A full or partial separation of Encompass Health’s home health and hospice business from its rehabilitation hospitals is all but guaranteed by the end of this year.
Encompass Health President and CEO Mark Tarr told analysts during an earnings call Wednesday the Birmingham, AL-based firm has made “key preparatory actions” for a separation, including required regulatory filings with the Securities and Exchange Commission.
“Our board of directors believes a full or partial separation of the home and hospice business will enhance the long term success and value of the business,” Tarr said. “The final form is still to be determined as we continue to pursue a separation by either a public or private means.”
Tarr dodged follow-up questions from analysts about the separation during the call, saying the company would not comment further until it had an announcement on a deal.
Last December, Encompass Health announced an alternative review of the home health and hospice business that could result in a spin off or sale. In late June, the company appointed Barbara Jacobsmeyer as CEO of that unit and Chrissy Carlisle as CFO. Tarr offered no word on their futures with Encompass.
Late Tuesday, Encompass released solid second quarter earnings that beat Wall Street expectations. The company reported adjusted earnings per share of $1.17 in the quarter that ended June 30, compared to $0.1 in the same period last year. Revenues for the quarter totaled $1.29 billion, a nearly 20% increase from the $1.07 billion the company reported last year.
While the company’s home health and hospice business didn’t perform as well as the facility business, it did turn in a solid performance for the quarter. Together, the segments made $286 million, a 14.6% increase over the same period last year.
Both Tarr and Jacobsmeyer acknowledged that labor is one of the headwinds for Encompass Health going forward. Jacobsmeyer said the market for registered nurses and licenced practical nurses is especially tough, but she did not think the difficulties recruiting and retaining talent would limit growth for the home health and hospice business.
“We do have dashboards that tell us where we do have hiring challenges versus where we are sufficiently staffed. So it’s really about blocking and tackling and knowing where we have staffing challenges and then focus on talent acquisition in those markets,” Jacobsmeyer said on the call.
Encompass Health operates 250 home health agencies and 94 hospice locations in 42 states and Puerto Rico.
