Enhabit Home Health & Hospice Finally on the edge of the fetus

The vision of Enhabit Home Health & Hospice – soon to be a stand-alone company following the spin-off of Encompass Health Corporation (NYSE: EHC) – is becoming clearer with each passing day.

Over the past two weeks, Encompass Health has given the public a look at its organized thoughts on Enhabit, which have been coming to this for some time. In fact, Encompass Health sites have been moving to Enhabit sites since February.

This is after the company first announced in December 2020 that it was exploring “strategic alternatives” for its home health and hospice business, which included sales, spin-offs or mergers. Spinoff was identified as the best option later in 2021, but not without repulsion.

First, investment firm Jana Partners – which owns more than 2% of Encompass Health – urged the company to reconsider options, particularly the merger. Then there were rumors that there may be other buyers willing to buy the business segment, including private investment company Advent International and home care provider Aveanna Healthcare Holdings (Nasdaq: AVAH).

But in the end, the spin is at full speed and the industry will once again win another home health-specific partner in the public market. According to a recent registration on Form 10 with the US Securities and Exchange Commission, Enhabit now plans to split completely by next month, except for the usual regulatory approvals and conditions.

A slide deck of Enhabit was shown on Monday in an 8-K file from Encompass: a home healthcare provider and hospice with a market share in the top 5, including 252 home healthcare locations in 34 states and 99 hospice locations in 22 states.

Taken together, they account for more than $ 1.1 billion in annual revenue. The company will have more than 10,000 employees, excluding employees in the corporate office.

Source: Encompass Health

Enhabit CEO Barb Jacobsmeier told Home Health Care News in February that the biggest adjustment in her new role was working with the mobile workforce, but she was also focused on the company’s staffing situation.

“For me, the learning curve is definitely about working with a mobile workforce,” said Jacobsmeier. “It’s really different from being able to go around all your employees in a few hours. But coming to the hospital helped me know what I always expected from home health as a provider to my patients. So I know what our team should be proud of and what we’re doing really well. “

Jacobsmeier used to be the head of Encompass Health’s inpatient rehabilitation business. She joins Enhabit at the helm of Chrissy Carlisle as CFO, former head of Encompass Health’s investor relations department.

“We had a few successful quarters here,” Jacobsmeier continued. “I’m excited to be able to turn the page, stop talking about turnover and talk about detention. I think this is the place. And it’s not meant to sound easy. I don’t think it’s easy at all. I think it’s really, very difficult. But I think it’s doable. “

The slide review also included the fact that 80% of the home health company’s revenue comes from a Medicare service fee.

Encompass Health leaders also drew attention to this discrepancy between juggling Medicare recommended fees and Medicare Advantage (MA) recommendations in recent earnings calls, noting in particular the preference for service fees given rate differences, especially when you are dealing with a shortage of staff.

“I think home health in the past, [it] was a bit exploited because it was a very fragmented industry, “said Encompass Health CEO and President Mark Tarr at the BofA Securities 2022 Health Conference. The agency will not take care of the patient, well, there will be others who would like to get stronger. “

But in the presentation, Enhabit said it wanted to expand its focus on MA, given market trends that will make MA the dominant type of insurer for Medicare beneficiaries – likely by the end of the decade.

Source: Encompass Health

Expected growth

Two weeks ago, Encompass also unveiled Enhabit loan agreements, including a $ 400 million term loan and a $ 350 million revolving loan.

As he prepares to be on his own, Jacobsmeier and Carlisle will take over as sole decision-makers for growth plans, while everything went through Encompass Health during this period of failure.

Source: Encompass Health

In 2022, Enhabit noted that it plans to spend $ 50 million to $ 100 million on strategic acquisitions while stimulating organic growth. It also expects to open 10 de novo locations.

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