A day after the CEO announced its planned departure, Enhabit Inc. (NYSE: EHAB) announced that it had closed or consolidated 11 branches by the end of the second quarter.
According to the company's second quarter revenue call, the company plans to consolidate additional home health and hospice branches by the end of the third quarter. The closure occurs when a company evaluates its cost structure in light of proposed Medicare home health payment rules.
“We can make tougher decisions,” Barb Jacobsmeyer, president and CEO of Enhabit, said in the phone. “We will continue to assess the potential limitations of future investments in additional branch closures or consolidation, each community's service area, technology and overall (general and administrative) (G&A) costs. Evaluating these and other potential levers is necessary to maintain a competitive wage rate.
The company has closed several branches and opened one at-home hygiene and two hospice locations while considering other such decisions, and is on track to 10 locations in 2025.
Enhabit evaluates several strategies to address the “extreme headwinds” of proposed cuts while trying to maintain access to high quality care.
“Needless to say, if CMS does not change its extreme position, something will have to give,” Jacobsmeier said. “Our size and size, coupled with recent investments in technology and operational improvement, puts us in a position to address the challenges of this moment.”
Enhabit has been advocated against the proposed reduction “nonstop” and has “significant concerns” with the Centers for Medicare and Medicaid Services methodology. The final rules were less serious than the rules proposed in the previous year, but there is no guarantee as to where the final 2026 rules will land, Jacobsmeyer said.
Despite these challenges, the company says it is well located for success in the second half of 2025 thanks to its enhanced balance sheet.
In the second quarter, Enhabit Net Service Inverue reported an adjusted EBITDA of $266.1 million and $206.9 million. Non-medicare admissions for home medical care increased by 5.2%, while total admissions increased by 1.3% from the previous year. If the branches closed in 2025 were regularised, total admission growth sounded at 2%.
According to Jacobsmeyer, Enhabit's home healthcare performance is a payer contract initiative, focusing on the balance between admissions and census payers.
The company encountered “confusion” over admissions and census at the end of the second quarter due to renegotiation with payers nationwide.
“In mid-June… the payer sent the patient a notice by July 15th that he would not become a contractor,” Jacobsmeyer said. “Unfortunately, that causes confusion. The census from that payer dropped 59% of two peak census for the quarter between mid-600 and mid-June. On average, its payers are just over 3%.
The company is currently reaching 76% of its peak census from payers, with weekly admissions averages up about 13%. The company feels “confident” as it regains the rest of its peak census and grows from it, Jacobsmeier said.
Still, Enhabit achieved double-digit increases per visit rate. This will take effect on August 15th.
The company expects full-year revenue to range from $1.06 billion to $1.073 billion, with annual adjusted EBITDA of between $104 million and $188 million.
