Enhabit Inc. (NYSE: EHAB) is beginning to see the fruits of its growth strategies, while reporting decreased home health care services revenue.

After reporting a loss of $46 million in 2024, the company’s leadership drew up a game plan to establish a foundation for success in 2025.  This strategic plan included securing new payer contracts and implementing cost-saving measures. After beginning to execute on these steps, President and CEO Barb Jacobsmeyer announced a promising start to 2025 during Enhabit’s Q1 earnings call on Thursday.

“Our first quarter home health performance results from executing on our payer contract initiative are optimistic,” Jacobsmeyer said during the call. “We started 2025 in a stronger position with our payer contract, and we’re able to fully focus on growth.”

This growth includes transitioning from volume replacement in the first quarter after signing a significant national contract, allowing the company to leverage its full-service provider capabilities with referral sources. The company also reported that its cost structure strategy updates are progressing as planned. 

Enhabit Home Health & Hospice is nationally operated across 34 states with 370 locations. The company’s footprint includes 255 home health and 115 hospice locations.

On the earnings call, Enhabit leadership outlined key priorities for 2025, including growth, financial health, quality and people. The company plans to continue focusing on home health census growth, payer mix optimization, hospice average daily census expansion and de novo location development.

The company reported net Q1 income of $17.8 million, which includes a gain of $14.7 million from the sale of investments. Consolidated adjusted EBITDA grew by 5.1% year-over-year and by 6% sequentially, reaching $26.6 million.

On the other hand, Enhabit’s home health service revenue declined by 5.9% compared to the same quarter last year.

Company leadership has taken action to improve home health rates. In Q1, renegotiated 43 payer contracts to secure better pricing and shift to more episodic arrangements. Jacobsmeyer said the company would continue monitoring recertification rates and focus on growing census through admissions and early institutional referrals to offset recertification declines.

In 2024, Enhabit famously walked away from larger contracts unfavorable to the company. Most notably, it terminated its contract with UnitedHealth Group’s (NYSE: UNH) UnitedHealthcare in August.

In December, Enhabit formed a new home health agreement with the insurer. 

“As Medicare Advantage grows, even if we believe a patient needs a recertification, we’re not always successful in getting that,” Jacobsmeyer said. “So, our focus has been on growing census because ultimately that’s going to be the driver, whether that’s through admissions or recertification.”

Enhabit announced a 3.7% sequential growth in its home health census, with non-Medicare admissions increasing by 7.4%. Year-over-year, total admissions rose by 0.7%, a growth attributed to a shift in volume replacement.

Cost savings strategies

Enhabit saw the cost per home health patient day decrease by 2.4% compared to the previous year, and the company plans to lower costs further by leveraging technology.

In the first quarter, Enhabit completed the transition of all branches to an outsourced coding resource, which the company expects to generate $1.5 million in cost savings for the remainder of 2025. Additionally, the company has closed or consolidated seven branches, with plans to close four more by the end of the second quarter.

Furthermore, Enhabit is piloting two internally developed applications: one aims to improve communication between clinicians and patients regarding scheduled visits, while the other focuses on enhancing communication between the business development and operations teams regarding patient referrals and admissions processes.

“Q1 2025 financial performance delivers strong sequential growth, margin expansion and continued deleveraging of our balance sheet,” said Ryan Solomon, chief financial officer. “Our execution in this quarter on broader strategic priorities for 2025 has enabled a strong start to the year.”