Encompass Health Appears Ready to Divest Health and Hospice Business

Encompass Health announced it is “exploring strategic alternatives” for its home health and hospice business, ranked as the fourth-largest home health provider in the nation by LexisNexis with 242 home health locations and 83 hospice locations. Segment revenue was $275 million in the third quarter of 2020 and $1.09 billion in 2019.

The company is considering “a range of options” for its home health and hospice business, including a full or partial separation from Encompass Health through an initial public offering, spin-off, merger, sale or other transaction.

Encompass Health had viewed, despite the pandemic, strong interest in partnering the home health and hospice business among ACOs and Medicare Advantage payers, seeking value-based payment arrangements. 

Encompass Health’s strengths have included the combination of industry-leading hospital readmission rates resulting in more healthy days at home for patients, success in prior risk-based payment arrangements and a commitment to scale and density at the regional level. 

Home health revenue decreased 6.5% in the third quarter of 2020 based on the 3.3% decline in admissions and a 2.3% drop in revenue per episode. The decrease in revenue per episode is primarily attributable to the implementation of PDGM, the effects of which have been exacerbated by the pandemic.

No timetable has been established for the completion of the strategic review. Encompass Health does not intend to disclose further developments with respect to its strategic review process.


Takeaway: Encompass Health identification of strategic opportunities in the home health and hospice business has become much more challenging as a result of the pandemic