Encompass Health Corporation (NYSE: EHC) continues to rebound from the recent staffing woes within its hospice and home health segment.
But in light of rising COVID-19 cases and hospitalization rates across the U.S., that near-term optimism coming from Encompass Health – and many of its peers – could prove short-lived. To fully move on from pervasive workforce challenges, hospice providers and others will need to find long-term solutions aimed at bringing more nurses into the field.
“We had a nursing shortage well before the pandemic,” Encompass Health CEO and President Mark Tarr said Tuesday at the BofA Securities 2022 Healthcare Conference. “And it was already a challenging environment. The pandemic just made it that much more difficult.”
As the largest operator of in-patient rehabilitation facilities (IRFs) in the country, the Birmingham, Alabama-based Encompass Health has had to work around clinician recruitment and retention roadblocks across multiple settings. Along with its 147 IRFs, the company operates 252 home health locations and 99 hospice locations.
For the IRF business, an increased utilization of costly contract labor and travel nurses had been the chief concern throughout most of the public health emergency. Encompass Health’s leadership team believes the use of contract labor peaked in the first quarter.
That belief is in line with outside reports that contract nurses generally are seeing reduced pay and canceled assignments due to diminished demand.
“Our hospitals or IRFs had significant use of contract labor,” Tarr said. “It wasn’t such a factor on home health and hospice.”
Instead, the hospice and home health segment – expected to spin off into the new publicly traded company “Enhabit Home Health & Hospice” on July 1 – had to combat having a large number of sidelined clinicians due to quarantine protocols. At one point, for example, the segment had as many as 1,300 staff members out on quarantine.
“We were just undermanned,” Tarr continued. “And now we’ve been in the process of hiring new nursing staff, and adding to that has helped to accommodate the [growing patient] volume.”
Again, though, it’s not clear how long those quarantine-related headwinds will stay dormant.
At least 46 states have seen their daily COVID-19 case counts increase over the last two weeks, according to New York Times data. At least 37 states have seen their daily COVID-19 hospitalizations rise over the past 14 days as well.
To strengthen its ongoing clinician-retention efforts, Encompass Health has offered more educational opportunities while making sure it’s paying a market-competitive rate. The company has additionally “added significant resources” into its talent-acquisition teams across both of its operating segments.
On a near-term basis, inflation could nudge some nurses back into the field, according to Tarr. The U.S. inflation rate remained close to its highest annual rate in four decades in April, dropping slightly to 8.3%.
That could help offset some of today’s labor pressures as the future pipeline of nurses is replenished, Tarr noted.
“On a positive note, the applications for nursing schools have gone up, I think, since COVID,” he said. “That’s going to be a longer-term part of the overall solution.”
As for the planned spinoff, all signs still point to that being completed later this summer. The process has taken “a while” since Encompass Health first announced it was exploring strategic alternatives in December 2020.
But that’s partly because of due diligence to ensure no stone was left unturned, Tarr said.
“This has been a very comprehensive process taken on by our board,” he explained. “The board started this process with no preconceived notion in terms of what the outcomes would be. They didn’t go into this just [thinking about] an IPO, a spin or sale. We evaluated all the options that were out there.”
When Enhabit is spun off, Encompass Health anticipates robust clinical collaboration between the IRF giant and the hospice and home health provider.
“Even though they’ll be called ‘Enhabit,’ they’ll be a separate company, many of these relationships and these referral relationships will continue,” Tarr said. “And of course, patient choice is what drives that.”
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