WILMINGTON, Del. – Encompass Health (NYSE: EHC) and Enhabit Inc. (NYSE: EHAB) have secured $43.1 million in attorneys’ fees and damages stemming from a profit-sharing dispute with VitalCaring, the companies announced Thursday. This substantial recovery marks a significant outcome in a complex legal battle over business practices and alleged breaches of contract.
Court Orders VitalCaring to Share Profits
A federal judge in Delaware mandated that 43% of VitalCaring’s profits, along with proceeds from any future sale, be held in trust and divided between Encompass and Enhabit.
- The dispute originated from allegations of “willful misconduct” by former Encompass Health executives.
- VitalCaring’s private equity backers, Vistria Group and Nautic Partners, will retain the remaining 57% of the profits.
- A planned acquisition of VitalCaring was put on hold due to the court order.
- VitalCaring recently expanded its operations through the acquisition of Traditions Health.
The case, decided by a federal judge in Delaware, centered on the actions of April Anthony, Luke James, and Chris Walker, who previously held senior positions at Encompass Health’s home health and hospice division. The court’s 116-page opinion detailed the allegations against them. Encompass’ home health and hospice division was spun off to form Enhabit Inc. in 2022.
April Anthony, the CEO of VitalCaring, initially founded Encompass Home Health & Hospice in 1998, building it into a nationally recognized provider. In 2021, Anthony, alongside Vistria Group and Nautic Partners, founded VitalCaring.
Encompass Health alleged that Anthony and her colleagues engaged in unethical practices when establishing VitalCaring and that Anthony violated the terms of her employment agreement. The company argued that these actions were detrimental to its business interests.
What does this ruling mean for the future of home health acquisitions? The court’s decision has temporarily stalled VitalCaring’s planned acquisition of over 100 home health and hospice locations that were being divested as part of UnitedHealth Group’s (NYSE: UNH) acquisition of Amedisys. The deal was suspended pending the resolution of the profit-sharing order.
Despite the legal challenges, VitalCaring has continued to expand its footprint. The company recently acquired the home health, hospice, and palliative care operations of Traditions Health, significantly increasing its geographic reach.
