Enhabit’s Q2 2025 Earnings Call: Navigating Contradictions in Home Nursing Rules and Payer Contracts

Mitigation strategies for proposed home nursing rule impact, payer innovation contracts and rate increases, impact of proposed home nursing rule, payer innovation contracts and strategy are the key contradictions discussed in Enhabit's latest 2025Q2 earnings call.



Revenue and Financial Performance:
- Enhabit's consolidated net revenue for Q2 2025 was $266.1 million, with a 2.4% sequential increase and 2.1% growth year-over-year.
- The growth was driven by both home health and hospice segments, achieving sequential revenue growth due to improved volumes in both businesses.

Home Health Segment Challenges:
- Home health revenue was $205.9 million, down 2.0% year-over-year but up 2.6% sequentially.
- The decline in year-over-year revenue was attributed to continued CMS proposed cuts and mix shifts towards Medicare Advantage patients, despite stabilizing Medicare ADC.

Hospice Segment Growth:
- Hospice revenue reached $60.2 million, showing a 19.4% year-over-year increase and 1.5% sequential growth.
- This growth was driven by strong volume momentum, with a 12.3% year-over-year increase in census and expansion of de novo locations.

Cost Management and Balance Sheet Improvements:
- The company achieved a 51.9% free cash flow conversion rate year-to-date, reducing bank debt by $10.5 million in Q2 2025.
- These improvements were due to strategic focus on leverage reduction through cash flow generation and debt prepayments, reducing the net debt to adjusted EBITDA ratio to 4.3x.

Operational Adjustments and Strategic Initiatives:
- Enhabit is implementing an advanced visit per episode management pilot in 11 branches to mitigate CMS proposed cuts, aiming to optimize visit utilization and staffing models without impacting quality.
- These adjustments are necessary to address extreme headwinds from CMS proposed cuts, while maintaining competitive wage rates and recruiting skilled workforce in a challenging labor market.