ehc-20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________________

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-10315

______________________________

Encompass Health Corporation

(Exact name of Registrant as specified in its Charter)


Delaware			63-0860407
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

9001 Liberty Parkway

Birmingham, Alabama 35242

(Address of Principal Executive Offices)

(205) 967-7116

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	EHC	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☒

The registrant had 99,199,080 shares of common stock outstanding, net of treasury shares, as of April 24, 2026.

TABLE OF CONTENTS


		Page
PART I	Financial Information

Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 4.	Controls and Procedures	30

PART II	Other Information

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 5.	Other Information	32
Item 6.	Exhibits	33

NOTE TO READERS

As used in this report, the terms “Encompass Health,” “we,” “us,” “our,” and the “Company” refer to Encompass Health Corporation and its consolidated subsidiaries, unless otherwise stated or indicated by context. This drafting style is suggested by the Securities and Exchange Commission and is not meant to imply that Encompass Health Corporation, the publicly traded parent company, owns or operates any specific asset, business, or property. The hospitals, operations, and businesses described in this filing are primarily owned and operated by subsidiaries of the parent company. In addition, we use the term “Encompass Health Corporation” to refer to Encompass Health Corporation alone wherever a distinction between Encompass Health Corporation and its subsidiaries is required or aids in the understanding of this filing.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains historical information, as well as forward-looking statements that involve known and unknown risks and relate to, among other things, future events, changes to Medicare reimbursement and other healthcare laws and regulations from time to time, our business strategy, labor cost trends, our dividend and stock repurchase strategies, our financial plans, our growth plans, our future financial performance, our projected business results, or our projected capital expenditures. In some cases, the reader can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “targets,” “potential,” or “continue” or the negative of these terms or other comparable terminology. Such forward-looking statements are necessarily estimates based upon current information and involve a number of risks and uncertainties, many of which are beyond our control. Any forward-looking statement is based on information current as of the date of this report and speaks only as of the date on which such statement is made. Actual events or results may differ materially from the results anticipated in these forward-looking statements as a result of a variety of factors. While it is impossible to identify all such factors, the factors described below could cause, and in the case of the COVID-19 pandemic has already caused, actual results to differ materially from those estimated by us.

•Each of the factors discussed in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as uncertainties and factors discussed elsewhere in this Form 10-Q, including in the “Executive Overview—Key Challenges” section of Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our other filings from time to time with the SEC, or in materials incorporated therein by reference.

•We are highly concentrated in our primary line of business, particularly with respect to Medicare regulations and reimbursement.

•Reductions or delays in, or suspension of, reimbursement for our services by governmental or private payors, including our inability to obtain and retain favorable arrangements with third-party payors, could decrease our revenues and adversely affect other operating results.

•The disruption to the operations of Medicare and Medicaid as a result of a long-lasting federal government shutdown could delay reimbursements for care and impede some regulatory processes, such as provider enrollment.

•Restrictive interpretations of the regulations governing the claims that are reimbursable by Medicare could decrease our revenues and adversely affect other operating results.

•Reimbursement claims are subject to various audits and such audits may lead to assertions that we have been overpaid or have submitted improper claims, and these assertions have in the past and will in the future require us to incur additional costs to respond to requests for records and defend the validity of payments and to refund any amounts determined to have been overpaid.

•The use by governmental agencies and contractors of statistical sampling and extrapolation may substantially expand claims of overpayment or noncompliance.

•Substantive and procedural deficiencies in the administrative appeals process associated with denied Medicare reimbursement claims, including from various Medicare audit programs, have in the past and could in the future delay or reduce our reimbursement for services previously provided, including through recoupment from other claims due to us from Medicare.

•Efforts to reduce payments to healthcare providers undertaken by third-party payors and conveners could adversely affect our revenues or profitability.

•Changes in our payor mix, including shifts to Medicare Advantage providers that limit patient access to inpatient rehabilitation, or the acuity of our patients could reduce our volumes, revenues or profitability.

•Significant reforms or limitations to Medicaid at the federal and state levels, such as those reducing coverage or provider reimbursement including supplemental payments, could adversely affect our revenues directly or indirectly by affecting acute-care providers who refer patients to us.

•Changes in the rules and regulations of the healthcare industry at the federal, state, and local levels, including those contemplated now and in the future as part of healthcare reform and deficit reduction (such as the Inpatient Rehabilitation Facility Review Choice Demonstration, the re-basing of payment systems, value-based episodic payment models, the introduction of site neutral payments or case-mix weightings across post-acute settings, and

other payment system reforms) could decrease revenues and increase the costs of complying with the rules and regulations and have done so in the past from time to time.

•Alternative payment models and value-based purchasing initiatives could decrease our patient volumes and reimbursement rate or increase costs associated with our operations.

•Compliance with the extensive and frequently changing laws and regulations applicable to healthcare providers, including those related to patient care, coding and billing, data privacy and security, consumer protection, anti-trust, and employment practices, requires substantial time, effort and expense, and if we fail to comply, we could incur penalties and significant costs of investigating and defending asserted claims, whether meritorious or not, or be required to make significant changes to our operations, including potentially closing a facility.

•Our inability to maintain proper local, state and federal licensing, including compliance with the Medicare conditions of participation and provider enrollment requirements, could decrease our revenues.

•Incidents affecting the proper operation, availability, or security of our or our payors’, vendors’ or partners’ information systems, including the patient information stored there, or business continuity could cause substantial losses and adversely affect our operations, and governmental mandates to increase use of electronic records and interoperability exacerbate that risk.

•Any adverse outcome of various lawsuits, claims, and legal or regulatory proceedings, including disclosed and undisclosed qui tam suits, could be difficult to predict and could adversely affect our financial results or condition or our operations, and we could experience increased costs of defending and insuring against alleged professional liability and other claims.

•Our inability to successfully complete and integrate de novo developments, acquisitions, investments, and joint ventures consistent with our growth strategy, including realization of anticipated revenues, cost savings, productivity improvements arising from the related operations and avoidance of unanticipated difficulties, costs or liabilities that could arise from acquisitions or integrations could adversely affect our financial results or condition.

•Our inability to attract and retain nurses, therapists, and other healthcare professionals in a highly competitive environment with often severe staffing shortages and potential union activity could increase staffing costs and adversely affect other financial and operating results and has done so in the past.

•Competitive pressures in the healthcare industry, including from large acute-care hospitals that would typically serve as referral sources for us, and our response to those pressures could adversely affect our revenues or other financial results.

•Medicare quality reporting requirements could adversely affect our operating costs or Medicare reimbursement.

•Our inability to provide a consistently high quality of care, including as represented in metrics published by Medicare, could decrease our revenues.

•Our inability to maintain or develop relationships with patient referral sources, including our joint venture hospitals, or managed care payors could decrease our revenues.

•Acute-care hospitals that participate in joint ventures with us may experience, and in the past some have experienced, operational or financial challenges that, in turn, affect our joint venture inpatient rehabilitation hospitals.

•A pandemic, epidemic, or other widespread outbreak of an infectious disease or other public health crisis, and governmental responses to those events, could decrease our patient volumes, pricing, and revenues, lead to staffing and supply shortages and associated cost increases, otherwise interrupt operations, or lead to increased litigation risk and, in the case of the COVID-19 pandemic, has already done so in many instances.

•Regional, particularly Texas or Florida, or global socio-political, weather, or other catastrophic events have previously severely disrupted, and could again in the future disrupt, our business, including indirectly by affecting the patient population and referral sources in our markets.

•Regulatory and other efforts to promote a transition to a lower-carbon economy may result in significant operational and financial challenges for us.

iii

•Our inability to maintain infectious disease prevention and control efforts that are required and effectively minimize the spread among patients and employees could decrease our patient volumes and revenues, lead to staffing shortages or otherwise interrupt operations, or lead to increased litigation risk.

•The price of our common stock could adversely affect our willingness and ability to repurchase shares.

•We may be unable or unwilling to continue to declare and pay dividends on our common stock.

•General conditions in the economy and capital markets, including inflation (such as impacts from tariffs), any disruption, instability, or uncertainty related to armed conflict or an act of terrorism, a governmental impasse over approval of the United States federal budget or an increase to the debt ceiling, an international trade war, or a sovereign debt crisis could adversely affect our financial results or condition, including access to the capital markets.

The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements, even though our situation may change in the future. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements (Unaudited)

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
		2026		2025
		(In Millions, Except Per Share Data)
Net operating revenues		$	1,586.6	$	1,455.4
Operating expenses:
Salaries and benefits		818.1		762.3
Other operating expenses		241.9		217.5
Occupancy costs		15.2		14.9
Supplies		64.3		62.2
General and administrative expenses		58.2		52.3
Depreciation and amortization		87.3		79.2
Total operating expenses		1,285.0		1,188.4
Loss on early extinguishment of debt		0.2		—
Interest expense and amortization of debt discounts and fees		31.8		31.8
Other income		(18.7)		(2.5)
Equity in net income of nonconsolidated affiliates		(0.4)		(0.9)
Income from continuing operations before income tax expense		288.7		238.6
Provision for income tax expense		56.4		41.6
Income from continuing operations		232.3		197.0
Income (loss) from discontinued operations, net of tax		15.9		(0.5)
Net income		248.2		196.5


Less: Net income attributable to noncontrolling interests		(53.7)		(45.0)
Net income attributable to Encompass Health		$	194.5	$	151.5

Weighted average common shares outstanding:
Basic		99.2		100.5
Diluted		100.6		102.1
Earnings per common share:
Basic earnings per share attributable to Encompass Health common shareholders:
Continuing operations		$	1.80	$	1.50
Discontinued operations		0.16		—
Net income		$	1.96	$	1.50
Diluted earnings per share attributable to Encompass Health common shareholders:
Continuing operations		$	1.77	$	1.48
Discontinued operations		0.16		—
Net income		$	1.93	$	1.48

Amounts attributable to Encompass Health common shareholders:
Income from continuing operations		$	178.6	$	152.0
Income (loss) from discontinued operations, net of tax		15.9		(0.5)
Net income attributable to Encompass Health		$	194.5	$	151.5

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed statements.

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended March 31,
		2026		2025
		(In Millions)
COMPREHENSIVE INCOME
Net income		$	248.2	$	196.5
Other comprehensive loss, net of tax:
Net change in unrealized loss on available-for-sale securities:
Unrealized net holding loss arising during the period		(0.9)		—

Other comprehensive loss before income taxes		(0.9)		—
Provision for income tax benefit related to other comprehensive loss items		0.2		—
Other comprehensive loss, net of tax		(0.7)		—
Comprehensive income		247.5		196.5
Comprehensive income attributable to noncontrolling interests		(53.7)		(45.0)
Comprehensive income attributable to Encompass Health		$	193.8	$	151.5

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed statements.

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


	March 31, 2026		December 31, 2025
	(In Millions)
Assets
Current assets:
Cash and cash equivalents	$	110.5	$	72.2
Restricted cash	52.9		30.7
Accounts receivable	676.0		619.2
Other current assets	189.7		183.8
Total current assets	1,029.1		905.9
Property and equipment, net	4,216.5		4,101.6
Operating lease right-of-use assets	205.3		212.6
Goodwill	1,317.6		1,317.6
Intangible assets, net	300.3		308.3

Other long-term assets	244.4		243.7
Total assets(1)	$	7,313.2	$	7,089.7
Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term debt	$	42.9	$	43.6
Current operating lease liabilities	26.9		26.5
Accounts payable	204.0		178.2

Accrued expenses and other current liabilities	603.0		588.1
Total current liabilities	876.8		836.4
Long-term debt, net of current portion	2,530.9		2,447.2
Long-term operating lease liabilities	188.7		196.6
Deferred income tax liabilities	135.1		126.8
Other long-term liabilities	214.5		206.9
Total liabilities(1)	3,946.0		3,813.9
Commitments and contingencies
Redeemable noncontrolling interests	58.8		58.3
Shareholders’ equity:
Encompass Health shareholders’ equity	2,521.7		2,438.2
Noncontrolling interests	786.7		779.3
Total shareholders’ equity	3,308.4		3,217.5
Total liabilities(1) and shareholders’ equity	$	7,313.2	$	7,089.7

(1)Our consolidated assets as of March 31, 2026 and December 31, 2025 include total assets of variable interest entities of $206.0 million and $203.8 million, respectively, which cannot be used by us to settle the obligations of other entities. Our consolidated liabilities as of March 31, 2026 and December 31, 2025 include total liabilities of the variable interest entities of $45.8 million and $50.5 million, respectively. See Note 2, Variable Interest Entities.

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed statements.

Encompass Health Corporation and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity (Continued)

(Unaudited)


	Three Months Ended March 31, 2026
	(In Millions)
	Encompass Health Common Shareholders
	Number of Common Shares Outstanding	Common Stock		Capital in Excess of Par Value		Accumulated Income		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Noncontrolling Interests		Total
Balance at beginning of period	100.0	$	1.2	$	1,869.6	$	1,289.4	$	0.5	$	(722.5)	$	779.3	$	3,217.5
Net income	—	—		—		194.5		—		—		51.0		245.5
Issuance of restricted stock	0.4	—		(20.8)		—		—		20.8		—		—
Receipt of treasury stock	(0.3)	—		—		—		—		(30.9)		—		(30.9)
Dividends declared ($0.19 per share)	—	—		0.1		(19.2)		—		—		—		(19.1)

Stock-based compensation	—	—		11.5		—		—		—		—		11.5


Distributions declared	—	—		—		—		—		—		(41.1)		(41.1)



Repurchases of common stock in open market	(0.7)	—		—		—		—		(71.6)		—		(71.6)



Other	—	—		0.3		—		(0.7)		(0.5)		(2.5)		(3.4)
Balance at end of period	99.4	$	1.2	$	1,860.7	$	1,464.7	$	(0.2)	$	(804.7)	$	786.7	$	3,308.4


	Three Months Ended March 31, 2025
	(In Millions)
	Encompass Health Common Shareholders
	Number of Common Shares Outstanding	Common Stock		Capital in Excess of Par Value		Accumulated Income		Treasury Stock		Noncontrolling Interests		Total
Balance at beginning of period	100.8	$	1.2	$	1,847.0	$	796.7	$	(577.9)	$	725.7	$	2,792.7
Net income	—	—		—		151.5		—		42.6		194.1
Issuance of restricted stock	0.7	—		(27.7)		—		27.7		—		—
Receipt of treasury stock	(0.2)	—		—		—		(19.8)		—		(19.8)
Dividends declared ($0.17 per share)	—	—		—		(17.4)		—		—		(17.4)

Stock-based compensation	—	—

SEC Form 10-Q filed by Encompass Health Corporation