Enhabit, Inc ((EHAB)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Enhabit, Inc. revealed a mixed sentiment, highlighting both positive strides and looming challenges. The company showcased robust performance in its hospice segment, successful negotiations with payers, and prudent financial management. However, significant concerns were raised due to proposed rate cuts by CMS and ongoing pressure on the fee-for-service Medicare business.
Strong Hospice Segment Performance
The hospice segment of Enhabit, Inc. demonstrated impressive growth, with revenue increasing by 19.4% year-over-year. This growth was driven by a substantial 54% rise in adjusted EBITDA, attributed to double-digit volume growth and margin expansion. The hospice segment continues to be a strong performer for the company.
Successful Payer Negotiation
Enhabit achieved a notable success in payer negotiations, securing a low double-digit increase in the per visit rate effective from August 15, 2025, with a national payer. This negotiation has resulted in regained and increased patient census, reflecting positively on the company’s strategic initiatives.
Deleveraging and Financial Performance
The company marked its fifth consecutive quarter of debt prepayments, totaling $50 million through Q3 2025. This financial strategy has improved cash interest expense by $10 million annually. Additionally, Enhabit reported a 6.7% year-over-year growth in adjusted EBITDA, underscoring its effective financial management.
Revenue Growth and Stabilization
Enhabit reported a 2.1% year-over-year increase in consolidated net revenue, marking the first quarter of year-over-year consolidated revenue growth since its spin-off. This growth indicates a stabilization in the company’s financial performance.
Payer Innovation Strategy Success
The company’s payer innovation strategy has borne fruit, with non-Medicare admissions growing by 5.2% year-over-year. This growth is driven by innovative contracts with payers, showcasing Enhabit’s adaptability in a changing healthcare landscape.
Continued Strong Performance in Hospice ADC
The hospice Average Daily Census (ADC) grew by 12.3% year-over-year, with all regions reporting double-digit revenue growth. This consistent performance highlights the strength and resilience of the hospice segment.
CMS Proposed Rate Cuts
A significant challenge looms with CMS proposing a 6.4% cut in 2026, adding to cumulative cuts of over 20% since the implementation of PDGM. This presents a substantial headwind for Enhabit and the industry at large.
Fee-for-Service Medicare Pressure
The fee-for-service Medicare census is stabilizing but remains under pressure, with a 3.4% decline year-over-year. This segment continues to face challenges, impacting overall performance.
Branch Closures and Consolidations
Enhabit closed or consolidated 11 branches by the end of Q2 2025, with further potential closures as the company evaluates its cost structure. This move is part of a broader strategy to optimize operations.
Challenges in Home Health
The home health segment experienced a 2.0% decline in revenue year-over-year, with adjusted EBITDA margin down by 190 basis points due to an unfavorable mix shift. This remains a challenging area for the company.
Forward-Looking Guidance
Enhabit provided updated financial guidance for fiscal year 2025, expecting full-year revenue between $1.060 billion and $1.073 billion, with adjusted EBITDA ranging from $104 million to $108 million. The company anticipates adjusted free cash flow between $47 million and $57 million. These projections reflect Enhabit’s efforts to mitigate challenges from proposed CMS rate cuts and leverage operational efficiencies.
In conclusion, Enhabit, Inc.’s earnings call highlighted a balanced narrative of strong hospice performance and strategic financial management, juxtaposed with significant industry challenges. The company’s forward-looking guidance suggests a cautious yet optimistic outlook as it navigates these complexities.