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Segment Reporting Segment Reporting
 12 Months Ended
Dec. 31, 2018
Segment Reporting [Abstract]  
Segment Reporting
Segment Reporting:
Our internal financial reporting and management structure is focused on the major types of services provided by Encompass Health. We manage our operations using two operating segments which are also our reportable segments: (1) inpatient rehabilitation and (2) home health and hospice. These reportable operating segments are consistent with information used by our chief executive officer, who is our chief operating decision maker, to assess performance and allocate resources. The following is a brief description of our reportable segments:
•
Inpatient Rehabilitation - Our national network of inpatient rehabilitation hospitals stretches across 32 states and Puerto Rico, with a concentration of hospitals in the eastern half of the United States and Texas. As of December 31, 2018, we operate 130 inpatient rehabilitation hospitals, including one hospital that operates as a joint venture which we account for using the equity method of accounting. We are the sole owner of 85 of these hospitals. We retain 50.0% to 97.5% ownership in the remaining 45 jointly owned hospitals. In addition, we manage five inpatient rehabilitation units through management contracts. We provide specialized rehabilitative treatment on both an inpatient and outpatient 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.
•
Home Health and Hospice - As of December 31, 2018, we provide home health and hospice services in 278 locations across 30 states with concentrations in the Southeast and Texas. In addition, two of these agencies operate as joint ventures which we account for using the equity method of accounting. We are the sole owner of 270 of these locations We retain 50.0% to 81.0% ownership in the remaining eight jointly owned locations. Our home health services include a comprehensive range of Medicare-certified home nursing services to adult patients in need of care. These services include, among others, skilled nursing, physical, occupational, and speech therapy, medical social work, and home health aide services. Our hospice services include in-home services to terminally ill patients and their families to address patients’ physical needs, including pain control and symptom management, and to provide emotional and spiritual support.
The accounting policies of our reportable segments are the same as those described in Note 1, Summary of Significant Accounting Policies. All revenues for our services are generated through external customers. See Note 1, Summary of Significant Accounting Policies, “Net Operating Revenues,” for the payor composition of our revenues. No corporate overhead is allocated to either of our reportable segments. Our chief operating decision maker evaluates the performance of our segments and allocates resources to them based on adjusted earnings before interest, taxes, depreciation, and amortization (“Segment Adjusted EBITDA”).
Selected financial information for our reportable segments is as follows (in millions):
 
Inpatient Rehabilitation
 
Home Health and Hospice
 
For the Year Ended December 31,
 
For the Year Ended December 31,
 
2018
 
2017
 
2016
 
2018
 
2017
 
2016
Net operating revenues
$
3,346.2

 
$
3,141.3

 
$
2,964.1

 
$
931.1

 
$
772.6

 
$
678.5

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Inpatient rehabilitation:
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
1,701.5

 
1,603.8

 
1,493.4

 
—

 
—

 
—

Other operating expenses
502.3

 
462.5

 
431.5

 
—

 
—

 
—

Supplies
140.6

 
135.7

 
128.8

 
—

 
—

 
—

Occupancy costs
63.8

 
61.9

 
61.2

 
—

 
—

 
—

Home health and hospice:
 
 
 
 
 
 
 
 
 
 
 
Cost of services sold (excluding depreciation and amortization)
—

 
—

 
—

 
438.4

 
363.3

 
333.1

Support and overhead costs
—

 
—

 
—

 
323.5

 
277.2

 
237.2

 
2,408.2

 
2,263.9

 
2,114.9

 
761.9

 
640.5

 
570.3

Other income
(3.6
)
 
(4.1
)
 
(2.9
)
 
(0.5
)
 
—

 
—

Equity in net income of nonconsolidated affiliates
(7.5
)
 
(7.3
)
 
(9.1
)
 
(1.2
)
 
(0.7
)
 
(0.7
)
Noncontrolling interests
77.2

 
67.6

 
64.0

 
8.5

 
6.9

 
6.5

Segment Adjusted EBITDA
$
871.9

 
$
821.2

 
$
797.2

 
$
162.4

 
$
125.9

 
$
102.4

 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
$
264.6

 
$
238.0

 
$
198.3

 
$
11.6

 
$
10.7

 
$
8.7


 
Inpatient Rehabilitation
 
Home Health and Hospice
 
Encompass Health Consolidated
As of December 31, 2018
 
 
 
 
 
Total assets
$
3,900.9

 
$
1,314.6

 
$
5,175.0

Investments in and advances to nonconsolidated affiliates
9.5

 
2.7

 
12.2

As of December 31, 2017
 
 
 
 
 
Total assets*
$
3,759.9

 
$
1,150.5

 
$
4,864.5

Investments in and advances to nonconsolidated affiliates
9.3

 
2.6

 
11.9


(*) 2017 amounts have been revised to correct an error in our deferred tax assets as discussed in Note 1, Summary of Significant Accounting Policies, “Revision of Previously Issued Financial Statements.”
Segment reconciliations (in millions):
 
For the Year Ended December 31,
 
2018
 
2017
 
2016
Total segment Adjusted EBITDA
$
1,034.3

 
$
947.1

 
$
899.6

General and administrative expenses
(220.2
)
 
(171.7
)
 
(133.4
)
Depreciation and amortization
(199.7
)
 
(183.8
)
 
(172.6
)
Loss on disposal of assets
(5.7
)
 
(4.6
)
 
(0.7
)
Government, class action, and related settlements
(52.0
)
 
—

 
—

Professional fees—accounting, tax, and legal
—

 
—

 
(1.9
)
Loss on early extinguishment of debt
—

 
(10.7
)
 
(7.4
)
Interest expense and amortization of debt discounts and fees
(147.3
)
 
(154.4
)
 
(172.1
)
Net income attributable to noncontrolling interests
83.1

 
79.1

 
70.5

SARs mark-to-market impact on noncontrolling interests
2.6

 
—

 
—

Change in fair market value of equity securities
(1.9
)
 
—

 
—

Tax reform impact on noncontrolling interests
—

 
(4.6
)
 
—

Income from continuing operations before income tax expense
$
493.2

 
$
496.4

 
$
482.0


 
As of December 31, 2018
 
As of December 31, 2017
Total assets for reportable segments*
$
5,215.5

 
$
4,910.4

Reclassification of noncurrent deferred income tax liabilities to net noncurrent deferred income tax assets
(40.5
)
 
(45.9
)
Total consolidated assets*
$
5,175.0

 
$
4,864.5


(*) 2017 amounts have been revised to correct an error in our deferred tax assets as discussed in Note 1, Summary of Significant Accounting Policies, “Revision of Previously Issued Financial Statements.”
Additional detail regarding the revenues of our operating segments by service line follows (in millions):
 
For the Year Ended December 31,
 
2018
 
2017
 
2016
Inpatient rehabilitation:
 
 
 
 
 
Inpatient
$
3,247.9

 
$
3,039.3

 
$
2,853.9

Outpatient and other
98.3

 
102.0

 
110.2

Total inpatient rehabilitation
3,346.2

 
3,141.3

 
2,964.1

Home health and hospice:
 
 
 
 
 
Home health
814.6

 
702.4

 
630.8

Hospice
116.5

 
70.2

 
47.7

Total home health and hospice
931.1

 
772.6

 
678.5

Total net operating revenues
$
4,277.3

 
$
3,913.9

 
$
3,642.6