LHC Group, Inc (Form: 10-Q, Received: 05/09/2008 15:47:27)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


þ		Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2008


o		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: 0-8082

LHC GROUP, INC.

(Exact Name of Registrant as Specified in Charter)


Delaware		71-0918189
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)

420 West Pinhook Rd, Suite A
Lafayette, LA 70503
(Address of principal executive offices including zip code)

(337) 233-1307
(Registrant’s telephone number, including area code)

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 þ No o

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


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of common stock, par value $0.01, outstanding as of May 6, 2008: 18,092,646 shares

LHC GROUP, INC.

INDEX


			Page
Part I. Financial Information				3

	Item 1.	Financial Statements (unaudited)		3

		Consolidated Balance Sheets — March 31, 2008 (unaudited) and December 31, 2007		3
		Consolidated Statements of Income (unaudited) — Three months ended March 31, 2008 and 2007		4
		Consolidated Statements of Cash Flows (unaudited) — Three months ended March 31, 2008 and 2007		5
		Notes to Consolidated Financial Statements (unaudited)		6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk		27

	Item 4.	Controls and Procedures		28

Part II. Other Information				29

	Item 1.	Legal Proceedings		29

	Item 1A.	Risk Factors		29

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29

	Item 3.	Defaults Upon Senior Securities		29

	Item 4.	Submission of Matters to a Vote of Security Holders		29

	Item 5.	Other Information		29

	Item 6.	Exhibits		29

Signatures				31
EX-3.2 BYLAWS OF LHC GROUP,INC. AS AMENDED ON DECEMBER 31,2007
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32 SECTION 906 CERTIFICATION OF CEO AND CFO

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

LHC GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)


	March 31,			December 31,
	2008			2007
	(unaudited)
ASSETS
Current assets:
Cash	$	1,072		$	1,155
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $7,027 and $8,953, respectively		68,165			70,033
Other receivables		2,998			2,425
Amounts due from governmental entities		1,249			1,459

Total Receivables, net		72,412			73,917
Deferred income taxes		2,331			2,946
Prepaid expenses and other current assets		3,830			4,423
Assets held for sale		556			556

Total current assets		80,201			82,997
Property, building and equipment, net		14,440			12,523
Goodwill		66,985			62,227
Intangible assets, net		14,167			14,055
Advance payments on acquisitions		8,300			—
Other assets		4,067			3,183

Total assets	$	188,160		$	174,985


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable and other accrued liabilities	$	7,938		$	6,103
Salaries, wages, and benefits payable		14,085			11,303
Amounts due to governmental entities		3,162			3,162
Income taxes payable		1,691			863
Current portion of capital lease obligations		105			88
Current portion of long-term debt		527			433

Total current liabilities		27,508			21,952
Deferred income taxes, less current portion		3,284			3,243
Capital lease obligations, less current portion		23			63
Long-term debt, less current portion		4,871			2,847
Minority interests subject to exchange contracts and/or put options		20			121
Other minority interests		3,288			3,388
Stockholders’ equity:

Common stock — $0.01 par value: 40,000,000 shares authorized; 20,770,254 and 20,725,713 shares issued and 17,816,466 and 17,775,284 shares outstanding, respectively		178			177
Treasury stock — 2,953,788 and 2,950,429 shares at cost, respectively		(2,939	)		(2,866	)
Additional paid-in capital		82,411			81,983
Retained earnings		69,516			64,077

Total stockholders’ equity		149,166			143,371

Total liabilities and stockholders’ equity	$	188,160		$	174,985

See accompanying notes.

LHC GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except share and per share data)
(Unaudited)


	Three Months Ended
	March 31,
	2008			2007
Net service revenue	$	83,473		$	68,727
Cost of service revenue		41,896			34,617

Gross margin		41,577			34,110
Provision for bad debts		3,686			1,741
General and administrative expenses		26,873			20,927

Operating income		11,018			11,442
Interest expense		148			83
Non-operating income, including gain on sales of assets		(402	)		(293	)

Income from continuing operations before income taxes and minority interest allocations		11,272			11,652
Income tax expense		3,363			3,794
Minority interest		2,440			1,807

Income from continuing operations		5,469			6,051
Loss from discontinued operations (net of income tax benefit of $84 and $162, respectively)		(131	)		(266	)

Net income		5,338			5,785
Redeemable minority interests		101			35

Net income available to common stockholders	$	5,439		$	5,820


Earnings per share — basic and diluted:
Income from continuing operations	$	0.31		$	0.34
Loss from discontinued operations, net		(0.01	)		(0.01	)

Net income		0.30			0.33
Redeemable minority interests		0.01			—

Net income available to common shareholders	$	0.31		$	0.33


Weighted average shares outstanding:
Basic		17,800,066			17,748,369
Diluted		17,813,967			17,807,338

See accompanying notes.

LHC GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
( Dollars in thousands)
(Unaudited)


	Three Months Ended
	March 31,
	2008			2007
Operating activities
Net income	$	5,338		$	5,785
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		877			710
Provision for bad debts		4,040			1,816
Stock-based compensation expense		385			227
Minority interest in earnings of subsidiaries		2,330			1,756
Deferred income taxes		(86	)		(596	)
Gain on sale of assets		( 346	)		—
Changes in operating assets and liabilities, net of acquisitions:
Receivables		(2,817	)		(12,801	)
Prepaid expenses and other assets		472			526
Accounts payable and accrued expenses		6,112			4,573
Net amounts due governmental entities		210			(61	)

Net cash provided by operating activities		16,515			1,935


Investing activities
Purchases of property, building and equipment		(5,527	)		(716	)
Proceeds from sale of assets		3,081			—
Cash paid for acquisitions, primarily goodwill, intangible assets and advance payments on acquisitions		(14,031	)		(5,865	)

Net cash used in investing activities		(16,477	)		(6,581	)


Financing activities
Proceeds from line of credit		5,442			—
Payments on line of credit		(5,442	)		—
Proceeds on debt issuance		5,050			—
Principal payments on debt		(2,932	)		(39	)
Payments on capital leases		(23	)		(66	)
Excess tax benefits from vesting of restricted stock		33			46
Proceeds from employee stock purchase plan		134			88
Minority interest distributions, net		(2,383	)		(1,404	)

Net cash used in financing activities		(121	)		(1,375	)

Change in cash		(83	)		(6,021	)
Cash at beginning of period		1,155			26,877

Cash at end of period	$	1,072		$	20,856


Supplemental disclosures of cash flow information
Interest paid	$	148		$	83

Income taxes paid	$	1,885		$	1,240

See accompanying notes.

LHC GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Organization

LHC Group, Inc. (the “Company”) is a healthcare provider specializing in the post-acute continuum of care primarily for Medicare beneficiaries in non-urban markets in the United States. The Company provides home-based services, primarily through home nursing agencies and hospices, and facility-based services, primarily through long-term acute care hospitals and outpatient rehabilitation clinics. As of the date of this report, the Company, through its wholly and majority-owned subsidiaries, equity joint ventures, and controlled affiliates, operated in Louisiana, Alabama, Arkansas, Mississippi, Texas, West Virginia, Kentucky, Florida, Georgia, Tennessee, Ohio and Missouri. During the three months ended March 31, 2008, the Company acquired two home health agencies and initiated operations at six home health agencies.

Unaudited Interim Financial Information

The unaudited consolidated balance sheet as of March 31, 2008 and the related consolidated statements of income for the three months ended March 31, 2008 and 2007, and cash flows for the three months ended March 31, 2008 and 2007 and related notes (interim financial information) have been prepared by LHC Group, Inc. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation in accordance with U.S. generally accepted accounting principles (US GAAP) have been included. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted from the interim financial information presented. This report should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on March 17, 2008, which includes information and disclosures not included herein.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenue and expenses during the reporting period. Actual results could differ from those estimates.

Critical Accounting Policies

The most critical accounting policies relate to the principles of consolidation, revenue recognition, and accounts receivable and allowances for uncollectible accounts.

Principles of Consolidation

The consolidated financial statements include all subsidiaries and entities controlled by the Company. Control is generally defined by the Company as ownership of a majority of the voting interest of an entity. The consolidated financial statements include entities in which the Company absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity.

All significant inter-company accounts and transactions have been eliminated in consolidation. Business combinations, which are accounted for as purchases, have been included in the consolidated financial statements from the respective dates of acquisition.

The following describes the Company’s consolidation policy with respect to its various ventures excluding wholly-owned subsidiaries.

Equity Joint Ventures

The Company’s joint ventures are structured as limited liability companies in which the Company typically owns a majority equity interest ranging from 51 to 99 percent. Each member of all but one of the Company’s equity joint ventures participates in profits and losses in proportion to their equity interests. The Company has one joint venture partner whose participation in losses is limited. The Company consolidates these entities as the Company absorbs a majority of the entities’ expected losses, receives a majority of the entities’ expected residual returns and generally has voting control over the entity.

License Leasing Arrangements

The Company, through wholly-owned subsidiaries, leases home health licenses necessary to operate certain of its home nursing agencies. As with wholly-owned subsidiaries, the Company owns 100 percent of the equity of these entities and consolidates them based on such ownership as well as the Company’s right to receive a majority of the entities’ expected residual returns and the Company’s obligation to absorb a majority of the entities’ expected losses.

Management Services

The Company has various management services agreements under which the Company manages certain operations of agencies and facilities. The Company does not consolidate these agencies or facilities, as the Company does not have an ownership interest and does not have a right to receive a majority of the agencies’ or facilities’ expected residual returns or an obligation to absorb a majority of the agencies’ or facilities’ expected losses.

The following table summarizes the percentage of net service revenue earned by type of ownership or relationship the Company had with the operating entity:


	Three Months
	Ended March 31,
	2008			2007
Wholly-owned subsidiaries		46.7	%		45.4	%
Equity joint ventures		49.4			42.1
License leasing arrangements		2.0			9.7
Management services		1.9			2.8

		100.0	%		100.0	%

Revenue Recognition

The Company reports net service revenue at the estimated net realizable amount due from Medicare, Medicaid, commercial insurance, managed care payors, patients, and others for services rendered. Under Medicare, the Company’s home nursing patients are classified into a group referred to as a home health resource group prior to the receipt of services. Based on the home health resource group, the Company is entitled to receive a prospective Medicare payment for delivering care over a 60-day period referred to as an episode. Medicare adjusts these prospective payments based on a variety of factors, such as low utilization, patient transfers and the level of services provided. In calculating the Company’s reported net service revenue from home nursing services, the Company adjusts the prospective Medicare payments by an estimate of the adjustments. The adjustments are calculated using a historical average of these types of adjustments. For home nursing services, the Company recognizes revenue based on the number of days elapsed during the episode of care within the reporting period.

Revenue is recognized as services are provided for the Company’s long-term acute care hospitals. Under Medicare, patients in the Company’s long-term acute care facilities are classified into long-term diagnosis-related groups. Medicare provides a fixed payment, subject to adjustments due to factors such as short stays, based on the group classification. The net service revenue for the period is reduced for the prospective payment amounts by an estimate of the adjustments. The Company calculates the adjustment based on a historical average of these types of adjustments for claims paid.

Medicare pays the Company a per diem payment for hospice services. The Company receives one of four predetermined daily or hourly rates based upon the level of care the Company furnished. The Company records net service revenue from hospice services based on the daily or hourly rate. The Company recognizes revenue for hospice as services are provided.

Under Medicare, the Company is reimbursed for rehabilitation services based on a fee schedule for services provided adjusted by the geographical area in which the facility is located. The Company recognizes revenue as the services are provided.

The Company’s Medicaid reimbursement is based on a predetermined fee schedule applied to each service provided. Therefore, revenue is recognized for Medicaid services as services are provided based on the fee schedule. The Company’s managed care payors reimburse the Company in a manner similar to either Medicare or Medicaid. Accordingly, the Company recognizes revenue from managed care payors in the same manner as the Company recognizes revenue from Medicare or Medicaid.

The Company records management services revenue as services are provided in accordance with the various management services agreements to which the Company is a party. As described in the agreements, the Company provides billing, management, and other consulting services suited to and designed for the efficient operation of the applicable home nursing agency or inpatient rehabilitation facility. The Company is responsible for the costs associated with the locations and personnel required for the provision of the services. The Company is generally compensated based on a percentage of net billings or an established base fee. The Company is also eligible to earn incentive compensation on certain of the management agreements.

Net service revenue was comprised of the following:


	Three Months
	Ended March 31,
	2008			2007
Home-based services		81.9	%		80.1	%
Facility-based services		18.1			19.9

		100.0	%		100.0	%

The following table sets forth the percentage of net service revenue earned by category of payor:


	Three Months
	Ended March 31,
	2008			2007
Payor:
Medicare		82.4	%		81.9	%
Medicaid		5.2			6.2
Other		12.4			11.9

		100.0	%		100.0	%

Home-Based Services

Home Nursing Services. The Company receives a standard prospective Medicare payment for delivering care. The base payment, established through federal legislation, is a flat rate that is adjusted upward or downward based upon differences in the expected resource needs of individual patients as indicated by clinical severity, functional severity, and service utilization. The magnitude of the adjustment is determined by each patient’s categorization into

one of 153 payment groups, known as home health resource groups, and the costliness of care for patients in each group relative to the average patient. The Company’s payment is also adjusted for differences in local prices using the hospital wage index. The Company performs payment variance analyses to verify the models utilized in projecting total net service revenue are accurately reflecting the payments to be received.

Medicare rates are subject to change. Due to the length of the Company’s episodes of care, a situation may arise where Medicare rate changes affect a prior period’s net service revenue. In the event that Medicare rates experience change, the net effect of that change will be reflected in the current reporting period.

Final payments from Medicare may reflect one of four retroactive adjustments to ensure the adequacy and effectiveness of the total reimbursement: (a) an outlier payment if the patient’s care was unusually costly; (b) a low utilization adjustment if the number of visits was fewer than five; (c) a partial payment if the patient transferred to another provider before completing the episode; or (d) a payment adjustment based upon the level of therapy services required in the population base. Management estimates the effect of these payment adjustments based on historical experience and records this estimate during the period the services are rendered.

Hospice Services. The Company’s Medicare hospice reimbursement is based on an annually-updated prospective payment system. Hospice payments are also subject to two caps. One cap relates to individual programs receiving more than 20 percent of their total Medicare reimbursement from inpatient care services. The second cap relates to individual programs receiving reimbursements in excess of a “cap amount,” calculated by multiplying the number of beneficiaries during the period by a statutory amount that is indexed for inflation. The determination for each cap is made annually based on the 12-month period ending on October 31 of each year. This limit is computed on a program-by-program basis. None of the Company’s hospices exceeded either cap during the three months ended March 31, 2008 or 2007.

Facility-Based Services

Long-Term Acute Care Services. The Company is reimbursed by Medicare for services provided under the long-term acute care hospital prospective payment system, which was implemented on October 1, 2002. Each patient is assigned a long-term care diagnosis-related group. The Company is paid a predetermined fixed amount applicable to that particular group. The payment is intended to reflect the average cost of treating a Medicare patient classified in that particular long-term care diagnosis-related group. For selected patients, the amount may be further adjusted based on length of stay and facility-specific costs, as well as in instances where a patient is discharged and subsequently readmitted, among other factors. Similar to other Medicare prospective payment systems, the rate is also adjusted for geographic wage differences. Revenue from patients covered by private insurance is recognized in accordance with the terms of the individual contracts.

Outpatient Rehabilitation Services. Outpatient therapy services are reimbursed on a fee schedule, subject to annual limitations. Outpatient therapy providers receive a fixed fee for each procedure performed, adjusted by the geographical area in which the facility is located. The Company recognizes revenue as the services are provided. There are also annual per Medicare beneficiary caps that limit Medicare coverage for outpatient rehabilitation services.

Accounts Receivable and Allowances for Uncollectible Accounts

The Company reports accounts receivable net of estimated allowances for uncollectible accounts and adjustments. Accounts receivable are uncollateralized and primarily consist of amounts due from third-party payors and patients. To provide for accounts receivable that could become uncollectible in the future, the Company establishes an allowance for uncollectible accounts to reduce the carrying amount of such receivables to their estimated net realizable value. The credit risk for other concentrations of receivables is limited due to the significance of Medicare as the primary payor. The Company does not believe that there are any other significant concentrations of receivables from any particular payor that would subject it to significant credit risk in the collection of accounts receivable.

The amount of the provision for bad debts is based upon the Company’s assessment of historical and expected net collections, business and economic conditions and trends in government reimbursement. Uncollectible accounts are written off when the Company has determined the account will not be collected.

A portion of the estimated Medicare prospective payment system reimbursement from each submitted home nursing episode is received in the form of a request for accelerated payment (RAP). The Company submits a RAP for 60 percent of the estimated reimbursement for the initial episode at the start of care. The full amount of the episode is billed after the episode has been completed. The RAP received for that particular episode is deducted from the final payment. If a final bill is not submitted within the greater of 120 days from the start of the episode, or 60 days from the date the RAP was paid, any RAPs received for that episode will be recouped by Medicare from other Medicare claims in process for that particular provider. The RAP and final claim must then be re-submitted. For subsequent episodes of care contiguous with the first episode for a particular patient, the Company submits a RAP for 50 percent instead of 60 percent of the estimated reimbursement. The remaining 50 percent reimbursement is requested upon completion of the episode. The Company has earned net service revenue in excess of billings rendered to Medicare. Only a nominal portion of the amounts due to the Medicare program represent cash collected in advance of providing services.

The Company’s Medicare population is paid at a prospectively set amount that can be determined at the time services are rendered. Medicaid reimbursement is based on a predetermined fee schedule applied to each individual service provided by the Company. The Company’s managed care contracts are structured similar to either the Medicare or Medicaid payment methodologies. Because of the payor mix, the Company is able to calculate the actual amount due at the patient level and adjust the gross charges to the actual amount expected to be received for services at the time of billing. An estimated contractual allowance is therefore not needed at the time the Company reports net service revenue for each reporting period.

Other Significant Accounting Policies

Earnings Per Share

Basic per share information is computed by dividing the relevant amounts from the Consolidated Statements of Income by the weighted-average number of shares outstanding during the period. Diluted per share information is computed by dividing the relevant amounts from the Consolidated Statements of Income by the weighted-average number of shares outstanding plus dilutive potential shares.

The following table sets forth shares used in the computation of basic and diluted per share information:


	Three Months
	Ended March 31,
	2008		2007
Weighted average number of shares outstanding for basic per share calculation		17,800,066		17,748,369
Effect of dilutive potential shares:
Options		3,291		4,789
Restricted stock		10,610		54,180

Adjusted weighted average shares for diluted per share calculation		17,813,967		17,807,338

Discontinued Operations

Certain amounts previously disclosed for the quarter ended March 31, 2007 related to the operations of the Company’s critical access hospital have been reclassified into discontinued operations. The sale of the critical access hospital was completed on July 1, 2007.

Reclassifications

Excess tax benefits from the vesting of restricted stock has been reclassed from operating activities to financing activities on the Consolidated Statement of Cash Flows for the period ended March 31, 2007 to conform to the current year presentation.

Recently Issued Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (Revised 2007), Business Combinations (“SFAS 141R”). Under SFAS 141R, an acquiring entity will be required to recognize all assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS 141R changes the accounting treatment and disclosure requirements for certain items in a business combination. For instance, acquisition-related costs, with the exception of debt or equity issuance costs are to be recorded in the period that the costs are incurred and the services are received. SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The Company expects SFAS 141R will have an effect on accounting for business combinations once adopted but the effect is dependent upon acquisitions at the time.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (“SFAS 160”). SFAS 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. Management has not completed its evaluation of the potential effect, if any, of the adoption of SFAS 160 on the Company’s consolidated financial position, results of operations and cash flows.

Adoption of New Accounting Standards

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in US GAAP and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. In February 2008, the FASB issued FASB Staff Position No. 157-2, which deferred the effective date for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. These nonfinancial items include assets and liabilities such as reporting units measured at fair value in goodwill impairment tests and nonfinancial assets acquired and liabilities assumed in a business combination. The Company adopted SFAS 157 for financial assets and liabilities recognized at fair value on recurring bases effective January 1, 2008. The partial adoption of SFAS 157 for financial assets and liabilities did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”). Under SFAS 159, companies may elect to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS 159 was effective for the Company beginning in the first quarter of 2008. The Company did not elect to fair value any eligible items during the first quarter of 2008. Therefore, the adoption of SFAS 159 in the first quarter of 2008 did not affect the Company’s consolidated financial position, results of operations or cash flows.

3. Acquisitions and Divestitures

The following acquisitions were completed pursuant to the Company’s strategy of becoming the leading provider of post-acute healthcare services to Medicare patients in non-urban markets in the United States. The purchase price of each acquisition was determined based on the Company’s analysis of comparable acquisitions and the target market’s potential cash flows. Goodwill generated from the acquisitions was recognized based on the expected contributions of each acquisition to the overall corporate strategy. The Company expects the goodwill recognized in connection with the acquisition of existing operations to be fully tax deductible.

2008 Acquisitions

During the three months ended March 31, 2008, the Company acquired the existing operations of one entity and a majority ownership interest in the existing operations of another entity for $5.2 million in cash and $323,000 in acquisition costs. Goodwill of $4.8 million was assigned to the home-based services segment. The allocation of the purchase price for certain acquisitions during the three months ended March 31, 2008 has not been finalized and is subject to change upon completion of final valuation.

On March 31, 2008, the Company paid $8.3 million in cash for acquisitions of several entities. The acquisitions were completed on April 1, 2008. The $8.3 million cash payment is recorded as advance payments on acquisitions in the balance sheet as of March 31, 2008.

The changes in recorded goodwill by segment for the three months ended March 31, 2008 were as follows:


	Three Months
	Ended
	March 31,
	2008
	(in thousands)
Home-based services segment:
Balance at December 31, 2007	$	57,884
Goodwill acquired during the period from acquisitions		4,669

Balance at March 31, 2008	$	62,553


Facility-based services segment:
Balance at December 31, 2007	$	4,343
Goodwill acquired during the period from redemption of minority interest		89

Balance at March 31, 2008	$	4,432

There were no dispositions during the three months ended March 31, 2008.

The above transactions were considered to be immaterial individually and in the aggregate. Accordingly, no supplemental pro forma information is required.

4. Credit Arrangements

Long-Term Debt

Long-term debt consisted of the following:


	March 31,		December 31,
	2008		2007
	(in thousands)
Notes payable:
Due in yearly installments of $50,000 through August 2010 at 6.25%	$	150	$	150
Due in monthly installments of $20,565 through October 2015 at LIBOR plus 2.25% (6.71% at December 31, 2007)		—		2,870
Due in monthly installments of $28,056 through February 2015 at LIBOR plus 1.90% (4.61% at March 31, 2008)		5,022		—
Due in monthly installments of $12,500 through November 2009 at 5.78%		226		260

		5,398		3,280
Less current portion of long-term debt		527		433

	$	4,871	$	2,847

On February 28, 2008, the Company paid its promissory note with Bancorp Equipment Finance, Inc. in full. The note was collateralized by the Company’s aircraft, which was sold in February 2008 for $3.1 million. The sale resulted in a gain of $315,000.

In February 2008, the Company entered into a loan agreement with Capital One, National Association (“Capital One”) for a term note in the amount of $5.1 million for the purchase of a 1999 Cessna 560 aircraft. The term note is payable in 84 monthly installments of principal plus interest commencing on March 6, 2008 and ending on February 6, 2015. The term note bears interest at the LIBOR Rate (adjusted monthly) plus the Applicable Margin of 1.9 percent.

Certain of the Company’s loan agreements contain restrictive covenants, including limitations on indebtedness and the maintenance of certain financial ratios. At March 31, 2008 and December 31, 2007, the Company was in compliance with all covenants.

Other Credit Arrangements

On February 20, 2008, the Company terminated its credit facility agreement with C.F. Blackburn, LLC successor by assignment to Residential Funding Company, LLC, f/k/a Residential Funding Corporation (“Former Credit Facility”) and entered into a new credit facility agreement with Capital One (“New Credit Facility”). Under the terms of the Former Credit Facility, which was in effect at December 31, 2007, the Company could be advanced funds up to a defined limit of eligible accounts receivables not to exceed the borrowing limit. No amounts were outstanding under this facility at December 31, 2007. Interest accrued on any outstanding amounts at a varying rate and was based on the Wells Fargo Bank, N.A. prime rate plus 1.5 percent (9.02 percent at December 31, 2007). The annual facility fee was 0.5 percent of the total availability. The Former Credit Facility was due to expire on April 15, 2010.

On February 20, 2008, the Company entered into the New Credit Facility, which was amended on March 6, 2008 to include an additional lender, First Tennessee Bank, N.A., to increase the line of credit from $25.0 million to $37.5 million and to amend the Eurodollar Margin for each Eurodollar Loan (as those terms are defined in the New Credit Facility) issued under the New Credit Facility. The New Credit Facility is unsecured, has a term of two years and a letter of credit sublimit of $2.5 million. The Company has an option to increase the line of credit to a total maximum aggregate principal amount of $50.0 million. The annual facility fee is 0.125 percent of the total availability. The interest rate for borrowings under the New Credit Agreement is a function of the prime rate (Base Rate) or the Eurodollar rate (Eurodollar), as elected by the Company, plus the applicable margin based on the Leverage Ratio as defined in the New Credit Facility.

5. Income Taxes

The Company recognizes interest and penalties related to uncertain tax positions in interest expense and general and administrative expense, respectively. As of March 31, 2008, the Company has no unrecognized tax benefit and no accrued interest or penalties relating to unrecognized income tax benefits recognized in the statement of operations.

The Company is subject to both federal and state income tax for jurisdictions within which it operates. Within these jurisdictions, the Company is open to examination for tax years ended after December 31, 2004.

6. Stockholders’ Equity

The following table summarizes the activity in stockholders’ equity for the three months ended March 31, 2008 (amounts in thousands, except share data):


	Common Stock									Additional
	Issued				Treasury					Paid-In			Retained
	Amount		Shares		Amount			Shares		Capital			Earnings		Total
Balances at December 31, 2007	$	177		20,725,713	$	(2,866	)		2,950,429	$	81,983		$	64,077	$	143,371
Net income		—		—		—			—		—			5,338		5,338
Nonvested stock compensation		—		—		—			—		385			—		385
Issuance of non-vested restricted stock		—		38,883		—			—		—			—		—
Treasury shares redeemed to pay income tax		—		—		(73	)		3,359		—			—		(73	)
Excess tax benefits from issuance of nonvested stock		—		—		—			—		(91	)		—		(91	)
Issuance of common stock under Employee Stock Purchase Plan		1		5,658		—			—		134			—		135
Recording minority interest in joint venture at redemption value		—		—		—			—		—			101		101

Balances at March 31, 2008	$	178		20,770,254	$	(2,939	)		2,953,788	$	82,411		$	69,516	$	149,166

Share Based Compensation

On January 20, 2005, the board of directors and stockholders of the Company approved the 2005 Long Term Incentive Plan (the “Incentive Plan”). The Incentive Plan provides for 1,000,000 shares of common stock that may be issued or transferred pursuant to awards made under the plan. A variety of discretionary awards for employees, officers, directors and consultants are authorized under the Incentive Plan, including incentive or non-qualified statutory stock options and restricted stock. All awards must be evidenced by a written award certificate which will include the provisions specified by the compensation committee of the board of directors. The compensation committee will determine the exercise price for non-statutory stock options. The exercise price for any option cannot be less than the fair market value of our common stock as of the date of grant.

Also on January 20, 2005, the 2005 Director Compensation Plan was adopted. The shares issued under our 2005 Director Compensation Plan are issued from the 1,000,000 shares reserved for issuance under our Incentive Plan.

Stock Options

As of March 31, 2008, 19,000 options were issued and exercisable. During the three months ended March 31, 2008 and 2007, no options were exercised, no options were forfeited and no options were granted.

Nonvested Stock

During the three months ended March 31, 2008, 16,100 nonvested shares of stock were granted to our independent directors under the 2005 Director Compensation Plan. All of these shares vest in one year. During the three months ended March 31, 2008, 121,950 nonvested shares were granted to employees pursuant to the 2005 Long-Term Incentive Plan. All of these shares vest over a five year period. The fair value of nonvested shares is determined based on the closing trading price of the Company’s shares on the grant date. The weighted average grant date fair value of nonvested shares granted during the three months ended March 31, 2008 was $17.00.

The following table represents the nonvested stock activity for the three months ended March 31, 2008:


				Weighted
				average
	Number of			grant date
	Shares			fair value
Nonvested shares outstanding at December 31, 2007		218,832		$	24.03
Granted		138,050		$	17.00
Vested		(38,883	)	$	26.08
Forfeited		(6,708	)	$	22.74

Nonvested shares outstanding at March 31, 2008		311,291		$	22.12

As of March 31, 2008, there was $7.1 million of total unrecognized compensation cost related to nonvested shares granted. That cost is expected to be recognized over the weighted average period of 2.1 years. The total fair value of shares vested in the three months ended March 31, 2008 and 2007 was $1.0 million and $278,000, respectively. The Company records compensation expense related to nonvested share awards at the grant date for

shares that are awarded fully vested, and over the vesting term on a straight line basis for shares that vest over time. The Company has recorded $385,000 and $227,000 of compensation expense related to nonvested stock grants in the three months ended March 31, 2008 and 2007, respectively.

Employee Stock Purchase Plan

The Company has a plan whereby eligible employees may purchase the Company’s common stock at 95 percent of the market price on the last day of the calendar quarter. There are 250,000 shares reserved for the plan. The Company issued 5,658 shares of common stock under the plan at a per share price of $23.73 during the three months ended March 31, 2008. As of March 31, 2008 there were 220,353 shares available for future issuance.

7. Commitments and Contingencies

Contingencies

The terms of one joint venture operating agreement grant a buy/sell option that would require the Company to either purchase or sell the existing membership interest in the joint venture within 30 days of the receipt of the notice to exercise the provision. Both the Company and its joint venture partner have the right to exercise the buy/sell option. The party receiving the exercise notice has the right to purchase the interests held by the other party, sell its interests to the other party or dissolve the partnership. The purchase price formula for the interests is set forth in the joint venture agreement and is typically based on a multiple of the earnings before income taxes, depreciation and amortization of the joint venture. Total revenue earned by the Company from the joint venture subject to this arrangement was $3.2 million and $3.8 million for the three months ended March 31, 2008 and 2007, respectively. During the first quarter of 2008, certain minority interest holders redeemed their interest in the joint venture, resulting in a cash payment of approximately $89,000. In connection with the partial redemption of certain minority interests, the Company decreased minority interest by approximately $84,000 and increased retained earnings by the same amount, which represents the fair value of the shares at December 31, 2007 converted during the first quarter of 2008. Simultaneously, the Company recorded goodwill of $89,000 to represent the value of the minority interests redeemed. Also at the end of the first quarter of 2008, the Company recorded a mark to market benefit of $17,000. As of March 31, 2008, approximately 88.2% of these minority interest holders have converted their interests to cash.

The Company is involved in various legal proceedings arising in the ordinary course of business. Although the results of litigation cannot be predicted with certainty, management believes the outcome of pending litigation will not have a material adverse effect, after considering the effect of the Company’s insurance coverage, on the Company’s consolidated financial statements.

Compliance

The laws and regulations governing the Company’s operations, along with the terms of participation in various government programs, regulate how the Company does business, the services offered and interactions with patients and the public. These laws and regulations, and their interpretations, are subject to frequent change. Changes in existing laws or regulations, or their interpretations, or the enactment of new laws or regulations could materially and adversely affect the Company’s operations and financial condition.

The Company is subject to various routine and non-routine governmental reviews, audits and investigations. In recent years, federal and state civil and criminal enforcement agencies have heightened and coordinated their oversight efforts related to the healthcare industry, including with respect to referral practices, cost reporting, billing practices, joint ventures and other financial relationships among healthcare providers. Violation of the laws governing the Company’s operations, or changes in the interpretation of those laws, could result in the imposition of fines, civil or criminal penalties, termination of the Company’s rights to participate in federal and state-sponsored programs and suspension or revocation of the Company’s licenses.

If the Company’s long-term acute care hospitals fail to meet or maintain the standards for Medicare certification as long-term acute care hospitals, such as average minimum length of patient stay, they will receive payments under the prospective payment system applicable to general acute care hospitals rather than payment under the system

applicable to long-term acute care hospitals. Payments at rates applicable to general acute care hospitals would likely result in the Company receiving less Medicare reimbursement than currently received for patient services. Moreover, all of the Company’s long-term acute care hospitals are subject to additional Medicare criteria because they operate as separate hospitals located in space leased from, and located in, a general acute care hospital, known as a host hospital. This is known as a “hospital within a hospital” model. These additional criteria include requirements concerning financial and operational separateness from the host hospital.

The Company anticipates there may be changes to the standard episode-of-care payment from Medicare in the future. Due to the uncertainty of the revised payment amount, the Company cannot estimate the impact that changes in the payment rate, if any, will have on its future financial statements.

The Company believes that it is in material compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action, including fines, penalties and exclusion from the Medicare program.

8. Segment Information

The Company’s segments consist of home-based services and facility-based services. Home-based services include home nursing services and hospice services. Facility-based services include long-term acute care services and outpatient rehabilitation services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.


	Three Months Ended March 31, 2008
	Home-Based			Facility-Based
	Services			Services			Total
	(in thousands)
Net service revenue	$	68,363		$	15,110		$	83,473
Cost of service revenue		33,379			8,517			41,896
Provision for bad debts		3,246			440			3,686
General and administrative expenses		23,161			3,712			26,873
Operating income		8,577			2,441			11,018
Interest expense		101			47			148
Non-operating income, including gain on sale of assets		(285	)		(117	)		(402	)
Income from continuing operations before income taxes and minority interest		8,761			2,511			11,272
Minority interest		1,740			700			2,440
Income from continuing operations before income taxes		7,021			1,811			8,832
Total assets	$	161,891		$	26,269		$	188,160


	Three Months Ended March 31, 2007
	Home-Based			Facility-Based
	Services			Services			Total
	(in thousands)
Net service revenue	$	55,066		$	13,661		$	68,727
Cost of service revenue		26,028			8,589			34,617
Provision for bad debts		1,224			517			1,741
General and administrative expenses		16,612			4,315			20,927
Operating income		11,202			240			11,442
Interest expense		54			29			83
Non-operating income, including gain on sale of assets		(204	)		(89	)		(293	)
Income from continuing operations before income taxes and minority interest		11,352			300			11,652
Minority interest		1,421			386			1,807
Income from continuing operations before income taxes		9,931			(86	)		9,845
Total assets	$	128,165		$	35,856		$	164,021


ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contain “forward-looking statements.” Forward-looking statements relate to expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or that necessarily depend upon future events. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential” and similar expressions. Specifically, this report contains, among others, forward-looking statements about:

	•		our expectations regarding financial condition or results of operations for periods after March 31, 2008;

	•		our critical accounting policies;

	•		our business strategies and our ability to grow our business;

	•		our participation in the Medicare and Medicaid programs;

	•		the reimbursement levels of Medicare and other third-party payors;

	•		the prompt receipt of payments from Medicare and other third-party payors;

	•		our future sources of and needs for liquidity and capital resources;

	•		our ability to obtain financing;

	•		our ability to make payments as they become due;

	•		the outcomes of various routine and non-routine governmental reviews, audits and investigations;

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

	•		the value of our proprietary technology;

	•		the impact of legal proceedings;

	•		our insurance coverage;

	•		the costs of medical supplies;

	•		our competitors and our competitive advantages;

	•		our ability to attract and retain valuable employees;

	•		the payment of dividends;

	•		the price of our stock;

	•		our compliance with environmental, health and safety laws and regulations;

	•		our compliance with health care laws and regulations;

	•		our compliance with SEC laws and regulations and Sarbanes-Oxley requirements;

	•		the impact of federal and state government regulation on our business;

	•		the impact of changes in our future interpretations of fraud, anti-kickbacks or other laws.

The forward-looking statements contained in this report reflect our current views about future events and are based on assumptions and are subject to known and unknown risks and uncertainties. Many important factors could cause actual results or achievements to differ materially from any future results or achievements expressed in or implied by our forward-looking statements. Many of the factors that will determine future events or achievements are beyond our ability to control or predict. Important factors that could cause actual results or achievements to differ materially from the results or achievements reflected in our forward-looking statements include, among other things, the factors discussed in the Part II, Item 1A “Risk Factors,” included in this report and in other of our filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2007. This report should be read in conjunction with that annual report on Form 10-K, and all our other filings, including quarterly reports on Form 10-Q and current reports on Form 8-K, made with the SEC through the date of this report.

You should read this report, the information incorporated by reference into this report and the documents filed as exhibits to this report completely and with the understanding that our actual future results or achievements may be materially different from what we expect or anticipate.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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

Overview

We provide post-acute healthcare services, through our home nursing agencies hospices, long-term acute care hospitals and an outpatient rehabilitation clinic, primarily to Medicare beneficiaries in non-urban markets in the United States. Since our founders began operations in 1994 with one home nursing agency in Palmetto, Louisiana, we have grown to 180 service providers in Louisiana, Mississippi, Alabama, Texas, Arkansas, West Virginia, Kentucky, Florida, Tennessee, Georgia, Ohio and Missouri as of March 31, 2008. Approximately 58% and 55%, respectively, of our net service revenue for the three months ended March 31, 2008 and 2007 was derived from patients who do not reside in Metropolitan Statistical Areas (MSAs).

Segments

We operate in two segments for financial reporting purposes: home-based services and facility-based services. During the three months ended March 31, 2008 and 2007, home-based services accounted for 81.9% and 80.1%, respectively, of our net service revenue. The remaining net service revenue balance relates to our facility-based services segment.

Through our home-based services segment we offer a wide range of services, including skilled nursing, private duty nursing, medically-oriented social services, hospice care and physical, occupational and speech therapy. As of March 31, 2008, we owned and operated 150 home nursing locations, nine hospices, two private duty agencies and a diabetes self management company. We also manage the operations of five locations in which we have no ownership interest. Of our 167 home-based services locations, 94 are wholly-owned by us, 61 are majority-owned or controlled by us through joint ventures, seven are license lease arrangements and we manage the operations of the remaining five locations. We intend to increase the number of home nursing agencies that we operate through continued acquisitions and development, primarily in underserved non-urban markets. As we acquire and develop

home nursing agencies, we anticipate the percentage of our net service revenue and operating income derived from our home-based services segment will increase.

We provide facility-based services principally through our long-term acute care hospitals and an outpatient rehabilitation clinic. As of March 31, 2008, we owned and operated four long-term acute care hospitals with seven locations, of which all but one are located within host hospitals. We also owned and operated one outpatient rehabilitation clinic, two medical equipment locations, a health club and a pharmacy. Of these twelve facility-based services locations, six are wholly-owned by us and six are majority-owned or controlled by us through joint ventures. We also manage the operations of one inpatient rehabilitation facility in which we have no ownership interest. Due to our emphasis on expansion through the acquisition and development of home nursing agencies, we anticipate that the percentage of our net service revenue and operating income derived from our facility-based segment will decline.

Recent Developments

Medicare

Home-Based Services. The base payment rate for Medicare home nursing in 2008 is $2,270.32 per 60-day episode. Since the inception of the prospective payment system in October 2000, the base episode rate payment has varied due to both the impact of annual market basket based increases and Medicare-related legislation. Home health payment rates are updated annually by either the full home health market basket percentage, or by the home health market basket percentage as adjusted by Congress. The Centers for Medicare & Medicaid Services (CMS) establish the home health market basket index, which measures inflation in the prices of an appropriate mix of goods and services included in home health services.

In August 2007, CMS released a final rule, updating and making major refinements to the Medicare home health prospective payment system (“HH-PPS”) for 2008 (the “Final Rule”). The Final Rule, including any amendments thereto, was effective on January 1, 2008. CMS instituted these changes to the home health payment system to account for reported increases over the past several years in the home health case-mix, which CMS believes have been caused by changes in home health agencies (HHA) coding practices and documentation — not by the treatment of resource-intense patients. CMS thus designed the new case-mix model to better predict the resource-intensity required by home health beneficiaries over the 60-day episode of care, which would, in turn, improve the accuracy of Medicare reimbursement to HHAs. To effectuate the improvements, the new model does the following: (1) enables more precise coding for co-morbidities and the differing health characteristics of longer-stay patients; (2) accounts more accurately for the effect of rehabilitation services on resource use; and (3) lessens the risk of overutilization of therapy services by replacing the single threshold (10 visits per episode) with three thresholds (at 6, 14 and 20 visits), as well as a graduated bonus system based on severity between each threshold.

Also, to address the increases in case-mix that CMS views as unrelated to home health patients’ clinical conditions, the final rule released in 2007 implemented a reduction in the national standardized 60-day episode payment rate for four years. A 2.75 percent reduction began in 2008 and will continue for three years, with a 2.71 percent reduction in the fourth year. Also, in the final rule, CMS finalized the market basket increase of 3.0 percent, a 0.1 percent increase from the proposed rule. When the market basket update is viewed in conjunction with — (1) the 2.75 percent reduction in home health payment rates for 2008; (2) the implementation of the new case-mix adjustment system; (3) the changes in the wage index; and (4) the other changes made in the final rule — CMS predicts a 0.8 percent increase in payments for urban HHAs and a 1.77 percent decrease in payments for rural HHAs. Collectively, the changes in the final rule (not including the case-mix or wage index adjustments) decrease the national 60-day episode payment rate for HHAs from the 2007 level of $2,339.00 to $2,270.32 in 2008.

In June 2007, CMS announced a 3.3% rate increase for hospice care and hospice services provided during the twelve-month period beginning on October 1, 2007 through September 30, 2008. In addition, CMS also announced that the hospice cap amount for the year ending October 31, 2007 was $21,410.

In April 2008, CMS released the 2009 Medicare hospice proposal, which would reduce the industry’s annual market basket rate increase by 1.1% in 2009 and by approximately 2.0% in 2010 and 1.0% in 2011. The proposal will

go through a 60-day comment period with the final rule expected in August 2008 and implementation in October 2008.

Facility-Based Services. Under the long-term acute care hospital prospective payment system implemented on October 1, 2002, each patient discharged from our long-term acute care hospitals is assigned a long-term care diagnosis-related group (LTACH-DRG). CMS establishes these long-term care diagnosis-related groups by categorizing diseases by diagnosis, reflecting the amount of resources needed to treat a given disease. For each patient, the Company’s long-term acute care hospitals are paid a pre-determined fixed amount applicable to the particular LTACH-DRG to which that patient is assigned. The payment is further increased for severity based on co-morbidities, complications, and procedures. The payment is decreased for short-stay outlier patients whose stay does not reach a predetermined minimum assigned for the LTACH-DRG. In addition, extremely high cost patients, after crossing a fixed loss threshold, receive an additional high-cost outlier payment intended to account for resource utilization requirements above the LTACH-DRG payment.

In May 2007, CMS published its annual long-term acute care hospital update (“LTACH Final Rule”) which expands to apply not only to LTACH hospitals within a hospital (“HwHs”) and satellites but also freestanding LTACHs and grandfathered LTACHs as well as to HwHs and satellites that admit Medicare patients from non-co-located hospitals. While the policy change was supposed to take effect for cost reporting periods beginning on or after July 1, 2007, the Medicare, Medicaid, and SCHIP Extensions Act of 2007 (“MMSEA”) delayed the implementation of the policy for three years with respect to freestanding LTACHs and grandfathered LTACHs. Further, the MMSEA set the percentage threshold at 50 percent for three years for HwHs and satellites located in urban areas that would otherwise be subject to a transition period, and it established a 75 percent ceiling for HwHs and satellite facilities located in rural areas and those that receive referrals from MSA dominant hospitals or urban single hospitals. Final guidance from CMS has not been issued on the implementation of the LTACH provisions of MMSEA.

We currently have a total of seven LTACHs. Six of our hospitals are classified as HwHs and one as freestanding. Under the provisions of the MMSEA all six of our LTACH hospitals classified as HwHs will be subject to the 75 percent limit on host hospital admission. Four of our HwH hospitals are classified as rural. Our two urban HwH locations are co-located with an MSA dominant hospital and are therefore subject to the 75 percent ceiling. Our one freestanding LTACH will not have any limits placed on admissions from any single provider. Changes in the HwH thresholds become effective for our next cost reporting period beginning September 1, 2008.

Until the changes take effect under the provisions of the MMSEA, our six HwH locations are subject to an admission percentage ceiling of 50 percent for the cost reporting period beginning September 1, 2007 to August 31, 2008. Without the MMSEA changes, two of our six HwH facilities are located in MSA or urban areas and would be subject to a final admission percentage ceiling of 25 percent at the end of the phase-in period. Our rural HwH locations would stay at 50 percent ceiling.

For current cost reporting period, on an individual basis, all of our LTACH locations have admitted between 49 percent and 60 percent of their patients from their host hospitals. The current threshold is 50 percent for all six HwH facilities. As of March 31, 2008, four of the six HwH locations were between 55 percent and 60 percent with the remaining two locations below 50 percent. The remaining LTACH is not an HwH; therefore, it is not subject to the limits on host hospital referrals.

In January 2008, CMS published a proposed rule proposing to set the Medicare payment rates for LTACHs at $39,076.28 for patient discharges taking place on or after July 1, 2008 through September 30, 2009. (CMS proposed in this rule to have a 15-month rate year for 2009 in order to bring into alignment the timing of the annual update for the LTACH PPS and the annual update for the DRGs used for LTACH patients.) CMS also proposed to set the cost outlier fixed loss threshold at $21,199. Further, CMS declined to apply its one-time budget neutrality adjustment, in accordance with the MMSEA, which prohibits the Secretary of Health and Human Services from making this one-time prospective adjustment until December 29, 2010. However, in the rule CMS discussed a methodology it had developed prior to the enactment of the MMSEA for evaluating whether to propose this one-time adjustment and it requested comments on its proposed methodology. CMS indicated that as December 29, 2010 approaches, it plans to use its finalized methodology to evaluate whether to propose a one-time budget neutrality adjustment at that time. (CMS also noted that, had the MMSEA not been enacted, CMS would have proposed to use the proposed

methodology at this time and to make a one-time adjustment of 3.75 percent to the standard federal rate.) CMS indicated that other MMSEA LTACH provisions that were not addressed in the proposed rule (i.e., provisions relating to the “25 percent rule,” the short stay outlier policy, the establishment of new facilities and the expanded review of medical necessity for admission and continued stay at LTACHs) would be the subject of future regulations.

The fiscal year 2009 Inpatient Prospective Payment System (IPPS) proposed rule made several minor refinements to the severity-adjusted patient classification system established during 2008. Most notably, CMS proposed a new methodology for determining the relative weights of Medicare severity long-term care diagnostic related groups (“MS-LTC-DRGs”) with no LTACH cases in 2008. The proposed rule updates the MS-LTC-DRG relative weights for LTACHS in a budget-neutral manner. In this regulation, CMS does not propose policies implementing the provisions of the MMSEA.

Under Medicare, we are reimbursed for rehabilitation services based on a fee schedule for services provided adjusted by the geographical area in which the facility is located. On February 1, 2006, Congress passed the Deficit Reduction Act of 2005. This legislature allows, among other things, an annual $1,740 Medicare Part B outpatient therapy cap that was effective on January 1, 2006. CMS subsequently increased the therapy cap to $1,780 on January 1, 2007 and to $1,810 on January 1, 2008. The legislation also required CMS to implement a broad process for reviewing medically necessary therapy claims, creating an exception to the cap. The exception process, which was set to expire on January 1, 2007 was included in the Tax Relief and Health Care Act of 2006 and continued to function as an exception to the Medicare Part B outpatient therapy cap until January 1, 2008. The MMSEA further extended the Medicare Part B outpatient therapy cap until June 30, 2008. We cannot be assured that one or more of our outpatient rehabilitation clinics will not exceed the caps in the future.

Office of Inspector General

The Office of Inspector General (“OIG”) has a responsibility to report both to the Secretary of the Department of Health and Human Services and to Congress any program and management problems related to programs such as Medicare. The OIG’s duties are carried out through a nationwide network of audits, investigations and inspections. Each year, the OIG outlines areas it intends to study relating to a wide range of providers. In fiscal year 2007, the OIG indicated its intent to study topics relating to, among others, home health, hospice, long-term care hospitals and certain outpatient rehabilitation services. No estimate can be made at this time regarding the impact, if any, of the OIG’s findings.

Results of Operations

Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

Accounts Receivable and Allowance for Uncollectible Accounts

At March 31, 2008, the Company’s allowance for uncollectible accounts, as a percentage of patient accounts receivable, was approximately 9.3%, or $7.0 million, compared to 11.3% and 10.6% at December 31, 2007 and March 31, 2007, respectively.

The following table sets forth as of March 31, 2008, the aging of accounts receivable (based on the billing date) and the total allowance for uncollectible accounts expressed as a percentage of the related aged accounts:


Payor	0-30			31-60			61-90			91-120			121-150			151-180			181-240			241+			Total
							(in thousands)
Medicare	$	23,288		$	7,101		$	2,116		$	3,187		$	3,093		$	6,761		$	1,784		$	4,481		$	51,811
Medicaid		551			1,463			233			790			676			1,239			714			4,115			9,781
Other		2,055			2,945			588			988			1,379			1,268			371			4,006			13,600

Total	$	25,894		$	11,509		$	2,937		$	4,965		$	5,148		$	9,268		$	2,869		$	12,602		$	75,192
Allowance as a percentage of receivables		3.2	%		4.3	%		1.4	%		4.4	%		3.1	%		9.0	%		9.0	%		33.3	%		9.3	%

Consolidated Net Service Revenues:

Consolidated net service revenue for the three months ended March 31, 2008 was $83.5 million, an increase of $14.8 million, or 21.5%, from $68.7 million for the three months ended March 31, 2007. As of March 31, 2008, home-based services accounted for 81.9% of revenue and facility-based services accounted for 18.1% of revenue compared with 80.1% and 19.9%, respectively, for the comparable prior year quarter.

Home-Based Services

Net service revenue for home-based services for the three months ended March 31, 2008 increased $13.3 million, or 24.1%, to $68.4 million, compared to $55.1 million for the three months ended March 31, 2007. Total admissions increased 24.2% to 13,180 during the current period, versus 10,615 for the same period in 2007. Average home-based patient census for the three months ended March 31, 2008, increased 20.7% to 18,958 patients as compared with 15,712 patients for the three months ended March 31, 2007.

Organic Growth

Organic growth includes growth on “same store” locations (owned for greater than 12 months) and growth from “de novo” locations. We calculate organic growth by dividing organic growth generated in a period by total revenue generated in the same period of the prior year. Revenue contributed by acquired agencies contributes to organic growth beginning with the thirteenth month after acquisition. In the first twelve months after an acquisition, we are able to grow the acquired agencies revenue. This growth is called internal acquisition growth (IAG). When combined, IAG and organic growth provide a more complete measure of the Company’s actual growth between two periods.

The following table details the Company’s revenue growth and percentages for organic and total growth during the three months ended March 31, 2008.


	Same						Organic			Organic &		Organic & IAG					Total		Total
	Store(1)		De Novo(2)		Organic(3)		Growth %			IAG		Growth %			Acquired(4)		Growth		Growth %
Revenue	$	57,424	$	1,425	$	58,849		6.9	%	$	60,316		9.5	%	$	9,514	$	68,363		24.1	%
Revenue Medicare	$	47,286	$	1,219	$	48,505		8.6	%	$	49,928		11.7	%	$	8,255	$	56,760		27.0	%
Average Census		16,143		646		16,789		6.9	%		17,374		10.6	%		2,169		18,958		20.7	%
Average Medicare Census		12,537		509		13,046		12.1	%		13,553		16.4	%		1,830		14,876		27.8	%
Episodes		21,504		658		22,162		27.6	%		23,537		35.5	%		3,253		25,415		46.4	%


(1)		Same store — location that has been in service with the Company for at greater than 12 months.

(2)		De Novo — internally developed location that has been in service with the Company for 12 months or less.

(3)		Organic — combination of same store and de novo.

(4)		Acquired — purchased location that has been in service with the Company for 12 months or less.

Facility-Based Services.

Net service revenue for facility-based services for the three months ended March 31, 2008, increased $1.4 million, or 10.2%, to $15.1 million compared to $13.7 million for the three months ended March 31, 2007.

Organic growth made up the total growth in this service sector during the period. Patient days increased 3.1% to 12,034 in the three months ended March 31, 2008, from 11,674 in the three months ended March 31, 2007.

Cost of Service Revenue

Cost of service revenue for the three months ended March 31, 2008 was $41.9 million, an increase of $7.3 million, or 21.1%, from $34.6 million for the three months ended March 31, 2007. Cost of service revenue consistently represented approximately 50.0% of our net service revenue for the three months ended March 31, 2008 and 2007.

Home-Based Services. Cost of service revenue for the home-based services was $33.4 million, an increase of $7.4 million, or 28.5%, from $26.0 million for the three months ended March 31, 2007. The following table summarizes our cost of service revenue for the periods (amounts in thousands).


	Three Months
	Ended March 31,
	2008		2007
Salaries, wages and benefits	$	28,636	$	22,635
Transportation		2,206		1,755
Supplies and services		2,537		1,638

Total	$	33,379	$	26,028

Approximately $5.1 million of the $6.0 million increase in salaries, wages and benefits was due to acquisitions and developments that occurred in 2007 and approximately $0.9 million of the increase in salaries, wages and benefits expense relates to acquisitions and developments that occurred in the first three months of 2008. The $450,000 increase in transportation costs primarily relates to our growth and development throughout 2007. Of the $900,000 increase in supplies and services, $300,000 relates to acquisitions and development throughout 2007, while the remaining $600,000 relates to “same store” locations. Cost of home-based services revenue represented approximately 48.8% and 47.2% of our net home-based services revenue for the three months ended March 31, 2008 and 2007, respectively.

Facility-Based Services. Cost of service revenue for the facility-based services was $8.5 million, a decrease of $0.1 million, or 1.2%, from $8.6 million for the three months ended March 31, 2007. The following table summarizes our cost of service revenue for the periods (amounts in thousands).


	Three Months
	Ended March 31,
	2008		2007
Salaries, wages and benefits	$	5,534	$	5,378
Transportation		76		56
Supplies and services		2,907		3,155

Total	$	8,517	$	8,589

Cost of service revenue for the facility-based services represented approximately 56.3% and 62.9% of our net facility-based services revenue for the three months ended March 31, 2008 and 2007, respectively. The decrease is primarily due to increased revenue related to increased occupancy in the three months ended March 31, 2008 compared to the prior year.

Provision for Bad Debts

Provision for bad debts for the three months ended March 31, 2008 was $3.7 million, an increase of $2.0 million, from $1.7 million for the three months ended March 31, 2007. For the three months ended March 31, 2008 the provision for bad debt was approximately 4.4% of net service revenue compare to 2.5% for the same period in 2007. The increase in the provision for bad debts as a percent of net service revenue primarily relates to commercial claims

and increased collection difficulties from those payors.

General and Administrative Expenses

Our general and administrative expenses consist primarily of the following expenses incurred by our home office and administrative field personnel:

•

Home office:

	•		salaries and related benefits;

	•		insurance;

	•		costs associated with advertising and other marketing activities; and

	•		rent and utilities;

•

Supplies and services:

	•		accounting, legal and other professional services; and

	•		office supplies;

	•		Depreciation; and

	•		Other:

	•		advertising and marketing expenses;

	•		recruitment;

	•		field office rent; and

	•		taxes.

General and administrative expenses for the three months ended March 31, 2008 were $26.9 million compared to $20.9 million for the three months ended March 31, 2007. General and administrative expenses represented approximately 32.2% and 30.4% of our net service revenue for the three months ended March 31, 2008 and 2007, respectively. The 1.8% increase in general and administrative expenses as a percent of net service revenue relates to $1.0 million (1.2% of net service revenue) of consulting services, primarily supporting our billing and collections of patient receivables, a charge of $225,000 (0.3% of net service revenue) related to the early retirement of our credit facility with C.F. Blackburn, LLC successor by assignment to Residential Funding Company, LLC, f/k/a Residential Funding Corporation and $100,000 (0.1% of net service revenue) of legal expenses in connection with the early debt retirement.

Home-Based Services. General and administrative expenses in the home-based services for the three months ended March 31, 2008 were $23.2 million, an increase of $6.6 million, or 39.8%, from $16.6 million for the three months ended March 31, 2007. General and administrative expenses in the home-based services segment represented approximately 33.9% and 30.2% of our net service revenue for the three months ended March 31, 2008 and 2007, respectively.

Facility-Based Services. General and administrative expenses in the facility-based services for the three months ended March 31, 2008 were $3.7 million, a decrease of $0.6 million, or 14.0%, from $4.3 million for the three months ended March 31, 2007. General and administrative expenses in the facility-based services segment represented approximately 24.6% and 31.6% of our net service revenue for the three months ended March 31, 2008 and 2007, respectively. The decrease is primarily due to increased revenue related to increased occupancy in the three months ended March 31, 2008 compared to the prior year.

Income Tax Expense

The effective tax rates for the three months ended March 31, 2008 and 2007 were 38.1% and 38.5%, respectively.

Minority Interest

Minority interest expense increased $600,000 to $2.4 million for the three months ended March 31, 2008 from $1.8 million for the three months ended March 31, 2007. The increase relates to an increase in joint ventures throughout 2007 and 2008 and an increase in the income from operations related to our joint ventures.

Discontinued Operations

Net service revenue from discontinued operations for the three months ended March 31, 2008 and 2007 was $52,000 and $1.1 million, respectively. Costs, expenses and minority interest were $267,000 and $1.5 million, for the three months ended March 31, 2008 and 2007, respectively. For the three months ended March 31, 2008, the loss from discontinued operations after tax was $131,000 as compared to a loss from discontinued operations of $266,000 for the same period in 2007.

Liquidity and Capital Resources

Our principal source of liquidity for operating activities is the collection of our accounts receivable, most of which are collected from governmental and third party commercial payors. Our reported cash flows from operating activities are affected by various external and internal factors, including the following:

	•		Operating Results — Our net income has a significant effect on our operating cash flows. Any significant increase or decrease in our net income could have a material effect on our operating cash flows.

	•		Receipt of payments from Centers for Medicare & Medicaid Services (CMS) - Operating cash flows are dependent upon our collections from CMS. Process lags within the CMS system affect our operating cash flows.

	•		Start-Up Costs — Following the completion of an acquisition, we generally incur substantial start-up costs in order to implement our business strategy. There is generally a delay between our expenditure of these start-up costs and the increase in net service revenue, and subsequent cash collections, which adversely affects our cash flows from operating activities.

	•		Timing of Payroll — Our employees are paid bi-weekly on Fridays; therefore, operating cash flows decline in reporting periods that end on a Friday. Conversely, for those reporting periods ending on a day other than Friday, our cash flows are higher because we have not yet paid our payroll.

	•		Medical Insurance Plan Funding — We are self-funded for medical insurance purposes. Any significant changes in the amount of insurance claims submitted could have a direct effect on our operating cash flows.

	•		Medical Supplies — The cost of medical supplies is a significant expense associated with our business. Any increase in the cost of medical supplies, or in the use of medical supplies by our patients, could have a material effect on our operating cash flows.

The following table summarizes changes in cash:


	Three Months
	Ended March 31,
	2008			2007
Cash provided by operating activities	$	16,515		$	1,935
Cash used in investing activities		(16,477	)		(6,581	)
Cash used in financing activities		(121	)		(1,375	)

Change in cash		(83	)		(6,021	)
Cash and cash equivalents at beginning of period		1,155			26,877

Cash and cash equivalents at end of period	$	1,072		$	20,856

Net income provided $5.3 million of operating cash flows during the three months ended March 31, 2008. Non-cash items such as depreciation and amortization, provision for bad debts, stock compensation, minority interest in earnings of subsidiaries, deferred income taxes and gain on the sale of assets totaled $7.2 million.

Investing cash outflows increased $9.9 million during the three months ended March 31, 2008. Approximately $8.3 million of the increase relates to advanced payments in March 2008 for acquisitions effective April 1, 2008. The remaining increase is primarily due to the net effect of acquiring the Company’s current aircraft for $5.1 million offset by proceeds from selling the previous aircraft of $3.1 million.

Financing cash outflows decreased by $1.3 million during the three months ended March 31, 2008, primarily related to the financing arrangements on the purchase of the Company’s aircraft discussed above. In February 2008 we entered into a new loan agreement with Capital One for $5.1 million and paid off our December 31, 2007 outstanding loan with a balance of $2.9 million.

Days sales outstanding, or DSO, at March 31, 2008, was 74 days compared to 79 days at March 31, 2007. When adjusted for acquisitions and unbilled accounts receivables, DSO at March 31, 2008 was 56 days. The adjustment takes into account $16.4 million of unbilled receivables that the Company is delayed in billing due to the lag time in receiving the change of ownership after acquisitions. As of April 1, 2008, the Company has received the change of ownership approvals on $7.8 million of the $16.4 million in unbilled receivables. For the comparable period in 2007, adjusted DSO was 68 days, taking into account $8.1 million in unbilled accounts receivable.

At March 31, 2008, we had working capital of $52.7 million compared to $61.0 million at December 31, 2007, a decrease of $8.3 million, or 13.6%. The decrease in working capital relates to an increase in current liabilities of $5.5 million, primarily in accounts payable, accrued liabilities and accrued salaries, wages and benefits at March 31, 2008 compared to December 31, 2007. Patient accounts receivable also decreased by $2.0 million as of March 31, 2008 compared to December 31, 2007.

Indebtedness

Our total long-term indebtedness was $5.5 million at March 31, 2008 and $3.4 million at December 31, 2007, including the current portions of $632,000 and $521,000, respectively.

On February 20, 2008, the Company terminated its credit facility agreement with C.F. Blackburn, LLC successor by assignment to Residential Funding Company, LLC, f/k/a Residential Funding Corporation (“Former Credit Facility”) and entered into a new credit facility agreement with Capital One, National Association (“New Credit Facility”). Under the terms of the Former Credit Facility, which was in effect at December 31, 2007, the Company could be advanced funds up to a defined limit of eligible accounts receivables not to exceed the borrowing limit. No amounts were outstanding under this facility at December 31, 2007. Interest accrued on any outstanding amounts at a varying rate and was based on the Wells Fargo Bank, N.A. prime rate plus 1.5 percent (9.02 percent at December 31, 2007). The annual facility fee was 0.5 percent of the total availability. The Former Credit Facility was due to expire on April 15, 2010.

On February 20, 2008, the Company entered into the New Credit Facility, which was amended on March 6, 2008 to include an additional lender, First Tennessee Bank, N.A., to increase the line of credit from $25 million to $37.5 million and to amend the Eurodollar Margin for each Eurodollar Loan (as those terms are defined in the New Credit Facility) issued under the New Credit Facility. The New Credit Facility is unsecured, has a term of two years and a letter of credit sublimit of $2.5 million. The Company has an option to increase the line of credit to a total maximum aggregate principal amount of $50.0 million. The annual facility fee is 0.125 percent of the total availability.

The interest rate for borrowings under the New Credit Agreement is a function of the prime rate (Base Rate) or the Eurodollar rate (Eurodollar), as elected by the Company, plus the applicable margin as set forth below:


	Eurodollar			Base Rate
Leverage Ratio	Margin			Margin
<1.00:1.00		1.75	%		(0.25	)%
³ 1.00:1.00<1.50:1.00		2.00	%		0	%
³ 1.50:1.00<2.00:1.00		2.25	%		0	%
³ 2.00:1.00		2.50	%		0	%

Our New Credit Facility contains customary affirmative, negative and financial covenants. For example, we are restricted in incurring additional debt, disposing of assets, making investments, allowing fundamental changes to our business or organization, and making certain payments in respect of stock or other ownership interests, such as dividends and stock repurchases. Under the New Credit Facility we are also required to meet certain financial covenants with respect to fixed charge coverage, leverage, working capital and liabilities to tangible net worth ratios. At March 31, 2008 and December 31, 2007, the Company was in compliance with all covenants.

Our New Credit Facility also contains customary events of default. These include bankruptcy and other insolvency events, cross-defaults to other debt agreements, a change in control involving us or any subsidiary guarantor, and the failure to comply with certain covenants.

On February 6, 2008, the Company entered into a Loan Agreement with Capital One, National Association for a term note in the amount of $5.1 million for the purchase of a 1999 Cessna 560 aircraft. The term note is payable in 84 monthly installments of principal plus interest commencing on March 6, 2008 and ending February 6, 2015. The term note bears interest at the LIBOR Rate (adjusted monthly) plus the Applicable Margin of 1.9 percent.

Contingencies

For a discussion of contingencies, see Item 1, “Notes to Consolidated Financial Statements — Note 7 — Commitments and Contingencies” of this Form 10-Q.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Policies

For a discussion of critical accounting policies, see Item 1, “Notes to Consolidated Financial Statements — Note 2 — Significant Accounting Policies” of this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2008, we had cash of $1.1 million. Cash in excess of requirements is deposited in highly liquid money market instruments with maturities of less than 90 days. Because of the short maturities of these instruments, a sudden change in market interest rates would not be expected to have a material impact on the fair value of the portfolio. We would not expect our operating results or cash flows to be materially affected by the effect of a sudden change in market interest rates on our portfolio. At times, cash in banks is in excess of the FDIC insurance limit. The Company has not experienced any loss as a result of those deposits and does not expect any in the future.

Our exposure to market risk relates to changes in interest rates for borrowings under the New Credit Facility we entered into in February 2008. The New Credit Facility is a revolving credit facility and as such the Company borrows, repays and reborrows amounts as needed, changing the average daily balance outstanding under the facility. Since the average daily amounts outstanding under the New Credit Facility were not significant during the first quarter, a hypothetical 100 basis point adverse move (increase) in interest rates would have only increased interest expense $2,000 for the three months ended March 31, 2008.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the Company’s reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Such information is also accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management of the Company, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. As reported in the Company’s Form 10-K for the year ended December 31, 2007, management identified a material weakness in the Company’s internal control over financial reporting related to the process of estimating the allowance for uncollectible accounts. The Company’s process for determining the allowance for uncollectible accounts focused primarily on evaluating the appropriate percentage of gross revenues to record during a particular period. However, as of December 31, 2007, the Company did not have a process or controls in place that enabled management to appropriately evaluate, document and review the adequacy of the allowance for uncollectible accounts as of a particular period end. As a result, the Company recorded adjustments to increase the allowance for doubtful accounts by $3.9 million in the fourth quarter of 2007.

Because of this material weakness, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2007. During the first quarter of 2008, management implemented two primary measures to address the material weakness. First, the Company enhanced the controls and processes for calculating the allowance for uncollectible accounts. The enhancements include estimating and documenting the collectability of receivables at the end of a period based on the aging categories and timely review of the documentation by senior management and our outside consultants, Simione Consultants (“Simione”). Second, the Company engaged outside consultants, Simione, to oversee the Company’s billing and collection efforts with regards to commercial, managed care and non Private Fee-For-Service Medicare Advantage plan payors beginning in February 2008. Simione’s oversight has improved collection efforts and provided an additional evaluation of the collectability of the accounts.

Although the Company’s remediation efforts with respect to the above referenced material weakness are substantially completed, management will not be able to affirmatively conclude that the internal controls over financial reporting implemented to remediate the material weakness are operating effectively until such controls are effectively operational for a period of time and are successfully tested. As of March 31, 2008, the Company’s chief executive officer and chief financial officer concluded that because additional testing is required to determine if the material weakness described in the Company’s annual report on Form 10-K for the year ended December 31, 2007 has been fully remedied, the Company did not maintain effective internal control over financial reporting as of the end of the period covered by this report.

Changes in Internal Controls

Except for the controls implemented to address the material weakness identified in the Company’s report on Form 10-K for the year ended December 31, 2007, there have been no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) that occurred during the three months ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We are involved in litigation and proceedings in the ordinary course of business. We do not believe that the outcome of any of the matters in which we are currently involved, individually or in the aggregate, will have a material adverse effect upon our business, financial condition or results of operations.

ITEM 1A. RISK FACTORS.

There have been no material changes from the Risk Factors we previously disclosed in our Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission on March 17, 2008.

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

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

None

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

	3.1		Certificate of Incorporation of LHC Group, Inc. (previously filed as an exhibit to the Form S-1/A (File No. 333-120792) on February 14, 2005).

	3.2		Bylaws of LHC Group, Inc. as amended on December 31, 2007.

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

	4.2		Reference is made to Exhibits 3.1 and 3.2 (previously filed as an exhibit to the Form S-1/A (File No. 333-120792) on February 14, 2005 and May 9, 2005, respectively).

	4.3		Form of Stockholder Protection Rights Agreement, between LHC Group, Inc. and Computershare Trust Company, N.A., as Rights Agent (previously filed as Exhibit 4.1 to the Form 8-K on March 11, 2008).

	10.1		Employment Agreement between LHC Group, Inc. and Keith G. Myers dated January 1, 2008 (previously filed as Exhibit 10.1 to the Form 8-K on January 4, 2008).

	10.2		Employment Agreement between LHC Group, Inc. and John L. Indest dated January 1, 2008 (previously filed as Exhibit 10.2 to the Form 8-K on January 4, 2008).

	10.3		Employment Agreement by and between LHC Group, Inc. and Peter J. Roman, dated January 1, 2008 (previously filed as Exhibit 10.3 to the Form 8-K on January 4, 2008).

	10.4		Employment Agreement between LHC Group, Inc. and Daryl J. Doise dated January 1, 2008, to be effective June 1, 2008 (previously filed as Exhibit 10.4 to the Form 8-K on January 4, 2008).

	10.5		Loan Agreement by and between LHC Group, Inc., Palmetto Express, L.L.C. and Capital One, National Association dated February 6, 2008 (previously filed as Exhibit 10.1 to the Form 8-K on February 13, 2008).

	10.6		Credit Agreement by and between LHC Group, Inc. and Capital One, National Association dated February 20, 2008 (previously filed as Exhibit 10.1 to the Form 8-K on February 25, 2008).

	10.7		First Amendment to Credit Agreement by and between LHC Group, Inc., Capital One, National Association and First Tennessee Bank, N.A. dated March 6, 2008 (previously filed as Exhibit 10.1 to the Form 8-K on March 10, 2008).

	10.8		Second Amendment to Credit Agreement by and between LHC Group, Inc., Capital One, National Association and First Tennessee Bank, N.A. dated March 31, 2008 (previously filed as Exhibit 10.1 to the Form 8-K on April 2, 2008).

	31.1		Certification of Keith G. Myers, Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2		Certification of Peter J. Roman, Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32*		Certification of Chief Executive Officer and Chief Financial Officer of LHC Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		This exhibit is furnished to the SEC as an accompanying document and is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, and the document will not be deemed incorporated by reference into any filing under the Securities Act of 1933.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		LHC GROUP, INC.

Date May 9, 2008		/s/ Peter J. Roman
		Peter J. Roman
		Senior Vice President and Chief Financial Officer

Exhibit 3.2

AMENDMENT TO THE LHC GROUP, INC. BYLAWS

This Amendment to the LHC Group, Inc. Bylaws (the “Bylaws”) is made and entered into this 3rd day of December 2007, by LHC Group, Inc. (the “Company”).

Pursuant to a resolution of the Board of Directors of the Company, in accordance with Article VIII of the Bylaws, the Bylaws are hereby amended as follows:

1.		By deleting Section 5.1(A) in its entirety and replacing it with the following:

		“The interest of each stockholder of the Corporation shall be evidenced by certificated or uncertificated shares, as provided under the General Corporation Law of the State of Delaware, and shall be entered in the books of the Corporation and registered as they are issued. Each stockholder, upon written request to the transfer agent or registrar of the Corporation, shall be entitled to a certificate of the capital stock of the Corporation. Certificates representing shares of stock shall be in such form as the appropriate officers of the Corporation may from time to time prescribe. Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation. In the case of certificated shares of stock, transfers of stock shall be made by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. In the case of uncertificated shares of stock, transfers of stock shall be made upon the receipt of proper transfer instructions from the registered owner of uncertificated shares or by such person’s attorney lawfully constituted in writing, and upon compliance with appropriate procedures for transferring the shares in uncertificated form; such uncertificated shares shall be cancelled, issuance of new equivalent uncertificated shares or certificated shares shall be made to the shareholder entitled thereto and the transaction shall be recorded upon the books of the Corporation. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to who transferred.”

2.		By deleting Section 5.1(B) in its entirety and replacing it with the following:

		“The shares of stock represented by certificates shall be signed, countersigned and registered in such manner as the Board of Directors may by resolution prescribe, which resolution may permit all or any of the signatures on such certificates, if any, to be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.”

3.		By adding a new Section 5.1(C) to read as follows:

		“Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice that shall set forth the information required to be set forth or stated on certificates pursuant to the General Corporation Law of the State of Delaware or, unless otherwise provided by the General Corporation Law of the State of Delaware, a statement that the Corporation will furnish,

		without charge to each stockholder who so requests the powers, designations, preferences, and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.”

4.		Except as specifically set forth herein, the Bylaws shall remain in full force and effect as prior to this amendment.

BYLAWS OF

LHC GROUP, INC.

A DELAWARE CORPORATION

TABLE OF CONTENTS


	Page
ARTICLE I OFFICE AND RECORDS		1
Section 1.1 Delaware Office		1
Section 1.2 Other Offices		1
Section 1.3 Books and Records		1

ARTICLE II STOCKHOLDERS		1
Section 2.1 Annual Meeting		1
Section 2.2 Special Meeting		1
Section 2.3 Place of Meeting		1
Section 2.4 Notice of Meeting		1
Section 2.5 Quorum and Adjournment		2
Section 2.6 Proxies		2
Section 2.7 Notice of Stockholder Business and Nominations		2
Section 2.8 Procedure for Election of Directors		5
Section 2.9 Inspectors of Elections		5
Section 2.10 Conduct of Meetings		5
Section 2.11 Consent of Stockholders in Lieu of Meeting		6

ARTICLE III BOARD OF DIRECTORS		6
Section 3.1 General Powers		6
Section 3.2 Number, Tenure and Qualifications		6
Section 3.3 Regular Meetings		6
Section 3.4 Special Meetings		6
Section 3.5 Action by Unanimous Consent of Directors		7
Section 3.6 Notice		7
Section 3.7 Conference Telephone Meetings		7
Section 3.8 Quorum		7
Section 3.9 Vacancies		7
Section 3.10 Committee		8
Section 3.11 Compensation of Directors		8

ARTICLE IV OFFICERS		8
Section 4.1 Elected Officers		8
Section 4.2 Election and Term of Office		9
Section 4.3 Chairman of the Board		9
Section 4.4 President and Chief Executive Officer		9
Section 4.5 Secretary		9
Section 4.6 Treasurer		9
Section 4.7 Removal		10
Section 4.8 Vacancies		10


	Page
ARTICLE V STOCK CERTIFICATES AND TRANSFERS		10
Section 5.1 Stock Certificates and Transfers		10

ARTICLE VI INDEMNIFICATION		10
Section 6.1 Right to Indemnification		10
Section 6.2 Right to Advancement of Expenses		11
Section 6.3 Right of Indemnitee to Bring Suit		11
Section 6.4 Non-Exclusivity of Rights		12
Section 6.5 Insurance		12

ARTICLE VII MISCELLANEOUS PROVISIONS		12
Section 7.1 Fiscal Year		12
Section 7.2 Dividends		12
Section 7.3 Seal		12
Section 7.4 Waiver of Notice		12
Section 7.5 Audits		12
Section 7.6 Resignations		13
Section 7.7 Contracts		13
Section 7.8 Proxies		13

ARTICLE VIII AMENDMENTS		13

ARTICLE I

OFFICES AND RECORDS

Section 1.1 Delaware Office . The registered office of the Corporation in the State of Delaware shall be located in the City of Wilmington, County of New Castle.

Section 1.2 Other Offices . The Corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may from time to time require.

Section 1.3 Books and Records . The books and records of the Corporation may be kept at the Corporation’s headquarters in Lafayette, Louisiana or at such other locations outside the State of Delaware as may from time to time be designated by the Board of Directors.

ARTICLE II

STOCKHOLDERS

Section 2.1 Annual Meeting . The annual meeting of the stockholders of the Corporation shall be held at such date, place and/or time as may be fixed by resolution of the Board of Directors.

Section 2.2 Special Meeting . Special meetings of stockholders of the Corporation may be called only by the Chairman of the Board or the President or by the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board. For purposes of these Bylaws, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships.

Section 2.3 Place of Meeting . The Board of Directors may designate the place of meeting for any meeting of the stockholders. If no designation is made by the Board of Directors, the place of meeting shall be the principal office of the Corporation. Notwithstanding the foregoing, the Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but shall be held solely by means of remote communication, subject to such guidelines and procedures as the Board of Directors may adopt, as permitted by applicable law.

Section 2.4 Notice of Meeting . Except as otherwise required by law, written, printed or electronic notice stating the place, day and hour of the meeting and the purposes for which the meeting is called shall be prepared and delivered by the Corporation not less than ten (10) days nor more than sixty (60) days before the date of the meeting, either personally, by mail, or in the case of stockholders who have consented to such delivery, by electronic transmission (as such term is defined in the Delaware General Corporation Law), to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the U.S. mail with postage thereon prepaid, addressed to the stockholder at his address as it appears on the stock transfer books of the Corporation. Notice given by electronic transmission shall be effective (A) if by facsimile, when faxed to a number where the

stockholder has consented to receive notice; (B) if by electronic mail, when mailed electronically to an electronic mail address at which the stockholder has consented to receive such notice; (C) if by posting on an electronic network together with a separate notice of such posting, upon the later to occur of (1) the posting or (2) the giving of separate notice of the posting; or (D) if by other form of electronic communication, when directed to the stockholder in the manner consented to by the stockholder. Meetings may be held without notice if all stockholders entitled to vote are present (except as otherwise provided by law), or if notice is waived by those not present. Any previously scheduled meeting of the stockholders may be postponed and (unless the Corporations’s Certificate of Incorporation (the “Certificate of Incorporation”) otherwise provides) any special meeting of the stockholders may be cancelled, by resolution of the Board of Directors upon public notice given prior to the time previously scheduled for such meeting of stockholders.

Section 2.5 Quorum and Adjournment . Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority of the voting power of the outstanding shares of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series voting separately as a class or series, the holders of a majority of the voting power of the shares of such class or series shall constitute a quorum for the transaction of such business for the purposes of taking action on such business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. At such adjourned meeting at which a quorum is present or represented, any business may be transacted which might have been transacted at the original meeting. The stockholders present at a duly called or convened meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. No notice of the time and place of adjourned meetings need be given provided such adjournment is for less than thirty (30) days and further provided that no new record date is fixed for the adjourned meeting.

Section 2.6 Proxies . At all meetings of stockholders, a stockholder may vote by proxy executed in writing by the stockholder or as may be permitted by law, or by his duly authorized attorney-in-fact. Such proxy must be filed with the Secretary of the Corporation or his representative, or otherwise delivered telephonically or electronically as set forth in the applicable proxy statement, at or before the time of the meeting.

Section 2.7 Notice of Stockholder Business and Nominations .

A. Nominations of persons for election to the Board of Directors and the proposal of business to be transacted by the stockholders may be made at an annual meeting of stockholders (1) pursuant to the Corporation’s notice with respect to such meeting, (2) by or at the direction of the Board of Directors or (3) by any stockholder of record of the Corporation who was a stockholder of record at the time of the giving of the notice provided for in the following paragraph, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 2.7.

B. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to paragraph (A)(3) of this Section 2.7, (1) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, (2) such business must be a proper matter for stockholder action under the Delaware General Corporation Law, (3) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice, as that term is defined in subclause (c)(iii) of this paragraph, such stockholder or beneficial owner must, in the case of a proposal, have delivered prior to the meeting a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered prior to the meeting a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial holder to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice and (4) if no Solicitation Notice relating thereto has been timely provided pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this section. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than sixty (60) or more than ninety (90) days prior to the first anniversary (the “Anniversary”) of the date on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting of stockholders (for purposes of the first annual meeting of stockholders of the Corporation held after its initial public offering pursuant to an effective registration statement under the Securities Act of 1933 (the “Registration Statement”), as amended, covering the offer and sale of Common Stock of the Corporation to the public, the Anniversary of such annual meeting shall be January 15 of the following year); provided, however, that if no proxy materials were mailed by the Corporation in connection with the preceding year’s annual meeting, or if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not later than the close of business on the later of (x) the 90th day prior to such annual meeting or (y) the 10th day following the day on which public announcement of the date of such meeting is first made. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and such person’s written consent to serve as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class and number of shares of the Corporation that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under

applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

C. Notwithstanding anything in the second sentence of paragraph (B) of this Section 2.7 to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least fifty-five (55) days prior to the Anniversary, a stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

D. Only persons nominated in accordance with the procedures set forth in this Section 2.7 shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.7. The chair of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposed business or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

E. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (1) by or at the direction of the Board of Directors or (2) by any stockholder of record of the Corporation who is a stockholder of record at the time of giving of notice provided for in this paragraph, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 2.7. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder’s notice required by paragraph (B) of this Section 2.7 shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.

F. For purposes of this Section 2.7, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

G. Notwithstanding the foregoing provisions of this Section 2.7, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to matters set forth in this Section 2.7. Nothing in this

Section 2.7 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

Section 2.8 Procedure for Election of Directors . Election of directors at all meetings of the stockholders at which directors are to be elected need not be by written ballot, and, except as otherwise set forth in the Certificate of Incorporation with respect to the right of the holders of any series of Preferred Stock or any other series or class of stock to elect additional directors under specified circumstances, a plurality of the votes cast thereat shall elect directors. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all matters other than the election of directors submitted to the stockholders at any meeting shall be decided by the affirmative vote of a majority of the voting power of the outstanding Voting Stock present in person or represented by proxy at the meeting and entitled to vote thereon.

Section 2.9 Inspectors of Elections:

The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at the meeting and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the Delaware General Corporation Law.

Section 2.10 Conduct of Meetings .

A. The President and Chief Executive Officer shall preside at all meetings of the stockholders. In the absence of the President and Chief Executive Officer, the Chairman of the Board shall preside at a meeting of the stockholders. In the absence of both the President and Chief Executive Officer and the Chairman of the Board, the Secretary shall preside at a meeting of the stockholders. In the anticipated absence of all officers designated to preside over the meetings of stockholders, the Board of Directors may designate an individual to preside over a meeting of the stockholders.

B. The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting.

C. The Board of Directors may, to the extent not prohibited by law, adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as,

in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may to the extent not prohibited by law include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof and (v) limitations on the time allotted to questions or comments by participants. Unless, and to the extent, determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.11 Consent of Stockholders in Lieu of Meeting . Following the date the Registration Statement is declared effective by the Securities and Exchange Commission, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

ARTICLE III

BOARD OF DIRECTORS

Section 3.1 General Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by the Certificate of Incorporation or by these Bylaws, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation.

Section 3.2 Number, Tenure and Qualifications . Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board, and each director elected shall hold office until his successor is elected and qualified. The directors, other than those who may be elected by the holders of any series of Preferred Stock under specified circumstances, shall be divided into three classes pursuant to the Certificate of Incorporation. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election.

Section 3.3 Regular Meetings . The Board of Directors may, by resolution, provide the time and place for the holding of regular meetings of the Board of Directors.

Section 3.4 Special Meetings . Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the Chief Executive Officer or a majority of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.

Section 3.5 Action By Unanimous Consent of Directors . The Board of Directors may take action without the necessity of a meeting by unanimous consent of directors. Such consent may be in writing or given by electronic transmission, as such term is defined in the Delaware General Corporation Law.

Section 3.6 Notice . Notice of any special meeting shall be given to each director at his business or residence in writing, or by telegram, facsimile transmission, telephone communication or electronic transmission (provided, with respect to electronic transmission, that the director has consented to receive the form of transmission at the address to which it is directed). If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least five (5) days before such meeting. If by telegram, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company at least twenty-four (24) hours before such meeting. If by facsimile transmission or other electronic transmission, such notice shall be transmitted at least twenty-four (24) hours before such meeting. If by telephone, the notice shall be given at least twelve (12) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these Bylaws as provided under Section 8.1 of Article VIII hereof. A meeting may be held at any time without notice if all the directors are present (except as otherwise provided by law) or if those not present waive notice of the meeting in writing, either before or after such meeting.

Section 3.7 Conference Telephone Meetings . Members of the Board of Directors, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

Section 3.8 Quorum . A whole number of directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3.9 Vacancies . Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall, unless otherwise provided by law or by resolution of the Board of Directors, be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office until their successor is elected and qualified. No decrease in the authorized number of directors shall shorten the term of any incumbent director.

Section 3.10 Committees .

A. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that no committee shall have power or authority in reference to the following matters: (1) approving, adopting or recommending to stockholders any action or matter required by law to be submitted to stockholders for approval or (2) adopting, amending or repealing any bylaw.

B. Unless the Board of Directors otherwise provides, each committee designated by the Board of Directors may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to these Bylaws.

Section 3.11 Removal . Subject to the rights of the holders of any series of Preferred Stock then outstanding, any directors, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

Section 3.12 Compensation of Directors . Directors may receive such compensation, if any, for their services, and such reimbursement for expenses, as may be fixed or determined by resolution of the Board of Directors.

ARTICLE IV

OFFICERS

Section 4.1 Elected Officers . The elected officers of the Corporation shall be a Chairman of the Board, a President, a Secretary, a Treasurer, and such other officers as the Board of Directors from time to time may deem proper. The Chairman of the Board shall be chosen from the directors. All officers chosen by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof.

Section 4.2 Election and Term of Office . The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Subject to Section 4.7 of these Bylaws, each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign.

Section 4.3 Chairman of the Board . The Chairman of the Board shall preside at all meetings of the Board and perform such other duties and have such other powers as the Board of Directors shall designate from time to time.

Section 4.4 President and Chief Executive Officer . The President and Chief Executive Officer shall be the general manager of the Corporation, subject to the control of the Board of Directors, and as such shall, subject to Section 2.10 (A) hereof, preside at all meetings of shareholders, shall have general supervision of the affairs of the Corporation, shall sign or countersign or authorize another officer to sign all certificates, contracts, and other instruments of the Corporation as authorized by the Board of Directors, shall make reports to the Board of Directors and shareholders, and shall perform all such other duties as are incident to such office or are properly required by the Board of Directors. If the Board of Directors creates the office of Chief Executive Officer as a separate office from President, the President shall be the chief operating officer of the corporation and shall be subject to the general supervision, direction, and control of the Chief Executive Officer unless the Board of Directors provides otherwise.

Section 4.5 Secretary . The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors and all other notices required by law or by these Bylaws, and in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman of the Board or the President, or by the Board of Directors, upon whose request the meeting is called as provided in these Bylaws. He shall record all the proceedings of the meetings of the Board of Directors, any committees thereof and the stockholders of the Corporation in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the Board of Directors, the Chairman of the Board or the President. He shall have custody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors, the Chairman of the Board or the President, and attest to the same.

Section 4.6 Treasurer . The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate receipts and disbursements in books belonging to the Corporation. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors the Chairman of the Board, or the President, taking proper vouchers for such disbursements. The Treasurer shall render to the Chairman of the Board, the President and the Board of Directors, whenever requested, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond for the faithful discharge of his duties in such amount and with such surety as the Board of Directors shall prescribe. The Treasurer shall also perform such other

duties as may be assigned to him by the Board of Directors, the President or Chief Executive Officer.

Section 4.7 Removal . Any officer elected by the Board of Directors may be removed by the Board of Directors whenever, in their judgment, the best interests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of his successor, his death, his resignation or his removal, whichever event shall first occur, except as otherwise provided in an employment contract or an employee plan.

Section 4.8 Vacancies . A newly created office and a vacancy in any office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors.

ARTICLE V

STOCK CERTIFICATES AND TRANSFERS

Section 5.1 Stock Certificates and Transfers .

A. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the appropriate officers of the Corporation may from time to time prescribe. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, and with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require.

B. The certificates of stock shall be signed, countersigned and registered in such manner as the Board of Directors may by resolution prescribe, which resolution may permit all or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an

“indemnitee”), where the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith and such indemnification shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee’s heirs, executors and administrators; provided , however , that, except as provided in Section 6.3 hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.

Section 6.2 Right to Advancement of Expenses . The right to indemnification conferred in Section 6.1 shall include the right to be paid by the Corporation the expenses incurred in defending any proceeding for which such right to indemnification is applicable in advance of its final disposition (hereinafter an “advancement of expenses”); provided , however , that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a “final adjudication”) that such indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise.

Section 6.3 Right of Indemnitee to Bring Suit . The rights to indemnification and to the advancement of expenses conferred in Section 6.1 and Section 6.2, respectively, shall be contract rights. If a claim under Section 6.1 or Section 6.2 is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (A) any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (B) in any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law,

nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Section or otherwise shall be on the Corporation.

Section 6.4 Non-Exclusivity of Rights . The rights to indemnification and to the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under the Certificate of Incorporation, these Bylaws, or any statute, agreement, vote of stockholders or disinterested directors or otherwise.

Section 6.5 Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1 Fiscal Year . The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December of each year.

Section 7.2 Dividends . The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation.

Section 7.3 Seal . The corporate seal shall have inscribed the name of the Corporation thereon and shall be in such form as may be approved from time to time by the Board of Directors.

Section 7.4 Waiver of Notice . Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the Delaware General Corporation Law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders of the Board of Directors need be specified in any waiver of notice of such meeting.

Section 7.5 Audits . The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant

selected by the Board of Directors, and it shall be the duty of the Board of Directors to cause such audit to be made annually.

Section 7.6 Resignations . Any director or any officer, whether elected or appointed, may resign at any time by serving written notice of such resignation on the Chairman of the Board, the Chief Executive Officer or the Secretary, or by submitting such resignation by electronic transmission (as such term is defined in the Delaware General Corporation Law), and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the Chief Executive Officer, or the Secretary or at such later date as is stated therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

Section 7.7 Contracts . Except as otherwise required by law, the Certificate of Incorporation or these Bylaws, any contracts or other instruments may be executed and delivered in the name and on the behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, the Chief Executive Officer, the President or any Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed for or on behalf of the Corporation. Subject to any restrictions imposed by the Board of Directors or the Chairman of the Board, the Chief Executive Officer, the President or any Vice President of the Corporation may delegate contractual powers to others under his jurisdiction, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

Section 7.8 Proxies . Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or any Vice President may from time to time appoint any attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holder of stock or other securities in any other corporation or other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock and other securities of such other corporation or other entity, or to consent in writing, in the name of the Corporation as such holder, to any action by such other corporation or other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such written proxies or other instruments as he may deem necessary or proper in the premises.

ARTICLE VIII

AMENDMENTS

Section 8.1 Amendments . Subject to the provisions of the Certificate of Incorporation, these Bylaws may be adopted, amended or repealed at any meeting of the Board of Directors by a resolution adopted by a majority of the Whole Board, provided notice of the proposed change was given in the notice of the meeting in a notice given no less than twenty-

four (24) hours prior to the meeting. Subject to the provisions of the Certificate of Incorporation, the stockholders shall also have power to adopt, amend or repeal these Bylaws, provided that notice of the proposed change was given in the notice of the meeting and provided further that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of these Bylaws.

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Keith G. Myers, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of LHC Group, Inc.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008


		/s/ Keith G. Myers
		Keith G. Myers
		Chief Executive Officer

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter J. Roman, certify that:

	1.		I have reviewed this quarterly report on Form 10-Q of LHC Group, Inc.;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2008


		/s/ Peter J. Roman
		Peter J. Roman
		Senior Vice President and Chief Financial Officer

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of LHC Group, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Keith G. Myers, Chief Executive Officer of the Company, and Peter J. Roman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

	1.		The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	2.		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


		/s/ Keith G. Myers
		Keith G. Myers
		Chief Executive Officer
		May 9, 2008

		/s/ Peter J. Roman
		Peter J. Roman
		Senior Vice President and Chief Financial Officer
		May 9, 2008

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