Enhabit(US:EHAB)2023-04-13 16:00Financial Performance - The average cost per visit for the home health segment was $89 in 2022, compared to $83 in 2021, and $84 in 2020, which is 10.9% lower than the public peer average of $100[26]. - The company has a 30-day hospital readmission rate of 14.2%, which is 400 basis points lower than the national average of 18.2%[47]. - In 2022, Medicare and Medicare Advantage revenues accounted for 92.6% of total net service revenue, with Medicare representing 78.4% and Medicare Advantage 14.2%[71]. - The company recognized net service revenue based on estimates of transaction prices, including adjustments for contractual allowances and uncollectible amounts[321]. - The company adjusted reserves for the year ended December 31, 2022, due to a slowing rate of collections influenced by a shift in third-party payor mix[324]. - As of December 31, 2022, total accounts receivable amounted to $150.5 million, a decrease from $170.6 million in 2021, representing a decline of approximately 11.9%[327]. - Current accounts receivable decreased to $149.6 million in 2022 from $164.5 million in 2021, reflecting a reduction of about 9.0%[327]. - The amount of patient accounts receivable representing denials under review or audit was $2.5 million in 2022 compared to $8.9 million in 2021 for the home health segment, indicating a significant decrease of approximately 71.9%[327]. - An impairment charge of $109.0 million was recorded in the three months ended December 31, 2022, due to a decrease in the carrying value of the home health reporting unit[334]. - The fair value of the hospice reporting unit exceeded its carrying value by less than 15% as of December 31, 2022, with an allocated goodwill balance of $303.6 million[334]. - A 50 basis point increase in the discount rate assumption would lead to a decrease in the fair value of the Home Health and Hospice reporting units by approximately $38 million and $15 million, respectively[335]. - The company did not have a valuation allowance recorded against any of its deferred tax assets as of December 31, 2022 and 2021[341]. - The company identified potential impairment triggering events in the fourth quarter of 2022, including lower than expected operating results and a change in acquisition strategy[334]. - The fair value of the home health reporting unit exceeded its carrying value by less than 5% as of September 30, 2022[332]. - The company utilizes both the income approach and market approach to estimate the fair value of its reporting units during impairment testing[334]. Market Trends and Growth Opportunities - The home health expenditures are projected to grow from approximately $125.2 billion in 2021 to $226.4 billion by 2030, representing a 6.8% compound annual growth rate[29]. - The total number of Medicare beneficiaries choosing Medicare Advantage is expected to grow to 61% by 2032, presenting a significant growth opportunity for the company[55]. - The company holds a leading position in home health services, representing approximately 69% of total home health Medicare revenues in 2020, indicating strong organic growth potential[50]. - The growth strategy includes organic growth, new location openings, strategic acquisitions, and expanding Medicare Advantage offerings[49]. Operational Insights - Since 2015, the company has deployed over $796 million in capital for 41 home health and hospice acquisitions and opened 33 de novo locations across 16 states[26]. - Since 2015, the company has opened 33 de novo locations across 16 states, including 18 home health and 15 hospice locations, to complement organic growth[51]. - The company's home health business had 202,495 patient admissions for the year ended December 31, 2022, operating 252 home health agencies in 34 states[56]. - The hospice business had an average daily census of 3,519 hospice patients for the year ended December 31, 2022, operating 105 hospice agencies in 23 states[61]. - Approximately 40% of home health patient admissions were from physician offices or community referral sources, while 60% were from facility-based sources[57]. - The company has a proven history of integrating acquisitions, demonstrated by consistent growth in EBITDA of acquired businesses following acquisition[53]. - The company is reorganizing its home health and hospice organizations to improve alignment between business development and operations, enhancing referral development[66]. Regulatory Environment - The company is subject to audits that may lead to adjustments in Medicare and Medicaid reimbursements, impacting financial results[82]. - The federal False Claims Act imposes penalties of up to $27,000 per false claim, with potential treble damages for overpayments[109]. - The Improving Medicare Post-Acute Care Transformation Act requires standardized patient assessment data reporting, with penalties for non-compliance including a 2% reduction in market basket prices[124]. - The Home Health Review Choice Demonstration was initiated to test pre-claim review effectiveness in reducing Medicare fraud and expenditures[127]. - The company must navigate complex regulations that affect reimbursement rates and operational licenses, impacting growth strategies[104]. - The Anti-Kickback Law prohibits remuneration to induce patient referrals, with violations leading to significant penalties and exclusion from Medicare[111]. - The Stark Law restricts physician referrals for designated health services to entities with which they have a financial relationship, with penalties for violations[113]. - The company has developed a compliance program overseen by the Compliance/Quality of Care Committee to meet regulatory and legal requirements[104]. Employee and Organizational Development - The company employed approximately 11,000 individuals as of December 31, 2022, with no labor union representation[132]. - Employee development programs include tuition reimbursement and scholarship opportunities, with a 20% to 50% reduction in tuition costs for academic advancement[142]. - The company maintains a strong focus on diversity, equity, inclusion, and belonging, recognized as a 'Top 100 Best Place to Work for Women and for Diversity' in 2019[133]. Financial Obligations and Capital Expenditures - Total contractual obligations as of December 31, 2022, amounted to $729 million, with long-term debt obligations of $390 million[314]. - Capital expenditures for 2022 were $7.1 million, with expectations of $5 million to $10 million for 2023[316]. Technology and Innovation - The information management system provides real-time market intelligence to the sales team, enhancing referral source identification[142]. - The company has invested in technology to improve patient care and operational efficiencies, including an electronic medical records system[140].