AMEDISYS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2001

COMMISSION FILE NUMBER: 0-24260

AMEDISYS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 11-3131700
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)

11100 MEAD ROAD, SUITE 300
BATON ROUGE, LOUISIANA 70816
(Address of principal executive offices, including zip code)

(225) 292-2031 or (800) 467-2662
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share

Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-K in this form, and if no disclosure will be contained, to
the best of 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. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the last sale price as quoted by the OTC Bulletin Board
on March 18, 2002 was $55,487,000. As of March 18, 2002, registrant has
7,364,711 shares of Common Stock outstanding.

Documents incorporated by reference: Registrant's definitive Proxy
Statement for its 2002 Annual Meeting of Stockholders to be filed pursuant to
the Securities Exchange Act of 1934 is incorporated herein by reference into
Part III hereof.

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TABLE OF CONTENTS

PART I

FORWARD LOOKING STATEMENTS

When included in the Annual Report on Form 10-K or in documents
incorporated herein by reference, the words "expects", "intends", "anticipates",
"believes", "estimates", and analogous expressions are intended to identify
forward-looking statements. Such statements inherently are subject to a variety
of risks and uncertainties that could cause actual results to differ materially
from those projected. Such risks and uncertainties include, among others,
general economic and business conditions, current cash flows and operating
deficits, debt service needs, adverse changes in federal and state laws relating
to the health care industry, competition, regulatory initiatives and compliance
with governmental regulations, customer preferences and various other matters,
many of which are beyond the Company's control. These forward-looking statements
speak only as of the date of the Annual Report on Form 10-K. The Company
expressly disclaims any obligation or undertaking to release publicly any
updates or any changes in the Company's expectations with regard thereto or any
changes in events, conditions or circumstances on which any statement is based.

ITEM 1. BUSINESS

GENERAL

Amedisys, Inc., a Delaware corporation ("Amedisys" or "the Company"), is a
leading multi-regional provider of home health care nursing services. The
Company operates fifty-six home care nursing offices and two corporate offices
in the southern and southeastern United States.

During 1999, the Company changed its strategy from providing a variety of
alternate site provider health care services to becoming a leader in home health
care nursing services. The Company's change of focus was largely attributed to
its significant investment in this segment as a result of its acquisition of 83
home care offices from Columbia/HCA Healthcare Corporation a/k/a The Healthcare
Company ("Columbia/HCA") in late 1998. A second major factor was the
governmental reimbursement changes in the Medicare system that would allow home
care providers the opportunity to be profitable under the Prospective Payment
System ("PPS") which was implemented in October 2000. A third significant factor
was the Company's established reputation and expertise in the field. Amedisys
has over a decade of experience in home care nursing and was an early innovator
in bringing technology, previously used only in acute care settings, to the
home, as well as providing traditional home care services.

Pursuant to this strategy, the Company launched a restructuring plan to
divest its non-home health care nursing divisions. During the period from
September 1999 through September 2001, the Company sold or closed its six
surgery centers and four infusion locations. The Company plans to achieve market
dominance in the southern and southeastern United States by expanding its
referral base by utilizing a highly trained sales force, offering specialized
programs such as wound care, and completing selective acquisitions.

The Company's business model has been developed to be successful under PPS.
The Company has implemented disease state management programs and clinical
protocols as well as supporting technology to monitor and report outcome data,
to standardize care, and to ensure quality outcomes. Using clinical managers to
assess and track patient progress and highly skilled nurses to deliver care are
also important components of the overall plan.

DEVELOPMENTS

Acquisitions

Effective October 1, 2000, the Company acquired, through its wholly-owned
subsidiary Amedisys Northwest Home Health, Inc., certain assets and liabilities
of Northwest Home Health Agency, Inc. and Georgia Mountains Homecare Services,
Inc. The purchase price amounted to the assumption of certain liabilities. In
connection with this acquisition, the Company recorded $1,148,000 of goodwill.

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Effective November 17, 2000, the Company acquired, through its wholly-owned
subsidiary Amedisys Home Health, Inc. of Florida, certain assets and liabilities
of Mid-Florida Home Health Services from Winter Haven Hospital, Inc. In
consideration for the acquired assets and liabilities, the Company paid $975,000
cash (less the value of paid time off) at the time of closing and executed a
promissory note in the amount of $975,000 bearing an annual interest rate of 7%
and payable in 36 monthly principal and interest installments of $30,105. In
connection with this acquisition, the Company recorded $1,554,000 of goodwill.

Effective March 1, 2001, the Company acquired, through its wholly owned
subsidiary Amedisys Home Health, Inc. of Alabama, certain assets and liabilities
of Seton Home Health Services, Inc. ("Seton") from Seton Health Corporation of
North Alabama associated with their operations in Mobile and Fairhope, Alabama.
In consideration for the acquired assets and liabilities, the Company paid
$440,000 cash, which represents a purchase price of $475,000 less the estimated
value of accrued vacation obligations. In connection with this acquisition, the
Company recorded $448,000 of goodwill.

Effective April 6, 2001, the Company acquired, through its wholly-owned
subsidiary Amedisys Home Health, Inc. of Alabama, certain additional assets and
liabilities of Seton from Seton Health Corporation of North Alabama associated
with their operations in Birmingham, Tuscaloosa, Anniston, Greensboro, and
Reform, Alabama. In consideration for the acquired assets and liabilities, the
Company paid $2,216,000 cash, which represents a purchase price of $2,325,000
less the value of accrued vacation obligations. In connection with this
acquisition, the Company recorded $2,235,000 of goodwill.

Effective June 11, 2001, the Company acquired from East Cooper Community
Hospital, Inc. certain assets and liabilities of HealthCalls Professional Home
Health Services. In consideration for the acquired assets and liabilities, the
Company paid $750,000 cash. In connection with this acquisition, the Company
recorded $726,000 in goodwill.

Dispositions and Discontinued Operations

In the accompanying Statements of Operations for each of the three years
ended December 31, 2001, the Company has reflected its staffing, management
services, outpatient surgery, and infusion therapy divisions as discontinued
operations.

In August 1999, the Company adopted a formal plan to sell all of its
interests in its ambulatory surgery and infusion therapy divisions. The
Company's strategic plan was to become a focused home health nursing company. As
of December 31, 2001, the Company has completed the divestiture of both its
infusion therapy division and ambulatory surgery division. A discussion of the
sales that have occurred since the adoption of the plan is as follows.

Effective September 1, 1999, by an Asset Purchase Agreement, the Company
sold certain assets, subject to the assumption of certain liabilities, of its
wholly-owned subsidiary, Amedisys Surgery Centers, L.C. ("ASC"), to United
Surgical Partners International, Inc. The assets and liabilities sold related to
two free-standing outpatient surgery centers operated by ASC, Amedisys Surgery
Center of Pasadena and Amedisys Surgery Center of South Houston. The Company
recorded a pre-tax gain of $9,417,000 as a result of this transaction. The
Company filed a Current Report on Form 8-K with the SEC on September 15, 1999
with regard to this transaction.

Effective December 1, 1999, ASC, by a Membership Interest Purchase
Agreement, sold all of its 67% membership interest in West Texas Ambulatory
Surgery Center, L.L.C. to U.S. Orthopedics Texas, L.L.C. ASC also assigned all
of its rights under a certain management agreement to U.S. Orthopedics, Inc. At
closing, ASC received $783,333 representing the purchase price for the
membership interest and ASC's share of the assignment of the management
agreement. ASC has agreed to a five-year non-compete covenant. The Company
recorded a pre-tax gain of $324,000 as a result of this transaction.

On April 28, 2000, the Company, Park Place Surgery Center, LLC ("Park
Place"), and the remaining Members of Park Place Surgery Center ("Physician
Members") entered into an agreement for the purchase and sale of the Company's
20% membership interest in Park Place, an outpatient surgery center in
Lafayette, Louisiana, to the Physician Members. The purchase price of $3,200,000
cash was paid to the Company at
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closing. The Company received a final partnership distribution of $165,000 in
May 2000. The Company recorded a pre-tax gain of $2,665,000 as a result of this
transaction in the quarter ended June 30, 2000. The Company filed a Current
Report on Form 8-K with the SEC on May 11, 2000 with regard to this transaction.

In May 2000, the Company decided, after a thorough evaluation of historical
financial results and available divestiture opportunities, to close one infusion
therapy location. In connection with this closure, the Company recorded a
goodwill impairment of $1,252,000 in the quarter ended June 30, 2000.
Concurrently, the Company re-evaluated the goodwill recorded for the remaining
infusion therapy locations, resulting in an additional goodwill impairment of
$519,000.

On August 9, 2000, the Company, through its wholly-owned subsidiaries,
Amedisys Alternate-Site Infusion Therapy Services, Inc. ("AASI") and PRN, Inc.
("PRN"), sold, by a Bill of Sale and Asset Purchase Agreement, certain assets,
subject to the assumption of certain liabilities, of AASI and PRN, to Park
Infusion Services, LP. The transaction had an effective date of August 1, 2000.
Subject to certain post-closing adjustments, the Company received $1,750,000,
paid immediately to the Company at closing. The Company recorded a pre-tax gain
of $1,114,000 as a result of this transaction in the quarter ended September 30,
2000. The Company filed a Current Report on Form 8-K with the SEC on August 23,
2000 with regard to this transaction.

On December 1, 2000, the Company's wholly-owned subsidiary, ASC, East
Houston Physician Surgical Services, Ltd. ("Surgical Services"), and East
Houston Surgery Center, Ltd. ("East Houston") entered into an agreement for the
purchase and sale of the Company's 22.98% membership interest in East Houston,
an outpatient surgery center in Houston, Texas, to Surgical Services. The
purchase price of $1,650,000 cash was paid to the Company at closing. The
Company recorded a pre-tax gain of $1,307,000 as a result of this transaction in
the quarter ended December 31, 2000.

Effective September 7, 2001, the Company, its wholly-owned subsidiary ASC,
its 56% owned subsidiary Hammond Surgical Care Center, L.C. d/b/a St. Luke's
SurgiCenter ("St. Luke's"), and Surgery Center of Hammond, L.L.C. ("Surgery
Center") entered into an agreement for the purchase and sale of the operations
and assets of St. Luke's, an outpatient surgery center located in Hammond,
Louisiana, to Surgery Center. The sales price of $2,850,000 was paid at closing
and distributed in the following manner: $1,066,000 paid directly to debtors of
St. Luke's relating to existing debt obligations, $1,684,000 paid to St. Luke's,
and $100,000 in cash to be released upon the determination of the value of
working capital transferred. Subsequent to the sale, St. Luke's made partnership
distributions of $1,693,000 of which the Company received $948,000 and the
physician investors received $745,000. The agreement stipulated a required level
of working capital, defined as patient accounts receivable less trade accounts
payable, of $430,000 to be conveyed at closing. Any amount in excess of $430,000
will be returned to St. Luke's, and any amount less than $430,000 will be
payable by St. Luke's to Surgery Center. In the accompanying Consolidated
Statements of Operations, the Company recorded a pre-tax gain of $1,738,000,
offset by minority interest expense of $672,000, resulting in a net pre-tax gain
of $1,066,000 in the quarter ended September 30, 2001.

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Summarized financial information for the discontinued operations is as
follows (in 000's):

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During 2001, the Company completed its strategy to divest of all non-core
business assets. Included in the accompanying Consolidated Balance Sheet as of
December 31, 2000 are the following assets and liabilities Held for Sale (in
000's):

Remodification of Loan

On December 28, 2000, the Company entered into a loan agreement with NPF
Capital, Inc. ("NPF") for a principal sum of up to $11,725,000. At execution,
NPF paid $9,000,000 directly to Columbia/HCA for the benefit of the Company. The
note with Columbia/HCA ("HCA Note") was a result of the acquisition of home
health agencies consummated in November 1998. The Company also financed $725,000
of debt issue costs under this agreement, with the remaining unfunded portion of
$2,000,000 available for future acquisitions. Simultaneously, Amedisys entered
into a Termination Agreement with Columbia/HCA relating to the note payable (HCA
Note). The Termination Agreement with Columbia/HCA was effective October 1,
2000. The Termination Agreement related to that certain Credit Agreement dated
November 16, 1998 and that certain promissory note dated December 1, 1998 as
modified by that certain Loan Modification Agreement dated September 30, 1999.
As part of this agreement, the HCA Note, which carried a balance (including
accrued interest) of $16,600,000 at September 30, 2000, was terminated effective
October 1, 2000 for a cash payment of $9,000,000 and the execution of a warrant
agreement that allows Columbia/HCA to purchase up to 200,000 shares of Amedisys'
Common Stock, subject to certain conditions. These warrants have an estimated
value of $344,000. As of result of these transactions, the Company recorded an
extraordinary gain of $5,100,000, net of taxes, in the fourth quarter of 2000.

The loan agreement with NPF Capital, Inc. ("NPF Note"), an affiliate of
National Century Financial Enterprises, Inc., is for a principal sum not to
exceed $11,725,000 at an annual interest rate of 10.5%. At loan execution, the
Company borrowed an amount ("Initial Loan Amount") equal to $9,000,000 which was
paid directly to Columbia/HCA. The Initial Loan Amount is payable over a three
year term with interest only payments for the first six months and monthly
payments of principal and interest for the remainder of the term. The Company
had available an amount not to exceed $2,000,000 ("Supplemental Loan Amount")
for the acquisition of businesses, companies and/or their assets of which
$2,000,000 was drawn in 2001. The fees charged by NPF relating to the NPF Note
totaled $725,000 and are payable in accordance with the payment

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terms of the Initial Loan Amount. The security for this note consists of all
credits, deposits, accounts, securities or moneys, and all other property rights
belonging to or in which the Company has any interest, now or hereafter, as well
as every other liability now or hereafter existing of the Company, absolute or
contingent, due or to become due.

Segment Information

The Company's principal source of revenue is derived from home health care
services. The Company's Statements of Operations for the Years Ended December
31, 2001, 2000, and 1999, attached hereto and referenced in Item 8 herein and
the "Dispositions and Discontinued Operations" section above, contain financial
information on this segment. The financial information for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 have been reflected as continuing
and discontinued operations as a result of the Company's decision to reflect its
staffing, management services, outpatient surgery, and infusion therapy
divisions as discontinued operations. Financial information on the segments is
treated as discontinued operations as stated above.

INDUSTRY OVERVIEW

As national health care spending continues to outpace the rate of inflation
and the population of older Americans increases at a faster rate, alternatives
to costly hospital stays will be in even greater demand. Managed care, Medicare,
Medicaid and other payor pressures continue to drive patients through the
continuum of care until they reach a setting where the appropriate level of care
can be provided most cost effectively. Over the past several years, home health
care has evolved as an acceptable and often preferred alternative in this
continuum. In addition to patient comfort and convenience, substantial cost
savings can usually be realized through treatment at home as an alternative to
traditional institutional settings. The continuing economic pressures within the
health care industry and the reimbursement changes dictated by the Balanced
Budget Act of 1997 ("BBA"), have forced providers of home health care services
to closely examine and often modify the manner in which they provide patient
care and services. To survive under the Interim Payment System ("IPS"),
companies were challenged with streamlining operations and modifying staffing
models to manage costs and operate successfully. As the Company has now moved
into PPS, which was effective October 1, 2000, those pressures continue to
exist. However, those companies who successfully operate with effective business
models can provide quality patient care and manage costs under this
reimbursement system.

Traditionally, the home health care industry has been highly fragmented,
comprised primarily of "mom and pop" local home health agencies offering limited
services. These local providers often do not have the necessary capital to
expand their operations or services and are often not able to achieve the
efficiencies to compete effectively. With the implementation of IPS and other
provisions of the BBA, the home health care industry experienced major
consolidation for the first time in its history. Further, with PPS recently
implemented, we continue to experience closures/consolidations in the home
nursing sector.

STRATEGY

The Company's business objective is to enhance its position in its
geographic market areas as a leading provider of high quality, low cost home
health nursing services. To accomplish this, it will do the following:

Internal Growth Strategy

Focus on Its Employees. Because the Company is engaged in a service
business, the essence of the Company is its people. The Company's emphasis
on communication, education, empowerment, and competitive benefits allows
it to attract and retain highly skilled and experienced people in its
markets.

Expand Its Service Base. The Company has targeted selected markets in
the southern and southeastern United States. Through the expansion of its
services and development of niche programs, it plans to dominate these
markets, to increase utilization of its services by payors and referral
sources, and to enhance its overall market position.
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Expand Its Referral Base. It is anticipated that revenue growth will
be spurred by the Company's strategy to employ sales account executives
whose sole focus will be to expand its referral base, so the Company is not
dependent on relatively few physician groups in any given market.

Capitalize on the Closure of Competitive Agencies. Keeping a pulse on
agency closures (as a result of BBA) and understanding referral patterns in
each of its markets allows the Company the opportunity to gain market share
with no acquisition costs.

Manage Costs Through Disease State Management. Payors are focusing on
the management of patients who suffer from chronic diseases which correlate
with substantial long-term costs. In 1999, the Company introduced Disease
State Management programs for wound care, cardiac, and diabetics. In 2000,
the Company introduced other Disease State Management programs, such as
ortho/rehab, pain management, pulmonary/respiratory, pneumonia, cardio
vascular accident, and cancer. The Company's Disease State Management
programs include patient and family education and empowerment, frequent
monitoring and coordinated care with other medical professionals involved
in the care of the patient.

Manage Costs Through Technology. The Company utilizes a software
system that was developed internally which reduces its cost to operate its
business and integrates a number of financial and operating functions into
a single entry system. The software system was sold to CPII Acquisition
Corp., an affiliate of CareSouth Home Health Services, Inc. ("CareSouth")
in 1998. The Company is currently utilizing the software pursuant to a
licensing agreement with CareSouth which expires in 2004. The agreement
contains a bargain purchase option which the Company intends to exercise
upon expiration of the agreement. By enhancing its operations through the
use of information technology and expanded computer applications, the
Company is positioned to not only operate more efficiently, but to compete
in an environment increasingly influenced by cost containment.

External Growth Strategy

The Company's external growth strategy is to continue expansion through
selected acquisitions. The Company believes that home health nursing
companies are currently undervalued and provide excellent opportunities to
gain additional market share. The Company's acquisition strategy is to:

Focus on Large Hospital Systems with Internal Home Health
Agencies. PPS, which was implemented in October 2000, eliminates the
opportunities for cost-shifting by hospitals. Many hospitals are no longer
interested in participating in the home health business. As a result, many
have made the decision, or are in the process of deciding, to sell their
agencies or partner with a reputable company to provide these services.
This not only provides the Company with the opportunity to acquire quality
agencies, but to acquire agencies with strong physician referral bases.

Target Large, Multi-Site Agencies. By acquiring multi-site agencies
and eliminating their corporate structure, the Company hopes to rapidly
dominate a market by either layering the new business into their current
agencies, enhancing current market share or expanding its coverage to
contiguous markets.

Concentrate on Metropolitan Areas. Metropolitan-based agencies are
principal targets due to the synergies created by large patient populations
located close together.

HOME HEALTH CARE SERVICES

Services provided in home health care include four broad categories: (1)
nursing and allied health services, (2) infusion therapy, (3) respiratory
therapy and, (4) home medical equipment. According to statistics released by
HCFA Online, total spending for home care was $33.1 billion in 1999 and is
projected to be $46.6 billion in 2002, an overall increase of 41%. The Company
operates in the category of nursing and allied services which represents the
largest sector, or 70%, of all home health care spending.

The Company currently operates 56 home health care nursing offices
consisting of 35 parent offices with Medicare provider numbers, and 21 branch
offices. Serving this market for the past 10 years, the Company has built an
excellent reputation based on quality care and specialty nursing services.
Because its services are

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comprehensive, cost-effective and accessible 24 hours a day, seven days a week,
the Company's home health care nursing services are attractive to payors and
physicians. All of its offices are accredited or in the process of seeking
accreditation by the Joint Commission on Accreditation of Health Care
Organizations ("JCAHO"), with the exception of one office which is accredited by
the Community Health Accreditation Program. The Company provides a wide variety
of home health care services including:

Registered nurses who provide specialty services such as infusion
therapy, skilled monitoring, assessments, and patient education. Many of
the Company's nurses have advanced certifications.

Licensed practical (vocational) nurses who perform technical procedures,
administer medications and change surgical and medical dressings.

Physical and occupational therapists who work to strengthen muscles,
restore range of motion and help patients perform the activities of
daily living.

Speech pathologists/therapists who work to restore communication and
oral skills.

Social workers who help families address the problems associated with
acute and chronic illnesses.

Home health aides who perform personal care such as bathing or
assistance in walking.

Private duty services such as continuous hourly nursing care and sitter
services.

BILLING AND REIMBURSEMENT

Revenues generated from the Company's home health care services are paid by
Medicare, Medicaid, private insurance carriers, managed care organizations,
individuals, and other local health insurance programs. Medicare is a federally
funded program available to persons with certain disabilities and persons aged
65 or older. Medicaid, a program jointly funded by federal, state, and local
governmental health care programs, is designed to pay for certain health care
and medical services provided to low income individuals without regard to age.
The Company has several contracts for negotiated fees with insurers and managed
care organizations. The Company submits all home health Medicare claims to a
single insurance company acting as a fiscal intermediary for the federal
government.

MEDICARE REIMBURSEMENT REDUCTIONS AND RELATED RESTRUCTURING

The Company derived approximately 88% of its revenues from continuing
operations from the Medicare system for the year ended December 31, 2001. In
1997, Congress approved BBA, which established IPS that provided for the
lowering of reimbursement limits for home health visits until PPS was
implemented on October 1, 2000. For cost reporting periods beginning on or after
October 1, 1997, Medicare-reimbursed home health agencies' cost limits were
determined as the lesser of (i) their actual costs, (ii) per visit cost limits
based on 105% of national median costs of freestanding home health agencies, or
(iii) a per beneficiary limit determined for each specific agency based on
whether the agency was an "old" or "new" provider. The IPS cost limits applied
to the Company for the cost reporting periods beginning January 1, 1998 until
the implementation of PPS on October 1, 2000.

In October 1999, Centers for Medicare & Medicaid Services ("CMS"), formerly
known as Health Care Financing Administration, issued proposed regulations for
PPS. On June 28, 2000, CMS issued the final rules for PPS which were effective
for all Medicare-certified home health agencies on October 1, 2000. The final
regulations establish payments based on episodes of care. An episode is defined
as a length of care up to sixty days with multiple continuous episodes allowed
under the rule. The services covered by the episode payment include all
disciplines of care, in addition to medical supplies, within the scope of the
home health benefit. At the onset of PPS, the standard episode payment was
established at $2,115 per episode for federal fiscal year 2001, to be adjusted
by a case mix adjuster consisting of eighty (80) home health resource groups
("HHRG") and the applicable geographic wage index. Effective October 1, 2001,
the standard episode payment was increased to $2,274. The standard episode
payment may be subject to further individual adjustments due to low utilization,
intervening events and other factors. Providers are allowed to make a request
for anticipated payment at the start of care equal to 60% of the expected
payment for the initial
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episode and 50% for each subsequent episode. The remaining balance due to the
provider is paid following the submission of the final claim at the end of the
episode. In contrast to the cost-based reimbursement system whereby providers'
reimbursement was limited, among other things, to their actual costs, episode
payments are to be made to providers regardless of the cost to provide care,
except with regard to certain outlier provisions.

In December 2000, Congress passed the Benefits Improvement and Protection
Act ("BIPA"), which provides additional funding to healthcare providers. BIPA
provided for the following: (i) a one-year delay in applying the budgeted 15%
reduction on payment limits, (ii) the restoration of a full home health market
basket update for episodes ending on or after April 1, 2001, and before October
1, 2001 resulting in an increase to revenues of 2.2%, and (iii) a 10% increase,
beginning April 1, 2001 and extending for a period of twenty four months, for
home health services provided in a rural area. Currently, the delay in the
budgeted 15% reduction in payment limits resulting from BIPA will expire
September 30, 2002. There is ongoing debate and discussion at the congressional
level concerning the scheduled payment reduction which was further intensified
with the recommendation by the Medicare Payment Advisory Committee to eliminate
the budgeted 15% payment reduction.

DATA PROCESSING

In connection with the acquisition of the home health care agencies from
Columbia/HCA in November 1998, the Company decided to outsource its home health
care billing and payroll processing functions to create greater operating and
financial efficiencies. On November 2, 1998, the Company and CareSouth entered
into a Master Corporate Guaranty of Service Agreement whereby the Company agreed
to act as guarantor for each Agency Service Agreement, which was amended and
restated as of September 1, 1999, between CareSouth and all home health agencies
which are owned or managed by the Company. Under the Agency Service Agreements,
CareSouth agreed to provide payroll processing, billing services, and collection
services for the home health agencies. Effective October 1, 2001, the Company
terminated the management agreement. In connection with this termination, the
Company entered into a Software License Agreement ("License Agreement") with
CareSouth for the use of a home health care billing and collections software
system. This License Agreement expires May 1, 2004 at which time the Company
intends to purchase the software in accordance with the terms of the License
Agreement.

QUALITY CONTROL AND IMPROVEMENT

As a medical service business, the quality and reputation of the Company's
personnel and operations are critical to its success. The Company has
implemented quality management and improvement programs, a corporate compliance
program, and policies and procedures at both the corporate and field levels. The
Company strives to meet regulations set forth by state licensure, federal
guidelines for Medicare and Medicaid, and JCAHO standards.

The Company has an active quality management team that makes periodic
on-site inspections of field offices to review systems, operations, and clinical
procedures. An educational division is also part of this quality management team
which is responsible for conducting educational and training sessions at the
field offices, as well as disseminating continuing education materials to the
Company's employees. Additionally, the quality management team works in
conjunction with the Company's corporate compliance officer to perform audits
and conduct education to enhance the knowledge of the field staff and to ensure
compliance with state and federal laws and regulations.

RECRUITING AND TRAINING

The Company's Human Resources Department coordinates recruiting efforts for
corporate and field personnel. Employees are recruited through newspaper
advertising, professional recruiters, the Company's web page, networking,
participation in job fairs, and word-of-mouth referrals. The Company believes it
is competitive in the industry and offers its employees upward mobility, health
insurance, an Employee Stock Purchase Plan, a 401(k) plan with company matching
contributions, and a cafeteria plan.

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Uniform procedures for screening, testing, and verifying references,
including criminal background checks where appropriate, have been established.
All employees receive a formalized orientation program, including
familiarization with the Company's policies and procedures.

The Company believes that it is in compliance with all material Department
of Labor regulations.

GOVERNMENT REGULATION

The Company's home health care business is highly regulated by federal,
state and local authorities. Regulations and policies frequently change and the
Company monitors changes through trade and governmental publications and
associations. The Company's home health care subsidiaries are certified by CMS
and are therefore eligible to receive reimbursement for services through the
Medicare system. As a provider under the Medicare and Medicaid systems, the
Company is subject to the various "anti-fraud and abuse" laws, including the
federal health care programs' anti-kickback statute. This law prohibits any
offer, payment, solicitation or receipt of any form of remuneration to induce
the referral of business reimbursable under a federal health care program or in
return for the purchase, lease, order, arranging for, or recommendation of items
or services covered by any federal health care programs or any health care plans
or programs that are funded by the United States (other than certain federal
employee health insurance benefits) and certain state health care programs that
receive federal funds under various programs, such as Medicaid. A related law
forbids the offer or transfer of any item or service for less than fair market
value, or certain waivers of copayment obligations, to a beneficiary of Medicare
or a state health care program that is likely to influence the beneficiary's
selection of health care providers. Violations of the anti-fraud and abuse laws
can result in the imposition of substantial civil and criminal penalties and,
potentially, exclusion from furnishing services under any federal health care
programs. In addition, the states in which the Company operates generally have
laws that prohibit certain direct or indirect payments or fee-splitting
arrangements between health care providers where they are designed to obtain the
referral of patients to a particular provider.

Congress adopted legislation in 1989, known as the "Stark" Law, that
generally prohibits a physician from ordering clinical laboratory services for a
Medicare beneficiary where the entity providing that service has a financial
relationship (including direct or indirect ownership or compensation
relationships) with the physician (or a member of his immediate family), and
prohibits such entity from billing for or receiving reimbursement for such
services, unless a specified exception is available. Additional legislation
became effective as of January 1, 1993 known as "Stark II," that extends the
Stark law prohibitions to services under state Medicaid programs, and beyond
clinical laboratory services to all "designated health services," including but
not limited to home health services, durable medical equipment and supplies, and
parenteral and enteral nutrients, equipment, and supplies. Violations of the
Stark Law may also trigger civil monetary penalties and program exclusion.
Pursuant to Stark II, physicians who are compensated by the Company will be
prohibited from seeking reimbursement for designated health services rendered to
such patients unless an exception applies. Several of the states in which the
Company conducts business have also enacted statutes similar in scope and
purpose to the federal fraud and abuse laws and the Stark laws.

Various federal and state laws impose criminal and civil penalties for
making false claims for Medicare, Medicaid or other health care reimbursements.
The Company believes that it bills for its services under such programs
accurately. However, the rules governing coverage of, and reimbursements for,
the Company's services are complex. There can be no assurance that these rules
will be interpreted in a manner consistent with the Company's billing practices.

The Health Insurance Portability and Accountability Act ("HIPAA") was
enacted August 21, 1996 to assure health insurance portability, reduce
healthcare fraud and abuse, guarantee security and privacy of health information
and enforce standards for health information. Organizations are required to be
in compliance with certain HIPAA provisions beginning October 2002. Provisions
not yet finalized are required to be implemented two years after the effective
date of the regulation. Organizations are subject to significant fines and
penalties if found not to be compliant with the provisions outlined in the
regulations. Management is in the process of evaluating the impact of this
legislation on its operations including future financial commitments and
operational enhancements that will be required to comply with the legislation.

10

Home health care offices have licenses granted by the health authorities of
their respective states. Additionally, some state health authorities require a
Certificate of Need ("CON"). Tennessee, Georgia, Alabama, and North Carolina do
require a CON to establish and operate a home health care agency, while
Louisiana, Oklahoma, Virginia, South Carolina and Florida currently do not. In
every state, each location license and/or CON issued by the state health
authority determines the service areas for the home health care agency.
Currently, JCAHO accreditation of home health care agencies is voluntary.
However, Managed Care Organizations ("MCOs") use JCAHO accreditation as a
minimum standard for regional and state contracts.

The Company strives to comply with all federal, state and local regulations
and has satisfactorily passed all federal and state inspections and surveys. The
ability of the Company to operate properly and fulfill its business objective
will depend on the Company's ability to comply with all applicable healthcare
regulations.

COMPETITION

The services provided by the Company are also provided by competitors at
the local, regional and national levels. Home health care providers compete for
referrals based primarily on scope and quality of services, geographic coverage,
pricing, and outcomes data. The impact of competitors is best determined on a
market-by-market basis.

The Company believes its favorable competitive position is attributable to
its reputation for over a decade of consistent, high quality care; its
comprehensive range of services; its state-of-the-art information management
systems; and its widespread service network.

SEASONALITY

The demand for the Company's home health care nursing is not typically
influenced by seasonal factors.

EMPLOYEES

As of December 31, 2001, the Company had 1,521 full-time employees,
excluding part-time field nurses and other professionals in the field. The
Company currently employs the following classifications of personnel:
administrative level employees which consist of a senior management team (CEO,
COO, Chief Development Officer, General Counsel, senior vice presidents and vice
presidents); office administrators; nursing directors; accountants; sales
executives; licensed and certified professional staff (RNs, LPNs, therapists and
therapy assistants); and non-licensed care givers (aides).

The Company complies with the Fair Labor Standards Act in establishing
compensation methods for its employees. Select positions within the Company are
eligible for bonuses based on the achievement of pre-determined budget criteria.
The Company sponsors and contributes toward the cost of a group health insurance
program for its eligible employees and their dependents. The group health
insurance program is self-funded by the Company; however, there is a
re-insurance policy in place to limit the liability for the Company. In
addition, the Company provides a group term life insurance policy and a long
term disability policy for eligible employees. The Company also offers a 401(k)
retirement plan, a Cafeteria 125 plan, an Employee Stock Purchase Plan,
supplemental benefit programs, and paid time-off benefits for eligible
employees.

The Company believes its employee relations are good. It successfully
recruits employees and most of its employees are shareholders.

INSURANCE

The Company maintains casualty coverages for all of its operations,
including professional and general liability, workers' compensation, automobile,
property, fiduciary liability, and directors and officers. The insurance program
is reviewed periodically throughout the year and thoroughly on an annual basis
to insure adequate coverage is in place. For the years ended December 31, 1995
through December 31, 1998, the Company was approved through the State of
Louisiana to self-insure its workers' compensation program. All other states
were covered on a fully insured basis through "A+" rated insurers. In January
1999, the Company

11

changed from the self-insured workers' compensation plan to a fully-insured,
guaranteed cost plan. All of the Company's employees are bonded. The Company is
self-insured for its employee health benefits.

ITEM 2. PROPERTIES

The Company operates fifty-six home care nursing offices and two corporate
offices in the southern and southeastern United States. The Company presently
leases approximately 22,337 square feet located at 11100 Mead Road, Baton Rouge,
Louisiana, and 7,797 square feet located at 3029 South Sherwood Forest
Boulevard, Baton Rouge, Louisiana, representing the corporate offices. The Mead
Road lease provides for a basic annual rental rate of approximately $14.60 per
square foot through the expiration date on December 31, 2003. The South Sherwood
Forest lease provides for a basic annual rental rate of approximately $13.75 per
square foot through the expiration date on December 31, 2003. The Company has an
aggregate of 294,081 square feet of leased space for regional offices pursuant
to leases which expire between March, 2002 and October, 2006. Rental rates for
these regional offices range from $2.28 per square foot to $26.01 per square
foot with an average of $11.23 per square foot. During 1999 and 2000, the
Company consolidated offices that covered the same patient service area in an
overall effort to decrease costs and gain operating efficiencies, while still
providing quality and accessible home health services.

The following is a list of the Company's offices. Unless otherwise
indicated, the Company has one office in each city.

Georgia (21) Louisiana (7) North Carolina (1)
Atlanta Alexandria Chapel Hill
Blue Ridge Baton Rouge (3)
Cartersville Lafayette Oklahoma (4)
Cedartown Metairie Claremore
Clayton Monroe Gore
College Park Stilwell
Covington Tennessee (11) Tulsa
Dalton Athens
Decatur Bristol Alabama (10)
Douglasville Chattanooga Anniston
Fayetteville Gordonsville Birmingham
Ft. Oglethorpe Johnson City Demopolis
Gainesville Kingsport Fairhope
Jasper Livingston Huntsville
Kennesaw McMinnville Mobile
Lavonia Nashville Montgomery
Lawrenceville Pikeville Reform
Macon Winchester Selma
Rome Tuscaloosa
Summerville Virginia (1)
Toccoa Weber City Florida (2)
Lakeland
South Carolina (1) Winter Haven
Charleston

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company and its subsidiaries are defendants in
lawsuits arising in the ordinary course of the Company's business. While the
outcome of these lawsuits cannot be predicted with certainty, management
believes that the resolution of these matters will not have a material adverse
effect on the Company's financial condition or results of operations.

12

The Company filed a lawsuit against Mr. James P. Cefaratti, the Company's
former President and Chief Operations Officer, alleging various negligent
actions which constituted breaches of fiduciary duty owed to the Company and its
stockholders. The lawsuit was initially filed in the 19th Judicial District
Court of the Parish of East Baton Rouge, State of Louisiana on November 24,
1998. The lawsuit was then removed to the United States District Court for the
Middle District of Louisiana. The Company was seeking unspecified damages
incurred as a result of the alleged negligent actions and all other appropriate
relief.

On December 7, 1998, Mr. Cefaratti filed a lawsuit naming the Company as a
defendant and claimed that he was terminated in violation of an alleged
employment contract. On December 11, 1998, Ms. Judi McQueary, the former
President of the Company's managed care division, and Mr. William G. Hardee, the
former Vice President of the Company's southeaster alternate site infusion
division, filed lawsuits claiming breaches of alleged employment contracts.

All of the above mentioned lawsuits filed by the ex-employees of the
Company were initially filed in the United States District Court for the Eastern
District of Louisiana and were consolidated together as one lawsuit. All the
said lawsuits were then transferred to the United States District Court for the
Middle District of Louisiana and severed to be tried separately. The Chief
Executive Officer of the Company, and its directors and officers liability
insurer were subsequently named as defendants in all the above mentioned
lawsuits. The relief sought in all these cases was contract damages, penalty
wages, costs, and attorney fees. All of the above mentioned lawsuits have been
settled out of court and are no longer pending against the Company.

Alliance Home Health, Inc. ("Alliance"), a wholly-owned subsidiary of the
Company (which was acquired in 1998 and ceased operations in 1999), filed for
Chapter 7 Federal bankruptcy protection with the United States Bankruptcy Court
in the Northern District of Oklahoma on September 29, 2000. A trustee was
appointed for Alliance in 2001. Until the contingencies associated with the
liabilities are resolved, the accompanying consolidated financial statements
continue to consolidate Alliance, which has net liabilities of $4.2 million.

On August 23 and October 4, 2001, two suits were filed against the Company
and three of its executive officers in the United States District Court for the
Middle District of Louisiana by individuals purportedly as class actions on
behalf of all purchasers of Amedisys stock between November 15, 2000 and June
13, 2001. The suits, which have now been consolidated, seek damages based on the
decline in Amedisys' stock price following an announced restatement of earnings
for the fourth quarter of 2000 and first quarter of 2001, claiming that the
defendants knew or were reckless in not knowing the facts giving rise to the
restatement. The Company intends to vigorously defend them.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of 2001.

13

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

From August 1997, through September 1998, the Company's common stock traded
on the Nasdaq National Market. Since September 1998, the Company has been
trading on the Over the Counter ("OTC") Bulletin Board. As of March 18, 2002,
there were approximately 163 holders of record of the Company's Common Stock and
the Company believes there are approximately 2,435 beneficial holders. The
Company has not paid any dividends on its Common Stock since inception and
expects to retain any future earnings for use in its business development for
the foreseeable future. In 2001, holders of 390,000 shares of preferred stock
converted the shares into 1,300,000 shares of common stock pursuant to
conversion rights in the terms of the preferred stock. Exemption is claimed for
the issuance of the common stock under Section 3(a)(9) of the Securities Act of
1933. The following table provides the high and low prices of the Company's
Common Stock during 2000, 2001, and the first quarter of 2002 through March 18
as quoted by the OTC Bulletin Board.

14

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data presented below are derived from
audited financial statements for each of the years ended December 31, 1997
through December 31, 2001. Selected financial data for the years ended December
31, 1997 through December 31, 1998 have been restated to reflect discontinued
operations (see "Dispositions and Discontinued Operations" section discussed in
Item 1). The financial data for the years ended December 31, 2001 and 2000
should be read in conjunction with the consolidated financial statements and
related notes attached hereto, the information set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations", and
other financial information included herein.

SELECTED HISTORICAL STATEMENT OF INCOME DATA

- ---------------

(1) Selected Financial Data for the years ended December 31, 1997 through
December 31, 1998 reflect discontinued operations. See "Dispositions and
Discontinued Operations" section discussed in Item 1.

16

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

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. This discussion should be read in
conjunction with the Consolidated Financial Statements and notes thereto
referenced in Item 8.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
included in the Company's consolidated statements of operations as a percentage
of net revenues:

YEARS ENDED DECEMBER 31, 2001 AND 2000

NET SERVICE REVENUES

For the year ended December 31, 2001 as compared to the year ended December
31, 2000, net revenues increased $22,019,000 or 25%. This increase was
attributed to the implementation of PPS in October 2000 as well as an increase
in patient admissions of 11,203, or 44%, from 25,431 for 2000 to 36,634 for 2001
from both internal growth and acquisitions completed during the latter part of
2000 and 2001.

COST OF SERVICE REVENUES

Cost of revenues increased by 18% in 2001 as compared to 2000. This
increase is primarily attributed to increased salaries for the clinical manager
positions from 2000 to 2001 of $3,898,000. The clinical manager position was
implemented company-wide in the latter part of 2000 to provide a greater level
of patient care oversight and coordination. As a percentage of net revenues,
cost of revenues decreased to 45% in 2001 from 47% in 2000.

17

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses increased by 8% in 2001 as compared to
2000. This increase is primarily attributed to the general and administrative
expenses at the agency location relating to acquisitions completed in the latter
part of 2000 and the early part of 2001 of $6,316,000. As a percentage of net
revenues, general and administrative expenses decreased to 49% in 2001 from 56%
in 2000.

OPERATING INCOME (LOSS)

The Company had operating income of $7,463,000 in 2001 as compared to an
operating loss of $2,564,000 in 2000. The improvement in operating results of
$10,027,000 is attributed to increased patient admissions and improvement in
operating results as a percentage of revenue.

OTHER INCOME (EXPENSE)

Other income and expenses increased $398,000 primarily due to an increase
in interest expense of $626,000 due to higher net borrowings, offset by $228,000
of miscellaneous income items.

INCOME TAX (EXPENSE) BENEFIT

For the year ended December 31, 2001 as compared to December 31, 2000,
income tax expense increased from a benefit of $1,647,000 in 2000 to an expense
of $220,000 in 2001 (see Note 8 in the Notes to the Consolidated Financial
Statements). Total income tax expense for 2001 of $410,000 is comprised of
income tax expense from continuing operations of $220,000 and discontinued
operations of $190,000. For 2000, total income tax expense of $200,000 is
comprised of income tax benefit from continuing operations of $1,647,000, offset
by income tax expense from discontinued operations of $402,000 and income tax
expense related to an extraordinary item of $1,445,000.

DISCONTINUED OPERATIONS

Losses from discontinued operations, net of income taxes, amounted to
$566,000 for 2001 as compared to losses of $3,281,000 for 2000 primarily due to
a write-off of goodwill in 2000 related to the infusion division of
approximately $1,770,000. The gain on disposition of $876,000, net of taxes of
$190,000, for 2001 is attributed to the sale of one surgery center, while the
gain on disposition of $4,684,000, net of taxes, for 2000 is attributed to the
sale of two surgery centers and the Company's Infusion Division.

NET INCOME

The Company recorded net income of $5,386,000, or $0.68 per diluted common
share, for 2001 compared with net income of $3,770,000, or $0.87 per common
share, for 2000. Common stock equivalents were anti-dilutive at December 31,
2000.

YEARS ENDED DECEMBER 31, 2000 AND 1999

NET SERVICE REVENUES

For the year ended December 31, 2000 as compared to the year ended December
31, 1999, net revenues decreased $9,256,000 or 10%. This decrease was attributed
to a decrease in visits of 249,708 from 1,283,738 to 1,034,030 which is
primarily attributable to the implementation of Disease State Management
Programs which are diagnosis-specific treatment protocols implemented by each
agency. These protocols implement standardized treatment plans for patients to
reach a quality outcome in the most efficient manner possible.

COST OF SERVICE REVENUES

Cost of revenues decreased by 12% in 2000 as compared to 1999. This
decrease is primarily attributed to a reduction in visit volume as noted above.
As a percentage of net revenues, cost of revenues decreased to 47%

18

in 2000 from 48% in 1999. This decrease is attributed to cost reduction efforts
implemented during 1999 and 2000 for all operating locations in preparation for
PPS.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses decreased by 7% in 2000 as compared to
1999. This decrease is primarily attributed to the restructuring efforts during
1999 and 2000 following the acquisition of certain Columbia/HCA home health care
agencies in the latter part of 1998 in preparation for PPS. As a percentage of
net revenues, general and administrative expenses increased to 56% in 2000 from
55% in 1999.

OPERATING LOSS

The Company had an operating loss of $2,564,000 in 2000 as compared to an
operating loss of $2,625,000 in 1999. The reduction in operating losses of
$61,000 or 2% is attributed to the restructuring efforts implemented during 2000
and the implementation of PPS on October 1, 2000.

OTHER INCOME (EXPENSE)

Other income and expenses decreased by $2,950,000 primarily due to a
write-off of goodwill in 1999 of approximately $1.8 million related to the sale
of certain home health care agencies previously acquired from Columbia/HCA in
the latter part of 1998 and a decrease in interest expense of $1.5 million due
to lower net borrowings on line of credit agreements.

INCOME TAX BENEFIT

For the year ended December 31, 2000 as compared to December 31, 1999,
income tax expense decreased from $383,000 in 1999 to $200,000 in 2000 (see Note
8 in the Notes to the Consolidated Financial Statements). Total income tax
expense for 2000 of $200,000 is comprised of income tax benefit from continuing
operations of $659,000, offset by income tax expense from discontinued
operations of $172,000 and income tax expense related to an extraordinary item
of $687,000. For 1999, total income tax expense of $383,000 is comprised of
income tax benefit from continuing operations of $3,263,000, offset by income
tax expense from discontinued operations of $3,646,000.

DISCONTINUED OPERATIONS

Losses from discontinued operations, net of income taxes, amounted to
$3,281,000 for 2000 as compared to losses of $784,000 for 1999 primarily due to
a write-off of goodwill related to the infusion division of approximately $1,770
000. The gain on disposition of $4,684,000, net of taxes of $402,000, for 2000
is attributed to the sale of two surgery centers and the Company's Infusion
Division, while the gain on disposition of $6,165,000, net of taxes, for 1999 is
attributed to the sale of three surgery centers.

NET INCOME

The Company recorded net income of $3,770,000, or $0.87 per common share,
for 2000 compared with net income of $1,300,000, or $0.42 per common share, for
1999.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2001, the Company was indebted under various promissory
notes for $10.9 million, including amounts due to NPF of $8.9 million, to
CareSouth of $0.9 million, to Winter Haven Hospital of $0.6 million and various
other notes. The Company's principal and interest requirements due under all
promissory notes is approximately $6.2 million in 2002 and $6.0 million in 2003.
At December 31, 2001 the Company had obligations under capital leases of $5.6
million, including amounts due to CareSouth under the License Agreement of $4.7
million, to Cisco Systems Capital Corporation of $0.6 million for expenditures
related to the wide area network ("WAN"), and various other capital leases. The
Company's principal and

19

interest requirements due under all capital leases are approximately $2.7
million in 2002 and $2.6 million in 2003.

The fair value of long-term debt as of December 31, 2001 and 2000,
estimated based on the Company's current borrowing rate of 11.0% and 15.3%, at
December 31, 2001 and 2000, respectively, was approximately $10.7 million and
$12.9 million, respectively.

Notes payable as of December 31, 2001 consists primarily of an asset-based
line of credit with availability, depending on collateral, of up to $25 million
with NCFE and borrowings under a revolving bank line of credit of up to
$2,500,000. The NCFE $25 million asset-based line of credit, which expires
December, 2003, is collateralized by eligible accounts receivable of the home
health care nursing division. Eligible receivables are defined as receivables,
exclusive of workers' compensation and self-pay, that are aged less than 181
days. The effective interest rate on this line of credit which had outstanding
balances at December 31, 2001 and 2000 of $8,593,000 and $2,952,000,
respectively, was 11.00% and 15.29% for the years ended December 31, 2001 and
2000, respectively. There were no amounts available under this line as of
December 31, 2001. The revolving bank line of credit of $2,500,000 bears
interest at the Bank One Prime Floating Rate, which was 4.75% and 9.5% at
December 31, 2001 and 2000, respectively. The bank line of credit expires
September 21, 2002 and is collateralized by $2.5 million cash. At December 31,
2001 there was a balance outstanding of $712,000 with $1,788,000 available. At
December 31, 2000, there were no amounts drawn on the line of credit. Notes
payable as of December 31, 2001 are reflected as current liabilities in the
accompanying Consolidated Balance Sheets due to the revolving nature of the
agreements and/or the nature of the collateral. The Company expects to produce
sufficient collateral from ongoing operations to allow those facilities to be
maintained through their respective expiration dates.

Prior to the implementation of PPS on October 1, 2000, the Company recorded
Medicare revenues at the lower of actual costs, the per visit cost limit, or a
per beneficiary cost limit on a individual provider basis. Under the previous
Medicare cost-based reimbursement system, ultimate reimbursement under the
Medicare program was determined upon review of the annual cost reports. As of
December 31, 2001, the Company estimates an aggregate payable to Medicare of
$14.2 million, of which $13.2 is netted against accounts receivable and $1.0 is
reflected in the accompanying balance sheet as a long-term Medicare liability.
For the cost report year ended December 31, 2000, the Company has aggregate
overpayments of $8.1 million offset by aggregate underpayments of $1.7 million.
The aggregate overpayments of $8.1 million are primarily attributed to a
provision in BIPA whereby the Company was eligible to receive a one-time payment
equal to two months of periodic interim payments equaling $7.4 million. For the
cost report years ended 1999 and prior, the Company has an estimated payable of
$7.8 million. Of the $7.8 million, $3.1 million is related to the bankrupt
subsidiary Alliance, $3.7 million is due within one year, and $1.0 million is
due in excess of one year. The Company derived 88%, 90%, and 90% of its revenues
from continuing operations from the Medicare system for the years ended December
31, 2001, 2000, and 1999, respectively.

The following table summarizes the Company's current contractual
obligations:

PAYMENTS DUE BY PERIOD

The Company's operating activities provided $7.7 million in cash during the
year ended December 31, 2001 whereas such activities provided $6.9 million in
cash during the year ended December 31, 2000. Cash provided by operating
activities in 2001 is primarily attributable to net income of $5.4 million,
non-cash items such as depreciation and amortization of $3.4 million, offset by
gains on the sale of discontinued operations of

20

$1.7 million. Investing activities used $15.8 million for the year ended
December 31, 2001, whereas such activities provided $6.0 million for the year
ended December 31, 2000. Cash used in investing activities in 2001 is primarily
attributed to purchases of property and equipment and cash used in acquisitions,
offset by proceeds from the sale of discontinued operations of $1.6 million.
Financing activities provided cash during 2001 of $4.7 million, whereas such
activities used $7.4 million during 2000. Cash provided by financing activities
in 2001 is primarily attributed to borrowings on line of credit agreements of
$6.3 million and proceeds from issuance of notes payable and capital leases of
$8.1 million offset by payments on notes payable and capital leases of $5.4
million and a decrease in long-term Medicare liabilities of $5.1 million.

As of December 31, 2001, the Company had a working capital deficit of $18.4
million. Included in this deficit are short-term Medicare liabilities, netted
against accounts receivable in the accompanying Consolidated Balance Sheets
which the Company does not expect to fully liquidate in cash during 2002. These
Medicare liabilities include an overpayment of $3.1 million relating to
Alliance, a subsidiary of the Company currently in bankruptcy proceedings, and
overpayments totaling $7.4 million as a result of BIPA. The overpayment relating
to Alliance is listed as a debt to be discharged during the final liquidation.
The BIPA overpayment relates to fiscal year 2000 for which the year-end cost
report deadline is currently June 17, 2002. The Company plans to request a
thirty-six (36) month repayment plan for this overpayment upon submission of the
cost reports. If approved, the long-term portion of this debt will be reflected
as Long-Term Medicare Liabilities on the balance sheet. The Company also has
certain contingencies recorded as current liabilities in the accompanying
Consolidated Balance Sheets (in accordance with SFAS No. 5) that management does
not believe will currently impact cash flow. Also, as discussed above, the
Company has available $1.8 million under the bank line of credit which would be
available to fund working capital needs.

The Company has completed the installation of a company-wide computer
network infrastructure to connect all of its regional offices. This WAN will
allow more immediate access to information by all company personnel including
senior management, which will increase operational efficiencies. This project
was completed in the fourth quarter of 2001 at an approximate cost of $2.3
million.

Effective October 1, 2001, the Company, in connection with the termination
of its management services agreement, entered into a Software License Agreement
that has been accounted for as a capital lease in the accompanying consolidated
balance sheets as of December 31, 2001. The capitalized value of this software
lease was $8.9 million, which was offset by the unamortized gain as of September
30, 2001 of $4.4 million.

INFLATION

The Company does not believe that inflation has had a material effect on
its results of operations for the twelve months ended December 31, 2001.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company does not engage in derivative financial instruments, other
financial instruments, or derivative commodity instruments for speculative or
trading/non-trading purposes.

ITEM 8. FINANCIAL STATEMENTS

See Consolidated Financial Statements on Page 29.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

21

PART III

Certain information required by Part III is omitted from this Report in
that the Registrant will file its definitive Proxy Statement for its 2002 Annual
Meeting of Shareholders to be held June 13, 2002 pursuant to Regulation 14A of
the Securities Exchange Act of 1934 (the "Proxy Statement") no later than 120
days after the end of the fiscal year covered by this Report, and certain
information included in the Proxy Statement is incorporated herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Directors -- Certain information about the current directors is set
forth below:

William F. Borne. Mr. Borne founded the Company in 1982 and has served as
Chief Executive Officer and a director since that time. In 1988, Mr. Borne also
founded and served as President and Chief Executive Officer of Amedisys
Specialized Medical Services, Inc., a wholly-owned subsidiary of the Company
engaged in the provision of home health care services, until June 1993.

Ronald A. LaBorde. Since 1995, Mr. LaBorde has served as the President,
Chief Executive Officer, and Chairman of the Board of Piccadilly Cafeterias,
Inc. ("Piccadilly"), a publicly held retail restaurant business. Prior to 1995,
Mr. LaBorde held various executive positions with Piccadilly including Executive
Vice President and Chief Financial Officer from 1992 to 1995, Executive Vice
President, Corporate Secretary and Controller from 1986 to 1992, and Vice
President and Assistant Controller from 1982 to 1986.

Jake L. Netterville. Mr. Netterville was the Managing Director of
Postlethwaite & Netterville, A Professional Accounting Corporation from 1977 to
1998 and is now Chairman of the Board of Directors. Mr. Netterville is a
certified public accountant and has served as Chairman of the Board of the
American Institute of Certified Public Accountants, Inc. ("AICPA") and is a
permanent member of the AICPA's Governing Council.

David R. Pitts. Mr. Pitts is the President and Chief Executive Officer of
Pitts Management Associates, Inc., a national hospital and healthcare consulting
firm. Mr. Pitts has over forty years experience in hospital operations,
healthcare planning and multi-institutional organization, and has served in
executive capacities in a number of hospitals, multi-hospital systems, and
medical schools.

Peter F. Ricchiuti. Mr. Ricchiuti has been Assistant Dean and Director of
Research of BURKENROAD REPORTS at Tulane University's A. B. Freeman School of
Business since 1993, and an Adjunct Professor of Finance at Tulane since 1986.
Mr. Ricchiuti is a member of the Board of Trustees for WYES-TV, the public
broadcasting station in New Orleans, Louisiana.

22

(b) Executive Officers -- The executive officers of the Company are as
follows:

- ---------------

(1) Biographical information with respect to this officer was previously
provided above.
---------------------

Larry R. Graham became Chief Operating Officer in January 1999 and was
appointed as interim Senior Vice President of Finance in January 2002. He joined
the Company in April 1996 as Vice President of Finance and in January 1998 he
was promoted to Senior Vice President of Operations. From 1993 to 1996, he was
Director of Financial Services at General Health Systems, a regional
multi-faceted health care system in Baton Rouge. From 1989 to 1993, he was a
Senior Accountant for Arthur Andersen LLP.

John H. Linden became Chief Information Officer in September 2000 after
consulting with the Company on various projects. Prior to his appointment, Mr.
Linden was President of Impact Solutions, Inc., a consulting firm specializing
in project management and automation solutions.

John R. Nugent joined the Company in October 2001 as Chief Development
Officer. From 1999 to 2001, he was Vice President of Business Development with
AON Corporation's Health Care Practice. Prior to 1999, Mr. Nugent held several
executive positions including President/CEO of Associated Health Services, Inc.,
a regional home health provider, and President/CEO of LAMMICO Practice
Management, a state wide physician practice management and managed care
organization.

Jeffrey D. Jeter joined the Company in April 2001 as Vice President of
Compliance. Prior to joining the Company he served as an Assistant Attorney
General for the Louisiana Department of Justice, where he prosecuted health care
fraud and nursing home abuse.

Michael D. Lutgring was named General Counsel and Secretary in 1997.
Previously, after his graduation from law school in 1996, he was in the private
practice of law.

(c) Section 16(a) Beneficial Ownership Reporting Compliance -- Section
16(a) of the Securities Exchange Act of 1934 requires the Company's directors
and executive officers, and persons who own more than ten percent of the
Company's Common Stock, to file reports of ownership and changes of ownership
with the Securities and Exchange Commission ("SEC"). Copies of all filed reports
are required to be furnished to the Company. Based solely on the reports
received by the Company, the Company believes all such persons complied with all
applicable filing requirements during 2001.

23

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain information regarding compensation
earned by the chief executive officer and for all other executive officers whose
total annual salary and bonus exceeded $100,000 during 2001.

SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION

- ---------------

(1) Mr. Joffrion passed away January 1, 2002.

2001 STOCK OPTION GRANTS

- ---------------

(1) Represents the fair market value on the date of the grant.

24

AGGREGATED OPTION EXERCISES IN 2001
AND YEAR-END OPTION VALUES

- ---------------

(*) Computed based on the differences between the fair market value at fiscal
year end and aggregate exercise prices.

---------------------

DIRECTORS' COMPENSATION

Each director is paid a retainer fee of $1,000 per month and, in addition,
is also eligible to receive stock options. During 2001, each director was
granted stock options for 10,000 shares of Common Stock at an exercise price of
$6.00 per share (fair market value at the date of grant). All directors are
entitled to reimbursement for reasonable travel and lodging expenses incurred in
attending meetings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

There have been no Compensation Committee interlocks or insider
participation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated by reference to the
sections entitled "Record Date and Principal Ownership" and "Security Ownership
of Management" in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Notes receivable from related parties at December 31, 2001 of $13,000
consists of payments made to John Nugent in accordance with a loan agreement.
The loan agreement, which bears interest at 6% annually, provides for monthly
payments beginning October 1, 2001 and ending July 1, 2003 for a cumulative
principal sum not to exceed $102,000.

The Company paid consulting fees to Matt Hession, an Amedisys stockholder,
of $75,000, $63,000, and $125,000 for the years ended December 31, 2001, 2000
and 1999, respectively. The company paid The Printing Department, owned by Cecil
Williams, father-in-law of Michael Lutgring, $465,000, $278,000, and $277,000
for the years ended December 31, 2001, 2000 and 1999 respectively. The Printing
Department prints forms and other materials used in daily operations. The
Company paid Alphagraphics, owned by Carole Nugent, wife of John Nugent,
$115,000 for the year ended December 31, 2001. Alphagraphics provides printing
and recruitment mail-out services. The Company believes the fees paid for these
goods and services approximated fair market value.

25

PART IV

ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K

Documents to be filed with Form 10-K:

- Report of Independent Public Accountants

- Consolidated Balance Sheets as of December 31, 2001 and 2000

- Consolidated Statements of Operations for the Years Ended December 31,
2001, 2000, and 1999

- Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 2001, 2000, and 1999

- Consolidated Statements of Cash Flows for the Years Ended December 31,
2001, 2000, and 1999

- Notes to Financial Statements as of December 31, 2001, 2000, and 1999

(a) Exhibits.

- ---------------

(1) Previously filed as an exhibit to the Current Report on Form 8-K dated
December 20, 1993.

(2) Previously filed as an exhibit to the Current Report on Form 8-K dated
February 14, 1994.

(3) Previously filed as an exhibit to the Current Report on Form 8-K dated
August 11, 1994.

(4) Previously filed as an exhibit to the Annual Report on Form 10-KSB for the
year ended December 31, 1994.

(5) Previously filed as an exhibit to the Current Report on Form 8-K dated June
30, 1995.

(6) Previously filed as an exhibit to the Registration Statement on Form S-1
(333-8329) dated July 18, 1996.

(7) Previously filed as an exhibit to the Registration Statement on Form S-3
dated March 11, 1998.

(8) Previously filed as an exhibit to the Quarterly Report on Form 10-Q dated
August 14, 1998.

(9) Previously filed as an exhibit to the Current Report on Form 8-K dated
October 5, 1998.

(10) Previously filed as an exhibit to the Current Report on Form 8-K dated
November 10, 1998.

(11) Previously filed as an exhibit to the Quarterly Report on Form 10-Q dated
December 30, 1998.

(12) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1997.

(13) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1998.

(14) Previously filed as an exhibit to the Quarterly Report on Form 10-Q/A for
the period ended June 30, 1999.

(15) Previously filed as an exhibit to the Current Report on Form 8-K dated
September 15, 1999.

(16) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the
period ended September 30, 1999.

(17) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 1999.

(18) Previously filed as an exhibit to the Current Report on Form 8-K dated May
11, 2000.

(19) Previously filed as an exhibit to the Current Report on Form 8-K dated
August 23, 2000.

(20) Previously filed as an exhibit to the Annual Report on Form 10-K for the
year ended December 31, 2000.

(21) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the
period ended March 31, 2001.

(22) Previously filed as an exhibit to the Quarterly Report on Form 10-Q for the
period ended September 30, 2001.

(23) Filed herewith.

(b) Report on Form 8-K.

On November 1, 2001, the Company filed a current Report on Form 8-K with
the SEC attaching a press release announcing that it will release third quarter
operating results on November 5, 2001 and will host a conference call on that
same day.

On November 5, 2001, the Company filed a current Report on Form 8-K with
the SEC attaching a press release announcing third quarter 2001 operating
results.

27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, there unto duly authorized, on the 21st day of
March, 2002.

AMEDISYS, INC.

By: /s/ WILLIAM F. BORNE
----------------------------------
WILLIAM F. BORNE,
Chief Executive Officer
and Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

28

AMEDISYS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001 AND 2000
TOGETHER WITH AUDITORS' REPORT

29

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
of Amedisys, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Amedisys,
Inc. (a Delaware Corporation) and subsidiaries (the Company) as of December 31,
2001 and 2000, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amedisys, Inc.
and Subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.

/s/ ARTHUR ANDERSEN LLP

New Orleans, Louisiana
February 28, 2002

30

AMEDISYS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2001 AND 2000
(IN 000'S EXCEPT SHARE DATA)

The accompanying notes are an integral part of these consolidated financial
statements.

31

AMEDISYS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN 000'S EXCEPT SHARE DATA)