Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Enhabit Inc (EHAB, Financial) demonstrated a 6.4% total admission growth in the home health segment, driven by the payor innovation strategy.
- Non-Medicare admissions grew by 25.2%, contributing to overall admissions growth.
- The company successfully shifted 43% of non-Medicare visits to payor innovation contracts, increasing revenue per visit.
- Hospice segment showed steady progress with a 2.7% year-over-year increase in average daily census.
- Enhabit Inc (EHAB) eliminated nursing contract labor in 2023, positioning the company for long-term growth with 243 more full-time nurses compared to 2022.
Negative Points
- Consolidated net revenue decreased by $1.7 million or 0.6% year-over-year.
- Revenue in the home health segment declined by $3.6 million or 1.7%, primarily due to lower Medicare recertifications.
- Medicare fee-for-service admissions were down 11% year-over-year, indicating a need for improvement in this area.
- The company terminated its contract with UnitedHealthcare after unsuccessful negotiations, which may impact future revenue.
- Home office general and administrative expenses increased by $0.9 million year-over-year, offsetting some cost structure changes.
Q & A Highlights
Q: As we think about the turnaround process for the company, how are you strategizing to turn Medicare fee-for-service admissions around? Is that a salesforce thing, or are there other moves that can be made?
A: (Barbara Jacobsmeyer, President, CEO, Director): The initial strategy focused on building out payor innovation and payor contracts. We are seeing success in some branches, and now it's about taking those best practices across the company. This involves deep dives into referral sources and adjusting focus based on payor mix.
Q: There's pretty good success in bringing down cost per visit. How much room do you see in driving that figure down? And is there room to drive improvement in visits per episode?
A: (Barbara Jacobsmeyer, President, CEO, Director): We are benefiting from eliminating contract labor and focusing on productivity and optimization. Visits per episode have declined, and we are using freed-up capacity to serve more patients, which helps manage cost per visit.
Q: Thinking about home health demand, your overall admissions growth has had a solid first half. How should we be thinking about the contribution split between Medicare and non-Medicare admissions?
A: (Crissy Carlisle, CFO, EVP): The mix is the most sensitive factor in any outlook. We have plans to spread best practices from branches that are growing fee-for-service business. The termination of the UnitedHealthcare contract should speed up the process of moving volumes into higher-paying contracts.
Q: How are you thinking about the impact of the UnitedHealthcare contract termination on top-line contribution and long-term admission growth?
A: (Barbara Jacobsmeyer, President, CEO, Director): We feel confident in replacing that census with 68 other agreements, including two national agreements. Our current non-Medicare conversion rate is 48%, so we have room to replace that census over the notice period.
Q: What are your updated thoughts on permanent labor cost growth and turnover?
A: (Crissy Carlisle, CFO, EVP): We expect about 3% comp growth on average. The benefit is coming from eliminating contract labor and favorable claims experience on insurance-related costs. We continue to focus on productivity and optimization to manage costs.
Q: Can you talk about the drivers for the $30 million reduction in revenue guidance? Is that due to the UnitedHealthcare contract termination?
A: (Crissy Carlisle, CFO, EVP): The UnitedHealthcare contract has not been a significant part of our guidance. The main driver for the revenue guidance change is Medicare fee-for-service, where we still have work to do.
Q: What specific actions are you taking to grow the Medicare business?
A: (Barbara Jacobsmeyer, President, CEO, Director): We are doing deep dives into each book of business, using tools like Trella for Medicare claims information. We are also working with referral sources to understand payor mix shifts and redeploying business development teams as needed.
Q: What was the same-store census growth in the quarter for hospice?
A: (Barbara Jacobsmeyer, President, CEO, Director): Same-store average daily census (ADC) growth was 1.2% positive.
Q: How is the new DME contract progressing, and is there any further pressure on DME costs?
A: (Crissy Carlisle, CFO, EVP): DME and supplies had about a $2 million annual impact based on the new contract. We expect to gain leverage against that fixed cost structure as volumes grow.
Q: Do you think the headwind impact from payor mix changes has reached an inflection point?
A: (Barbara Jacobsmeyer, President, CEO, Director): We see positive results in branches growing fee-for-service and success in moving into payor innovation contracts. The termination of the UnitedHealthcare contract should make the shift faster.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
