Enhabit, Inc.

Hello, good morning, everyone, and welcome to Inhabit Home and Health Hospice Second Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Bob Okunski, Inhabit's Vice President of Investor Relations. Mr. Okunski, please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining our call today. With me on the call this morning is Barb Jacobsmeyer, President and Chief Executive Officer, and Ryan Solomon, Chief Financial Officer. Before we begin, if you do not already have a copy, our second quarter earnings release, supplemental information, and related form 8K filed with the SEC are available on our website at investors.ehab.com. On page two of the supplemental information, you will find the safe harbor statements, which are also set forth on the last page of the earnings release. During the call, we will make forward-looking statements which are subject to various risks and uncertainties, many of which are beyond our control. Certain risks and uncertainties that could cause actual results to differ materially from our projections, estimates, and expectations are discussed in our SEC filings, including our annual report on Form 10-K, which is available on our website. We encourage you to read those documents. We will also caution not to place undue reliance on the estimates, projections, guidance, and other forward-looking information presented. which are based on current estimates of future events and speak only as of today. We do not undertake a duty to update these forward-looking statements. Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation in the most directly comparable GAAP measure is available at the end of the supplemental information and in our earnings release. With that, I'd like to turn the call over to Barb. Barb?

Thanks, Bob. Good morning, and thanks for joining us. I'm excited to highlight how our teams continue to execute on 2025 strategies in the second quarter. But I'll start by addressing CMS's final rule for hospice and CMS's incredibly disappointing preliminary home health rule. The final hospice rule improved the rate adjustment effective October 1, 2025 from the proposed rule of 2.4% to final rule at 2.6%. While we appreciate the slight increase, we continue to be disappointed that the rate update does not accurately reflect the increasing cost of care. This sentiment is intensified as we reflect on the home health proposed rule. At a time when inflation continues to rise and demand for home-based care grows, CMS has ignored data showing how these proposed cuts are destructive of the home health industry, which is the lowest cost care setting and critical to managing overall healthcare expenditures. The repeated cuts over the past few years have forced the industry to make tough decisions, including closing locations, which reduces patient access to care. And Habit has had to make these tough decisions too, and the 2026 proposed cuts exacerbate the pressure on the industry. It goes without saying, if CMS does not change its extreme position, something will have to give. Our size and scale coupled with our recent investments in technology and operational improvements put us in a position to address the challenges of this moment. While we have used MediLogix to advise a just right care plan, we have allowed individual clinicians to override those recommendations. We will be implementing an advanced process whereby this override will occur only after review and approval by our trained virtual team of clinicians. Mindful of our obligations to our shareholders, our staff, and our patients, we are thoroughly evaluating these and other plausible levers to address the extreme headwind presented by the proposed cuts while striving to maintain access to the high-quality care that we have provided in years past. In addition to the visits per episode focus, more tough decisions could be made. We will continue to evaluate additional closures or consolidations of branches service areas in each community, potential limitations of our future investments in technologies, and our overall G&A expenses. Evaluating these and other potential levers is necessary to ensure we can maintain competitive wage rates to recruit and retain our skilled workforce within a highly competitive labor market. While we work on adapting our business practices in response to the ongoing cuts, We've also been working nonstop alongside the National Alliance for Care at Home, the leading home health trade association, to articulate to CMS and members of Congress a holistic argument against deep cuts to our industry, which provides the lowest cost care setting and saves the system money by reducing the use of higher cost alternatives. Although we will continue those efforts, And although in recent years the final rule has been less severe than the proposed rule, there are no guarantees or indications at this time where the final rule will ultimately land. Due to the severity of the proposed cuts, we are unable to just wait and see. The efficiencies that we have as a scaled company will position us better than others as we navigate these challenges. Now let's move on to our quarter results. Our second quarter home health performance is the result of continued execution on our payer contract initiative with a focus on a payer balance of admissions and census. Our second quarter admissions were up 1.3% year over year. Normalized for the closed branches, this growth is 2%. Fee-for-service Medicare census is stabilizing. With steady progress from our low entry point to the new year, our census has grown 2.1% sequentially and now up 0.5% year-over-year. Our non-Medicare admissions were up 5.2% year-over-year, mainly within our payer innovation contracts. We had disruption at the end of the second quarter in both admissions and census from the impact of renegotiations with a national payer. However, we were successful in achieving a low double-digit increase in our per visit rate effective August 15, 2025. Our scale drives meaningful access to payer members and that access coupled with our high quality outcomes positions us well for continued progress within our payer strategy. Moving now to our hospice segment, the impact of our investments and our strategies continue to drive outstanding results. We have now experienced six straight quarters of sequential census growth. Total admissions grew 8.7% year over year same store up 5.7%. Normalized for closed branches, admissions were up 10%. Census grew 12.3% with 10.7% same store growth. The census growth continues to create leverage on the six costs we added in 2023, evident in the minimal cost per day increase year over year of 1%. To complement our organic growth strategy, our de novo strategy is positively impacting total growth. In quarter two, we opened one home health and two hospice locations. Combined with the one hospice in quarter one, we are on track to open 10 locations this year, all in areas we believe have strong growth potential. Turning now to our cost strategy update. Eleven branches were closed or consolidated by the end of Quarter 2, 2025. An additional home health and hospice branch will be consolidated by the end of Quarter 3 as we continue to evaluate our cost structure. At the start of the call, I mentioned advanced visit per episode management as one of our levers to mitigate the impact of the 2026 proposed rate cut. This advanced visit per episode management will be initiated with a pilot in 11 branches next week, and I look forward to sharing details of the results in future calls, as well as additional insights into the other potential levers. And now I will turn it over to Ryan, who will cover the financial results of quarter two.