NEW YORK (AP) -- Shares of Amedisys extended their decline Wednesday after the home health company said it will pay $150 million to settle a federal investigation and reported weak third-quarter results.
THE SPARK: On Tuesday, Amedisys said it will pay $150 million to resolve a federal investigation into reimbursement and billing claims the company submitted to Medicare. The investigation in to Amedisys and several of its competitors started in 2010.
The company also reported a loss in the third quarter as its revenue slumped, and it lowered its guidance for the year.
THE BIG PICTURE: In 2010, the U.S. Department of Justice asked Amedisys Inc. to turn over documents under a civil investigative demand linked to the federal False Claims Act. Amedisys said the settlement does not represent an admission of wrongdoing.
The company said it lost a penny per share if special items like settlement costs are excluded from its third-quarter results. Its revenue fell 17 percent to $301.6 million.
According to FactSet, analysts expected net income of 12 cents per share and $311 million in revenue.
THE ANALYSIS: Deutsche Bank analyst Darren Lehrich said Amedisys now has limited financial flexibility because of the cost of the settlement and its low earnings. He added that the company's legal troubles may not be over.
"We do not think Amedisys has been granted a full release from investigation exposure given the way (the settlement) was structured," Lehrich wrote. He downgraded Amedisys shares to "Sell" from "Hold" and cut his price target to $8 per share from $11.
SHARE ACTION: Amedisys stock lost $1.25, or 9 percent, to $13.07 in afternoon trading. The shares fell 17.5 percent Tuesday.