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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
OR
☐
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)
Delaware63-0860407
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareEHCNew 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
 
   
     
 
   
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.
i

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
ii

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.
iv

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,
 20262025
(In Millions, Except Per Share Data)
Net operating revenues$1,586.6 $1,455.4 
Operating expenses:
Salaries and benefits818.1 762.3 
Other operating expenses241.9 217.5 
Occupancy costs15.2 14.9 
Supplies64.3 62.2 
General and administrative expenses58.2 52.3 
Depreciation and amortization87.3 79.2 
Total operating expenses1,285.0 1,188.4 
Loss on early extinguishment of debt0.2 — 
Interest expense and amortization of debt discounts and fees31.8 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 expense288.7 238.6 
Provision for income tax expense56.4 41.6 
Income from continuing operations232.3 197.0 
Income (loss) from discontinued operations, net of tax15.9 (0.5)
Net income248.2 196.5 
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:
Basic99.2 100.5 
Diluted100.6 102.1 
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 tax15.9 (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.
1


Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended March 31,
 20262025
 (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 items0.2 — 
Other comprehensive loss, net of tax(0.7)— 
Comprehensive income247.5 196.5 
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.
2


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 assets189.7 183.8 
Total current assets1,029.1 905.9 
Property and equipment, net4,216.5 4,101.6 
Operating lease right-of-use assets205.3 212.6 
Goodwill1,317.6 1,317.6 
Intangible assets, net300.3 308.3 
Other long-term assets244.4 243.7 
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 liabilities26.9 26.5 
Accounts payable204.0 178.2 
Accrued expenses and other current liabilities603.0 588.1 
Total current liabilities876.8 836.4 
Long-term debt, net of current portion2,530.9 2,447.2 
Long-term operating lease liabilities188.7 196.6 
Deferred income tax liabilities135.1 126.8 
Other long-term liabilities214.5 206.9 
Total liabilities(1)
3,946.0 3,813.9 
Commitments and contingencies
Redeemable noncontrolling interests58.8 58.3 
Shareholders’ equity:  
Encompass Health shareholders’ equity2,521.7 2,438.2 
Noncontrolling interests786.7 779.3 
Total shareholders’ equity3,308.4 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.
3


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 StockCapital in Excess of Par ValueAccumulated IncomeAccumulated Other
Comprehensive
Income (Loss)		Treasury StockNoncontrolling
Interests		Total
Balance at beginning of period100.0 $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 stock0.4 — (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 period99.4 $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 OutstandingCommon StockCapital in Excess of Par ValueAccumulated IncomeTreasury StockNoncontrolling InterestsTotal
Balance at beginning of period100.8 $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 stock0.7 — (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— — 9.5 — — — 9.5 
Distributions declared— — — — — (45.9)(45.9)
Repurchases of common stock in open market(0.3)— — — (32.1)— (32.1)
Other(0.1)— 0.7 — (0.3)— 0.4 
Balance at end of period100.9 $1.2 $1,829.5 $930.8 $(602.4)$722.4 $2,881.5 
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed statements.
4


Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 Three Months Ended March 31,
 20262025
 (In Millions)
Cash flows from operating activities:  
Net income$248.2 $196.5 
(Income) loss from discontinued operations, net of tax(15.9)0.5 
Adjustments to reconcile net income to net cash provided by operating activities—  
Depreciation and amortization87.3 79.2 
Stock-based compensation11.5 9.5 
Deferred tax expense8.5 8.8 
(Gain) loss on investments(16.2)0.1 
Other, net2.3 2.2 
Change in assets and liabilities, net of acquisitions— 
Accounts receivable(53.2)(24.7)
Other assets(11.6)0.7 
Accounts payable(2.0)(2.1)
Other liabilities33.0 18.6 
Net cash provided by (used in) operating activities of discontinued operations21.2 (0.7)
Total adjustments80.8 91.6 
Net cash provided by operating activities313.1 288.6 
Cash flows from investing activities:
Purchases of property, equipment, and intangible assets(162.4)(163.1)
Proceeds from sale of restricted investments42.9 11.0 
Purchases of restricted investments(26.4)(2.3)
Other, net(4.2)(4.1)
Net cash used in investing activities(150.1)(158.5)
Cash flows from financing activities:
Borrowings on revolving credit facility420.0 60.0 
Payments on revolving credit facility(330.0)(80.0)
Repurchases of common stock, including fees and expenses(71.6)(32.1)
Dividends paid on common stock(20.3)(18.0)
Distributions paid to noncontrolling interests of consolidated affiliates(57.8)(32.9)
Taxes paid on behalf of employees for shares withheld(30.9)(19.8)
Other, net(11.9)(7.6)
Net cash used in financing activities(102.5)(130.4)
Increase (decrease) in cash, cash equivalents, and restricted cash60.5 (0.3)
Cash, cash equivalents, and restricted cash at beginning of period102.9 123.1 
Cash, cash equivalents, and restricted cash at end of period$163.4 $122.8 
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed statements.
5


Encompass Health Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)
(Unaudited)

Three Months Ended March 31,
20262025
(In Millions)
Reconciliation of Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents at beginning of period
$72.2 $85.4 
Restricted cash at beginning of period
30.7 37.7 
Cash, cash equivalents, and restricted cash at beginning of period
$102.9 $123.1 
Cash and cash equivalents at end of period
$110.5 $95.8 
Restricted cash at end of period
52.9 27.0 
Cash, cash equivalents, and restricted cash at end of period
$163.4 $122.8 
Supplemental schedule of noncash operating, investing, and financing activities:
Accrued purchases of property, equipment, and intangible assets$27.9 $(9.9)
Operating lease adjustments— 22.3 
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed statements.
6

Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements

1.Basis of Presentation
Encompass Health Corporation (the “Company” or “Encompass Health”), incorporated in Delaware in 1984, including its subsidiaries, is a provider of inpatient rehabilitation services. We operate hospitals in 39 states and Puerto Rico, with concentrations in Florida and Texas. As of March 31, 2026, we operated 174 inpatient rehabilitation hospitals. We are the sole owner of 108 of these hospitals. We retain 50.0% to 97.5% ownership in the remaining 66 jointly owned hospitals.
On December 31, 2025, we entered into an agreement to sell our 50% membership interest in Gamma Knife Center at Barnes-Jewish Hospital, LLC (“Gamma Knife”) to our existing joint venture partner, Barnes-Jewish Hospital, LLC, for $17.9 million effective January 1, 2026. We accounted for Gamma Knife as an equity method investment. As a result of this transaction, we recorded a $17.5 million pre-tax gain in Other income on our condensed consolidated statement of operations during the three months ended March 31, 2026. The $17.9 million proceeds are classified as an investing activity within our condensed consolidated statement of cash flows during the three months ended March 31, 2026.
The accompanying unaudited condensed consolidated financial statements of Encompass Health Corporation and Subsidiaries should be read in conjunction with the consolidated financial statements and accompanying notes contained in Encompass Health’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission on February 26, 2026 (the “2025 Form 10‑K”). The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC applicable to interim financial information. Certain information and note disclosures included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted in these interim statements, as allowed by such SEC rules and regulations. The condensed consolidated balance sheet as of December 31, 2025 has been derived from audited financial statements, but it does not include all disclosures required by GAAP. However, we believe the disclosures are adequate to make the information presented not misleading. Certain prior year amounts may have been reclassified for comparative purposes to conform to the current-year financial statement presentation.
The unaudited results of operations for the interim periods shown in these financial statements are not necessarily indicative of operating results for the entire year. In our opinion, the accompanying condensed consolidated financial statements recognize all adjustments of a normal recurring nature considered necessary to fairly state the financial position, results of operations, and cash flows for each interim period presented.
Net Operating Revenues—
Our Net operating revenues disaggregated by payor source are as follows (in millions):
Three Months Ended March 31,
20262025
Medicare$1,038.5 $975.5 
Medicare Advantage
257.6 239.6 
Managed care
167.7 145.7 
Medicaid46.1 42.0 
Other third-party payors10.7 8.3 
Workers’ compensation8.1 6.0 
Patients7.1 3.1 
Other income50.8 35.2 
Total$1,586.6 $1,455.4 
See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2025 Form 10-K for our policy related to Net operating revenues.

7
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Assets and Liabilities in and Results of Discontinued Operations—
In January 2026, we reached an agreement with certain defendants involved in our ongoing litigation against former executive officers of our home health and hospice business, which was spun off on July 1, 2022. This agreement related to our claims for attorneys’ fees and mitigation damages previously awarded to us. In February 2026, we collected $21.9 million in full satisfaction of our claims. As a result, we recorded a $16.3 million after tax gain in Income (loss) from discontinued operations, net of tax, in the condensed consolidated statements of operations during the three months ended March 31, 2026.
Recent Accounting Pronouncements Not Yet Adopted—
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires disaggregation of certain expense captions into specified categories within the notes to the financial statements for both interim and annual reporting periods. ASU 2024-03 is effective for our annual periods beginning January 1, 2027 and interim periods beginning January 1, 2028. Early adoption is permitted. We are currently evaluating the requirements of this standard and any potential impact it may have on our condensed consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, “Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which intends to modernize the guidance related to internal-use software costs to reflect current software development methods. ASU 2025-06 requires entities to begin capitalizing software costs when management authorizes and commits to funding the software project, and it is probable the project will be completed and the software will be used for its intended purpose. ASU 2025-06 is effective for our annual and interim periods beginning January 1, 2028. Early adoption is permitted. The guidance can be applied on a prospective basis, a modified basis for in-process projects, or on a retrospective basis. We are currently evaluating the requirements of this standard and any potential impact it may have on our condensed consolidated financial statements.
We do not believe any other recently issued, but not yet effective, accounting standards will have a material effect on our condensed consolidated financial position, results of operations, or cash flows.

8
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
2.Variable Interest Entities
As of March 31, 2026 and December 31, 2025, we consolidated eight limited partnership-like entities that are variable interest entities (“VIEs”) and of which we are the primary beneficiary. Our ownership percentages in these entities range from 50.0% to 75.0% as of March 31, 2026. Through partnership and management agreements with or governing each of these entities, we manage all of these entities and handle all day-to-day operating decisions. Accordingly, we have the decision-making power over the activities that most significantly impact the economic performance of our VIEs and an obligation to absorb losses or receive benefits from the VIE that could potentially be significant to the VIE. These decisions and significant activities include, but are not limited to, marketing efforts, oversight of patient admissions, medical training, nurse and therapist scheduling, provision of healthcare services, billing, collections, and creation and maintenance of medical records. The terms of the agreements governing each of our VIEs prohibit us from using the assets of each VIE to satisfy the obligations of other entities.
The carrying amounts and classifications of the consolidated VIEs’ assets and liabilities, which are included in our condensed consolidated balance sheets, are as follows (in millions):
March 31, 2026December 31, 2025
Assets 
Current assets: 
Cash and cash equivalents$0.7 $1.6 
Accounts receivable
38.6 34.9 
Other current assets6.0 4.7 
Total current assets45.3 41.2 
Property and equipment, net133.1 135.0 
Operating lease right-of-use assets1.3 1.3 
Goodwill15.9 15.9 
Intangible assets, net0.8 0.8 
Other long-term assets9.6 9.6 
Total assets$206.0 $203.8 
Liabilities
Current liabilities:
Current portion of long-term debt$1.1 $1.0 
Accounts payable5.7 6.6 
Accrued expenses and other current liabilities26.3 29.9 
Total current liabilities33.1 37.5 
Long-term debt, net of current portion11.3 11.6 
Long-term operating lease liabilities1.4 1.4 
Total liabilities$45.8 $50.5 
3.Marketable Securities
Restricted marketable securities at both balance sheet dates represent restricted assets held at HCS, Ltd (“HCS”), our consolidated wholly owned offshore captive insurance company. HCS insures a substantial portion of Encompass Health’s professional liability, workers’ compensation, and other insurance claims. These funds are committed for payment of claims incurred, and the classification of these marketable securities as current or noncurrent depends on the classification of the corresponding claims liability. As of March 31, 2026, $37.1 million of restricted marketable securities are included in Other current assets and $109.2 million of restricted marketable securities are included in Other long-term assets in our condensed consolidated balance sheet. As of December 31, 2025, $42.2 million of restricted marketable securities are included in Other current assets and $103.6 million are included in Other long-term assets in our condensed consolidated balance sheet.

9
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
During the three months ended March 31, 2026 and 2025, $(0.2) million and $0.7 million, respectively, of unrealized net (losses) gains were recognized in our condensed consolidated statements of operations on equity securities still held at the reporting date.
A summary of our debt securities as of March 31, 2026 is as follows (in millions):
Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Available-for-sale debt securities:
U.S. government and agency securities$36.1 $— $— $36.1 
Corporate bonds and notes81.3 0.1 (0.4)81.0 
During the three months ended March 31, 2026, we did not record any impairment charges related to our debt securities. We did not have any debt securities during the three months ended March 31, 2025.
Investing information related to our available-for-sale debt securities is as follows (in millions):
Three Months Ended March 31,
20262025
Proceeds from sales and maturities$10.3 $— 
The contractual maturities of our available-for-sale debt securities as of March 31, 2026 are as follows (in millions):
Amortized CostFair Value
Due in one year or less$24.1 $24.1 
Due after one year through five years80.7 80.6 
Due after five years through ten years6.0 5.9 
Due after ten years6.6 6.5 
Total$117.4 $117.1 
4.Long-term Debt
Our long-term debt outstanding consists of the following (in millions):
March 31, 2026December 31, 2025
Credit Agreement—  
Advances under revolving credit facility$220.0 $130.0 
Bonds payable—
4.50% Senior Notes due 2028
792.9 792.0 
4.75% Senior Notes due 2030
787.7 787.0 
4.625% Senior Notes due 2031
393.8 393.6 
Other notes payable91.2 93.6 
Finance lease obligations288.2 294.6 
2,573.8 2,490.8 
Less: Current portion(42.9)(43.6)
Long-term debt, net of current portion$2,530.9 $2,447.2 

10
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following chart shows scheduled principal payments due on long-term debt for the next five years and thereafter (in millions):
Face AmountNet Amount
April 1 through December 31, 2026$34.2 $34.2 
202746.9 46.9 
2028835.8 828.7 
202944.9 44.9 
2030850.8 838.4 
2031660.1 653.9 
Thereafter126.8 126.8 
Total$2,599.5 $2,573.8 
On March 9, 2026 (the “Closing Date”), we entered into a credit agreement (the “2026 Credit Agreement”), by and among us, certain of our subsidiaries, as guarantors, Truist Bank, as administrative agent and collateral agent, and various other lenders. In connection with the execution of the 2026 Credit Agreement, we paid off all outstanding amounts, and terminated the commitments, as of the Closing Date, under the Sixth Amended and Restated Credit Agreement, dated October 7, 2022 (the “2022 Credit Agreement”), by and among us, certain of our subsidiaries, as guarantors, Barclays Bank PLC, as administrative agent and collateral agent (“Barclays”), and various other lenders. The terms of the 2026 Credit Agreement are substantially the same as the terms of the 2022 Credit Agreement, except that (i) the maturity date has been changed to March 9, 2031, (ii) the fee for the undrawn portion of the revolving loan commitment has been lowered by five basis points, (iii) certain limitations on the ability of us and our subsidiaries to make investments, incur debt or liens, or make restricted payments have been relaxed, (iv) the 0.10% adjustment to interest payable on Term SOFR Borrowings has been eliminated, and (v) the swingline loan sublimit has been increased from $25 million to $40 million.
Our obligations under the 2026 Credit Agreement are secured by the current and future personal property of the Company and its subsidiary guarantors. Additionally, we terminated our existing collateral and guarantee agreement with Barclays and entered into the Collateral and Guarantee Agreement (the “2026 Collateral and Guarantee Agreement”), by and among the Company, certain of its subsidiaries, and Truist Bank, as collateral agent, which provides for similar terms in all material respects.
During March 2026, we drew $250.0 million on the revolving credit facility under the 2026 Credit Agreement to repay in full and retire the remaining amounts outstanding under the 2022 Credit Agreement. As of March 31, 2026, $220.0 million was drawn under the revolving credit facility with an interest rate of 4.9%. As of December 31, 2025, $130.0 million was drawn under the revolving credit facility with an interest rate of 5.9%.
5.Redeemable Noncontrolling Interests
The following is a summary of the activity related to our Redeemable noncontrolling interests (in millions):
Three Months Ended March 31,
20262025
Balance at beginning of period$58.3 $56.5 
Net income attributable to noncontrolling interests2.7 2.4 
Distributions declared(2.2)(2.8)
Balance at end of period$58.8 $56.1 

11
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following table reconciles the net income attributable to nonredeemable Noncontrolling interests, as recorded in the shareholders’ equity section of the condensed consolidated balance sheets, and the net income attributable to Redeemable noncontrolling interests, as recorded in the mezzanine section of the condensed consolidated balance sheets, to the Net income attributable to noncontrolling interests presented in the condensed consolidated statements of operations (in millions):
Three Months Ended March 31,
20262025
Net income attributable to nonredeemable noncontrolling interests$51.0 $42.6 
Net income attributable to redeemable noncontrolling interests2.7 2.4 
Net income attributable to noncontrolling interests$53.7 $45.0 
See also Note 6, Fair Value Measurements.
6.Fair Value Measurements
Our financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in millions):
  Fair Value Measurements at Reporting Date Using
As of March 31, 2026Fair ValueQuoted Prices in Active Markets for Identical Assets
(Level 1)		Significant Other Observable Inputs
(Level 2)		Significant Unobservable Inputs
(Level 3)
Valuation Technique (1)
Equity securities$29.2 $22.0 $7.2 $— M
Available-for-sale debt securities:
U.S. government and agency securities36.1 36.1 — — M
Corporate bonds and notes81.0 — 81.0 — M
Redeemable noncontrolling interests58.8 — — 58.8 I
As of December 31, 2025
Equity securities$36.3 $20.3 $16.0 $— M
Available-for-sale debt securities:
U.S. government and agency securities40.4 40.4 — — M
Corporate bonds and notes69.1 — 69.1 — M
Redeemable noncontrolling interests58.3 — — 58.3 I
(1) The two valuation techniques are: market approach (M) and income approach (I).
There are assets and liabilities that are not required to be measured at fair value on a recurring basis. However, these assets may be recorded at fair value as a result of impairment charges or other adjustments made to the carrying value of the applicable assets. During the three months ended March 31, 2026 and 2025, we did not record any material gains or losses related to these assets.

12
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
As discussed in Note 1, Summary of Significant Accounting Policies, “Fair Value Measurements,” to the consolidated financial statements accompanying the 2025 Form 10‑K, the carrying value equals fair value for our financial instruments that are not included in the table below and are classified as current in our condensed consolidated balance sheets. The carrying amounts and estimated fair values for all of our other financial instruments are presented in the following table (in millions):
 As of March 31, 2026As of December 31, 2025
 Carrying AmountEstimated Fair ValueCarrying AmountEstimated Fair Value
Long-term debt:    
Advances under revolving credit facility$220.0 $220.0 $130.0 $130.0 
4.50% Senior Notes due 2028
792.9 792.9 792.0 799.6 
4.75% Senior Notes due 2030
787.7 783.4 787.0 796.6 
4.625% Senior Notes due 2031
393.8 386.2 393.6 392.7 
Other notes payable91.2 91.2 93.6 93.6 
Financial commitments:
Letters of credit— 53.6 — 46.3 
Fair values for our long-term debt and financial commitments are determined using inputs, including quoted prices in nonactive markets, that are observable either directly or indirectly, or Level 2 inputs within the fair value hierarchy. See Note 1, Summary of Significant Accounting Policies, “Fair Value Measurements,” to the consolidated financial statements accompanying the 2025 Form 10‑K.
7.Share-Based Payments
During the three months ended March 31, 2026, we issued a total of 0.4 million restricted stock awards to members of our management team and our board of directors. Of the restricted stock awards issued to members of our management team, 0.1 million contain only a service condition, while the remainder contain a service and/or performance condition as well as a market condition for certain members of management. For the awards that include a performance and market condition, the number of shares that will ultimately be granted to employees may vary based on the Company’s performance during the applicable three-year performance measurement period. Additionally, we granted 0.1 million stock options to members of our management team. The fair value of these awards and options was determined using the policies described in Note 1, Summary of Significant Accounting Policies, and Note 12, Share-Based Payments, to the consolidated financial statements accompanying the 2025 Form 10‑K.
8.Income Taxes
Our Provision for income tax expense of $56.4 million for the three months ended March 31, 2026 primarily resulted from the application of our estimated effective blended federal and state income tax rate together with non-deductible executive compensation partially offset by tax benefits resulting from share-based compensation windfalls. Our Provision for income tax expense of $41.6 million for the three months ended March 31, 2025 primarily resulted from the application of our estimated effective blended federal and state income tax rate primarily offset by tax benefits resulting from share-based compensation windfalls.

13
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
9.Earnings per Common Share
The following table sets forth the computation of basic and diluted earnings per common share (in millions, except per share amounts):
 Three Months Ended March 31,
 20262025
Basic:
Numerator:
Income from continuing operations$232.3 $197.0 
Less: Net income attributable to noncontrolling interests included in continuing operations(53.7)(45.0)
Less: Income allocated to participating securities(0.5)(0.4)
Income from continuing operations attributable to Encompass Health common shareholders178.1 151.6 
Income (loss) from discontinued operations attributable to Encompass Health common shareholders15.9 (0.5)
Net income attributable to Encompass Health common shareholders$194.0 $151.1 
Denominator:
Basic weighted average common shares outstanding
99.2 100.5 
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:
Numerator:
Income from continuing operations$232.3 $197.0 
Less: Net income attributable to noncontrolling interests included in continuing operations(53.7)(45.0)
Income from continuing operations attributable to Encompass Health common shareholders178.6 152.0 
Income (loss) from discontinued operations attributable to Encompass Health common shareholders15.9 (0.5)
Net income attributable to Encompass Health common shareholders$194.5 $151.5 
Denominator:
Diluted weighted average common shares outstanding
100.6 102.1 
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 

14
Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The following table sets forth the reconciliation between basic weighted average common shares outstanding and diluted weighted average common shares outstanding (in millions):
Three Months Ended March 31,
20262025
Basic weighted average common shares outstanding99.2 100.5 
Restricted stock awards, dilutive stock options, and restricted stock units
1.4 1.6 
Diluted weighted average common shares outstanding100.6 102.1 
See Note 15, Earnings per Common Share, to the consolidated financial statements accompanying the 2025 Form 10‑K for additional information related to our common stock.
10.Contingencies and Other Commitments
We provide services in the highly regulated healthcare industry. Furthermore, operating inpatient rehabilitation hospitals requires significant staffing and involves intensive therapy for individuals suffering from significant physical or cognitive disabilities or injuries. As a result, various lawsuits, claims, and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. The resolution of any such lawsuits, claims, or legal and regulatory proceedings could materially and adversely affect our financial position, results of operations, and cash flows in a given period.
The False Claims Act allows private citizens, called “relators,” to institute civil proceedings on behalf of the United States alleging violations of the False Claims Act. These lawsuits, also known as “whistleblower” or “qui tam” actions, can involve significant monetary damages, fines, attorneys’ fees and the award of bounties to the relators who successfully prosecute or bring these suits to the government. Qui tam cases are sealed at the time of filing, which means knowledge of the information contained in the complaint typically is limited to the relator, the federal government, and the presiding court. The defendant in a qui tam action may remain unaware of the existence of a sealed complaint or its specific claims for years. While the complaint is under seal, the government reviews the merits of the case and may conduct a broad investigation and seek discovery from the defendant and other parties before deciding whether to intervene in the case and take the lead on litigating the claims. The court lifts the seal when the government makes its decision on whether to intervene. If the government decides not to intervene, the relator may elect to continue to pursue the lawsuit individually on behalf of the government. It is possible that qui tam lawsuits have been filed against us, which suits remain under seal, or that we are unaware of such filings or precluded by existing law or court order from discussing or disclosing the filing of such suits. We may be subject to liability under one or more undisclosed qui tam cases brought pursuant to the False Claims Act.
It is our obligation as a participant in Medicare and other federal healthcare programs to routinely conduct audits and reviews of the accuracy of our billing systems and other regulatory compliance matters. As a result of these reviews, we have made, and will continue to make, disclosures to the United States Department of Health and Human Services Office of Inspector General and the Centers for Medicare & Medicaid Services relating to amounts we suspect represent over-payments from these programs, whether due to inaccurate billing or otherwise. Some of these disclosures have resulted in, and may in the future result in, Encompass Health refunding amounts to Medicare or other federal healthcare programs.
Other Commitments—
We are a party to service and other contracts in connection with conducting our business. Minimum amounts due under these agreements are $51.6 million for the remainder of 2026, $40.1 million in 2027, $36.3 million in 2028, $30.3 million in 2029, $27.4 million in 2030, and $37.2 million thereafter. These contracts primarily relate to software licensing and support and medical equipment.
11.Segment Reporting:
We manage our operations using one operating segment which is also our reportable segment: inpatient rehabilitation. Our national network of inpatient rehabilitation hospitals provide specialized rehabilitative treatment on an inpatient basis. Our inpatient rehabilitation hospitals provide a higher level of rehabilitative care to patients who are recovering from conditions such as stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions, and amputations.
The accounting policies of our reportable segment are the same as those described in Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2025 Form 10‑K. All revenues for our services

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Encompass Health Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
are generated through external customers. See Note 1, Basis of Presentation, “Net Operating Revenues,” for the disaggregation of our revenues. Our chief operating decision maker (“CODM”) is the chief executive officer. Our CODM evaluates the performance and allocates resources based on adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”). Our CODM primarily considers forecast-to-budget variances and current year actuals to prior year actuals variances to assess performance and to help inform operating decisions, including allocating resources.
Selected financial information, including significant segment expenses, for our reportable segment is as follows (in millions):
Three Months Ended March 31,
20262025
Net operating revenues$1,586.6 $1,455.4 
Less:
Salaries and benefits818.1 762.3 
Other operating expenses241.6 217.3 
Occupancy costs15.2 14.9 
Supplies64.3 62.2 
General and administrative expenses47.5 43.3 
Net income attributable to noncontrolling interests53.7 45.0 
Other segment items(1)
(2.6)(3.2)
Adjusted EBITDA$348.8 $313.6 
(1)Includes interest and dividend income, investment gain or loss, and equity in net income of nonconsolidated affiliates.
Segment reconciliation (in millions):
Three Months Ended March 31,
20262025
Adjusted EBITDA$348.8 $313.6 
Stock-based compensation(11.5)(9.5)
Depreciation and amortization(87.3)(79.2)
Loss on disposal or impairment of assets(0.3)(0.2)
Loss on early extinguishment of debt(0.2)— 
Interest expense and amortization of debt discounts and fees(31.8)(31.8)
Net income attributable to noncontrolling interests53.7 45.0 
Change in fair market value of marketable securities(0.2)0.7 
Gain on sale of Gamma Knife17.5 — 
Income from continuing operations before income tax expense$288.7 $238.6 
Additional detail regarding the revenues of our operating segment by service line follows (in millions):
Three Months Ended March 31,
20262025
Net operating revenues:
Inpatient$1,533.7 $1,417.7 
Other52.9 37.7 
Net operating revenues$1,586.6 $1,455.4 
Equity in net income of nonconsolidated affiliates and the Provision for income tax expense are reported on our condensed consolidated statements of operations. Segment assets are reported on our condensed consolidated balance sheets as Total assets. Segment capital expenditures are reported on our condensed consolidated statements of cash flows as Purchases of property, equipment, and intangible assets.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) relates to Encompass Health Corporation and its subsidiaries and should be read in conjunction with our condensed consolidated financial statements included under Part I, Item 1, Financial Statements (Unaudited), of this report. In addition, the following MD&A should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2025, Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Part I, Item 1, Business, and Item 1A, Risk Factors, included in our Annual Report on Form 10-K for the year ended December 31, 2025 filed on February 26, 2026 (collectively, the “2025 Form 10‑K”).
This MD&A is designed to provide the reader with information that will assist in understanding our condensed consolidated financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our condensed consolidated financial statements. See “Cautionary Statement Regarding Forward-Looking Statements” beginning on page ii of this report, which is incorporated herein by reference for a description of important factors that could cause actual results to differ from expected results. See also Item 1A, Risk Factors, in Part II of this report and Part I of the 2025 Form 10‑K.
Executive Overview
Our Business
We are the nation’s largest owner and operator of inpatient rehabilitation hospitals (“IRFs”) in terms of patients treated, revenues, and number of hospitals. We provide specialized rehabilitative treatment on an inpatient basis. We operate IRFs in 39 states and Puerto Rico, with concentrations in Florida and Texas. As of March 31, 2026, we operated 174 IRFs. For additional information about our business, see Part I, Item 1, Business, and Item 1A, Risk Factors, of the 2025 Form 10‑K.
2026 Overview
During the three months ended March 31, 2026, Net operating revenues increased 9.0% over the same period of 2025 due primarily to volume growth and increased pricing. See “Results of Operations” section of this Item for additional volume and pricing information.
In our continued development and expansion efforts during the three months ended March 31, 2026, we:
•began operating our new 49-bed inpatient rehabilitation hospital in Irmo, South Carolina in March;
•expanded our capacity by adding 44 new beds to existing hospitals; and

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•announced or continued the development of the following hospitals:
Expected open dateNumber of New Beds
20262027
De novo projects(1)
Concordville, Pennsylvania2Q2650—
Loganville, Georgia(2)
2Q2640—
Norristown, Pennsylvania3Q2650—
Bangor, Maine4Q2650—
San Antonio, Texas4Q2650—
Avondale, Arizona4Q2660—
Wesley Chapel, Florida—50
Apollo Beach, Florida—50
St. George, Utah—50
Fishers, Indiana—50
Haslet, Texas—50
Flowood, Mississippi—50
Cookeville, Tennessee(2)
—40
Remote and satellite hospitals (included in bed additions)(1)
Cleveland, Tennessee4Q2640—
Other bed additions150 - 200150 - 200
(1) Opening dates are tentative
(2) Expected joint venture
We also continued our shareholder distributions during the three months ended March 31, 2026 through common stock repurchases and paying a quarterly cash dividend. For additional information see the “Liquidity and Capital Resources” section of this Item.
Business Outlook
We remain optimistic regarding the intermediate and long-term prospects of our business. Demographic trends, such as population aging, should continue to increase long-term demand for the services we provide. While we treat patients of all ages, most of our patients are 65 and older, and the number of Medicare enrollees is expected to continue to grow for the foreseeable future. More specifically, the average age of our Medicare patients is approximately 77, and the population group for ages 75 and older is expected to grow at approximately 4% per year through 2030. We believe the demand for the services we provide will continue to increase as the U.S. population ages. We believe these factors align with our strengths in, and focus on, inpatient rehabilitation services.
We are committed to delivering high-quality, cost-effective patient care. As the nation’s largest owner and operator of inpatient rehabilitation hospitals in terms of patients treated, revenues, and number of hospitals, we believe we differentiate ourselves from our competitors based on, among other things, the quality of our clinical outcomes, our cost-effectiveness, our financial strength, and our extensive application of technology. We also believe our competitive strengths discussed in Part I, Item 1, Business, “Competitive Strengths,” of the 2025 Form 10‑K, give us the ability to adapt and succeed in a healthcare industry facing regulatory uncertainty around attempts to improve outcomes and reduce costs.
The healthcare industry faces the prospect of ongoing efforts to transform the healthcare system to coordinated care delivery and payment models. The nature, timing and extent of that transformation remains uncertain, as the development and implementation of new care delivery and payment systems will require significant time and resources. Our goal is to position the Company in a prudent manner to be responsive to industry shifts. We have invested in our core business and created an infrastructure that enables us to provide high-quality care on a cost-effective basis. We have been disciplined in creating a capital structure that is flexible with no significant debt maturities until 2028. We continue to have a strong, well-capitalized balance sheet, including a substantial portfolio of owned real estate, and ample availability under our revolving credit facility, which along with the cash flows generated from operations should, we believe, provide sufficient support for our ability to adapt to changes in reimbursement, sustain our business model, and grow through new hospitals and bed additions. See also Part I, Item 1, Business, “Strategy and Strategic Priorities” and “Competitive Strengths” of the 2025 Form 10‑K.

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Key Challenges
Healthcare is a highly regulated industry facing many well-publicized regulatory and reimbursement challenges. The future of many aspects of healthcare regulation generally and Medicare reimbursement specifically remains uncertain. Successful healthcare providers are those able to adapt to changes in the regulatory and operating environments, build strategic relationships across the healthcare continuum, and consistently provide high-quality, cost-effective care. We believe we have the necessary capabilities—change agility, strategic relationships, quality of patient outcomes, cost effectiveness, and ability to capitalize on growth opportunities—to adapt to and succeed in a dynamic, highly regulated industry, and we have a proven track record of doing so. For a detailed discussion of the challenges we face, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Executive Overview—Key Challenges” of the 2025 Form 10‑K.
As we continue to execute our business plan, the following are some of the key challenges we face.
•Operating in a Highly Regulated Industry. We are required to comply with extensive and complex laws and regulations at the federal, state, and local government levels. More specifically, because Medicare comprises a significant portion of our Net operating revenues, failure to comply with the laws and regulations governing the Medicare program and related matters, including anti-kickback and anti-fraud requirements, could materially and adversely affect us. These rules and regulations have affected, or could in the future affect, our business activities by having an impact on the reimbursement we receive for services provided or the costs of compliance, mandating new documentation standards, requiring additional licensure or certification, regulating our relationships with physicians and other referral sources, regulating the use of our properties, and limiting our ability to enter new markets or add new capacity to existing hospitals. See Part I, Item 1, Business, “Regulation,” and Item 1A, Risk Factors, “Reimbursement Risks” and “Other Regulatory Risks” of the 2025 Form 10‑K for detailed discussions of the most important regulations we face and our programs intended to ensure we comply with those regulations.
•Changes in Medicare Reimbursement and Regulatory Requirements for Operating IRFs. On April 2, 2026, the Centers for Medicare & Medicaid Services (“CMS”) released its notice of proposed rulemaking for fiscal year 2027 for IRFs (the “2027 Proposed IRF Rule”) under the inpatient rehabilitation facility prospective payment system. The 2027 Proposed IRF Rule would implement a net 2.4% market basket increase (market basket update of 3.2% reduced by a productivity adjustment of 0.8%) effective for discharges between October 1, 2026 and September 30, 2027. The 2027 Proposed IRF Rule also includes changes that impact our hospital-by-hospital base rate for Medicare reimbursement. Such changes include, but are not limited to, revisions to the wage index, updates to outlier payments, and updates to the case-mix group relative weights and average lengths of stay values. Based on our analysis that utilizes the acuity of our patients annualized over a twelve-month period ended February 28, 2026, our experience with outlier payments over this same time frame, and other factors, we believe the 2027 Proposed IRF Rule would result in a net increase to our Medicare payment rates of approximately 2.4% effective October 1, 2026.
In August 2023, IRFs located in Alabama began participation in CMS’s review choice demonstration (“RCD”), under which Medicare reimbursement claims are assessed for compliance with applicable coverage and clinical documentation requirements. On June 17, 2024, CMS expanded RCD to include IRFs located in Pennsylvania and billing to a certain Medicare Administrative Contractor (“MAC”). We do not bill to this MAC, so we are not subject to RCD in Pennsylvania at this time. In December 2025, CMS announced the expansion of RCD to Texas and California, effective March 2, 2026 and May 1, 2026, respectively. With the expansion to those two states, we expect 33 of our current inpatient rehabilitation hospitals (representing approximately 11.9% of our IRF Medicare claims) to be subject to RCD. After the initial four states, CMS intends to expand the demonstration to include additional cohorts of IRFs based on the MAC to which those IRFs submit claims. There are no details of that expansion at this time.

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Under RCD, each participating IRF has an initial choice between pre-claim or post-payment review of 100% of Medicare claims submitted to demonstrate compliance with applicable requirements during the first six-month review period or cycle. Under the pre-claim review choice, services can begin prior to the submission of the review request and continue while the decision is being made. The pre-claim review request with required documentation must be submitted, reviewed, and approved before the final claim is paid. If a certain percentage of the claims reviewed are found to be valid, the “affirmation rate,” the IRF may then opt out of the 100% pre-claim review in the next cycle. The opt-out affirmation rate for each IRF under RCD is 80% or greater for the first cycle, 85% or greater for the second cycle, and 90% or greater for each cycle thereafter. In opting out, the IRF may elect spot prepayment reviews of samples consisting of 5% of total claims or selective post-payment review of a statistically valid random sample. To date, we have elected the pre-claim review option for each participating hospital, including those hospitals that met or exceeded the opt-out affirmation rate, in each cycle.
If the MAC determines a claim is not valid under the RCD pre-claim review, the IRF may still submit the claim for payment and appeal the denial. The affirmation rate for a cycle as determined by CMS does not include claims found to be valid on appeal. Therefore, the ultimate percentage of valid claims submitted under RCD depends on the resolution of all related appeals in the same CMS process applicable to non-RCD claims. That appeals process can extend for a significant period of time as discussed in Part 1, Item 1A, Risk Factors, of the 2025 Form 10‑K. The affirmation rate for our hospitals in Alabama has varied over the four completed cycles. We believe the MAC for these hospitals has failed to affirm many claims over the course of RCD based on inconsistent and improper application of standards or requirements that, in some cases, directly conflict with the Medicare coverage criteria for IRFs. We have engaged, and will continue to engage, with the MAC and CMS to ensure the review process is consistent with existing rules, regulations and statutes. Additionally, we have appealed many of the claims not affirmed by the MAC. Given the inconsistent review process applied by the MAC associated with our Alabama hospitals across the previous cycles, we cannot predict the impact, if any, RCD may have on the collectability of our Medicare claims over the program’s full breadth, including involvement of other MACs, and term and ultimately on our financial position, results of operations, and cash flows.
•Maintaining Strong Volume Growth. Various factors, including competition and increasing regulatory and administrative burdens, may impact our ability to maintain and grow our hospital volumes. In any particular market, we may encounter competition from local or national entities with longer operating histories or other competitive advantages, such as acute-care hospitals who provide post-acute services similar to ours or other post-acute providers with relationships with referring acute-care hospitals or physicians. Aggressive payment review practices by Medicare contractors, aggressive enforcement of regulatory policies by government agencies, and restrictive or burdensome rules, regulations or statutes governing reimbursement and admissions practices may deny access to care for, or lead us to not accept patients who would be appropriate for and would benefit from the services we provide. In addition, from time to time, we must get regulatory approval to expand our services and locations in states with certificate of need laws. This approval may be withheld or take longer than expected. In the case of new-store volume growth, the addition of hospitals to our portfolio also may be difficult and take longer than expected.
•Recruiting and Retaining High-Quality Personnel. Recruiting and retaining qualified personnel, including management, for our inpatient hospitals remains a high priority for us. We attempt to maintain a comprehensive compensation and benefits package that allows us to be competitive in this challenging staffing environment while remaining consistent with our goal of providing high-quality, cost-effective care. Additionally, our operations have been affected and may in the future be affected by staffing shortages. In recent years, staffing shortages and competition have resulted in increased labor costs, including significant sign-on and shift bonuses, and increased use of contract labor. See Part I, Item 1A, Risk Factors, of the 2025 Form 10‑K for further discussion of competition for staffing, shortages of qualified personnel, and other factors that may increase our labor costs and constrain our ability to take new patients.
We remain confident in the prospects of our business based on the increasing demands for the services we provide to an aging population. This confidence is further supported by our strong financial foundation and the substantial investments we have made in our business. We have a proven track record of working through difficult operating environments, and we believe in our ability to overcome current and future challenges.

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Results of Operations
Payor Mix
We derived consolidated Net operating revenues from the following payor sources:
Three Months Ended March 31,
 20262025
Medicare65.5 %67.0 %
Medicare Advantage
16.2 %16.5 %
Managed care
10.6 %10.0 %
Medicaid2.9 %2.9 %
Other third-party payors0.7 %0.6 %
Workers’ compensation0.5 %0.4 %
Patients0.4 %0.2 %
Other income3.2 %2.4 %
Total100.0 %100.0 %
For additional information regarding our payors, see the “Sources of Revenues” section of Item 1, Business, of the 2025 Form 10‑K.
Our Results
Our consolidated results of operations were as follows:
 Three Months Ended March 31,Percentage Change
 202620252026 vs. 2025
 (In Millions, Except Percentage Change)
Net operating revenues$1,586.6 $1,455.4 9.0 %
Operating expenses:   
Salaries and benefits818.1 762.3 7.3 %
Other operating expenses241.9 217.5 11.2 %
Occupancy costs15.2 14.9 2.0 %
Supplies64.3 62.2 3.4 %
General and administrative expenses58.2 52.3 11.3 %
Depreciation and amortization87.3 79.2 10.2 %
Total operating expenses1,285.0 1,188.4 8.1 %
Loss on early extinguishment of debt0.2 — N/A
Interest expense and amortization of debt discounts and fees31.8 31.8 — %
Other income(18.7)(2.5)648.0 %
Equity in net income of nonconsolidated affiliates(0.4)(0.9)(55.6)%
Income from continuing operations before income tax expense288.7 238.6 21.0 %
Provision for income tax expense56.4 41.6 35.6 %
Income from continuing operations232.3 197.0 17.9 %
Income (loss) from discontinued operations, net of tax15.9 (0.5)(3,280.0)%
Net income248.2 196.5 26.3 %
Less: Net income attributable to noncontrolling interests(53.7)(45.0)19.3 %
Net income attributable to Encompass Health$194.5 $151.5 28.4 %

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Operating Expenses as a % of Net Operating Revenues
 Three Months Ended March 31,
 20262025
Operating expenses:
Salaries and benefits
51.6 %52.4 %
Other operating expenses
15.2 %14.9 %
Occupancy costs
1.0 %1.0 %
Supplies
4.1 %4.3 %
General and administrative expenses
3.7 %3.6 %
Depreciation and amortization
5.5 %5.4 %
Total operating expenses
81.0 %81.7 %
Additional information regarding our operating results is as follows:
Three Months Ended March 31,Percentage Change
202620252026 vs. 2025
(In Millions, Except Percentage Change)
Net operating revenues:
Inpatient
$1,533.7$1,417.78.2 %
Other52.937.740.3 %
Net operating revenues$1,586.6$1,455.49.0 %
(Actual Amounts)
Discharges67,76364,9854.3 %
Net patient revenue per discharge
$22,633$21,8163.7 %
Outpatient visits21,93519,9559.9 %
Average length of stay (days)12.112.2(0.8)%
Occupancy %78.7 %78.8 %(0.1)%
# of licensed beds11,54111,1593.4 %
Occupied beds9,0838,7933.3 %
Full-time equivalents (FTEs) - internal29,59928,5723.6 %
Contract labor FTEs345375(8.0)%
Total FTEs*29,94428,9473.4 %
Employees per occupied bed3.303.290.3 %
*    FTEs included in the above table represent our employees who participate in or support the operations of our hospitals and include FTEs related to contract labor.
We actively manage the productive portion of our Salaries and benefits utilizing certain metrics, including employees per occupied bed, or “EPOB.” This metric is determined by dividing the number of full-time equivalents, including full-time equivalents from the utilization of contract labor, by the number of occupied beds during each period.
In the discussion that follows, we use “same-store” comparisons to explain the changes in certain performance metrics within our financial statements. We calculate same-store comparisons based on hospitals open throughout both the full current period and prior period presented. These comparisons include the financial results of market consolidation transactions and capacity expansions (including the addition of satellite and remote hospitals) in existing markets, as it is difficult to determine, with precision, the incremental impact of these transactions on our results of operations.

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Net Operating Revenues
Our consolidated Net operating revenues increased during the three months ended March 31, 2026 compared to the same period of 2025 primarily due to increased volumes and favorable pricing. Discharge growth included a 1.6% increase in same-store discharges. Discharge growth from new stores during the three months ended March 31, 2026 compared to the same period of 2025 resulted from our joint ventures in Athens, Georgia (March 2025), Fort Myers, Florida (May 2025), and Amarillo, Texas (November 2025), as well as our wholly owned hospitals in Daytona Beach, Florida (July 2025), Danbury, Connecticut (September 2025), St. Petersburg, Florida (October 2025), Lake Worth, Florida (December 2025), and Irmo, South Carolina (March 2026). Growth in net patient revenue per discharge during the three months ended March 31, 2026 compared to the same period of 2025 primarily resulted from an increase in reimbursement rates, retroactive cost reporting adjustments, and patient mix.
The increase in other revenue during the three months ended March 31, 2026 included an increase of $15.3 million in Medicaid supplemental payments (partially offset by an increase of $9.7 million in provider tax expenses included in Other operating expenses). Medicaid supplemental payments represent amounts received under state directed and supplemental payment programs associated with Medicaid. For additional information, see Part I, Item 1, Business, “Medicaid Reimbursement,” of the 2025 Form 10‑K.
Salaries and Benefits
Salaries and benefits increased during the three months ended March 31, 2026 compared to the same period of 2025 primarily due to salary and benefit cost increases for our employees and increased patient volumes, including an increase in the number of full-time equivalents as a result of our development activities. Salaries and benefits decreased as a percent of Net operating revenues during the three months ended March 31, 2026 compared to the same period of 2025 primarily due to an increase in Medicaid supplemental payments and decreases in both contract labor and sign-on and shift bonuses.
Other Operating Expenses
Other operating expenses increased in terms of dollars and as a percent of Net operating revenues during the three months ended March 31, 2026 compared to the same period of 2025 primarily due to increased provider taxes and higher costs resulting from our development activities partially offset by lower legal costs.
General and Administrative Expenses
General and administrative expenses increased in terms of dollars and as a percent of Net operating revenues during the three months ended March 31, 2026 compared to the same period of 2025 primarily due to higher costs associated with our transition to a new enterprise resource planning system, Oracle Fusion, in 2025.
Depreciation and Amortization
Depreciation and amortization increased during the three months ended March 31, 2026 compared to the same period of 2025 due to our capital investments. See the “Executive Overview” section of this item for information related to our development activity. We expect Depreciation and amortization to increase going forward as a result of our recent and ongoing capital investments.
Other Income
Other income during the three months ended March 31, 2026 includes a $17.5 million gain as a result of the sale of our 50% membership interest in Gamma Knife Center at Barnes-Jewish Hospital, LLC (“Gamma Knife”) to our existing joint venture partner, Barnes-Jewish Hospital, LLC, effective January 1, 2026. For additional information, see Note 1, Basis of Presentation, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report.
Income from Continuing Operations Before Income Tax Expense
Our pre-tax income from continuing operations increased during the three months ended March 31, 2026 compared to the same period of 2025 primarily due to the increase in Net operating revenues as discussed above.

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Provision for Income Tax Expense
Our Provision for income tax expense increased during the three months ended March 31, 2026 compared to the same period of 2025 primarily due to higher Income from continuing operations before income tax expense.
We currently estimate our cash payments for income taxes to be approximately $160 million to $190 million, net of refunds, for 2026. These payments are expected to primarily result from federal and state income tax expenses based on estimates of taxable income for 2026.
In certain jurisdictions, we do not expect to generate sufficient income to use all available state net operating losses and foreign tax credits prior to their expiration. This determination is based on our evaluation of all available evidence in these jurisdictions including results of operations during the preceding three years, our forecast of future earnings, and prudent tax planning strategies. It is possible we may be required to increase or decrease our valuation allowance at some future time if our forecast of future earnings varies from actual results on a consolidated basis or in the applicable tax jurisdiction, if the timing of future tax deductions differs from our expectations, or pursuant to changes in state and foreign tax laws and rates.
See Note 8, Income Taxes, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report and Note 14, Income Taxes, to the consolidated financial statements accompanying the 2025 Form 10‑K.
Net Income Attributable to Noncontrolling Interests
The increase in Net income attributable to noncontrolling interests during the three months ended March 31, 2026 compared to the same period of 2025 resulted from increased profitability from certain existing joint venture hospitals.
Liquidity and Capital Resources
Our primary sources of liquidity are cash on hand, cash flows from operations, and borrowings under our revolving credit facility.
The objectives of our capital structure strategy are to ensure we maintain adequate liquidity and flexibility. Pursuing and achieving those objectives allow us to support the execution of our operating and strategic plans and weather temporary disruptions in the capital markets and general business environment. Maintaining adequate liquidity is a function of our unrestricted Cash and cash equivalents and our available borrowing capacity. Maintaining flexibility in our capital structure is a function of, among other things, the amount of debt maturities in any given year, the options for debt prepayments without onerous penalties, and limiting restrictive terms and maintenance covenants in our debt agreements.
We have been disciplined in creating a capital structure that is flexible with no significant debt maturities until 2028. We continue to have a strong, well-capitalized balance sheet, including a substantial portfolio of owned real estate, and we have significant availability under our revolving credit facility. We continue to generate strong cash flows from operations, and we have significant flexibility with how we choose to invest our cash and return capital to shareholders.
On March 9, 2026, we entered into a new credit agreement (the “2026 Credit Agreement”). In connection with the execution of the 2026 Credit Agreement, we paid off all outstanding amounts, and terminated the commitments under the Sixth Amended and Restated Credit Agreement, dated October 7, 2022 (the “2022 Credit Agreement”). During March 2026, we drew $250.0 million on the revolving credit facility under the 2026 Credit Agreement to repay in full and retire the remaining amounts outstanding under the 2022 Credit Agreement.
For additional information, see Note 4, Long-term Debt, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2025 Form 10‑K.

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Current Liquidity
As of March 31, 2026, we had $110.5 million in Cash and cash equivalents. This amount excludes $52.9 million in Restricted cash and $146.3 million of restricted marketable securities ($37.1 million included in Other current assets and $109.2 million included in Other long-term assets in our condensed consolidated balance sheet). Our restricted assets pertain primarily to obligations associated with our captive insurance company, as well as obligations we have under agreements with joint venture partners. See Note 3, Marketable Securities, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 3, Cash and Marketable Securities, to the consolidated financial statements accompanying the 2025 Form 10‑K.
In addition to Cash and cash equivalents, as of March 31, 2026, we had approximately $726 million available to us under our revolving credit facility. Our credit agreement governs our senior secured borrowing capacity and contains a leverage ratio and an interest coverage ratio as financial covenants. Our leverage ratio is defined in our credit agreement as the ratio of consolidated total debt (less cash on hand) to Adjusted EBITDA for the trailing four quarters. In calculating the leverage ratio under our credit agreement, we are permitted to use pro forma Adjusted EBITDA, the calculation of which includes historical income statement items and pro forma adjustments, subject to certain limitations, resulting from (1) dispositions and repayments or incurrence of debt and (2) investments, acquisitions, mergers, amalgamations, consolidations and other operational changes to the extent such items or effects are not yet reflected in our trailing four-quarter financial statements. Our interest coverage ratio is defined in our credit agreement as the ratio of Adjusted EBITDA to consolidated interest expense, excluding the amortization of financing fees, for the trailing four quarters. As of March 31, 2026, the maximum leverage ratio requirement per our credit agreement was 4.50x and the minimum interest coverage ratio requirement was 3.0x, and we were in compliance with these covenants. Based on Adjusted EBITDA for the trailing four quarters and the interest rate in effect under our credit agreement during the three-month period ended March 31, 2026, if we had drawn on the first day and maintained the maximum amount of outstanding draws under our revolving credit facility for that entire period, we would still be in compliance with the maximum leverage ratio and minimum interest coverage ratio requirements.
We do not face near-term refinancing risk, as the amounts outstanding under our credit agreement do not mature until 2031, and our bonds all mature in 2028 and beyond. See Note 4, Long-term Debt, to the accompanying condensed consolidated financial statements, for additional information related to our debt. Also, see the “Contractual Obligations” section below for information related to our contractual obligations as of March 31, 2026.
For a discussion of risks and uncertainties facing us see Item 1A, Risk Factors, under Part II, Other Information, of this report and Part I, Item 1A, Risk Factors, of the 2025 Form 10‑K.
Sources and Uses of Cash
The following table shows the cash flows provided by or used in operating, investing, and financing activities (in millions):
 Three Months Ended March 31,
 20262025
Net cash provided by operating activities$313.1 $288.6 
Net cash used in investing activities(150.1)(158.5)
Net cash used in financing activities(102.5)(130.4)
Increase (decrease) in cash, cash equivalents, and restricted cash$60.5 $(0.3)
Operating activities. The increase in Net cash provided by operating activities for the three months ended March 31, 2026 compared to the same period of 2025 primarily resulted from an increase in Net income which was driven by growth in Net operating revenues.
Investing activities. The decrease in Net cash used in investing activities during the three months ended March 31, 2026 compared to the same period of 2025 primarily resulted from increased Proceeds from sale of restricted investments partially offset by increased Purchases of restricted investments. Proceeds from sale of restricted investments during the three months ended March 31, 2026 includes $17.9 million resulting from the sale of our 50% membership interest in Gamma Knife. For additional information, see Note 1, Basis of Presentation, to the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report.

25

Financing activities. The decrease in Net cash used in financing activities during the three months ended March 31, 2026 compared to the same period of 2025 primarily resulted from higher net debt borrowings, partially offset by higher Repurchases of common stock, including fees and expenses and Distributions paid to noncontrolling interests of consolidated affiliates. For additional information on our net debt borrowings, see Note 4, Long-term Debt, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2025 Form 10‑K. For additional information related to our stock repurchases, see the “Authorizations for Returning Capital to Stakeholders” section below.
Contractual Obligations
Our consolidated contractual obligations as of March 31, 2026 are as follows (in millions):
 TotalCurrentLong-term
Long-term debt obligations:   
Long-term debt, excluding finance lease obligations (a)
$2,065.6 $15.7 $2,049.9 
Revolving credit facility220.0 — 220.0 
Interest on long-term debt (b)
384.2 109.8 274.4 
Finance lease obligations (c)
399.5 47.9 351.6 
Operating lease obligations (d)
294.4 39.5 254.9 
Purchase obligations (e)
222.9 59.5 163.4 
Total$3,586.6 $272.4 $3,314.2 
(a)    Included in long-term debt are amounts owed on our bonds payable and other notes payable. These borrowings are further explained in Note 4, Long-term Debt, accompanying the condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2025 Form 10‑K.
(b)    Interest on our fixed rate debt is presented using the stated interest rate. Interest on our variable rate debt is estimated using the rate in effect as of March 31, 2026. Interest pertaining to our bonds is included to their respective ultimate maturity dates. Interest related to finance lease obligations is excluded from this line. Amounts exclude amortization of debt discounts, amortization of loan fees, or fees for lines of credit that would be included in interest expense in our condensed consolidated statements of operations.
(c)    Amounts include interest portion of future minimum finance lease payments.
(d)    We lease approximately 9% of our hospitals as well as other property and equipment under operating leases 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 consolidated financial statements accompanying the 2025 Form 10‑K.
(e)    Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on Encompass Health 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 and medical equipment. Purchase obligations are not recognized in our condensed consolidated balance sheet.
Our capital expenditures include costs associated with our hospital renovation program, de novo projects, capacity expansions, technology initiatives, and building and equipment upgrades and purchases. During the three months ended March 31, 2026, we made capital expenditures of approximately $162 million for property, equipment, and intangible assets. During 2026, we expect to spend approximately $920 million to $995 million for capital expenditures using cash on hand and borrowings under our revolving credit facility. Approximately $225 million to $240 million of this budgeted amount is considered nondiscretionary expenditures, which we may refer to in other filings as “maintenance” expenditures. Actual amounts spent will be dependent upon the timing of development projects. At March 31, 2026, we have projects under construction which have an estimated additional cost to complete over the next two years of approximately $367 million. We expect to fund capital expenditures using cash on hand and borrowings under our revolving credit facility.

26

Authorizations for Returning Capital to Stakeholders
In October 2025 and February 2026, our board of directors declared cash dividends of $0.19 per share that were paid in January 2026 and April 2026, respectively. We expect quarterly dividends to be paid in January, April, July, and October. However, the actual declaration of any future cash dividends, and the setting of record and payment dates as well as the per share amounts, will be at the discretion of our board of directors after consideration of various factors, including our capital position and alternative uses of funds. Cash dividends are expected to be funded using cash flows from operations, cash on hand, and availability under our revolving credit facility.
The terms of our credit agreement allow us to declare and pay cash dividends on our common stock so long as: (1) we are not in default under our credit agreement, and (2) either (a) our senior secured leverage ratio (as defined in our credit agreement) remains less than or equal to 2x and our leverage ratio (as defined in our credit agreement) remains less than or equal to 4.50x or (b) our leverage ratio remains in compliance with the leverage ratio covenant and there is capacity under the Available Amount as defined in the credit agreement. The terms of our Notes indenture allow us to declare and pay cash dividends on our common stock so long as (1) we are not in default, (2) the consolidated coverage ratio (as defined in the indenture) exceeds 2x or we are otherwise allowed under the indenture to incur debt, and (3) we have capacity under the indenture’s restricted payments covenant to declare and pay dividends. See Note 4, Long-term Debt, to the accompanying condensed consolidated financial statements included in Part I, Item 1, Financial Statements (Unaudited), of this report, and Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2025 Form 10‑K.
In 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock, which has been amended from time to time. Most recently, on July 24, 2024, our board approved resetting the aggregate common stock repurchase authorization to $500 million. As of March 31, 2026, approximately $261 million remained under this authorization. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. During the three months ended March 31, 2026, we repurchased 0.7 million shares of our common stock in the open market for $71.6 million under this repurchase authorization using cash on hand. Future repurchases under this authorization generally are expected to be funded using a combination of cash on hand and availability under our $1 billion revolving credit facility. For additional information, see Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this report.
Supplemental Guarantor Financial Information
Our indebtedness under our credit agreement and the 4.50% Senior Notes due 2028, 4.75% Senior Notes due 2030, and 4.625% Senior Notes due 2031, (collectively, the “Senior Notes”) are guaranteed by certain consolidated subsidiaries. These guarantees are full and unconditional and joint and several, subject to certain customary conditions for release. The Senior Notes are guaranteed on a senior, unsecured basis by all of our existing and future subsidiaries that guarantee borrowings under our credit agreement and other capital markets debt. The other subsidiaries of Encompass Health do not guarantee the Senior Notes (such subsidiaries are referred to as the “non-guarantor subsidiaries”).

27

Summarized financial information is presented below for Encompass Health, the parent company, and the subsidiary guarantors on a combined basis after elimination of intercompany transactions and balances among Encompass Health and the subsidiary guarantors and does not include investments in and equity in the earnings of non-guarantor subsidiaries.
Three Months Ended March 31, 2026
(In Millions)
Net operating revenues$998.9 
Intercompany revenues generated from non-guarantor subsidiaries30.2 
Total net operating revenues$1,029.1 
Operating expenses$848.6 
Intercompany expenses incurred in transactions with non-guarantor subsidiaries11.4 
Total operating expenses$860.0 
Income from continuing operations$119.0 
Net income$134.9 
Net income attributable to Encompass Health
$134.9 
As of
 March 31, 2026		As of
December 31, 2025
(In Millions)
Total current assets$673.0 $604.3 
Property and equipment, net
$2,911.3 $2,804.6 
Goodwill
883.2 883.2 
Other noncurrent assets499.1 517.2 
Total noncurrent assets$4,293.6 $4,205.0 
Total current liabilities$658.4 $625.0 
Long-term debt, net of current portion
$2,469.0 $2,383.7 
Intercompany payable due to non-guarantor subsidiaries7.6 3.9 
Other noncurrent liabilities328.9 328.3 
Total noncurrent liabilities
$2,805.5 $2,715.9 
Adjusted EBITDA
Management believes Adjusted EBITDA as defined in our credit agreement is a measure of our ability to service our debt and our ability to make capital expenditures. We reconcile Adjusted EBITDA to Net cash provided by operating activities and to Net income.
We use Adjusted EBITDA on a consolidated basis as a liquidity measure. We believe this financial measure on a consolidated basis is important in analyzing our liquidity because it is the key component of certain material covenants contained within our credit agreement, which is discussed in more detail in Note 8, Long-term Debt, to the consolidated financial statements accompanying the 2025 Form 10‑K. These covenants are material terms of the credit agreement. Noncompliance with these financial covenants under our credit agreement—our interest coverage ratio and our leverage ratio—could result in our lenders requiring us to immediately repay all amounts borrowed. If we anticipated a potential covenant violation, we would seek relief from our lenders, which would have some cost to us, and such relief might be on terms less favorable to us than those in our existing credit agreement. In addition, if we cannot satisfy these financial covenants, we would be prohibited under our credit agreement from engaging in certain activities, such as incurring additional indebtedness, paying common stock dividends, repurchasing our common stock, making certain payments, and acquiring and disposing of assets. Consequently, Adjusted EBITDA is critical to our assessment of our liquidity.

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In general terms, the credit agreement definition of Adjusted EBITDA, therein referred to as “Adjusted Consolidated EBITDA,” allows us to add back to consolidated Net income interest expense, income taxes, and depreciation and amortization and then add back to consolidated Net income (1) all unusual or nonrecurring items reducing consolidated Net income (of which only up to $10 million in a year may be cash expenditures), (2) any losses from discontinued operations, (3) non-ordinary course fees, costs and expenses incurred with respect to any litigation or settlement, (4) share-based compensation expense, (5) costs and expenses associated with changes in the fair value of marketable securities, (6) costs and expenses associated with the issuance or prepayment of debt, and acquisitions, and (7) any restructuring charges and certain pro forma cost savings and synergies related to transactions and initiatives, which in the aggregate are not in excess of 25% of Adjusted Consolidated EBITDA. We also subtract from consolidated Net income all unusual or nonrecurring items to the extent they increase consolidated Net income.
Under the credit agreement, the Adjusted EBITDA calculation does not require us to deduct net income attributable to noncontrolling interests or gains on fair value adjustments of hedging and equity instruments, disposal of assets, and development activities. It also does not allow us to add back losses on fair value adjustments of hedging instruments or unusual or nonrecurring cash expenditures in excess of $10 million. These items and amounts, in addition to the items falling within the credit agreement’s “unusual or nonrecurring” classification, may occur in future periods, but can vary significantly from period to period and may not directly relate to, or be indicative of, our ongoing liquidity or operating performance. Accordingly, the Adjusted EBITDA calculation presented here includes adjustments for them.
Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America, 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 or cash flows from operating, investing, or financing activities. 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 consolidated financial statements accompanying the 2025 Form 10‑K.
Our Adjusted EBITDA was as follows (in millions):
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA
 Three Months Ended March 31,
 20262025
Net cash provided by operating activities$313.1 $288.6 
Interest expense and amortization of debt discounts and fees31.8 31.8 
Gain (loss) on investments, excluding impairments16.2 (0.1)
Equity in net income of nonconsolidated affiliates0.4 0.9 
Net income attributable to noncontrolling interests in continuing operations(53.7)(45.0)
Amortization of debt-related items(2.4)(2.4)
Distributions from nonconsolidated affiliates(0.1)(0.5)
Current portion of income tax expense47.9 32.8 
Change in assets and liabilities33.8 7.5 
Cash (provided by) used in operating activities of discontinued operations(21.2)0.7 
Change in fair market value of marketable securities0.2 (0.7)
Gain on sale of Gamma Knife(17.5)— 
Other0.3 — 
Adjusted EBITDA$348.8 $313.6 

29

Reconciliation of Net Income to Adjusted EBITDA
Three Months Ended March 31,
 20262025
Net income$248.2 $196.5 
(Income) loss from discontinued operations, net of tax, attributable to Encompass Health(15.9)0.5 
Net income attributable to noncontrolling interests included in continuing operations(53.7)(45.0)
Provision for income tax expense56.4 41.6 
Interest expense and amortization of debt discounts and fees31.8 31.8 
Depreciation and amortization87.3 79.2 
Loss on early extinguishment of debt0.2 — 
Loss on disposal or impairment of assets0.3 0.2 
Stock-based compensation11.5 9.5 
Change in fair market value of marketable securities0.2 (0.7)
Gain on sale of Gamma Knife(17.5)— 
Adjusted EBITDA$348.8 $313.6 
For additional information see the “Results of Operations” section of this Item.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 1, Basis of Presentation, to our condensed consolidated financial statements included under Part I, Item 1, Financial Statements (Unaudited), of this report.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, an evaluation was carried out by our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended. Based on our evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our Internal Control over Financial Reporting during the quarter ended March 31, 2026 that have a material effect on our Internal Control over Financial Reporting.

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PART II. OTHER INFORMATION
Item 1.Legal Proceedings
We provide services in the highly regulated healthcare industry. Furthermore, operating inpatient rehabilitation hospitals requires significant staffing and involves intensive therapy for individuals suffering from significant physical or cognitive disabilities or injuries. In the ordinary course of our business, we are subject to regulatory and other governmental audits and investigations and are party to various legal actions, proceedings, and claims, including employment and personal injury claims. These matters could potentially subject us to sanctions, damages, recoupments, fines, and other penalties. Some of these matters have been material to us in the past, and others in the future may, either individually or in the aggregate, be material and adverse to our business, financial position, results of operations, and liquidity.
Additionally, the False Claims Act (the “FCA”) allows private citizens, called “relators,” to institute civil proceedings on behalf of the United States alleging violations of the FCA. These lawsuits, also known as “qui tam” actions, are common in the healthcare industry and can involve significant monetary damages, fines, attorneys’ fees and the award of bounties to the relators who successfully prosecute or bring these suits to the government. It is possible that qui tam lawsuits have been filed against us, which suits remain under seal, or that we are unaware of such filings or prevented by existing law or court order from discussing or disclosing the filing of such suits. Therefore, from time to time, we may be party to one or more undisclosed qui tam cases brought pursuant to the FCA.
Information relating to certain legal proceedings in which we are involved is included in Note 10, Contingencies and Other Commitments, to the condensed consolidated financial statements contained in Part I, Item 1, Financial Statements (Unaudited), of this report and should be read in conjunction with the related disclosure previously reported in our Annual Report on Form 10‑K for the year ended December 31, 2025 (the “2025 Form 10‑K”).
Item 1A.Risk Factors
There have been no material changes from the risk factors disclosed in Part I, Item 1A, Risk Factors, of the 2025 Form 10-K. However, certain information in those risk factors has been updated by the discussion in the “Executive Overview—Key Challenges” section of Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report, which section is incorporated by reference herein.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities
The following table summarizes our repurchases of equity securities during the three months ended March 31, 2026:
Period
Total Number of Shares (or Units) Purchased(1)
Average Price Paid per Share (or Unit) ($)Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs(2)
January 1 through January 31, 2026496,959 $101.76 396,586 290,275,909 
February 1 through February 28, 2026318,093 104.46 128,656 277,310,462 
March 1 through March 31, 2026172,377 

101.71 172,346 259,780,455 
Total987,429 102.62 697,588 
(1)Except as noted in the following sentence, the number of shares reported in this column includes the shares purchased under the plan or program as reported in the third column of this table and shares tendered by employees as payment of the tax liabilities incident to the vesting of previously awarded shares of restricted stock. In January, 615 shares were purchased pursuant to our Directors’ Deferred Stock Investment Plan. This plan is a nonqualified deferral plan allowing non-employee directors to make advance elections to defer a fixed percentage of their director fees. The plan administrator acquires the shares in the open market which are then held in a rabbi trust. The plan also provides that dividends paid on the shares held for the accounts of the directors will be reinvested in shares of our common stock which will also be held in the trust. The directors’ rights to all shares in the trust are nonforfeitable, but the shares are only released to the directors after departure from our board.
(2)    On October 28, 2013, we announced our board of directors authorized the repurchase of up to $200 million of our common stock, which has been amended from time to time. Most recently, on July 24, 2024, our board approved resetting the aggregate common stock repurchase authorization to $500 million. The repurchase authorization does not require the repurchase of a specific number of shares, has an indefinite term, and is subject to termination at any time by our board of directors. Subject to certain terms and conditions, including a maximum price per share and compliance with federal and state securities and other laws, the repurchases may be made from time to time in open market transactions, privately negotiated transactions, or other transactions, including trades under a plan established in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.

Item 5.Other Information
Insider Trading Arrangements
None.

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Item 6.Exhibits
No. Description
 
 
 
 
 
 
 
101 
Sections of the Encompass Health Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in XBRL (eXtensible Business Reporting Language), submitted in the following files:
 101.INSXBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

33

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 ENCOMPASS HEALTH CORPORATION
   
By:/s/ Douglas E. Coltharp
  Douglas E. Coltharp
  Executive Vice President and Chief Financial Officer
   
 Date:May 1, 2026

34

Exhibit 22
List of Subsidiary Guarantors
The following direct and indirect subsidiaries of Encompass Health Corporation guarantee each series of its senior unsecured notes as of March 31, 2026.
Advanced Homecare Holdings, Inc.
Continental Medical Systems, LLC
Continental Rehabilitation Hospital of Arizona, Inc.
Encompass Health Acquisition Holdings Subsidiary, LLC
Encompass Health Acquisition Holdings, LLC
Encompass Health Alabama Real Estate, LLC
Encompass Health Arizona Real Estate, LLC
Encompass Health Arkansas Real Estate, LLC
Encompass Health California Real Estate, LLC
Encompass Health Colorado Real Estate, LLC
Encompass Health Connecticut Real Estate, LLC
Encompass Health Fairlawn Holdings, LLC
Encompass Health Illinois Real Estate, LLC
Encompass Health Iowa Real Estate, LLC
Encompass Health Joint Ventures Holdings, LLC
Encompass Health Kansas Real Estate, LLC
Encompass Health Kentucky Real Estate, LLC
Encompass Health Louisiana Real Estate, LLC
Encompass Health Maryland Real Estate, LLC
Encompass Health Massachusetts Real Estate, LLC
Encompass Health Nevada Real Estate, LLC
Encompass Health New Mexico Real Estate, LLC
Encompass Health Ohio Real Estate, LLC
Encompass Health Owned Hospitals Holdings, LLC
Encompass Health Pennsylvania Real Estate, LLC
Encompass Health Real Estate, LLC
Encompass Health Rehabilitation Hospital of Abilene, LLC
Encompass Health Rehabilitation Hospital of Albuquerque, LLC
Encompass Health Rehabilitation Hospital of Altamonte Springs, LLC
Encompass Health Rehabilitation Hospital of Arlington, LLC
Encompass Health Rehabilitation Hospital of Austin, LLC
Encompass Health Rehabilitation Hospital of Bakersfield, LLC
Encompass Health Rehabilitation Hospital of Bluffton, LLC
Encompass Health Rehabilitation Hospital of Braintree, LLC
Encompass Health Rehabilitation Hospital of Cardinal Hill, LLC
Encompass Health Rehabilitation Hospital of Central Florida, LLC
Encompass Health Rehabilitation Hospital of Cincinnati, LLC
Encompass Health Rehabilitation Hospital of City View, Inc.
Encompass Health Rehabilitation Hospital of Clermont, LLC
Encompass Health Rehabilitation Hospital of Colorado Springs, Inc.


Encompass Health Rehabilitation Hospital of Columbia, Inc.
Encompass Health Rehabilitation Hospital of Concord, Inc.
Encompass Health Rehabilitation Hospital of Cumming, LLC
Encompass Health Rehabilitation Hospital of Cypress, LLC
Encompass Health Rehabilitation Hospital of Dallas, LLC
Encompass Health Rehabilitation Hospital of Danbury, LLC
Encompass Health Rehabilitation Hospital of Daytona Beach, LLC
Encompass Health Rehabilitation Hospital of Desert Canyon, LLC
Encompass Health Rehabilitation Hospital of Dothan, Inc.
Encompass Health Rehabilitation Hospital of East Valley, LLC
Encompass Health Rehabilitation Hospital of Erie, LLC
Encompass Health Rehabilitation Hospital of Fitchburg, LLC
Encompass Health Rehabilitation Hospital of Florence, Inc.
Encompass Health Rehabilitation Hospital of Fort Mill, LLC
Encompass Health Rehabilitation Hospital of Fort Smith, LLC
Encompass Health Rehabilitation Hospital of Franklin, LLC
Encompass Health Rehabilitation Hospital of Fredericksburg, LLC
Encompass Health Rehabilitation Hospital of Gadsden, LLC
Encompass Health Rehabilitation Hospital of Greenville, LLC
Encompass Health Rehabilitation Hospital of Harmarville, LLC
Encompass Health Rehabilitation Hospital of Henderson, LLC
Encompass Health Rehabilitation Hospital of Houston, LLC
Encompass Health Rehabilitation Hospital of Humble, LLC
Encompass Health Rehabilitation Hospital of Jacksonville, LLC
Encompass Health Rehabilitation Hospital of Johnston, LLC
Encompass Health Rehabilitation Hospital of Katy, LLC
Encompass Health Rehabilitation Hospital of Kissimmee, LLC
Encompass Health Rehabilitation Hospital of Lake Worth, LLC
Encompass Health Rehabilitation Hospital of Lakeland, LLC
Encompass Health Rehabilitation Hospital of Lakeview, LLC
Encompass Health Rehabilitation Hospital of Largo, LLC
Encompass Health Rehabilitation Hospital of Las Vegas, LLC
Encompass Health Rehabilitation Hospital of Libertyville, LLC
Encompass Health Rehabilitation Hospital of Manati, Inc.
Encompass Health Rehabilitation Hospital of Mechanicsburg, LLC
Encompass Health Rehabilitation Hospital of Miami, LLC
Encompass Health Rehabilitation Hospital of Middletown, LLC
Encompass Health Rehabilitation Hospital of Modesto, LLC
Encompass Health Rehabilitation Hospital of Montgomery, Inc.
Encompass Health Rehabilitation Hospital of Murrieta, LLC
Encompass Health Rehabilitation Hospital of New England, LLC
Encompass Health Rehabilitation Hospital of Nittany Valley, Inc.
Encompass Health Rehabilitation Hospital of North Tampa, LLC
Encompass Health Rehabilitation Hospital of Northern Kentucky, LLC
Encompass Health Rehabilitation Hospital of Northern Virginia, LLC


Encompass Health Rehabilitation Hospital of Northwest Tucson, LLC
Encompass Health Rehabilitation Hospital of Panama City, Inc.
Encompass Health Rehabilitation Hospital of Pearland, LLC
Encompass Health Rehabilitation Hospital of Pensacola, LLC
Encompass Health Rehabilitation Hospital of Petersburg, LLC
Encompass Health Rehabilitation Hospital of Plano, LLC
Encompass Health Rehabilitation Hospital of Prosper, LLC
Encompass Health Rehabilitation Hospital of Reading, LLC
Encompass Health Rehabilitation Hospital of Richardson, LLC
Encompass Health Rehabilitation Hospital of Round Rock, LLC
Encompass Health Rehabilitation Hospital of San Antonio, Inc.
Encompass Health Rehabilitation Hospital of San Juan, Inc.
Encompass Health Rehabilitation Hospital of Sarasota, LLC
Encompass Health Rehabilitation Hospital of Scottsdale, LLC
Encompass Health Rehabilitation Hospital of Shelby County, LLC
Encompass Health Rehabilitation Hospital of Shreveport, LLC
Encompass Health Rehabilitation Hospital of Sioux Falls, LLC
Encompass Health Rehabilitation Hospital of Spring Hill, Inc.
Encompass Health Rehabilitation Hospital of St. Augustine, LLC
Encompass Health Rehabilitation Hospital of St. Petersburg, LLC
Encompass Health Rehabilitation Hospital of Sugar Land, LLC
Encompass Health Rehabilitation Hospital of Sunrise, LLC
Encompass Health Rehabilitation Hospital of Tallahassee, LLC
Encompass Health Rehabilitation Hospital of Texarkana, Inc.
Encompass Health Rehabilitation Hospital of the Mid-Cities, LLC
Encompass Health Rehabilitation Hospital of The Woodlands, Inc.
Encompass Health Rehabilitation Hospital of Toledo, LLC
Encompass Health Rehabilitation Hospital of Toms River, LLC
Encompass Health Rehabilitation Hospital of Treasure Coast, Inc.
Encompass Health Rehabilitation Hospital of Tustin, LLC
Encompass Health Rehabilitation Hospital of Utah, LLC
Encompass Health Rehabilitation Hospital of Vineland, LLC
Encompass Health Rehabilitation Hospital of Waco, LLC
Encompass Health Rehabilitation Hospital of Western Massachusetts, LLC
Encompass Health Rehabilitation Hospital of York, LLC
Encompass Health Rehabilitation Hospital The Vintage, LLC
Encompass Health Rehabilitation Hospital Vision Park, LLC
Encompass Health Rehabilitation Institute of Tucson, LLC
Encompass Health Rhode Island Real Estate, LLC
Encompass Health South Carolina Real Estate, LLC
Encompass Health South Dakota Real Estate, LLC
Encompass Health Support Companies, LLC
Encompass Health Texas Real Estate, LLC
Encompass Health Tucson Holdings, LLC
Encompass Health Utah Real Estate, LLC


Encompass Health ValleyofTheSun Rehabilitation Hospital, LLC
Encompass Health Virginia Real Estate, LLC
Encompass Health West Virginia Real Estate, LLC
Encompass Health Wisconsin Real Estate, LLC
Encompass IP Holdings Corporation
K.C. Rehabilitation Hospital, Inc.
Print Promotions Group, LLC
Rebound, LLC
Rehabilitation Hospital Corporation of America, LLC
Rehabilitation Hospital of North Alabama, LLC
Rehabilitation Hospital of Plano, LLC
Reliant Blocker Corp.
West Virginia Rehabilitation Hospital, Inc.
Western Administrative Services, Inc.

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Mark J. Tarr, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Encompass Health Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:May 1, 2026   
 By:
/s/ MARK J. TARR
 
  Mark J. Tarr 
  President and Chief Executive Officer 
    

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Douglas E. Coltharp, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Encompass Health Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:May 1, 2026   
 By:
/s/ DOUGLAS E. COLTHARP
 
  Douglas E. Coltharp 
  Executive Vice President and 
  Chief Financial Officer 

Exhibit 32.1

CERTIFICATE OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Encompass Health Corporation on Form 10-Q for the period ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark J. Tarr, President and Chief Executive Officer of Encompass Health Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Encompass Health Corporation.
Date:May 1, 2026   
 By:
/s/ MARK J. TARR
 
  Mark J. Tarr 
  President and Chief Executive Officer 
    
 
A signed original of this written statement has been provided to Encompass Health Corporation and will be retained by Encompass Health Corporation and furnished to the Securities and Exchange Commission or its staff upon request.  This written statement shall not, except to the extent required by the 2002 Act, be deemed filed by Encompass Health Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Encompass Health Corporation specifically incorporates it by reference.

Exhibit 32.2

CERTIFICATE OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report of Encompass Health Corporation on Form 10-Q for the period ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas E. Coltharp, Executive Vice President and Chief Financial Officer of Encompass Health Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Encompass Health Corporation.
Date:May 1, 2026   
 By:
/s/ DOUGLAS E. COLTHARP
 
  Douglas E. Coltharp 
  Executive Vice President and 
  Chief Financial Officer 

A signed original of this written statement has been provided to Encompass Health Corporation and will be retained by Encompass Health Corporation and furnished to the Securities and Exchange Commission or its staff upon request.  This written statement shall not, except to the extent required by the 2002 Act, be deemed filed by Encompass Health Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Encompass Health Corporation specifically incorporates it by reference.