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Basis of Presentation | 9 Months Ended
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Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Basis of Presentation | 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. Our national network of inpatient rehabilitation hospitals stretches across 38 states and Puerto Rico, with concentrations of hospitals in Florida and Texas. As of September 30, 2024, we operate 165 inpatient rehabilitation hospitals. We are the sole owner of 100 of these hospitals. We retain 50.0% to 97.5% ownership in the remaining 65 jointly owned hospitals. 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 28, 2024 (the “2023 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, 2023 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 September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Medicare | $ | 883.3 |  |  | $ | 786.5 |  |  | $ | 2,573.9 |  |  | $ | 2,306.1 |
Medicare Advantage | 220.9 |  |  | 191.7 |  |  | 671.4 |  |  | 576.6 |
Managed care | 148.1 |  |  | 135.4 |  |  | 430.8 |  |  | 396.4 |
Medicaid | 46.1 |  |  | 49.2 |  |  | 134.4 |  |  | 145.6 |
Other third-party payors | 10.0 |  |  | 10.6 |  |  | 30.8 |  |  | 32.2 |
Workers’ compensation | 7.0 |  |  | 6.6 |  |  | 21.0 |  |  | 19.6 |
Patients | 4.1 |  |  | 3.8 |  |  | 11.8 |  |  | 10.4 |
Other income | 31.5 |  |  | 23.1 |  |  | 94.1 |  |  | 67.5 |
Total | $ | 1,351.0 |  |  | $ | 1,206.9 |  |  | $ | 3,968.2 |  |  | $ | 3,554.4 |
See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements accompanying the 2023 Form 10-K for our policy related to Net operating revenues. Noncontrolling Interests in Consolidated Affiliates— Effective July 1, 2024, we expanded our existing joint venture with Piedmont Healthcare (“Piedmont”), which we control, by contributing the assets and operations of our previously wholly-owned 70-bed hospital in Augusta, Georgia. Piedmont contributed approximately $90 million on July 1, 2024, which indirectly resulted in Piedmont obtaining a 50% ownership interest in the hospital. As a result of this transaction, we recorded a post-tax gain of $22.9 million increasing C apital in excess of par value on the condensed consolidated statement of shareholders’ equity for the nine months ending September 30, 2024. The contribution from Piedmont is included in Contributions from noncontrolling interests of consolidated affiliates on the condensed consolidated statement of cash flows for the nine months ended September 30, 2024. On July 1, 2023, we entered into a joint venture agreement with the University of Maryland Rehabilitation Institute of Southern Maryland, LLC (“UM Rehab”) to operate our previously wholly-owned 60-bed hospital in Bowie, Maryland. As a condition of the joint venture agreement, UM Rehab paid $26.3 million on June 30, 2023, for a 50% ownership interest in the hospital which became effective on July 1, 2023. This payment is included in Contributions from noncontrolling interests of consolidated affiliates on the condensed consolidated statement of cash flows for the nine months ended September 30, 2023. Recent Accounting Pronouncements— In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires all public entities, including entities with a single reportable segment, to provide disclosure of (1) significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, (2) the amount and description of the composition of other segment items which reconcile to segment profit or loss, and (3) the title and position of the entity’s CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and allocating resources. ASU 2023-07 is effective for our annual periods beginning January 1, 2024 and interim periods beginning January 1, 2025. Early adoption is permitted with retrospective application required for all prior periods presented in the financial statements. We are currently evaluating the requirements of this standard and any potential impact it may have on our condensed consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which intends to improve the transparency of income tax disclosures by requiring companies to (1) disclose consistent categories and greater disaggregation of information in the effective rate reconciliation and (2) provide information on income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are required to apply the guidance prospectively but have the option to apply it retrospectively. 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.

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