With Strategic Review In Final Innings, Enhabit Takes Stock Of Medicare Advantage Contract Wins

Payer innovation success, continued progress with its people strategy and strong performance with quality outcomes. According to Enhabit Inc. (NYSE: EHAB) leaders, these areas were the company’s key achievements in 2023.

On the payer innovation front, CEO Barb Jacobsmeyer credits Enhabit’s hospital readmission rate for the company’s success when negotiating with payers and conveners.

“Our strongest factor in negotiating with payers and conveners, and in creating strong referral relationships, remains our 30-day hospital readmission rate that is 20.5% better than the national average,” Jacobsmeyer said during Enhabit’s fourth quarter earnings call on Thursday. “This quality is a solution to the challenge of rising health care costs, and helping payers manage their MLRs. Helping to control emergency room visits, hospitalizations, and readmissions results in higher patient and family satisfaction, and control of health care dollars.”


Dallas-based Enhabit has 255 home health locations and 108 hospice locations across 34 states.

In Q4, Enhabit negotiated a total of 11 new agreements with Medicare Advantage (MA) payers. Eight of these agreements were negotiated at episodic rates.

The company also announced a new national agreement that became effective Jan. 1, 2024.


“This new national agreement is an advanced episodic model that allows us to prioritize access to home care for patients discharged from institutional settings,” Jacobsmeyer said. “Said in another way, it aligns our incentives with the payers’ need for member access to skilled home care for a successful transition to home, following an institutional admission.”

Jacobsmeyer noted that this national agreement falls in line with Enhabit’s larger goal of moving away from the lower-paying agreements that don’t recognize the company’s ability to achieve high-quality outcomes.

Since the formation of the payer innovation team in 2022, Enhabit has negotiated 59 new agreements. More than two-thirds of these agreements are episodic rates.

Plus, 25% of Enhabit’s non-episodic visits were in new payer innovation contracts, a 5% increase from Q1 2023.

During the call, Enhabit leaders also touched on how the company is complementing its organic growth strategy with its de novo strategy.

“This allows us to enter a new market with low capital costs,” Jacobsmeyer said. “The main investment is in staffing, as we hire the clinical team to build the patient census to obtain our licensing survey.”

Enhabit added one home health and one hospice to de novo in Q4, which brought it total to eight de novo locations. The company expects to open 12 de novo locations in 2024.

Enhabit didn’t offer much update on its strategic review, except to say that the company is in the later stages of the process.

“The board, with the assistance of our advisors, is being comprehensive in its assessment of strategic alternatives, and discussions with interested parties are ongoing,” Jacobsmeyer said. “We are in the later stages of our strategic review, but don’t intend to disclose developments unless and until we determine further disclosure is appropriate or necessary. We will not be commenting beyond that.”

In Q4, Enhabit’s net service revenue was $260.6 million, a 1% decrease compared to $263.2 million in Q4 2022. The full year net service revenue for 2023 was $1.04 billion, compared to $1.07 billion in 2022.

“We are making significant progress demonstrating our value proposition to payers, as we negotiate new agreements with improved rates and are successfully shifting Medicare Advantage volumes into our payer innovation agreement,” Crissy Carlisle, CFO of Enhabit, said during the call. “The revenue and adjusted EBITDA impact from this volume shift has not been enough to overcome the financial impact from the erosion of Medicare fee-for-service volume.”

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