Encompass Health (NYSE: EHC) is considering a strategic repositioning of its business lines that could lead to a spin off of their home health and hospice services to a new, separate company. Other options under consideration include a potential merger, sale, initial public offering or other transaction.
Encompass provides both facility-based and home-based patient care through inpatient rehabilitation hospitals, home health agencies and hospice. The company operates 137 hospitals, 242 home health locations, and 83 hospice locations in 39 states and Puerto Rico.
“Since joining together with Encompass Home Health and Hospice in 2015, we have generated substantial growth in both our business segments,” said Encompass President and CEO Mark Tarr. “We continue to deliver high-quality, cost-effective, integrated care to a growing number of our patients.”
Despite facing blustery COVID-19 headwinds, the company’s hospice segment saw revenue growth during the third quarter of 2020. The hospice business line brought in $51.2 million in revenue, a 1.6% increase from $50.4 million in the prior year’s quarter. Home health income declined due to reduced referrals during the pandemic and fallout related to patient-driven groupings model (PDGM), leading to a 5.1% dip for its overall Home Health & Hospice segment.
Encompass is not the first large hospice provider to consider a spin off. In 2019, the Pennant Group (NASDAQ: PNTG) which owns and operates hospice provider Cornerstone Healthcare, was spun off from The Ensign Group (NASDAQ: ENSG). Pennant retained Ensign’s hospice, home health and senior living operations.
Encompass has not yet established a timetable for completion of the strategic review process, which is undergoing board approval. Citi and Wachtell, Lipton, Rosen and Katz are advising the company in connection with the strategic review.
“Our primary focus this year has been to ensure Encompass Health’s best possible response to this unprecedented global pandemic,” said Lee Higdon, chairman of the Encompass Health board of directors. “This notwithstanding, the United States health care delivery system continues to change, and we believe the time is appropriate for us to further reassess the corporate structure that may optimize the strategic positioning and growth of our businesses.”