Odyssey Healthcare (ODSY)

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Chris Kallos

www.zacks.com

Odyssey HealthCare, Inc. (ODSY), headquartered in Dallas, Texas, is the second largest provider of hospice services in terms of number of locations in the U.S. The provider is one of only two publicly traded pure-play hospice providers. Odyssey was founded in 1995 and has since expanded rapidly through acquisitions and de novo openings to its current portfolio of 81 Medicare-certified hospice programs in 30 states. By state, Odyssey's greatest numbers of hospice facilities are in Texas, California, Arizona and Ohio. The company provides for all medical and psychosocial care, as well as certain other support services associated with patients' terminal illnesses. Odyssey's service offerings include Routine Home Care, General Inpatient Care, Continuous Home Care, and Respite Care.

The bulk of Odyssey's revenues (greater than 90%) are derived from government reimbursements under Medicare and Medicaid. Medicare is the national health insurance program for people age 65 or older. Medicaid is a state-run program that pays for medical assistance for certain individuals and families with low incomes and resources. Under the Medicare Hospice benefit, a patient waives Medicare coverage for treatment of a terminal illness to receive palliative treatment, which helps ease pain and symptoms instead of trying to cure a disease. The benefit reimburses for hospice services that are delivered in freestanding hospice facilities, hospitals, nursing homes, and other long-term care facilities. However, the benefit does not cover expenses for room and board. In some instances, Medicaid may cover these expenses for eligible patients. Medicare limits the amount of payment hospice companies can receive for inpatient care services. Overall, payments made by Medicare to hospice providers are subject to a cap amount per beneficiary (typically 160 days of routine care). Payments in excess of the cap amount must be returned to Medicare. The cap is calculated by taking the average of the entire patient base of a specific local provider. Under the so-called "80-20" rule, if the number of inpatient care days furnished to Medicare beneficiaries exceeds 20% of the total days of hospice care, Medicare payments for days exceeding the inpatient cap is reduced to the routine home care rate.

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