Encompass CEO Mark Tarr: Home Health Separation Will Enhance Long-Term Business Value

Those interested in what Encompass Health Corporation (NYSE: EHC) will do next with its home health and hospice segment have been largely left to read the tea leaves up to this point.

And while there is still not a final conclusion, the company is on the verge of completing its exploration of “strategic alternatives” for the segment, it announced Tuesday. Encompass Health’s board of directors believes a full or partial separation — either by public or private means — is the best way to move forward.

“As we mentioned in our earnings release, based on the analysis of alternatives today, our board of directors believes a full or partial separation of the home health and hospice business will enhance the long-term success and value of the business,” Encompass Health CEO Mark Tarr said on the company’s Q2 earnings call Wednesday. “The final form is still to be determined, as we continue to pursue a separation transaction by either public or private means.”


The decision is among many that executives and board members at Encompass have had to consider over the last year. During the call, they were still unwilling to give specific details around when everything would be completed or whether an S-1 filing to go public had been submitted.

In the meantime, it also had to fill out some executive positions in the home health and hospice segment. The most noteworthy is Barb Jacobsmeyer, who is now the segment’s CEO.

Crissy Carlisle, the current head of investor relations, will also be joining the segment as its CFO.


“Barb is a proven leader with extensive health care operating experience, and we are confident she’s the right person to lead this business going forward,” Tarr said. “Crissy’s extensive financial expertise, and familiarity with our business, make her ideally suited to take on the CFO role. I’ve worked closely with both Barb and Chrissy for many years, and know they will do an excellent job.”

Birmingham, Alabama-based Encompass Health has an overall network that includes 140 hospitals, 249 home health locations and 94 hospice locations in 42 states and Puerto Rico.

Its overall net operating revenues increased to over $1.28 billion in Q2, a 19.9% increase year over year from $1.074 billion. Home health and hospice revenues also increased to over $286 million, a 14.6% increase compared to the nearly $250 million it posted last year in Q2.

That rebounding home health and hospice was undoubtedly bolstered — as the rest of Encompass Health’s business lines were — by the fact that elective procedures have recovered following pandemic-related shutdowns last spring.

The COVID-19 delta variant and the subsequent spike in U.S. cases has mildly affected the number of staff members in quarantine, but overall, it has not yet affected operations as previous waves did.

“We’re prepared for what lies ahead,” Tarr said. “But at this point, we’ve not seen any direct impact on our business.”

Spurring new growth in home health

Encompass Health’s new head of home health and hospice, Jacobsmeyer, recently told HHCN that staffing and employee engagement would be one of her primary focuses to kick off her tenure.

After all, without enough workers, growth plans are moot. Also, without proper retention, advancing the operations of the segment becomes far more difficult.

“So I think first on the part of staffing, it is certainly a market-by-market [issue],” Jacobsmeyer said on the call. “I think the good news, though, is that we achieved our highest total nursing hires in quarter two since 2019.”

The company, and segment, is equipped with dashboards that show where it’s having challenges with staffing versus areas where it’s less of a pain point. That allows them to further efforts in select markets on talent acquisition.

Likewise, the company is focusing on making sure it has the right number of sales team members in each market so that it can continue to increase referral sources, and also the amount of referrals coming from current sources.

“So it’s both things, and we think we’re going to continue to see growth as we focus on talent acquisition,” Jacobsmeyer said.

Staffing has acted as a growth limitation for home health, but the company’s executives said they believe they’re taking the correct steps to address that, and don’t anticipate it being an issue moving forward.

In home health and hospice, Encompass Health has been able to increase its referral sources by about 3,000 per quarter, which is helping with recovery and growth, Jacobsmeyer said.

“Our electives are actually back up to pre-COVID levels, and some of that is about increasing the number of referral sources that are direct orthopedic physicians, so we’ve been able to market directly to them.” Jacobsmeyer said. “They’re doing some of these surgeries in ambulatory surgery centers, which has helped increase those types of referrals. But we’re also seeing new referral sources that are helping so many other diagnoses mixes. So I think it’s a combination.”

The company also believes that its referrals from skilled nursing facilities (SNFs) and senior living facilities will also eventually return to normal levels.

Two other large home health players have recently made significant plays to treat higher-acuity patients in the home, whether through hospital-at-home programs or other measures.

Amedisys Inc. (Nasdaq: AMED) acquired a hospital-at-home leader in Contessa Health. Meanwhile, LHC Group Inc. (Nasdaq: LHCG) and SCP Health announced a new strategic partnership that aims to support any type of in-home care for patients, including hospital-at-home and SNF-at-home models.

Encompass Health is prepared to advance the type of patients it can care for in the home as well.

“We certainly think from a SNF-at-home setting, there have been a number of different types of diagnostic backgrounds that historically have gone to skilled nursing facilities that — given the advancements of home health — a number of those could be done in the home setting,” Tarr said. “And that’s what we’re preparing to meet the demand for.”

But the company is seemingly not yet prepared to go all-in on hospital-at-home as its peers are.

“I think hospital-at-home has a long way to go,” Tarr said. “Certainly the patients that are in our hospitals are non-discretionary. They need a high intensity of care. And it would be hard to imagine that that can be provided in a home setting in a more efficient manner than what we’re providing in the hospital.”

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