Encompass Health Corp
NYSE:EHC
Encompass Health Corp
Encompass Health Corporation has carved a distinctive niche in the healthcare industry as a leading provider of rehabilitation services. Formed through the combination of HealthSouth Corporation and Encompass Home Health & Hospice, the company leverages its extensive network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies to deliver high-quality rehabilitative care across the United States. Operating in a field that requires precision and empathy, Encompass Health focuses on helping patients regain their independence after illnesses, injuries, or surgeries. The company's business model is centered around patient recovery, wherein they use a team-based approach involving physicians, therapists, and nurses, further enriched by state-of-the-art technology and evidence-based practices. Their inpatient rehabilitation hospitals offer specialized programs that significantly reduce the time and cost of patient recovery compared to general hospitals, thereby attracting a steady flow of referrals from healthcare providers.
Financially, Encompass Health derives its revenue by billing patients' insurance providers, including Medicare and Medicaid, based on the services rendered during the patients' recovery process. By primarily focusing on inpatient rehabilitation and home health services, segments that are in high demand due to the aging population and rising prevalence of chronic conditions, the company has positioned itself well for sustainable growth. The strategic expansion of their footprint through acquisitions and organic growth, along with innovative treatment offerings, enhances their market reach and capacity. This operational strategy not only ensures a steady revenue stream but also buffers against the inherent uncertainties in the healthcare landscape. Balancing regulatory compliance with exceptional patient care, Encompass Health thrives in a competitive industry, continually adapting to shifts in healthcare policy while maintaining a strong emphasis on patient outcomes.
Encompass Health Corporation has carved a distinctive niche in the healthcare industry as a leading provider of rehabilitation services. Formed through the combination of HealthSouth Corporation and Encompass Home Health & Hospice, the company leverages its extensive network of inpatient rehabilitation hospitals, home health agencies, and hospice agencies to deliver high-quality rehabilitative care across the United States. Operating in a field that requires precision and empathy, Encompass Health focuses on helping patients regain their independence after illnesses, injuries, or surgeries. The company's business model is centered around patient recovery, wherein they use a team-based approach involving physicians, therapists, and nurses, further enriched by state-of-the-art technology and evidence-based practices. Their inpatient rehabilitation hospitals offer specialized programs that significantly reduce the time and cost of patient recovery compared to general hospitals, thereby attracting a steady flow of referrals from healthcare providers.
Financially, Encompass Health derives its revenue by billing patients' insurance providers, including Medicare and Medicaid, based on the services rendered during the patients' recovery process. By primarily focusing on inpatient rehabilitation and home health services, segments that are in high demand due to the aging population and rising prevalence of chronic conditions, the company has positioned itself well for sustainable growth. The strategic expansion of their footprint through acquisitions and organic growth, along with innovative treatment offerings, enhances their market reach and capacity. This operational strategy not only ensures a steady revenue stream but also buffers against the inherent uncertainties in the healthcare landscape. Balancing regulatory compliance with exceptional patient care, Encompass Health thrives in a competitive industry, continually adapting to shifts in healthcare policy while maintaining a strong emphasis on patient outcomes.
Strong Growth: Encompass Health reported Q4 revenue up 9.9% to $1.5 billion and full-year 2025 revenue up 10.5%, driven by discharge and pricing growth.
Profitability: Q4 adjusted EBITDA rose 15.9% to $335.6 million, and full-year EBITDA grew 14.9%, helped by disciplined expense management and lower premium labor costs.
Labor Cost Control: Premium labor spend decreased by over $21 million in 2025 versus 2024, and contract labor usage hit its lowest level since early 2021.
Positive Cash Flow: Free cash flow for the year was $818 million, up 18.5%, supporting $158 million in share repurchases and $71 million in dividends.
2026 Guidance: Management issued 2026 guidance with revenue of $6.365-$6.465 billion, adjusted EBITDA of $1.34-$1.38 billion, and adjusted EPS of $5.81-$6.10.
Regulatory Preparedness: Company expressed confidence in handling regulatory changes, citing a 93% affirmation rate in Alabama's RCD and no material impact so far from new team models.
Capacity Expansion: Added 517 beds in 2025, with plans to introduce small-format hospitals in 2027 to further boost growth.
Payer Mix Dynamics: Strong Medicare fee-for-service growth offset challenges with specific Medicare Advantage plans, which saw lower conversion rates.
