Enhabit Inc at Bank of America Home Care Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joanna Gajuk - Bank of America - Analyst : And we're going to go right into Q&A. But I want to make sure that the audience is aware that there's a way for them to pose a question. So you can use the ask question window, I guess, in the panel there. So please feel free to submit your questions. So maybe -- Barb, Ryan, thank you so much again. And let's start with the final home held rig, right? It just came out feels like yesterday, we're very delayed. But finally, it's out, so that's good. And the headline number, much better than the proposal, but it's still a cut, right? So how we should think about the impact that you expect now based on this final rate update? And also in terms of your mitigation strategies, I mean, it sounds like clearly, it's going to be easier, but kind of walk us through how you're thinking about that now based on the final reg?

Question: Joanna Gajuk - Bank of America - Analyst : Thanks for that. And yes, the -- in the reg, right, there were a couple of different points, I guess, of discussions. So the first, maybe let's talk about the behavior adjustment. So it sounds like CMS is kind of say, "Hey, guys, I kind of agree with you in terms of the -- what we observed in behavior changes?" Might not be just the reimbursement on the PDGM along it could be other things, right? So they only finalized 1% cut. So is that your interpretation that they're kind of done with the behavior adjustment because also in another place in the reg, they kind of talk about, they might come back and analyze and try to figure out the PDGM alone impact in '23, '24. So sort of kind of how is your read on what they're trying to tell us about the behavior adjustment going forward?

Question: Joanna Gajuk - Bank of America - Analyst : But I guess on the flip side, right, there's still some questions about the temporary adjustment or the recruitment. I mean clearly, they lowered it, right? So that was good, right? At 3% versus the 5% in the proposal, but they still talk about this pretty sizable overpayment that they estimate, right? I mean the number itself came down a little bit. So that's good. But kind of, what is your take on what CMS is planning to do when it comes to the recruitments? Would you expect additional recruitment cut added to get to that 5% in '27 or kind of -- any kind of read you guys have on that piece?

Question: Joanna Gajuk - Bank of America - Analyst : And I guess sort of a follow-up question in terms of -- because you alluded to this earlier in the first question around the company looking back are investing more because of the final payer looks better than the proposal. So the question is about can you talk about the outlook for M&A in terms of both, I guess, Home Health and Hospice as you think about next year and also longer term?

Question: Joanna Gajuk - Bank of America - Analyst : Okay. Great. And then just coming back to home health specifically. So we talk about the Medicare rates and where we stand in terms of the '26 rate out there. But I guess the other piece that's growing is Medicare Advantage rate. So can you talk about what percent of your Medicare Advantage book is actually linked to Medicare fee-for-service? Because the way I'm thinking about is, is there a risk that like the MA plans will actually follow that negative 1% cut into '26. So kind of, just want to make sure we clarify that. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 09, 2025 / 8:50PM, EHAB.N - Enhabit Inc at Bank of America Home Care Conference (Virtual)

Question: Joanna Gajuk - Bank of America - Analyst : And I guess, switching to the payer innovation strategy. Can you provide us what percent of revenue now is in those payer innovation contracts? And with this latest quarter, you start talking about renewals, right, of these contracts, so that's good. And can you share a little bit more color in terms of what type of rate increases you're getting? And also similar to my other question in terms of are these contracts are somehow linked to Medicare fee-for-service or they're completely like de-linked from that.

Question: Joanna Gajuk - Bank of America - Analyst : And you alluded to this renegotiation and it sounds like you guys are able to I guess, even give up by some of the volume or at least temporarily disrupt the business as you're negotiating these contracts, right? So is that you kind of implying that you got -- you're working maybe from the more position of power, so to speak, or in a better spot now versus maybe a couple of years ago with these payers?

Question: Joanna Gajuk - Bank of America - Analyst : No, exactly. That's good to hear there. And when it comes to these contracts, right? So clearly, a pretty good job there improving the contract with these plans. And can you just give us a flavor of when you look at that Medicare Advantage business, right? How much, I guess, is there still to be done in terms of the per visit contracts, right? Because clearly, you're doing a good job on these episodic type contracts, but any update there on per visit.

Question: Joanna Gajuk - Bank of America - Analyst : So I guess what's the mix now? Like how much, I guess, is in the per visit versus episodic of your MA book?

Question: Joanna Gajuk - Bank of America - Analyst : Okay, right. So there's still, I guess, more home there. And when we're thinking about the MA plans, right, they're seeing some rate pressure there. And we heard from some providers, hospital space about increase in denials and some issues there. So I want to ask you whether there's anything you kind of see in your home health business when it comes to MA, putting maybe more pressure than typical in terms of -- we know about the right but in terms of just payments and maybe the NAHC increasing and such. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 09, 2025 / 8:50PM, EHAB.N - Enhabit Inc at Bank of America Home Care Conference (Virtual)

Question: Joanna Gajuk - Bank of America - Analyst : Right. And -- so coming back a little bit to the Medicare fee-for-service and talking about volumes, right? So here, Medicare fee-for-service admissions declined about 3% in third quarter and like it's still sequentially down couple of percentage points. So can you walk us through kind of what's happening there? Are you losing market share? Kind of what's the outlook for you to kind of stem that or try to improve that business, the mix.

Question: Joanna Gajuk - Bank of America - Analyst : Okay. So you're saying that in some instances, it might be that kind of your referral sources have that mix that maybe skews lower fee-for-service higher MA or other or others. And that's what's kind of happening. So now you mentioned that T model could be one of the things that maybe allows you to kind of change that mix. Anything else you can call out that could that could help improve the mix towards future service?

Question: Joanna Gajuk - Bank of America - Analyst : And switching gears a little bit to cost discussions. So I think for your -- for this year, for '25 guidance, you assume cost per day were actually

Question: Joanna Gajuk - Bank of America - Analyst : And talking about labor, what's the current state there of labor in home health, I guess, first? And how are you thinking about the wage inflation into next year?

Question: Joanna Gajuk - Bank of America - Analyst : And when are we thinking about the home health census growth going forward? Kind of how should we think about the rate there of growth? Is the low single digits sustainable growth for home health?

Question: Joanna Gajuk - Bank of America - Analyst : And switching to hospice. So their hospice census has been growing sequentially and grew double digits, I think year-to-date, right, is a pretty robust growth. So can you kind of help us understand how much is same store really census growing there, right? Because I think you don't give that number, you give the same-store admissions, which grew like 3.5% or so. So my question is around the census same-store census growth and also de novo. So, you alluded to this before that because of the multiples being higher, kind of more focused on doing de novos there. So how much, I

Question: Joanna Gajuk - Bank of America - Analyst : So how you think about census into next year, right? Is there some number is fair to assume sort of similar growth or kind of more normalized growth into next year?

Question: Joanna Gajuk - Bank of America - Analyst : Okay. And is this assuming some de novos in that number when you talk about the high single digits?

Question: Joanna Gajuk - Bank of America - Analyst : And I guess I want to say that in the past, you also talked about some changes you were doing around recruiting and retention because when we look at this hospice census growth improvement, right? And you said like there's some of the de novo and some of the de novo ramping, that helps that number. But can you talk about hospice, I guess, labor and some of the metrics in terms of turnover and retention there in that business?

Question: Joanna Gajuk - Bank of America - Analyst : And when we talk about wage growth for home health in the 3% range, so is that something similar you would expect for hospice here?

Question: Joanna Gajuk - Bank of America - Analyst : Okay. So pretty comparable number. Any, I guess, difference in terms of the labor market situation between home health and hospice in your mind?

Question: Joanna Gajuk - Bank of America - Analyst : And your guidance for hospice assumes revenue per patient day to grow 6% year-over-year. So obviously, there's the Medicare rate, right? But it seems like there's something else. So is it just higher length of stay? Or what else is, I guess, driving that average revenue per day?

Question: Joanna Gajuk - Bank of America - Analyst : And as we think about the next year, so we talk a little bit about the census, and I guess we kind of know the rate growth for fiscal '26. So kind of as you combine that to? And would you expect additional benefit from the mix? I mean I understand the cup maybe that you would have put it in another tailwind from that. But kind of walk us through the kind of high-level math in terms of how we should think about the top line growth for hospice.

Question: Joanna Gajuk - Bank of America - Analyst : Okay. And then the other piece of the question in terms of the cost per day. So you guys have been doing a pretty good job there. So what is driving that and kind of how we should think about this into next year?

Question: Joanna Gajuk - Bank of America - Analyst : And one more thing, I guess, when it comes to, I guess, both businesses in hospice, but also in home health, sounds like you closed branches during third quarter. So I guess how many? And kind of what drove that decision? And should we expect more of this happening going forward in terms of just consolidation or closing of the branches?

Question: Joanna Gajuk - Bank of America - Analyst : So what was exactly driving the decision to close the branches?

Question: Joanna Gajuk - Bank of America - Analyst : And you also mentioned the idea around de novos and also kind of having the two services in the same market. So can you remind us kind of the percent of your markets where you have the overlap. And sort of what are the benefits of having hospice in the same market as you have home health?

Question: Joanna Gajuk - Bank of America - Analyst : Is there any percentage you have in terms of percent of, I guess, your home health patients getting into your hospice or percent of hospice, I guess, that you get from your own home health in the markets where you have overlap?

Question: Joanna Gajuk - Bank of America - Analyst : Okay. And I guess maybe transitioning into the corporate level on your leverage ratio, where you exited the quarter with 3.9 times, I think. So can you talk about your leverage targets? And also how do you plan to get to that?

Question: Joanna Gajuk - Bank of America - Analyst : So I guess you're kind of suggesting that 3.9 times is sort of where you feel comfortable? Or are you saying that there could be more, I guess, the leveraging that's happening. While at the same time, it sounds like you plan to -- we deploy some of the free cash flow into acquisitions.

Question: Joanna Gajuk - Bank of America - Analyst : All right. I think that's all the questions that I had here. So thank you so much to Barb and Ryan, and thanks, everyone, for joining us today and yesterday and hope we -- because see you pretty soon somewhere maybe in person as well. Thanks, everyone. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 09, 2025 / 8:50PM, EHAB.N - Enhabit Inc at Bank of America Home Care Conference (Virtual)