Enhabit Inc. (NYSE: EHAB) has a brand new CFO and a considerably new technique. It nonetheless suffers from most of the identical issues.

On Thursday, CEO Barb Jacobsmeyer mentioned the corporate would shut or consolidate sure places which can be underperforming, notably on the subject of conventional Medicare residence care operations.

Whereas the payer innovation technique stays intact, it largely deviates from the purpose of transferring extra towards Medicare Benefit (MA) income in recent times. Particularly, the corporate has sought to diversify its income combine to turn out to be a greater companion for referral sources and adapt to a extra MA-dominated future.

However now, after a strategic evaluation and a battle with activist investor AREX Capital, the corporate seems to be refocusing on conventional Medicare reimbursement for companies.

“We stay centered on implementing greatest practices … throughout our services in an effort to keep up and develop our fee-for-service Medicare quantity,” Jacobsmeyer mentioned throughout the firm's third-party earnings name quarter. “We’re actively evaluating the consolidation or closure of associates that we consider won’t reverse the decline in Medicare reimbursements and that don’t present acceptable returns to our shareholders.”

Enhabit, primarily based in Dallas, operates 256 residence care places and 112 hospice places in 34 states.

When Enhabit spun off from Embody Well being (NYSE: EHC), its residence well being income combine was dominated by conventional Medicare. With referral sources and MA penetration in thoughts, the corporate labored to diversify its income combine whereas additionally renegotiating MA contracts to enhance charges or upside danger alternatives.

The corporate will proceed to work on its MA contracts, however seems to be re-prioritizing conventional Medicare. Conventional Medicare – regardless of current price cuts – usually pays significantly better for residence well being care companies than MA plans. MA plans typically don't even cowl healthcare prices with their reimbursement.

“We don't have all the small print [consolidation or closings]however we can have that by the point we get to the fourth quarter name,” Jacobsmeyer continued. “As a result of they’re there [locations] that we want to consolidate as an alternative of shut. All of us have a look at that and say one thing like, “What quantity do we expect we will get for the consolidated versus the closed?” These are going to be essential particulars, and we have to discuss admissions, income and issues like that.”

In concrete phrases, Enhabit needs to shut eight to 10 places by early 2025. These places will probably be closed primarily based on an “exhaustive evaluation of all residence well being and hospice branches.”

Hurricanes Helene and Milton additionally negatively impacted Enhabit, which has a powerful presence within the southeastern US. Helene particularly had an affect on the final days of the third quarter. The consequences of each storms are more likely to affect customer numbers and revenues within the fourth quarter.

Jacobsmeyer additionally commented on the Facilities for Medicare & Medicaid Providers' (CMS) remaining residence well being care rule, which was launched final week.

“Ongoing cuts to residence care reimbursement are destabilizing the house care panorama and detrimental to broader coverage targets of offering equitable, high-quality well being care to seniors of their properties,” she mentioned.

Within the third quarter, Enhabit's internet companies income was $253.6 million, down 1.8% yr over yr. House care revenues had been $201 million, down 4.7% yr over yr.

Non-traditional Medicare admissions elevated 20.1%, rising complete admissions by 5.6% yr over yr. About 45% of non-Medicare admissions at the moment are via enhanced contracts, the corporate mentioned.

The corporate additionally mentioned the common every day rely has elevated each month because the starting of the yr.

Additionally introduced was the brand new CFO, Ryan Solomon, who will begin in his new function on December 9. Solomon replaces Crissy Carlisle, who has served as CFO because the firm spun off from Embody Well being.

Solomon was beforehand the CFO of AccentCare, one other of the nation's largest residence care suppliers. Most not too long ago, he served as CFO of Aspirion, a income cycle administration firm.

Updates on the UnitedHealthcare contract

In August, Jacobsmeyer introduced that Enhabit had terminated its contract with UnitedHealth Group's (NYSE: UNH) UnitedHealthcare, the nation's largest MA administrator.

“After greater than 9 months of failed negotiations with UnitedHealthcare, we submitted our discover of termination on August 1,” she mentioned on the time. “We are going to deploy our scientific assets to profit Medicare sufferers who’re members of the 68 favorable contracts. We stay dedicated to delivering our sturdy high quality of care to United Healthcare members, if in some unspecified time in the future they determine to contract at acceptable charges.”

On Thursday, Jacobsmeyer supplied an replace on these negotiations.

“We’ve got maintained an ongoing dialogue with United and have diligently centered the dialog on the worth of the care we offer to them and their members,” she mentioned. “Whereas we’ve got not but signed an settlement, we’ve got made vital progress in agreeing phrases with United that might be acceptable to us. Till we’ve got a signed settlement, we are going to preserve our technique to switch the U.S. Census.”

A powerful level that Enhabit has repeatedly identified is the takeover price. Particularly, the corporate says the 30-day hospital readmission price in residence care is 23.3% higher than the nationwide common.

“We really feel superb about the place we’re with the negotiations with United,” Jacobsmeyer continued. “I'd say…we've nearly come to an settlement.”