Encompass Health CFO: Second Coronavirus Wave Would Be ‘Significantly Less Disruptive’

Encompass Health Corporation (NYSE: EHC) was flying high at the beginning of the year. Like most other health care organizations, though, COVID-19 threw it off its intended path.

But the Birmingham, Alabama-based company is geared up to return to expanding its business in the near-term. It’s also bullish on new opportunities that have popped up due to the public health emergency, such as converting nursing home residents to home health care patients.

Additionally, Encompass Health has planned extensively for a potential “second wave” of COVID-19. In doing so, it’s confident that — if there is another spike in the fall — it will be fully prepared and ready to stop the virus from disrupting its operations.

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In addition to its network of 134 hospital locations, Encompass Health is one of the biggest home health and hospice providers in the country. It has 245 home health locations and 83 hospice locations in 37 states and Puerto Rico.

“Overall, we’ve been very pleased with the trajectory of our ramp up, but we’re not back to where we were pre-COVID-19 quite yet,” CEO Mark Tarr said Wednesday during a presentation at William Blair’s virtual Growth Stock Conference. “Part of the reason [we’re not there yet] is because we just started out the year extremely strong and all the service lines were running extremely well going into the month of March. So we set the bar pretty high.”

COVID-19 impeded M&A progress for some major home health providers that were banking on an influx of acquisition opportunities due to the implementation of the Patient-Driven Groupings Model (PDGM), which went into effect on Jan. 1.

Yet during the height of the outbreak, Encompass Health continued to control what it could in regards to expansion, especially when it comes to its facility-based operations.

“We have continued throughout this pandemic phase and made great progress on the acquisition of land and developing plans for expansion around those target markets,” CFO Doug Coltharp said at the conference.

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Part of what gives Encompass Health leadership confidence for the future, regardless of a COVID-19 vaccine, is their evaluation of what a second wave might look like. COVID-19 has bolstered its internal scenario-analysis planning.

“We don’t have just one internal view of how things may transpire,” Coltharp said. “We have a set of assumptions around what the world might look like if the trajectory that we’ve been experiencing here recently continues and there isn’t a second wave. And then we’ve got a couple of scenarios regarding the potential impact of the second wave, [if that does happen].”

What that scenario analysis has definitely led Encompass Health to believe, however, is that if a second wave comes, it won’t be nearly as troublesome as the first.

“If there is a second wave, we believe that it’ll be significantly less disruptive than the initial wave,” Coltharp said. “We believe that the entire infrastructure from the federal government … to the local health authorities, to provider networks and the payers, [we] are all better prepared to deal with this. Now we know which tools were deployed successfully, and which were unnecessary. And so we think it will be much more effective.”

One of the aspects of the first wave that Encompass Health found noteworthy was the sometimes unnecessary shutting down of certain hospital services, like elective surgeries.

With a more nuanced approach the second time around, less shutdowns of those elective surgeries will mean home health, in general, takes less of a hit.

Regardless, Encompass Health is taking second-wave precautions that include: continuing aggressive procurement of personal protective equipment (PPE), re-establishing excess liquidity and managing its staff in a way that allows the company to adjust to volume fluctuations.

It’s also hoping for a higher volume of patients through skilled nursing facility (SNF) diversions, Tarr said.

“I think the whole period of this pandemic helps to really put an exclamation point on our goals and our quality outcomes,” Tarr said. “From a more global standpoint, it’s helped to point out the differences of the post-acute settings and how certain patients have much better outcomes.”

A large percentage of COVID-19 deaths have come from SNFs, and the home health world has positioned itself as a far better option over the last few months.

“We have taken COVID-19 patients in our hospitals, and we’ve been taking them through our home health agencies and providing great care with great outcomes,” Tarr said. “I think that it does — and will — help to differentiate us going forward, and there will be a lot of goodwill that we have built up.”

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