Enhabit (NYSE:EHAB) 2025 Conference Transcript

Enhabit (NYSE: EHAB) 2025 Conference Summary Company Overview - Enhabit operates in the home health and hospice industry, focusing on providing care services to patients in their homes. Key Points Industry Performance - The hospice segment has continued to outperform expectations, reinforcing the effectiveness of strategies implemented over the past few years [2][4] - Home health payer strategies are beginning to yield positive results, particularly in negotiations with various payers [2][4] Financial Performance - The company reported strong performance in 2025, with a focus on reducing leverage and improving free cash flow [2][5] - Hospice revenues increased by 20% in the quarter, driven by admissions and revenue per patient day [29] - The company anticipates low to mid-single-digit growth for home health and mid to high single-digit growth for hospice in the coming years [4] Proposed Rule Impact - The final rule from CMS is expected to be released by the end of November or early December, with expectations that it will be better than the proposed rule [6][8] - The proposed rule includes a potential 6.4% rate cut, which could create a headwind of $35 million to $40 million for the company [9][14] - Clarity on the final rule is critical for the company to strategize effectively and mitigate potential impacts [10][12] Margin and Cost Management - Hospice margins have benefited from increased volume on fixed costs, indicating durable margin profiles [5] - The company is implementing a pilot program to reduce visits per episode from 15 to 13, which could result in significant cost savings without compromising quality [11][39] Payer Relationships - The company has successfully renegotiated contracts with national payers, resulting in low double-digit increases in rates [17] - Most payer agreements are three-year contracts, with a preference for episodic arrangements to manage patient visits effectively [18] Labor Market and Workforce - The clinical workforce situation has improved compared to the pandemic years, with turnover rates returning to pre-pandemic levels [21][55] - Wage trends are stabilizing at a normal increase of 2.5% to 3% [52] Growth Strategy - Enhabit aims to open 10 new locations each year, with a focus on hospice services [37] - The company is prioritizing de novo strategies and expanding its footprint in markets where it already has home health services [34][36] Market Dynamics - The company has not observed significant changes in market dynamics despite the presence of larger competitors like Humana and UnitedHealth [22] - There is ongoing interest in the Medicare Advantage market, with potential stabilization in the transition back to fee-for-service models [23] M&A Opportunities - The company is exploring strategic M&A opportunities, particularly in smaller and medium-sized assets that do not command high multiples [60][61] - Clarity from the final rule is expected to facilitate better alignment between buyer and seller expectations in the market [62][63] Summary Outlook - Enhabit is positioned well for the end of 2025 and the start of 2026, with strong execution in hospice and improving metrics in home health [78][80] - The company is confident in its ability to navigate the proposed rule changes and maintain operational effectiveness [80]