Enhabit Home Health & Hospice’s Rocky Start On The Public Market

Enhabit Home Health & Hospice (NYSE: EHAB) is the newest face on the home health public market.

External factors have made it far from a red-carpet welcome.

Its cost per visit shot up in the second quarter, the proposed home health rule is hanging over its head and – all the while – it’s dealing with Medicare Advantage (MA) plans that aren’t yet willing to pay fair rates for its services.


“In our discussions with the larger payers, we’ve been talking about things like episodic [payment] or case rates, because I think we’re all very interested in going that direction,” Enhabit CEO Barb Jacobsmeyer said on a second-quarter earnings call Tuesday. “But without a fix now to where we are on a per-visit rate, we’re left with continuing to deprioritize [MA] patients.”

Enhabit has entered into negotiations with payers on changing the rate structure, but is uncertain if that will happen by the end of 2022, Jacobsmeyer said. However, she is hopeful that some progress will be made.

“I think that it’s hard to say [what the timing will be] on getting us to that episodic or case rate, but I do feel that by the end of the year we will have made some progress,” she said. “At least on some of these larger per-visit rates.”


New kid on the block

Earlier this month, Enhabit completed its spinoff from Encompass Health Corporation (NYSE: EHC). Tuesday marked the first earnings call since then.

For expansion plans, Enhabit is seeing higher potential for hospice development due to the proposed rule, and will focus on areas where the company already has home health locations where there could be beneficial overlap.

“For home health, we look at opportunities that allow us to have those tuck-ins,” Jacobsmeyer said. “If there are markets that could benefit our productivity and optimization by adding home health locations to build out a territory, then that’s a continued focus for us. But at this point, we are seeing a little bit more of hospice than home health in the pipeline.”

Enhabit reported $268 million in revenue during Q2 of 2022, a 6.3% year-over-year decline.

The decline in revenue was attributed to three things: an increase in the use of PTO from employees, the impact on electronic referral systems due to rebranding and a decrease in admissions at acute care hospitals.

The cost per visit in home health also shot up from 6% to 10% in the second quarter. That’s one of the main focuses Enhabit will focus on in the second half of the year.

The company’s financial team feels confident that PTO usage will decline and return to normal numbers sooner rather than later.

“We are seeing an increase in PTO usage and, of course, when someone goes on PTO, you do have to put someone back in the field to service that volume,” CFO Crissy Carlisle said. “That can be done through premium rates to a PRN staff or by our own staff.”

The company expects volume to pick up during the second half of the year, Carlisle said, and having the staff members handle that volume will be key to reducing the cost per visit.

“That is one of the more significant items impacting our fixed cost structure right now,” Carlisle said.

Hiring more employees will also help offset costs in other ways too, Jacobsmeyer said.

“As we continue to see our net new hires improve, we’ll be able to focus on using those for our productivity and our optimization, because we do have room to continue to improve in both of those areas,” she said. “When you think about being more fully staffed, you can also [reduce] the mileage for our staff and offset those mileage costs.”

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