Enhabit Experiences Growth in Home Health and Hospice Segments

Enhabit Home Health & Hospice (NYSE: EHAB) has reported mixed results in its second quarter 2024 earnings. The company’s consolidated net revenue decreased by 0.6% year-over-year to $260.6 million, despite experiencing growth in its Home Health and Hospice segments.

Notably, total Home Health admissions increased by 6.4%, thanks to payer innovation strategies and effective clinical resource utilization. The adjusted EBITDA for the quarter rose by 5.4% to $25.2 million.

Enhabit has also updated its full-year 2024 guidance, narrowing the expected ranges for net service revenue and adjusted EBITDA, signaling confidence in the company’s long-term prospects.

### Key Takeaways
– A 6.4% rise in Home Health admissions was recorded, alongside steady growth in Hospice average daily census.
– The proposed 2025 home health payment rule may lead to a 1.7% net decrease in revenues for Enhabit.
– Consolidated net revenue for Q2 was $260.6 million, slightly down from the previous year.
– Adjusted EBITDA increased by 5.4% to $25.2 million.
– Enhabit’s leverage ratio improved to 5.1x, with available liquidity of around $72 million.
– The company anticipates mid to high single-digit growth in volumes over the next three years, powered by organic growth and new locations.

### Company Outlook
– Enhabit has revised its full-year 2024 guidance, now expecting net service revenue between $1.060 billion and $1.063 billion and adjusted EBITDA between $100 million and $106 million.
– The company forecasts mid to high single-digit growth in both Home Health admissions and Hospice volumes in the next three years.
– Plans are in place to open approximately 10 new locations each year, pending licensing and regulatory approvals.

### Challenges
– The proposed 2025 home health payment rule poses a potential challenge with a projected net revenue decrease of 1.7%.
– A slight decline of 0.6% in consolidated net revenue year-over-year was noted.
– Limited acquisition opportunities are being experienced due to the company’s current credit agreement and leverage.

### Positive Highlights
– Home health adjusted EBITDA improved due to reduced costs per visit and a shift towards non-Medicare visits.
– Revenue growth in Hospice was aided by higher Medicare reimbursement rates and increased patient days.
– Effective strategies, such as a centralized admissions department, have led to improved referral processing.

### Misses
– The termination of the United contract did not significantly affect revenue guidance.
– An issue with durable medical equipment (DME) has impacted cost per day, though Enhabit anticipates gaining leverage as volumes increase.

### Q&A Highlights
– Enhabit is dedicated to understanding shifts in payer mix and establishing strong relationships with referral sources to enhance its Medicare business.
– The company is actively working on legislative advocacy to lessen pressures on home health services and is engaging with trade associations for support.
– A positive impact of $1 million was reported from changes in payer mix resulting from newly negotiated contracts.

Enhabit’s second quarter performance showcases the company as it navigates industry challenges while leveraging strategic initiatives for growth. Although there has been a minor reduction in net revenue, improvements in operations and a focus on optimizing payer mix have led to a positive outlook. With plans to open new locations and foster organic growth, Enhabit appears well-positioned for ongoing success in the dynamic home health and hospice care market.