Encompass Health Looks to Acquire, Take on Payment Reform in 2018

Encompass Health (NSYE: EHC) may have recently checked a major rebranding off its to-do list for 2018, but the home health care provider is still taking on new acquisitions, industry consolidation and payment reform.

Speaking at the J.P. Morgan Healthcare Conference, Encompass Health executives summarized their 2018 goals, guidance and challenges. CEO Mark Tarr reiterated that that company will continue to implement its acquisition and growth strategy to fill out the overlap between its inpatient rehabilitation facility (IRF) and home health and hospice business.

Currently, Encompass is the nation’s fourth-largest home health care provider, with 200 locations in 28 states, and the largest owner and operator of IRFs. Encompass acquired or opened 15 home health and hospice agencies in 2017. Looking ahead, the company expects to spend between $50 million and $100 million in acquisition in the sector in 2018, according to a presentation.


Payment reform

While the home health care industry helped beat back the proposed home health grouping model (HHGM), which CMS did not finalize into its prospective payment system (PPS) 2018 update, payment reform is not off the table entirely in 2018, and Encompass is stepping up to a seat at the regulatory table.

“We have plenty of opportunity over the next 12 months to work alongside CMS to come up with transformational revisions to the home health model, but done in a more thoughtful manner… to consolidate our view and vision on how the industry can impact the overall Medicare system,” April Anthony, CEO of the home health branch, Encompass Home Health and Hospice, said during the presentation.


In fact, work on potential payment reforms begins in February 2018, according to Anthony, who is part of a technical panel that is convening to collaborate between payers and industry partners, she said.

“There were some pretty major flaws [in HHGM] that need to be addressed, and I think we have a pretty good opportunity to do that,” Anthony said.

Even when HHGM was on the table in 2017 as a possible rule, Encompass did not back down from acquiring in the home heath and hospice space. Currently, Anthony is anticipating that there will some further possible changes to home health payment in the forthcoming Medicare extenders package from Congress, but these “material changes” aren’t likely to deter acquisition aims.

“Frankly, if we had been waiting for payment reform clarity, we would have never bought anything in the last 20 years,” she said. “We’re going to keep trudging ahead.”

Encompass provided guidance of net operating revenues of $4.15 billion to $4.25 billion in 2018, according to a public filing released in conjunction with the presentation.

Written by Amy Baxter

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