A public or private separation of Encompass Health’s (NYSE: EHC) home health and hospice segment is underway, though details of the forthcoming transaction remain hidden. Encompass announced last December that a strategic repositioning of the segment was in the cards and expects to reveal their ultimate decision before the end of this year.
To ready themselves for a separation, Encompass has prepared audited carved-out financial statements for its home health and hospice business as well as a draft registration statement for the U.S. Securities and Exchange Commission, among other regulatory filings.
“Our board of directors believes a full or partial separation of the home health and hospice business will enhance the long term success and value of the business,” CEO Mark Tarr said in an earnings call. “The final form is still to be determined, as we continue to pursue a separation transaction by either public or private means. Many of the key preparatory actions required for separation have been completed.”
Tarr indicated that the company will make no further comment about separation plans for the time being.
In June, Barbara Jacobsmeyer took the helm as CEO of the home health and hospice business, with Crissy B. Carlisle, currently the company’s chief investor relations officer, coming on as CFO. The previous CEO, April Anthony, stepped down June 18 in a planned departure. These appointments led some industry observers to conclude that a spin off would be coming.
The company’s home health and hospice segment revenues jumped 14.6% during the second quarter to more than $286 million, up from $249 million in Q2 2020.
Recent acquisitions activity is supporting hospice admissions growth at Encompass. In April, the company acquired Frontier Home Health & Hospice for $99 million, adding 11 hospice and nine home health locations across five states. This was a significant contributor to a 14.7% increase in home health and hospice admissions during the second quarter.
Same-store hospice admissions dropped 1.9% during Q2, but this was offset by a 5.3% boost from Frontier.
Encompass like many others has been plagued by workforce shortages, particularly among nurses. While this has been a longstanding problem for the industry, the COVID-19 pandemic has exacerbated the labor issue.
“There’s been a lot of pressure on nursing levels for a number of years, but it was certainly exacerbated in 2020,” Tarr said. “It continues to be a market-by-market issue. It seems to be primarily limited to nursing, but we see more pressure in home health than we have with the hospitals.”
More than 35% of hospice leaders surveyed by Hospice News earlier this year cited staffing shortages as a top concern for their organizations, along with regaining access to patients in facilities.
Many hospice providers have seen staff turnover rise during the pandemic, as have organizations in other health care settings. Slightly more than 20% of health care workers have considered leaving the field due to stress brought on by the pandemic, and 30% have considered reducing their hours, according to a recent study published in JAMA Network Open.
Encompass has brought on more staff dedicated to employee recruitment, which is contributing to a hiring rebound. The company hired more nurses during the second quarter of 2021 than it had in any other period since 2019, according to Encompass CFO Doug Coltharp. Coltharp indicated in the earnings call that the company does not expect staffing issues to limit its growth.
“We’ve always had a focus on retention, and we’re going to continue that focus,” said Jacobsmeyer. “We’ve added some flexibility around part-time and PRN in addition to our full time positions. Nurses today are looking for a lot more flexibility; that’s also why we’re seeing some success in our recruitment.”
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