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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    number: 0-8082
 LHC GROUP, INC.
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

71-0918189(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)   420 West
    Pinhook Rd, Suite A
    Lafayette, Louisiana 70503 (Address
    of principal executive offices)
  (337) 233-1307
 (Registrants telephone number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Exchange Act:
  Common Stock, par value $.001
    per share

NASDAQ Global Select
    Market(Title of each class)

(Name of each exchange on which registered)   Securities registered pursuant to Section 12(g) of the
    Exchange Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
    Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting
    Company oDo not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K. Form 10-K.




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##### 





LHC
    GROUP, INC.
  TABLE OF
    CONTENTS
   
 PagePART ICautionary Statement Regarding Forward-Looking
    Statements


3Item 1.


Business


4Item 1A.


Risk Factors


29Item 1B.


Unresolved Staff Comments


41Item 2.


Properties


41Item 3.


Legal Proceedings


42Item 4.


Submission of Matters to a Vote of Security
    Holders


42PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


42Item 6.


Selected Financial Data


43Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operation


44Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


65Item 8.


Financial Statements and Supplementary Data


65Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


65Item 9A.


Controls and Procedures


66Item 9B.


Other Information


68PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


68Item 11.


Executive Compensation


68Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


68Item 13.


Certain Relationships and Related Transactions
    and Director Independence


69Item 14.


Principal Accounting Fees and Services


69PART IVItem 15.


Exhibits and Financial Statement Schedules


70Signatures


71Exhibit Index


73EX-21.1EX-23.1EX-23.2EX-31.1EX-31.2EX-32.1   2




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PART I CAUTIONARY
    STATEMENT REGARDING FORWARD-LOOKING STATEMENTS  Form 10-K forward-looking
  
    our expectations regarding financial condition or results of
    operations for periods after December 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 impact of the Presidents budget proposal;
    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;
    the effect of any changes in market rates on our operating and
    cash flows;
    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 propriety 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 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 Securities and Exchange Commission laws and
    regulations and Sarbanes-Oxley requirements;
    the impact of federal and state government regulation on our
    business; and
    the impact of changes in or future interpretations of fraud,
    anti-kickback or other laws. 3




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Form 10-K Form 10-K,
        Item 1.
    Business.  Overview
       4




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12 facility-based
    Year Ended December 31,2008


2007


2006Home-Based Services

$
326,041


$
244,107


$
164,701Facility-Based Services

$
57,255


$
53,924


$
53,834Consolidated Net Service Revenue

$
383,296


$
298,031


$
218,535   (337) 233-1307
  Industry
    and Market Opportunity
      
    a U.S. population that is getting older and living longer;
    patient preference for less restrictive care settings;
    incentives for general acute care hospitals to discharge
    patients into less intensive treatment settings as quickly as
    medically appropriate;
    higher incidences of chronic conditions and disease; and
    a continued movement of institutionalized people into home- and
    community-based care.   5




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Business
    Strategy
    Drive internal growth in existing markets.
  Achieve margin improvement through the active management of
    costs.
  Expand into new markets.
 6




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Pursue strategic acquisitions.
  Develop joint ventures.
  Services
    Home-Based
    Services
  Home Nursing.
    24-hour and/or
 7




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Hospice.
  Facility-Based
    Services
  Long-term Acute Care Hospitals.
  Rehabilitation Services. speech-language
  Operations
  10-K.
  Home-Based
    Services
   8




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on-site
  Facility-Based
    Services
  Long-Term Acute Care Hospitals.
    on-site
  Rehabilitation Services. on-site
  on-site
 9




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Joint
    Ventures
    Type of ServicesHome Nursing Agencies


91Hospice


10LTACH


6107     Equity
    Joint Ventures
       10




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License
    Leasing Agreements
    Management
    Services Agreements
      Competition
     11




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Compliance
    and Quality Control
    
    internal audits;   
    external audits;
    Joint Commission;
    state and regulatory surveys;
    home health compare; and
    patient perception of care.    
    the appointment of a compliance officer and committee;
    adoption of codes of business conduct and ethics;
    employee education and training;
    monitoring of an internal system, including a toll-free hotline,
    for reporting concerns on a confidential, anonymous basis;
    ongoing internal compliance auditing and monitoring programs;
    means for enforcing the compliance programs
    policies; and
    a system to respond to and correct detected problems.    follow-up
    
    ongoing education of staff and quarterly continuous quality
    improvement meetings at each of our agencies and facilities and
    at our home office;
    quarterly comprehensive audits of patient charts performed by
    each of our agencies and facilities;
    at least annually, a comprehensive audit of patient charts
    performed on each of our agencies and facilities by our home
    office staff;
    review of Home Health Compare scores;
    assessment of patients perception of care; and
    assessment of infection control practices/risk events. 12




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follow-up
      Technology
    and Intellectual Property
           13




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Reimbursement
  Medicare
    Home Nursing.
  60-day
   14




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60-day
  60-day
  60-day 60-day
  60-day
      Hospice.
 15




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90-day 60-day
    
    Routine Care.  This level of care includes care
    that is not classified under any of the other levels of care,
    such as the work of social workers or home health aides.
    General Inpatient Care.  This level of care is
    available for pain control or acute or chronic symptom
    management that cannot be managed in a setting other than an
    inpatient Medicare certified facility, such as a hospital,
    skilled nursing facility or hospice inpatient facility.
    Continuous Home Care.  This level of care is
    provided when a patient is experiencing a medical crisis and
    requires nursing services to achieve palliation and symptom
    control. For services to qualify for this level of care, the
    agency must provide a minimum of eight hours of care within a
    24-hour
    period.
    Respite Care.  This level of care is provided
    on a short-term, inpatient basis to give temporary relief to the
    person who regularly provides care to relieve the patient.      80-20 12-month program-by-program
      
    Inpatient Cap.  This cap limits the number of
    days of inpatient care (both respite and general) under a
    provider number to 20% of the total number of days of hospice
    care (both inpatient and in-home) furnished to all patients
    served. The daily payment rate for any inpatient days of service
    in excess of 16




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the cap amount is calculated at the routine home care rate, with
    excess amounts due back to Medicare; and  
    Overall Payment Cap.  This cap is calculated by
    the Medicare fiscal intermediary at the end of each hospice cap
    period to determine the maximum allowable payments per provider
    number. On a monthly and quarterly basis, we estimate our
    potential cap exposure using information available for both
    inpatient day limits as well as per beneficiary cap amounts. The
    total cap amount for each provider is calculated by multiplying
    the number of beneficiaries electing hospice care from
    September 28, 2007 to September 27, 2008 by a
    statutory amount that is indexed for inflation. The per
    beneficiary cap amount was $22,386 for the twelve-month period
    ended October 31, 2008 and $21,410 for the twelve month
    period ended October 31, 2007. There will be a cap
    liability if actual payments per the PS&R for the period of
    November 1, 2007 to October 31, 2008 exceed the
    beneficiary cap amount.  Long-term Acute Care Hospitals.
      May 2007 Final Rule.
   17




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August 2007 Final Rule.
 18




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Medicare, Medicaid and SCHIP Extension Act of
    2007.
      May 6, 2008 Interim Final Rule.
  May 9, 2008 Final Rule. 15-month
  May 22, 2008 Interim Final Rule.
 19




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Outpatient Rehabilitation Services. speech-language
      Inpatient Rehabilitation Facilities.
 20




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August 2008 Final Rule.
  Medicaid
    Non-Governmental
    Payors
      Government
    Regulations
  General
   21




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
    Medicare and Medicaid participation and reimbursement;
    the federal Anti-Kickback Statute and similar state laws;
    the federal Stark Law and similar state laws;
    false and other improper claims;
    the Health Insurance Portability and Accountability Act of 1996
    (HIPAA);
    civil monetary penalties;
    environmental health and safety laws;
    licensing; and
    certificates of need and permits of approval.    Office
    of Inspector General (OIG)
    Medicare
    Participation
     22




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Anti-Kickback
    Statute
    case-by-case
      Fraud and Abuse in Nursing Home
    Arrangements with Hospices.
   23




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Stark
    Law
               24




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False
    and Improper Claims
  and/or
  Anti-fraud
    Provisions of the HIPAA
     25




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Administrative
    Simplification Provisions of HIPAA
      
    obtain patient authorization prior to certain uses or
    disclosures of protected health information;
    provide notice of privacy practices to patients and obtain an
    acknowledgement that the patient has received the notice;
    respond to requests from patients for access to or to obtain a
    copy of their protected health information;
    respond to patient requests for amendments of their protected
    health information;
    provide an accounting to patients of certain disclosure of their
    protected health information;
    enter into agreements with the companies business
    associates through which the business associates agree to use
    and disclose protected health information only as permitted by
    the agreement and the requirements of the privacy regulations;
    train the companies workforce in privacy compliance;
    designate a privacy officer;
    use and disclose only the minimum necessary information to
    accomplish a particular purpose; and
    establish policies and procedures with respect to uses and
    disclosures of protected health information.      
    conduct a thorough assessment of the potential risks and
    vulnerabilities to confidentiality, integrity and availability
    of electronic protected health information and to reduce the
    risks and vulnerabilities to a reasonable and appropriate level
    as required by the security regulations; 26




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
    designate a security officer;
    establish policies relating to access by the companies
    workforce to electronic protected health information;
    enter into agreements with the companies business
    associates whereby business associates agree to establish
    administrative, physical and technical safeguards for electronic
    protected health information received from or on behalf of the
    companies;
    create a disaster and contingency plan to ensure the
    availability of electronic protected health information;
    train the companies workforce in security compliance;
    establish physical controls for electronic devices and media
    containing or transmitting electronic protected health
    information;
    establish policies and procedures regarding the use of
    workstations with access to electronic protected health
    information; and
    establish technical controls for the information systems
    maintaining or transmitting electronic protected health
    information.    Civil
    Monetary Penalties
        
    for physician services that the person or entity knew or should
    have known were rendered by a person who was unlicensed, or
    misrepresented either (1) his or her qualifications in
    obtaining his or her license or (2) his or her
    certification in a medical specialty;
    for services furnished by a person who was, at the time the
    claim was made, excluded from the program to which the claim was
    made; or
    that show a pattern of medically unnecessary items or services.    Environmental
    Health and Safety Laws
   27




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Licensing
        Certificate
    of Need and Permit of Approval Laws
     28




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Employees
    Insurance
    Available
    Information
  Form 10-K, Form 10-Q, Form 8-K,
  Item 1A.
    Risk
    Factors.  The risks described below should be carefully considered
    before investing in the Company. The risks and uncertainties
    described below are notthe only ones we face. Other
    risks and uncertainties that we have not predicted or assessed
    may also adversely affect us.
  If any of the following risks occurs, our earnings, financial
    condition or business could be materially harmed and the trading
    price of our common stock could decline, resulting in the loss
    of all or part of investments.
  Risk
    Factors Related to Reimbursement and Government
    Regulation
  We
    derive more than 80% of our net service revenue from Medicare.
    If there are changes in Medicare rates or methods governing
    Medicare payments for our services, or if we are unable to
    control our costs, our results of operations and cash flows
    could decline materially.
   29




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
    administrative or legislative changes to the base rates under
    the applicable prospective payment systems;
    the reduction or elimination of annual rate increases;
    the imposition or increase by Medicare of mechanisms, such as
    co-payments, shifting more responsibility for a portion of
    payment to beneficiaries;
    adjustments to the relative components of the wage index used in
    determining reimbursement rates;
    changes to case mix or therapy thresholds;
    changes in the case mix of our patients;
    bundling of post-acute healthcare payments;
    the reclassification of home health resource groups or long-term
    care diagnosis-related groups; or
    further limitations on referrals to long-term acute care
    hospitals from host hospitals.    We are
    subject to extensive government regulation. Any changes in the
    laws and regulations governing our business, or the
    interpretation and enforcement of those laws or regulations,
    could cause us to modify our operations and could negatively
    impact our operating results and cash flows.
    
    licensure and certificates of need and permits of approval;
    coding and billing for services;
    conduct of operations, including financial relationships among
    health care providers, Medicare fraud and abuse and physician
    self-referral;
    maintenance and protection of records, including HIPAA;
    environmental protection, health and safety;
    certification of additional agencies or facilities by the
    Medicare program; and
    payment for services.   30




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Current
    economic conditions and continued decline in spending by the
    Federal and State governments could harm our results of
    operations and cash flows.
    The
    Presidents proposed budget for Federal Fiscal Year 2010
    and beyond may impair our earnings, cash flow and financial
    condition.
    If any
    of our agencies or facilities fail to comply with the conditions
    of participation in the Medicare program, that agency or
    facility could be terminated from Medicare, which could
    adversely affect our net service revenue and net
    income.
   31




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The
    inability of long-term acute care hospitals to maintain their
    certification as long-term acute care hospital could have an
    adverse affect on our results of operations and cash
    flows.
    CMS
    has adopted regulations that could materially and adversely
    affect the results of operations and cash flows of our long-term
    acute care hospitals.
         32




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Legislative
    initiatives could negatively impact our operations and financial
    results.
    If the
    structures or operations of our joint ventures are found to
    violate the law, it could have a material adverse impact on our
    financial condition and consolidated results of
    operations.
      
    the investment interest offered is not based upon actual or
    expected referrals by the hospital or physician;
    our joint venture partners are not required to make or influence
    referrals to the joint venture; 33




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
    at the time the joint venture is formed, each hospital or
    physician joint venture partner is required to make an actual
    capital contribution to the joint venture equal to the fair
    market value of his or her investment interest and is at risk to
    lose its investment;
    neither we nor the joint venture entity lends funds to or
    guarantees a loan to acquire interests in the joint venture for
    a hospital or physician; and
    distributions to our joint venture partners are based solely on
    their equity interests and are not affected by referrals from
    the hospital or physician.        The
    application of state certificate of need and permit of approval
    regulations and compliance with federal and state licensing
    requirements could substantially limit our ability to operate
    and grow our business.
     34




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Risk
    Factors Related to Capital and Liquidity
  The
    adverse changes and uncertainty in the capital and credit
    markets may negatively affect our ability to access financing.
    Without such financing we may be unable to achieve our
    objectives for strategic acquisitions and internal
    growth.
        The
    agreement governing our credit facility contains, and future
    debt agreements may contain, various covenants that limit our
    discretion in the operation of our business.
    
    incur more debt;
    redeem or repurchase stock, pay dividends or make other
    distributions;
    make certain investments;
    create liens;
    enter into transactions with affiliates;
    make unapproved acquisitions;
    merge or consolidate;
    transfer or sell assets; and
    make fundamental changes in our corporate existence and
    principal business.   35




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Our
    net service revenue is concentrated in a small number of states,
    which makes us sensitive to regulatory and economic changes in
    those states.
    Hurricanes
    or other adverse weather events could negatively affect the
    local economies in which we operate or disrupt our operations,
    which could have an adverse effect on our business or results of
    operations.
    Delays
    in reimbursement may cause liquidity problems.
    Risk
    Factors Related to Operations and our Growth Strategy
  We
    could be required to record a material non-cash charge to income
    if our recorded goodwill or intangible assets are
    impaired.
   36




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Our
    allowance for contractual adjustments and doubtful accounts may
    not be sufficient to cover uncollectible amounts.
    
    adverse changes in our estimates as a result of changes in payor
    mix and related collection rates;
    inability to collect funds due to missed filing deadlines or
    inability to prove that timely filings were made;
    adverse changes in the economy generally exceeding our
    expectations; or
    unanticipated changes in reimbursement from Medicare, Medicaid
    and private insurance companies.    Shortages
    in qualified nurses and other health care professionals could
    increase our operating costs significantly or constrain our
    ability to grow.
    If we
    are required to either repurchase or sell a substantial portion
    of the equity interests in our joint ventures, our capital
    resources and financial condition could be materially adversely
    impacted.
    If we
    are unable to maintain relationships with existing referral
    sources or establish new referral sources, our growth and net
    income could be adversely affected.
   37




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We
    face competition, including from competitors with greater
    resources, which may make it difficult for us to compete
    effectively as a provider of post-acute health care
    services.
    Future
    acquisitions may be unsuccessful and could expose us to
    unforeseen liabilities. Further, our acquisition and internal
    development activity may impose strains on our existing
    resources.
        We may
    face increased competition for attractive acquisition and joint
    venture candidates.
   38




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If we
    are subject to substantial malpractice or other similar claims,
    it could materially adversely impact our income from operations
    and cash flows.
    If we
    are unable to protect the proprietary nature of our software
    systems and methodologies, our business and financial condition
    could be harmed.
    Failure
    of, or problems with, our critical software or information
    systems could harm our business and operating
    results.
     39




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Risk
    Factors Related to our Ownership and Management
  As a
    holding company, we have no material assets or operations of our
    own.
    The
    loss of certain senior management could have a material adverse
    effect on our operations and financial
    performance.
    Certain
    provisions of our charter, bylaws, Delaware law and our
    stockholders rights plan may delay or prevent a change in
    control of the Company.
    
    a staggered board of directors;
    limitations on persons authorized to call a special meeting of
    stockholders;
    the authorization of undesignated preferred stock, the terms of
    which may be established and shares of which may be issued
    without stockholder approval;
    advance notice procedures required for stockholders to nominate
    candidates for election as directors or to bring matters before
    an annual meeting of stockholders; and
    a stockholders rights plan that includes a 20% threshold
    for triggering events, a three-year term for directors, an
    independent director evaluation provision (commonly known as a
    TIDE provision) and a stockholder redemption feature
    allowing stockholders to vote at a special meeting that would be
    called to consider qualified takeover offers.    Our
    stock price is thinly traded, which may cause volatility in our
    common stock, including a decline in value.
   40




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If we
    identify deficiencies in our internal control over financial
    reporting, our business and our stock price could be adversely
    affected.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties.    Louisiana


62Mississippi


28Tennessee


28Kentucky


25Arkansas


19West Virginia


16Alabama


14Texas


12Washington


12Maryland


11Florida


6Georgia


5Missouri


5North Carolina


2Ohio


2Virginia


2Oklahoma


1250    41




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Item 3.
    Legal
    Proceedings.    Item 4.
    Submission
    of Matters to a Vote of Security Holders.   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities.  Sales of
    Unregistered Common Stock
    Market
    Information and Holders
    Dividend
    Policy
    Price
    Range of Common Stock
    High


Low2008Fourth Quarter

$
36.83


$
22.46Third Quarter


31.42



21.50Second Quarter


23.64



13.55First Quarter


25.48



15.04   42




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High


Low2007Fourth Quarter

$
26.17


$
20.28Third Quarter


27.06



18.58Second Quarter


33.14



24.52First Quarter


33.00



24.15     Performance
    Graph
    Item 6.
    Selected
    Financial Data.  Form 10-K Form 10-K. Item 8-Financial
  Year Ended December 31,2008


2007


2006


2005


2004(In thousands except share and per share data)Consolidated Statements of Income Data:Net service revenue

$
383,296


$
298,031


$
218,535


$
155,687


$
116,090Gross margin


196,447



147,272



107,741



71,247



57,357Operating income


60,286



38,659



35,325



23,760



22,523Income from continuing operations


30,730



21,225



21,421



11,226



9,852Net income


30,202



19,589



20,594



10,102



9,313Change in the redemption value of redeemable minority interests


31



193



1,163



(1,476
)


Net income available to common stockholders

$
30,233


$
19,782


$
21,757


$
8,626


$
9,313Net income per basic share(1):

$
1.69


$
1.11


$
1.27


$
0.59


$
0.77Net income per diluted share(1)

$
1.69


$
1.11


$
1.27


$
0.59


$
0.76Weighted average shares outstanding(1):Basic


17,855,634



17,760,432



17,090,583



14,628,737



12,085,154Diluted


17,899,087



17,827,444



17,104,660



14,684,639



12,145,150Cash dividends declared per common share














.009



.039   43




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As of December 31,2008


2007


2006


2005


2004(In thousands)Consolidated Balance Sheet Data:Cash

$
3,511


$
1,155


$
26,877


$
17,398


$
2,911Total assets

$
243,400



174,985



152,694



104,418



47,519Total debt

$
5,116



3,431



3,837



5,427



18,275Total stockholders equity

$
176,821



143,371



121,889



78,444



16,351     (1)
    
    All references to shares and per share amounts have been
    retroactively restated to reflect our incorporation in the State
    of Delaware in 2005 and to give effect to a three-for-two stock
    split with respect to our common stock as if such events
    occurred as of the beginning of the earliest period presented.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  The following discussion and analysis contains
    forward-looking statements about our future revenues, operating
    results, plans and expectations. Forward-looking statements are
    based on a number of assumptions and estimates that are
    inherently subject to significant risks and uncertainties and
    our results could differ materially from the results anticipated
    by our forward-looking statements as a result of many known or
    unknown factors, including, but not limited to, those factors
    discussed in Part I, Item 1A  , Risk
    Factors. Also, please read the Cautionary Statements
    Regarding Forward-Looking Statements set forth at the
    beginning of this Annual Report on
    Form 10-K.
  Please read the following discussion in conjunction with
    Part 1 of this
    Form 10-K
    as well as our Consolidated Financial Statements and the related
    notes contained elsewhere in this Annual Report on
    Form 10-K.
  Overview
    Segments
   44




---



##### Table of Contents



Type of ServiceHome Health


206Hospice


19Diabetes Management Company


2Private Duty


4Specialty Services


3Management Companies


4238       Development
    Activities
    Facility-Based ServicesLong-Term Acute CareSpecialty


Hospitals, Critical


Specialty andHome-Based Services


and


Access Hospitals


OutpatientHome Nursing


Hospice


Private


and Inpatient


RehabilitationYear

Agencies


Agencies


Duty


Rehabilitation Facilities


ClinicsTotal at January 1, 2006


69



4



2



9



4Developed


5















Acquired


27



2



1







Divested/Closed


(1
)










(1
)


Total at January 1, 2007


100



6



3



8



4Developed


18















Acquired


20



3











Divested/Closed


(1
)










(1
)


Total at December 31, 2007


137



9



3



7



4Developed


19



1











Acquired


50



9



6







Total at December 31, 2008


206



19



9



7



4  45




---



##### Table of Contents



Recent
    Developments
  Home-Based
    Services
  Home Nursing. 60-day
  60-day 60-day
  60-day
  Hospice.
    Facility-Based
    Services
  LTACHs.
  15-month
 46




---



##### Table of Contents



2008 and
    2007 Operational Data
    Three Months


Three Months


Three Months


Three MonthsEnded


Ended


Ended


Ended


Year EndedMarch 31, 2008


June 30, 2008


September 30, 2008


December 31, 2008


December 31, 2008Home-Based Services Data:Average census


18,958



20,469



21,733



24,675



21,519Average Medicare census


14,876



16,544



17,810



19,987



17,355Admissions


13,367



13,688



14,113



15,462



56,630Medicare admissions


9,774



10,053



10,482



11,402



41,711Facility-Based Services Data:Patient days


12,034



11,298



10,930



11,928



46,190   Three Months


Three Months


Three Months


Three MonthsEnded


Ended


Ended


Ended


Year EndedMarch 31, 2007


June 30, 2007


September 30, 2007


December 31, 2007


December 31, 2007Home-Based Services Data:Average census


15,712



16,283



16,862



17,914



16,635Average Medicare census


11,642



12,222



12,767



13,734



12,560Admissions


10,615



10,825



11,216



11,080



43,736Medicare admissions


7,333



7,500



7,819



8,099



30,751Facility-Based Services Data:Patient days


11,674



11,453



11,202



11,489



45,818  47




---



##### Table of Contents



Consolidated
    Results of Operations
    Year Ended December 31,2008


2007


2006Home-Based Services Data:Net service revenue

$
326,041


$
244,107


$
164,701Cost of service revenue


154,376



116,962



78,089Gross margin


171,665



127,145



86,612Provision for bad debts


10,208



9,426



3,051General and administrative expenses


109,917



80,595



53,630Operating income

$
51,540


$
37,124


$
29,931Average census


21,519



16,635



12,982Average Medicare census


17,355



12,560



9,573Total admissions


56,630



43,736



26,972Total Medicare admissions


41,711



30,751



19,138Facility-Based Services Data:Net service revenue

$
57,255


$
53,924


$
53,834Cost of service revenue


32,473



33,797



32,705Gross margin


24,782



20,127



21,129Provision for bad debts


1,563



2,822



1,054General and administrative expenses


14,473



15,770



14,681Operating income

$
8,746


$
1,535


$
5,394Patient days


46,190



45,818



45,461     Year Ended December 31,2008


2007


2006Net service revenue


100.0
%


100.0
%


100.0
%Cost of service revenue


48.7



50.6



50.7Gross margin


51.3



49.4



49.3Provision for bad debts


3.1



4.1



1.9General and administrative expenses


32.5



32.3



31.3Operating income


15.7



13.0



16.2Interest expense


(0.1
)


(0.1
)


(0.1
)Non-operating income, including gain on sales of assets


0.4



0.4



0.9Income tax expense


4.9



4.1



4.9Minority interest expense


3.1



2.0



2.2Income from continuing operations


8.0
%


7.1
%


9.8
%  48




---



##### Table of Contents



Year
    Ended December 31, 2008 Compared to Year Ended
    December 31, 2007
  Net
    Service Revenue
    2008


2007Home-based services


85.1
%


81.9
%Facility-based services


14.9



18.1100.0
%


100.0
%     Home-Based Services.
        Same








Organic








TotalStore(1)


De Novo(2)


Organic(3)


Growth %


Acquired(4)


Total


Growth %Revenue

$
286,342


$
2,879


$
289,221



18.5
%

$
36,820


$
326,041



33.6
%Revenue Medicare

$
239,627


$
2,431


$
242,058



21.9
%

$
31,375


$
273,433



37.7
%Average Census


17,228



341



17,569



5.6
%


3,950



21,519



29.4
%Average Medicare Census


14,099



277



14,376



14.5
%


2,979



17,355



38.2
%Episodes


105,712



1,323



107,035



34.4
%


10,412



117,447



47.4
%     (1)
    
    Same store  location that has been in service with
    the Company for 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.
 49




---



##### Table of Contents



Cost
    of Service Revenue
    Home-Based Services.
  Year Ended December 31,2008


2007Salaries, wages and benefits


131,452



40.3
%(1)


99,446



40.7
%(1)Transportation, primarily mileage reimbursement


11,803



3.6



8,589



3.5Supplies and services


11,121



3.4



8,927



3.7Total

$
154,376



47.3
%

$
116,962



47.9
%     (1)
    
    Percentage of Home-Based net service revenue    Facility-Based Services.
  Year Ended December 31,2008


2007Salaries, wages and benefits


20,717



36.2
%(1)


20,969



38.9
%(1)Transportation


262



0.4



327



0.6Supplies and services


11,494



20.1



12,501



23.2Total

$
32,473



56.7
%

$
33,797



62.7
%     (1)
    
    Percentage of Facility-Based net service revenue    Provision
    for Bad Debts
   50




---



##### Table of Contents



General
    and Administrative Expenses
    
    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;
    operating locations rent; and
    taxes.    Home-Based Services.
  Facility-Based Services.
   51




---



##### Table of Contents



Non-operating
    income
    Income
    Tax Expense
    Minority
    Interest
    Discontinued
    Operations
    Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
  Net
    Service Revenue
    2007


2006Home-based services


81.9
%


75.4
%Facility-based services


18.1



24.6100.0
%


100.0
%     Home-Based Services.
 52




---



##### Table of Contents



Same








Organic








TotalStore(1)


De Novo(2)


Organic(3)


Growth %


Acquired(4)


Total


Growth %Revenue

$
221,154


$
2,674


$
223,828



35.9
%

$
20,279


$
244,107



48.2
%Revenue Medicare

$
178,795


$
2,213


$
181,008



36.0
%

$
17,595


$
198,603



49.2
%Average Census


14,285



297



14,582



12.3
%


2,053



16,635



28.1
%Average Medicare Census


10,645



224



10,869



13.5
%


1,691



12,560



31.2
%Episodes


75,305



485



75,790



43.5
%


3,872



79,662



50.8
%     (1)
    
    Same store  location that has been in service with
    the Company for 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.
  Cost
    of Service Revenue
    Home-Based Services.
  Year Ended December 31,2007


2006Salaries, wages and benefits


99,446



40.7
%(1)


66,419



40.0
%(1)Transportation, primarily mileage reimbursement


8,589



3.5



5,548



3.4Supplies and services


8,927



3.7



6,122



3.7Total

$
116,962



47.9
%

$
78,089



47.4
%     (1)
    
    Percentage of Home-Based net service revenue   53




---



##### Table of Contents



Facility-Based Services.
  Year Ended


December 31,2007





2006Salaries, wages and benefits


20,969



38.9
%(1)


20,949



38.9
%(1)Transportation


327



0.6



254



0.5Supplies and services


12,501



23.2



11,502



21.4Total

$
33,797



62.7
%

$
32,705



60.8
%     (1)
    
    Percentage of Facility-Based net service revenue    General
    and Administrative Expenses
    Home-Based Services.
    Facility-Based Services.
    Non-operating
    income
   54




---



##### Table of Contents



Income
    Tax Expense
    Minority
    Interest
    Discontinued
    Operations
    Liquidity
    and Capital Resources
  Liquidity
    
    Operating Results Our net income has a
    significant impact on our operating cash flows. Any significant
    increase or decrease in our net income could have a material
    impact on our operating cash flows.
    Timing of Acquisitions We use our operating
    cash flows to purchase home health and hospice agencies. When
    the acquisitions occur at or near the end of a period, our cash
    outflows significantly increase.
    Start-Up
    Costs Following the completion of an
    acquisition, we suspend billing Medicare and Medicaid claims
    until we receive the change of ownership and electronic funds
    transfer approvals. We also generally incur substantial
    start-up
    costs in order to implement our business strategy. There is
    generally a delay between our expenditure
    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 impact on our operating cash flows.
    Medical Supplies A significant expense
    associated with our business is the cost of medical supplies.
    Any increase in the cost of medical supplies, or in the use of
    medical supplies by our patients, could have a material impact
    on our operating cash flows. 55




---



##### Table of Contents



Year EndedDecember 31,2008


2007Cash provided by operating activities

$
85,504


$
12,014Cash used in investing activities


(75,876
)


(32,281
)Cash used in financing activities


(7,272
)


(5,455
)Change in cash


2,356



(25,722
)Cash and cash equivalents at beginning of period


1,155



26,877Cash and cash equivalents at end of period

$
3,511


$
1,155           Indebtedness
     56




---



##### Table of Contents



Eurodollar


Base RateLeverage Ratio

Margin


Margin< 1.00:1.00


1.75
%


(0.25
)%3
    1.00:1.00 < 1.50:100


2.00
%


0
%3
    1.50:1.00 < 2.00:1.00


2.25
%


0
%32.00:1.00


2.50
%


0
%            57




---



##### Table of Contents



Commitments
    Payment due by periodLess Than








More ThanContractual Cash Obligation

Total


1 Year


1-3 Years


3-5 Years


5 Years(In thousands)Long-term debt

$
4,991


$
508


$
1,061


$
1,010


$
2,412Capital lease obligations


125



75



50







Operating leases


19,049



7,699



9,103



2,180



67Total contractual cash obligations

$
24,165


$
8,282


$
10,214


$
3,190


$
2,479   Off-Balance
    Sheet Arrangements
      Critical
    Accounting Policies
    Principles
    of Consolidation
   58




---



##### Table of Contents



2008


2007


2006Wholly owned subsidiaries


46.6
%


46.4
%


41.7
%Equity joint ventures


49.6



43.7



46.3License leasing arrangements


2.1



7.8



9.5Management services


1.7



2.1



2.5100.0
%


100.0
%


100.0
%         Equity
    Joint Ventures
    License
    Leasing Arrangements
    Management
    Services
    Revenue
    Recognition
   59




---



##### Table of Contents



2008


2007


2006Payor:Medicare


83.2
%


81.7
%


82.6
%Medicaid


4.6



5.5



5.7Other


12.2



12.8



11.7100.0
%


100.0
%


100.0
%     2008


2007


2006Home-based services


85.1
%


81.9
%


75.4
%Facility-based services


14.9



18.1



24.6100.0
%


100.0
%


100.0
%   Medicare
  Home-Based
    Services
  Home Nursing Services. 60-day
    Hospice Services.
  12-month program-by-program
 60




---



##### Table of Contents



Facility-Based
    Services
  Long-Term Acute Care Services.
  Outpatient Rehabilitation Services.
  Medicaid,
    managed care and other payors
    Management
    Services
    Accounts
    Receivable and Allowances for Uncollectible
    Accounts
       61




---



##### Table of Contents



Payor

0-30


31-60


61-90


91-120


121-150


151-180


181-240


241+


Total(Amounts in thousands)Medicare

$
30,704


$
7,113


$
3,955


$
2,688


$
2,207


$
1,911


$
711


$
3,272


$
52,561Medicaid


1,556



837



414



301



281



499



327



1,727



5,942Other


2,126



4,060



1,470



1,160



1,106



973



406



1,696



12,997Total

$
34,386


$
12,010


$
5,839


$
4,149


$
3,594


$
3,383


$
1,444


$
6,995


$
71,500Allowance as a
    percentage of


6.1%



8.0%



9.3%



10.3%



10.9%



27.6%



41.8%



59.8%



14.0%receivables       Payor

0-30


31-60


61-90


91-120


121-150


151-180


181-240


241+


Total(Amounts in thousands)Medicare

$
20,326


$
4,904


$
4,678


$
3,751


$
2,915


$
3,722


$
861


$
3,629


$
44,786Medicaid


7,292



1,111



938



840



958



1,040



309



3,083



15,571Other


3,228



2,799



2,321



1,012



1,151



1,113



1,051



5,954



18,269Total

$
30,846


$
8,814


$
7,937


$
5,603


$
5,024


$
5,875


$
2,221



12,666


$
78,986Allowance as a percentage of receivables


4.6
%


5.1
%


5.4
%


4.7
%


6.2
%


11.7
%


23.9
%


38.3
%


11.3
%  62




---



##### Table of Contents



Beginning








End ofof Year


Additions and





YearBalance


Expenses


Deductions


Balance(In thousands)Year ended December 31:2008

$
8,953


$
12,463


$
11,440


$
9,9762007


5,769



13,817



10,633



8,9532006


2,544



4,778



1,553



5,769   Goodwill
    and Intangible Assets
    th
      Adoption
    of New Accounting Standards
  Fair Value
    Measurements
 63




---



##### Table of Contents



No. 157-2,
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Recently
    Issued Accounting Pronouncements
  Business
    Combinations
  Non-controlling Interests in Consolidated Financial
    Statements  an Amendment of ARB No. 51
 64




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk.      Item 8.
    Financial
    Statements and Supplementary Data.  Form 10-K
  Item 9.
    Changes
    In and Disagreements with Accountants on Accounting and
    Financial Disclosure.      Form 10-K
  Form 10-Q Form 10-K,
 65




---



##### Table of Contents



Item 9A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Control and Procedures
  Rule 13a-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f). Internal Control  Integrated
    Framework
  Internal Control-Integrated Framework, 13a-15(f),
    Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(f)
 66




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Internal Control 
    Integrated Framework
        Internal Control  Integrated Framework
    
    67




---



##### Table of Contents



Item 9B.
    Other
    Information.   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance.        Code of
    Conduct and Ethics
    Item 11.
    Executive
    Compensation.    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.    Equity
    Compensation Plan Information
  (a)


(b)


(c)Number of SharesNumber of Shares to





Remaining Availablebe Issued Upon


Weighted-Average


for Future IssuanceExercise of


Exercise Price of


Under EquityOutstanding


Outstanding Price


Compensation PlansOptions, Warrants,


of Outstanding


(Excluding SecuritiesPlan Category

and Rights


Rights


Reflected in Column(a))Equity compensation plans approved by Stockholders:


19,000


$
17.20



767,627
(1)Equity compensation plans not approved by Stockholders:










Total


19,000


$
17.20



767,627  68




---



##### Table of Contents



(1)
    
    564,604 of these shares are reserved under the LHC Group, Inc.
    2005 Long-Term Incentive Plan and are available for issuance
    pursuant to the exercise or grant of stock options, stock
    appreciation rights, restricted stock, restricted stock units,
    performance shares or unrestricted stock. 203,023 of these
    shares are reserved and available for issuance under the 2006
    LHC Group, Inc. Employee Stock Purchase Plan.  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.    Item 14.
    Principal
    Accounting Fees and Services.   69




---



##### Table of Contents



PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules.  Form 10-K:
    Report of Independent Registered Public
    Accounting Firm


F-1Consolidated Balance Sheets as of December 31,
    2008 and 2007


F-3For each of the three years in the period ended December 31,
    2008, 2007 and 2006Consolidated Statements of Income


F-4Consolidated Statements of Changes in
    Stockholders Equity


F-5Consolidated Statements of Cash Flows


F-6Notes to the Consolidated Financial Statements


F-7         Regulation S-K
 70




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control  Integrated Framework
  
    F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
          Accounting for Uncertainty
    in Income Taxes  an Interpretation of FASB Statement
    No. 109 Share-Based Payment
  Internal Control-Integrated
    Framework
      F-2




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
 (Amounts
    in thousands, except share data)
  As of December 31,2008


2007ASSETSCurrent assets:Cash

$
3,511


$
1,155Receivables:Patient accounts receivable, less allowance for uncollectible
    accounts of $9,976 and $8,953, respectively


61,524



70,033Other receivables


2,317



1,748Amounts due from governmental entities


2,434



1,459Total receivables, net


66,275



73,240Deferred income taxes


4,959



2,946Prepaid expenses and other current assets


6,464



5,656Total current assets


81,209



82,997Property, building and equipment, net


16,348



12,523Goodwill


112,572



62,227Intangible assets, net


29,975



14,055Other assets


3,296



3,183Total assets

$
243,400


$
174,985LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and other accrued liabilities

$
15,422


$
6,103Salaries, wages and benefits payable


16,400



11,303Amounts due to governmental entities


6,023



3,162Income taxes payable


10,682



863Current portion of capital lease obligations


75



88Current portion of long-term debt


508



433Total current liabilities


49,110



21,952Deferred income taxes


5,718



3,243Capital lease obligations, less current portion


50



63Long-term debt, less current portion


4,483



2,847Minority interests subject to exchange contracts and/or put
    options


95



121Other minority interests


7,123



3,388Stockholders equity:Common stock  $0.01 par value:
    40,000,000 shares authorized; 20,853,463 and
    20,725,713 shares issued and 17,895,832 and
    17,775,284 shares outstanding, respectively


179



177Treasury stock  2,957,631 and 2,950,429 shares
    at cost, respectively


(3,072
)


(2,866
)Additional paid-in capital


85,404



81,983Retained earnings


94,310



64,077Total stockholders equity


176,821



143,371Total liabilities and stockholders equity

$
243,400


$
174,985    F-3




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF INCOME
 (Amounts
    in thousands, except share and per share data)
  For the Year Ended of December 31,2008


2007


2006Net service revenue

$
383,296


$
298,031


$
218,535Cost of service revenue


186,849



150,759



110,794Gross margin


196,447



147,272



107,741Provision for bad debts


11,771



12,248



4,105General and administrative expenses


124,390



96,365



68,311Operating income


60,286



38,659



35,325Interest expense


(469
)


(376
)


(325
)Gain (loss) on the sale of assets and entities


967



(108
)


(20
)Non-operating income


473



1,181



2,053Income from continuing operations before income taxes and
    minority interest


61,257



39,356



37,033Income tax expense


18,728



12,147



10,817Minority interest


11,799



5,984



4,795Income from continuing operations


30,730



21,225



21,421Loss from discontinued operations (net of income tax benefit of
    $110, $239 and $897, respectively)


(528
)


(1,667
)


(1,464
)Gain on sale of discontinued operations (net of income taxes of
    $20 and $390, respectively)






31



637Net income


30,202



19,589



20,594Change in the redemption value of redeemable minority interests


31



193



1,163Net income available to common stockholders

$
30,233


$
19,782


$
21,757Earnings per share  basic and diluted:Income from continuing operations


1.72



1.19



1.25Loss from discontinued operations, net


(0.03
)


(0.09
)


(0.09
)Gain on sale of discontinued operations, net










0.04Net income

$
1.69



1.10



1.20Change in the redemption value of redeemable minority interests






0.01



0.07Net income available to common shareholders

$
1.69


$
1.11


$
1.27Weighted average shares outstanding:Basic


17,855,634



17,760,432



17,090,583Diluted


17,899,087



17,827,444



17,104,660    F-4




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Amounts
    in thousands, except share and per share data)
  Common Stock


AdditionalIssued


Treasury


Paid-In


RetainedAmount


Shares


Amount


Shares


Capital


Earnings


TotalBalances at December 31, 2005

$
166



19,507,887


$
(2,856
)


2,950,059


$
58,596


$
22,538


$
78,444Net income






















20,594



20,594Sale of 1,150,000 shares of common stock at $19.25 per
    share, net of underwriting discount and offering costs of $1,403


11



1,150,000











20,711







20,722Stock option compensation


















128







128Exercise of stock options






8,000











165







165Nonvested stock compensation


















484







484Issuance of 1,167 shares of vested stock






1,167











23







23Issuance of vested stock






8,167



















Issuance of common stock under Employee Stock Purchase Plan






7,096











166







166Change in redemption value of redeemable minority interest






















1,163



1,163Balances at December 31, 2006


177



20,682,317



(2,856
)


2,950,059



80,273



44,295



121,889Net income






















19,589



19,589Exercise of stock options






527



















Nonvested stock compensation


















1,125







1,125Issuance of vested stock






25,976











62







62Treasury shares redeemed to pay income tax










(10
)


370











(10
)Excess tax benefit  vesting of nonvested stock


















104







104Issuance of common stock under Employee Stock Purchase Plan






16,893











419







419Change in redemption value of redeemable minority interest






















193



193Balances at December 31, 2007


177



20,725,713



(2,866
)


2,950,429



81,983



64,077



143,371Net income






















30,202



30,202Issuance of common stock to joint venture partners in exchange
    for a portion of their minority ownership


1



51,736











1,033







1,034Nonvested stock compensation


















1,935







1,935Issuance of vested stock






53,026



















Treasury shares redeemed to pay income tax










(206
)


7,202











(206
)Tax short-fall  vesting of nonvested stock


















(39
)






(39
)Issuance of common stock under Employee Stock Purchase Plan


1



22,988











492







493Change in redemption value of redeemable minority interest






















31



31Balances at December 31, 2008

$
179



20,853,463


$
(3,072
)


2,957,631


$
85,404


$
94,310


$
176,821    F-5




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
 (Amounts
    in thousands)
  For the Year Ended December 31,2008


2007


2006Operating activitiesNet income

$
30,202


$
19,589


$
20,594Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization expense


3,740



3,026



2,427Provision for bad debts


12,463



13,817



4,778Stock based compensation expense


1,935



1,187



635Minority interest in earnings of subsidiaries


11,676



5,312



4,471Deferred income taxes


462



129



(1,253
)Gain on sale of assets and partial sale of entity


(967
)






(979
)Changes in operating assets and liabilities, net of acquisitions:Receivables


(597
)


(31,109
)


(15,625
)Prepaid expenses, other assets


4,155



(1,446
)


(1,466
)Accounts payable and accrued expenses


20,549



1,570



6,036Net amounts due from/to governmental entities


1,886



(61
)


2,144Net cash provided by operating activities


85,504



12,014



21,762Investing activitiesPurchases of property, building and equipment


(8,550
)


(3,346
)


(3,938
)Proceeds from sale of property and equipment


3,094







7Purchase of certificate of deposit


(522
)






Proceeds from sale of entities










1,440Acquisitions, net of cash acquired


(69,898
)


(28,935
)


(25,009
)Net cash used in investing activities


(75,876
)


(32,281
)


(27,500
)Financing activitiesProceeds from line of credit


32,850







Payments on line of credit


(32,850
)






Proceeds from debt issuance


5,050







Principal payments on debt


(3,339
)


(199
)


(1,201
)Payment of deferred financing fees


(75
)






Payments on capital leases


(101
)


(207
)


(389
)Excess tax benefits from vesting of restricted stock


91



104



Offering costs incurred










(311
)Proceeds from exercise of stock options










135Proceeds from issuance of common stock under ESPP


493



419



140Minority interest distributions, net of contributions


(9,391
)


(5,572
)


(4,190
)Issuance of common stock, net of underwriting discounts of $1,104










21,033Net cash provided by (used in) financing activities


(7,272
)


(5,455
)


15,217Change in cash


2,356



(25,722
)


9,479Cash at beginning of period


1,155



26,877



17,398Cash at end of period

$
3,511


$
1,155


$
26,877Supplemental disclosures of cash flow informationInterest paid

$
456


$
376


$
342Income taxes paid

$
8,937


$
12,052


$
9,370   Supplemental
    disclosure of non-cash transactions:
       F-6




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Organization    2.
    Summary
    of Significant Accounting Policies  Use of
    Estimates
    Reclassifications
    Principles
    of Consolidation
      2008


2007


2006Wholly owned subsidiaries


46.6
%


46.4
%


41.7
%Equity joint ventures


49.6



43.7



46.3License leasing arrangements


2.1



7.8



9.5Management services


1.7



2.1



2.5100.0
%


100.0
%


100.0
%  F-7




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Equity
    Joint Ventures
    License
    Leasing Arrangements
    Management
    Services
    Revenue
    Recognition
      2008


2007


2006Payor:Medicare


83.2
%


81.7
%


82.6
%Medicaid


4.6



5.5



5.7Other


12.2



12.8



11.7100.0
%


100.0
%


100.0
%  F-8




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006Home-based services


85.1
%


81.9
%


75.4
%Facility-based services


14.9



18.1



24.6100.0
%


100.0
%


100.0
%   Medicare
  Home-Based
    Services
  Home Nursing Services. 60-day
    Hospice Services.
  12-month program-by-program
  Facility-Based
    Services
  Long-Term Acute Care Services
    (LTACHs).
 F-9




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Outpatient Rehabilitation Services.
  Medicaid,
    managed care and other payors
    Management
    Services
    Accounts
    Receivable and Allowances for Uncollectible
    Accounts
       F-10




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Goodwill
    and Intangible Assets
    th
     F-11




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Due
    to/from Governmental Entities
  due to/from governmental entities
  Property,
    Building and Equipment
    Accounting for the impairment or Disposal
    of Long-Lived Assets
    December 31,2008


2007(In thousands)Land

$
342


$
135Building and improvements


3,719



3,079Transportation equipment


5,496



3,434Furniture and other equipment


17,695



13,66127,252



20,309Less accumulated depreciation and amortization


10,904



7,786$
16,348


$
12,523     Minority
    Interest
    Minority
    Interest Subject to Put Agreements
   F-12




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              Stock-Based
    Employee Compensation
  Share-Based Payment Accounting for
    Stock-Based Compensation
    Earnings
    Per Share
   F-13




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006Weighted average number of shares outstanding for basic per
    share calculation


17,855,634



17,760,432



17,090,583Effect of dilutive potential shares:Options


5,705



6,461



2,399Restricted stock


37,748



60,551



11,678Adjusted weighted average shares for diluted per share
    calculation


17,899,087



17,827,444



17,104,660   Adoption
    of New Accounting Standards
  Fair Value Measurements No. 157-2,
  The
    Fair Value Option for Financial Assets and Financial Liabilities
  Recently
    Issued Accounting Pronouncements
  Business Combinations
 F-14




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Non-controlling Interests in Consolidated Financial
    Statements  an Amendment of ARB No. 51
  3.
    Acquisitions
    and Divestitures    2008
    Acquisitions
  Home-Based
       F-15




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Facility-Based
        2008


2007Net service revenue

$
438,510


$
373,965Operating income


27,119



36,175Net income


27,992



18,009Basic and diluted earnings per share

$
1.56


$
1.01       2007
    Acquisitions
    2007
    Divestitures
    2006
    Acquisitions
   F-16




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2006
    Divestitures
      2008


2007


2006Net service revenue

$
51


$
2,979


$
5,261Costs, expenses and minority interest


689



4,885



7,622Loss from discontinued operations before income taxes


(638
)


(1,906
)


(2,361
)Income tax benefit


110



239



897Loss from discontinued operations

$
(528
)

$
(1,667
)

$
(1,464
)    F-17




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.  Goodwill
    and Other Intangibles, Net
    2008


2007(In thousands)Home-based services segment:Balances at beginning of period

$
57,885


$
35,740Goodwill acquired during the period from acquisitions


49,223



22,192Goodwill retired during the period






(47
)Home-based services balance at end of period


107,108



57,885Facility-based services segment:Balance at beginning of period

$
4,342



3,941Goodwill classified as held for sale during the period






401Goodwill acquired during the period from redemption of minority
    interest


1,122



Facility-based services balance at end of period


5,464



4,342Consolidated Balance at end of period

$
112,572


$
62,227     Trade


Certificates of


OtherNames


Need


Intangibles


TotalBalance at December 31, 2007

$
12,873


$
1,041


$
141


$
14,055Additions


14,360



843



874



16,0772007 Acquisition Adjustments






117







117Amortization










(274
)


(274
)Balance at December 31, 2008

$
27,233


$
2,001


$
741


$
29,975     5.
    Income
    taxes   F-18




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007(In thousands)Deferred tax assets:Allowance for uncollectible accounts

$
3,503


$
3,392Accrued employee benefits


1,679



1,005Stock compensation


742



495Net operating loss carry forward


644



505Valuation allowance


(689
)


(505
)Accrued self-insurance


796



508Deferred tax assets


6,675



5,400Deferred tax liabilities:Amortization of intangible assets


(4,733
)


(2,166
)Tax in excess of book depreciation


(1,683
)


(1,563
)Prepaid expenses


(364
)


(1,095
)Non-accrual experience accounting method


(654
)


(862
)Conversion from cash basis accounting






(11
)Deferred tax liabilities


(7,434
)


(5,697
)Net deferred tax liability

$
(759
)

$
(297
)       2008


2007


2006(In thousands)Current:Federal

$
15,858


$
10,542


$
10,139State


2,408



1,476



1,93118,266



12,018



12,070Deferred:Federal


401



111



(1,053
)State


61



18



(200
)462



129



(1,253
)Total provision for income taxes

$
18,728


$
12,147


$
10,817  F-19




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007


2006(In thousands)Income taxes computed at federal statutory tax rate

$
17,190


$
11,680


$
11,283State income taxes, net of federal benefit


1,730



1,001



967Gulf Opportunity Act tax credit


(518
)


(662
)


(1,027
)Nondeductible expenses


326



128



54Tax exempt proceeds from life insurance










(380
)Tax exempt interest income










(80
)Total provision for income taxes

$
18,728


$
12,147


$
10,817   Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
    6.
    Credit
    Arrangements  Long-Term
    Debt
    December 31,2008


2007(In thousands)Notes payable:Due in monthly installments of $28,056 through February 2015 at
    LIBOR plus 1.90% (3.8% at December 31, 2008) plus a
    balloon payment of $2.7 million


4,769



Due in monthly installments of $12,500 through November 2009 at
    5.78%


122



260Due in yearly installments of $50,000 through August 2010 at
    6.25%


100



150Due in monthly installments of $20,565 through October 2015 at
    LIBOR plus 2.25% (6.71% at December 31, 2007)






2,8704,991



3,280Less current portion of long-term debt


508



433$
4,483


$
2,847    F-20




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      A-1 (A-1) A-1.
      2009

$
5082010


3872011


3372012


3372013


337Thereafter


3,085$
4,991   Credit
    Facility
    7.
    Stockholders
    Equity  Issuance
    of Common Stock
   F-21




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Equity
    Based Awards
            Share
    Based Compensation
  Stock
    Options
    Weighted


Weighted AverageNumber of


Average Exercise


Remaining


AggregateShares


Price


Contractual Term


Intrinsic ValueOptions outstanding at January 1, 2008


19,000



17.20Options granted






Options exercised






Options forfeited or expired






Options outstanding at December 31, 2008


19,000



17.20



7.0 years


$
357,275Options exercisable at December 31, 2008


19,000



17.20



7.0 years


$
357,275    F-22




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Non-vested
    Stock
            WeightedNumber of


Average GrantShares


Date Fair ValueNon-vested shares outstanding at January 1, 2008


218,332



24.08Granted


165,195



18.67Vested


(53,026
)


25.49Forfeited


(24,095
)


21.40Non-vested shares outstanding at December 31, 2008


306,406



22.45     Employee
    Stock Purchase Plan
   F-23




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Treasury
    Stock
    Public
    Offering
    8.
    Related
    Party Transactions  Employee
    Receivables
      9.
    Leases         F-24




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009

$
7,6992010


4,3642011


2,8112012


1,9282013


1,450Thereafter


797$
19,049     2009

$
752010


282011


222012


2013


Thereafter


Total minimum lease payments


125Current portion of capital lease obligations


75Capital lease obligations, long-term

$
50     10.
    Employee
    Benefit Plan  Defined
    Contribution Plan
    11.
    Commitments
    and Contingencies  Contingencies
   F-25




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Compliance
            12.
    Segment
    Information    F-26




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year Ended December 31, 2008Home-Based


Facility-BasedServices


Services


Total(In thousands)Net service revenue

$
326,041


$
57,255


$
383,296Cost of service revenue


154,376



32,473



186,849Provision for bad debts


10,208



1,563



11,771General and administrative expenses


109,917



14,473



124,390Operating income


51,540



8,746



60,286Interest expense


(377
)


(92
)


(469
)Non operating income, including gain on sale of assets


1,246



194



1,440Income from continuing operations before income taxes and
    minority interest


52,409



8,848



61,257Minority interest


10,219



1,580



11,799Income from continuing operations before income taxes


42,190



7,268



49,458Total assets

$
220,822


$
22,578


$
243,400   Year Ended December 31, 2007Home-Based


Facility-BasedServices


Services


Total(In thousands)Net service revenue

$
244,107


$
53,924


$
298,031Cost of service revenue


116,962



33,797



150,759Provision for bad debt


9,426



2,822



12,248General and administrative expenses


80,595



15,770



96,365Operating income


37,124



1,535



38,659Interest expense


(250
)


(126
)


(376
)Non operating income, including gain on sale of assets


746



327



1,073Income from continuing operations before income taxes and
    minority interest


37,620



1,736



39,356Minority interest


5,177



807



5,984Income from continuing operations before income taxes


32,443



929



33,372Total assets


151,540



23,445



174,985   F-27




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Year Ended December 31, 2006Home-Based


Facility-BasedServices


Services


Total(In thousands)Net service revenue

$
164,701


$
53,834


$
218,535Cost of service revenue


78,089



32,705



110,794Provision for bad debt


3,051



1,054



4,105General and administrative expenses


53,630



14,681



68,311Operating income


29,931



5,394



35,325Interest expense


(210
)


(115
)


(325
)Non operating income, including gain on sale of assets


1,404



629



2,033Income from continuing operations before income taxes and
    minority interest


31,125



5,908



37,033Minority interest


3,075



1,720



4,795Income from continuing operations before income taxes


28,050



4,188



32,238Total assets


117,585



35,109



152,694   13.
    Fair
    Value of Financial Instruments    14.
    Allowance
    for Uncollectible Accounts    Beginning








End ofof Year


Additions and





YearBalance


Expenses


Deductions


Balance(In thousands)Year ended December 31:2008

$
8,953


$
12,463


$
11,440


$
9,9762007


5,769



13,817



10,633



8,9532006


2,544



4,778



1,553



5,769   15.
    Concentration
    of Risk   F-28




---



##### Table of Contents



LHC
    GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  16.
    Unaudited
    Summarized Quarterly Financial Information    First Quarter


Second Quarter


Third Quarter


Fourth Quarter2008


2008


2008


2008Net service revenue

$
83,473


$
90,115


$
98,166


$
111,542Gross margin


42,201



45,180



50,813



58,253Net income


5,338



6,334



8,032



10,498Net income available to common stockholders


5,439



6,298



8,003



10,493Basic and Diluted earnings per shareNet income

$
0.30


$
0.35


$
0.45


$
0.58Net income available to common shareholders

$
0.31


$
0.35


$
0.45


$
0.58Weighted average shares outstanding Basic


17,800,066



17,849,820



17,881,228



17,891,426Diluted


17,813,967



17,883,964



17,976,305



17,993,815   First Quarter


Second Quarter


Third Quarter


Fourth Quarter2007


2007


2007


2007Net service revenue

$
68,727


$
70,564


$
77,495


$
81,245Gross margin


34,567



34,937



37,970



39,798Net income


5,786



5,038



6,025



2,740Net income available to common stockholders


5,820



5,160



6,082



2,720Basic and Diluted earnings per shareNet income

$
0.33


$
0.28


$
0.34


$
0.15Net income available to common shareholders

$
0.33


$
0.29


$
0.34


$
0.15Weighted average shares outstanding Basic


17,748,369



17,754,632



17,766,612



17,773,616Diluted


17,807,338



17,798,952



17,794,072



17,808,795    F-29




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##### Table of Contents



SIGNATURES    LHC GROUP, INC.
  
       Form 10-K
    Signature

Title

Date/s/  Keith
    G. MyersKeith
    G. Myers

Chief Executive Officer and Chairman of the Board of Directors

March 16, 2009/s/  Peter
    J. RomanPeter
    J. Roman

Senior Vice President, Chief Financial Officer

March 16, 2009/s/  John
    L. IndestJohn
    L. Indest

President, Chief Operating Officer Secretary and Director

March 16, 2009/s/  Dan
    S. WilfordDan
    S. Wilford

Director

March 16, 2009/s/  Ronald
    T. NixonRonald
    T. Nixon

Director

March 16, 2009/s/  Ted
    W. HoytTed
    W. Hoyt

Director

March 16, 2009/s/  George
    A. LewisGeorge
    A. Lewis

Director

March 16, 2009 71




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##### Table of Contents



Signature

Title

Date/s/  John
    B. BreauxJohn
    B. Breaux

Director

March 16, 2009/s/  Monica
    F. AzareMonica
    F. Azare

Director

March 16, 2009/s/  W.J.
    Billy TauzinW.J.
    Billy Tauzin

Director

March 16, 2009  72




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##### Table of Contents



EXHIBIT INDEX  ExhibitNumber

Description of Exhibits3
.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

Amended and Restated Bylaws of LHC Group, Inc., as amended
    December 3, 2008 (previously filed as Exhibit 3.2 to the
    Form 10-Q on May 9, 2008).3
.3

Certificate of Designations (previously filed as Exhibit B
    to Exhibit 4.1 to the
    Form 8-A12B
    on March 11, 2008).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

Stockholder Protection Rights Agreement, Dated March 10,
    2008 by and between LHC Group, Inc. and Computershare
    Trust Company, N.A., as rights agent (previously filed as
    Exhibit 4.1 to the
    Form 8-A12B
    on March 11, 2008).10
.1

LHC 2003 Key Employee Equity Participation Plan (previously
    filed as an exhibit to the
    Form S-1/A
    (File
    No. 333-120792)
    on November 26, 2004).10
.2

LHC Group, Inc. 2005 Long-Term Incentive Plan (previously filed
    as an exhibit to the
    Form S-1/A
    (File
    No. 333-120792)
    on February 14, 2005).10
.3

Form of Award under LHC Group, Inc. 2005 Director
    Compensation Plan. (previously filed as an exhibit to the
    Form S-1/A
    (File
    No. 333-120792)
    on February 14, 2005).10
.4

Form of Indemnity Agreement between LHC Group and directors and
    certain officers (previously filed as an exhibit to the
    Form S-1/A
    (File
    No. 333-120792)
    on February 14, 2005).10
.5

LHC Group, Inc. 2005 Director Compensation Plan (previously
    filed as an exhibit to the
    Form S-1/A
    (File
    No. 333-120792)
    on February 14, 2005).10
.6

Amendment to LHC Group, Inc. 2005 Director Compensation
    Plan (previously filed as Exhibit 99.1 to the
    Form 8-K
    on June 12, 2006).10
.7

LHC Group, Inc. 2006 Employee Stock Purchase Plan (previously
    filed as Exhibit 99.2 to the
    Form 8-K
    on June 12, 2006).10
.8

Severance and Consulting Agreement by and between LHC Group,
    Inc. and Barry E. Stewart, dated August 15, 2007
    (previously filed as Exhibit 10.1 to the
    Form 8-K
    on August 15, 2007).10
.9

Employment Agreement by and between LHC Group, Inc. and Don
    Stelly, dated October 22, 2007 (previously filed as
    Exhibit 10.1 to the
    Form 8-K
    on October 30, 2007).10
.10

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
.11

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
.12

Employment Agreement by and between LHC Group, Inc. and Peter
    Roman, dated January 1, 2008 (previously filed as
    Exhibit 10.3 to the
    Form 8-K
    on January 4, 2008).10
.13

Employment Agreement between LHC Group, Inc. and Daryl Doise
    dated January 1, 2008 (previously filed as
    Exhibit 10.4 to the
    Form 8-K
    on January 4, 2008).10
.14

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
.15

Amended and Restated Credit Agreement by and among LHC Group,
    Inc., Capital One, National Association, First Tennessee Bank,
    N.A. and Brand Banking and Trust Company, dated
    June 12, 2008 (previously filed as Exhibit 10.1 to the
    Form 8-K
    on June 17, 2008).21
.1

Subsidiaries of the Registrant.23
.1

Consent of Ernst & Young LLP.23
.2

Consent of KPMG LLP. 73




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##### Table of Contents



ExhibitNumber

Description of Exhibits31
.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
.1*

Certification of the Chief Executive Officer and Chief Financial
    Officer 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. 74