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Enhabit Inc. (NYSE: EHAB) is in talks with interested parties about a possible forthcoming sale.
Cost reductions helped propel revenue growth for Enhabit Inc.’s hospice business, though the company had no further updates on its planned “strategic alternatives,” which could include a sale.
“The board, with the assistance of our advisors, is being comprehensive in its assessment of strategic alternatives, and discussions with interested parties are ongoing,” Enhabit CEO Barb Jacobsmeyer said today in an earnings call. “We are in the later stages of our strategic review, but don’t intend to disclose developments unless and until we determine further disclosure is appropriate or necessary.”
The company announced last August that it was considering its alternatives. Progress on the company’s goals has not been fast enough, Jacobsmeyer said at the time. This followed a June 2023 push by one of Enhabit’s minority investors, AREX Capital Management, to pursue a sale or other alternative in a letter to the home health and hospice provider’s board of directors. AREX holds about 4.5% of Enhabit’s shares.
AREX was motivated in part by recent, massive deals involving similar companies. For example, during the past year the UnitedHealth Group (NYSE: UNH) subsidiary Optum closed a deal to purchase LHC Group for $5.4 billion and agreed to acquire Amedisys (NASDAQ: AMED) for $3.3 billion.
Thost transactions came on the heels of Humana Inc.’s (NYSE: HUM) 2021 acquisition of Kindred at Home for $8.1 billion.
Enhabit in Q4 2023 brought in $260.6 million, down year-over-year from $263.2 million. The losses are largely the result of a shifting home health payer mix from fee-for-service to Medicare Advantage, which generally pays lower rates. Nevertheless, the company beat Wall Street expectations by 0.2%, Brian Tanquilut, equity analyst for the investment banking firm Jefferies Financial Group, indicated in a research note.
Net service revenues for the hospice segment rose 7.8% to more than $58 million in Q4 compared to the prior year’s quarter, driven in part by the October 2023 base rate increase from the U.S. Centers for Medicare & Medicaid Services (CMS). Enhabit also saw cost-per-visit drop to $76 from $77 in prior years.
Enhabit in the fourth quarter of last year opened one new hospice location and one home health. The company foresees 10 de novos launching in 2024.
The company’s 2024 priorities for its hospice segment include boosting census growth, increasing its use of analytics to improve quality of care and building greater efficiency into admissions workflows for speedier processing, according to slides accompanying the company’s Q4 earnings report.
“We continually analyze our hospice business and efforts to increase efficiency in the referral to admission process and improve our ability to respond quickly to our referral sources,” Jacobsmeyer said. “Recently, we re-allocated certain hospice resources to form centralized admission departments. With a sole focus on those efforts. We complement our organic growth strategy with our de novo strategy.”
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