Enhabit Plots Growth Path With Strategic Changes, Renewed Unitedhealth Agreement

The move to exit its previous Medicare Advantage agreement with UnitedHealthcare, as well as the hurricanes that struck the United States last fall, contributed to a Q4 loss for Enhabit Home Health & Hospice (NYSE: EHAB), but the company’s leaders are gearing up for 2025 with a strategy for growth.

In the fourth quarter, Enhabit reported net service revenue of $258.2 million and a loss of $46 million, despite a strategic focus on stabilizing Medicare admissions and increasing non-Medicare volumes.

As the company looks toward 2025, its leaders to enhance the growth trajectory through new payer contracts and cost-saving measures, anticipating improved adjusted EBITDA against a backdrop of significant operational changes.

The home health segment experienced a 4.3% decline in revenue in Q4, dropping from $209.5 million in the fourth quarter of 2023 to $200.4 million in the same quarter of 2024.

“Home health executed on specific growth strategies in 2024,” President and CEO Barb Jacobsmeyer said in an earnings call. “Throughout the year, we focused on stabilizing our Medicare fee-for-service admissions as a percentage of overall home health admissions, growing the percentage of home health visits in our payer innovation contract and leveraging visit efficiency to increase clinical capacity.”

As in previous quarters, Medicare fee-for-service made up 44% of home health admissions in the fourth quarter, according to Jacobsmeyer. Non-Medicare admissions increased by 10.7% year over year, contributing to the company’s total admission growth of 1.8%.

“Our home health team achieved total admissions growth even while replacing United Healthcare (UHC) volumes for much of the fourth quarter and managing through the impact of Hurricanes Helene and Milton,” she said.

Jacobsmeyer speculated that if UHC volumes had remained flat and there had been no hurricanes, growth in admissions would have been 5.4%, which would have aligned with the second and third quarters.

Enhabit Home Health & Hospice is nationally operated across 34 states with over 10,000 employees. The company’s footprint includes 255 home health locations and 115 hospice locations.

Cost saving strategies

Enhabit famously parted ways with several Medicare Advantage (MA) payers in 2024, including UHC. After nine months of unsuccessful negotiations, Enhabit submitted a termination notice to the insurance giant on Aug. 1, 2024, to dedicate clinical resources to fee-for-service Medicare patients. The two companies reached a new home health agreement in December 2024.

“We enter 2025 in a stronger position, with our new UHC contract in place alongside our other two fully ramped-up national contracts,” Jacobsmeyer said. “Our home health teams can once again be full-service providers for our referral sources. Our teams are motivated and reenergized by their ability to focus solely on admission and census growth.”

This focus is reportedly already yielding results, as the company announced a census growth of 7.2% sequentially from January to February 2025.

Regarding cost structure strategies, Enhabit announced its plans to close or consolidate several branches in the third quarter of 2024. In a follow-up, Jacobsmeyer stated that the company would now close five home health and two hospice branches while consolidating one home health and two hospice branches. The closing dates for branches vary by state due to notice requirements, but she expected that seven would be closed or consolidated by the end of the first quarter of 2025, with the remainder by the end of the second quarter.

“We anticipate the impact of these closures and consolidation will improve 2025 adjusted EBITDA by approximately $1 million or by an annualized rate of $1.5 million,” she said.

Jacobsmeyer also stated that the company would outsource coding functions as an additional cost-saving measure. All branches would be transitioned by the end of the first quarter, and the company estimates $1.5 million in cost savings for the remainder of 2025.

Looking forward to 2025

Company guidance for the full year 2025 is net service revenue between $1.05 billion and $1.08 million and adjusted EBITDA between $101 million and $107 million, reflecting growth of approximately 7% at the wide end of the range.

Enhabit’s CFO, Ryan Solomon, said that he believes the quarterly case for the company’s full-year adjusted EBITDA guidance will show incremental, sequential improvement each quarter throughout 2025, with acceleration anticipated after the first quarter, during which the company expects 23% to 24% of full-year adjusted EBITDA to be realized.

“The quarterly cadence outlined reflects the trough in our home health segment as we pivot from replacement to growth made throughout Q1 and following the signing of our national agreement in late Q4 2024,” Solomon said on the earnings call.

Referencing home health, Solomon said that 2024 was a foundational year to set the stage for consistent census growth while using the results of Enhabit’s payer innovation strategy to differentiate the company in the market as a true full-service provider to its referral sources, allowing it to both grow and improve the mix.

The company’s payer innovation strategy has reportedly continued to foster MA growth, with 48% of non-Medicare visits now in payer innovation contracts at improved rates. The strategy has also improved clinical capacity and increased favorable payer contracts. Enhabit has negotiated 76 new contracts and has a pipeline of 49 new contracting opportunities, with an additional 31 agreements being renegotiated, according to Solomon.

“This, combined with continued staffing and cost disciplines, should allow us to expand home health margins as we exit 2025 despite CMS rate reimbursement increases not keeping pace with our overall market inflation,” he said.

The post Enhabit Plots Growth Path With Strategic Changes, Renewed UnitedHealth Agreement appeared first on Home Health Care News.