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Business Combinations | 12 Months Ended
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Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations: 2022 Acquisitions During 2022, we completed the following inpatient rehabilitation acquisitions, none of which were individually material to our financial position, results of operations, or cash flows. Each acquisition was made to enhance our position and ability to provide inpatient rehabilitation services to patients in the applicable geographic areas. •In August 2022, we acquired 60% of the operations of a 23-bed inpatient rehabilitation unit in Grand Forks, North Dakota when Altru Health System contributed those operations to our existing joint venture. •In August 2022, we acquired 50% of the operations of a 22-bed inpatient rehabilitation unit in Moline, Illinois when Trinity Medical Center contributed those operations to our existing joint venture. •In December 2022, we acquired 50% of the operations of a 54-bed inpatient rehabilitation unit in Naples, Florida when NCH Healthcare System contributed those operations to our joint venture. We accounted for these transactions under the acquisition method of accounting and reported the results of operations of the acquired hospitals from the respective dates of acquisition. Assets acquired were recorded at their estimated fair values as of the acquisition date. Estimated fair values were based on an income approach using discounted cash flow techniques for the noncompete intangible assets. The aforementioned income method utilizes management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital. The excess of the fair value of the consideration conveyed over the fair value of the assets acquired was recorded as goodwill. The goodwill reflects our expectations of our ability to gain access to and penetrate the acquired hospitals’ historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in these markets. None of the goodwill recorded as a result from these transactions is deductible for federal income tax purposes. The fair value of the assets acquired at the acquisition dates were as follows (in millions):
Identifiable intangible assets: |
Noncompete agreements (useful lives of 2 to 3 years) | $ | 0.9 |
Goodwill | 26.2 |
Total assets acquired | $ | 27.1 |
Information regarding the net cash paid for the acquisitions during 2022 is as follows (in millions):
Fair value of assets acquired | $ | 0.9 |
Goodwill | 26.2 |
Fair value of noncontrolling interest owned by joint venture partner | (27.1) |
Net cash paid for acquisitions | $ | — |
Pro Forma Results of Operations The following table summarizes the results of operations of the above-mentioned acquisitions from the dates of acquisitions included in our consolidated results of operations and the unaudited pro forma results of operations of the combined entity had the dates of the acquisitions been January 1, 2021 (in millions):
| Net Operating Revenues |  | Net Income Attributable to Encompass Health
Acquired entities only: Actual from acquisition date to December 31, 2022 | $ | — |  |  | $ | — |
Combined entity: Supplemental pro forma from 01/01/2022-12/31/2022 (unaudited) | 4,369.0 |  |  | 273.7 |
Combined entity: Supplemental pro forma from 01/01/2021-12/31/2021 (unaudited) | 4,039.8 |  |  | 415.3 |
The information presented above is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisitions had occurred as of the beginning of our 2021 period. 2021 Acquisitions During 2021, we completed the following inpatient rehabilitation acquisitions, none of which were individually material to our financial position, results of operations, or cash flows. Each acquisition was made to enhance our position and ability to provide inpatient rehabilitation services to patients in the applicable geographic areas. •In April 2021, we acquired 51% of the operations of a 14-bed inpatient rehabilitation unit in San Angelo, Texas when Shannon Medical contributed those operations to our existing joint venture entity. •In June 2021, we acquired 75% of the operations of a 16-bed inpatient rehabilitation unit in McKees Rocks, Pennsylvania through our existing joint venture with Heritage Valley Health System, Inc. The acquisition was funded using cash on hand. •In July 2021, we acquired 65% of the operations of a 22-bed inpatient rehabilitation unit in Odessa, Texas when ECHD Ventures contributed those operations to our existing joint venture entity. We accounted for these transactions under the acquisition method of accounting and reported the results of operations of the acquired hospitals from its respective date of acquisition. Assets acquired were recorded at their estimated fair values as of the acquisition date. Estimated fair values were based on various valuation methodologies including: an income approach using primarily discounted cash flow techniques for the noncompete intangible assets and an income approach utilizing the relief from royalty method for the trade name intangible asset. The aforementioned income methods utilize management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration conveyed over the fair value of the assets acquired was recorded as goodwill. The goodwill reflects our expectations of our ability to gain access to and penetrate the acquired hospital’s historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in this market. None of the goodwill recorded as a result from these transactions is deductible for federal income tax purposes. The fair value of the assets acquired at the acquisition dates were as follows (in millions):
Identifiable intangible assets: |
Noncompete agreements (useful lives of 3 to 5 years) | $ | 1.0 |
Trade name (useful life of 20 years) | 0.3 |
Goodwill | 8.8 |
Other long-term assets | 0.1 |
Total assets acquired | $ | 10.2 |
Information regarding the net cash paid for the acquisitions during 2021 is as follows (in millions):
Fair value of assets acquired | $ | 1.4 |
Goodwill | 8.8 |
Fair value of noncontrolling interest owned by joint venture partner | (9.1) |
Net cash paid for acquisitions | $ | 1.1 |
2021 Pro Forma Results of Operations The following table summarizes the results of operations of the above mentioned-acquisitions from their respective dates of acquisition included in our consolidated results of operations and the unaudited pro forma results of operations of the combined entity had the date of the acquisitions been January 1, 2020 (in millions):
| Net Operating Revenues |  | Net Income Attributable to Encompass Health
Acquired entities only: Actual from acquisition date to December 31, 2021 | $ | — |  |  | $ | — |
Combined entity: Supplemental pro forma from 01/01/2021-12/31/2021 (unaudited) | 4,021.1 |  |  | 412.5 |
Combined entity: Supplemental pro forma from 01/01/2020-12/31/2020 (unaudited) | 3,581.3 |  |  | 285.0 |
The information presented above is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisitions had occurred as of the beginning of our 2020 period. 2020 Acquisitions During 2020, we completed the following inpatient rehabilitation acquisitions, none of which were individually material to our financial position, results of operations, or cash flows. Each acquisition was made to enhance our position and ability to provide inpatient rehabilitation services to patients in the applicable geographic areas. •In January 2020, we acquired 68% of the operations of a 13-bed inpatient rehabilitation unit in Denver, Colorado through a joint venture with Portercare Adventist Health System. The acquisition was funded through a contribution of our existing 40-bed inpatient rehabilitation hospital in Littleton, Colorado and through contributions of funds which were utilized by the consolidated joint venture to build a 20-bed expansion to the Littleton hospital. •In May 2020, we acquired 51% of the operations of a 45-bed inpatient rehabilitation unit in Dayton, Ohio through a joint venture with Premier Health Partners. The acquisition was funded through contributions of funds which were utilized by the consolidated joint venture to build a 60-bed de novo inpatient rehabilitation hospital. We accounted for these transactions under the acquisition method of accounting and reported the results of operations of the acquired hospitals from its respective date of acquisition. Assets acquired were recorded at their estimated fair values as of the acquisition date. Estimated fair values were based on various valuation methodologies including an income approach using primarily discounted cash flow techniques for the noncompete intangible assets and an income approach utilizing the relief from royalty method for the trade name intangible asset. The aforementioned income methods utilize management’s estimates of future operating results and cash flows discounted using a weighted-average cost of capital that reflects market participant assumptions. The excess of the fair value of the consideration conveyed over the fair value of the assets acquired was recorded as goodwill. The goodwill reflects our expectations of our ability to gain access to and penetrate the acquired hospital’s historical patient base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities based on positive demographic trends in this market. None of the goodwill recorded as a result from these transactions are deductible for federal income tax purposes. The fair value of the assets acquired at the acquisition date were as follows (in millions):
Identifiable intangible assets: |
Noncompete agreements (useful lives of 2 to 3 years) | $ | 0.7 |
Trade name (useful life of 20 years) | 0.9 |
Goodwill | 9.3 |
Total assets acquired | $ | 10.9 |
Information regarding the net cash paid for the inpatient rehabilitation acquisitions during 2020 is as follows (in millions):
Fair value of assets acquired | $ | 1.6 |
Goodwill | 9.3 |
Fair value of noncontrolling interest owned by joint venture partner | (10.9) |
Net cash paid for acquisitions | $ | — |
2020 Pro Forma Results of Operations The following table summarizes the results of operations of the above-mentioned acquisitions from their respective dates of acquisition included in our consolidated results of operations and the unaudited pro forma results of operations of the combined entity had the date of the acquisitions been January 1, 2020 (in millions):
| Net Operating Revenues |  | Net Income Attributable to Encompass Health
Acquired entities only: Actual from acquisition date to December 31, 2020 | $ | — |  |  | $ | — |
Combined entity: Supplemental pro forma from 01/01/2020-12/31/2020 (unaudited) | 3,571.9 |  |  | 284.8 |
The information presented above is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisitions had occurred as of the beginning of our 2020 reporting period.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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