “Stein Individual Action”), against our Company and our board of directors. The complaint in the Stein Individual Action alleges that the Form S-4 Registration Statement filed on December 21, 2017 contained materially incomplete and misleading statements with respect to the proposed transaction. The complaint in the Stein Individual Action asserts claims against our Company and our board of directors for violations of Section 14(a) of the 1934 Act, and asserts claims against our board of directors for violations of Section 20(a) of the 1934 Act as controlling persons of our Company. The Stein Individual Action seeks, among other things, an injunction enjoining the proposed transaction from closing, monetary damages suffered by Plaintiff, and an award of attorneys’ fees and costs.

We, our board of directors, LHC Group and Merger Sub believe that the claims in the complaints are without merit and intend to defend these actions vigorously.

From time to time, we are subject to various other legal actions arising in the ordinary course of our business, including claims for damages for personal injuries. In our opinion, after discussion with legal counsel, the ultimate resolution of any of these pending ordinary course claims and legal proceedings will not have a material effect on our financial position or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the NASDAQ Global Select market under the symbol “AFAM” Set forth below are the high and low close prices for the common stock for the periods indicated as reported by NASDAQ:

Closing Common Stock Prices
Quarter Ended:		High		Low
December 30, 2016	$	44.85	$	36.21
December 29, 2017	$	64.35	$	40.40
September 29, 2017		62.45		45.90
June 30, 2017		62.25		46.20
March 31, 2017		50.00		45.30
December 30, 2016		44.85		36.21
September 30, 2016		44.39		35.41
July 1, 2016		44.01		36.75
April 1, 2016		40.78		34.62
January 1, 2016		44.70		37.75
October 2, 2015		49.74		39.14
July 3, 2015		47.76		36.59
April 3, 2015		46.55		28.68

On ~~March~~February 1326, ~~2017~~2018, the last reported sale price for the common stock reported by NASDAQ was $4859.7520 and there were approximately ~~279~~243 holders of record of our common stock. We did not pay dividends in ~~2016~~2017 or ~~2015~~2016. We do not intend to pay additional dividends on our common stock and will retain our earnings for future operations and the growth of our business.

					(d) Maximum Number
	(a) Total			(c) Total Number of	(or Approximate Dollar
	Number of	(b) Average		Shares (or Units)	Value) of Shares (or
	Shares (or	Price Paid		Purchased as Part of	Units) that May Yet Be
	Units)	per Share		Publicly Announced	Purchased Under the
Period	Purchased (1)	(or Unit)		Plans or Programs	Plans or Programs
October 1, 2016 – October 28, 2016	—	$	—	—	—
September 20, 2017 – October 27, 2017	—	$	-	—	—
October 29, 2016 – November 25, 2016	1,064		40.95	—	—
October 28, 2017 – November 24, 2017	—		-	—	—
November 26, 2016 – December 30, 2016	—		—	—	—
November 25, 2017 – December 29, 2017	82,767		56.60	—	—
Total	182,~~064~~767	$	4056.9560	—	—
(1) Shares were submitted by employees in lieu of tax withholding that would have otherwise been due on exercise of
stock options approved by the Company's Board of Directors.
stock options or vesting of restricted shares approved by the Company's Board of Directors.

Except as previously reported, there were no securities sold by the Company during the period covered by this ~~Annual~~annual ~~Report~~report on Form 10-K that were not registered under the Securities Act of 1933, as amended.

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STOCK PERFORMANCE GRAPH

The following stock performance graph does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates the performance graph by reference therein.

The Performance Graph below compares the cumulative total stockholder return on our common stock, $0.10 par value per share, for the five-year period ended December 3029, ~~2016~~2017, with the cumulative total return on the Russell 2000 index and an industry peer group over the same period (assuming the investment of $100 in each on December 31, ~~2011~~2012 and the reinvestment of dividends, if any). The peer group we selected is comprised of: Amedisys, Inc. (AMED) and LHC Group, Inc. (LHCG). The cumulative total stockholder return on the following graph is historical and is not necessarily indicative of future stock price performance.

$G:\F9 Financials FY2017\Financial Reports\10-K\Part 2 - Stock Performance Graph - 2017.jpg$

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12/14

12/15

12/16

12/12

12/13

12/14

12/15

12/16

12/17

Almost Family, Inc.

100

~~134~~159.3558

~~214~~142.3989

~~191~~188.9770

~~253~~217.5167

~~292~~273.4420

Russell 2000

100

~~116~~138.3582

~~161~~145.5262

~~169~~139.4319

~~161~~168.9585

~~196~~193.4558

Peer Group

100

~~130~~121.4002

~~157~~202.8135

~~263~~279.8634

~~364~~294.2687

~~384~~375.5084

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ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial information derived from the consolidated financial statements of the Company for the periods and at the dates indicated. The information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this and prior year Form 10-Ks.

	Fiscal Year(1)				~~Calendar~~		Calendar Year
(In thousands except per share data)	~~2016~~2017		~~2015~~2016		~~2014~~2015		~~2013~~2014		~~2012~~2013
Results of operations data:
Net service revenues	$	~~623~~796,~~541~~965	$	~~532~~623,~~214~~541	$	~~495~~532,~~829~~214	$	~~356~~495,~~912~~829	$	~~340~~356,~~620~~912
Income from continued operations attributable to Almost Family, Inc.	$	17,653	$	20,009	$	13,763	$	8,784	$	16,802
Net income attributable to Almost Family, Inc.	$	20,414	$	17,653	$	20,009	$	13,763	$	8,226
Discontinued operations		—		—		—		(558)		482
Net income attributable to Almost Family, Inc.	$	17,653	$	20,009	$	13,763	$	8,226	$	17,284
Per share:
Basic:
Number of shares		1013,~~153~~539		910,~~505~~153		9,~~333~~505		9,~~279~~333		9,~~285~~279
Income from continued operations attributable to Almost Family, Inc.	$	1.74	$	2.11	$	1.47	$	0.95	$	1.81
Net income attributable to Almost Family, Inc.	$	1.51	$	1.74	$	2.11	$	1.47	$	0.89
Discontinued operations		—		—		—		(0.06)		0.05
Net income attributable to Almost Family, Inc.	$	1.74	$	2.11	$	1.47	$	0.89	$	1.86
Diluted:
Number of shares		1013,~~346~~757		910,~~745~~346		9,~~462~~745		9,~~374~~462		9,~~324~~374
Income from continued operations attributable to Almost Family, Inc.	$	1.71	$	2.05	$	1.45	$	0.94	$	1.80
Net income attributable to Almost Family, Inc.	$	1.48	$	1.71	$	2.05	$	1.45	$	0.88
Discontinued operations		—		—		—		(0.06)		0.05
Net income attributable to Almost Family, Inc.	$	1.71	$	2.05	$	1.45	$	0.88	$	1.85
Dividend declared per share	$	—	$	—	$	—	$	—	$	2

(1)

See page 39 for discussion regarding the Company’s change to a 52-53 week reporting calendar in 2015.

2016

2015

2014

2013

2012

2017

2016

2015

2014

2013

Balance sheet data

Working capital

6874,~~904~~492

5468,~~643~~904

4054,~~274~~643

4440,~~148~~274

6244,~~541~~148

Total assets

~~658~~717,~~712~~818

~~464~~658,~~769~~712

~~345~~464,~~258~~769

~~354~~345,~~362~~258

~~249~~354,~~259~~362

Long-term liabilities

~~302~~134,~~682~~073

~~136~~302,~~048~~682

60136,~~432~~048

8360,~~436~~432

1783,~~846~~436

Total liabilities

~~354~~211,~~532~~265

~~190~~354,~~869~~532

~~112~~190,~~066~~869

~~136~~112,~~669~~066

44136,~~944~~669

Noncontrolling interest-redeemable - Healthcare Innovations

2,256

32,~~639~~256

3,639

—3,639

Stockholders’ equity

~~301~~504,~~924~~297

~~270~~301,~~261~~924

~~229~~270,~~553~~261

~~214~~229,~~054~~553

~~204~~214,~~315~~054

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company has ~~two~~three ~~divisions,~~reportable segments: a) Home Health ~~care~~(“HH”), ~~and~~b) ~~Healthcare~~Other ~~Innovations. The~~ Home-Based ~~Health~~Services ~~care~~(“OHBS”) ~~division~~which isincludes ~~comprised~~all ofother ~~two~~home ~~reportable~~care ~~segments,~~services ~~Visiting~~outside ~~Nurse~~of ~~Services~~Home ~~(“VN”~~Health orservices ~~“Visiting~~and ~~Nurse”~~c) ~~and~~the ~~Personal~~Healthcare ~~Care~~Innovations ~~Services~~ (“PCHCI” ~~or “Personal Care”~~)~~. Our~~ ~~Healthcare Innovations division is also a reporting~~ segment. Reportable segments have been identified based upon how management has organized the business by services provided to customers and the criteria in Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting. Consistent with information given to our chief operating decision maker, we do not allocate certain expenses to the reportable segments. We evaluate the performance of our business segments based on operating income.

Our VNHH segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care. VNApproximately ~~Medicare revenues are generated primarily on a per episode basis rather than a fee per visit or an hourly basis. This segment generated 70~~95% of our ~~revenue~~HH ~~for~~segment ~~2016~~revenues ~~with~~were ~~approximately 95%~~ generated from the Medicare program, while the balance iswas generated from Medicaid and private insurance programs.

Our PCOHBS segment ~~services~~includes ~~are~~traditional ~~also~~personal ~~provided~~care ~~in patients’ homes. These~~ services (“PC”) (generally provided by paraprofessional staff such as home health aides) which are generally of a custodial rather than skilled nature, as well as hospice services. PCPersonal care revenues are generated ~~primarily~~ on an hourly basis~~. This~~ ~~segment~~and ~~generated~~are 26primarily from Medicaid (approximately 80% of ~~our~~personal ~~revenue~~care ~~for~~revenues). Hospice ~~2016~~services ~~with~~are ~~approximately~~largely ~~83%~~provided ~~generated~~in ~~from~~patients’ ~~Medicaid~~homes and ~~other~~generally ~~government~~require ~~programs~~specialized ~~while~~hospice ~~the~~nursing ~~balance~~skills. Hospice isrevenues are generated ~~from~~on ~~insurance~~a ~~programs~~per diem basis and ~~private~~are ~~pay~~primarily ~~patients~~from Medicare (approximately 93% of hospice revenues).

Our HCI business segment ~~was~~is ~~created~~used to ~~house and separately~~ report on ~~its~~our developmental activities outside our ~~traditional~~HH ~~home health business platform. These activities are intended ultimately, whether directly or indirectly, to benefit patients~~ and ~~payers~~OHBS ~~through the enhanced provision of home health services~~businesses. The HCI’s ~~activities~~segment ~~all~~includes: ~~share~~ a) ~~common~~an ~~goal~~ACO ofenablement ~~improving~~company; ~~patient~~b) ~~experiences~~an ~~and~~in-home ~~quality~~assessment ~~outcomes,~~company ~~while~~serving ~~lowering~~the ~~costs. These include, but are not limited to: technology, information, population health management, risk~~long-~~sharing,~~term ~~assessments,~~ care ~~coordination~~insurance ~~and~~industry ~~transitions, clinical advancements, enhanced patient engagement~~ and ~~informed~~managed ~~clinical~~care ~~decision~~organizations; ~~making. We believe these activities help us discover valuable insight~~ and ~~experiences~~c) ~~that~~an ~~would~~investment ~~not otherwise be gained~~ in ~~the~~a ~~routine operation of our core home~~ population-health ~~business~~analytics ~~segments~~company. Further, we believe these innovation activities will play an important role in collaborating with policy makers, payers, providers, and anyone who assumes financial risk for managing patient populations, to seek to reduce costs and improve quality by providing increasingly more care for more patients in their homes than ever before. This segment generated approximately 4% of our revenue for 2016.

~~The~~LHC ~~HCI~~Group segment now includes: a) Imperium Health Management, LLC ("Imperium"), an ACO enablement company, b) Long Term Solutions, Inc. ("LTS"), an in-home assessment company serving the long-term care insurance industry, c) Ingenios Health Co. (“Ingenios”), a Nurse-Practitioner-oriented and ~~mobile~~Almost ~~technology-enabled~~Family ~~health~~Merger ~~risk~~of ~~assessment company primarily serving managed care organizations; and d) an investment in NavHealth, Inc. ("NavHealth"), a population-health analytics company.~~Equals

~~Recent~~On ~~Developments~~November 15, 2017, our Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with LHC Group, Inc., a Delaware corporation (“LHC Group”), and Hammer Merger Sub, Inc., a newly-formed Delaware corporation and a wholly owned subsidiary of LHC Group (“Merger Sub”), providing for a “merger of equals” business combination of our Company and LHC Group. The Merger Agreement provides that, if the conditions to the Merger are satisfied or waived and the Merger is consummated, stockholders of our Company will receive 0.9150 shares of LHC Group common stock for each share of our Company’s common stock, plus the cash equivalent of any fractional share. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, at the closing Merger Sub will be merged with and into our Company (the “Merger”), with our Company continuing as the surviving corporation and as a wholly owned subsidiary of LHC Group. The parties’ obligations to complete the Merger are subject to several conditions, including, among others, (i) the adoption of the Merger Agreement by the affirmative vote of the holders of at least a majority of the outstanding shares of the Company’s common stock; (ii) the approval of the issuance of shares of LHC Group’s common stock to be issued to our stockholders in the merger by the affirmative vote of a majority of the shares of LHC Group’s common stock present in person or represented by proxy at LHC Group’s special meeting; (iii) the expiration or termination of the required waiting periods under the Hart-Scott Rodino Act (which occurred on February 21, 2018); (iv) the absence of any order or law prohibiting the Merger or the other transactions contemplated by the Merger Agreement; (v) the receipt of certain tax opinions; and (vi) the absence of a material adverse effect with respect to either LHC Group or our Company (as defined in the Merger Agreement).

OnThe ~~December 31,~~Merger ~~2016,~~Agreement ~~the~~contains ~~first~~certain ~~day~~termination ~~after~~rights for both our ~~2016~~Company ~~fiscal~~and ~~year~~LHC ~~end~~Group, weincluding ~~acquired~~if anthe ~~80%~~Merger ~~controlling~~is ~~interest~~not inconsummated ~~the~~on ~~entity~~or ~~holding~~before ~~the~~July ~~home~~1, ~~health~~2018 ~~and~~(subject ~~hospice~~to ~~assets~~extension ofto ~~Community~~October ~~Health Systems~~1, ~~Inc.~~ ~~(NYSE:~~2018 ~~CYH~~in certain circumstances) ~~(referred~~and toif ~~herein~~the asrequired ~~“CHS~~approval ~~Home~~of ~~Health”). CHS~~the ~~Home~~stockholders ~~Health,~~of aeither ~~provider~~our ofCompany ~~skilled~~or ~~home~~LHC ~~health~~Group ~~and~~is ~~hospice~~not ~~services,~~obtained. ~~currently~~The ~~operates~~Merger 74Agreement ~~home~~further ~~health~~provides ~~and~~that, 15upon ~~hospice~~termination ~~branch~~of ~~locations~~the inMerger 22Agreement ~~states. With~~under specified circumstances, including the ~~completion~~termination of ~~this~~the ~~transaction,~~Merger ~~Almost~~Agreement ~~Family~~by ~~now~~our ~~operates~~Company ~~340~~or ~~branches~~LHC ~~across~~Group 26as ~~states. The~~a ~~purchase~~result ~~price~~ of ~~$128 million~~an ~~was~~adverse ~~funded~~change ~~through~~in ~~borrowings~~the onrecommendation of the ~~Company'~~other party’s ~~Revolving~~board ~~Credit~~of ~~Facility. We~~directors, ~~expect~~our ~~the~~Company ~~transaction~~may ~~will~~be ~~add~~required ~~approximately~~to ~~$200~~pay ~~million~~to inLHC ~~revenue~~Group, ~~all~~or ofLHC ~~which~~Group ~~will~~may be ~~included~~required ~~reported~~to inpay to our ~~Home~~Company, ~~Health~~as ~~division~~applicable, a termination fee of $30 million. Further, if the Merger

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Agreement is terminated as a result of the stockholders of either our Company or LHC Group failing to approve the transaction, our Company may be required to reimburse to LHC Group, or LHC Group may be required to reimburse to our Company, the other party’s expenses in connection with the proposed transaction, up to a maximum of $5 million.

In the absence of required stockholder approvals, we will continue to operate on a stand-alone basis. All references within this Form 10-K assumes Almost Family, Inc. operating on a stand-alone basis.

2017 Acquisitions

On November 20, 2017, our CHS-JV purchased assets of a Medicare-certified home health agency in Fort Myers, Florida. The purchase price was $0.5 million. Post-acquisition operating results are reported in our HH segments.

On July 14, 2017, our CHS-JV purchased assets of a Medicare-certified home health agency and related private duty company in Key West, Florida. The purchase price was $1.2 million. Post-acquisition operating results are reported in our HH and OHBS segments.

On December 31, 2016, the first day of our 2017 fiscal year end, we acquired an 80% controlling interest in the entity holding the home health and hospice assets of Community Health Systems, Inc. (NYSE: CYH) (referred to herein as “CHS Home Health”). CHS Home Health, a provider of skilled home health and hospice services, operated 74 home health and 15 hospice branch locations in 22 states. The purchase price of $128 million was funded through borrowings on the Company's Revolving Credit Facility. Post-acquisition results are reported in our HH and OHBS segments.

2017 Common Stock Offering

On January 25, 2017, we sold 3,450 shares of common stock at $44.50 per share for gross proceeds of approximately $153.5 million. Total net proceeds, after underwriting discounts and commissions and our offering expenses, were approximately $~~144~~143.39 million. These proceeds were used to repay obligations under the revolving credit facility.

2015 and 2016 Acquisitions

During 2016, we completed three acquisitions and increased our ownership of one of our HCI subsidiaries. In the third quarter, one of our HCI subsidiaries redeemed certain outstanding shares increasing our ownership percentage to 72.0% from 61.5%. On June 18, 2016, ~~the~~we ~~Company~~ acquired certain home health agency assets primarily in Wisconsin, but also in Connecticut and Kentucky (collectively, the “Wisconsin Acquisition”). On January 5, 2016, we acquired 100% of the equity of LTS for a purchase price of $37 million. On January 5, 2016, we also purchased the assets of a Medicare-certified home health agency owned by Bayonne Visiting Nurse Association (“Bayonne”) located in New Jersey.

During 2015, we completed four acquisitions and made a cost based investment. On November 5, 2015, we completed the acquisition of Black Stone Operations, LLC (“Black Stone”). Black Stone owned and operated personal care and skilled home health services in western Ohio. On August 29, 2015, we completed the acquisition of Bracor, Inc. (dba “WillCare”). WillCare owned and operated VNHH and PC branch locations in New York (12) and Connecticut (1). On March 1, 2015 we acquired the stock of WillCare’s Ohio operations. On July 22, 2015, we acquired Ingenios Health Co. Ingenios is a leading provider of technology enabled in-home clinical assessments for Medicare Advantage, Managed Medicaid and Commercial Exchange lives in 7 states and Washington, D.C. The results of the Black Stone and WillCare acquisitions are reported in our VNHH and PCOHBS segments, while our Ingenios acquisition results are included in the Healthcare Innovations segment.

Our View on Reimbursement and Diversification of Risk

Our Company is highly dependent on government reimbursement programs which pay for the majority of the services we provide to our patients. Reimbursement under these programs, primarily Medicare and Medicaid, is subject to frequent changes as policy makers balance their own needs to meet the health care needs of constituents while also meeting their fiscal objectives. Medicare and Medicaid are consuming a greater percentage of federal and states’ budgets, respectively, which is exacerbated in times of economic downturn. We believe that these financial issues are cyclical in nature rather than indicative of the long-term prospect for Medicare and Medicaid funding of health care services. Additionally, we believe our services offer the lowest cost alternative to institutional care and is a part of the solution to both balancing the federal budget and the states’ Medicaid financing problems.

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frequent changes as policy makers balance their own needs to meet the health care needs of constituents while also meeting their fiscal objectives. Medicare and Medicaid are consuming a greater percentage of federal and states’ budgets, respectively, which is exacerbated in times of economic downturn. We believe that these financial issues are cyclical in nature rather than indicative of the long-term prospect for Medicare and Medicaid funding of health care services. Additionally, we believe our services offer the lowest cost alternative to institutional care and is a part of the solution to both balancing the federal budget and the states’ Medicaid financing problems.

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Our Business Plan

Our future success depends on our ability to execute our business plan. Over the next three to five years we will try to accomplish the following:

Generate meaningful same store sales growth through the focused provision of high quality services and attending to the needs of our patients;

Drive our costs down, while continuing to provide high-quality patient care, by improving the productivity of our work force through improved monitoring, tighter controls, workflow automation, use of technology and other opportunities for efficiency gains;

Make additional strategic investments which expand our Healthcare Innovation segment in its mission to find solutions for more effective, efficient and appropriate delivery of homecare; and

Expand our capital base through both earnings performance and by seeking additional capital investments in our Company.

Health Care Reform Legislation and Medicare Regulations

The Federal Government has been pursuing a comprehensive reform of the US healthcare system since early 2009. Numerous changes have been enacted, proposed and continue to be debated, which are discussed in more detail in Part I, Item 1, “Government Regulation” and Part I, Item 1A, “Risk Factors.” Many of the change provisions do not take effect for an extended period of time and most will require the publication of implementing regulations and/or the issuance of programmatic guidelines.

It is reasonable to expect that recent and potential changes described in Part I, Item 1, Government Regulation, might have a more immediate and negative impact on those providers generating lower margins than us, with more leverage relative to earnings than us, with less capital resources than us, or with less ability to adapt their operations. We believe this may result in a contraction of the number of home health providers. In the event of such a contraction in the number of providers, we believe the surviving providers may benefit from a higher rate of admissions growth than would have otherwise occurred. Those surviving providers may earn incremental margins on those higher admissions that may serve to offset a portion of the rate reduction from the Medicare program. However, there can be no assurance that we will be successful in attracting such higher admissions.

It is also reasonable to expect that future rate cuts will present additional opportunities for us to make acquisitions of other providers at valuations and on terms that are attractive to us and enable us to spread our segment and unallocated corporate overhead expenses across a larger business base. However, there can be no assurance that we will be successful in making such acquisitions or that such opportunities will present themselves.39

As a result of the broad scope of health care reform, the significant changes it will effect in the healthcare industry and society generally, and the complexity of the technical issues it addresses, we are unable to predict, at this time, all the ramifications health care reform may have on our business as a health care provider or a sponsor of an employee health insurance benefit plan. These matters could have a material adverse impact on our results of operations or financial condition in ways not currently anticipated by us. This may increase our costs, decrease our revenues, expose us to expanded liability or require us to revise the ways in which we conduct our business. Refer to the results of operations for the impact of these items on revenue, operating and net income for the years ended December 30, 2016, January 1, 2016 and December 31, 2014.

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Management is continuing its work to evaluate the implications of these changes and to develop appropriate courses of action for the Company. Additionally, we may be unable to take actions to mitigate any, or all, of the negative implications of these matters.

We contemplate formulating and taking actions intended to mitigate or otherwise offset some of the negative effects of reimbursement changes. These actions may include any or all of the following:

Attempting to increase our revenues by: investing more resources in sales and marketing activities, development of diagnosis related specialty programs and increasing our educational programs regarding the value of home health to drive admission growth, establishing startup branch operations to expand our service territories, and acquisitions of underperforming providers with strong referral relationships,

Attempting to reduce our costs by: developing a more efficient delivery model, increasing the productivity standards for our staff, optimizing the appropriate use of different levels of professional staff, limiting or eliminating the growth in wage rates, limiting or reducing the size of our work force, closing unprofitable branch operations and accelerating our efforts to evaluate the use of various technological approaches to the delivery of patient care to improve patient outcomes and/or improve the productivity of our workforce,

Evaluating the potential implications of health care reform on our employee benefit plans, and possible changes we may need to make to our plans, and

Potentially other actions we deem appropriate including evaluation of potential additional service offerings in patients’ homes consistent with our Senior Advocacy mission or changing the mix of the types of services we provide.

Although we will attempt to mitigate or otherwise offset the negative effect of health care reform on our revenue and our employee benefit plans, our actions may not ultimately be cost effective or prove successful.

Seasonality

Our ~~Visiting~~HH ~~Nurse~~ segment operations ~~located~~ in Florida ~~(which generated approximately 26% of that segment’s revenues in fiscal year 2016)~~ normally experience higher admissions during the first quarter and lower admissions during the third quarter than in the other quarters due to seasonal population fluctuations. ~~After the CHS JV Transaction, we expect~~ Florida operations togenerated ~~generate~~approximately 1920% of our 2017 revenue.

In our HCI segment, first quarter assessment revenues are traditionally lower than the other quarters due to the seasonal nature of our Medicare Advantage plan customers, while the majority of our ACO Management revenues have historically been generated in the third quarter.

Fiscal Year End

Effective with the first quarter of 2015, the Company adopted a 52-53 week fiscal reporting calendar under which it will report its annual results going forward in four equal 13-week quarters. Every fifth year, one quarter will include 14 weeks and that year will include 53 weeks of operating results. This approach minimizes the impact of calendar differences when comparing different historical periods. All references herein for the years 2016, 2015 and 2014 represent the fiscal years ended December 30, 2016 and January 1, 2016 and the calendar year ended December 31, 2014, respectively.

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differences when comparing different historical periods. All references herein for the years 2017, 2016 and 2015 represent the fiscal years ended December 29, 2017 and December 30, 2016 and the calendar year ended January 1, 2016, respectively.

Critical Accounting Policies

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or the method of its application, is generally accepted, we select the principle or method that is appropriate in the specific circumstances. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties; actual results could differ from these estimates. We evaluate our estimates, including those related to revenue recognition, collectability of accounts receivable, insurance reserves, goodwill, intangibles, income taxes, stock-based compensation, litigation, and contingencies on an on-going basis. We base these estimates on our historical experience and other assumptions that we believe are appropriate under the circumstances. In preparing these consolidated financial statements, we have made our best estimates and judgments of the amounts and disclosures included in the consolidated financial statements.

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Revenue Recognition

We recognize revenues when patient services are provided, primarily in our patients’ homes. Net service revenues are stated at amounts estimated by us to be their net realizable values. We are paid for our services primarily by federal and state third-party reimbursement programs and, to a lesser degree, commercial insurance companies and patients.

Medicare Episodic Revenues

Approximately 6875% of our consolidated net service revenues are derived from the Medicare program. Net service revenues are recorded under the Medicare prospective payment program (“PPS”) based on a 60-day episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) changes in the base episode payments established by the Medicare program; (b) adjustments to the base episode payments for case-mix and geographic wages; (c) a low utilization payment adjustment (“LUPA”) if the number of visits was fewer than five; (d) a partial payment if our patient transferred to another provider or we received a patient from another provider before completing the episode; (e) a payment adjustment based upon the level of therapy services required (thresholds set at 6, 14 and 20 visits); (f) an outlier payment if our patient’s care was unusually costly (capped at 10% of total reimbursement at the agency level); (g) the number of episodes of care provided to a patient; and (h) 2% sequestration reduction.

At the beginning of each Medicare episode, we calculate an estimate of the amount of expected reimbursement based on the variables outlined above and recognize Medicare revenue on an episode-by-episode basis during the course of each episode over its expected number of visits. Over the course of each episode, as changes in the variables become known, we calculate and record adjustments as needed to reflect changes in expectations for that episode from those established at the start of the 60 day period until its ultimate outcome at the end of the 60 day period is known.

Non-Medicare Revenues

Substantially all remaining revenues are derived from services provided under a per visit, per hour or unit basis (as opposed to episodic) for which revenues are calculated and recorded using payor-specific or patient-specific fee schedules based on the contracted rates in each third party payor agreement.

Contingent Service Revenues

Our Healthcare Innovations segment provides strategic health management services to ACOs that have been approved to participate in the “MSSP.” In addition to having ownership interests in a few ACOs, we also have service agreements with ACOs that provide for sharing of MSSP payments received by the ACO, if any. ACOs are entities that contract with Centers for Medicare and Medicaid Services (CMS) to serve the Medicare fee-for-service population with the goal of better care for individuals, improved health for populations and lower 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 MSSP is relatively new and therefore has limited historical experience, which impacts the Company’s ability to accurately accumulate and interpret the data available for calculating an ACOs’ shared savings, if any. MSSP payments are not recognized in revenue until persuasive evidence of an arrangement exists, services have been rendered, the payment is fixed and determinable and collectability is assured, which generally is satisfied only upon cash receipt. Under such agreements, we recognized $4.3 million and $1.4 million in MSSP payments for cash received during 2016 and 2015 related to savings generated for the program period ended December 31, 2015 and December 31, 2014, respectively, which accounted for 17% and 41%, respectively of our HCI segment revenues. No revenue has been recognized related to potential MSSP payments for savings generated for the program period ended December 31, 2016, if any.

~~Revenue Adjustments~~41

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orextent ~~services~~that ~~provided~~the ~~under~~actual ~~per~~costs ~~visit,~~of ~~per~~serving ~~hour~~assigned orbeneficiaries ~~unit~~are ~~basis~~below ~~which~~certain ~~differ~~trended ~~from~~benchmarks ~~our~~of ~~estimates~~such orbeneficiaries ~~audit~~and ~~adjustments~~certain ~~are~~quality ~~recorded~~performance ~~when~~measures ~~known~~are ~~and estimable~~achieved. ~~Historically,~~The ~~revenue~~MSSP ~~adjustments~~is ~~have~~relatively ~~not~~new ~~been~~and ~~significant~~therefore ~~and~~has aslimited ~~such~~historical experience, wewhich ~~believe~~impacts ~~that~~the ~~net~~Company’s ~~service~~ability ~~revenues~~to accurately accumulate and ~~accounts~~interpret ~~receivable~~the -data ~~net~~available ~~reflect~~for ~~their~~calculating ~~net~~an ~~realizable~~ACOs’ ~~value~~shared savings, if any. ~~Changes~~MSSP payments are not recognized in ~~estimates~~revenue ~~related~~until topersuasive ~~prior~~evidence ~~periods~~of ~~(increased)~~an ~~decreased~~arrangement ~~revenues~~exists, byservices ~~approximately~~have ~~($608~~been rendered,~~000)~~ the payment is fixed and determinable and collectability is assured, ~~($365~~which generally is satisfied only upon cash receipt. Under such agreements,~~000)~~ we recognized $2.4 million and ($~~320,000)~~4.3 million in MSSP payments for cash received during 2017 and 2016 related to savings generated for the ~~years~~program period ended December 3031, 2016 and December 31, ~~January~~2015, 1respectively, ~~2016~~which accounted for 9% and 17%, respectively of our HCI segment revenues. No revenue has been recognized related to potential MSSP payments for savings generated for the program period ended December 31, ~~2014~~2017, ~~respectively~~if any.

Revenue Adjustments

Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. As a result, we may adjust previously recorded revenue amounts due to issues related to: a) medical coding, particularly with respect to Medicare, b) patient eligibility, particularly with respect to Medicaid, and c) other reasons unrelated to credit risk. Revenue adjustments, if any, to reflect actual payment amounts for completed episodes or services provided under per visit, per hour or unit basis which differ from our estimates or audit adjustments are recorded when known and estimable. Historically, revenue adjustments have not been significant and as such, we believe that net service revenues and accounts receivable - net reflect their net realizable value. Changes in estimates related to prior periods (increased) decreased revenues by approximately ($780,000), ($608,000) and ($365,000) in the years ended December 29, 2017, December 30, 2016 and January 1, 2016, respectively.

Accounts Receivable

Accounts receivable are reported at their estimated net realizable value and are net of estimated allowances for uncollectible accounts and adjustments. Accounts receivable consist primarily of amounts due from third-party payors and patients. We evaluate the collectability of our accounts receivable based on certain factors, such as payor types, historical collection trends and aging categories. We calculate our reserve for uncollectible accounts based on the length of time that the receivables are past due. The percentage applied to the receivable balances for each payor’s various aging categories is based on historical collection experience, business and economic conditions and reimbursement trends.

New Revenue Recognition Guidance

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 affects virtually all aspects of an entity’s revenue recognition, including determining the measurement of revenue and the timing of when it is recognized for the transfer of goods or services to customers. We adopted Topic 606 effective for our next fiscal year beginning December 30, 2017 using a modified retrospective approach. Based on our assessment of the guidance, no opening balance sheet adjustment to retained earnings was identified. We do, however, anticipate the reclassification of all bad debt expense to net patient service revenue on a go-forward basis, as the standard largely limits bad debt expense to bankruptcies or changes in credit risk.

A significant element of implementing Topic 606 is reviewing sources of revenue and evaluating the characteristics of the patient population to develop the appropriate portfolio distribution with similar characteristics that when evaluated under the new revenue standard, will result in a materially consistent revenue amount for such portfolios as if each patient account was evaluated on a “contract-by-contract” basis. Our review supports an allocation of patients to portfolios that is consistent with our current MD&A, segment and footnote disclosures. Additionally, we believe the adoption will have minimal impact on our financial statement disclosures.

Application of this guidance by the healthcare industry is continuing to develop, and changes could arise that are inconsistent with our year-end assessment. We will continue to monitor the application Topic 606 by peer organizations.

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Insurance Programs

We bear significant risk under our large-deductible workers’ compensation insurance program and our self-insured employee health program. Under the workers’ compensation insurance program, we bear risk up to $400,000 per incident. We purchase stop-loss insurance for the employee health plan that places a specific limit, generally $300,000, on our exposure for any individual covered life.

Malpractice and general patient liability claims for incidents which may give rise to litigation have been asserted against us by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. We are aware of incidents that have occurred through year-end that may result in the assertion of additional claims. We currently carry professional and general liability insurance coverage (on a claims made basis) for this exposure with no deductible. We also carry D&O coverage (also on a claims made basis) for potential claims against our directors and officers, including securities actions, with deductibles ranging from $175,000 to $500,000 per claim.

We record estimated liabilities for our insurance programs based on information provided by the third-party plan administrators, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. We monitor our estimated insurance-related liabilities and recoveries, if any, on a monthly basis and as required by ASU 2010-24, Health Care Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries, record amounts due under insurance policies in other current assets, while recording the estimated carrier liability in other current liabilities in the consolidated balance sheets. As facts change, it may become necessary to make adjustments that could be material to our results of operations and financial condition.

Goodwill and Other Intangible Assets

Intangible assets are stated at fair value at the time of acquisition and goodwill represents the excess cost over the fair value of net assets acquired and liabilities assumed. Finite lived intangible assets are amortized on a straight-line basis over the estimated useful life of the asset. Goodwill and indefinite-lived assets are not amortized. We perform impairment ~~tests~~analysis of goodwill and indefinite lived assets as required by ASC Topic 350, Intangibles - Goodwill and Other on at least an annual basis. An ~~impairment~~In ~~analysis~~2017 ~~requires~~we ~~numerous~~performed ~~subjective~~qualitative ~~assumptions~~assessments ~~and estimates~~ to determine ~~fair~~whether ~~value~~any ofgoodwill ~~the~~or ~~respective~~indefinite ~~reporting~~lived ~~units~~assets were impaired. We ~~estimate~~evaluated the ~~fair~~relevant ~~value~~events ofand ~~the~~circumstances, ~~related~~such ~~reporting~~as ~~units~~the ~~using a combined~~ market ~~approach~~conditions, ~~(guideline~~financial ~~company~~performance, and ~~similar~~share ~~transaction~~price ~~method)~~to ~~and~~determine ~~income~~if ~~approach~~any ~~(discounted~~impairment ~~cash~~is ~~flow analysis)~~indicated. ~~These~~Based ~~models are based~~ on our ~~projections~~2017 ofanalysis, ~~future~~an ~~revenues~~impairment ~~and~~of ~~operating~~goodwill ~~costs~~or ~~and~~indefinite ~~are~~lived ~~reconciled~~assets towas ~~our~~not ~~consolidated market capitalization~~indicated. ~~Discounted~~ ~~cash~~Had ~~flow~~our ~~models~~2017 ~~are~~assessments ~~highly~~indicated ~~reliant on various assumptions. Significant assumptions we utilize in these models for the current year included: projected business results and future industry direction~~impairment, ~~long-term growth factor of 3% and weighted-average cost of capital of 15%. We use assumptions that~~ we ~~deem~~would toperform bea ~~reasonable~~quantitative ~~estimates~~test ofsimilar ~~likely future events and compares the total fair values of each reporting unit~~ to ~~our~~2016 ~~overall market capitalization,~~ and ~~implied~~2015 ~~control~~as ~~premium, to determine if the fair values are reasonable compared to~~ follows.

41Our 2016 and 2015 quantitative impairment analysis required numerous subjective assumptions and estimates to determine fair value of the respective reporting units. We estimated the fair value of the related reporting units using a combined market approach (guideline company and similar transaction method) and income approach (discounted cash flow analysis). These models were based on our projections of future revenues and operating costs and were reconciled to our consolidated market capitalization. Discounted cash flow models are highly reliant on various assumptions. Significant assumptions we utilized in these models included: projected business results and future industry direction, long-term growth factor of 3% and weighted-average cost of capital of 15%. We used assumptions that we deemed to be reasonable estimates of likely future events and compared the total fair values of each reporting unit to our overall market capitalization, and implied control premium, to determine if the fair values were reasonable compared to external market indicators. Subsequent changes in these key assumptions could affect the results of future qualitative impairment reviews.

Important to our overall impairment conclusion was the comparison of the aggregate fair values of the reporting units to our overall market capitalization at the annual assessment date, including the implied control premium, to determine if the fair values are reasonable compared to external market indicators. The aggregate fair value for each reporting unit did not exceed our market value as of the annual impairment testing date. A negative control premium indicated conservatism built into our fair value models.

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~~external~~reporting ~~market~~unit ~~indicators~~fair values were significantly over their carrying value. ~~Subsequent~~Based ~~changes~~on inthe ~~these~~sensitivity analysis performed on two key assumptions ~~could~~in ~~affect~~the discounted cash flow models of each reporting unit, a 100 basis point change in either assumption (either individually or in the ~~results~~aggregate) would not result in any impairment of ~~future~~our goodwill ~~impairment~~or ~~reviews~~intangible assets within any reporting unit.

Because the fair value results for each reporting unit did not indicate a potential impairment existed, we did not recognize any goodwill or intangible asset impairment during 2016, 2015 and 2014. Specifically, our VN, PC and HCI reporting unit fair values were significantly over their carrying value. Based on the sensitivity analysis performed on two key assumptions in the discounted cash flow models of each reporting unit, a 100 basis point change in either assumption (either individually or in the aggregate) would not result in any impairment of our goodwill or intangible assets within either reporting unit.

Assuming no changes in the key assumptions identified and projected results, we currently anticipate the future fair value of our reporting units to increase over time; however, future declines in the operating results of either reporting unit could indicate a need to reevaluate the fair value of these businesses under U.S. GAAP requirements and may ultimately result in an impairment to goodwill. We will continue to monitor for any potential indicators of impairment.

Accounting for Income Taxes

We account for taxes in accordance with ASC Topic 740, Income Taxes. As of December 3029, ~~2016~~2017, we have net deferred tax liabilities of approximately $2118.16 million. The net deferred tax liability is composed of approximately $1815.93 million of deferred tax assets and approximately $4033.09 million of deferred tax liabilities. We have provided a valuation allowance against certain deferred tax assets based upon our estimates of realizability of those assets through future taxable income. This valuation allowance was based in large part on our history of generating operating income or losses in individual tax locales and expectations for the future. Our ability to generate the expected amounts of taxable income from future operations is dependent upon general economic conditions, competitive pressures on revenues and margins and legislation and regulation at all levels of government. Further, we have book goodwill of $105.1 million which is not deductible for tax purposes. The remaining deductible goodwill provides an annual tax deduction approximating $15.21 million through 2022. We have considered the above factors in reaching our conclusion that it is more likely than not that future taxable income will be sufficient to fully utilize the deferred tax assets (net of the valuation allowance) as of December 3029, ~~2016~~2017.

42The Tax Cuts and Jobs Act (Tax Act) was enacted on December 22, 2017 and introduces significant changes to the U.S. income tax law. Effective in 2018, the Tax Act reduces U.S. statutory tax rates from 35% to 21%. Accordingly, we remeasured our deferred taxes as of December 29, 2017 to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized, resulting in a one-time $9.5 million net tax benefit in 2017.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we have made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 29, 2017. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the Internal Revenue Service, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes and effective tax rate in the period in which adjustments are made. The accounting for the tax effects of the Tax Act will be completed in 2018.

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RESULTS OF OPERATIONS

Year Ended December 3029, ~~2016~~2017 Compared with Year Ended ~~January~~December 130, 2016

(In thousands)

	2016				2015				Change
	2017				2016				Change
Consolidated	Amount		% Rev		Amount		% Rev		Amount		%
Home Health Operations
Net service revenues:
Visiting Nurse	$	436,147	73.0	%	$	401,051	75.8	%	$	35,096	8.8	%
Home Health	$	586,070	73.5	%	$	434,968	69.8	%	$	151,102	34.7	%
Personal Care		161,367	27.0	%		127,712	24.2	%		33,655	26.4	%
Other Home-Based Services		184,752	23.2	%		162,546	26.1	%		22,206	13.7	%
		597,514	100.0	%		528,763	100.0	%		68,751	13.0	%
Healthcare Innovations		26,143	3.3	%		26,027	4.2	%		116	0.4	%
		796,965	100.0	%		623,541	100.0	%		173,424	27.8	%
Operating income before corporate expenses:
Visiting Nurse		56,574	13.0	%		49,872	12.4	%		6,702	13.4	%
Home Health		75,587	12.9	%		56,564	13.0	%		19,023	33.6	%
Personal Care		13,509	8.4	%		14,170	11.1	%		(661)	(4.7)	%
Other Home-Based Services		14,555	7.9	%		13,519	8.3	%		1,036	7.7	%
		70,083	11.7	%		64,042	12.1	%		6,041	9.4	%
Healthcare Innovations		4,046	15.5	%		5,657	21.7	%		(1,611)	(28.5)	%
Healthcare Innovations
		94,188	11.8	%		75,740	12.1	%		18,448	24.4	%
Revenue		26,027	100.0	%		3,451	100.0	%		22,576	654.2	%
Corporate expenses		35,565	4.5	%		28,457	4.6	%		7,108	25.0	%
Operating income (loss)		5,657	21.7	%		(1,217)	(35.3)	%		6,874	NM
Deal, transition and other costs		29,405	3.7	%		11,842	1.9	%		17,563	148.3	%
Corporate expenses		28,966	4.6	%		26,302	4.9	%		2,664	10.1	%
Operating income		29,218	3.7	%		35,441	5.7	%		(6,223)	(17.6)	%
Deal, transition and other costs		11,842	1.9	%		4,139	0.8	%		7,703	186.1	%
Interest expense, net		7,391	0.9	%		6,285	1.0	%		1,106	17.6	%
Operating income		34,932	5.6	%		32,384	6.1	%		2,548	7.9	%
Net income - noncontrolling interests		3,523	0.4	%		519	0.1	%		3,004	578.8	%
Interest expense, net		(5,776)	(0.9)	%		(2,287)	(0.4)	%		(3,489)	152.6	%
Net income before income taxes	$	18,304	2.3	%	$	28,637	4.6	%	$	(10,333)	(36.1)	%
Income tax expense		(10,984)	(1.8)	%		(10,556)	(2.0)	%		(428)	4.1	%
Adjusted EBITDA (1)	$	67,965	8.5	%	$	54,552	8.7	%	$	13,413	24.6	%
Net income	$	18,172	2.9	%	$	19,541	3.7	%	$	(1,369)	(7.0)	%
Adjusted net income (1)	$	28,864	3.6	%	$	24,640	4.0	%	$	4,224	17.1	%
Adjusted EBITDA (1)	$	53,515	8.6	%	$	42,571	8.0	%	$	10,944	25.7	%
Adjusted net income (1)	$	24,640	4.0	%	$	20,746	3.9	%	$	3,894	18.8	%

(1)

See page 52 for GAAP reconciliation of Adjusted EBITDA and Adjusted net income attributable to Almost Family, Inc.

Home Health ~~revenue~~segment net revenues increased 34.7% or $68151.81 million to $586.1 million from ~~prior~~$435.0 ~~year~~million ~~primarily~~in ~~due~~the toprior ~~acquisitions~~year, ~~occurring~~and ~~late~~episodic inadmissions ~~2015~~grew ~~(WillCare~~by ~~and~~40.4% ~~Black~~to ~~Stone)~~118,115 ~~and~~from in84,401, ~~2016~~primarily ~~(Bayonne~~due ~~and~~to ~~Wisconsin)~~the CHS-JV acquisition. ~~Refer~~Revenues tofrom VNthe ~~and~~Home PCHealth ~~segment~~facilities ~~discussions~~acquired ~~for~~in ~~further~~the ~~operating~~CHS-JV ~~performance~~acquisition ~~details~~were $167.7 million for 2017.

~~HCI~~Other Home-Based Services segment net revenues increased ~~$22.6~~year ~~million~~over toyear aby ~~record~~ $2622.02 million inor ~~2016 versus $3~~13.57% ~~million~~to ~~in 2015, as acquired assessment business revenues were~~ $20184.68 million ~~and shared-savings revenues~~ from ~~Imperium served ACOs in 2016 increased to~~ $4162.35 million inprimarily ~~2016,~~ as ~~compared~~a toresult ~~$1.4~~of ~~million~~the inCHS-JV ~~2015. Overall~~acquisition’s ~~HCI~~15 ~~segment~~hospice ~~contribution improved $6~~facilities.9 Hospice ~~million~~revenues towere $529.78 million infor ~~2016 versus a $1~~2017.~~2 million net loss in 2015.~~

~~Corporate~~Healthcare ~~expenses~~Innovations assegment anet ~~percentage~~revenues ofand ~~revenue~~operating ~~declined~~income towere 4$26.6%1 ~~from~~million and $4.9%0 million in ~~the~~2017 ~~prior~~as ~~year~~compared ~~period due~~ to ~~the expansion of the size and scope of our operations~~$26. ~~Deal,~~0 ~~transition~~million and ~~other costs were~~ $115.87 million ~~for~~in 2016, ~~primarily as a result of costs related to acquisitions, while the prior year included a one-time $4~~respectively.~~2 million benefit related to legal settlements.~~

~~Borrowings~~Each ~~related~~of toour ~~acquisitions increased~~operating ~~interest~~segments ~~expense~~experienced toprolonged ~~$5.8~~disruption ~~million,~~during ~~from $2.3 million in 2015. Further, in~~ the ~~fourth~~third quarter of ~~2016,~~2017 weas ~~commenced~~a ~~our~~result VNof ~~Segment’s~~Hurricanes ~~company-wide~~Irma ~~clinical~~and ~~system~~Harvey ~~conversion~~(the to“Hurricanes”), ~~the~~with ~~HomeCare~~our ~~HomeBase~~Home ~~information~~Health ~~platform. Such~~segment ~~implementation,~~operations ~~training~~in ~~and~~Florida ~~related~~the ~~costs~~most ~~began~~severely inaffected. ~~the~~The ~~fourth~~Hurricanes ~~quarter~~reduced ofoperating ~~2016~~income ~~and~~by ~~are~~approximately ~~expected~~$3.3 tomillion, ~~continue~~largely ~~throughout~~on ~~2017~~lost volume.

43Refer to the individual segment discussions for further operating performance details.

Corporate expenses as a percentage of revenue decreased 0.1% to 4.5% in 2017. Deal, transition and other costs were $29.4 million, largely driven by transaction costs of the pending LHC Group merger and the CHS-JV acquisition, in addition to the conversion of the Home Health segment to the Homecare Homebase information system. Unused fees associated with our larger credit facility and higher amortization of loan costs increased interest expense to $7.4 million from $6.3 million in the prior year.

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~~Our~~We recorded a net tax benefit of $2.1 million in our fiscal 2017 due to a favorable $9.5 million impact from the 2017 Tax Cuts and Jobs Act (Tax Act); excluding Tax Act impact our tax expense and effective tax rate ~~for~~would ~~2016~~have ~~was~~been 38$7.4% ~~compared~~million toand 3440.5%, respectively, for ~~2015,~~the ~~respectively~~full year. The ~~lower~~2016 effective tax rate ~~for~~was ~~2015~~38.4%. The increase was ~~primarily~~largely ~~related~~due to ~~the~~an ~~tax~~increase ~~treatment~~in ofthe aratio ~~legal~~of ~~settlement. Excluding~~permanent ~~the~~current year non-~~taxable~~deductible ~~settlement~~items ~~and~~to ~~other nondeductible deal costs, our effective~~ pre-tax ~~rate~~income ~~for~~driven ~~2015~~largely ~~would~~by ~~have~~merger ~~been~~related 40differences.~~5%.~~

~~Visiting~~The ~~Nurse~~Tax ~~Segment-Years~~Act ~~Ended~~was signed into law on December 30 22, ~~2016~~ 2017, is effective for our fiscal 2018 and ~~January 1~~will reduce our U.S. corporate tax rate from 35% to 21% in 2018. We expect our effective tax rate will approximate 26.5% in 2018. See Part II, ~~2016~~ Item 8, “Note 6 – Income Taxes” for further discussion of the Tax Act.

~~Approximately~~Home ~~95%~~Health of the VN segment revenues were generated from the Medicare program while the balance was generated from Medicaid and private insurance programs. In addition to our focus on operating income from the Visiting Nurse segment, we also measure this segment’s performance in terms of admissions, episodes, visits, patient months of care, revenue per episode and visits per episode. (In thousands, except statistical information)Segment

	2016					2015					Change
	Amount			% Rev		Amount			% Rev		Amount			%
Net service revenues	$	436,147		100.0	%	$	401,051		100.0	%	$	35,096		8.8	%
Cost of service revenues		213,397		48.9	%		194,098		48.4	%		19,299		9.9	%
Gross margin		222,750		51.1	%		206,953		51.6	%		15,797		7.6	%
General and administrative expenses:
Salaries and benefits		122,444		28.1	%		115,002		28.7	%		7,442		6.5	%
Other		43,732		10.0	%		42,079		10.5	%		1,653		3.9	%
Total general and administrative expenses		166,176		38.1	%		157,081		39.2	%		9,095		5.8	%
Operating income before corporate expenses	$	56,574		13.0	%	$	49,872		12.4	%	$	6,702		13.4	%
Average number of locations		166					163					3		1.8	%
All payors:
Patient Months		357,971					333,343					24,628		7.4	%
Admissions		107,520					102,381					5,139		5.0	%
Billable Visits		2,861,962					2,621,443					240,519		9.2	%
Medicare:
Admissions (1)		95,487		88.8	%		91,823		89.7	%		3,664		4.0	%
Revenue (in thousands)	$	414,814		95.1	%	$	377,724		94.2	%	$	37,090		9.8	%
Revenue per admission	$	4,344				$	4,114				$	231		5.6	%
Billable visits (1)		2,537,873		88.7	%		2,364,404		90.2	%		173,469		7.3	%
Recertifications		51,731					48,743					2,988		6.1	%
Payor mix % of Admissions
Traditional Medicare Episodic		82.8	%				83.3	%				(0.5)	%
Replacement Plans Paid Episodically		5.5	%				4.1	%				1.4	%
Replacement Plans Paid Per Visit		11.7	%				12.6	%				(0.9)	%
Non-Medicare:
Admissions (1)		12,033		11.2	%		10,558		10.3	%		1,475		14.0	%
Revenue (in thousands)	$	21,333		4.9	%	$	23,327		5.8	%	$	(1,994)		(8.5)	%
Revenue per admission	$	1,773				$	2,209				$	(437)		(19.8)	%
Billable visits (1)		324,089		11.3	%		257,039		9.8	%		67,050		26.1	%
Recertifications		4,063					2,329					1,734		74.5	%
Payor mix % of Admissions
Medicaid & other governmental		37.8	%				30.6	%				7.2	%
Private payors		62.2	%				69.4	%				(7.2)	%

Approximately 95% of the HH segment revenues were generated from the Medicare program while the balance was generated from Medicaid and private insurance programs. In addition to our focus on operating income from the Home

4446

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Health segment, we also measure this segment’s performance in terms of admissions, episodes, visits, patient months of care, revenue per episode and visits per episode. (In thousands, except statistical information)



	2017				2016				Change
	Amount		% Rev		Amount		% Rev		Amount		%
Net service revenues	$	586,070	100.0	%	$	434,968	100.0	%	$	151,102	34.7	%
Cost of service revenues		287,270	49.0	%		212,744	48.9	%		74,526	35.0	%
Gross margin		298,800	51.0	%		222,224	51.1	%		76,576	34.5	%
General and administrative expenses:
Salaries and benefits		164,015	28.0	%		121,972	28.0	%		42,043	34.5	%
Other		59,198	10.1	%		43,688	10.0	%		15,510	35.5	%
Total general and administrative expenses		223,213	38.1	%		165,660	38.1	%		57,553	34.7	%
Operating income before corporate expenses	$	75,587	12.9	%	$	56,564	13.0	%	$	19,023	33.6	%

Average number of locations		242				168				74	44.0	%

All payors:
Admissions		159,079				107,576				51,503	47.9	%
Census		31,224				22,980				8,244	35.9	%
Visits		3,729,562				2,870,277				859,285	29.9	%
Cost per visit	$	77			$	74			$	3	3.9	%
G&A expense per census	$	7,149			$	7,209			$	(60)	(0.8)	%

Episodic:
Admissions		118,535				84,401				34,134	40.4	%
Census		23,874				17,894				5,980	33.4	%
Episodes		178,540				130,003				48,537	37.3	%
Visits		2,933,044				2,317,540				615,504	26.6	%
Revenue (in thousands)	$	498,075	85.0	%	$	379,701	87.3	%	$	118,374	31.2	%
Revenue per episode	$	2,790			$	2,921			$	(131)	(4.5)	%
Visits per episode		16.4				17.8				(1.4)	(7.8)	%

Non-episodic:
Admissions		40,544				23,175				17,369	74.9	%
Census		7,350				5,086				2,264	44.5	%
Visits		796,518				552,737				243,781	44.1	%
Revenue (in thousands)	$	87,995	15.0	%	$	55,267	12.7	%	$	32,728	59.2	%
Revenue per visit	$	110			$	100			$	10	10.5	%
Visits per admission		19.6				23.9				(4.2)	(17.6)	%

(1)

Percentages pertain to percentage of total admissions or total billable visits, as applicable.

VNHome Health segment net service revenues increased by $35151.1 million or 834.87% to a$586.1 ~~record~~million from $~~436~~435.10 million in ~~2016~~the ~~primarily~~prior ~~due~~year toand ~~acquisitions~~episodic ~~occurring~~admissions ~~late~~grew inby ~~2015~~40.4% ~~(WillCare~~to 118,535 ~~and~~from ~~Black~~84,401 ~~Stone)~~primarily ~~and~~due into ~~2016~~the ~~(Bayonne)~~CHS-JV acquisition. ~~Acquisitions~~Excluding ~~drove~~the ~~increases~~CHS-JV ~~in Medicare billable visits~~acquisition, ~~Medicare~~episodic admissions ~~and~~grew ~~Medicare~~by ~~recertifications~~approximately 2%, which ~~increased~~was ~~7.3%~~reduced toby ~~2,537,873,~~the 4impact of the Hurricanes.0% Volume togrowth ~~95,487~~was ~~and~~partially 6.offset by a net effective 1% toMedicare ~~51,731,~~rate ~~respectively~~cut inand ~~2016~~the impact of the Hurricanes.

~~Substantially~~Gross ~~all~~margin as a percent of revenue declined 0.1% from prior year due to the ~~changes~~combined inimpact of a 1.0% Medicare rate cut and an annual cost of ~~service~~living ~~revenues~~wage rate adjustment of 2%, ~~general~~both ~~and~~effective ~~administrative~~January ~~expenses~~1, ~~and~~2017, ~~payor~~that ~~information~~slightly ~~were~~outpaced cost side improvements. Cost per visit increased 3.9% due to ~~acquisitions~~a combination of increased wage rates, lower visit utilization and costs associated with the Homecare Homebase implementation.

Gross margin as a percentage of revenue decreased to 51.1% from 51.6% primarily due to higher labor costs per visit from acquired agencies and higher insurance claims experience. Total general and administrative expenses declined slightly as a percentage of revenue to 38.1% from 39.2% in 2015 primarily from the effect of acquired operations plus the closure of selected underperforming branches in late 2015.47

As a result, VN segment operating income before corporate expenses improved $6.7 million to $56.6 million from $49.8 million in the prior year, while VN segment operating income as a percentage of revenue increased to 13.0% from 12.4% in the prior year.

Personal Care Segment-Years Ended December 30, 2016 and January 1, 2016

Approximately 83% of the PC segment revenues were generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients. (In thousands, except statistical information)

	2016				2015				Change
	Amount		% Rev		Amount		% Rev		Amount		%
Net service revenues	$	161,367	100.0	%	$	127,712	100.0	%	$	33,655	26.4	%
Cost of service revenues		111,320	69.0	%		86,642	67.8	%		24,678	28.5	%
Gross margin		50,047	31.0	%		41,070	32.2	%		8,977	21.9	%
General and administrative expenses:
Salaries and benefits		24,120	14.9	%		17,373	13.6	%		6,747	38.8	%
Other		12,418	7.7	%		9,527	7.5	%		2,891	30.3	%
Total general and administrative expenses		36,538	22.6	%		26,900	21.1	%		9,638	35.8	%
Operating income before corporate expenses	$	13,509	8.4	%	$	14,170	11.1	%	$	(661)	(4.7)	%
Average number of locations		75				65				10	15.4	%
Admissions		9,671				6,879				2,792	40.6	%
Patient months of care		165,995				108,512				57,483	53.0	%
Billable hours		7,441,565				5,747,214				1,694,351	29.5	%
Revenue per billable hour	$	21.68			$	22.22			$	(0.54)	(2.4)	%

PC segment net revenue increased $33.7 million or 26.4% to a record $161.4 million due to acquisitions in the second half of 2015 (WillCare and Black Stone) and in mid-2016 (Wisconsin). Cost of service revenues as a percentage of net service revenues increased slightly to 69.0% in 2016 from 67.8% in 2015 due to the mix of acquired operations and rate reductions in certain skilled elements of the Connecticut and Ohio Medicaid programs.

Total general and administrative expenses increased as a percent of net service revenues to 22.6% from 21.1% in 2015, largely due to higher insurance claims experience in 2016 as compared to 2015.

As a result, PC segment operating income before corporate expenses as a percentage of revenue decreased 2.7%, or $0.7 million.

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~~Year~~Total ~~Ended~~general ~~January~~ and administrative expenses remained consistent at 38.1%, ~~2016~~ ~~Compared~~as ~~with~~a ~~Year~~percent ~~Ended~~of ~~December 31, 2014~~revenue.

Home Health segment contribution increased $19.0 million, or 33.6%, to $75.6 million, from $56.6 million in the prior year.

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Other Home-Based Services

Approximately 80% of the OHBS segment revenues were generated from Medicaid and other government programs while the balance is generated from insurance programs and private pay patients. (In thousands, except statistical information)



	2017				2016				Change
	Amount		% Rev		Amount		% Rev		Amount		%
Net service revenues	$	184,752	100.0	%	$	162,546	100.0	%	$	22,206	13.7	%
Cost of service revenues		121,946	66.0	%		111,973	68.9	%		9,973	8.9	%
Gross margin		62,806	34.0	%		50,573	31.1	%		12,233	24.2	%
General and administrative expenses:
Salaries and benefits		31,743	17.2	%		24,592	15.1	%		7,151	29.1	%
Other		16,508	8.9	%		12,462	7.7	%		4,046	32.5	%
Total general and administrative expenses		48,251	26.1	%		37,054	22.8	%		11,197	30.2	%
Operating income before corporate expenses	$	14,555	7.9	%	$	13,519	8.3	%	$	1,036	7.7	%


Personal Care:
Locations		75				76				(1)	(1.3)	%
Admissions		9,420				9,671				(251)	(2.6)	%
Census		12,603				13,216				(613)	(4.6)	%
Hours of service		7,197,211				7,538,223				(341,012)	(4.5)	%
Hours per patient per week		11.0				11.0				0.0	0.1	%
Revenue	$	154,937	83.9	%	$	161,367	99.3	%	$	(6,430)	(4.0)	%
Operating income	$	10,102			$	13,509			$	(3,407)	(25.2)	%
Revenue per hour	$	21.53			$	21.41			$	0.12	0.6	%
Cost per hour	$	13.19			$	13.15			$	0.04	0.3	%

Hospice:
Locations		16				1				15	NM
Admissions		2,879				97				2,782	NM
Census		482				23				459	NM
Length of stay		61				42				19	51.7	%
Revenue	$	29,815	16.1	%	$	1,179	0.7	%	$	28,636	NM
Operating income	$	4,453			$	10			$	4,443	NM
Revenue per day	$	170			$	141			$	29	20.3	%

OHBS segment net service revenues increased $22.2 million or 13.7% to $184.8 million from $162.6 million, primarily as a result of the 15 hospice facilities acquired in the CHS-JV transaction. Hospice revenues were $29.8 million. Personal care revenues were down $6.4 million or 4.0% from prior year on lower volumes. Additionally, mix changes combined with rate cuts and increases in wages influenced by increases in statutory minimum wage rates in certain states negatively impacted personal care margins. Overall OHBS segment contribution before corporate expenses increased $1.0 million or 7.7%, as compared to the same period of last year.

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Healthcare Innovations Segment

(In thousands, except statistical information)


	2017				2016				Change
	Amount		% Rev		Amount		% Rev		Amount		%
Net service revenues	$	26,143	100.0	%	$	26,027	100.0	%	$	116	0.4	%
Cost of service revenues		10,069	38.5	%		10,733	41.2	%		(664)	(6.2)	%
Gross margin		16,074	61.5	%		15,294	58.8	%		780	5.1	%
General and administrative expenses:
Salaries and benefits		7,014	26.8	%		5,915	22.7	%		1,099	18.6	%
Other		5,014	19.2	%		3,722	14.3	%		1,292	34.7	%
Total general and administrative expenses		12,028	46.0	%		9,637	37.0	%		2,391	24.8	%
Operating income before corporate expenses	$	4,046	15.5	%	$	5,657	21.7	%	$	(1,611)	(28.5)	%

ACO Management
Medicare ACO enrollees under management		141,556				121,881				19,675	16.1	%
ACOs under contract		15				14				1	7.1	%
Revenue	$	5,076	19.4	%	$	5,294	20.3	%	$	(218)	(4.1)	%
Operating income	$	479			$	2,714			$	(2,235)	82.4	%

Assessment Services
Assessments		87,948				75,814				12,134	16.0	%
Revenue	$	21,067	80.6	%	$	20,733	79.7	%	$	334	1.6	%
Operating income	$	3,567			$	2,943			$	624	21.2	%

HCI segment net revenues increased slightly to $26.1 million in 2017 from $26.0 million in 2016. Increases in both ACO Management membership fees and Assessment Services revenue largely offset a $1.9 million reduction in ACO shared savings payments revenue in 2017 versus the prior year. As such, HCI operating income before corporate expenses decreased $1.6 million to $4.0 million in 2017.

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Year Ended December 30, 2016 Compared with Year Ended January 1, 2016

(in thousands)

	2015				2014				Change
	2016				2015				Change
Consolidated	Amount		% Rev		Amount		% Rev		Amount		%
Home Health Operations
Net service revenues:
Visiting Nurse	$	401,051	75.8	%	$	380,788	77.2	%	$	20,263	5.3	%
Home Health	$	434,968	69.8	%	$	400,133	75.2	%	$	34,835	8.7	%
Personal Care		127,712	24.2	%		112,497	22.8	%		15,215	13.5	%
Other Home-Based Services		162,546	26.1	%		128,630	24.2	%		33,916	26.4	%
		528,763	100.0	%		493,285	100.0	%		35,478	7.2	%
Healthcare Innovations		26,027	4.2	%		3,451	0.6	%		22,576	654.2	%
		623,541	100.0	%		532,214	100.0	%		91,327	17.2	%
Operating income before corporate expenses:
Visiting Nurse		49,872	12.4	%		42,899	11.3	%		6,973	16.3	%
Home Health		56,564	13.0	%		49,608	12.4	%		6,956	14.0	%
Personal Care		14,170	11.1	%		12,453	11.1	%		1,717	13.8	%
Other Home-Based Services		13,519	8.3	%		14,434	11.2	%		(915)	(6.3)	%
		64,042	12.1	%		55,352	11.2	%		8,690	15.7	%
Healthcare Innovations		5,657	21.7	%		(1,217)	(35.3)	%		6,874	(564.8)	%
Healthcare Innovations
		75,740	12.1	%		62,825	11.8	%		12,915	20.6	%
Revenue		3,451	100.0	%		2,544	100.0	%		907	35.7	%
Corporate expenses		28,457	4.6	%		25,737	4.8	%		2,720	10.6	%
Operating income (loss)		(1,217)	(35.3)	%		(13)	(0.5)	%		(1,204)	NM	%
Deal, transition and other costs		11,842	1.9	%		4,139	0.8	%		7,703	186.1	%
Corporate expenses		26,302	4.9	%		25,368	5.1	%		934	3.7	%
Operating income		35,441	5.7	%		32,949	6.2	%		2,492	7.6	%
Deal, transition and other costs		4,139	0.8	%		5,304	1.1	%		(1,165)	(22.0)	%
Interest expense, net		6,285	1.0	%		2,852	0.5	%		3,433	120.4	%
Operating income		32,384	6.1	%		24,667	5.0	%		7,717	31.3	%
Net income - noncontrolling interests		519	0.1	%		(468)	(0.1)	%		987	(210.9)	%
Interest expense, net		(2,287)	(0.4)	%		(1,632)	(0.3)	%		(655)	40.1	%
Net income before income taxes		28,637	4.6	%		30,565	5.7	%	$	(1,928)	(6.3)	%
Income tax expense		(10,556)	(2.0)	%		(9,511)	(1.9)	%		(1,045)	11.0	%
Adjusted EBITDA (1)	$	54,552	8.7	%	$	43,745	8.2	%	$	10,807	24.7	%
Net income	$	19,541	3.7	%	$	13,524	2.7	%	$	6,017	44.5	%
Adjusted net income (1)	$	24,640	4.0	%	$	20,746	3.9	%	$	3,894	18.8	%
Adjusted EBITDA (1)	$	42,571	8.0	%	$	35,698	7.2	%	$	6,873	19.3	%
Adjusted net income (1)	$	20,746	3.9	%	$	16,919	3.4	%	$	3,827	22.6	%

(1)

See page 52 for GAAP reconciliation of Adjusted EBITDA and Adjusted net income attributable to Almost Family, Inc.

~~Approximately~~Home ~~$31.2~~Health ~~million~~segment ofand ~~our~~Other Home-Based Services net service revenues in 2016 increased $3534.58 million ~~year~~and ~~over~~$33.9 ~~year~~million, ~~increase~~respectively infrom ~~Home~~prior ~~Health~~year ~~revenue~~primarily ~~was~~due ato ~~result~~acquisitions ofoccurring ~~our~~late ~~acquisition~~in of2015 (WillCare and Black Stone) and in 2016 (Bayonne and Wisconsin). Refer to VNHH and PCOHBS segment discussions for further operating performance details. ~~Refer to “Fiscal Year End” related to our 52-53 week reporting conversion.~~

~~Healthcare~~HCI ~~Innovations’~~segment ~~operating~~net ~~loss~~service ~~was~~revenues ~~primarily~~increased ~~due~~$22.6 million to ~~the~~$26.0 ~~expected~~million ~~losses~~in of2016 ~~our~~versus ~~third~~$3.5 ~~quarter~~million in 2015, ~~acquisition~~as ofacquired ~~Ingenios~~assessment ~~and~~service torevenues awere ~~lesser~~$20.7 ~~degree,~~million ~~higher~~and ~~losses~~shared-savings inrevenues ~~Imperium~~from ~~primarily~~our ~~related~~ACO tobusiness ain ~~lower~~2016 ~~MSSP~~increased ~~payment~~to $4.3 million in ~~2015~~2016, as compared to ~~2014~~$1.4 million in 2015. Overall HCI segment contribution improved $6.9 million to $5.7 million in 2016 versus a $1.2 million net loss in 2015.

Corporate expenses as a percentage of revenue ~~decreased~~declined ~~slightly~~ to 4.96% ~~in 2015~~ from 54.19% in ~~2014. Deal,~~the ~~transition~~prior ~~and~~year ~~other~~period ~~costs~~due ~~for~~to ~~2015~~the ~~include~~expansion ~~a net benefit~~ of ~~$4.2~~the ~~million~~size ~~related~~and toscope ~~legal~~of ~~settlements,~~our ~~which was offset by $2~~operations.5 Deal, ~~million~~transition ~~of deal~~ and ~~transition~~other costs ~~related~~were ~~to our 2015 acquisitions, the~~ $111.8 million ~~provision~~ for ~~the~~2016, ~~Chapter~~primarily 7as ~~bankruptcy filing of~~ a ~~specific~~result ~~payor and $1.4 million related to the fourth quarter~~ of ~~2015 closure of underperforming branch locations in the VN segment. Deal and transition~~ costs ~~in 2014 primarily~~ related to ~~the~~acquisitions, ~~completion~~while of the ~~transition~~prior ofyear ~~our~~included ~~2013~~a ~~acquisitions. Interest~~one-time ~~expense increased~~ $04.6 2 million ~~due~~benefit related to ~~borrowings~~legal ~~on our line of credit in conjunction with 2015 acquisitions~~settlements.

Our effective tax rate for 2015 was 34.5% compared to 41.0% for 2014. The lower effective tax rate for 2015 was primarily related to the tax treatment of a legal settlement. Excluding the non-taxable settlement and other nondeductible deal costs, our effective tax rate for 2015 would have been 40.5%.51

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~~Visiting~~Borrowings ~~Nurse~~related to acquisitions, fees associated with our credit facility and higher amortization of loan costs increased interest expense to $6.3 million, from $2.9 million in 2015. Further, in the fourth quarter of 2016, we commenced our HH Segment’s company-~~Years~~wide ~~Ended~~clinical ~~January~~system 1conversion to the Homecare Homebase information platform. Such implementation, training and related costs began in the fourth quarter of 2016 and ~~December~~continued ~~31,~~throughout ~~2014~~2017.

~~Approximately~~Our ~~94%~~effective oftax ~~the~~rate VNfor ~~segment~~2016 ~~revenues~~was ~~were~~38.4% ~~generated~~compared ~~from~~to ~~the~~34.5% ~~Medicare~~for ~~program~~2015, ~~while~~respectively. The ~~the~~lower ~~balance~~effective tax rate for 2015 was ~~generated~~primarily ~~from~~related ~~Medicaid~~to ~~and~~the ~~private~~tax ~~insurance~~treatment ~~programs~~of a legal settlement. ~~(In~~Excluding ~~thousands~~the non-taxable settlement and other nondeductible deal costs, ~~except~~our ~~statistical~~effective ~~information)~~tax rate for 2015 would have been 40.5%.

	2015					2014					Change
	Amount			% Rev		Amount			% Rev		Amount			%
Net service revenues	$	401,051		100.0	%	$	380,788		100.0	%	$	20,263		5.3	%
Cost of service revenues		194,098		48.4	%		186,837		49.1	%		7,261		3.9	%
Gross margin		206,953		51.6	%		193,951		50.9	%		13,002		6.7	%
General and administrative expenses:
Salaries and benefits		115,002		28.7	%		110,480		29.0	%		4,522		4.1	%
Other		42,079		10.5	%		40,572		10.7	%		1,507		3.7	%
Total general and administrative expenses		157,081		39.2	%		151,052		39.7	%		6,029		4.0	%
Operating income before corporate expenses	$	49,872		12.4	%	$	42,899		11.3	%	$	6,973		16.3	%
Average number of locations		163					167					(4)		(2.4)	%
All payors:
Patient Months		333,343					319,430					13,913		4.4	%
Admissions		102,381					98,634					3,747		3.8	%
Billable Visits		2,621,443					2,507,067					114,376		4.6	%
Medicare:
Admissions (1)		91,823		89.7	%		87,650		88.9	%		4,173		4.8	%
Revenue (in thousands)	$	377,724		94.2	%	$	365,075		95.9	%	$	12,649		3.5	%
Revenue per admission	$	4,114				$	4,165				$	(52)		(1.2)	%
Billable visits (1)		2,364,404		90.2	%		2,259,896		90.1	%		104,508		4.6	%
Recertifications		48,743					47,875					868		1.8	%
Payor mix % of Admissions
Traditional Medicare Episodic		83.3	%				84.0	%				(0.7)	%
Replacement Plans Paid Episodically		4.1	%				3.4	%				0.7	%
Replacement Plans Paid Per Visit		12.6	%				12.6	%				—	%
Non-Medicare:
Admissions (1)		10,558		10.3	%		10,984		11.1	%		(426)		(3.9)	%
Revenue (in thousands)	$	23,327		5.8	%	$	15,713		4.1	%	$	7,614		48.5	%
Revenue per admission	$	2,209				$	1,431				$	779		54.4	%
Billable visits (1)		257,039		9.8	%		247,171		9.9	%		9,868		4.0	%
Recertifications		2,329					1,865					464		24.9	%
Payor mix % of Admissions
Medicaid & other governmental		30.6	%				23.3	%				7.3	%
Private payors		69.4	%				76.7	%				(7.3)	%

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Home Health Segment

Approximately 95% of the HH segment revenues were generated from the Medicare program while the balance was generated from Medicaid and private insurance programs. (In thousands, except statistical information)



	2016				2015				Change
	Amount		% Rev		Amount		% Rev		Amount		%
Net service revenues	$	434,968	100.0	%	$	400,133	100.0	%	$	34,835	8.7	%
Cost of service revenues		212,744	48.9	%		193,674	48.4	%		19,070	9.8	%
Gross margin		222,224	51.1	%		206,459	51.6	%		15,765	7.6	%
General and administrative expenses:
Salaries and benefits		121,972	28.0	%		114,781	28.7	%		7,191	6.3	%
Other		43,688	10.0	%		42,070	10.5	%		1,618	3.8	%
Total general and administrative expenses		165,660	38.1	%		156,851	39.2	%		8,809	5.6	%
Operating income before corporate expenses	$	56,564	13.0	%	$	49,608	12.4	%	$	6,956	14.0	%

Average number of locations		168				164				4	2.4	%

All payors:
Admissions		107,576				102,381				5,195	5.1	%
Census		22,980				83,703				(60,723)	(72.5)	%
Visits		2,870,277				2,621,443				248,834	9.5	%
Cost per visit	$	74			$	74			$	0	0.3	%
G&A expense per census	$	7,209			$	1,874			$	5,335	284.7	%

Episodic:
Admissions		84,401				80,341				4,060	5.1	%
Census		17,894				68,127				(50,233)	(73.7)	%
Episodes		130,003				124,205				5,798	4.7	%
Visits		2,317,540				2,198,927				118,613	5.4	%
Revenue (in thousands)	$	379,701	87.3	%	$	356,739	89.2	%	$	22,962	6.4	%
Revenue per episode	$	2,921			$	2,872			$	49	1.7	%
Visits per episode		17.8				17.7				0.1	0.7	%

Non-episodic:

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