Merger, handshake

Encompass Health ended speculation about the fate of its home health and hospice business late Wednesday. It disclosed that this unit will be spun off to form an independent publicly traded company branded Enhabit Home Health and Hospice. A company spokeswoman told McKnight’s Home Care Daily Pulse that Barbara Jacobsmeyer, CEO of the company’s home health and hospice unit, will maintain that position at the new company.

Barb Jacobsmeyer

The company’s board of directors believes separating its inpatient rehabilitation business and home health and hospice business into two independent, publicly traded companies will provide “significant benefits to both businesses and their stakeholders, including improving the strategic and operational flexibility of each business, increasing the focus of each management team on its business strategy and operations, allowing each business to adopt a capital structure and investment policy best suited to its financial profile and business needs, and providing each company with its own equity currency to facilitate acquisitions and to better incentivize management,” the firm said in a statement.

Encompass is one of the nation’s largest providers of integrated health services. It launched an internal review of its home health and hospice business at the end of 2020. At the time, the company said all options were on the table for the business, including a spin-off, an initial public offering or an outright sale of the unit.

As the review was underway, the business was buffeted by the COVID-19 pandemic. In the third quarter, a surge of coronavirus infections hampered referrals in the Southeast and Texas. Labor shortages systemwide made it difficult for the company to add new patients. As a result, revenues for home health and hospice declined 0.2% for the quarter.

The company said the newly formed Enhabit Home Health & Hospice will strengthen the business’s focus on high-quality, cost-effective care delivered in the home. Encompass said it chose the name Enhabit because it is “intuitively linked to the home.” The “En,” it noted, is a nod to the Encompass brand.

The rebranding of the new unit is expected to be completed by late April, with the spin-off completed by the end of the second quarter.

This is a developing story. Please check back for the latest updates.