Enhabit Inc. (NYSE: EHAB) introduced final month that it had filed a termination discover with UnitedHealthcare from UnitedHealth Group (NYSE: UNH).

Members of Enhabit’s management workforce are actually sharing extra particulars about how the corporate finally arrived at this strategic determination.

“It’s essential to keep in mind that the explanation we created a payer innovation technique about two years in the past was as a result of we had United as a big payer after which we had a number of regional smaller contracts that had come by acquisitions over time,” Enhabit CEO Barb Jacobsmeyer mentioned throughout a dialogue on the 2024 Wells Fargo Healthcare Convention on Thursday. “These mixed contracts gave us a few 40% minimize of Medicare. That’s clearly not sustainable. We began the payer innovation technique to have extra and higher contracts.”

Enhabit, primarily based in Dallas, has 256 house well being care places and 112 hospice places in 34 states.

Jacobsmeyer defined that Enhabit was capable of distance itself from UnitedHealthcare as a result of its payer innovation technique allowed them to win 68 new contracts, two of which had been giant nationwide contracts.

The corporate had been making an attempt to barter with UnitedHealthcare since final yr.

“Our contract was up for renewal in February of this yr,” Jacobsmeyer mentioned. “It mechanically renews with out discover. Sadly, we made the choice after that point and with out success, as a result of frankly, we now have the flexibility and the entry to fill that capability with higher paying contracts.”

In line with Jacobsmeyer, Enhabit relied on the prime quality of its outcomes, significantly the corporate's low readmission and readmission charges, to barter with payers and negotiate higher charges.

“These have been efficiently negotiated with a reduction of zero to 25%, as an alternative of the historic low cost of 40%,” she mentioned.

Through the dialog, Jacobsmeyer additionally mentioned the potential impression of the proposed house care fee rule and the extent to which Enhabit will face stress from Medicare reimbursements in 2025 and past.

“For those who take a look at at this time, the proposed rule for 2025 really comes out to a few -1.7% value for house take care of the trade subsequent yr,” she mentioned. “Primarily based on our affected person combine and the impression of the wage index for us, we estimate about -1% for subsequent yr. If historical past repeats itself, we count on the ultimate rule to be higher, that means there might be a greater adjustment to the market basket and perhaps even halve that everlasting adjustment.”

Jacobsmeyer additionally defined how Enhabit offers with the present labor market.

Enhabit's deal with recruitment and retention allowed the corporate to shed all of its house care and hospice contract staff on the finish of final yr.

“We're sort of again to regular, a few 3% wage enhance,” Jacobsmeyer mentioned. “Now we now have some markets the place we're having to make market changes. The Northeast particularly has been a difficult market this yr, however we predict even with these market will increase in some markets, we will keep round that 3%.”