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Share-Based Payments
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Share-Based Payments Share-Based Payments:
The Company has awarded employee stock-based compensation in the form of stock options and restricted stock awards (“RSAs”) under the terms of share-based incentive plans designed to align employee and executive interests to those of its stockholders. All employee stock-based compensation awarded during 2022, 2021, and 2020 was issued under the 2016 Omnibus Performance Incentive Plan, a stockholder-approved plan that reserves and provides for the grant of up to 16,860,765 shares of common stock after adjustment for the effect of the Spin Off. This plan allows for the grants of nonqualified stock options, incentive stock options, restricted stock, stock appreciate rights, performance shares, performance share units, dividend equivalents, restricted stock units (“RSUs”), and/or other stock-based awards. Stock-based compensation expense recognized in continuing operations was $29.2 million, $29.1 million, and $25.6 million during 2022, 2021, and 2020, respectively. Stock-based compensation expense classified as discontinued operations was $2.5 million, $3.6 million, and $3.9 million during 2022, 2021, and 2020, respectively.
Stock Options—
Under our share-based incentive plans, officers and employees are given the right to purchase shares of Encompass Health common stock at a fixed grant price determined on the day the options are granted. The terms and conditions of the options, including exercise prices and the periods in which options are exercisable, are generally at the discretion of the compensation and human capital committee of our board of directors. However, no options are exercisable beyond ten years from the date of grant. Granted options vest over the awards’ requisite service periods, which are generally three years.
The fair values of the options granted during the years ended December 31, 2022, 2021, and 2020 have been estimated at the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 For the Year Ended December 31,
 202220212020
Expected volatility28.3 %28.4 %24.8 %
Risk-free interest rate1.7 %1.1 %1.0 %
Expected life (years)7.87.17.1
Dividend yield1.9 %1.9 %2.0 %
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, the Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the expected stock price volatility. We estimate our expected term through an analysis of actual, historical post-vesting exercise, cancellation, and expiration behavior by our officers and employees and projected post-vesting activity of outstanding options. We calculate volatility based on the historical volatility of our common stock over the period commensurate with the expected term of the options. The risk-free interest rate is the implied daily yield currently available on U.S. Treasury issues with a remaining term closely approximating the expected term used as the input to the Black-Scholes option-pricing model. We estimated our dividend yield based on our annual dividend rate and our stock price on the dividend payment dates. Under the Black-Scholes option-pricing model, the weighted-average grant date fair value per share of employee stock options granted during the years ended December 31, 2022, 2021, and 2020 was $17.29, $19.21, and $15.48, respectively.
A summary of our stock option activity and related information is as follows:
 Shares
(In Thousands)		Weighted- Average Exercise Price per ShareWeighted- Average Remaining Life (Years)Aggregate Intrinsic Value
(In Millions)
Outstanding, December 31, 2021711 $54.33   
Granted (1)
117 66.39   
Exercised (1)
(47)20.60   
Enhabit spin-off adjustment (2)
55 51.65 
Outstanding, December 31, 2022836 47.12 5.6$11.7 
Exercisable, December 31, 2022621 42.65 4.611.2 
(1) Options activity represents historical grant values prior to the Spin Off.
(2) In connection with the Spin Off, all outstanding Encompass Health stock options (whether vested or unvested) were converted into adjusted Encompass Health awards for current and former Encompass Health employees or Enhabit awards for Enhabit employees. Such adjusted awards preserved the same intrinsic value and general terms and conditions (including vesting) as were in place immediately prior to the adjustments.
We recognized approximately $1.2 million, $2.2 million, and $1.5 million of compensation expense related to our stock options for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, there was $1.5 million of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 23 months. The total intrinsic value of options exercised during the years ended December 31, 2022, 2021, and 2020 was $1.8 million, $0.1 million, and $2.3 million, respectively.
Restricted Stock—
The RSAs granted in 2022, 2021, and 2020 included service-based awards and performance-based awards (that also included a service requirement). These awards generally vest over a three-year requisite service period. For RSAs with a service and/or performance requirement, the fair value of the RSA is determined by the closing price of our common stock on the grant date.
A summary of our issued restricted stock awards is as follows (share information in thousands):
 SharesWeighted-Average Grant Date Fair Value
Nonvested shares at December 31, 2021454 $74.46 
Granted (1)
425 74.08 
Vested (1)
(306)70.92 
Forfeited (2)
(31)71.35 
Enhabit spin-off adjustment (3)
(16)62.87 
Nonvested shares at December 31, 2022526 63.35 
(1) RSA activity represents historical grant values prior to the Spin Off.
(2) Forfeiture activity prior to the Spin Off represents historical grant values, while the post-spin forfeitures reflects the impact of Spin Off.
(3) In connection with the Spin Off, all outstanding RSAs (whether vested or unvested) were converted into adjusted Encompass Health awards for current Encompass Health employees or Enhabit awards for Enhabit employees. Such adjusted awards preserved the same intrinsic value and general terms and conditions (including vesting) as were in place immediately prior to the adjustments.
The weighted-average grant-date fair value of restricted stock granted during the years ended December 31, 2021 and 2020 was $73.89 and $61.81 per share, respectively. We recognized approximately $26.4 million, $24.9 million, and $22.0 million of compensation expense related to our restricted stock awards for the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, there was $30.0 million of unrecognized compensation expense related to unvested restricted stock. This cost is expected to be recognized over a weighted-average period of 20 months. The remaining unrecognized compensation expense for the performance-based awards may vary each reporting period based on changes in the expected achievement of performance measures. The total fair value of shares vested during the years ended December 31, 2022, 2021, and 2020 was $20.0 million, $32.6 million, and $41.4 million, respectively. We accrue dividends on outstanding RSAs, which are paid upon vesting.
Nonemployee Stock-Based Compensation Plans—
During the years ended December 31, 2022, 2021, and 2020, we provided incentives to our nonemployee members of our board of directors through the issuance of RSUs out of our share-based incentive plans. RSUs are fully vested when awarded and receive dividend equivalents in the form of additional RSUs upon the payment of a cash dividend on our common stock. During the years ended December 31, 2022, 2021, and 2020, we issued 22,469, 24,043, and 32,196 RSUs, respectively, with a fair value of $67.42, $84.83, and $65.39, respectively, per unit. We recognized approximately $1.5 million, $2.0 million, and $2.1 million, respectively, of compensation expense upon their issuance in 2022, 2021, and 2020. There was no unrecognized compensation related to unvested shares as of December 31, 2022. During the years ended 2022, 2021, and 2020, we issued an additional 11,976, 8,577, and 8,987, respectively, of RSUs as dividend equivalents. As of December 31, 2022, 775,312 RSUs were outstanding. In addition to the above, we issued 130,406 additional RSUs to current and former members of our board of directors in connection with the Spin Off. Such adjusted awards preserved the same intrinsic value and general terms and conditions (including vesting) as were in place immediately prior to the adjustments.