Enhabit Inc. (NYSE: EHAB) expects consistent hospice growth even as it contends with payer and reimbursement headwinds for its home health business.

The home health and hospice provider recently terminated its home health contract with the Medicare Advantage payer UnitedHealthcare, a subsidiary of UnitedHealth Group (NYSE: UNH), citing nine months of unsuccessful negotiations. In addition, Enhabit and the rest of the home health industry are facing a potential 1.7% rate cut from the U.S. Centers for Medicare & Medicaid Innovation’s proposed 2025 payment rule.

Meanwhile, Enhabit’s hospice segment continues to grow sequentially.

“We’re not under the same reimbursement uncertainty for hospice. Based on the final rule at this point that will go into effect Oct. 1, we expect an approximate 3% increase, CFO Crissy Carlysle said at the Wells Fargo Healthcare Conference. “Based off our current census and mix, that’s about a $6 million tailwind for 2025 … As we continue to grow our census, we expect to be able to spread those out more, so our cost per day should be fairly stable, and we should be able to grow in regards to not having to add additional fixed costs in order to achieve that.”

Carlyle also credited Enhabit’s case management system, which it implemented in 2022, as a contributor to its hospice growth.

Enhabit brought in $260.6 million in revenue during the second quarter, a 0.6% decrease compared to last year’s same period. The Dallas-headquartered company has 112 hospice locations and 256 home health locations across 34 states.

Enhabit’s hospice segment revenue saw a 3.9% year-over-year rise, reaching $50.4 million, resulting from boosted clinical capacity. The company’s average hospice daily census reached 3,517 patients during the second quarter, or a 2.7% year-over-year increase. Total hospice admissions hovered at 2,888, representing a 1.8% jump.

A spate of hiring has allowed for increased patient volume. The company has added 243 full-time nurses to its ranks since its 2022 spinoff from Encompass Health (NYSE: EHC), CEO Barb Jacobsmeyer said in a recent earnings call.

RoboToaster / Home Health Care News

Enhabit has also been focused on strengthening business development. The company added three new vice presidents of business development at the end of last year and has continued to reinforce that team during 2024, according to Jacobsmeyer.

“If you look back at last year, we had a lot of capacity constraints clinically. We were very successful last year changing to a case management model that allowed us to recruit and retain staff. That recruitment and retention allowed us to not only eliminate all contract labor by the end of last year but also to be able to remove all capacity constraints,” Jacobsmeyer said at Wells Fargo. “Once we were able to remove the clinical capacity constraints, we could really focus on building up business development.”