Enhabit at Goldman Sachs Conference: Strategic Shifts in Home Health

On Tuesday, June 10, 2025, Enhabit Inc (NYSE:EHAB) presented at the Goldman Sachs 46th Annual Global Healthcare Conference, highlighting its strategic initiatives in the home health and hospice sectors. The company is focusing on transitioning to a full-service provider while addressing challenges like declining Medicare volumes and reimbursement pressures. Despite these hurdles, Enhabit aims to maintain its competitive edge through payer innovation and operational improvements.

Key Takeaways

• Enhabit aims to cut the decline in traditional Medicare volumes by half, focusing on payer mix and messaging.
• The company secured contracts with major payers, enhancing its full-service provider status.
• Revenue per day has been introduced as a key metric to track success.
• Enhabit plans to expand with 10 new hospice sites annually and explore strategic M&A opportunities.
• The company is committed to maintaining a 19-20% margin in the home health sector.

Financial Results

• Medicare average daily census decline improved from -13.4% to -7.5% in Q1 2025.
• Enhabit aims to reduce the Medicare fee-for-service decline to -4% to -5% by year-end.
• Payer innovation admits increased by 15% year-over-year.
• Medicare accounts for just under 57% of revenues, aligning with industry peers.
• General and administrative expenses are stabilizing at $27 to $28 million per quarter.

Operational Updates

• Enhabit achieved full-service provider status with national and regional payer contracts.
• Focus on enhancing branch-level visibility into profit and loss and payer mix.
• De novo growth targets 10 new hospice sites annually.
• Utilizes Metalogics for care planning and visit optimization.
• Rate increases during contracts are tied to quality metrics.

Future Outlook

• Medicare Advantage is expected to drive home health utilization.
• Anticipates a 300-400 basis point decline in Medicare fee-for-service volumes over several years.
• Strategic M&A opportunities are prioritized for late this year and early next.
• The company focuses on deleveraging its balance sheet.
• New sites are expected to break even within 12-18 months.

Q&A Highlights

• Strategies include referral conversion analysis and evaluating referral sources.
• Hiring slowed in Q4 due to payer negotiations.
• Submissions to CMS seek rate updates under the proposed hospice rule.
• MedPAC is urged to consider all-payer margins for more accurate reimbursement rates.

Readers are encouraged to refer to the full transcript for more detailed insights.

Full transcript - Goldman Sachs 46th Annual Global Healthcare Conference:

Unidentified speaker, Interviewer: Good morning, everyone. I think we’re gonna get started with our next session. We’ve got, in habit here for our next fireside chat, Barb Jacobs, Meyer, president and CEO, and Ryan Solomon, CFO. Thank you for for joining.

Barb Jacobs, President and CEO, Meyer: Thanks for

Unidentified speaker, Interviewer: having Maybe just to start, I mean, high level, kind of reflecting on the last two or so years. It’s been a little more challenging than I think you guys expected. Maybe just reflect on that journey, where you are in it, what lessons you’ve learned kind of going through that process.

Barb Jacobs, President and CEO, Meyer: Sure. Well, guess to talk about home health. Certainly, we’ve been on a journey, particularly as it relates to payer innovation. That has been the most critical part of our strategy to have us really be seen as a full service provider. I would say looking back, it’s been a more lengthy process than maybe what I would have originally anticipated, but certainly been a worthwhile process.

For hospice, it really was about changing our whole case management clinical model. While that took a lot of time and a heavy lift and quite a bit of an investment, clearly we’re showing that that investment has paid off well because we do know that there’s a market out there that needs high quality hospice care. And I think we’re showing that with our growth that we’ve seen, particularly throughout 2024 that’s continued into 2025 that we made the right changes as it relates to hospice.

Unidentified speaker, Interviewer: Okay. And I think we’ll we’ll we’ll get into both of those elements in a minute. As you think about the next, you know, two or three years, what is it that you’re building towards? Do you define success? I mean, what does that look like to you?

Barb Jacobs, President and CEO, Meyer: Yeah. I think it’s becoming more and more important to be kind of that large provider out there, whether it’s you’re negotiating with a plan or whether it’s going to referral sources, knowing that you have the scope of the ability to care for a large number of their members or their patients is important. So for us to continue to grow in the models that we’ve established is gonna be an important part of our strategy.

Unidentified speaker, Interviewer: Okay. And before diving, you know, into more detail on the company, I wanted to start big picture on the market. How would you assess where we are from a volume growth perspective, you know, on the home health side? And you you can segment that by, you know, traditional members, Medicare Advantage and just help us think about what you’re seeing from a volume growth for the industry.

Barb Jacobs, President and CEO, Meyer: Yeah, think we’ve tended to see kind of that mid single digit volume growth on the home health side throughout the industry. I think we’re going to continue to see that and potentially see that continue to increase. Medicare Advantage does tend to utilize home health more so than some of the traditional facility side post acute settings. So as Medicare Advantage continues to grow, think so does the utilization of home health. And then obviously, the aging population will continue to fuel the growth for home health.

Unidentified speaker, Interviewer: And how would you break that down between traditional Medicare and Medicare Advantage, just in terms of the volume growth in the industry?

Barb Jacobs, President and CEO, Meyer: Well, you’ll see Medicare Advantage grow because of two things. One, obviously more beneficiaries continue to choose Medicare Advantage. And again, just the utilization with home health being the lowest cost setting, Medicare Advantage does certainly manage the use of those post acute services. So for example, when we see patients coming out of an acute care hospital, you’ll see much more Medicare Advantage go directly to home health maybe versus the utilization of fee for service on the SNF and and IRF side of things.

Unidentified speaker, Interviewer: Okay. And I I think you’ve previously kinda characterized the traditional Medicare side as growing well, declining, like, minus 4%. Is is that still, you you know, kinda your best view of of market growth?

Ryan Solomon, CFO, Meyer: Yeah. And and as we think about Medicare, I mean, there’s a couple different lenses that we look at that through. You know, one, and and we kinda focused, you know, a bit more on our q one content around ADC. You know, as you think about ADC for q one of of twenty twenty five, we saw roughly overall kind of 7.5% type decline versus same quarter prior year would have been closer to 13.4%. And so we’re seeing that rate of decline.

And so what we’ve said is we want to cut that in half, which we largely did in Q1. We would anticipate to continue to execute in that regard. How we’re doing that is a combination of aligning incentives across our sales team, some of the Medicare messaging. We think that’s really important. Also, referenced some of the material that we put out in front of the conference through an eight k that shows some of the Medicare as a percentage of revenues.

We’re also seeing that rate of decline slow as well. So both on the volume overall as a percent of revenue and really coming more in line with our peers, we had just under 57% Medicare as a percentage of revenues. That’s very in line with some of our larger kind of public peers at this point, and we would expect to continue to you know, see that normalization through the balance of the year and and prospectively.

Unidentified speaker, Interviewer: Yeah. Maybe we can go through some of those, you know, strategies and and things you’re implementing to, you know, to to cut the rate of declines in in half throughout this year. just in terms of, you know, serving your your referral partners and and being a a one stop shop, I mean, where are you in terms of, you know, being a a good partner to those referral sources and and getting an an enough contracts in place so that you can be kind of a one stop shop and responsive to their, you know, their referrals?

Barb Jacobs, President and CEO, Meyer: Yeah. I would say effective January one of this year has been the time that I would consider us really full service. Up to that point, we were either negotiating or renegotiating or giving notice to various payers. And so January one of this year is the time that we’ve had all the large national payers as well as a large number of the regional payers, and so really being seen as a full service provider now.

Unidentified speaker, Interviewer: And has that message been, you know, kinda, I guess, broadly disseminated? You know, how how is the the referral source responding to to that?

Barb Jacobs, President and CEO, Meyer: Yeah. So a lot a lot of work has been put on what we call our messaging, really, now for our teams out in the field to go the referral sources and say, we’ve done this contracting for you. We want to be able to take care of the majority of your patients. But we need a healthy mix. We can’t be just your shop for a certain payer.

We have to receive a healthy mix. So it really is about out there messaging now to the referral sources that we’ve done this work for them, but now we want to be we want this to be a partnership in how we get a healthy payer mix from them.

Unidentified speaker, Interviewer: Is that starting to show up, just a better mix of obviously, you’re referring to getting enough traditional Medicare patients to support the business. I mean, is that starting to take Yeah.

Barb Jacobs, President and CEO, Meyer: You’ll see that when you see not only our traditional Medicare, but the continued growth in our payer innovation contracts. And so kind of, again, working to balance that payer mix. Think it’s one of the reasons that it’s been really important. One of the metrics that Ryan really introduced after he came and we put it in our deck for this meeting is really now focusing on that revenue per day. Because it’s been really noisy over the last couple of years for the analysts and for our shareholders to say, wow, there’s lot of moving parts here.

There’s fee for service. There’s episodic. There’s nonepisodic. It’s just a lot of noise. That revenue per day should really be able to show our results and how we are using the messaging to make sure that we are getting that balanced payer mix.

Unidentified speaker, Interviewer: And then, Ryan, you mentioned just incentives with the with the Salesforce. I mean, maybe give us a sense of, you know, how that’s evolved over the last, you know, year or two and and what the incentives look like today?

Ryan Solomon, CFO, Meyer: So I think building on bars, mean, it’s really allowed us with the, you know, having a a full service provider, the ability to kinda tier the broader payers as we think about the tiering structure, we’re able to align incentives. You know? And that really gives know, allows us to set expectations with the broader sales team, but also with our referral providers as far as kinda how we think about, you know, the overall kinda access that that we provide. And so, at the end of the day, building on Barb’s point, I think we’re really starting to see that. We talked about Medicare earlier.

Payer innovation, when you look at that sequentially, admits were up a little over 4% sequentially. If you look at payer innovation year over year, up closer to 15% overall admits in that payer innovation contract. And then when we look at the non payer innovation, we know that those typically have a higher discount to Medicare fee for service. And so we’re seeing the strategy really come together, slow the rate of decline on the Medicare ADC. We believe that to be gravity within the industry, but we want to be as good or better than our peers in that regard.

How do we grow our payer innovation contracts that have a smaller discount to Medicare fee for service than the nonpayer innovation, and then make sure that we normalize those volumes in the in the nonpayer innovation to make sure that we’re providing a really good service to our referral partners. We wanna provide high quality care for all payers, but we need to do it in a way that

Unidentified speaker, Interviewer: we can have healthy margins from a prospective basis. That all makes sense. But how are you actually aligning incentives with the sales force to drive that?

Barb Jacobs, President and CEO, Meyer: Yeah. So it’s important for us again, they have to be aligned with the operational partners at the branch, right? Because ultimately, it’s the branch that’s accepting the referrals. So the business development teams bring the referrals, but the branch accepts them. But the branch is the one that’s responsible for their local budget.

So it’s making sure that not only at the branch level, but at the business development level, they know the tiers. Very easy on, they know red, yellow, green. They know where that payer fits within our payer profile. And they know that if I’m going to be accepting, for example, red referrals from a referral source, it has to be a referral source that’s driving a good mix of patients. Again, and we explain it to both the sales team and the operations team, is that we didn’t put ourselves in this predicament.

The payers did. But for us, we have to have a healthy mix if we’re going to reinvest in our teams and in technology. And so we need them to be good stewards and make sure that they’re accepting that healthy mix from their referral sources.

Ryan Solomon, CFO, Meyer: And so the collaboration between operations and incentives, as Barb just touched on, and then a clear point system for, if we think about our BD or our sales reps, what are the not every payer type is worth a similar amount of points. So how how do you think about the collaboration and setting expectations? And then clear objectives for our sales reps to to focus on the types of tier of the business that will ultimately deliver their goals and objectives. And so it’s multifactorial, but, ultimately, we’ve seen some really good success, you know, as we think about late last year, early through q one as we have that kind of full payer innovation capability.

Unidentified speaker, Interviewer: Okay. And I I guess just, you know, thinking back over the last, you know, year plus, how how is the branch visibility into into their own performance? You know, I mean, you talked about the red, yellow, green. It’s just making it very clear. How has that evolved?

And I guess as part of that, does each branch have essentially their own P and L and just, you know, very clear visibility on on how they’re tracking relative to what you’re incentivizing?

Barb Jacobs, President and CEO, Meyer: Yes. So they each have their P and L. They they each see where is every day. They know where their payer mix of their census is. They know how that compares to their target and knows how it compares to last year this time.

And so they had those clear objectives in front of them every day.

Unidentified speaker, Interviewer: And then what do you do when a branch is not optimized you know, at at the levels you’d like? I mean, what interventions kind of at a, you know, regional or or corporate level are are in place to, you know, move branches along?

Barb Jacobs, President and CEO, Meyer: Yeah. So you look at, well, what are the referrals they’re getting in? Right? So if it comes down to the referral conversion, well, then why are we not converting the right referrals? But if it comes down to that they’re not even getting that healthy payer mix from a referral, then it’s really working with our data and analytics team to say, well, then our business development team’s really focused on the right referral sources, and then building out their referral books of business to make sure we’re focusing.

I mentioned this a couple of quarters ago on a call. For example, community care used to be, and still is, a big part of our business, but that was where we had sales team and clinicians inside senior apartment settings. Well, it may be that we have to evaluate if that apartment setting today has really been taken over by one MA plan, and that is not an MA plan that pays well. Well, it doesn’t matter that we’ve been in there for years. We may have to decide, is that really a place that we can have a presence anymore?

So that’s the type of thing that you then dig deeper to to say, do we have to even change where we’re getting those referrals from? Okay.

Unidentified speaker, Interviewer: And then obviously, on the first quarter, grew a little under 1% terms of total admissions. You highlighted more progress on a sequential basis, I think around 8% growth. Any updates in terms of here in June, if the momentum has continued and just how you’d characterize the continued progress?

Barb Jacobs, President and CEO, Meyer: Yeah. We really haven’t talked about anything about Q2. But what I will say is that when we were in still negotiations with the large payer at the end of fourth quarter, we did have to slow down our hiring. Our teams were focused solely on replacing volume for a payer that we weren’t sure we were going to get across the finish line. And so we had to slow down that hiring because we are focused on productivity and the margin of the business.

And so when we knew that we were successful in December of getting a final contract executed, then we did return to kind of our historic focus on talent acquisition and had a nice hiring in the first quarter. Now those clinicians have a time of orientation and onboarding. So what I would say is as we look at like the capacity, that has been building throughout the end of first quarter into the second quarter.

Unidentified speaker, Interviewer: Okay. And then Ryan, you mentioned you went from minus 13% in the fee for service to minus 7% year over year and characterized that as cutting the declines in half. I just want to be clear. I think last year, fee for service was down 11%. So when you’ve characterized cutting the rate of decline in half as you get to the back half of the year, minus four minus 5%

Ryan Solomon, CFO, Meyer: that you’re targeting. Is that right? Yes. Think that’s fair. As you kind of prospectively play it forward in kinda overall absolute volumes.

And then as you play those forward, I think that’s a a fair

Unidentified speaker, Interviewer: Okay. So that note essentially be in line with with with the market. Is that I think that yeah.

Ryan Solomon, CFO, Meyer: I think that’s fair.

Unidentified speaker, Interviewer: Okay. Is there opportunity as you now have all these contracts in place as of January to do better than the market? I mean, what’s the kind of next few years look like in terms of how you’re gauging your success on the fee for service front?

Barb Jacobs, President and CEO, Meyer: Yeah, that’s definitely a goal of ours. We would like to be the leader in that and continue to decrease and stabilize that business. It really does come down to looking at where those patients are in those markets and making sure, again, that we’re identifying those referral sources. We have markets that have done really well. We have markets that actually have increased their fee for service business.

And so it’s taking those best practices from those markets and then redeploying those best practices across the portfolio.

Unidentified speaker, Interviewer: Okay. And as we think about mix now, I mean, that’s obviously been a huge driver of not just the top line but the P and L. And where should that go from here? I mean, you’re at 40% or so of visits in these payer innovation contracts. What’s the opportunity, you know, on the non fee for service front?

Ryan Solomon, CFO, Meyer: Yeah. I I think we’re, you know, in some of the materials that we produced, we think we’re kinda more at equilibrium with the broader market at this point. I think, reasonably, if you look at Kaiser projections and things of that sort, think that that would project kind of a 300, 400 basis point type continued deterioration over a multiyear period in overall kind of Medicare fee for service volumes. And so I think that, you know, we would expect to continue to perform in line with the market or, as Barb touched on, try to outpace the market in that regard. We think we’ve got a lot of the the strategy in place to allow us to do that.

But but I think, realistically, we think we’re kinda at that normalization, and then we play forward with broader market projections on a on a prospective basis at a minimum.

Unidentified speaker, Interviewer: Okay. And then just how should we think about your contracting? Obviously, you have, you know, this initial set of contracts in place, but annual rate updates and and just, you know, willingness of of payers to, you know, accommodate rate rate increases. I mean, what what’s what’s your perspective on on that?

Barb Jacobs, President and CEO, Meyer: Most of our contracts are two to three year contracts. So we’re now at the table renegotiating with ones that we had contracted on with early on. I will say that, you know, in more some of our more recent ones, even though they’re two to three year, we’ve been able to negotiate in some rate updates. Some of those have been tied to quality metrics, so really being able to have an opportunity to have rate increases even during the contract. But back at the table, already renegotiating with others, always focused on trying to get episodic if and when possible.

That allows us to manage the visits for the patient versus the payer managing the visits. And so that’s we go into every one of these discussions looking for episodic.

Unidentified speaker, Interviewer: Okay. And the those those are two to three year fixed, or there’s annual escalators?

Barb Jacobs, President and CEO, Meyer: Some have escalators. Some don’t.

Unidentified speaker, Interviewer: Okay. Okay. And so you’re at the, I guess, beginning of renegotiating some of

Barb Jacobs, President and CEO, Meyer: the Very early ones. Got it. Okay.

Unidentified speaker, Interviewer: Maybe we can just touch on c CMS reimbursement for for for home health, and then we’ll we’ll go to hospice after that. You know, obviously, it’s been a a a very challenging reimbursement backdrop. I I I think you’re set for 50 basis points increase in the latest update. I guess, what do you think CMS is looking at or seeing that is disconnected from the industry? I mean, any perspectives on what their this seems to be a clear market that they are going after.

Are they really the only one right now? But what’s your perspective?

Barb Jacobs, President and CEO, Meyer: Yeah. Think and foremost, we really do need MedPAC. When they release their reports, we need them to look at all payer margins. They’ve continued to produce reports for home health with only Medicare margins. And obviously, that was fine ten years ago when the majority of home health was fee for service.

It’s not Okay anymore when you have more than 50% in Medicare Advantage. So I think it’s really continuing to strongly encourage MedPAC and their reports to do an all payer margin. I think that does help take the eye off of this inflated number that’s put out there. I think it’s also really reinforcing the work that’s happening through our trade association on home health and hospice being the lowest cost setting, and how can we make sure that we are getting rate updates at least in line with our peers and other health care, because those that’s the that’s the talent workforce that we’re trying to recruit. And when we are getting 50 basis points versus others getting two and half, 3% increase, it really puts us in a a large disadvantage when we’re going after the same labor force.

Unidentified speaker, Interviewer: And is there any visibility to to MedPAC changing their approach, you know, as we think about 26? And then, I guess, as part of that, you know, for for ’26, would you expect another half of the permanent adjustment to be implemented?

Barb Jacobs, President and CEO, Meyer: Yeah. At this point, I don’t think that we would be surprised to see kind of a rinse and repeat of what we’ve seen the last couple of You know, it really will come down to not what the proposed rule says, but obviously what that final rule says. I do think that there was never a better time for the consolidation that we’ve had in the industry with NAC and HPCO and the Partnership for Quality to really have a single voice up on the hill. And I think Doctor. Steve Landers, who’s the CEO for the new alliance, I think is doing a really good job talking about the industry and what we need as as rate updates in the future.

So to your question on how will MedPAC look at that, I think that’s yet to be seen. But there certainly is not a lot of effort to show the data on why it needs to be looked at differently.

Unidentified speaker, Interviewer: Okay. And how are you thinking about the temporary adjustment? Mean, there’s obviously some big numbers out there. It’s hard to give visibility on what’s going on there.

Barb Jacobs, President and CEO, Meyer: Any Yeah. It’s a huge number on the potential clawbacks. I think the industry would be shocked if anything was in the proposed rules it relates to there’s no way the industry can withstand a permanent and some clawbacks at the same time. Again, I think there’s a lot of work being done by the Alliance to talk about how it’s just unattainable to think about those temporary clawbacks. And so the ask is really, frankly, to look to eliminate those.

And I guess, again, we’ll see if we can give an ear to that.

Unidentified speaker, Interviewer: Just broadly, you can answer this on the hospice side or home just across the new administration, are there are there any, you know, changes in in stance that you’re you’re seeing things that are impacting your business? Is this

Barb Jacobs, President and CEO, Meyer: I think it’s early on to say that. What I would say is I think it creates an opportunity for us. If we’re really looking at saving the Medicare trust fund, I think we have to look at what is the lowest cost setting. And we need to invest in the lowest cost setting. And so I think myself and others in the industry are saying this is an opportunity for us to reinforce the high quality care that can be provided in the home and cost and and save the trust fund dollars.

Unidentified speaker, Interviewer: Okay. Maybe moving on to hospice, you know, starting big picture again with the market. Know, how should we think about market growth going forward? And then beyond the obvious, you know, just demographic factors in play, what else is contributing to growth in terms of just duration of care? I know there’s an opportunity there, access to care.

I mean, what’s underpinning your kind of expectations going forward?

Barb Jacobs, President and CEO, Meyer: Yeah. Think there’s three real opportunities as it relates to a tailwind for hospice. One, obviously, is the aging population. The other is I think there continues to be growing acceptance for patients going on hospice. But I think a really big opportunity is to get that increase in acceptance earlier on.

We continue to get patients that are on service for seven to fourteen days. And frankly, they have a much longer benefit than that. And so it’s how can we even with our current population, how can we make sure they access their benefits earlier.

Unidentified speaker, Interviewer: Okay. And you talked in the beginning about the change in the care model. We’ve seen your progression sequentially in terms of your growth on average daily census. Where are we in kind of the benefits of that coming through? Do you expect more acceleration?

Just talk through the dynamics on growth on ADC.

Barb Jacobs, President and CEO, Meyer: I think we’ll continue to see the growth, and mainly because we’ve continued to put other things into play. We built out the RN case management model, then we turned to building out our business development teams. We put in place last year all the admission departments, which I think really has helped our conversion and the growth. And then a lot of our de novo investments have been on the hospice side, really putting hospice where we have home health. And that will create a line of growth as well for hospice.

Unidentified speaker, Interviewer: And how should we think about de novo activity, and foremost, but I guess over time, maybe M and A? Would that be focused on the hospice side? And then just from a magnitude perspective, how much capacity do you think the markets you serve or regional markets maybe you’re not in you could expand on the hospice side?

Ryan Solomon, CFO, Meyer: Yes. I think in general, our focus will continue to prioritize on deleveraging the balance sheet. That said, we do think it’s really important to have all three growth vehicles available to us, which we do believe will have capability prospectively going forward as we come out of the covenant relief period. And when I describe that, it’s organic growth as we’ve talked about, De novo growth, which we targeted roughly 10 sites a year, that tends to be a little bit more indexed towards the hospice side, kind of more of a sixtyforty split. And that generates roughly kind of 1% of kind of overall kind of revenue growth on an annualized or run rate basis.

And then M and A on a more small, medium sized kind of targeted strategic tuck in basis is a capability we’d look to continue or to prioritize as we think about late this year and early next. As we think about hospice, I think that in general, we’re roughly an eightytwenty split today between home health and hospice. We do think that similar to the de novo strategy, our M and

Unidentified speaker, Interviewer: A would

Ryan Solomon, CFO, Meyer: likely more biased towards hospice side, probably not an entirely different type of kind of SKU from the de novo side. So we think it’s really important to have all three growth levers available to us. That said, we’ll continue to be measured. We really want that to be strategic in nature while we continue to prioritize delevering the overall balance sheet.

Unidentified speaker, Interviewer: And can you remind us just how quickly you can scale a a de novo? How quickly it gets to breakeven? How quickly it gets to, you know, more corporate run rate?

Ryan Solomon, CFO, Meyer: There’s a lot of use case specific, as you could imagine, between sites and kind of the the host of other factors. But typically, we’d look for that to to be a twelve to eighteen month type of ramp on an overall kinda de novo basis when you think about breakeven or profitable and contributing. And so we’ve been at this for close to to three years at that kind of ten year 10 de novos a year. And so the nice thing about that is really our 2022, 2023 type de novos are really fully mature of new growth in 2025. And so it creates a nice run rate where we’re seeing sites mature each year while we’re putting in investment in new sites.

Unidentified speaker, Interviewer: Okay. And Barb, just back to some of the opportunities in the market. How much opportunity do you see from a duration of care and just getting patients on earlier? Mean, part of that’s just the acceptance that you talked about, but where do you see things going on that piece of the equation?

Barb Jacobs, President and CEO, Meyer: Yeah, it’s really about, I think many referral sources struggle to talk about end of life care. And so it’s really encouraging them that the patient has the benefit. If they feel the patient may be eligible for the benefit, we’re happy to talk with the patient about that benefit. So I think what you turn to many times is not that patient’s not ready, it’s the referral source struggles to refer early on. So it’s about the education at that referral source level and letting them know that we would be the ones that would be happy to talk.

And then maybe the patient decides that they’re not ready at that point, But sometimes the patient isn’t introduced to it till it’s so late.

Unidentified speaker, Interviewer: Okay. And and then just on excuse me. Reimbursement in this market has been much healthier, you know, three, four ish, you know, percent over the last couple years. Little bit lighter in the last rate update. I think it was 2.4%.

Is that sufficient to meet the needs of the industry and just the cost growth that you see?

Barb Jacobs, President and CEO, Meyer: We’re all right now submitting our comment letters for the proposed rule for hospice. And I would say we’re still reminding them that there’s been about a 4.9% forecast error if you look over the last few years and really keeping up with what inflation has been. We’re appreciative of the rate update. We still believe that it needs to be better than that for us, again, to continue to be competitive as we look to build these service lines. We need the clinical workforce to do it.

And so really taking into account that those rate updates have not kept in line with inflation.

Unidentified speaker, Interviewer: Okay. Maybe turning to the cost side of both businesses. Home health cost per day, I think, was up 1% in 2024, so a little bit higher number in the first quarter, I think around 2.5%. Is there any movement? Or is that comps?

What are you seeing from just a labor demand perspective and how that’s impacting wages?

Barb Jacobs, President and CEO, Meyer: That’s another one that I would say it’s important to look at some of the new metrics that we introduced in the fourth quarter call and, again, on the first quarter call is really moving from kind of that cost per visit for home health to a cost per day. Because if you think about it, you have two things. You have cost. But then as we manage our visits per episode, that lower visits per episode can actually inflate your cost per visit. And so really looking at that cost per day metric so that we can understand, as we’re managing cost and volume, that cost per day actually should be a better metric to look at as you’re looking at the home health segment.

Ryan Solomon, CFO, Meyer: Yeah. So I think just building on Bar’s point, I mean, you look at cost per visit up, as you touched on, and we did see some escalation there just as we see visit utilization come down. As you think about overall cost per patient day, we did see improvement there, and that’s a function of using technology and our Metalogics tool to think about our overall kind of care planning and the overall visit utilization. And so as we free up some of those visits, that allows the clinician to do and start to carry and carry a little bit higher patient load. And so we really do see an opportunity to continue to, on a clinically based approach, continue to optimize our overall BPE that will, you know, likely have lower visits per episode, which will allow some of that capacity to to to be freed up to start new patients and and create an offset to what would be merit or market inflation that we’d see within the business.

And so that’s the interplay you’re seeing within whether you look at both of those metrics. It’s visit utilization, it’s the market inflation, then ultimately better utilizing that clinical staff to to do more patient starts that’s creating this kinda push and pull mechanism as you think about our our unit cost in the home health business.

Unidentified speaker, Interviewer: Okay. So it sounds like nothing’s really changed on the the the wage front. It’s it’s it’s really just the visits per episode. I guess how much more opportunity is there? Mentioned that needs to be clinically focused and there’s you’re threading the needle there.

How do you just think about the remaining opportunity and again, kind of just creating the right balance to meet the needs of the patients but also being efficient.

Barb Jacobs, President and CEO, Meyer: You said it the right way, threading the needle, right? Because we tell the team all the time, our greatest value proposition to the payers is our high quality. And so we cannot sacrifice that by managing too too low a visit per episode. And so it’s why it’s so important for them to use the Metalogics tool. I would say we do believe we still have opportunity.

When you look across our portfolio, we have branches that manage very close to the recommended Metalogics visits per episode, and we have others that we see continue to have opportunity. So it’s about reminding them if a patient progresses quicker than what they anticipated, it’s about taking those visits and either redeploying them to a patient who has who is maybe declining or or increasing in their acuity or moving them to a new start of care. And so it is about, you know, us making sure that at a regional level, we’re looking at those dashboards and saying, are we using our clinical capacity in the right way? Okay.

Unidentified speaker, Interviewer: And then on hospice cost per day, I mean, has been very well controlled. You’ve guided to 2% to 3% growth for the year. I think that would imply an acceleration. Are there any specific dynamics you’re contemplating, you know, for the remainder of the year? Is that just reflect, you know, that’s about what inflation is?

I mean, what what goes into, you know, that you’re looking at?

Ryan Solomon, CFO, Meyer: I mean, I think you’re I mean, it’s really more how we think about kind of where market and market And then as Barb touched on, we believe that while we appreciate the proposed rule from a hospice perspective, we still don’t believe that keeps up with overall kind of market inflation. And so there’s a bit of an imbalance that we have assumed or modeled into, particularly as we think about our merit and market adjustments typically occur later in the year, in that kind of Q3, Q4 time frame. And so it’s that imbalance between the rate reimbursement update and kind of what we would assume as far as kind of merit and market inflation.

Unidentified speaker, Interviewer: Okay. And then just on G and A efficiency, this is that’s obviously come down as a percent of sales. I think you had a little over 200 basis points of leverage in the first quarter. If we go back away, I think the target coming out of the IPO is 27,000,000 to $28,000,000 in corporate cost per quarter. You’re already below that, I mean, marginally, but below that.

How should we think about remaining opportunities on G and A?

Ryan Solomon, CFO, Meyer: Yeah. think we’re starting to see that normalization on kind of the the broader corporate or home office expense. As you touched on, we are running a little bit below that in in q one. We do think with net of, there are some cost savings that we have contemplated through the balance of the year. You know, in addition, we do have kinda some market or merit inflation baked in there, and we do think we kinda run-in that 27 to $28,000,000 range on a prospective.

And so we think that’s kinda normalizing at this stage.

Unidentified speaker, Interviewer: Okay. So you’ve got increased wages for, you know, corporate employees, I don’t know, two, three, 4%. It sounds like that’s happening on an underlying basis, and then there’s some cost takeout. You know, does that cost takeout extend through ’25? And then in ’26, we’d start to see more normal, you know, two, three, 4% growth in G and A.

Is that the right way to

Ryan Solomon, CFO, Meyer: think about Our objective is to try to offset that as as much as possible. And so while we’ve got specific initiatives that are underway, some of which we’ve commented on, we’ll continue to look at opportunities through the the corporate or kinda home office structure to continue to take that approach. Some of those are underway and known today. On a prospective basis, we’re continuing to evaluate opportunities for efficiency across some of the back office functions. And so, exactly where that plays out, I think it’s more of an approach that we’ve got, that it’s not okay.

We’ll just see market increases of 2% to 3%. It’s going to be market offset by any efficiency that we can bring through.

Unidentified speaker, Interviewer: Okay. And then just tying this altogether with at the corporate margin level, your guidance also implies slightly lower margins in the remainder of the year than you delivered in the first quarter. Again, are there any kind of things you’re considering in that margin profile? Or does that reflect conservatism? How would

Ryan Solomon, CFO, Meyer: you expect? The biggest one I would call out, I mean, so we do have the rate increase in Q4 for hospice that partially offsets some of the On the home health side, that rate increase, wherever that proposed rule would go, or how that might look would not occur until Q1 of twenty twenty six. And so when you think about our kind of marketer merit cycle, it will come in front of particularly on the home health side, in front of any sort of proposed rate rule and reimbursement. And so that’s probably the biggest driver in what you’re seeing there.

Unidentified speaker, Interviewer: And then as you get to this more normalized mix on the particularly within home health, and just your cost dynamics that we talked to, how should we think about annual margin expansion in ’twenty six and beyond as the mix dynamic becomes less and less of a headwind?

Ryan Solomon, CFO, Meyer: Yeah. So I mean, there’s there’s multiple factors. There’s no you know, as we think about some of the mix in the unit revenue and continuing to to optimize there, we talked about the interplay between utilization and some of the market and and inflation. And then it’s know, really, as we think about reimbursement, the expectation or the assumption is is at least right now, if it is a wash, rinse, repeat, that it wouldn’t keep up with the overall inflation. So our assumption is is through unit revenue, through kind of appropriate utilization, being able to offset that market inflation given that reimbursement is not going to catch up.

And so I do think that running in the at least on the home health side, a 1920% type margin profile is actually there’s an awful lot of work to maintain that margin profile given the dynamics that we touched on earlier.

Unidentified speaker, Interviewer: Got it. Perfect. Well, with that, I think we’re out of time. Thank you both so much.

Barb Jacobs, President and CEO, Meyer: Thank you. Appreciate it.

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