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What changed in Enhabit, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Enhabit, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+428 added−541 removedSource: 10-K (2025-03-06) vs 10-K (2024-03-15)

Top changes in Enhabit, Inc.'s 2024 10-K

428 paragraphs added · 541 removed · 358 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

160 edited+18 added−58 removed52 unchanged
Biggest changeIn August 2011, President Obama signed into law the Budget Control Act of 2011 providing for an automatic 2% reduction, or “sequestration,” of Medicare program payments for all healthcare providers. Sequestration took effect April 1, 2013 and, as a result of subsequent legislation, will continue through fiscal year 2030 unless Congress and the President take further action.
Biggest changeSequestration took effect in April 2013 and, as a result of subsequent legislation, will continue through fiscal year 2030 unless Congress and the President take further action. • In 2018, President Trump signed into law the Bipartisan Budget Act of 2018 (the “2018 Budget Act”), which included several provisions affecting Medicare reimbursement, such as PDGM. 7 Table of Contents In the future, concerns about the federal deficit and national debt levels could result in enactment of further federal spending reductions, further entitlement reform legislation affecting the Medicare program, or both.
PDGM also reduced the early payment opportunity available through requests for anticipated payment (“RAP”) in 2020. Beginning in 2021, providers no longer have the opportunity to receive early payment through the RAP process.
In 2020 PDGM also reduced the early payment opportunity available through requests for anticipated payment (“RAP”). Beginning in 2021, providers no longer have the opportunity to receive early payment through the RAP process.
The 2023 HH Rule implemented a net 4.0% market basket increase (market basket update of 4.1% reduced by 0.1% for a productivity adjustment) and a 5% cap on wage index decreases, updated the case-mix weights and fixed-dollar loss ratio for outlier payments, and updated the LUPA thresholds.
The 2023 HH Rule implemented a net 4.0% market basket increase (market basket update of 4.1% reduced by 0.1% for a productivity adjustment) and a 5.0% cap on wage index decreases, updated the case‑mix weights and fixed-dollar loss ratio for outlier payments, and updated the LUPA thresholds.
For additional discussion of the regulatory risks associated with our business, see Item 1A, “ Risk Factors—Risks Related to Our Business .” Licensure and Certification Healthcare providers are subject to numerous federal, state, and local regulations relating to, among other things, the adequacy of medical care, equipment, personnel, operating policies and procedures, infection control, and maintenance of adequate records and patient privacy.
For additional discussion of the regulatory risks associated with our business, see Item 1A, “ Risk Factors—Risks Related to Our Business—Other Regulatory Risks .” Licensure and Certification Healthcare providers are subject to numerous federal, state, and local regulations relating to, among other things, the adequacy of medical care, equipment, personnel, operating policies and procedures, infection control, and maintenance of adequate records and patient privacy.
In any state where we are subject to a certificate of need law, we must obtain such certificate before acquiring, opening, reclassifying, or expanding a healthcare facility, starting a new healthcare program, or opening a new home health or hospice agency.
In any state where we are subject to a certificate of need law, we must obtain such certificate before acquiring, opening, reclassifying, or expanding a healthcare facility, starting a new healthcare program, or opening a new home health agency or hospice.
Available remedies or penalties under the Civil Monetary Penalties Law may include exclusion from federal healthcare programs such as Medicare and Medicaid in addition to monetary damages. The penalties are adjusted annually by HHS to account for inflation and as such, are subject to further changes.
Available remedies or penalties under the Civil Monetary Penalties Law may include exclusion from federal healthcare programs such as Medicare and Medicaid in addition to monetary damages. The penalties are adjusted annually by HHS to account for inflation and are subject to further changes.
Also, the charters of our Audit and Finance Committee, Compensation and Human Capital Committee, Care, Compliance, and Cybersecurity Committee, Nominating/Corporate Governance Committee, our Corporate Governance Guidelines, Standards of Business Conduct and Ethics, Insider Trading Policy, Incentive Compensation Recoupment Policy, Amended and Restated Bylaws, Certificate of Incorporation and information regarding certain of our investor presentations, press releases and shareholder communications are available through our website.
Also, the charters of our Audit & Finance Committee, Compensation & Human Capital Committee, Care, Compliance, & Cybersecurity Committee, Nominating & Corporate Governance Committee, our Corporate Governance Guidelines, Standards of Business Conduct and Ethics, Insider Trading Policy, Incentive Compensation Recoupment Policy, Amended and Restated Bylaws, Amended and Restated Certificate of Incorporation and information regarding certain of our investor presentations, press releases and shareholder communications are available through our website.
Civil Monetary Penalties Law Under the Civil Monetary Penalties Law, HHS may impose civil monetary penalties on healthcare providers for knowingly presenting, or causing to be presented, false or fraudulent reimbursement claims for services; knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim for payment under a federal healthcare program; transferring remuneration or offering to transfer remuneration that the provider knows or should know will induce a beneficiary to use a particular provider or service; and knowing of an overpayment and failing to report and return such overpayment as required.
Civil Monetary Penalties Law Under the Civil Monetary Penalties Law, HHS may impose civil monetary penalties on healthcare providers for knowingly presenting, or causing to be presented, false or fraudulent claims for reimbursement; knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim for payment under a federal healthcare program; transferring remuneration or offering to transfer remuneration that the provider knows or should know will induce a beneficiary to use a particular provider or service; and knowing of an overpayment and failing to report and return such overpayment as required.
Item 1. Business. Our Business We are a leading provider of home health and hospice services in the United States. We strive to provide superior, cost-effective care where patients prefer it: in their homes. For over twenty years, we have provided care in the low-cost home setting while achieving high-quality clinical outcomes.
ITEM 1. BUSINESS Our Business We are a leading provider of home health and hospice services in the United States. We strive to provide superior, cost-effective care where patients prefer it: in their homes. For over twenty-five years, we have provided care in the low‑cost home setting while achieving high-quality clinical outcomes.
We also believe our competitive strengths allow us to adapt and succeed in a healthcare industry facing continuing regulatory changes focused on improving outcomes and reducing costs. 3 Scale and Density Our current footprint reflects our multi-decade effort to establish scale and density in key markets with attractive demographic and regulatory profiles.
We also believe our competitive strengths allow us to adapt and succeed in a healthcare industry facing continuing regulatory changes focused on improving outcomes and reducing costs. Scale and Density Our current footprint reflects our multi-decade effort to establish scale and density in key markets with attractive demographic and regulatory profiles.
State and local healthcare regulation may cover additional matters such as nurse staffing ratios, healthcare worker safety, marijuana legalization, and medical aid in dying. These laws and regulations are extremely complex, and, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation.
State and local healthcare regulations may cover additional matters such as nurse staffing ratios, healthcare worker safety, marijuana legalization, and medical aid in dying. These laws and regulations are extremely complex, and, in many instances, the industry does not have the benefit of significant regulatory or judicial interpretation.
However, providers are required to submit certain RAP documentation components within five days of the start of each payment period and are subject to reimbursement penalties if not timely filed. Beginning in 2022, home health providers are required to submit a Notice of Admission (“NOA”) within five days of the start of the initial treatment period.
However, providers are required to submit certain RAP documentation components within five days of the start of each payment period and are subject to reimbursement penalties if not timely filed. Beginning in 2022, home health providers were required to submit a Notice of Admission (“NOA”) within five days of the start of the initial treatment period.
At the management level we have established an executive compliance committee, chaired by our Chief Compliance Officer, and an inter-departmental privacy and security committee that generally meets at 12 least quarterly and oversees our programs and initiatives that seek to protect and secure our data and systems.
At the management level we have established an executive compliance committee, chaired by our Chief Compliance Officer, and an inter-departmental privacy and security committee that generally meets at least quarterly and oversees our programs and initiatives that seek to protect and secure our data and systems.
In 2023, approximately 38% of our home health patient admissions were from physician offices or other community referral sources, and approximately 62% were from facility‑based sources, including acute care hospitals, long-term care facilities, skilled nursing facilities, or rehabilitation hospitals. Our home health services are provided by nurses, physical, occupational and speech therapists, medical social workers, and home health aides.
In 2024, approximately 38% of our home health patient admissions were from physician offices or other community referral sources, and approximately 62% were from facility‑based sources, including acute care hospitals, long-term care facilities, skilled nursing facilities, or rehabilitation hospitals. Our home health services are provided by nurses, physical, occupational and speech therapists, medical social workers, and home health aides.
In addition, HIPAA created new enforcement mechanisms to combat fraud and abuse, including the Medicare Integrity Program, and an incentive program under which individuals can receive a monetary reward for providing information on Medicare fraud and abuse that leads to the recovery of at least a portion of the Medicare funds. Violating HIPAA may result in civil and criminal penalties.
In addition, HIPAA created new enforcement mechanisms to combat fraud and abuse, including the Medicare Integrity Program, an incentive program under which individuals can receive a monetary reward for providing information on Medicare fraud and abuse that leads to the recovery of at least a portion of the Medicare funds. Violating HIPAA may result in civil and criminal penalties. U.S.
The IMPACT Act also includes provisions impacting Medicare-certified hospices, including: (1) increasing survey frequency for Medicare-certified hospices to once every 36 months; (2) imposing a medical review process for facilities with a high percentage of stays in excess of 180 days; and (3) updating the annual aggregate Medicare payment cap.
The IMPACT Act also includes provisions impacting Medicare-certified hospices, including: (1) increasing survey frequency for Medicare-certified hospices to once every 36 months; (2) imposing a medical review process for facilities with a higher percentage of stays in excess of 180 days; and (3) updating the annual aggregate Medicare payment cap.
The primary competitive factors in any given market include the quality and cost of care and service provided, the treatment outcomes achieved, the relationship and reputation with managed care and other private payors and the acute care hospitals, physicians, and other referral sources in the market, and the regulatory barriers to entry in certificate of need states.
The primary competitive factors in any given market include the quality and cost of care and service provided, the treatment outcomes achieved, the relationship and reputation with managed care and other private payers and the acute care hospitals, physicians, and other referral sources in the market, and the regulatory barriers to entry in certificate of need states.
Our compliance program is overseen primarily by the Care, Compliance, and Cybersecurity Committee, whose function is to assist our board of directors in fulfilling its fiduciary responsibilities relating to our regulatory compliance. Our Chief Compliance Officer provides quarterly reports to the Care, Compliance, and Cybersecurity Committee on compliance efforts and related matters.
Our compliance program is overseen primarily by our board of directors’ Care, Compliance, & Cybersecurity Committee, whose function is to assist the board in fulfilling its fiduciary responsibilities relating to our regulatory compliance. Our Chief Compliance Officer provides quarterly reports to the Care, Compliance, & Cybersecurity Committee on compliance efforts and related matters.
Additionally, due to the demographic overlap of our patients, we believe some of our home health patients will eventually require and choose the services of our hospice segment. We are one of the nation’s largest providers of Medicare-certified hospice services, measured by 2022 Medicare revenues.
Additionally, due to the demographic overlap of our patients, we believe some of our home health patients will eventually require and choose the services of our Hospice segment. We are one of the nation’s largest providers of Medicare-certified hospice services, measured by 2023 Medicare revenues.
Managed care 11 contracts typically have terms between one and three years, although we have a number of managed care contracts that automatically renew each year (with pre-defined rates) unless a party elects to terminate the contract. In 2023, typical rate increases for our renewed home health and hospice contracts ranged from 3-5%.
Managed care contracts typically have terms between one and three years, although we have a number of managed care contracts that automatically renew each year (with pre-defined rates) unless a party elects to terminate the contract. In 2024, typical rate increases for our renewed home health and hospice contracts ranged from 3-5%.
Because we furnish thousands of services a year for which we are reimbursed by Medicare and other federal payors and for which there is a relatively long statute of limitations, a billing error, cost reporting error or disagreement over physician medical judgment could result in significant civil damages under the FCA and penalties under criminal fraud equivalents.
Because we furnish thousands of services a year for which we are reimbursed by Medicare and other federal payers and for which there is a relatively long statute of limitations, a coding or billing error, cost reporting error or disagreement over physician medical judgment could result in significant civil damages and penalties under the FCA and penalties under criminal fraud equivalents.
MACs also conduct Target Probe and Educate (“TPE”) audits, which are designed to help providers reduce claim denials and appeals with one-on-one education focused on the documentation and coding of the services they provide.
MACs also conduct Targeted Probe and Educate (“TPE”) audits, which are designed to help providers reduce claim denials and appeals with one-on-one education focused on the documentation and coding of the services they provide.
Our home health and hospice agencies are each licensed under applicable law, certified by CMS for participation in the Medicare program, and generally certified by the applicable state Medicaid agencies to participate in those programs.
Our home health agencies and hospice provider locations are each licensed under applicable law, certified by CMS for participation in the Medicare program, and generally certified by the applicable state Medicaid agencies to participate in those programs.
Department of Health and Human Services Office of Inspector General (the “HHS-OIG”) has published numerous “safe harbors” that exempt some practices from enforcement action under the Anti-Kickback Statute.
Department of Health and Human Services Office of Inspector General (the “HHS-OIG”) has published numerous “safe harbors” that protect some practices from enforcement action under the Anti-Kickback Statute.
Patients are generally not responsible for the difference between established gross charges and amounts reimbursed for such services under Medicare, Medicaid, and other private insurance plans, HMOs, or PPOs, but patients are responsible to the extent of any exclusions, deductibles, co-payments, or coinsurance features of their coverage.
Patients are generally not responsible for the difference between established gross charges and amounts reimbursed for such services under Medicare, Medicaid, and other private 6 Table of Contents insurance plans, HMOs, or PPOs, but patients are responsible to the extent of any exclusions, deductibles, co-payments, or coinsurance features of their coverage.
We annually review our talent to identify potential successors for key positions and to identify candidates for accelerated development based on their performance and potential. The annual process includes an assessment of each employee’s promotability based on a set of leadership core competencies defined as part of our talent strategy.
We annually review our talent to identify potential successors for key positions and to identify candidates for accelerated development based on their performance 14 Table of Contents and potential. The annual process includes an assessment of each employee’s promotability based on a set of leadership core competencies defined as part of our talent strategy.
We believe we can attract Medicare Advantage payors and benefit administrators with our track record of providing high-quality outcomes and lower hospital readmission rates, along with our successful participation in risk-based payment models. By executing our strategy to shift Medicare Advantage business to our Payor Innovation contracts, we believe our focus on this segment of the market can drive growth.
We believe we can attract Medicare Advantage payers and benefit administrators with our track record of providing high-quality outcomes and lower hospital readmission rates, along with our successful participation in risk-based payment models. By executing our strategy to shift Medicare Advantage business to our Payer Innovation contracts, we believe our focus on this segment of the market can drive growth.
The IMPACT Act requires PACs to report: (1) standardized patient assessment data at admission and discharge; (2) quality measures, including functional status, skin integrity, medication reconciliation, incidence of major falls and patient preference regarding treatment and discharge; and (3) resource use measures, including Medicare spending per 15 beneficiary, discharge to community and hospitalization rates of potentially preventable readmissions.
The IMPACT Act requires PACs to report: (1) standardized patient assessment data at admission and discharge; 13 Table of Contents (2) quality measures, including functional status, skin integrity, medication reconciliation, incidence of major falls and patient preference regarding treatment and discharge; and (3) resource use measures, including Medicare spending per beneficiary, discharge to community and hospitalization rates of potentially preventable readmissions.
Failure to report such data when required would subject a facility to a two percent reduction in market basket prices then in effect. The IMPACT Act further requires HHS and MedPAC to study alternative PAC payment models, including payment based upon individual patient characteristics with corresponding Congressional reports required based on such analysis.
Failure to report such data when required could subject a facility to a reduction in market basket prices then in effect. The IMPACT Act further requires HHS and MedPAC to study alternative PAC payment models, including payment based upon individual patient characteristics with corresponding Congressional reports required based on such analysis.
Our payor innovation strategy includes four primary tenets: (i) building relationships with payors and conveners; (ii) obtaining new agreements with favorable rates and terms; (iii) renegotiating existing agreements to provide more favorable rates and terms; and (iv) whenever possible, negotiating to include value-based incentives in our agreements. Collectively we refer to these efforts as Payor Innovation.
Our payer innovation strategy includes four primary tenets: (i) building relationships with payers and conveners; (ii) obtaining new agreements with favorable rates and terms; (iii) renegotiating existing agreements to provide more favorable rates and terms; and (iv) whenever possible, negotiating to include value-based incentives in our agreements. Collectively we refer to these efforts as Payer Innovation.
The federal government has become increasingly aggressive in asserting that incidents of erroneous billing or record keeping represent FCA violations and in challenging the medical judgment of independent physicians as the basis for FCA allegations. Relationships between Physicians and Other Providers State and federal laws regulate relationships between physicians and certain healthcare providers.
The federal government appears to have become increasingly aggressive in asserting that incidents of erroneous billing or record keeping represent FCA violations and in challenging the medical judgment of independent physicians as the basis for FCA allegations. Relationships between Physicians and Other Providers State and federal laws regulate relationships between physicians and certain healthcare providers.
Each year, the Medicare Payment Advisory Commission (“MedPAC”), an independent agency that advises Congress on issues affecting Medicare, makes policy recommendations to Congress for a variety of Medicare payment systems, including, among others, the Home Health Prospective Payment System (“HH-PPS”) and the Hospice Payment System (“Hospice-PS”).
Each year, the MedPAC, an independent agency that advises Congress on issues affecting Medicare, makes policy recommendations to Congress for a variety of Medicare payment systems, including, among others, the Home Health Prospective Payment System (“HH-PPS”) and the Hospice Payment System (“Hospice-PS”).
As of December 31, 2023, approximately 33% of our home health and hospice locations are in states that have certificate of need laws. Certificate of need laws require a reviewing authority or agency to determine the public need for additional or expanded healthcare agencies, locations, or services.
As of December 31, 2024, approximately 30% of our home health and hospice locations are in states that have certificate of need laws. Certificate of need laws require a reviewing authority or agency to determine the public need for additional or expanded healthcare agencies, locations, or services.
We use this predictive analytics platform's models to help identify patients at risk for unplanned hospitalizations. The platform recommends a patient-centered visit utilization plan to promote discharge without hospitalization and prompts continued touch points with discharged patients to identify and prevent post-discharge hospitalizations.
We use this platform to help identify patients at risk for unplanned hospitalizations. The platform recommends a patient-centered visit utilization plan to promote discharge without hospitalization and prompts continued touch points with discharged patients to identify and prevent post-discharge hospitalizations.
In addition, the FCA allows private persons (“relators”) to file complaints under seal and provides a period of time for the government to investigate such complaints and determine whether to intervene in them and take over the handling of all or part of such complaints.
In addition, the FCA allows private persons (“relators”) to file complaints under seal (also known as whistleblower complaints) and provides a period of time for the government to investigate such complaints and determine whether to intervene in them and take over the handling of all or part of such complaints.
Governmental Review, Audits, Surveys, and Investigations Medicare reimbursement claims made by healthcare providers, including home health and hospice agencies, are subject to audit from time to time by governmental payors and their agents, such as MACs that act as fiscal intermediaries for all Medicare billings, auditors contracted by CMS, and insurance carriers, as well as the HHS-OIG, CMS, and state Medicaid programs.
Governmental Review, Audits, Surveys, and Investigations Medicare reimbursement claims submitted by healthcare providers, including home health agencies and hospice provider locations, are subject to audit from time to time by governmental payers and their agents, such as MACs that act as fiscal intermediaries for all Medicare billings, auditors contracted by CMS, and insurance carriers, as well as the HHS‑OIG, CMS, and state Medicaid programs.
Business Development We have teams allocated to all aspects of the referral and patient onboarding process. We believe this high touch approach enables our business development teams to develop deep rooted relationships and build density in the markets they serve, ultimately increasing patient referrals to our home health and hospice agencies.
Business Development We assign teams to all aspects of the referral and patient onboarding process. We believe this high touch approach enables our business development teams to develop deep rooted relationships and build density in the markets they serve, ultimately increasing patient referrals to our home health and hospice locations.
For additional discussion of CMS’s Star ratings, see Item 1A, “ Risk Factors — Risks Related to Our Business — Reimbursement Risks .” We focus on hospital readmission and acute care hospitalization rates as our primary indicators of clinical quality. We believe this focus results in superior clinical outcomes for patients, providers, and payors.
For additional discussion of CMS’s Star ratings, see Item 1A, “ Risk Factors — Risks Related to Our Business — Other Operational and Financial Risks .” We focus on hospital readmission and acute care hospitalization rates as our primary indicators of clinical quality. We believe this focus results in superior clinical outcomes for patients, providers, and payers.
In certain states in which we operate, we are experiencing an increase in Medicaid patients, partially as a result of expanded coverage consistent with the intent of the 2010 Healthcare Reform Laws. However, for the year ended December 31, 2023 Medicaid payments represented only 1.2% of our consolidated Net service revenue .
In certain states in which we operate, we are experiencing an increase in Medicaid patients, partially as a result of expanded coverage consistent with the intent of the 2010 Healthcare Reform Laws. However, for the year ended December 31, 2024 Medicaid payments represented only 0.9% of our consolidated Net service revenue.
The Payor Innovation team executes this strategy in collaboration with the executive leadership team. We continue to evaluate new models and other opportunities to collaborate with both existing and new payors along with potential strategic partners.
The Payer Innovation team executes this strategy in collaboration with the executive leadership team. We continue to evaluate new models and other opportunities to collaborate with both existing and new payers along with potential strategic partners.
Regulations and policies frequently change, and we monitor these changes through trade and governmental publications and associations. We have developed a compliance program to help ensure we meet regulatory and legal requirements applicable to our business.
Regulations and policies frequently change, and we monitor these changes through trade and governmental publications and associations. We have developed a compliance program to help facilitate meeting regulatory and legal requirements applicable to our business.
As of December 31, 2023, 105 of our 110 hospice locations were co-located within our home health markets, allowing us to minimize gaps in care and disruption to the patient.
As of December 31, 2024, 110 of our 115 hospice locations were co-located within our home health markets, allowing us to minimize gaps in care and disruption to the patient.
False Claims The federal civil False Claims Act (“FCA”) imposes liability for the knowing presentation of a false claim to the U.S. government and provides for penalties equal to three times the actual amount of any overpayments plus up to approximately $27,000 per claim. Federal civil penalties will be adjusted to account for inflation each year.
False Claims The federal civil False Claims Act (“FCA”) imposes liability for the knowing presentation of a false claim to the U.S. government and provides for damages equal to three times the actual amount of any overpayments plus additional penalties per claim. Federal civil penalties will be adjusted to account for inflation each year.
Although Medicare Advantage billings and collections are more labor intensive than with traditional Medicare, and Medicare Advantage generally involves a discount for services relative to traditional Medicare, we believe growth with these payors is important given that more Medicare eligibles are choosing Medicare Advantage plans .
Although Medicare Advantage billings and collections are more labor intensive than with traditional Medicare, and Medicare Advantage generally involves a discount for services relative to traditional Medicare, we believe growth with these payers is important given that more Medicare eligible people are choosing Medicare Advantage plans .
In spite of this cost advantage, the annual Medicare expenditure on skilled nursing facilities is over $27 billion as compared to home health and hospice, which are each less than $24 billion. We believe health care payors will increasingly encourage the treatment of patients in their homes and other low-cost settings.
In spite of this cost advantage, the annual Medicare expenditure on skilled nursing facilities is over $27 billion as compared to home 2 Table of Contents health and hospice, which are each less than $26 billion. We believe health care payers will increasingly encourage the treatment of patients in their homes and other low-cost settings.
For the year ended December 31, 2023, revenues from Medicare and Medicare Advantage represented 90.5% of total Net service revenue . 7 The following table identifies the sources and relative mix of our revenues for the periods stated for our consolidated business: For the Year Ended December 31, 2023 2022 2021 Medicare (1) 71.5 % 78.4 % 81.9 % Medicare Advantage 19.0 % 14.2 % 10.6 % Managed care 8.2 % 6.1 % 5.9 % Medicaid 1.2 % 1.2 % 1.4 % Other 0.1 % 0.1 % 0.2 % Total 100.0 % 100.0 % 100.0 % (1) The decline in Medicare revenue as a percentage of our home health Net service revenue and corresponding increase in Medicare Advantage revenue is primarily the result of continued national enrollment increases in Medicare Advantage plans by Medicare beneficiaries.
The following table identifies the sources and relative mix of our revenues for the periods stated for our consolidated business: Year Ended December 31, 2024 2023 2022 Medicare (1) 66.8 % 71.5 % 78.4 % Medicare Advantage 23.0 % 19.0 % 14.2 % Managed Care 9.1 % 8.2 % 6.1 % Medicaid 0.9 % 1.2 % 1.2 % Other 0.2 % 0.1 % 0.1 % Total 100.0 % 100.0 % 100.0 % (1) The decline in Medicare revenue as a percentage of our total Net service revenue and corresponding increase in Medicare Advantage revenue is primarily the result of the impact on Home Health Net service revenue from the continued national enrollment increases in Medicare Advantage plans by Medicare beneficiaries.
Within this expanding market, we focus primarily on skilled home health services. Medicare Advantage is becoming a more prevalent payor source within skilled home health services. Given our low cost of care and high-quality outcomes, we believe we are well-positioned to serve this growing population. The home health industry is comprised of both for-profit and not-for-profit organizations.
Medicare Advantage is becoming a more prevalent payer source within skilled home health services. Given our low cost of care and high-quality outcomes, we believe we are well-positioned to serve this growing population. The home health industry is comprised of both for-profit and not-for-profit organizations.
We make available, free of charge, through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as soon as reasonably practicable after providing such reports to the SEC.
We make available, free of charge, through our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as soon as reasonably practicable after providing such reports to the Securities and Exchange Commission (“SEC”).
One type of audit contractor, the Recovery Audit Contractors (“RACs”), receives claims data directly from MACs on a monthly or quarterly basis and is authorized to review previously paid claims. CMS has authorized RACs to conduct complex reviews of the medical records associated with home health and hospice reimbursement claims.
One type of audit contractor, the Recovery Audit Contractors (“RACs”), may receive claims data directly from MACs, for example, on a monthly or quarterly basis, and are authorized to review previously paid claims. CMS has authorized RACs to conduct complex reviews of the medical records associated with home health and hospice reimbursement claims.
Our industry-leading capabilities and clinical results, including our low acute care hospitalization and hospital readmission rates, position us to bring value to all payors, who are focused on managing and reducing the total cost of care .
Our industry-leading capabilities and clinical results, including our low acute care hospitalization and hospital readmission rates, position us to bring value to payers focused on managing and reducing the total cost of care.
Currently, state health authorities in 11 states where we operate require a certificate of need in order to establish and operate a home health care center, and state health authorities in 5 states where we operate require a certificate of need to operate a hospice care center.
Currently, state health authorities in 10 states where we operate require a certificate of need in order to establish and operate a home health care center, and state health authorities in 4 states where we operate require a certificate of need to operate a hospice care center.
See Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Results of Operations ,” for our home health cost per visit for the years ended December 31, 2023, 2022, and 2021.
See Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Segment Results of Operations ,” for our Home Health cost per patient day for the years ended December 31, 2024, 2023, and 2022.
Effective October 1, 2023, CMS implemented a 3.1% net increase to reimbursement rates as compared to 2023 reimbursement rates. This update represents a 3.3% update to the market basket, reduced by a 0.2% productivity adjustment.
Effective October 1, 2024, CMS implemented a 2.9% net increase to reimbursement rates as compared to 2024 reimbursement rates. This update represents a 3.4% update to the market basket, reduced by a 0.5% productivity adjustment.
U.S. Department of Health and Human Services Office for Civil Rights (“HHS-OCR”) implemented a permanent HIPAA audit program for healthcare providers nationwide in 2016. As of December 31, 2023, we have not been selected for audit. HIPAA—Administrative Simplification and Privacy HIPAA and related U.S.
Department of Health and Human Services Office for Civil Rights (“HHS-OCR”) implemented a HIPAA audit program for healthcare providers nationwide in 2016. As of December 31, 2024, we have not been selected for audit. Health Insurance Portability and Accountability Act–Administrative Simplification and Privacy HIPAA and related U.S.
We did not accept any CARES Act funds. The United States Congress (“Congress”) mandated that the Secretary of Health and Human Services make assumptions about potential behavior changes within the Medicare home health industry related to the implementation of PDGM and make one or more adjustments to the reimbursement system to achieve overall budget neutrality.
The United States Congress (“Congress”) mandated that the Secretary of Health and Human Services make assumptions about potential behavior changes within the Medicare home health industry related to the implementation of PDGM and make one or more adjustments to the reimbursement system to achieve overall budget neutrality.
Department of Health and Human Services (“HHS”) regulations require the use of uniform electronic data transmission standards for certain healthcare claims and payment transactions submitted or received electronically. HIPAA also regulates the use and disclosure of individually identifiable health related information, whether communicated electronically, on paper, or orally.
Department of Health and Human Services (“HHS”) regulations require the use of uniform electronic data transmission standards for certain healthcare claims and payment transactions submitted or received electronically. HIPAA also regulates the use and disclosure of protected health information (“PHI”), whether 12 Table of Contents communicated electronically, on paper, or orally.
On July 27, 2022, CMS released its notice of final rulemaking for calendar year 2023 for hospice agencies under the hospice prospective payment system (the “2023 Hospice Rule”). In addition to other changes, the 2023 Hospice Rule implemented a net 3.8% market basket increase (market basket update of 4.1% reduced by 0.3% for a productivity adjustment).
In July 2022, CMS released its notice of final rulemaking for calendar year 2023 for hospice provider locations under the Hospice PS (the “2023 Hospice Rule”). In addition to other changes, the 2023 Hospice Rule implemented a net 3.8% market basket increase (market basket update of 4.1% reduced by 0.3% for a productivity adjustment).
As of January 2024, the last publicly reported Star ratings, our QoPC Star Rating and Home Health Care Assessment of Healthcare Providers and Systems (“HHCAHPS”) Patient Survey Star Rating averaged 3.5 and 3.7, respectively, higher than the national averages of 3.0 and 3.5, respectively.
As of January 2025, the last publicly reported Star ratings, our QoPC Star Rating and Home Health Care Assessment of Healthcare Providers and Systems (“HHCAHPS”) Patient Survey Star Rating averaged 3.1 and 4.1, respectively, higher than the national averages of 3.0 and 3.9, respectively.
Based on a 2021 American Association of Retired Persons (“AARP”) survey, 77% of those over age 50 want to stay in their residence as long as possible. Similarly, a 2017 study by the Kaiser Family Foundation found that seven in ten Americans would prefer to spend their last days at home as opposed to any other care setting.
Based on a 2024 American Association of Retired Persons survey, 75% of those over age 50 want to stay in their residence as long as possible. Similarly, a 2017 study by KFF found that seven in ten Americans would prefer to spend their last days at home as opposed to any other care setting.
As of December 31, 2023, we employed over 10,800 individuals, none of whom was represented by a labor union.
As of December 31, 2024, we employed over 10,700 individuals, none of whom was represented by a labor union.
Our Strategy Our strategy comprises several avenues for continued growth, including organic growth through existing operations, opening new locations, increasing our Payor Innovation contracts and shifting business to Medicare Advantage contracts that pay us improved rates, leveraging our expertise in care transitions, and, consistent with the terms of our credit 4 facilities, pursuing strategic acquisitions.
Our Strategy Our growth strategy includes organic growth through existing operations, opening new locations, increasing our Payer Innovation contracts and shifting business to Medicare Advantage contracts that pay us improved rates, leveraging our expertise in care transitions, and, consistent with the terms of our credit facilities, pursuing strategic acquisitions.
Payments are also made for non-routine medical supplies that are used in treatment. On October 29, 2020, CMS released its notice of final rulemaking for calendar year 2021 for home health agencies under HH-PPS (the “2021 HH Rule”).
Payments are also made for non-routine medical supplies that are used in treatment. In October 2022, CMS released its notice of final rulemaking for calendar year 2023 for home health agencies under the HH-PPS (the “2023 HH Rule”).
Many states have also adopted similar laws relating to state government payments for healthcare services.
Many states have also adopted similar laws relating to state government payments for 11 Table of Contents healthcare services.
Federal civil penalties will be adjusted to account for inflation each year. There are statutory exceptions to the Stark law for many of the customary financial arrangements between physicians and providers, including personal services contracts and leases.
Federal civil penalties will be adjusted to account for inflation each year. There are statutory exceptions to the Stark law for many of the customary financial arrangements between physicians and providers, including personal services contracts and leases. However, the Stark law is a strict liability statute, and the requirements of Stark law exceptions are closely scrutinized.
Certain examples material to our business are discussed below. Anti-Kickback Statute . Federal law prohibits the offer, payment, solicitation, or receipt of remuneration by individuals or entities to induce referrals of patients for services reimbursed under federal health care programs like the Medicare or Medicaid programs (the “Anti-Kickback Statute”).
Certain examples material to our business are discussed below. Anti-Kickback Statute. Federal law prohibits individuals or entities from offering, paying, soliciting, or receiving remuneration to induce referrals of patients for services reimbursed under federal health care programs like the Medicare or Medicaid programs (the “Anti-Kickback Statute”).
These safe harbors exempt specified activities, including bona-fide employment relationships, contracts for the rental of space or equipment, personal service arrangements, and management contracts, so long as all of the requirements of the safe harbor are met. Physician Self-Referral Law .
These safe harbors exempt specified activities, including, without limitation, bona-fide employment relationships, contracts for the rental of space or equipment, and personal service arrangements and management contracts, among others, so long as all requirements of the particular safe harbor are met.
Individuals with a terminal illness may be eligible for hospice care if they have a life expectancy of six months or less.
Hospice Individuals with a terminal illness may be eligible for hospice care if they have a life expectancy of six months or less and have chosen to forego curative treatment.
Our corporate support operations provide centralized services in support of the field, branch, and business development team operations, including information technology, human resources, recruiting, finance, and regulatory and legal support services, among others.
Our corporate support operations provide centralized services in support of our operations, including information technology, human resources, recruiting, finance, and regulatory and legal support services, among others.
The rule reflects an estimated overall increase in Medicare home health reimbursement rates of 0.8% relative to 2023 levels. This payment update is the collective impact of a 3.3% market basket positive adjustment and a 0.4% fixed‑dollar loss ratio positive adjustment, offset by a 0.3% productivity negative adjustment and a 2.6% permanent behavioral negative adjustment.
The 2025 HH Rule reflects an estimated overall increase in Medicare home health reimbursement rates of 0.5% relative to 2024 levels. This payment update is the collective impact of a 2.7% market basket positive adjustment, offset by a 1.8% negative behavioral adjustment, and a 0.4% fixed dollar loss negative adjustment.
While Medicare Advantage accounted for only 19.0% of our revenue in 2023, we believe our Payor Innovation team’s successes in negotiating Medicare Advantage contracts with improved rates position us well to expand our business in this fast-growing segment of the market.
While Medicare Advantage accounted for only 23% of our revenue in 2024, we 4 Table of Contents believe our Payer Innovation team’s successes in negotiating Medicare Advantage contracts with improved rates position us well to expand our business in this fast-growing segment of the market.
To aid in employee development, we have invested in what we believe to be best-in-class technology to offer on demand learning and development programs, including podcasts and a broadcast studio for enhanced virtual learning. Another important aspect of employee development is succession planning.
We support the long-term career aspirations of our employees through education and professional development. To aid in employee development, we have invested in what we believe to be best-in-class technology to offer on demand learning and development programs, including podcasts and a broadcast studio for enhanced virtual learning. Another important aspect of employee development is succession planning.
As of December 31, 2023, we operated 255 home health agencies in 34 states. Our home health services are prescribed by a physician, typically following an episode of acute illness or surgical intervention, an exacerbation or worsening of a chronic disorder, or a patient’s discharge from a hospital, skilled nursing facility, rehabilitation hospital or other institutional setting.
Our Services Home Health Our home health services are prescribed by a physician, typically following an episode of acute illness or surgical intervention, an exacerbation or worsening of a chronic disorder, or a patient’s discharge from a hospital, skilled nursing facility, rehabilitation hospital or other institutional setting.
Clinical Expertise and High-Quality Outcomes We have extensive home-based clinical experience from which we have developed standardized best practices and protocols. We believe these best practices and protocols, when combined with our technology and well-trained, mission‑motivated clinicians, help ensure the delivery of consistently high-quality healthcare services, reduced inefficiencies, and improved performance across a spectrum of operational areas.
We believe these best practices and protocols, when combined with our technology and well-trained, mission‑motivated clinicians, help ensure the delivery of consistently high-quality healthcare services, reduced inefficiencies, and improved performance across a spectrum of operational areas.
A physician must document that he or she or a qualifying nurse practitioner has had a face-to-face encounter with the patient and then certify to CMS that a patient meets the eligibility requirements for the home health benefit.
A physician must document that he or she or a qualifying nurse practitioner has had a face-to-face encounter with the patient and then certify to CMS that a patient meets the eligibility requirements for the home health benefit. As of January 2020, Medicare began reimbursing home health providers under the PDGM.
Based on our analysis, which utilizes, among other things, our patient mix annualized over the twelve-month period ended December 31, 2023, our specific geographic coverage area, and other factors, we estimate the 2024 Hospice Final Rule will result in a net increase to our Medicare payment rates of approximately 2.9% effective for services provided beginning October 1, 2023.
Based on our analysis, which utilizes, among other things, our patient mix for 2024, our specific geographic coverage area, and other factors, we estimate the 2025 Hospice Rule will result in a net increase to our Medicare payment rates of approximately 4% effective for services provided beginning October 1, 2024.
The system manages the entire patient workflow and provides field clinicians with access to patient records, diagnostic information, and notes from prior visits via a mobile application. Real-time, customized feedback and instructions are provided to field clinicians on-site.
We use an electronic medical records system that we license under an agreement with Homecare Homebase. The system manages the entire patient workflow and provides field clinicians with access to patient records, diagnostic information, and notes from prior visits via a mobile application. Real-time, customized feedback and instructions are provided to field clinicians on-site.
Our home health business benefits from a diversity of referral sources, with patients referred from acute care hospitals, inpatient rehabilitation facilities, surgery centers, assisted living facilities, and skilled nursing facilities, as well as community physicians. We work closely with patients, families, caregivers, and physicians to deliver data-driven, evidence-based care plans focused on patient needs and goals.
Our patients are referred to us by acute care hospitals, inpatient rehabilitation facilities, surgery centers, assisted living facilities, and skilled nursing facilities, as well as community physicians. We work closely with patients, families, caregivers, and physicians to deliver data-driven, evidence-based care plans focused on patient needs and goals.
Unlike RACs, however, UPICs do not receive a specific financial incentive based on the amount of the error. We have, from time to time, received UPICs record requests which have resulted in claim denials on paid claims. CMS also established the hospice special focus program (“SFP”) effective for 2024.
Unlike RACs, however, UPICs do not receive a specific financial incentive based on the amount of the error. We have, from time to time, received UPICs record requests which have resulted in claim denials on paid claims.
In order to recruit and retain our clinical employees, we maintain a total rewards program that we view as a combination of the tangible components of pay and benefits with the intangible components of a culture that encourages learning, development, and a supportive work environment.
To recruit and retain our employees, we maintain a total rewards program that we view as a combination of the tangible components of pay and benefits with the intangible components of a culture that encourages learning, development, and a supportive work environment. The increases in demand for clinicians continues to generate pressure in our labor markets.
For example, home health and hospice agencies are required to submit quality data to CMS each year, and the failure to do so in accordance with the rules will result in a 2% and 4% reduction, respectively, in their market basket annual payment update.
In some instances, CMS’s modifications can have a substantial impact on healthcare providers. For example, home health agencies and hospice provider locations are required to submit quality data to CMS each year, and the failure to do so in accordance with the rules will result in a 2% and 4% reduction, respectively, in their market basket annual payment update.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs described above in the risk factor “ If we fail to implement and maintain effective internal control over financial reporting, we may be unable to accurately or timely report our financial condition or results of operations, which may adversely affect our business, results of operations, financial condition, and stock price ,” we have identified material weaknesses related to Goodwill in the past, and although they have been remediated as of December 31, 2023, there can be no assurance that similar internal control issues will not be identified in the future.
Biggest changeWe have identified material weaknesses related to Goodwill in the past, and there can be no assurance that similar internal control issues will not be identified in the future. Any additional impairment to goodwill or other intangible assets in future periods could adversely impact our results of operations and financial condition.
For a breakdown of the CON status of the states and territories in which we have operations, see Item 2, “ Properties ,” in this Annual Report. There can be no 25 assurance current or future competition will not adversely affect our business, financial position, results of operations, or cash flows.
For a breakdown of the CON status of the states and territories in which we have operations, see Item 2, “ Properties ,” in this Annual Report. There can be no assurance current or future competition will not adversely affect our business, financial position, results of operations, or cash flows.
It is possible that Medicare, Medicaid, documentation support, system problems or other provider issues or industry trends may extend our collection period, which may materially 21 adversely affect our working capital, and our working capital management procedures may not successfully mitigate this risk.
It is possible that Medicare, Medicaid, documentation support, system problems or other provider issues or industry trends may extend our collection period, which may materially adversely affect our working capital, and our working capital management procedures may not successfully mitigate this risk.
Those changes could also affect reimbursements as well as future compliance, training, and staffing costs. Examples of regulatory changes that can affect our business, beyond direct changes to Medicare reimbursement rates, can be found from time to time in CMS’s annual rulemaking.
Those changes could also affect reimbursements as well as future costs related to compliance, training, and staffing. Examples of regulatory changes that can affect our business, beyond direct changes to Medicare reimbursement rates, can be found from time to time in CMS’s annual rulemaking.
Our ability to attract patients could be adversely affected 20 if any of our home health agencies fails to provide or maintain a reputation for providing high-quality care on a cost‑effective basis as compared to other providers.
Our ability to attract patients could be adversely affected if any of our home health agencies fails to provide or maintain a reputation for providing high-quality care on a cost‑effective basis as compared to other providers.
We cannot 26 predict the impact any claims arising out of the travel, the home visits or the care being provided (regardless of their ultimate outcomes) could have on our business or reputation or on our ability to attract and retain patients and employees.
We cannot predict the impact any claims arising out of the travel, the home visits or the care being provided (regardless of their ultimate outcomes) could have on our business or reputation or on our ability to attract and retain patients and employees.
For additional discussion of healthcare reform and other factors affecting reimbursement for our services, see Item 1, “ Business — Regulation — Sources of Revenue—Medicare Reimbursement ,” in this Annual Report.
For additional discussion of healthcare reform and other factors affecting reimbursement for our services, see Item 1, “ Business—Sources of Revenue—Medicare Reimbursement ,” in this Annual Report.
The billing and collection of our accounts receivable is subject to numerous and complex administrative processes and requires a significant amount of time and effort, including, but not limited to, the assessment of patient eligibility, the process of pre-authorization, the recording and collection of provider documentation, the timely and complete submission of claims for reimbursement, the application of cash receipts to patient accounts, the timely response to payor denials, and the conduct of collection activities.
The billing and collection of our accounts receivable is subject to numerous and complex administrative processes and requires a significant amount of time and effort, including, but not limited to, the assessment of patient eligibility, the process of pre-authorization, the recording and collection of provider documentation, the timely and complete submission of claims for reimbursement, the application of cash receipts to patient accounts, the timely response to payer denials, and the conduct of collection activities.
For example, the 2010 Healthcare Reform Laws provide for the expansion of the federal Anti-Kickback Law and the FCA, likely increasing investigation and enforcement efforts in the healthcare industry generally.
For example, the 2010 Healthcare Reform Laws provide for the expansion of the federal Anti-Kickback Law and the FCA increasing investigation and enforcement efforts in the healthcare industry generally.
In the future, changes in these laws or regulations or the manner in which they are enforced could subject our current or past practices to allegations of impropriety or illegality or could require us to make changes in our equipment, personnel, services, capital expenditure programs, operating procedures, and contractual arrangements, as well as the way in which we deliver home health and hospice services.
Any changes in these laws or regulations or the manner in which they are enforced could subject our current or past practices to allegations of impropriety or illegality or could require us to make changes in our equipment, personnel, services, capital expenditure programs, operating procedures, and contractual arrangements, as well as the way in which we deliver home health and hospice services.
If we fail to attain our goals regarding acute care hospital readmission rates and other quality metrics, we expect our ability to generate referrals to be adversely impacted, which could have a material adverse effect upon our business and consolidated financial condition, results of operations, and cash flows.
If we fail to attain our goals regarding acute care hospital readmission rates and other quality metrics, we expect our ability to generate referrals and our Medicare reimbursements to be adversely impacted, which could have a material adverse effect upon our business and consolidated financial condition, results of operations, and cash flows.
In addition, the various restrictive covenants in our credit agreements could also adversely affect our ability to finance our future operations or capital needs and pursue available business opportunities. Further, we are required to maintain certain financial tests and ratios under the credit agreement.
In addition, the various restrictive covenants in our credit agreements could also adversely affect our ability to finance our future operations or capital needs and pursue available business opportunities. Further, we are required to maintain compliance with certain financial tests and ratios under the credit agreement.
These provisions include, among others: • rules regarding the number of votes of stockholders required to amend certain provisions of our amended and restated certificate of incorporation and approve a business combination; • limitations on the ability of stockholders to call special meetings; • the right of our board of directors to issue preferred stock without stockholder approval; • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; and • the ability of our directors, and not stockholders, to fill vacancies on our board of directors.
These provisions include, among others: • rules regarding the number of votes of stockholders required to amend certain provisions of our amended and restated certificate of incorporation and approve a business combination; • limitations on the ability of stockholders to call special meetings; • the right of our board of directors to issue preferred stock without stockholder approval; 27 Table of Contents • rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings; and • the ability of our directors, and not stockholders, to fill vacancies on our board of directors.
Similarly, CMS has established several ACO programs, the largest of which is the Medicare Shared Savings Program (“MSSP”), a voluntary ACO program in which hospitals, physicians, and other care providers pursue the delivery of coordinated healthcare on a more efficient, patient-centered basis.
In addition, CMS has established several ACO programs, the largest of which is the Medicare Shared Savings Program (“MSSP”), a voluntary ACO program in which hospitals, physicians, and other care providers pursue the delivery of coordinated healthcare on a more efficient, patient-centered basis.
In several states in which we operate, a majority of the Medicare Advantage patients within the state are insured by two large managed care companies that either currently offer home health services or are actively pursuing the acquisition of a business that offers home health services.
In several states in which we operate, a majority of the Medicare Advantage patients are insured by two large managed care companies that either currently offer home health services or are actively pursuing the acquisition of a business that offers home health services.
Our ability to attract and retain qualified personnel depends on several factors, including our ability to provide competitive wages and benefits. In some markets, the lack of availability of medical personnel is a significant operating issue facing all healthcare providers, including us.
Our ability to attract and retain qualified personnel depends on several factors, including our ability to provide competitive wages and benefits. In some markets, the lack of available medical personnel is a significant operating issue facing all healthcare providers, including us.
If any of our home health or hospice agencies fails to comply with the Medicare enrollment requirements or conditions of participation, that agency could be subject to sanctions or terminated from the Medicare program. Each of our home health and hospice agencies must comply with extensive enrollment requirements and conditions of participation for the Medicare program.
If any of our home health agencies or hospice provider locations fails to comply with the Medicare enrollment requirements or conditions of participation, that agency could be subject to sanctions or terminated from the Medicare program. Each of our home health agencies and hospice provider locations must comply with extensive enrollment requirements and conditions of participation for the Medicare program.
Settlements of alleged violations or imposed reductions in reimbursements, substantial damages and other remedies assessed against us could have a material adverse effect on our business, financial position, results of operations, and cash flows.
Settlements of alleged violations of applicable regulations or imposed reductions in reimbursements, substantial damages and other remedies assessed against us could have a material adverse effect on our business, financial position, results of operations, and cash flows.
In addition, Medicare or Medicaid may seek retroactive reimbursement from noncompliant providers or otherwise impose sanctions for noncompliance. Non-governmental payors often have the right to terminate provider contracts if the provider loses its Medicare or Medicaid certification.
In addition, Medicare or Medicaid may seek retroactive reimbursement from noncompliant providers or otherwise impose sanctions for noncompliance. Non-governmental payers often have the right to terminate provider contracts if the provider loses its Medicare or Medicaid certification.
The carrying value of Intangible assets, net represents the fair value of certificates of need, licenses, noncompete agreements, trade names, internal-use software, and other acquired intangibles as of the acquisition date or subsequent impairment date, if applicable, net of accumulated amortization, if applicable.
The carrying value of Intangible assets, net, represents the fair value of certificates of need, licenses, noncompete agreements, internal-use software, and other acquired intangibles as of the acquisition date or subsequent impairment date, if applicable, net of accumulated amortization, if applicable.
The managed care companies have substantial resources and existing relationships with customers, which may serve as a large patient base for their current or future home health services. Competition by these managed care companies in home health services may adversely affect our growth strategy of capturing greater Medicare Advantage volumes.
The managed care companies have substantial resources and existing relationships with customers, which may serve as a 22 Table of Contents large patient base for their current or future home health services. Competition by these managed care companies in home health services may adversely affect our growth strategy of capturing greater Medicare Advantage volumes.
However, there can be no assurance that individuals will not attempt to steer patients to competing post‑acute providers or otherwise limit our access to potential referrals. The establishment of joint ventures or networks between referral sources, such as acute care hospitals, and other post-acute providers may hinder patient referrals to us.
However, there can be no assurance that our competitors will not attempt to steer patients to other post‑acute providers or otherwise limit our access to potential referrals. The establishment of joint ventures or networks between referral sources, such as acute care hospitals, and other post-acute providers may hinder patient referrals to us.
This section does not describe all risks that may be applicable to us, our industry, or our business, and it is intended only as a summary of material risk factors. Additional risks and uncertainties we have not or cannot foresee may also adversely affect us in the future.
This section does not describe all risks that may be applicable to us, our industry, or our business, and it is intended only as a summary of material risk factors. Additional risks and 15 Table of Contents uncertainties we have not or cannot foresee may also adversely affect us in the future.
If we fail to implement and maintain effective internal control over financial reporting, our ability to record, process, summarize, and report financial information accurately, and to prepare the consolidated financial statements within the time periods specified by the rules and regulations of the SEC could be adversely affected.
If we fail to implement and maintain effective internal control over financial reporting, our ability to record, process, summarize, and report financial information accurately, and to prepare the consolidated financial statements within the 25 Table of Contents time periods specified by the rules and regulations of the SEC could be adversely affected.
Our indebtedness could have important consequences, including: • limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy and other general corporate purposes; • making us more vulnerable to unfavorable economic, industry and competitive conditions and government regulation by limiting our flexibility in planning for, and reacting to, changing conditions; • placing us at a competitive disadvantage compared with competing providers that have less debt or better access to capital resources; and • exposing us to risks inherent in interest rate fluctuations, which could result in higher interest expense, as discussed in Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” in this Annual Report.
Our indebtedness and the limitations on incurring additional debt could have important consequences and exacerbate the following risks: • limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, execution of our business strategy and other general corporate purposes; • making us more vulnerable to unfavorable economic, industry and competitive conditions and government regulation by limiting our flexibility in planning for, and reacting to, changing conditions; • placing us at a competitive disadvantage compared with competing providers that have less debt or better access to capital resources; and • exposing us to risks inherent in interest rate fluctuations, which could result in higher interest expense, as discussed in Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” in this Annual Report.
There can be no assurance that all of our agencies will meet quality reporting requirements or quality performance expectations in the future, which may result in one or more of our agencies seeing a reduction in its Medicare reimbursements or patient referral volume.
There can be no assurance that all our agencies will meet quality performance expectations (including Star ratings) or quality reporting requirements in the future, which may result in one or more of our agencies seeing a reduction in its Medicare reimbursements or patient referral volume.
In recent years, HHS has been studying the feasibility of bundling, including conducting a voluntary, multi-year bundling pilot program to test and evaluate alternative payment methodologies. CMS’s voluntary BPCI Advanced initiative ran through December 31, 2023 and covers 29 types of inpatient and three types of outpatient clinical episodes, including stroke and hip fracture.
In recent years, HHS has been studying the feasibility of bundling, including conducting a voluntary, multi-year bundling pilot program to test and evaluate alternative payment methodologies. CMS’s voluntary BPCI Advanced initiative runs through December 31, 2025 and covers 29 types of inpatient and three types of outpatient clinical episodes, including stroke and hip fracture.
However, there can be no assurance we will be able to obtain such waiver or amendment on commercially acceptable terms or at all. Various risks, uncertainties and events beyond our control could affect our ability to comply with the covenants and financial tests and ratios in the credit agreement.
However, there can be no assurance we will be able to obtain such waiver or amendment on commercially acceptable terms or at all. Various 24 Table of Contents risks, uncertainties and events beyond our control could affect our ability to comply with the covenants and financial tests and ratios in the credit agreement.
Any acquisitions, investments, and joint ventures that we complete involve numerous risks including: • legal and regulatory limitations on our ability to complete such acquisitions, particularly those involving not‑for‑profit providers, on terms, timelines, and valuations reasonable to us; • obtaining financing for acquisitions at a cost reasonable to us; • difficulties integrating acquired operations, personnel, and information systems, and in realizing projected revenues, efficiencies, and cost savings, or returns on invested capital; • entry into markets, businesses, or services in which we may have little or no experience; • diversion of business resources or management’s attention from ongoing business operations; and • exposure to undisclosed or unforeseen liabilities of acquired operations, including liabilities for failure to comply with healthcare laws and anti-trust considerations in specific markets, successor liability imposed by Medicare, and risks and liabilities related to previously compromised information systems.
Any acquisitions, joint ventures and investments, including de novo locations, that we complete involve numerous risks including: • legal and regulatory limitations on our ability to complete acquisitions, particularly those involving not‑for‑profit providers, on terms, timelines, and valuations reasonable to us; • obtaining financing for acquisitions at a cost reasonable to us; • legal and regulatory limitations on our ability to obtain approval to operate de novo locations on anticipated timeframes; • difficulties integrating acquired operations, personnel, and information systems, and in realizing projected revenues, efficiencies, and cost savings, or returns on invested capital; • entry into markets, businesses, or services in which we may have little or no experience; • diversion of business resources or management’s attention from ongoing business operations; and • exposure to undisclosed or unforeseen liabilities of acquired operations, including liabilities for failure to comply with healthcare laws and anti-trust considerations in specific markets, successor liability imposed by Medicare, and risks and liabilities related to previously compromised information systems.
We are required to comply with HIPAA regulations regarding the privacy and security of protected health information, as well as state laws that focus on privacy, security, and notification requirements with regard to personal information. The HIPAA regulations impose significant requirements on providers and our third-party vendors with regard to how such protected health information may be used and disclosed.
We are required to comply with HIPAA regulations regarding the privacy and security of protected health information, as well as state laws that focus on privacy, security, and notification requirements with regard to personal information. The HIPAA regulations impose significant requirements on providers with regard to how such protected health information may be used and disclosed.
In addition to many ordinary course reimbursement rate changes that CMS adopts each year as part of its annual rulemaking processes, Congress and certain state legislatures periodically propose significant changes in laws and regulations governing the healthcare system. These changes may result in limitations on increases and, in some cases, significant reductions in the levels of payments to healthcare providers.
In addition to many ordinary course reimbursement rate changes that CMS adopts each year as part of its annual rulemaking processes, Congress and certain state legislatures periodically propose significant changes in laws and regulations governing the healthcare system, which have resulted in, and may result in future, limitations on increases and, in some cases, significant reductions in the levels of payments to healthcare providers.
In addition, supply chain disruptions caused by a pandemic or a future public health catastrophe could increase our expenses for necessary equipment, pharmaceuticals, and medical supplies, including without limitation, personal protective equipment. All of these potential effects would have a negative impact on our business, financial condition, and operations results.
In addition, supply chain disruptions caused by a pandemic or a future public health catastrophe, or by the economic impact of foreign or domestic tariffs, could increase our expenses for necessary equipment, pharmaceuticals, and medical supplies, including without limitation, personal protective equipment. All of these potential effects would have a negative impact on our business, financial condition, and operations results.
Although we believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of Enhabit and its stockholders. Item 1B. Unresolved Staff Comments.
Although we believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in the best interests of Enhabit and its stockholders.
The initial suspension period may be up to 180 days. However, the payment suspension period can be extended almost indefinitely if 22 the matter is under investigation by the HHS-OIG or the DOJ. Any such suspension would adversely affect our financial position, results of operations, and cash flows.
While the initial suspension period may be up to 180 days, it can be extended almost indefinitely if the matter is under investigation by the HHS-OIG or the DOJ. Any such suspension would adversely affect our financial position, results of operations, and cash flows.
We utilize a $400.0 million term loan A facility and a $220.0 million revolving credit facility for working capital purposes. Subject to specified limitations, the credit agreement governing this indebtedness generally restricts our ability to incur additional debt, other than additional draws on the revolving credit facility. Any additional debt we incur could exacerbate these risks.
We utilize a $400.0 million term loan A facility and a $220.0 million revolving credit facility for working capital purposes. Subject to specified limitations, the credit agreement governing this indebtedness generally restricts our ability to incur additional debt, other than additional draws on the revolving credit facility.
In addition, our accounts receivable with Medicare and Medicaid are subject to the complex regulations that govern Medicare and Medicaid reimbursement and rules imposed by nongovernment payors, and a portion of our accounts receivable are typically under medical review by payors. The amount collected may materially differ from the amount billed.
In addition, our accounts receivable with Medicare and Medicaid are subject to the complex regulations that govern Medicare and Medicaid reimbursement and rules imposed by non-government payers, and a portion of our accounts receivable are typically under medical review by payers. The amount collected may materially differ from the amount billed.
These laws and regulations relate to, among other things: • licensure, certification, enrollments, and accreditation; • policies, at either the national or local level, delineating what conditions must be met to qualify for reimbursement under Medicare (also referred to as coverage requirements); • coding and billing for services; • relationships with physicians and other referral sources, including physician self-referral and anti-kickback laws; • quality of medical care; • use and maintenance of medical supplies and equipment; • maintenance, security and privacy of patient information and medical records, including electronic health data and health system interoperability; • minimum staffing; • acquisition and dispensing of pharmaceuticals and controlled substances; and • disposal of medical and hazardous waste.
These laws and regulations relate to, among other things: • licensure, certification, enrollments, and accreditation; • policies, at either the national or local level, delineating what conditions must be met to qualify for reimbursement under federal programs; • coding and billing for services; • relationships with physicians and other referral sources, including physician self-referral and anti-kickback laws; 19 Table of Contents • quality of medical care; • use and maintenance of medical supplies and equipment; • implementation, maintenance, security, and privacy of patient information and medical records, including electronic health data and health system interoperability; • minimum staffing; • acquisition and dispensing of pharmaceuticals and controlled substances; and • disposal of medical and hazardous waste.
Additional administrative processes are also required when patients elect to change their third-party payors, such as when patients switch from Medicare to Medicare Advantage. If we incorrectly estimate our Accounts receivable, net of allowances , it may result in adjustments to our financial statements.
Additional administrative processes are also required when patients elect to change their third-party payers, such as when patients switch from Medicare to Medicare Advantage. If we incorrectly estimate our Accounts receivable, net of allowances, or the timing of those collections, it may result in adjustments to our financial statements.
We may face substantial difficulties, costs, and delays involved in the integration of acquired businesses. In some cases, the acquired business has itself grown through acquisitions, and there may be legacy systems, operating policies and procedures, and financial and administrative practices yet to be fully integrated.
We may face substantial difficulties, costs, and delays involved in the integration of acquired businesses or de novo locations. In some cases, the acquired business has itself grown through acquisitions, and there may be legacy systems, 26 Table of Contents operating policies and procedures, and financial and administrative practices yet to be fully integrated.
For example, as a result of the quantitative impairment analysis performed, we recorded impairment charges totaling $85.8 million for the hospice reporting unit and $109.0 million for the home health reporting unit for the years ended December 31, 2023 and 2022, respectively.
For example, as a result of the quantitative impairment analysis performed, we recorded impairment charges totaling $161.7 million for the Home Health reporting unit and $85.8 million for the Hospice reporting unit for the years ended December 31, 2024 and 2023, respectively.
Moreover, an adverse review, audit or investigation could result in: • required refunding or retroactive adjustment of amounts we have been paid pursuant to the federal or state programs or from private payors; • state or federal agencies imposing fines, penalties, and other sanctions on us; • loss of our ability to participate in the Medicare program, state programs or one or more private payor networks; or • damage to our business and reputation in various markets.
Moreover, an adverse review, audit or investigation could result in: • required refunding or retroactive adjustment of amounts we have been paid by federal or state programs or private payers; • state or federal agencies imposing fines, penalties, and other sanctions on us; 17 Table of Contents • loss of our ability to participate in the Medicare program, state programs or one or more private payer networks; or • damage to our business and reputation in various markets.
Risks Related to Our Business Reimbursement Risks Reductions or changes in reimbursement from government or third-party payors could adversely affect our Net service revenue and other operating results. We derive a substantial portion of our Net service revenue from the Medicare program.
Risks Related to Our Business Reimbursement Risks Reductions or changes in reimbursement rates from government programs, or new government regulations, could adversely affect our Net service revenue and other operating results. We derive a substantial portion of our Net service revenue from the Medicare program.
In addition, the use of sub-regulatory guidance, statistical sampling, and extrapolation by CMS, Medicare contractors, HHS-OIG, and DOJ to deny claims, expand enforcement claims, and advocate for changes in reimbursement policy increases the risk that we could experience reduced revenue, suffer penalties, or be required to make significant changes to our operations.
In addition, the use of sub-regulatory guidance, statistical sampling, and extrapolation by CMS, Medicare contractors, HHS-OIG, and DOJ to deny claims, expand enforcement claims, and advocate for changes in reimbursement policy increases our risk of experiencing reduced revenue, financial penalties, or significant required changes to our operations.
A compromise of our network security measures or other controls, or those of businesses or vendors with whom we interact, which results in confidential information being accessed, obtained, damaged or used by unauthorized persons or unavailability of systems necessary to the operation of our business, could impact patient care, harm our reputation, and expose us to significant remedial costs as well as regulatory actions (fines and penalties) and claims from patients, financial institutions, regulatory and law enforcement agencies, and other persons, any of which could have a material adverse effect on our business, financial position, results of operations, and cash flows.
The occurrence of any information system failure, breach or security incident, or those of business associates or other vendors and businesses with whom we interact, which results in confidential, protected health or personal information being accessed, obtained, damaged or used by unauthorized persons or unavailability of systems necessary to the operation of our business, could impact patient care, harm our reputation, and expose us to significant remedial costs as well as regulatory actions (fines and penalties) and claims from patients, financial institutions, regulatory and law enforcement 21 Table of Contents agencies, and other persons, any of which could have a material adverse effect on our business, operations, financial position, results of operations, and cash flows.
In particular, if staffing costs continue to rise at an annual rate greater than the annual net impact of reimbursement rates from Medicare, as is expected to happen in 2024, or we experience a significant shift in our payor mix to lower rate payors such as Medicaid, our results of operations and cash flows will be adversely affected.
In particular, if staffing costs continue to rise at an annual rate greater than the annual net impact of reimbursement rates from Medicare, or we experience a significant shift in our payer mix to lower rate payers such as Medicare Advantage, our results of operations and cash flows will be adversely affected.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As described below, we have identified material weaknesses in the past.
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We have identified, and subsequently remediated, material weaknesses in our control environment in previous years.
For example, home health and hospice agencies are required to submit quality of care data to CMS each year. Failure to comply with quality reporting requirements may result in a penalty on our reimbursement. For home health agencies that do not comply with quality reporting requirements, the penalty is 2%; for hospices that do not comply, the penalty is 4%.
For example, home health agencies and hospice provider locations are required to submit quality of care data to CMS each year, and failure to comply with these requirements may result in a 2% penalty to our home health agencies reimbursement and 4% for hospices reimbursement.
Although our existing credit facility currently restricts acquisitions, they remain part of our long-term growth strategy. We may face limitations on our ability to identify sufficient acquisitions or other development targets and to complete those transactions to meet goals. In the home health industry, there is significant competition to acquire companies that have a large number of locations.
In the home health industry, there is significant competition to acquire companies that have a large number of locations. We may face limitations on our ability to identify sufficient acquisitions or other development targets and to complete those transactions to meet goals.
In healthcare generally, the burdens associated with collecting, recording, and reporting quality data are increasing. Currently, CMS requires home health providers to track and submit patient assessment data to support the calculation of 20 quality of care reporting measures.
In healthcare generally, the burdens associated with collecting, recording, and reporting quality data are increasing. Currently, for example, CMS requires home health providers to track and submit patient assessment data to support the calculation of 20 quality of care reporting measures. We, like other healthcare providers, are likely to incur additional expenses to comply with changing quality reporting requirements.
Our unwillingness or inability to participate in integrated delivery payment and other alternative payment models and the referral patterns of other providers participating in those models may limit our access to Medicare patients who would benefit from treatment by home health services. In an attempt to reduce costs, ACOs may seek to discourage referrals to post-acute care altogether.
Our unwillingness or inability to participate in integrated delivery payment and other alternative payment models and the referral patterns of other providers participating in those models may limit our access to patients who would benefit from treatment by home health services.
An inability to record, process, summarize, and report financial information accurately could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our financial condition and results of operations. 28 The carrying value of our Goodwill or other Intangible assets, net is subject to impairment testing and may result in the incurrence of impairment charges and adversely impact our results of operations and financial condition.
An inability to record, process, summarize, and report financial information accurately could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our financial condition and results of operations.
As of December 31, 2023, we had Goodwill of $1.1 billion and Intangible assets, net of $80.0 million. The net carrying value of Goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities as of the acquisition date or subsequent impairment date, if applicable.
The net carrying value of Goodwill represents the fair value of acquired businesses in excess of identifiable assets and liabilities as of the acquisition date or subsequent impairment date, if applicable.
Further, the regulations include extensive and complex requirements for providers to establish reasonable and appropriate administrative, technical, and physical safeguards to ensure the confidentiality, integrity, and availability of protected health information. HIPAA directs the Secretary of HHS to periodically audit compliance by covered entities.
Further, the regulations include extensive and complex requirements to establish reasonable and appropriate administrative, technical, and physical safeguards to ensure the confidentiality, integrity, and availability of protected health information.
In recent years, several hospitals have reported being victims of ransomware attacks in which they lost access to their systems, including 24 clinical systems, during the course of the attacks. There have been other recent significant incidents of software vendor compromises.
Some adverse consequences may not be insured, such as reputational harm and third-party business interruption. In recent years, several hospitals have reported being victims of ransomware attacks in which they lost access to their systems, including clinical systems, during the course of the attacks. There have been other recent significant incidents of software vendor compromises.
While this is consistent with our goal and proven track record of being a high-quality, cost-effective provider, broad-based implementation of a new delivery payment model would disrupt the healthcare industry, which may have a significant impact on our business and results of operations.
Providers are paid based on the overall value and quality, rather than the number, of services provided. While this is consistent with our 18 Table of Contents goal of being a high-quality, cost-effective provider, broad-based implementation of a new delivery payment model could disrupt the healthcare industry, and may have a significant impact on our business and results of operations.
We cannot predict what legislative or regulatory reforms or changes, if any, will ultimately be enacted or the timing or effect any of those changes or reforms will have on us.
We cannot predict what legislative or regulatory reforms or changes, if any, will ultimately be enacted or the timing or effect any of those changes or reforms will have on our Net service revenue, financial position, results of operations, and cash flows.
Conceptually, ACOs receive a portion of any savings generated from care coordination as long as benchmarks for the quality of care are maintained. The ACO rules are extremely complex and remain subject to further refinement by CMS.
While the ACO rules are extremely complex and remain subject to further refinement by CMS, ACOs generally receive a portion of any savings generated from care coordination as long as benchmarks for the quality of care are maintained. It is possible, however, that ACOs may seek to reduce costs by discouraging referrals to post-acute care altogether.
Accordingly, reimbursement may be increased or decreased, compared to what would otherwise be due, based on whether the total Medicare expenditures and patient outcomes meet, exceed, or fall short of the targets.
Accordingly, reimbursement may be increased or decreased, compared to what would otherwise be due, based on whether the total Medicare expenditures and patient outcomes meet, exceed, or fall short of the targets. Additionally, as the number and types of bundling, direct contracting, and ACO models increase, the number of patients who are treated in these models increases.
There is no assurance that rates will increase in future years or that rate increases will be adequate to offset increases in operating costs. Other federal legislation can also have a significant direct impact on our Medicare reimbursement.
There is no assurance that future market basket updates will result in increases, or that such updates will be sufficient to offset increases in operating costs or the effects of permanent adjustments to the home health or hospice base rates. • Other federal legislation can also have a significant direct impact on our Medicare reimbursement.
Other Regulatory Risks The ongoing evolution of the healthcare delivery system, including alternative payment models and value-based purchasing initiatives, may significantly affect our business and results of operations. The healthcare industry faces regulatory uncertainty around attempts to improve outcomes and reduce costs, including coordinated care and integrated delivery payment models.
Other Regulatory Risks The ongoing evolution of the healthcare delivery system, including alternative payment models and value-based purchasing initiatives, may significantly affect our business and results of operations. Government and private payers are increasingly looking to alternative payment models and value-based purchasing to contain costs.
Concerns held by federal policymakers about the federal deficit, national debt levels, or healthcare spending specifically, including solvency of the Medicare trust fund, could result in enactment of further federal spending reductions or limitations, further entitlement reform legislation affecting the Medicare program, and further reductions to provider payments.
Concerns held by federal policymakers about the federal deficit, national debt levels, or healthcare spending specifically, including solvency of the Medicare trust fund, could result in enactment of further federal spending reductions or limitations, further entitlement reform legislation affecting the Medicare program, and further reductions to provider payments. • Each year, MedPAC advises Congress on issues affecting Medicare, including, among others, the HH-PPS and the Hospice payment systems, which can affect the rates we are paid for our services.
But responding to actions by activist shareholders can be costly and time‑consuming and divert management’s attention from operations. Activist shareholder activity can create uncertainties as to our future direction and could lead to the perception of a change in the direction of our business or other instability.
Activist stockholder activity can create uncertainties as to our future direction and could lead to the perception of a change in the direction of our business or other instability.
Failure to achieve the anticipated benefits could also divert management’s time and energy and could have an adverse effect on our business, financial position, results of operations, and cash flows. Risks Related to Our Separation from Encompass.
If the acquired businesses and de novo locations underperform, we may be required to take an impairment charge. Failure to achieve the anticipated benefits could also divert management’s time and energy and could have an adverse effect on our business, financial position, results of operations, and cash flows.
For additional discussion of our indebtedness, see Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources ,” in this Annual Report, and Note 8, Long-term Debt , to the accompanying consolidated financial statements. 27 A pandemic, public health catastrophe or other unforeseen event, including regional or global sociopolitical conflicts, war, terrorism, or other man-made or natural disasters, could materially impact our operations.
For additional discussion of our indebtedness, see Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources ,” in this Annual Report, and Note 8, Long-Term Debt , to the accompanying consolidated financial statements.
Some states in which we operate have also undertaken, or are considering, healthcare reform initiatives that address similar issues.
Some states in which we operate have undertaken, or are considering, healthcare reform initiatives that address similar issues. The results of the 2024 federal elections further increase legislative and regulatory uncertainty.
For additional discussion of the reviews, audits, and investigations to which we are subject, see Item 1, “ Business—Regulation—Governmental Review, Audits, and Investigations ,” in this Annual Report. The HHS-OIG also conducts audits and has included various home health agency and hospice payment and quality issues in its current workplan. Additionally, private pay sources reserve the right to conduct audits.
The HHS-OIG also conducts audits and has included various home health agency and hospice payment and quality issues in its current workplan. Additionally, private pay sources reserve the right to conduct audits.
There can be no assurance that future governmental initiatives will not result in pricing freezes, reimbursement reductions, or levels of reimbursement increases that are less than the increases we may experience in our costs of operations. There is also no assurance that our patient accounts receivable will be collected in a timely fashion, or at all.
There can be no assurance that the government will not enact future initiatives that result in pricing freezes, reimbursement reductions, or levels of reimbursement increases that are less than the increases we may experience in our costs of operations, which could result in substantial changes to, or material reduction in, our reimbursements.
We, like other healthcare providers, are likely to incur additional expenses in an effort to comply with additional and changing quality reporting requirements. We face periodic and routine reviews, audits, and investigations under our contracts with federal and state government agencies and private payors, and these audits could have adverse findings that may negatively impact our business.
We face periodic and routine reviews, audits, and investigations under our contracts with federal and state government agencies and private payers, and these audits could have adverse findings that may negatively impact our business.
We are a defendant in a number of lawsuits, most of which are general and professional liability matters inherent in treating patients with medical conditions.
Various lawsuits, claims, and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. We are a defendant in a number of lawsuits, most of which are general and professional liability matters inherent in treating patients with medical conditions.
Changes in our payor mix or the needs of our patients could adversely affect our Net service revenue or our profitability. Although the reimbursement rates we receive from traditional Medicare Fee for Service are generally higher than those received from other payors, an increasing percentage of Medicare eligible individuals are choosing to enroll in a Medicare Advantage plan.
Although the reimbursement rates we receive from traditional Medicare Fee for Service are generally higher than those received from other payers, an increasing percentage of Medicare eligible individuals are choosing to enroll in a Medicare 16 Table of Contents Advantage plan. We are therefore attempting to grow the number of Medicare Advantage networks in which we participate.
Conversely, decreases in reimbursement revenues, such as with sequestration, may limit our ability to increase compensation or benefits to the extent necessary to retain key employees, increasing our turnover and associated costs. We operate in a highly regulated industry in which healthcare providers are routinely subject to litigation, the outcome of which could have a material adverse effect on us.
Conversely, decreases in reimbursement revenues, such as with sequestration, may limit our ability to increase compensation or benefits to the extent necessary to retain key employees, increasing our turnover and associated costs. The transition of management or unexpected departure of our key officers could harm our business. We are dependent on the efforts of our senior management.
There can be no assurance that future governmental action will not result in substantial changes to, or material reduction in, our reimbursements. In any given year, the net effect of statutory and regulatory changes may result in a decrease in our reimbursement rate, and that decrease may occur at a time when our expenses are increasing.
In any given year, the net effect of statutory and regulatory changes may result in a decrease in our reimbursement rate, and that decrease may occur at a time when our expenses are increasing. As a result, there could be a material adverse effect on our business, financial position, results of operations, and cash flows.
The healthcare industry faces strong competition and consistent pressure to grow revenues while containing escalating costs. In recent periods, these aspects of our industry have caused some consolidation. We could become an acquisition target, which could disrupt our business or impact our ability to operate as an independent entity.
In recent periods, these aspects of our industry have caused some consolidation. We could become an acquisition target, which could disrupt our business or impact our ability to operate as an independent entity. Even the announcement that we were an acquisition target could materially impact our business, financial position, results of operations, stock price, and cash flows.
In such a case, our competitors or other activist shareholders could exploit these uncertainties and perceptions, which could have a material adverse impact on our business, financial position, results of operations, and cash flows. 31 Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws, and of Delaware law, may prevent or delay an acquisition of Enhabit, which could decrease the trading price of our common stock.
In such a case, our competitors or other activist stockholders could exploit these uncertainties and perceptions, which could have a material adverse impact on our business, financial position, results of operations, and cash flows.
In 2011, President Obama signed into law the Budget Control Act of 2011, which provided for an automatic 2% reduction of Medicare program payments. This automatic reduction, known as “sequestration,” began affecting payments received after April 1, 2013. Under current law, the reimbursement we receive from Medicare will be reduced by this sequestration.
For example, in 2011, President Obama signed into law the Budget Control Act of 2011, which provided for an automatic 2% reduction of Medicare program payments, known as sequestration.
Even the announcement that we were an acquisition target could materially impact our business, financial position, results of operations, and cash flows. Additionally, our business could be negatively affected by the actions of activist shareholders, including without limitation by causing increased volatility in our share price. We value constructive input from investors and regularly engage in dialogue with our shareholders.
Additionally, our business could be negatively affected by the actions of activist stockholders, including without limitation by causing increased volatility in our stock price. We value constructive input from investors and regularly engage in dialogue with our stockholders. Responding to actions by activist stockholders can be costly and time‑consuming and divert management’s attention from operations.
To the extent we are attempting to 29 integrate multiple businesses at the same time, we may not be able to do so as efficiently or effectively as we initially anticipate. The failure to successfully integrate on a timely basis any acquired business could have an adverse effect on our business, financial position, results of operations, and cash flows.
The failure to successfully integrate on a timely basis any acquired business or de novo locations could have an adverse effect on our business, financial position, results of operations, and cash flows. In addition, acquired businesses and de novo locations may not contribute to our revenues or earnings to the extent anticipated, and any expected synergies may not be realized.
We may make investments or complete transactions that could expose us to unforeseen risks and liabilities. Further, we may not be able to successfully integrate acquisitions or realize the anticipated benefits of any acquisitions. Historically, we selectively pursued strategic acquisitions of, and in some instances joint ventures with, other healthcare providers.
Further, we may not be able to successfully integrate acquisitions or realize the anticipated benefits of any acquisitions or investments, including opening de novo locations. Historically, we selectively pursued strategic acquisitions of, and in some instances joint ventures with, other healthcare providers. Although our existing credit facility currently restricts acquisitions, they remain part of our long-term growth strategy.
In an integrated payment delivery model, hospitals, physicians, and other care providers are incentivized to coordinate healthcare on a more efficient, patient-centered basis. Providers are paid based on the overall value and quality, rather than the number, of services provided.
The healthcare industry faces uncertainty around attempts to improve outcomes and reduce costs, including coordinated care and integrated delivery payment models. In an integrated payment delivery model, hospitals, physicians, and other care providers are incentivized to coordinate healthcare on a more efficient, patient-centered basis.
Failure to achieve or exceed these averages may affect our ability to generate referrals, which could have a material adverse effect upon our business and consolidated financial condition, results of operations, and cash flows. We face intense competition for patients from other healthcare providers. We operate in the highly competitive and fragmented home health and hospice industries.
Failure to achieve or exceed these averages may affect our ability to generate referrals, which could have a material adverse effect upon our business and consolidated financial condition, results of operations, and cash flows. The adoption of additional quality reporting measures will require additional time and expense to track and report and could affect reimbursement in the future.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe chairperson of the Care, Compliance, and Cybersecurity Committee briefs the full board of directors on such quarterly reports. Our policies and procedures concerning cybersecurity matters apply to all employees. These policies and procedures address encryption standards, antivirus protection, remote access, multi-factor authentication, confidential information, and the use of the internet, social media, email and wireless devices.
Biggest changeThese policies and procedures address encryption standards, antivirus protection, remote access, multi-factor authentication, confidential information, and the use of the internet, social media, email and wireless devices. We have experienced threats to our data and systems, including malware and computer virus attacks from time to time.
Key components of our strategy include annual and ongoing security awareness 32 training for employees, advanced detection and monitoring systems, and robust incident response and containment. We actively monitor and investigate both internally discovered and externally reported issues that may compromise our information systems, permitting quick and decisive action when necessary.
Key components of our strategy include annual and ongoing security awareness 28 Table of Contents training for employees, advanced detection and monitoring systems, and robust incident response and containment. We actively monitor and investigate both internally discovered and externally reported issues that may compromise our information systems, permitting quick and decisive action when necessary.
Our board of directors, and the Care, Compliance, and Cybersecurity Committee of the board, supports our Chief Information Officer by bringing to bear members’ experience with information technology and management, including information technology strategy and risks associated with cybersecurity matters, as part of its oversight function.
Our board of directors, and the Care, Compliance, & Cybersecurity Committee of the board, supports our Chief Information Officer and Chief Information Security Officer by leveraging members’ experience with information technology and management, including information technology strategy and risks associated with cybersecurity matters, as part of its oversight function. Our policies and procedures concerning cybersecurity matters apply to all employees.
The Enterprise Risk Committee meets regularly during the year to assess various significant risks—including cybersecurity risks—and receives cybersecurity updates from the Chief Information Officer in connection with those assessments and with regard to the development and implementation of any risk mitigation plans.
The Enterprise Risk Committee meets regularly during the year to assess various significant risks—including cybersecurity risks—and receives cybersecurity updates in connection with those assessments and the development and implementation of any risk mitigation plans. Our President and Chief Executive Officer presents the report of the Enterprise Risk Committee quarterly to the full board of directors.
We also maintain an inter-departmental privacy and security committee which oversees programs and initiatives seeking to protect and secure patient information as well as our data and information systems. This committee is responsible for our IT-security incident response plan and various training and awareness programs that promote patient privacy and system security practices by employees.
We also maintain an inter-departmental privacy and security committee which oversees programs and initiatives to protect and secure patient information as well as our data and information systems.
The Chief Information Officer also serves on management’s Enterprise Risk Committee, along with our executive leadership team, the Chief Compliance Officer, and internal audit personnel.
The chairperson of the Care, Compliance, & Cybersecurity Committee briefs the full board of directors on such quarterly reports. The Chief Information Officer and our Chief Information Security Officer also serve on management’s Enterprise Risk Committee, along with our executive management team, the Chief Compliance Officer, and internal audit personnel.
Our President and Chief Executive Officer presents the report of the Enterprise Risk Committee quarterly to the full board of directors. Our Chief Information Officer provides quarterly reports on our cybersecurity program to the Care, Compliance, and Cybersecurity Committee and at least annually to our full board of directors.
Our Chief Information Officer provides quarterly reports on our cybersecurity program to the Care, Compliance, & Cybersecurity Committee.
Our board of directors has ultimate oversight of cybersecurity risk but has delegated to the Care, Compliance, and Cybersecurity Committee focused and pertinent oversight responsibilities as part of our enterprise risk management program.
ITEM 1C. CYBERSECURITY We take a holistic, multi-layered approach to management and oversight of cybersecurity risks. Our board of directors has ultimate oversight responsibility but has delegated to the board’s Care, Compliance, & Cybersecurity Committee focused and pertinent oversight duties, which have been integrated into our overall enterprise risk management program, as described below.
We also recognize the importance of securing third-party service providers and have implemented cybersecurity risk management protocols for such parties. For example, all vendors are required to complete our Ongoing Monitoring Assessment Questionnaire, and technology vendors are approved by our Architecture Review Committee.
We also have engaged third-party service providers and have implemented cybersecurity risk management protocols for such parties. For example, all vendors are required to complete our Ongoing Monitoring Assessment Questionnaire, which helps monitor each vendor’s continuing compliance, and we subject our technology vendors to a separate vetting and approval process formally assessing each vendor from a cybersecurity perspective.
The Company’s Chief Information Officer, who reports to our President and Chief Executive Officer, leverages more than a decade of experience in discharging his responsibility for developing and implementing our cybersecurity program. The Chief Information Officer leads a dedicated team of internal IT employees, along with multiple long-term third-party security vendors.
The Chief Information Security Officer leads a dedicated team of internal IT employees, along with multiple long-term third-party security vendors.
We have experienced threats to our data and systems, including malware and computer virus attacks from time to time. To our knowledge, these threats have not materially affected us, our business, financial position, results of operations or cash flows to date.
To our knowledge, these threats have not materially affected us, our business, financial position, results of operations or cash flows to date. For more information about the cybersecurity risks we face, see Item 1A, “ Risk Factors—Other Operational and Financial Risks .”
Removed
Item 1C. Cybersecurity. We recognize the critical importance of maintaining the integrity, availability and security of our information systems. We take a holistic, multi-layered approach to addressing cybersecurity risks, supported by management, the Care, Compliance, and Cybersecurity Committee of our board of directors, and the full board of directors.
Added
This committee reports to our executive management team and has responsibility for our IT-security incident response plan and various training and awareness programs that promote patient privacy and system security practices by employees.
Removed
Although no assurances can be given, we do not believe that such threats are reasonably likely to materially affect us in the future. For more information about the cybersecurity risks we face, see Item 1A, “ Risk Factors—Other Operational and Financial Risks .”
Added
Our Chief Information Security Officer, who reports to our Chief Information Officer, brings to bear more than two decades of experience implementing NIST cybersecurity frameworks, including most recently five years as chief information security officer for a Fortune 200 company. He also holds multiple certifications including the globally recognized Certificate Information Systems Security Professional designation since 2006.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur principal executive office and other properties are suitable for their respective uses and are, in all material respects, adequate for our present needs. 33 The following table sets forth information regarding our home health and hospice locations as of December 31, 2023: State Home Health Locations Hospice Locations Total Alabama+* 29 27 56 Alaska 1 1 2 Arizona 5 1 6 Arkansas+* 3 2 5 Colorado 6 3 9 Connecticut 1 — 1 Florida* 23 — 23 Georgia+ 19 4 23 Idaho 7 6 13 Illinois 3 1 4 Indiana 2 — 2 Kansas 4 2 6 Kentucky+* 3 — 3 Louisiana 1 2 3 Maryland+* 3 — 3 Massachusetts 5 — 5 Mississippi+ 9 11 20 Missouri 1 1 2 Montana+ 5 5 10 Nevada 3 1 4 New Mexico 5 3 8 North Carolina+* 6 — 6 Ohio 2 — 2 Oklahoma 19 2 21 Oregon 2 — 2 Pennsylvania 3 1 4 Rhode Island+* 1 — 1 South Carolina+* 3 1 4 Tennessee+* 7 1 8 Texas 51 23 74 Utah 6 6 12 Virginia 11 2 13 Washington+* 1 1 2 Wyoming 5 3 8 255 110 365 + Home health certificate of need state. * Hospice certificate of need state.
Biggest changeOur principal executive office and other properties are suitable for their respective uses and are, in all material respects, adequate for our present needs. 29 Table of Contents The following table sets forth information regarding our home health and hospice locations as of December 31, 2024: State Home Health Locations Hospice Locations Total Alabama+* 29 27 56 Alaska 1 1 2 Arizona 5 1 6 Arkansas+* 3 2 5 Colorado 6 3 9 Connecticut 1 1 2 Florida* 23 — 23 Georgia+ 19 4 23 Idaho 7 6 13 Illinois 3 1 4 Indiana 2 — 2 Kansas 4 2 6 Kentucky+* 3 — 3 Louisiana 1 2 3 Maryland+* 3 — 3 Massachusetts 5 — 5 Mississippi+ 9 11 20 Missouri 1 1 2 Montana 5 5 10 Nevada 3 1 4 New Mexico 5 4 9 North Carolina+* 6 — 6 Ohio 2 — 2 Oklahoma 19 2 21 Oregon 2 — 2 Pennsylvania 3 1 4 Rhode Island+* 1 — 1 South Carolina 3 1 4 Tennessee+* 7 1 8 Texas 51 26 77 Utah 6 6 12 Virginia 11 2 13 Washington+* 1 1 2 Wyoming 5 3 8 255 115 370 + Home health certificate of need state. * Hospice certificate of need state.
In addition to our principal executive office, as of December 31, 2023, we leased through various consolidated entities 292 agency offices. Our home health and hospice locations are in the localities served by that business and are subject to relatively small space leases, primarily of 5,000 square feet or less.
In addition to our principal executive office, as of December 31, 2024, we leased through various consolidated entities 290 locations. Our home health and hospice locations are in the localities served by that business and are subject to relatively small space leases, primarily of 5,000 square feet or less. Those space leases are typically five years or less in term.
Removed
Those space leases are typically five years or less in term.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor additional discussion regarding the FCA, see Item 1A, “ Risk Factors—Risks Relating to Our Business—Other Regulatory Risks .” Item 4. Mine Safety Disclosures. Not applicable. 35 Part II.
Biggest changeFor additional discussion regarding the FCA, see Item 1A, “ Risk Factors—Risks Relating to Our Business—Other Regulatory Risks .”
These lawsuits, also known as “qui tam” actions, are common in the healthcare industry and can involve 34 significant monetary damages, fines, attorneys’ fees, and the award of bounties to the relators who successfully prosecute or bring these suits to the government.
These lawsuits, also known as “qui tam” actions, are common in the healthcare industry and can involve 30 Table of Contents significant monetary damages, fines, attorneys’ fees, and the award of bounties to the relators who successfully prosecute or bring these suits to the government.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of Total Stockholder Return The following graph compares the cumulative total stockholder returns of Enhabit’s common stock with the cumulative total stockholder returns of the S&P 500 Index and the S&P Health Care Service Select Constituents Industry Index (the “S&P Health Care Service Index”).
Biggest changeComparison of Total Stockholder Return The following graph compares the cumulative total stockholder returns of Enhabit’s common stock with the cumulative total stockholder returns of the S&P Health Care Services Select Industry (the “S&P 500 Index and the S&P Health Care Services Index”). Data for the S&P 500 Index and S&P Health Care Services Index assume reinvestment of dividends.
Securities Authorized for Issuance Under Equity Compensation Plans Information required by this item is incorporated by reference to our definitive proxy statement for our 2024 Annual Meeting of stockholders.
Securities Authorized for Issuance Under Equity Compensation Plans Information required by this item is incorporated by reference to our definitive proxy statement for our 2025 Annual Meeting of stockholders.
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities During the three months ended December 31, 2023, we purchased shares of our common stock as follows: Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares that May Yet be Purchased under our Share Repurchase Plans October 1 through October 31 12,076 $ 8.65 — — November 1 through November 30 — — — — December 1 through December 31 — — — — Total 12,076 $ 8.65 — — (1) Represents shares of common stock we repurchased in October 2023 to satisfy employee tax-withholding obligations in connections with the vesting of stock‑based compensation awards.
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities During the three months ended December 31, 2024, we purchased shares of our common stock as follows: Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Approximate Dollar Value of Shares that May Yet be Purchased under our Share Repurchase Plans October 1 through October 31 — $ — — — November 1 through November 30 — — — — December 1 through December 31 31,670 8.52 — — 31,670 $ 8.52 — — (1) Represents shares of common stock we repurchased in December 2024 to satisfy employee tax-withholding obligations in connections with the vesting of stock‑based compensation awards.
The graph uses the closing market price on July 1, 2022 of $22.74 per share as the initial value of a share of our common stock. 36 This performance graph and other information furnished under this Comparison of Total Stockholder Return section shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
The graph uses the closing market price on July 1, 2022 of $22.74 per share as the initial value of a share of our common stock. 32 Table of Contents This performance graph and other information furnished under this Comparison of Total Stockholder Return section shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act.
Market Information for Common Stock Our common stock is listed for trading on the New York Stock Exchange under the symbol “EHAB.” Holders of Common Stock As of the close of business on March 12, 2024, approximately 5,600 holders of record held our common stock.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Our common stock is listed for trading on the New York Stock Exchange under the symbol “EHAB.” Holders of Common Stock As of the close of business on March 3, 2025, approximately 5,500 holders of record held our common stock.
Data for the S&P 500 Index and S&P Health Care Service Constituents Index assume reinvestment of dividends. The graph assumes that $100 was invested at market close on July 1, 2022, which was the first day that our common stock began trading.
The graph assumes that $100 was invested at market close on July 1, 2022, which was the first day that our common stock began trading.
Removed
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

72 edited+14 added−61 removed45 unchanged
Biggest changeRevenues and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies , to the accompanying consolidated financial statements. 41 The following table reconciles Net (loss) income to Adjusted EBITDA for the years ended December 31, 2023, 2022, and 2021 (in millions): For the Year Ended December 31, 2023 2022 2021 Net (loss) income $ (79.0) $ (38.3) $ 112.9 Impairment of goodwill 85.8 109.0 — Interest expense 43.0 15.0 0.3 Depreciation and amortization 30.9 33.0 36.9 Unusual or nonrecurring items not typical of ongoing operations (1) 21.2 9.5 11.9 Income tax (benefit) expense (11.4) 12.8 35.1 Stock-based compensation 8.9 9.2 3.6 Net income attributable to noncontrolling interest (1.5) (2.1) (1.8) (Gain) loss on disposal or impairment of assets (0.3) 0.1 (0.8) Stock-based compensation included in overhead allocation — 1.1 2.3 Gain on consolidation of joint venture formerly accounted for under the equity method of accounting — — (3.2) Adjusted EBITDA $ 97.6 $ 149.3 $ 197.2 The following table reconciles Net cash provided by operating activities to Adjusted EBITDA for the years ended December 31, 2023, 2022, and 2021 (in millions): For the Year Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 48.4 $ 80.1 $ 123.3 Interest expense excluding amortization of debt discounts and fees 40.9 15.0 0.3 Unusual or nonrecurring items not typical of ongoing operations (1) 21.2 9.5 11.9 Change in assets and liabilities, excluding derivative instruments (11.9) 29.2 32.8 Net income attributable to noncontrolling interests in continuing operations (1.5) (2.1) (1.8) Other 0.3 (0.6) 1.6 Current portion of income tax (benefit) expense 0.2 17.1 26.5 Equity in net income of nonconsolidated affiliates — — 0.6 Distributions from nonconsolidated affiliates — — (0.3) Stock-based compensation included in overhead allocation — 1.1 2.3 Adjusted EBITDA $ 97.6 $ 149.3 $ 197.2 (1) Unusual or nonrecurring items in 2023 include costs associated with nonroutine litigation, restructuring activities, one-time standalone transition costs, shareholder activism and the strategic review process; in 2022, they include one-time standalone transition costs and costs associated with nonroutine litigation.
Biggest changeRevenues and expenses are measured in accordance with the policies and procedures described in Note 1, Summary of Significant Accounting Policies , to the accompanying consolidated financial statements. 37 Table of Contents The following table reconciles Net loss to Adjusted EBITDA for the years ended December 31, 2024, 2023, and 2022 (in millions): Year Ended December 31, 2024 2023 2022 Net loss $ (154.0) $ (79.0) $ (38.3) Interest expense and amortization of debt discounts and fees 42.9 43.0 15.0 (Benefit from) provision for income taxes (4.0) (11.4) 12.8 Depreciation and amortization 31.5 30.9 33.0 (Gain) loss on disposal or impairment of assets (0.7) (0.3) 0.1 Impairment of goodwill 161.7 85.8 109.0 Stock-based compensation 11.7 8.9 9.2 Stock-based compensation included in overhead allocation — — 1.1 Net income attributable to noncontrolling interests (2.2) (1.5) (2.1) Unusual or nonrecurring items not typical of ongoing operations 13.2 21.2 9.5 Adjusted EBITDA $ 100.1 $ 97.6 $ 149.3 The following table reconciles Net cash provided by operating activities to Adjusted EBITDA for the years ended December 31, 2024, 2023, and 2022 (in millions): Year Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 51.2 $ 48.4 $ 80.1 Interest expense excluding amortization of debt discounts and fees 41.4 40.9 15.0 Current portion of (benefit from) provision for income taxes 1.7 0.2 17.1 Change in assets and liabilities, excluding derivative instrument (5.2) (11.9) 29.2 Net income attributable to noncontrolling interests (2.2) (1.5) (2.1) Unusual or nonrecurring items that are not typical of ongoing operations 13.2 21.2 9.5 Stock-based compensation included in overhead allocation — — 1.1 Other — 0.3 (0.6) Adjusted EBITDA $ 100.1 $ 97.6 $ 149.3 Unusual or nonrecurring items in the year ended December 31, 2024 include: (i) third-party legal and advisory fees related to shareholder activism; (ii) third-party legal and advisory fees related to the strategic review process that concluded in May 2024; (iii) certain third-party, nonrecurring litigation fees related to a lawsuit in which the Company is a plaintiff, styled Enhabit, Inc. et al v.
For more information on the Separation, see Item 1, “ Business—History .” COVID-19 Pandemic Impact on Our Results of Operations In response to the COVID-19 outbreak and ensuing pandemic (the “pandemic”), Congress and CMS adopted several statutory and regulatory measures intended to provide relief to healthcare providers in order to ensure patients would continue to have adequate access to care.
For more information on the Separation, see Item 1, “ Business—Our History .” COVID-19 Pandemic Impact on Our Results of Operations In response to the COVID-19 outbreak and ensuing pandemic (the “pandemic”), Congress and CMS adopted several statutory and regulatory measures intended to provide relief to healthcare providers in order to ensure patients would continue to have adequate access to care.
Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America (“GAAP”), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for Net (loss) income .
Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America (“GAAP”), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for Net income (loss).
The projected operating results use management’s best estimates of economic and market conditions over the forecasted period including assumptions for pricing and volume, operating expenses, and capital expenditures. Other significant estimates and assumptions include cost-saving synergies and tax benefits that would accrue to a market participant under a fair value 50 methodology.
The projected operating results use management’s best estimates of economic and market conditions over the forecasted period including assumptions for pricing and volume, operating expenses, and capital expenditures. Other significant estimates and assumptions include cost-saving synergies and tax benefits that would accrue to a market participant under a fair value methodology.
We expect the United States’ aging population will continue to increase long-term demand for the services we provide, which we believe will help us grow our home health and hospice volumes.
We expect the United States’ aging population will continue to increase long-term demand for our services, which we believe will help us grow our Home Health and Hospice volumes.
We target markets for expansion and growth that 38 allow us to leverage our existing operations to create operating efficiencies through scale and density. We also leverage technology to create operating and supply chain efficiencies throughout our organization.
We target markets for expansion and growth that allow us to leverage our existing operations to create operating efficiencies through scale and density. We also leverage technology to create operating and supply chain efficiencies throughout our organization.
See “— Results of Operations .” For additional information regarding our business segments, including a detailed description of the services we provide, financial data for each segment, and a reconciliation of total adjusted earnings before interest, taxes, depreciation, and amortization (“Segment Adjusted EBITDA”) to ( Loss) i ncome before income taxes and noncontrolling interests , see Note 14, Segment Reporting , to the accompanying consolidated financial statements.
See “— Results of Operations .” For additional information regarding our business segments, including a detailed description of the services we provide, financial data for each segment, and a reconciliation of total adjusted earnings before interest, taxes, depreciation, and amortization (“Segment Adjusted EBITDA”) to Loss before income taxes and noncontrolling interests, see Note 14, Segment Reporting , to the accompanying consolidated financial statements.
Our purchase obligations primarily relate to software licensing and support. Purchase obligations are not recognized in our Consolidated Balance Sheet. For more information, see Note 13, Contingencies and Other Commitments , to the accompanying consolidated financial statements. Our capital expenditures include costs associated with computer hardware and licensing software we utilize to run our business, as well as leasehold improvements.
Our purchase obligations primarily relate to software licensing and support. Purchase obligations are not recognized in our Consolidated Balance Sheets. For more information, see Note 13, Contingencies and Other Commitments , to the accompanying consolidated financial statements. Our capital expenditures include costs associated with computer hardware and licensing software we utilize to run our business, as well as leasehold improvements.
We believe the growing percentage of seniors experiencing chronic conditions will result in higher utilization of home health services in the future as patients require more care to support these conditions. Due to the continued national enrollment increases in Medicare Advantage plans by Medicare beneficiaries, we expect the volume of third-party payors to shift and evolve.
We believe the growing percentage of seniors experiencing chronic conditions will result in higher utilization of home health services in the future as patients require more care to support these conditions. Due to the continued national enrollment increases in Medicare Advantage plans by Medicare beneficiaries, we expect the volume of third-party payers to shift and evolve.
See Item 1, “ Business ,” and Item 1A, “ Risk Factors ,” and “—S egment Results of Operations ,” in this Annual Report, as well as Note 14, Segment Reporting , to the accompanying consolidated financial statements. We are also impacted by changes in reimbursement rates by other payors, and in particular, Medicare Advantage plans.
See Item 1, “ Business ,” and Item 1A, “ Risk Factors ,” and “—S egment Results of Operations ,” in this Annual Report, as well as Note 14, Segment Reporting , to the accompanying consolidated financial statements. We are also impacted by changes in reimbursement rates by other payers, and in particular, Medicare Advantage plans.
Due to complexities involved in determining amounts ultimately due under reimbursement arrangements with third‑party payors, which are often subject to interpretation and review, we may receive reimbursement for healthcare services authorized and provided that is different from our estimates, and such differences could be material.
Due to complexities involved in determining amounts ultimately due under reimbursement arrangements with third‑party payers, which are often subject to interpretation and review, we may receive reimbursement for healthcare services authorized and provided that is different from our estimates, and such differences could be material.
See Note 1, Summary of Significant Accounting Policies—Net service revenue , to the accompanying consolidated financial statements for a complete discussion of our revenue recognition policies. Our patient accounting systems calculate contractual allowances on a patient-by-patient basis based on the rates in effect for each primary third-party payor.
See Note 1, Summary of Significant Accounting Policies—Net Service Revenue , to the accompanying consolidated financial statements for a complete discussion of our revenue recognition policies. Our patient accounting systems calculate contractual allowances on a patient-by-patient basis based on the rates in effect for each primary third-party payer.
Our estimate of the transaction price includes estimates of price concessions for such items as contractual allowances (principally for patients covered by Medicare, Medicare Advantage, Medicaid, and other third-party payors), potential adjustments that may arise from payment and other reviews, and uncollectible amounts.
Our estimate of the transaction price includes estimates of price concessions for such items as contractual allowances (principally for patients covered by Medicare, Medicare Advantage, Medicaid, and other third-party payers), potential adjustments that may arise from payment and other reviews, and uncollectible amounts.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section is designed to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and other factors that may affect our future results.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section is designed to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and other factors that may affect our future results.
Certain other factors that are considered and could influence the estimated transaction price are assumed to remain consistent with the experience for patients discharged in similar time periods for the same payor classes, and additional adjustments are provided to account for these factors.
Certain other factors that are considered and could influence the estimated transaction price are assumed to remain consistent with the experience for patients discharged in similar time periods for the same payer classes, and additional adjustments are provided to account for these factors.
Liquidity and Capital Resources Our principal uses of cash include the funding of working capital requirements, servicing our debt, and funding capital expenditures, including acquisitions. See “— Contractual Obligations ” for more information about our material cash requirements from our contractual obligations at December 31, 2023.
Liquidity and Capital Resources Our principal uses of cash include the funding of working capital requirements, servicing our debt, and funding capital expenditures, including acquisitions. See “— Contractual Obligations ” for more information about our material cash requirements from our contractual obligations at December 31, 2024.
Our collection risks include payment denials by payors as a result of increasing complexities of documentation requirements, pre- and post-payment claim reviews by our respective MACs, and reimbursement claims audits by governmental or other payors and their agents.
Our collection risks include payment denials by payers as a result of increasing complexities of documentation requirements, pre- and post-payment claim reviews by our respective MACs, and reimbursement claims audits by governmental or other payers and their agents.
Information on the concentration of total patient accounts receivable by payor class can be found in Note 1, Summary of Significant Accounting Policies—Accounts Receivable, Net of Allowances , to the accompanying consolidated financial statements.
Information on the concentration of total patient accounts receivable by payer class can be found in Note 1, Summary of Significant Accounting Policies—Accounts Receivable, Net of Allowances , to the accompanying consolidated financial statements.
If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that could be material. See Note 1, Summary of Significant Accounting Policies—Net Service Revenue and — Accounts Receivable, Net of Allowances to the accompanying consolidated financial statements.
If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that could be material. See Note 1, Summary of Significant Accounting 45 Table of Contents Policies—Net Service Revenue and — Accounts Receivable, Net of Allowances , to the accompanying consolidated financial statements.
As of December 31, 2023 and 2022, the amount of our patient accounts receivable representing denials that were under review or audit in excess of reserves established for such denials was $1.8 million and $2.5 million, respectively, in our home health segment and $2.2 million and $1.6 million, respectively, in our hospice segment.
As of December 31, 2024 and 2023, the amount of our patient accounts receivable representing denials that were under review or audit in excess of reserves established for such denials was $1.2 million and $1.8 million, respectively, in our Home Health segment and $1.5 million and $2.2 million, respectively, in our Hospice segment.
Additionally, we have little or no ability to pass on these increased costs associated with providing service to Medicare Advantage and other third-party payor patients due to contractually negotiated rates. Recruiting and Retaining High-Quality Personnel Recruiting and retaining qualified personnel, including management, for our home health and hospice agencies remains a high priority for us.
Additionally, we have little or no ability to pass on these increased costs associated with providing service to Medicare Advantage and other third-party payer patients due to contractually negotiated rates. Recruiting and Retaining High-Quality Personnel Recruiting and retaining qualified personnel, including management, for our home health agencies and hospice provider locations remains a high priority for us.
While we treat patients of all ages, most of our patients are 65 and older, and, due to the increasingly aging U.S. population, the number of Medicare enrollees is expected to continue to grow approximately 3% per year. More specifically, the average age of our home health patients and hospice patients is approximately 75 and 80, respectively.
While we treat patients of all ages, most of our patients are 65 and older, and, due to the increasingly aging U.S. population, the number of Medicare enrollees is expected to continue to grow approximately 3% per year. More specifically, the average age of our home health patients and hospice patients is approximately 76 and 83, respectively.
(d) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancellable without penalty.
(4) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude agreements that are cancelable without penalty.
In addition, increases in healthcare costs are typically higher than inflation and, as such, would impact our costs under employee benefit plans. Managing these costs remains a significant challenge and priority for us. Suppliers may pass along rising costs to us in the form of higher prices.
In addition, increases in labor costs in the healthcare industry are typically higher than inflation 34 Table of Contents and, as such, would impact our costs under employee benefit plans. Managing these costs remains a significant challenge and priority for us. Suppliers may pass along rising costs to us in the form of higher prices.
(c) In addition to our corporate headquarters office space, our home health and hospice segments lease: (1) relatively small office spaces in the localities they serve; and (2) equipment in the normal course of business. Amounts include interest portion of future minimum operating lease payments. For more information, see Note 6, Leases , to the accompanying consolidated financial statements.
(3) In addition to our corporate headquarters office space, our Home Health and Hospice segments lease: (a) relatively small office spaces in the localities they serve; and (b) equipment in the normal course of business. Amounts include interest portion of future minimum operating lease payments. For more information, see Note 6, Leases , to the accompanying consolidated financial statements.
We include the results of operations of the businesses acquired as of the beginning of the acquisition dates. Recent Accounting Pronouncements For information regarding recent accounting pronouncements, see Note 1, Summary of Significant Accounting Policies , to the accompanying consolidated financial statements.
We include the results of operations of the businesses acquired as of the beginning of the acquisition dates. See Note 2, Business Combinations , to the accompanying consolidated financial statements for additional information. Recent Accounting Pronouncements For information regarding recent accounting pronouncements, see Note 1, Summary of Significant Accounting Policies , to the accompanying consolidated financial statements.
As of December 31, 2023, our footprint comprised 255 home health and 110 hospice locations across 34 states. 37 Our operations are principally managed on a services basis and include two operating segments for financial reporting purposes: (1) home health; and (2) hospice.
As of December 31, 2024, our footprint comprised 255 home health and 115 hospice locations across 34 states. Our operations are principally managed on a services basis and include two operating segments for financial reporting purposes: (1) Home Health; and (2) Hospice.
For additional information, see “— Results of Operations ” and “— Segment Results of Operations .” Segment Results of Operations Our segment and consolidated Net service revenue for the years ended December 31, 2023, 2022, and 2021 is provided in the table below.
For additional information, see “— Results of Operations ” and “— Segment Results of Operations .” 38 Table of Contents Segment Results of Operations Our segment and consolidated Net service revenue for the years ended December 31, 2024, 2023, and 2022 is provided in the table below.
The resumption of sequestration negatively impacted our home health and hospice revenues by $10.1 million and $2.4 million, respectively, for the year ended December 31, 2022. The lasting impact of the pandemic remains unknown and difficult to predict.
Sequestration resumed in full on July 1, 2022. The resumption of sequestration negatively impacted our Home Health and Hospice revenues by $10.1 million and $2.4 million, respectively, for the year ended December 31, 2022. The lasting impact of the pandemic remains unknown and difficult to predict.
For a comparison of our results of operations for the years ended December 31, 2022 to 2021, see Item 7, “ Management's Discussion and Analysis of Financial Condition and Results of Operations ,” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on April 14, 2023.
For a comparison of our results of operations for the years ended December 31, 2023 to 2022, see Item 7, “ Management's Discussion and Analysis of Financial Condition and Results of Operations ,” of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 15, 2024.
For example, in the year ended December 31, 2022, Medicare Advantage patients accounted for 14.2% of our revenue as compared to 19.0% for the year ended December 31, 2023. In addition to organic growth, our strategy includes volume growth through de novo location openings and strategic acquisitions.
For example, in the year ended December 31, 2023, Medicare Advantage patients accounted for 19% of our revenue as compared to 23% for the year ended December 31, 2024. In addition to organic growth, our strategy includes volume growth through de novo location openings and strategic acquisitions.
As of December 31, 2023 2022 (in Millions) Current 0 – 30 Days $ 102.5 $ 109.9 31 – 60 Days 24.2 22.0 61 – 90 Days 12.6 10.2 91 – 120 Days 8.1 4.5 120 + Days 17.3 3.0 Current accounts receivable, net of allowances 164.7 149.6 Noncurrent patient accounts receivable, net of allowances 0.5 0.9 Accounts receivable, net of allowances $ 165.2 $ 150.5 Changes in general economic conditions (such as increased unemployment rates or periods of recession), business office operations, payor mix, or trends in federal or state governmental and private employer healthcare coverage could affect our collection of accounts receivable.
As of December 31, (in millions) 2024 2023 Current 0 – 30 Days $ 92.5 $ 102.5 31 – 60 Days 16.6 24.2 61 – 90 Days 8.9 12.6 91 – 120 Days 6.1 8.1 120 + Days 25.1 17.3 Current accounts receivable, net of allowances 149.2 164.7 Noncurrent patient accounts receivable, net of allowances 0.5 0.5 Accounts receivable, net of allowances $ 149.7 $ 165.2 Changes in general economic conditions (such as increased unemployment rates or periods of recession), business office operations, payer mix, or trends in federal or state governmental and private employer healthcare coverage could affect our collection of accounts receivable.
Based on the sensitivity analysis performed at September 30, 2023 by reporting unit, it was determined that, assuming all other assumptions and inputs used in the discounted cash flow analysis are held constant, a 50 and 100 basis point increase in the discount rate assumption would result in decreases in the fair value of the home health and hospice reporting units of approximately $35 million and $10 million, respectively.
Based on the sensitivity analysis performed at December 31, 2024 by reporting unit, it was determined that, assuming all other assumptions and inputs used in the discounted cash flow analysis are held constant, a 50 and 100 basis point increase in the discount rate assumption would result in decreases in the fair value of the Home Health and Hospice reporting units, respectively, of approximately $20 million and $15 million, respectively.
As of December 31, 2023, we also had $33.4 million available to us under the Revolving Credit Facility, as discussed below.
As of December 31, 2024, we also had $51.4 million available to us under the Revolving Credit Facility, as discussed below.
For additional information regarding our debt, see Note 8, Long-term Debt , to the accompanying consolidated financial statements and “ —Quantitative and Qualitative Disclosures about Market Risk .” For additional information regarding our interest rate swap, see Note 12, Derivative Instruments , to the accompanying consolidated financial statements. 47 The following table shows the cash flows provided by or used in operating, investing, and financing activities for the years ended December 31, 2023, 2022, and 2021 (in millions): For the Year Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 48.4 $ 80.1 $ 123.3 Net cash used in investing activities (5.3) (42.3) (119.2) Net cash used in financing activities (40.5) (18.6) (36.1) Increase (decrease) in cash, cash equivalents, and restricted cash $ 2.6 $ 19.2 $ (32.0) Operating activities .
For additional information regarding our debt, see Note 8, Long-Term Debt , to the accompanying consolidated financial statements and “ —Quantitative and Qualitative Disclosures about Market Risk .” The following table shows the cash flows provided by or used in operating, investing, and financing activities for the years ended December 31, 2024, 2023, and 2022 (in millions): Year Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 51.2 $ 48.4 $ 80.1 Net cash used in investing activities (2.4) (5.3) (42.3) Net cash used in financing activities (48.3) (40.5) (18.6) Increase in cash, cash equivalents, and restricted cash $ 0.5 $ 2.6 $ 19.2 Operating Activities .
The decrease in Net cash provided by operating activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 resulted primarily from the increase in Net loss , partially offset by changes in working capital. Investing activities .
The increase in Net cash provided by operating activities for the year ended December 31, 2024 as compared to the prior year resulted primarily from changes in working capital, which was partially offset by the increase in Net loss. Investing Activities .
Amounts include interest portion of future minimum finance lease payments. For more information, see Note 6, Leases , to the accompanying consolidated financial statements. (b) Interest on long-term debt was calculated using the rate for the Term Loan A Facility as of December 31, 2023.
Amounts include interest portion of future minimum finance lease payments. For more information, see Note 6, Leases , to the accompanying consolidated financial statements. (2) Interest on long-term debt was calculated using the rate for the credit facilities as of December 31, 2024.
Our primary collection risks relate to the increasing complexities of documentation requirements by payors and claims reviews conducted by MACs or other contractors. 49 The table below shows a summary of our total Accounts receivable, net of allowances as of December 31, 2023 and 2022.
Our primary collection risks relate to the increasing complexities of documentation requirements by payers and claims reviews conducted by Medicare Administrative Contractors (“MACs”) or other contractors. The table below shows a summary of our total Accounts receivable, net of allowances, as of December 31, 2024 and 2023.
As of December 31, 2023 and 2022, we had $27.4 million and $22.9 million, respectively, in Cash and cash equivalents . These amounts exclude $2.4 million and $4.3 million, respectively, in Restricted cash .
As of December 31, 2024 and 2023, we had $28.4 million and $27.4 million, respectively, in Cash and cash equivalents. These amounts exclude $1.9 million and $2.4 million, respectively, in Restricted cash.
We also evaluate our tax positions and establish assets and liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes.
Income Taxes We provide for income taxes using the asset and liability method. We also evaluate our tax positions and establish assets and liabilities in accordance with the applicable accounting guidance on uncertainty in income taxes.
See “— Segment Results of Operations .” Cost of Service, Excluding Depreciation and Amortization Cost of service , excluding depreciation and amortization represents the cost of operating our business, which primarily consists of payroll and related benefits, travel, supplies, including pharmacy for hospice patients, and rental cost for our locations.
See “ —Segment Results of Operations .” Cost of service, excluding depreciation and amortization, represents the cost of operating our business, which primarily consists of payroll and related benefits, travel, supplies, including pharmacy for Hospice patients, and lease costs for our locations. 36 Table of Contents General and Administrative Expenses.
See Item 1, “ Business — Sources of Revenue ,” for a table identifying the sources and relative payor mix of our revenues. Sequestration resumed as of April 1, 2022 and resulted in a 1% payment reduction through June 30, 2022. Thereafter, the full 2% Medicare payment reduction resumed. Additional Medicare payment reductions are also possible under the Statutory PAYGO.
See Item 1, “ Business — Sources of Revenue ,” for a table identifying the sources and relative payer mix of our revenues. Sequestration resumed as of April 1, 2022 and resulted in a 1% payment reduction through June 30, 2022. Thereafter, the full 2% Medicare payment reduction resumed.
Impairment of goodwill for the year ended December 31, 2022 resulted from an impairment charge to reduce the carrying value of our home health reporting unit to its fair value. See Note 7, Goodwill and Other Intangible Assets, Net , to the accompanying consolidated financial statements for additional information.
For the year ended December 31, 2023, Impairment of goodwill resulted from an impairment charge to reduce the carrying value of our Hospice reporting unit to its fair value. See Note 7, Goodwill and Other Intangible Assets, Net , to the accompanying consolidated financial statements for additional information. Interest Expense and Amortization of Debt Discounts and Fees.
Various factors, including competition and increasing regulatory and administrative burdens, impact our ability to maintain and grow our home health and hospice volumes. In any particular market, we may encounter competition from local or national entities with longer operating histories or other competitive advantages.
Volume The volume of services we provide has a significant impact on our Net service revenue. Various factors, including competition and increasing regulatory and administrative burdens, impact our ability to maintain and grow our Home Health and Hospice volumes. In any particular market, we may encounter competition from local or national entities with longer operating histories or other competitive advantages.
During the years ended December 31, 2023 and 2022, we made capital expenditures of $3.5 million and $7.1 million, respectively, for property and equipment. These expenditures in 2023 and 2022 were exclusive of $2.8 million and $36.3 million, respectively, in net cash related to our acquisition activity. During 2024, we expect to spend approximately $6 million for maintenance capital expenditures.
During the years ended December 31, 2024 and 2023, we made capital expenditures for property and equipment of $3.8 million and $3.5 million, respectively. These expenditures in 2023 were exclusive of $2.8 million in net cash related to our acquisition activity. There was no acquisition activity in 2024.
We calculate Adjusted EBITDA as Net (loss) income adjusted to exclude (1) income tax (benefit) expense, (2) interest expense and amortization of debt discounts and fees, (3) depreciation and amortization, (4) gains or losses on disposal or impairment of assets or goodwill, (5) stock‑based compensation, (6) net income attributable to noncontrolling interest, (7) unusual or nonrecurring items not typical of ongoing operations, and (8) gain on consolidation of joint venture formerly accounted for under the equity method of accounting.
We calculate Adjusted EBITDA as Net income (loss) adjusted to exclude (1) interest expense and amortization of debt discounts and fees, (2) provision for or benefit from income taxes, (3) depreciation and amortization, (4) gains or losses on disposal or impairment of assets or goodwill, (5) stock‑based compensation, (6) net income attributable to noncontrolling interests, and (7) unusual or nonrecurring items not typical of ongoing operations.
Actual amounts spent will be dependent upon the timing of projects for our business. As of December 31, 2023, we do not have any material off-balance sheet arrangements. 48 Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP.
During 2025, we expect to spend approximately $5 million for maintenance capital expenditures. Actual amounts spent will be dependent upon the timing of projects for our business. As of December 31, 2024, we do not have any material off-balance sheet arrangements. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP.
Assessment of Loss Contingencies We have contingencies that could result in significant losses upon the ultimate resolution of such contingencies. We have provided for losses in situations where we have concluded it is probable a loss has been or will be incurred and the amount of loss is reasonably estimable.
Assessment of Loss Contingencies We provide for losses in situations where we have concluded it is probable a loss has been or will be incurred and the amount of loss is reasonably estimable.
Our evaluation of any required liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions which are periodically audited by tax authorities.
The amount of the valuation allowance may be adjusted in future periods in the event of changes to these factors. Our evaluation of any required liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions which are periodically audited by tax authorities.
The decrease in Net cash used in investing activities for the year ended December 31, 2023 as compared to the year ended December 31, 2022 resulted primarily from three acquisitions in the fourth quarter of 2022. See Note 2, Business Combinations . Financing activities .
The decrease in Net cash used in investing activities for the year ended December 31, 2024 as compared to the prior year resulted primarily from one acquisition in 2023. See Note 2, Business Combinations . Financing Activities .
Segment Adjusted EBITDA is calculated similarly to consolidated Adjusted EBITDA but excludes corporate overhead costs that are not allocated to reportable segments because they are not considered when management evaluates segment performance. See Note 14, Segment Reporting , to the accompanying consolidated financial statements for additional information about Segment Adjusted EBITDA.
Segment Adjusted EBITDA is calculated similarly to consolidated Adjusted EBITDA but excludes corporate overhead costs that are not allocated to reportable segments because they are not considered when management evaluates segment performance.
For discussion of the financial and operational impacts we have experienced as a result of the pandemic, see the sections titled Item 1, “ Business ,” Item 1A, “ Risk Factors ,” “— Results of Operations ,” and “— Segment Results of Operations .” 39 Results of Operations Our consolidated results of operations for the years ended December 31, 2023, 2022, and 2021 were as follows: For the Year Ended December 31, Percentage Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 (in Millions) Net service revenue $ 1,046.3 $ 1,071.1 $ 1,106.6 (2.3) % (3.2) % Cost of service, excluding depreciation and amortization 535.6 525.6 513.9 1.9 % 2.3 % Gross margin, excluding depreciation and amortization 510.7 545.5 592.7 (6.4) % (8.0) % General and administrative expenses 441.6 414.9 412.9 6.4 % 0.5 % Depreciation and amortization 30.9 33.0 36.9 (6.4) % (10.6) % Impairment of goodwill 85.8 109.0 — (21.3) % N/A Operating (loss) income (47.6) (11.4) 142.9 317.5 % (108.0) % Interest expense and amortization of debt discounts and fees 43.0 15.0 0.3 186.7 % 4900.0 % Equity in net income of nonconsolidated affiliates — — (0.6) N/A (100.0) % Other income (0.2) (0.9) (4.8) (77.8) % (81.3) % (Loss) income before income taxes and noncontrolling interests (90.4) (25.5) 148.0 254.5 % (117.2) % Income tax (benefit) expense (11.4) 12.8 35.1 (189.1) % (63.5) % Net (loss) income (79.0) (38.3) 112.9 106.3 % (133.9) % Less: Net income attributable to noncontrolling interests 1.5 2.1 1.8 (28.6) % 16.7 % Net (loss) income attributable to Enhabit, Inc. $ (80.5) $ (40.4) $ 111.1 99.3 % (136.4) % The following table sets forth our consolidated results as a percentage of Net service revenue : For the Year Ended December 31, 2023 2022 2021 Cost of service, excluding depreciation and amortization 51.2 % 49.1 % 46.4 % General and administrative expenses 42.2 % 38.7 % 37.3 % Depreciation and amortization 3.0 % 3.1 % 3.3 % Interest expense 4.1 % 1.4 % — % Net Service Revenue Our Net service revenue decreased for the year ended December 31, 2023 as compared to December 31, 2022 primarily due to the continued shift to more non-episodic patients in home health and the resumption of sequestration.
For discussion of the financial and operational impacts we have experienced as a result of the pandemic, see the sections titled Item 1, “ Business ,” Item 1A, “ Risk Factors ,” “— Results of Operations ,” and “— Segment Results of Operations .” 35 Table of Contents Results of Operations Our consolidated results of operations for the years ended December 31, 2024, 2023, and 2022 were as follows: Year Ended December 31, Percentage Change (in millions, except percentages) 2024 2023 2022 2024 vs 2023 2023 vs 2022 Net service revenue $ 1,034.8 $ 1,046.3 $ 1,071.1 (1.1) % (2.3) % Cost of service, excluding depreciation and amortization 530.8 535.6 525.6 (0.9) % 1.9 % Gross margin, excluding depreciation and amortization 504.0 510.7 545.5 (1.3) % (6.4) % General and administrative expenses 425.9 441.6 414.9 (3.6) % 6.4 % Depreciation and amortization 31.5 30.9 33.0 1.9 % (6.4) % Impairment of goodwill 161.7 85.8 109.0 88.5 % (21.3) % Operating loss (115.1) (47.6) (11.4) 141.8 % 317.5 % Interest expense and amortization of debt discounts and fees 42.9 43.0 15.0 (0.2) % 186.7 % Other income — (0.2) (0.9) (100.0) % (77.8) % Loss before income taxes and noncontrolling interests (158.0) (90.4) (25.5) 74.8 % 254.5 % (Benefit from) provision for income taxes (4.0) (11.4) 12.8 (64.9) % (189.1) % Net loss (154.0) (79.0) (38.3) 94.9 % 106.3 % Less: Net income attributable to noncontrolling interests 2.2 1.5 2.1 46.7 % (28.6) % Net loss attributable to Enhabit, Inc. $ (156.2) $ (80.5) $ (40.4) 94.0 % 99.3 % The following table sets forth our consolidated results as a percentage of Net service revenue: Year Ended December 31, 2024 2023 2022 Cost of service, excluding depreciation and amortization 51.3 % 51.2 % 49.1 % General and administrative expenses 41.2 % 42.2 % 38.7 % Depreciation and amortization 3.0 % 3.0 % 3.1 % Interest expense 4.1 % 4.1 % 1.4 % Net Service Revenue.
Segment Adjusted EBITDA The decrease in Segment Adjusted EBITDA for the year ended December 31, 2023 as compared to the year ended December 31, 2022 resulted primarily from the decrease in Net service revenue as discussed above. 44 Hospice During the years ended December 31, 2023, 2022, and 2021, our hospice segment derived its Net service revenue from the following payor sources: For the Year Ended December 31, 2023 2022 2021 Medicare 97.1 % 98.8 % 97.9 % Managed care 2.5 % 0.7 % 1.5 % Medicaid 0.4 % 0.5 % 0.6 % Total 100.0 % 100.0 % 100.0 % Additional information regarding our hospice segment’s operating results for the years ended December 31, 2023, 2022, and 2021 is as follows: For the Year Ended December 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (In Millions, Except Percentage Change) Hospice segment revenue $ 196.2 $ 194.0 $ 209.3 1.1 % (7.3) % Cost of service, excluding depreciation and amortization 96.6 90.1 90.4 7.2 % (0.3) % Gross margin, excluding depreciation and amortization 99.6 103.9 118.9 (4.1) % (12.6) % General and administrative expenses 63.4 65.2 62.6 (2.8) % 4.2 % Equity earnings and noncontrolling interests 0.1 0.3 0.1 (66.7) % 200.0 % Hospice Segment Adjusted EBITDA (a) $ 36.1 $ 38.4 $ 56.2 (6.0) % (31.7) % For the Year Ended December 31, Percentage Change 2023 2022 2021 2023 vs. 2022 2022 vs. 2021 (Actual Amounts) Total: Admissions 11,713 11,978 13,113 (2.2)% (8.7)% Patient days 1,256,081 1,284,386 1,372,980 (2.2)% (6.5)% Average daily census 3,441 3,519 3,762 (2.2)% (6.5)% Revenue per patient day $ 156 $ 151 $ 152 3.3% (0.7)% Cost per patient day $ 77 $ 70 $ 66 10.0% 6.1% (a) Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting , as a measure reported to management for purposes of making decisions on allocating resources and addressing the performance of our segments.
Home Health segment General and administrative expenses decreased 2.2% as compared to the prior year due to cost savings initiatives and lower benefit related expenses, partially offset by annual merit increases in the fourth quarter of 2023 and 2024. 41 Table of Contents Hospice During the years ended December 31, 2024, 2023, and 2022, our Hospice segment derived its Net service revenue from the following payer sources: Year Ended December 31, 2024 2023 2022 Medicare 98.3 % 97.1 % 98.8 % Managed care 1.7 % 2.5 % 0.7 % Medicaid — % 0.4 % 0.5 % Total 100.0 % 100.0 % 100.0 % Additional information regarding our Hospice segment’s operating results for the years ended December 31, 2024, 2023, and 2022 is as follows: Year Ended December 31, Percentage Change (in millions, except percentages) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Hospice net service revenue $ 210.0 $ 196.2 $ 194.0 7.0 % 1.1 % Cost of service, excluding depreciation and amortization 102.6 96.6 90.1 6.2 % 7.2 % Gross margin, excluding depreciation and amortization 107.4 99.6 103.9 7.8 % (4.1) % General and administrative expenses 65.5 63.4 65.2 3.3 % (2.8) % Equity earnings and noncontrolling interests 0.4 0.1 0.3 300.0 % (66.7) % Hospice Segment Adjusted EBITDA (1) $ 41.5 $ 36.1 $ 38.4 15.0 % (6.0) % Year Ended December 31, Percentage Change (actual amounts) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Total: Admissions 12,025 11,713 11,978 2.7% (2.2)% Same-store total admissions growth 0.5% (6.3)% Patient days 1,304,878 1,256,081 1,284,386 3.9% (2.2)% Discharged average length of stay 105 108 108 (2.8)% —% Average daily census 3,565 3,441 3,519 3.6% (2.2)% Revenue per patient day $ 160.9 $ 156.2 $ 151.0 3.0% 3.4% Cost per patient day $ 78.6 $ 76.9 $ 70.2 2.2% 9.5% (1) Segment Adjusted EBITDA is presented in conformity with ASC 280, Segment Reporting , as a measure reported to management for purposes of making decisions on allocating resources and addressing the performance of our segments.
For additional information about our business and reportable segments, see Item 1, “ Business ,” Item 1A, “ Risk Factors ,” “— Segment Results of Operations ,” and Note 14, Segment Reporting , to the accompanying consolidated financial statements in this Annual Report.
For additional information about our business and reportable segments, see Item 1, “ Business ,” Item 1A, “ Risk Factors ,” “— Segment Results of Operations ,” and Note 14, Segment Reporting , to the accompanying consolidated financial statements in this Annual Report. 33 Table of Contents Factors Affecting Our Performance There are a number of factors that have impacted, and we believe will continue to impact, our results of operations and growth.
We believe the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, as they require our most difficult, subjective, or complex judgments resulting from the need to make estimates about the effect of matters that are inherently uncertain.
We believe the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, as they require our most difficult, subjective, or complex judgments resulting from the need to make estimates about the effect of matters that are inherently uncertain. 44 Table of Contents Revenue Recognition We recognize Net service revenue in the reporting period in which we perform the service based on our best estimate of the transaction price for the type of service provided to the patient.
Because we derive a substantial portion of our Net service revenue from the Medicare program, our results of operations are heavily impacted by changes in Medicare reimbursement rates. Medicare reimbursement rates are subject to change annually, with the potential for more sweeping changes from time to time as a result of Congressional or state legislation.
Medicare reimbursement rates are subject to change annually, with the potential for more sweeping changes from time to time as a result of Congressional or state legislation.
In determining the fair value of assets acquired and liabilities assumed in a business combination, we primarily use the income and multi-period excess earnings approaches to estimate the value of our most significant acquired intangible assets.
During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. 47 Table of Contents In determining the fair value of assets acquired and liabilities assumed in a business combination, we primarily use the income and multi-period excess earnings approaches to estimate the value of our most significant acquired intangible assets.
Expenses as a % of Net Service Revenue For the Year Ended December 31, 2023 2022 2021 Cost of service, excluding depreciation and amortization 49.2% 46.4% 43.2% General and administrative expenses 32.3% 33.6% 29.9% 45 Net service revenue The increase in hospice Net service revenue for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily resulted from an increase in revenue per patient day.
Expenses as a % of Net Service Revenue Year Ended December 31, 2024 2023 2022 Cost of service, excluding depreciation and amortization 48.9% 49.2% 46.4% General and administrative expenses 31.2% 32.3% 33.6% 42 Table of Contents Net Service Revenue.
We based our fair value estimates on assumptions management believed to be reasonable but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. Income Taxes We provide for income taxes using the asset and liability method.
We based our fair value estimates 46 Table of Contents on assumptions management believed to be reasonable but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. See Note 7, Goodwill and Other Intangible Assets, Net , to the accompanying consolidated financial statements for additional information.
See also Note 1, Summary of Significant Accounting Policies —Basis of Presentation and Consolidation , and Note 11, Income Taxes , to the accompanying consolidated financial statements, and “ —Critical Accounting Estimates .” Adjusted EBITDA Adjusted EBITDA is a non-GAAP measure of our financial performance.
The difference in the effective rate is primarily due to a valuation allowance recorded against a portion of our deferred tax assets in 2024. See Note 11, Income Taxes , to the accompanying consolidated financial statements, and “ —Critical Accounting Estimates .” Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure of our financial performance.
However, we continually review the amounts actually collected in subsequent periods in order to determine the amounts by which our estimates differed.
However, we continually review the amounts actually collected in subsequent periods in order to determine the amounts by which our estimates differed. The collection of outstanding receivables from third-party payers and patients is our primary source of cash and is critical to our operating performance.
For the Year Ended December 31, 2023 % of Consolidated Revenue 2022 % of Consolidated Revenue 2021 % of Consolidated Revenue (In Millions) Home health segment net service revenue $ 850.1 81.2 % $ 877.1 81.9 % $ 897.3 81.1 % Hospice segment net service revenue 196.2 18.8 % 194.0 18.1 % 209.3 18.9 % Consolidated net service revenue $ 1,046.3 100.0 % $ 1,071.1 100.0 % $ 1,106.6 100.0 % 42 For the year ended December 31, 2023, our Net service revenue decreased 2.3% over 2022 due to the continued shift to more non-episodic patients in home health and the resumption of sequestration.
Year Ended December 31, 2024 2023 2022 (in millions, except percentages) $ Amount % of Consolidated Revenue $ Amount % of Consolidated Revenue $ Amount % of Consolidated Revenue Home Health segment net service revenue $ 824.8 79.7 % $ 850.1 81.2 % $ 877.1 81.9 % Hospice segment net service revenue 210.0 20.3 % 196.2 18.8 % 194.0 18.1 % Consolidated net service revenue $ 1,034.8 100.0 % $ 1,046.3 100.0 % $ 1,071.1 100.0 % For the year ended December 31, 2024, our Consolidated net service revenue decreased 1.1% compared to the prior year due to a decrease in Home Health segment revenues of 3.0% with average daily census in Home Health lower by 2.1% and unit revenue per patient day lower by 1.3% primarily related to the continued unfavorable mix shift to more non‑Medicare patients in the Home Health segment.
Impairment of Goodwill Impairment of goodwill for the year ended December 31, 2023 resulted from an impairment charge to reduce the carrying value of our hospice reporting unit to its fair value.
For the year ended December 31, 2024, Depreciation and amortization increased compared to the prior year due to our investments in technology and fleet vehicles in 2024. Impairment of Goodwill. For the year ended December 31, 2024, Impairment of goodwill resulted from impairment charges to reduce the carrying value of our Home Health reporting unit to its fair value.
Segment Adjusted EBITDA The decrease in hospice Segment Adjusted EBITDA for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily resulted from an increase in Cost of service , excluding depreciation and amortization .
Segment Adjusted EBITDA. The increase in Hospice Segment Adjusted EBITDA of 15.0% for the year ended December 31, 2024 as compared to the prior year primarily resulted from the increase in Net service revenue of 7.0% discussed above with Cost of service, excluding depreciation and amortization, higher by 6.2% to support revenue growth, partially offset by improved clinical staff productivity.
Contractual Obligations Our consolidated contractual obligations as of December 31, 2023 are as follows (in millions): Total Current Long Term Long-term debt obligations: Long-term debt, excluding revolving credit facility and finance lease obligations (a) $ 367.1 $ 20.0 $ 347.1 Revolving credit facility 180.0 — 180.0 Interest on long-term debt (b) 152.3 43.5 108.8 Finance lease obligations (a) 6.0 2.7 3.3 Operating lease obligations (c) 71.2 15.0 56.2 Purchase obligations (d) 7.4 5.6 1.8 Total $ 784.0 $ 86.8 $ 697.2 (a) We lease automobiles for our clinicians under finance leases.
The increase in Net cash used in financing activities for the year ended December 31, 2024 as compared to the prior year resulted primarily from an increase in net repayments of debt in 2024. 43 Table of Contents Contractual Obligations Our consolidated contractual obligations as of December 31, 2024 are as follows (in millions): Total Current Long-Term Long-term debt obligations: Long-term debt, excluding revolving credit facility and finance lease obligations (1) $ 348.0 $ 20.0 $ 328.0 Revolving credit facility 160.0 — 160.0 Interest on long-term debt (2) 105.9 35.3 70.6 Finance lease obligations (1) 8.1 3.0 5.1 Operating lease obligations (3) 66.1 15.4 50.7 Purchase obligations (4) 22.8 18.3 4.5 Total $ 710.9 $ 92.0 $ 618.9 (1) We lease automobiles under finance leases for our clinicians.
Home Health During the years ended December 31, 2023, 2022, and 2021, our home health segment derived its Net service revenue from the following payor sources: For the Year Ended December 31, 2023 2022 2021 Medicare 65.6 % 73.8 % 78.2 % Medicare Advantage 23.4 % 17.3 % 13.1 % Managed care 9.5 % 7.3 % 6.9 % Medicaid 1.4 % 1.4 % 1.6 % Other 0.1 % 0.2 % 0.2 % Total 100.0 % 100.0 % 100.0 % The decline in Medicare revenue as a percentage of our home health Net service revenue and corresponding increase in Medicare Advantage revenue is primarily the result of continued national enrollment increases in Medicare Advantage plans by Medicare beneficiaries.
Home Health During the years ended December 31, 2024, 2023, and 2022, our Home Health segment derived its Net service revenue from the following payer sources: Year Ended December 31, 2024 2023 2022 Medicare 58.8 % 65.6 % 73.8 % Medicare Advantage 28.8 % 23.4 % 17.3 % Managed Care 11.1 % 9.5 % 7.3 % Medicaid 1.1 % 1.4 % 1.4 % Other 0.2 % 0.1 % 0.2 % Total 100.0 % 100.0 % 100.0 % The decline in Medicare revenue as a percentage of our Home Health Net service revenue and corresponding increase in Medicare Advantage revenue is primarily the result of continued national enrollment increases in Medicare Advantage plans by Medicare beneficiaries. 39 Table of Contents Additional information regarding our Home Health segment’s operating results for the years ended December 31, 2024, 2023, and 2022 is as follows: Year Ended December 31, Percentage Change (in millions, except percentages) 2024 2023 2022 2024 vs. 2023 2023 vs. 2022 Net service revenue: Medicare $ 484.6 $ 557.4 $ 647.7 (13.1) % (13.9) % Non-Medicare 331.2 283.0 218.3 17.0 % 29.6 % Private duty (1) 9.0 9.7 11.1 (7.2) % (12.6) % Home Health net service revenue 824.8 850.1 877.1 (3.0) % (3.1) % Cost of service, excluding depreciation and amortization 428.2 439.0 435.5 (2.5) % 0.8 % Gross margin, excluding depreciation and amortization 396.6 411.1 441.6 (3.5) % (6.9) % General and administrative expenses 235.4 240.6 238.5 (2.2) % 0.9 % Other income — (0.2) (0.9) (100.0) % (77.8) % Equity earnings and noncontrolling interests 1.8 1.4 1.8 28.6 % (22.2) % Home Health Segment Adjusted EBITDA (2) $ 159.4 $ 169.3 $ 202.2 (5.8) % (16.3) % (1) Private duty represents long-term comprehensive hourly nursing medical care.
Factors Affecting Our Performance There are a number of factors that have impacted, and we believe will continue to impact, our results of operations and growth. These factors include: Pricing Generally, the pricing we receive for our services is based on reimbursement rates from payors.
These factors include: Pricing Generally, the pricing we receive for our services is based on reimbursement rates from payers. Because we derive a substantial portion of our Net service revenue from the Medicare program, our results of operations are heavily impacted by changes in Medicare reimbursement rates.
See “— Liquidity and Capital Resources .” Income Tax (Benefit) Expense Our effective tax rate in 2023 was 12.6% compared to an effective tax rate of (50.2)% in 2022. In 2023, the effective tax rate was impacted by the goodwill impairment in our hospice reporting unit, a significant portion of which was a permanent book-tax difference.
For the year ended December 31, 2024, Interest expense and amortization of debt discounts and fees remained relatively flat compared to the prior year. See “— Liquidity and Capital Resources .” (Benefit From) Provision For Income Taxes. Our effective tax rate in 2024 was 2.5% compared to an effective tax rate of 12.6% in 2023.
A high degree of judgment is required to determine the extent a valuation allowance should be provided against deferred tax assets. On a quarterly basis, we assess the likelihood of realization of our deferred tax assets, considering all available evidence, both positive and negative.
A high degree of judgment can be required to determine the extent a valuation allowance should be provided against deferred tax assets. Due to the pretax losses we have generated in recent years, we recorded a valuation allowance of $14.1 million in 2024.
Cost of service , excluding depreciation and amortization increased for the year ended December 31, 2023 as compared to December 31, 2022 due to an increase in labor costs, primarily as a result of annual merit and market increases and implementation of the case management staffing model in hospice, partially offset by a reduction in contract labor.
For the year ended December 31, 2024, General and administrative expenses decreased compared to the prior year primarily due to cost savings initiatives, lower benefit related expenses, and incentive compensation, partially offset by annual merit increases in the fourth quarter of 2023 and 2024. Depreciation and Amortization.
Expenses as a % of Net Service Revenue For the Year Ended December 31, 2023 2022 2021 Cost of service, excluding depreciation and amortization 51.6 % 49.7 % 47.2 % General and administrative expenses 28.3 % 27.2 % 27.2 % Net Service Revenue The decrease in home health Net service revenue for the year ended December 31, 2023 as compared to the year ended December 31, 2022 primarily was due to the continued shift to more non-episodic patients in home health and the resumption of sequestration.
The decrease in Home Health Net service revenue for the year ended December 31, 2024 as compared to the prior year of 3.0% is due to average daily census in Home Health being lower by 2.1% and unit revenue per patient day being lower by 1.3% primarily related to the continued unfavorable mix shift to more non-Medicare patients in the Home Health segment.
The increase in revenue per patient day for the year ended December 31, 2023 primarily was due to increased Medicare reimbursement rates and changes in our estimated recoverability of Net service revenue , partially offset by the resumption of sequestration.
The increase in Hospice Net service revenue for the year ended December 31, 2024 as compared to the prior year of 7.0% was due to improved unit revenue per patient day of 3.0% on improved Medicare reimbursement rates and growth in average daily census of 3.6% on strong admissions growth as we continue to see the benefits of the maturing case management model.
Removed
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Added
For the year ended December 31, 2024, Net service revenue decreased 1.1% compared to the prior year due to a decrease in Home Heath segment revenues of 3.0% with average daily census in Home Health lower by 2.1% and unit revenue per patient day lower by 1.3% primarily related to the continued unfavorable mix shift to more non‑Medicare patients in Home Health.
Removed
Over that time, we have grown to become the fourth-largest provider of home health services and a leading provider of hospice services nationally, measured by 2022 Medicare revenues.
Added
The decrease was partially offset by increased revenue in Hospice of 7.0% associated with both improved unit revenue per patient day of 3.0% on improved Medicare reimbursement rates and growth in average daily census of 3.6% on strong admissions growth as we continue to see the benefits of the maturing case management model put in place in 2023.
Removed
Statutory PAYGO requires, among other things, that mandatory spending and revenue legislation not increase the federal budget deficit over a five- or ten-year period. If the OMB finds there is a deficit, Statutory PAYGO requires OMB to order sequestration of Medicare.
Added
See “— Segment Results of Operations .” Cost of Service, Excluding Depreciation and Amortization. For the year ended December 31, 2024, Cost of service, excluding depreciation and amortization, decreased 0.9% compared to the prior year on a revenue decline of 1.1%.
Removed
During the second session of the 117 th Congress, the PAYGO cuts required in 2023 and 2024 were delayed until 2025. Volume The volume of services we provide has a significant impact on our Net service revenue .
Added
In the Home Health segment, unit cost per patient day improved 0.3% due to improved clinical staff productivity and a reduction in contract labor, partially offset by approximately 3% annual merit increases that were effective in the fourth quarter of 2023 and 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed2 unchanged
Biggest changeAssuming outstanding balances were to remain the same and including the impact of our interest rate swap agreement, a 1% increase in interest rates would result in an incremental negative cash flow of $3.5 million over the next 12 months, while a 1% decrease in interest rates would result in an incremental positive cash flow of $3.5 million over the next 12 months. 53 See Note 8, Long-term Debt , to the accompanying consolidated financial statements for additional information regarding our long-term debt.
Biggest changeAssuming outstanding balances were to remain the same and including the impact of our interest rate swap agreement, a 1% increase in interest rates would result in an incremental negative cash flow of $3.1 million over the next 12 months, while a 1% decrease in interest rates would result in an incremental positive cash flow of $3.1 million over the next 12 months.
As of December 31, 2023, our primary variable rate debt outstanding related to $180.0 million in advances under our Revolving Credit Facility and $367.1 million under our Term Loan A Facility. On October 20, 2022, we entered into an interest rate swap to hedge a portion of the cash flow risk related to our variable rate debt.
As of December 31, 2024, our primary variable rate debt outstanding related to $160.0 million in advances under our Revolving Credit Facility and $350.1 million under our Term Loan A Facility. On October 20, 2022, we entered into an interest rate swap to hedge a portion of the cash flow risk related to our variable rate debt.
See Note 12, Derivative Instruments , to the accompanying consolidated financial statements for additional information regarding our interest rate swap.
See Note 8, Long-Term Debt , to the accompanying consolidated financial statements for additional information regarding our long-term debt. See Note 12, Derivative Instruments , to the accompanying consolidated financial statements for additional information regarding our interest rate swap.

Other EHAB 10-K year-over-year comparisons