Hospice Pivotal to Enhabit’s Growth Strategy as a Standalone Company

Hospice will remain a core piece of Enhabit Inc.’s (NYSE: EHAB) strategic growth plans following its recent announcements to remain a standalone business.

The company was mum about its strategic decision not to sell in Thursday’s earnings call, but executives elaborated on its home health and hospice focal points.

Dallas-headquartered Enhabit has been mulling a potential sale since investors floated the idea in June 2023. Ultimately, a strategic review process did not result in formal bids to buy the company, according to Enhabit CEO Barbara Jacobsmeyer.


“After the evaluation of a full range of strategic alternatives with the support of external financial and legal advisors, our strategic review process has concluded there was serious interest based on party engagement in the process,” Jacobsmeyer said in the earnings call. “However, the company did not receive any formal proposals for a transaction. The board will continue to be open to and consider all opportunities to enhance shareholder value.”

Macro headwinds such as uncertain regulatory developments and Medicare reimbursement policies, an evolving antitrust landscape, a difficult health care operating environment and persistently high interest rates were among the factors fueling Enhabit’s decision.

The news came with disappointment from some of the company’s investors, including AREX Capital. AREX has been an investor since Enhabit spun off from Encompass Health Corporation (NYSE: EHC) in July 2022. The company owns 4.8% of Enhabit’s shares.


AREX Capital last summer urged the company to consider a full or fair sale process, partly fueled by recent large-scale transactions in the home health and hospice space. These included UnitedHealth Group (NYSE: UNH) subsidiary Optum’s $5.4 billion acquisition of LHC Group in February 2023, with the company also inking a deal to purchase Amedisys Inc. (NASDAQ: AMED) for $3.3 billion last June.

“We are disappointed that Enhabit’s strategic review process has concluded without a sale of the Company,” the company told indicated in a statement. “We do not believe that this failure reflects Enhabit’s intrinsic value or strategic potential.” 

Enhabit’s strategic plans continue to hinge on a mix of organic and de novo growth, according to Jacobsmeyer. Expanded clinical and operational capacity will be key to expanding reach of its hospice services, she added.

Enhabit has launched two hospice de novos thus far this year, with “work underway” to unfold 10 more new locations by the end of 2024, she stated.

“In our hospice segment, our priority is growing census, which will allow us to gain operating leverage against the fixed cost structure associated with the case management staffing model,” Jacobsmeyer said. “To complement our organic growth strategy in both segments, we continue to strategically reinvest for growth to our de novo strategy. This allows us to enter a new market with low capital costs. A critical key to our organic and de novo growth is our people strategy.”

All told, Enhabit has 112 hospice locations and 255 home health locations across 34 states.

Enhabit’s revenue reached $262.4 million in the first quarter, with its home health segment bringing in $213.2 million of that total. The company’s hospice services revenue reached $49.2 million, decreasing slightly by 0.2% year-over-year.

Enhabit’s hospice segment has seen mixed results in the past few years, experiencing sequential improvements alongside year-over-year declines, according to CFO Crissy Carlisle.

The company’s average daily hospice census volumes reached 3,391 patients in Q1 this year, a 3.7% drop from 3,523 patients during last year’s same period. Meanwhile, total hospice admissions saw a 2.9% year-over-year decline, but grew 5.6% sequentially in Q1 compared to Q4 2023.

“We saw a sequential decline in average daily census throughout the fourth quarter of 2023, followed by a sequential increase in average daily census each month of the first quarter of 2024 that persisted into April,” Carlisle said. “As we continue to ramp up our business development team and balance our referral portfolio, we expect [hospice] average daily census to grow throughout the remainder of the year.”

The company attributes recent hospice growth to improved clinical capacity. Enhabit’s recruitment and retention efforts led to a 30% increase in full-time nursing candidates, with the company hiring 151 new nurses during this year’s first quarter, Jacobsmeyer stated.

Enhabit plans to continue leveraging predictive analytics to bolster its ability to deliver care more efficiently and improve quality outcomes, she added.

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