Enhabit Inc.
03/05/2026 | Press release | Distributed by Public on 03/05/2026 05:02
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
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. The following discussion should be read in conjunction with the consolidated financial statements and related notes that appear in Item 15, "Exhibit and Financial Statement Schedules," in this Annual Report.
This discussion also contains forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations, and intentions. Our future results and financial condition may differ materially from those we currently anticipate as a result of the factors we describe under the sections titled "Cautionary Note Regarding Forward-Looking Statements," and Item 1A, "Risk Factors," in this Annual Report.
For a comparison of our results of operations for the years ended December 31, 2024 to 2023, 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, 2024, filed with the SEC on March 6, 2025.
Overview
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 25 years, we have provided care in the low-cost home setting while achieving high-quality clinical outcomes. As of December 31, 2025, our footprint comprised 249 home health and 117 hospice locations across 34 states.
Our operations are principally managed on a services basis and include two operating segments for financial reporting purposes: (i) Home Health; and (ii) Hospice. 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.
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 payers. Because we derive a substantial portion of our Net service revenuefrom 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. See Item 1, "Business," and Item 1A, "Risk Factors," and "-Segment 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. See Item 1, "Business-Sources of Revenue," for a table identifying the sources and relative payer mix of our revenues.
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. Aggressive payment review practices by Medicare contractors, aggressive enforcement of regulatory policies by government agencies, and restrictive or burdensome rules, regulations, or statutes governing admissions practices may lead us not to accept patients who would be appropriate for, and would benefit from, the services we provide.
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. While we treat patients of all ages, most of our patients are 65 and older, and, due to the growth of this segment of the 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. 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. For example, in the year ended December 31, 2024, Medicare Advantage patients accounted for 23.0% of our revenue as compared to 23.9% for the year ended December 31, 2025.
In addition to organic growth, our strategy includes volume growth through de novo location openings and strategic acquisitions. See Item 1, "Business-Our Strategy."
Efficiency
Cost and operating efficiencies impact the profitability of the patient care services we provide. We use a number of strategies to drive cost and operating efficiencies within our business. 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 Item 1, "Business-Our Competitive Strengths," for further discussion of the ways we seek to reduce costs while improving patient outcomes.
Impact of Inflation
Inflation has impacted us primarily with respect to our labor costs. The healthcare industry is labor intensive, and wages, and other expenses, may increase during periods of inflation, or when labor shortages occur in the marketplace. There can be no guarantee we will not experience increases in the cost of labor, as the need for clinical healthcare professionals is growing. In addition, increases in labor costs in the healthcare industry 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, we have experienced higher prices for our medical supplies as a result of inflation and other factors. Our supply chain efforts and our continual focus on monitoring and actively managing medical supplies and pharmaceutical costs have enabled us to mitigate the effect of increased pricing related to supplies and other operating expenses over the past few years. However, we cannot predict the magnitude of future cost increases.
We have little or no ability to pass on these increased costs associated with providing service to Medicare and Medicaid patients due to federal and state laws that establish fixed reimbursement rates through the annual Medicare reimbursement rate updates for home health and hospice. 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. We attempt to maintain a comprehensive compensation and benefits package to compete in the current challenging staffing environment.
Recent Developments
2026 Credit Agreement
On February 26, 2026, the Company entered into an amended and restated credit agreement (the "2026 Credit Agreement") that consists of a $315.0 million senior secured term loan A facility (the "2026 Term Loan A Facility") and a $160.0 million senior secured revolving credit facility (the "2026 Revolving Credit Facility" and together with the 2026 Term Loan A Facility, the "2026 Credit Facilities"). The 2026 Credit Facilities mature on February 26, 2031. See Note 8, Long-Term Debtfor additional information.
Merger Agreement
As previously disclosed, on February 22, 2026, we entered into the Merger Agreement with Parent and Merger Sub, providing for our acquisition by Kinderhook. If the Merger is completed, our stockholders will be entitled to receive $13.80 in cash for each share of common stock they hold as of the effective time of the Merger. The Merger is expected to close in the second quarter of 2026, subject to customary closing conditions, including approval by our stockholders and the receipt of certain regulatory approvals. See Note 17, Subsequent Events, to the accompanying consolidated financial statements for additional information regarding the Merger.
The consummation of the Merger remains subject to the satisfaction or, to the extent permitted under the Merger Agreement, waiver by each of us, Parent and Merger Sub, of closing conditions, including, but not limited to, stockholder approval. Our board of directors has approved the Merger Agreement and the transactions contemplated thereby.
If the Merger is consummated, our common stock will no longer be publicly listed and traded on the New York Stock Exchange, our common stock will be deregistered under the Exchange Act, we will no longer file periodic reports with the SEC and existing stockholders will cease to have any ownership interest in the Company.
Results of Operations
Our consolidated results of operations for the years ended December 31, 2025, 2024, and 2023 were as follows:
|
Year Ended December 31,
|
Percentage Change
|
||||||||||||||||||||||||||||
|
(in millions, except percentages)
|
2025 | 2024 | 2023 | 2025 vs 2024 | 2024 vs 2023 | ||||||||||||||||||||||||
| Net service revenue | $ | 1,060.0 | $ | 1,034.8 | $ | 1,046.3 | 2.4 | % | (1.1) | % | |||||||||||||||||||
| Cost of service, excluding depreciation and amortization | 540.2 | 530.8 | 535.6 | 1.8 | % | (0.9) | % | ||||||||||||||||||||||
| Gross margin, excluding depreciation and amortization | 519.8 | 504.0 | 510.7 | 3.1 | % | (1.3) | % | ||||||||||||||||||||||
| General and administrative expenses | 433.5 | 425.9 | 441.6 | 1.8 | % | (3.6) | % | ||||||||||||||||||||||
| Depreciation and amortization | 22.5 | 31.5 | 30.9 | (28.6) | % | 1.9 | % | ||||||||||||||||||||||
| Impairment of goodwill | 44.7 | 161.7 | 85.8 | (72.4) | % | 88.5 | % | ||||||||||||||||||||||
| Impairment of intangible assets | 3.0 | - | - | N/A | N/A | ||||||||||||||||||||||||
| Operating income (loss) | 16.1 | (115.1) | (47.6) | 114.0 | % | (141.8) | % | ||||||||||||||||||||||
| Interest income | 0.2 | - | - | N/A | N/A | ||||||||||||||||||||||||
| Interest expense and amortization of debt discounts and fees | 34.0 | 42.9 | 43.0 | (20.7) | % | (0.2) | % | ||||||||||||||||||||||
| Other (income) expense | (19.1) | - | (0.2) | N/A | (100.0) | % | |||||||||||||||||||||||
| Income (loss) before income taxes and noncontrolling interests | 1.4 | (158.0) | (90.4) | 100.9 | % | (74.8) | % | ||||||||||||||||||||||
| Provision for (benefit from) income taxes | 4.0 | (4.0) | (11.4) | 200.0 | % | 64.9 | % | ||||||||||||||||||||||
| Net income (loss) | (2.6) | (154.0) | (79.0) | 98.3 | % | (94.9) | % | ||||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 2.0 | 2.2 | 1.5 | (9.1) | % | 46.7 | % | ||||||||||||||||||||||
| Net income (loss) attributable to Enhabit, Inc. | $ | (4.6) | $ | (156.2) | $ | (80.5) | 97.1 | % | (94.0) | % | |||||||||||||||||||
The following table sets forth our consolidated results as a percentage of Net service revenue:
|
Year Ended December 31,
|
|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Cost of service, excluding depreciation and amortization | 51.0 | % | 51.3 | % | 51.2 | % | |||||||||||
| General and administrative expenses | 40.9 | % | 41.2 | % | 42.2 | % | |||||||||||
| Depreciation and amortization | 2.1 | % | 3.0 | % | 3.0 | % | |||||||||||
| Interest expense and amortization of debt discounts and fees | 3.2 | % | 4.1 | % | 4.1 | % | |||||||||||
Net Service Revenue. For the year ended December 31, 2025, Net service revenueincreased 2.4% compared to the prior year due to increased revenue in Hospice of 17.2% partially offset by decreased Home Heath segment revenues of 1.3%. See "-Segment Results of Operations."
Cost of Service, Excluding Depreciation and Amortization. For the year ended December 31, 2025, Cost of service, excluding depreciation and amortization, increased 1.8% compared to the prior year due to increased Cost of service, excluding depreciation and amortization of 10.8% in the Hospice segment partially offset by decreased Cost of service, excluding depreciation and amortizationof 0.4% in the Home Health segment.
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.
General and Administrative Expenses. For the year ended December 31, 2025, General and administrative expensesincreased 1.8% compared to the prior year primarily due to annual merit increases in the fourth quarter and increased incentive compensation partially offset by cost savings initiatives and lower benefit related expenses.
Depreciation and Amortization. For the year ended December 31, 2025, Depreciation and amortization decreased compared to the prior year due to a number of intangible assets, including licenses and non-compete agreements, reaching the end of their useful lives in 2024.
Impairment of Goodwill. For the year ended December 31, 2025, Impairment of goodwillresulted from impairment charges 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.
Impairment of Other Intangible Assets.For the year ended December 31, 2025,Impairment of other intangible assets resulted from the impairment of a portion of our certificates of need.
Interest Expense and Amortization of Debt Discounts and Fees. For the year ended December 31, 2025, Interest expense and amortization of debt discounts and feesdecreased compared to the prior year primarily due to a lower average borrowing level under our credit facilities and lower average interest rates. See "-Liquidity and Capital Resources" within this Item 5.
Provision For (Benefit From) Income Taxes. Our effective tax rate in 2025 was 285.7% compared to an effective tax rate of 2.5% in 2024. The difference in the rate is primarily attributable to a larger rate impact from permanent differences attributable to the impairment of goodwill in 2025. 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. Management believes Adjusted EBITDA assists investors in comparing our operating performance across operating periods on a consistent basis by excluding items we do not believe are indicative of our operating performance.
We calculate Adjusted EBITDA as Net income (loss)adjusted to exclude (i) interest expense, net and amortization of debt discounts and fees, (ii) provision for or benefit from income taxes, (iii) depreciation and amortization, (iv) gains or losses on disposal or impairment of assets or goodwill, (v) stock-based compensation, (vi) net income attributable to noncontrolling interests, and (vii) unusual or nonrecurring items not typical of ongoing operations.
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). Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues 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.
The following table reconciles Net income (loss) to Adjusted EBITDA for the years ended December 31, 2025, 2024, and 2023 (in millions):
|
Year Ended December 31,
|
|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Net income (loss) | $ | (2.6) | $ | (154.0) | $ | (79.0) | |||||||||||
| Interest expense, net and amortization of debt discounts and fees | 33.8 | 42.9 | 43.0 | ||||||||||||||
| Provision for (benefit from) income taxes | 4.0 | (4.0) | (11.4) | ||||||||||||||
| Depreciation and amortization | 22.5 | 31.5 | 30.9 | ||||||||||||||
| (Gain) loss on disposal of assets | (19.1) | (0.7) | (0.3) | ||||||||||||||
| Impairment of goodwill | 44.7 | 161.7 | 85.8 | ||||||||||||||
| Impairment of intangible assets | 3.0 | - | - | ||||||||||||||
| Stock-based compensation | 16.6 | 11.7 | 8.9 | ||||||||||||||
| Net income attributable to noncontrolling interests | (2.0) | (2.2) | (1.5) | ||||||||||||||
| Unusual or nonrecurring items not typical of ongoing operations | 7.6 | 13.2 | 21.2 | ||||||||||||||
| Adjusted EBITDA | $ | 108.5 | $ | 100.1 | $ | 97.6 | |||||||||||
Unusual or nonrecurring items in the year ended December 31, 2025 include: (i) restructuring activities and severance costs; (ii) third-party legal fees associated with the suit Enhabit, Inc. et al. v. Nautic Partners IX, L.P. et al. and pending in the Chancery Court of Delaware, and in which the Company has asserted claims for breach of fiduciary duty, aiding and abetting, and usurpation of corporate opportunity arising from actions involving its former officers; and (iii) third-party legal and advisory fees related to shareholder, non-shareholder and other matters, and merger and acquisition activities. 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 legal fees associated with the Enhabit, Inc. et al. v. Nautic Partners IX, L.P. et al. lawsuit referenced above; and (iv) costs related to severance.
For additional information, see "-Results of Operations" and "-Segment Results of Operations."
Segment Results of Operations
Our segment and consolidated Net service revenuefor the years ended December 31, 2025, 2024, and 2023 is provided in the table below.
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (in millions, except percentages) | $ Amount | % of Consolidated Revenue | $ Amount |
% of Consolidated
Revenue
|
$ Amount | % of Consolidated Revenue | |||||||||||||||||||||||||||||
|
Home Health segment net service revenue
|
$ | 813.8 | 76.8 | % | $ | 824.8 | 79.7 | % | $ | 850.1 | 81.2 | % | |||||||||||||||||||||||
|
Hospice segment net service revenue
|
246.2 | 23.2 | % | 210.0 | 20.3 | % | 196.2 | 18.8 | % | ||||||||||||||||||||||||||
|
Consolidated net service revenue
|
$ | 1,060.0 | 100.0 | % | $ | 1,034.8 | 100.0 | % | $ | 1,046.3 | 100.0 | % | |||||||||||||||||||||||
Net Service Revenue. For the year ended December 31, 2025, Net service revenueincreased 2.4% compared to the prior year due to increased revenue in Hospice of 17.2% partially offset by decreased Home Heath segment revenues of 1.3%. See "-Segment 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 Income (loss) before income taxes and noncontrolling interests, see Note 14, Segment Reporting, to the accompanying consolidated financial statements.
Home Health
During the years ended December 31, 2025, 2024, and 2023, our Home Health segment derived its Net service revenuefrom the following payer sources:
|
Year Ended December 31,
|
|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
Medicare
|
55.9 | % | 58.8 | % | 65.6 | % | |||||||||||
|
Medicare Advantage
|
31.1 | % | 28.8 | % | 23.4 | % | |||||||||||
|
Managed Care
|
11.5 | % | 11.1 | % | 9.5 | % | |||||||||||
|
Medicaid
|
0.9 | % | 1.1 | % | 1.4 | % | |||||||||||
|
Other
|
0.6 | % | 0.2 | % | 0.1 | % | |||||||||||
|
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.
Additional information regarding our Home Health segment's operating results for the years ended December 31, 2025, 2024, and 2023 is as follows:
|
Year Ended
December 31,
|
Percentage Change | ||||||||||||||||||||||||||||
|
(in millions, except percentages)
|
2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
| Net service revenue: | |||||||||||||||||||||||||||||
| Medicare | $ | 455.2 | $ | 484.6 | $ | 557.4 | (6.1) | % | (13.1) | % | |||||||||||||||||||
| Non-Medicare | 350.8 | 331.2 | 283.0 | 5.9 | % | 17.0 | % | ||||||||||||||||||||||
|
Private duty(1)
|
7.8 | 9.0 | 9.7 | (13.3) | % | (7.2) | % | ||||||||||||||||||||||
|
Home Health net service revenue
|
813.8 | 824.8 | 850.1 | (1.3) | % | (3.0) | % | ||||||||||||||||||||||
|
Cost of service, excluding depreciation and amortization
|
426.5 | 428.2 | 439.0 | (0.4) | % | (2.5) | % | ||||||||||||||||||||||
|
Gross margin, excluding depreciation and amortization
|
387.3 | 396.6 | 411.1 | (2.3) | % | (3.5) | % | ||||||||||||||||||||||
|
General and administrative expenses
|
237.3 | 235.4 | 240.6 | 0.8 | % | (2.2) | % | ||||||||||||||||||||||
|
Other income
|
- | - | (0.2) | N/A | (100.0) | % | |||||||||||||||||||||||
|
Equity earnings and noncontrolling interests
|
1.5 | 1.8 | 1.4 | (16.7) | % | 28.6 | % | ||||||||||||||||||||||
|
Home Health Segment Adjusted EBITDA(2)
|
$ | 148.5 | $ | 159.4 | $ | 169.3 | (6.8) | % | (5.8) | % | |||||||||||||||||||
(1) Private duty represents long-term comprehensive hourly nursing medical care.
(2) 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. 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.
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Year Ended
December 31,
|
Percentage Change | ||||||||||||||||||||||||||||
|
(actual amounts)
|
2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
| Medicare: | |||||||||||||||||||||||||||||
| Admissions | 91,603 | 96,502 | 106,805 | (5.1) | % | (9.6) | % | ||||||||||||||||||||||
| Recertifications | 62,687 | 66,692 | 78,113 | (6.0) | % | (14.6) | % | ||||||||||||||||||||||
| Completed episodes | 153,036 | 162,761 | 185,414 | (6.0) | % | (12.2) | % | ||||||||||||||||||||||
|
Average daily census
|
19,605 | 20,447 | 23,597 | (4.1) | % | (13.3) | % | ||||||||||||||||||||||
| Visits | 2,114,926 | 2,351,316 | 2,715,380 | (10.1) | % | (13.4) | % | ||||||||||||||||||||||
| Visits per episode | 13.8 | 14.4 | 14.6 | (4.2) | % | (1.4) | % | ||||||||||||||||||||||
| Revenue per episode | $ | 2,974 | $ | 2,977 | $ | 3,006 | (0.1) | % | (1.0) | % | |||||||||||||||||||
| Non-Medicare: | |||||||||||||||||||||||||||||
| Admissions | 132,599 | 120,850 | 100,643 | 9.7 | % | 20.1 | % | ||||||||||||||||||||||
| Recertifications | 56,915 | 55,729 | 51,767 | 2.1 | % | 7.7 | % | ||||||||||||||||||||||
|
Average daily census
|
22,181 | 20,540 | 18,253 | 8.0 | % | 12.5 | % | ||||||||||||||||||||||
| Visits | 2,249,095 | 2,239,048 | 2,020,714 | 0.4 | % | 10.8 | % | ||||||||||||||||||||||
| Total: | |||||||||||||||||||||||||||||
| Admissions | 224,202 | 217,352 | 207,448 | 3.2 | % | 4.8 | % | ||||||||||||||||||||||
| Same-store total admissions growth | 3.1 | % | 4.5 | % | |||||||||||||||||||||||||
| Recertifications | 119,602 | 122,421 | 129,880 | (2.3) | % | (5.7) | % | ||||||||||||||||||||||
| Same-store total recertifications growth | (2.3) | % | (5.9) | % | |||||||||||||||||||||||||
|
Average daily census
|
41,786 | 40,987 | 41,850 | 1.9 | % | (2.1) | % | ||||||||||||||||||||||
| Visits | 4,364,021 | 4,590,364 | 4,736,094 | (4.9) | % | (3.1) | % | ||||||||||||||||||||||
| Visits per episode | 13.4 | 14.2 | 14.6 | (5.6) | % | (2.7) | % | ||||||||||||||||||||||
| Cost per visit | $ | 97.7 | $ | 93.0 | $ | 91.0 | 5.1 | % | 2.2 | % | |||||||||||||||||||
|
Revenue per patient day
|
$ | 53.4 | $ | 55.0 | $ | 55.7 | (2.9) | % | (1.3) | % | |||||||||||||||||||
|
Cost per patient day
|
$ | 28.0 | $ | 28.6 | $ | 28.7 | (2.1) | % | (0.3) | % | |||||||||||||||||||
Expenses as a % of Net Service Revenue
|
Year Ended December 31,
|
|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
Cost of service, excluding depreciation and amortization
|
52.4 | % | 51.9 | % | 51.6 | % | |||||||||||
|
General and administrative expenses
|
29.2 | % | 28.5 | % | 28.3 | % | |||||||||||
Net Service Revenue. The decrease in Home Health Net service revenue for the year ended December 31, 2025 as compared to the prior year of 1.3% is due to a decrease in unit revenue per patient day of 2.9% primarily related to the growth in our non-Medicare patients, partially offset by an increase in average daily census in Home Health of 1.9%.
Segment Adjusted EBITDA. The decrease in Home Health Segment Adjusted EBITDA of 6.8% for the year ended December 31, 2025 as compared to the prior year resulted primarily from the decrease in Net service revenue of 1.3% as discussed above, partially offset by decreased Cost of service, excluding depreciation and amortizationof 0.4% attributable to improved clinical staff productivity in 2025. Home Health segment General and administrative expensesincreased 0.8% as compared to the prior year due to annual merit increases in the fourth quarter of 2023 and 2024.
Hospice
During the years ended December 31, 2025, 2024, and 2023, our Hospice segment derived its Net service revenuefrom the following payer sources:
|
Year Ended December 31,
|
|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
|
Medicare
|
98.2 | % | 98.3 | % | 97.1 | % | |||||||||||
|
Managed care
|
1.1 | % | 1.7 | % | 2.5 | % | |||||||||||
|
Medicaid
|
0.7 | % | - | % | 0.4 | % | |||||||||||
|
Total
|
100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
Additional information regarding our Hospice segment's operating results for the years ended December 31, 2025, 2024, and 2023 is as follows:
|
Year Ended
December 31,
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Percentage Change | ||||||||||||||||||||||||||||
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(in millions, except percentages)
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2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
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Hospice net service revenue
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$ | 246.2 | $ | 210.0 | $ | 196.2 | 17.2 | % | 7.0 | % | |||||||||||||||||||
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Cost of service, excluding depreciation and amortization
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113.7 | 102.6 | 96.6 | 10.8 | % | 6.2 | % | ||||||||||||||||||||||
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Gross margin, excluding depreciation and amortization
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132.5 | 107.4 | 99.6 | 23.4 | % | 7.8 | % | ||||||||||||||||||||||
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General and administrative expenses
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72.2 | 65.5 | 63.4 | 10.2 | % | 3.3 | % | ||||||||||||||||||||||
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Equity earnings and noncontrolling interests
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0.5 | 0.4 | 0.1 | 25.0 | % | 300.0 | % | ||||||||||||||||||||||
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Hospice Segment Adjusted EBITDA(1)
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$ | 59.8 | $ | 41.5 | $ | 36.1 | 44.1 | % | 15.0 | % | |||||||||||||||||||
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Year Ended December 31, |
Percentage Change | ||||||||||||||||||||||||||||
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(actual amounts)
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2025 | 2024 | 2023 | 2025 vs. 2024 | 2024 vs. 2023 | ||||||||||||||||||||||||
| Total: | |||||||||||||||||||||||||||||
| Admissions | 12,586 | 12,025 | 11,713 | 4.7% | 2.7% | ||||||||||||||||||||||||
| Same-store total admissions growth | 4.6% | 0.5% | |||||||||||||||||||||||||||
| Patient days | 1,454,421 | 1,304,878 | 1,256,081 | 11.5% | 3.9% | ||||||||||||||||||||||||
| Discharged average length of stay | 104 | 105 | 108 | (1.0)% | (2.8)% | ||||||||||||||||||||||||
| Average daily census | 3,985 | 3,565 | 3,441 | 11.8% | 3.6% | ||||||||||||||||||||||||
| Revenue per patient day | $ | 169.3 | $ | 160.9 | $ | 156.2 | 5.2% | 3.0% | |||||||||||||||||||||
| Cost per patient day | $ | 78.2 | $ | 78.6 | $ | 76.9 | (0.5)% | 2.2% | |||||||||||||||||||||
(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. 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.
Expenses as a % of Net Service Revenue
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Year Ended December 31,
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|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
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Cost of service, excluding depreciation and amortization
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46.2% | 48.9% | 49.2% | ||||||||||||||
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General and administrative expenses
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29.3% | 31.2% | 32.3% | ||||||||||||||
Net Service Revenue. The increase in Hospice Net service revenue for the year ended December 31, 2025 as compared to the prior year of 17.2% was due to an increase in average daily census of 11.8%, as we continue to see the benefits of the maturing case management model and improved unit revenue per patient day of 5.2% on improved Medicare reimbursement rates, compared to the prior year.
Segment Adjusted EBITDA. The increase in Hospice Segment Adjusted EBITDA of 44.1% for the year ended December 31, 2025 as compared to the prior year primarily resulted from the increase in Net service revenue of 17.2% discussed above with Cost of service, excluding depreciation and amortization, higher by 10.8% to support revenue growth, partially offset by improved clinical staff productivity with a decrease in cost per patient day of 0.5%. Hospice General and administrative expensesincreased 10.2% due to increased selling-related and back office support expenses to support revenue growth.
Liquidity and Capital Resources
Our principal uses of cash include the funding of working capital requirements, servicing our debt, funding capital expenditures and supporting de novo locations. See "-Contractual Obligations" for more information about our material cash requirements from our contractual obligations at December 31, 2025.
As of December 31, 2025 and 2024, we had $43.6 million and $28.4 million, respectively, in Cash and cash equivalents. These amounts exclude $1.9 million in Restricted cash. Our Restricted cashpertains primarily to a joint venture in which our joint venture partner requested, and we agreed, the joint venture's cash not be commingled with other corporate cash accounts. See Note 1, Summary of Significant Accounting Policies-Cash and Cash Equivalents and Restricted Cash, to the accompanying consolidated financial statements. As of December 31, 2025, we also had $92.5 million available to us under the Revolving Credit Facility, as discussed below.For additional information regarding our debt, see Note 8, Long-Term Debt, to the accompanying consolidated financial statements and "-Quantitative and Qualitative Disclosures about Market Risk."
The following table shows the cash flows provided by or used in operating, investing, and financing activities for the years ended December 31, 2025, 2024, and 2023 (in millions):
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Year Ended December 31,
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|||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
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Net cash provided by operating activities
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$ | 70.7 | $ | 51.2 | $ | 48.4 | |||||||||||
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Net cash provided by (used) in investing activities
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16.7 | (2.4) | (5.3) | ||||||||||||||
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Net cash used in financing activities
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(72.2) | (48.3) | (40.5) | ||||||||||||||
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Increase in cash, cash equivalents, and restricted cash
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$ | 15.2 | $ | 0.5 | $ | 2.6 | |||||||||||
Operating Activities.The increase in Net cash provided by operating activities for the year ended December 31, 2025 as compared to the prior year resulted primarily from the decrease in the net loss and changes in working capital.
Investing Activities.The increase in Net cash provided by (used) in investing activities for the year ended December 31, 2025 as compared to the prior year resulted primarily from the sale of an investment. During the year ended December 31, 2024, Net cash provided by (used) in investing activitiesprimarily resulted from purchases of property and equipment.
Financing Activities. The increase in Net cash used in financing activitiesfor the year ended December 31, 2025 as compared to the prior year resulted primarily from an increase in net repayments of debt in 2025.
Contractual Obligations
Our consolidated contractual obligations as of December 31, 2025 are as follows (in millions):
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Total
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Current
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Long-Term
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|||||||||||||||
| Long-term debt obligations: | |||||||||||||||||
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Long-term debt, excluding revolving credit facility and finance lease obligations(1)
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$ | 328.7 | $ | 20.0 | $ | 308.7 | |||||||||||
| Revolving credit facility | 115.0 | - | 115.0 | ||||||||||||||
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Interest on long-term debt(2)
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77.4 | 25.8 | 51.6 | ||||||||||||||
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Finance lease obligations(1)
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4.9 | 2.5 | 2.4 | ||||||||||||||
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Operating lease obligations(3)
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62.0 | 15.5 | 46.5 | ||||||||||||||
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Purchase obligations(4)
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68.4 | 40.9 | 27.5 | ||||||||||||||
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Total
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$ | 656.4 | $ | 104.7 | $ | 551.7 | |||||||||||
(1)We lease automobiles under finance leases for our clinicians. 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, 2025.
(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.
(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. 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. During the years ended December 31, 2025 and 2024, we made capital expenditures for property and equipment of $4.9 million and $3.8 million, respectively. During 2026, 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, 2025, we do not have any material off-balance sheet arrangements.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends, and other factors we believe to be relevant at the time we prepared our consolidated financial statements. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure our consolidated financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in Note 1, Summary of Significant Accounting Policies, to the accompanying consolidated financial statements. 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.
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. 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. 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. 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.
Management continually reviews the revenue transaction price estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms that result from contract renegotiations and renewals. In addition, laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that 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. 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. Our primary collection risks relate to the increasing complexities of documentation requirements by payers and claims reviews conducted by MACs or other contractors.
The table below shows a summary of our total Accounts receivable, net of allowances, as of December 31, 2025 and 2024. 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.
| As of December 31, | |||||||||||
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(in millions)
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2025 | 2024 | |||||||||
| Current | |||||||||||
|
0 - 30 Days
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$ | 98.6 | $ | 92.5 | |||||||
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31 - 60 Days
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13.8 | 16.6 | |||||||||
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61 - 90 Days
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10.9 | 8.9 | |||||||||
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91 - 120 Days
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4.8 | 6.1 | |||||||||
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120 + Days
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15.9 | 25.1 | |||||||||
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Current accounts receivable, net of allowances
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144.0 | 149.2 | |||||||||
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Noncurrent patient accounts receivable, net of allowances
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0.5 | 0.5 | |||||||||
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Accounts receivable, net of allowances
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$ | 144.5 | $ | 149.7 | |||||||
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. 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. As of December 31, 2025 and 2024, the amount of our patient accounts receivable representing denials that were under review or audit in excess of reserves established for such denials was $0.6 million and $1.2 million, respectively, in our Home Health segment and $1.2 million and $1.5 million, respectively, in our Hospice segment. 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.
Goodwill
We test Goodwillfor impairment annually as of October 1stof each year. We may perform interim impairment tests if an event occurs or circumstances change that could potentially reduce the fair value of a reporting unit below its carrying amount. We test Goodwillfor impairment by performing either a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors, including reporting unit specific operating results as well as industry, market and general economic conditions, to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount, including goodwill. We may elect to bypass this qualitative assessment for its reporting units and perform a quantitative test as of the measurement date of the test.
We test Goodwillfor impairment at the reporting unit level and are required to make certain subjective and complex judgments on a number of matters, including assumptions and estimates used to determine the fair value of our Home Health and Hospice reporting units. We assess qualitative factors in each reporting unit to determine whether it is necessary to perform the quantitative goodwill impairment test. The quantitative impairment test is required only if we conclude it is more likely than not a reporting unit's fair value is less than its carrying amount.
If, based on our qualitative assessment, we were to believe we must perform the quantitative goodwill impairment test, we would determine the fair value of the applicable reporting unit using generally accepted valuation techniques including equal weighting of the income approach and the market approach. We would validate our estimates under the income approach by reconciling the estimated fair value of the reporting units determined under the income approach to our market capitalization and estimated fair value determined under the market approach. Values from the income approach and market approach would then be evaluated and weighted to arrive at the estimated aggregate fair value of the reporting units.
The income approach includes the use of each reporting unit's projected operating results and cash flows that are discounted using a weighted average cost of capital that reflects market participant assumptions. 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. The market approach estimates fair value through the use of observable inputs, such as prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
See Note 1, Summary of Significant Accounting Policies-Goodwill and Other Intangible Assets, Net, and Note 7, Goodwill and Other Intangible Assets, Net, to the accompanying consolidated financial statements for additional information.
The following events and circumstances are certain of the qualitative factors we consider in evaluating whether it is more likely than not the fair value of a reporting unit is less than its carrying amount:
•macroeconomic conditions, such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets;
•industry and market considerations and changes in healthcare regulations, including reimbursement and compliance requirements under the Medicare and Medicaid programs;
•cost factors, such as an increase in labor, supply, or other costs;
•overall financial performance, such as negative or declining cash flows or a decline in actual or forecasted revenue or earnings;
•other relevant company-specific events, such as material changes in management or key personnel or outstanding litigation;
•material events, such as a change in the composition or carrying amount of each reporting unit's net assets, including acquisitions and dispositions; and
•length of time since the most recent quantitative analysis.
Based on the sensitivity analysis performed at December 31, 2025 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 approximately $15 million for both Home Health and Hospice reporting units. 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.
See Note 7, Goodwill and Other Intangible Assets, Net, to the accompanying consolidated financial statements for additional information.
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 Note 1, Summary of Significant Accounting Policies-Income Taxes, and Note 11, Income Taxes, to the accompanying consolidated financial statements for a more complete discussion of income taxes and our policies related to income taxes.
The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. We are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations change over time. As such, changes in our subjective assumptions and judgments can materially affect amounts recognized in our consolidated financial statements.
The ultimate recovery of certain of our deferred tax assets is dependent on the amount and timing of taxable income we will ultimately generate in the future, as well as other factors. 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. This negative evidence is more objectively verifiable than other subjective evidence, such as our projections for future growth and improvements in profitability. On a quarterly basis, we assess all available positive and negative evidence, and we recognize only the portion of our deferred tax assets that are more likely than not to be realized. The amount of the valuation allowance may be adjusted in future periods in the event of changes to these factors. This valuation allowance was reduced to $12.2 million in 2025. The reduction is primarily attributable to provisions of the OBBBA.
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. In addition, our effective income tax rate is affected by changes in tax law, the tax jurisdictions in which we operate, and the results of income tax audits.
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. A significant amount of judgment is involved in determining whether a loss is probable and reasonably estimable due to the uncertainty involved in determining the likelihood of future events and estimating the financial statement impact of such events. If further developments or resolutions of a contingent matter are not consistent with our assumptions and judgments, we may need to recognize a significant charge in a future period related to an existing contingent matter.
Business Combinations
We account for acquisitions of entities that qualify as business combinations under the acquisition method of accounting. Under the acquisition method of accounting, the total consideration is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill. 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.
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. Both income approaches utilize projected operating results and cash flows and include significant assumptions such as base revenue, revenue growth rate, projected EBITDA margin, discount rates, rates of increase in operating expenses, and the future effective income tax rates. The valuations of our significant acquired businesses have been performed by a third-party valuation specialist under our management's supervision. We believe the estimated fair value assigned to the assets acquired and liabilities assumed is based on reasonable assumptions and estimates that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates. Future changes in our assumptions or the interrelationship of those assumptions may result in purchase price allocations that are different than those recorded in recent years.
Acquisition-related costs are not considered part of the consideration paid and are expensed as operating expenses as incurred. Contingent consideration, if any, is measured at fair value initially on the acquisition date as well as subsequently at the end of each reporting period until the contingency is resolved and settlement occurs. Subsequent adjustments to contingent considerations are recorded in our Consolidated Statements of Comprehensive Income. 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.
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