On Monday, Enhabit Inc. defended. (NYSE: EHAB) its technique to generate extra Medicare Benefit (MA) income in recent times.

It did so in one more response to AREX Capital Administration, an activist investor that owns 4.9% of Enhabit shares. Enhabit and AREX Capital – which is seeking to substitute Enhabit's present board members – have publicly gone backwards and forwards in latest months. Particularly, the 2 have gone backwards and forwards after Enhabit determined to stay a public, unbiased firm following the strategic overview.

“AREX continues to criticize previous actions, and in lots of instances people who occurred previous to the separation from Enhabit,” Enhabit wrote. “To be clear, seven of Enhabit's eight proposed unbiased administrators weren’t even on the Board of Administrators on the time, having joined the corporate on the date of the spin-off or thereafter.”

Enhabit, primarily based in Dallas, has 255 house care areas and 112 hospice areas throughout 34 states. The corporate was spun off from Embody Well being Corp. two years in the past. (NYSE: EHC).

It has since needed to stability its house care revenues as a result of it was too reliant on providers income earlier than the divorce.

Final week, AREX Capital targeted on that stability.

“Moderately than progressively normalize its payer combine by rising Medicare Benefit volumes in a managed method whereas defending its current Medicare fee-for-service (“FFS”) market share, Enhabit has suffered a precipitous decline in its considerably extra worthwhile FFS volumes enabled,” AREX Capital wrote. “The sharp decline in FFS volumes was considerably out of proportion to any underlying decline within the variety of FFS beneficiaries. Whereas the variety of FFS beneficiaries nationwide has shrunk by ~7% between 2021 and 2023, we estimate that Enhabit's FFS admissions have declined by greater than 20% over that interval.”

Enhabit now has roughly 61% of its house care income linked to fee-for-service Medicare. On the spin-off, that quantity was roughly 75%.

“After the separation, it grew to become clear that sufferers have been shifting from conventional Medicare, the extra worthwhile payer, to Medicare Benefit plans extra rapidly than the business as a complete had anticipated,” Enhabit responded. “On the time, conventional Medicare made up roughly 75% of Enhabit's whole Dwelling Well being revenues. As well as, referral sources that wanted to serve a mixture of Medicare and Medicare Benefit sufferers seemed for suppliers keen to simply accept all sufferers. Because of this, not solely did we not develop, however we additionally misplaced the Medicare fee enterprise we had as a result of we weren’t thought-about 'full service.'

In adjusting its payer combine, Enhabit has additionally labored to get MA plans to pay it nearer to the standard Medicare fee. The corporate has been largely profitable on this regard and believes these new contracts will ship extra constructive monetary leads to the close to time period.

Along with defending its payer technique, Enhabit additionally defended its hospice enterprise and the way in which it’s “optimizing” its overhead.

“Enhabit's hospice revenues grew 2.9% between the second quarter of 2022 and the primary quarter of 2024, whereas Amedisys revenues grew 1.3% over the identical interval,” Enhabit continued. “Equally, Enhabit's hospice admissions grew by 6.9% between the second quarter of 2022 and the primary quarter of 2024, whereas Amedisys' admissions fell by 5.3% over the identical interval. Enhabit's month-to-month hospice rely has continued to extend sequentially within the second quarter of 2024.”

Enhabit mentions Amedisys (Nasdaq: AMED) as a result of AREX Capital in contrast Amedisys' numbers to Enhabit's to help its factors in its newest open letter.

Enhabit known as out Amedisys once more in defending its overhead prices.

“AREX additionally falsely claims that there are 'important alternatives for value financial savings' primarily based on a crude comparability of our overhead prices with 'public friends', which inherently ignores variations in dimension, enterprise fashions and price allocation strategies and doesn’t bear in mind the shortage of true public colleagues for Enhabit,” the corporate wrote. “As well as, Enhabit's house workplace G&A as a share of income is roughly 10%, which is greater than our nearest public peer, Amedisys, at roughly 11%. Notably, Enhabit achieved this degree of effectivity whereas being lower than half the scale of Amedisys.”

A vote is at present underway that may assist resolve the way forward for Enhabit's board on the firm's annual assembly later this summer time.