Relationships with new national and regional payers fueled performance growth in the first quarter, Enhabit’s CEO reiterated during their first-quarter earnings call this week.
“To put the financial impact of driving this change in perspective for you, every 5% move of non-episodic admissions under our current average rate per visit to one of our new national or regional agreements improved adjusted EBITDA by approximately $2 million annually,” Barbara Jacobsmeyer, CEO of the home health and hospice firm said Thursday.
The company continued to struggle financially in the quarter ended March 31. Enhabit’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter fell to $25.3 million, a decrease of 46.2% compared to the year-earlier quarter. Total net service revenue slipped by 3.4% to $265.1 million.
Still, the company on Thursday touted agreements with a national payer and two conveners — which work on behalf of health plans to guide care to higher-quality, lower cost providers — with national reach that became effective May 1. It has visited local leaders to explain the importance of new contracts, Jacobsmeyer said.
“We believe it’s important to take time to sit down and be transparent as we present not only how but why we must deselect certain payers and replace them with the new regional and national agreements,” she said.
In turn, the company believes it has a strong business case to present to payers, she added.
“We are confident the strong quality outcomes our clinicians drive, particularly our low readmission rates, which are 360 basis points below the national average, will continue to reinforce our value to the payers and the conveners,” she said.
Enhabit, which spun off from Encompass on July 1, 2022, has been vocal about the importance of negotiating fair rates with Medicare Advantage payers.
“We are not willing to enter a new contract if — unless we can get a discount at 25% to 30% or lower on a per visit,” she said during the question-and-answer period Thursday. “And on an episodic contract, we’re seeing them come in at 0 to 10% of a discount on the episodic.”
Jacobsmeyer Thursday also pointed out the company’s success in recruiting and retaining clinical staff during the quarter. The firm gained 101 new full-time nurses in the first quarter — 91 in home health and 10 in hospice. The quarter ended with four hospice locations and 71 home health locations at capacity constraints.
“With improved staffing and increasing volumes, the team’s efforts around productivity and optimization resulted in a 2.3% year-over-year increase in home health cost per visit and a 4% sequential decline in cost per visit from quarter 4 2022,” she said.
