Encompass Health CEO: Palliative Care Reimbursement Insufficient

Despite growing demand, the lack of a robust reimbursement structure for palliative care services may be keeping some providers out of that market. Encompass Health (NYSE: EHC) will not be entering the palliative care space any time soon, choosing to focus on growing its current hospice and home health operations.

About 50% of community-based palliative care providers are hospices, according to the Center to Advance Palliative Care. A rising number of hospices have been diversifying their services to engage patients further upstream and take advantage of emerging value-based payment models, with palliative care as one of the most common new business lines. However, reimbursement concerns may be slowing or limiting palliative care’s potential growth. 

“We’re keeping an eye on what’s happening with regard to personal care services. At some point in time, we think that Medicare and other payers are going to recognize the value that may be had in palliative services,” said Encompass CEO Mark Tarr at the UBS Global Healthcare Virtual Conference. “Right now, we don’t feel like the compensation structure for either of those two service lines is sufficient for us to devote capital to them, and we want to continue to focus within home health and hospice on clinical services.”


Currently Medicare reimburses for palliative care physician and licensed independent practitioner services through fee-for-service payment programs that do not sufficiently cover the full range of interdisciplinary care. Efforts have been underway among health care providers, state governments, advocacy groups and payers, among others, to make community-based palliative care more accessible to patients and families.

CMS also allows Medicare Advantage plans to cover palliative care as a supplemental benefit. According to an analysis by ATI Advisory, 61 health plans nationwide are offering in-home palliative care as a benefit. This is up from 29 in 2019. More than 455,000 beneficiaries are enrolled in these plans. However, the impact of these plans fall short of a potential national model.

Encompass does intend to continue growing its hospice and home health footprint even as the company weighs options for a “strategic repositioning” of those business lines. Encompass announced in Dec. 2020 that it would consider a potential spin off, merger, sale, initial public offering or other transaction. The company could reach a decision as soon as July, Tarr indicated in an earnings conference call earlier this month.


Acquisitions will be a key component of the company’s anticipated hospice growth. Encompass recently acquired Frontier Home Health & Hospice, giving Encompass 11 new hospice and nine home health locations in the Alaska, Colorado, Montana, Washington and Wyoming markets. Frontier earned nearly $36 million during 2020.

The Encompass footprint includes 82 hospice and 241 home health locations across 39 states in the United States and Puerto Rico. The company’s hospice segment brought in $53.6 million during the fourth quarter of 2020, up from $50.8 million in the prior year’s quarter.

The company expects further acquisitions to complete this year, including hospice transactions.

“If you look over the last several years, based on a higher organic growth rate and based on the composition of the more significant M&A transactions we’ve been doing, those have been slightly more heavily weighted towards hospice,” Tarr said. “Hospice is increasing as a percentage of revenue within our home health and hospice segment. We’re going to be opportunistic about how we grow both of those franchises.”

Companies featured in this article: