Encompass Health Corporation (EHC): Business Model Canvas [Dec-2025 Updated]

You're trying to figure out where the real value is hiding in the post-acute care sector, and honestly, the blueprint for Encompass Health Corporation (EHC) is surprisingly straightforward: they've built a machine around high-acuity inpatient rehab, banking on superior patient outcomes to keep the referral pipeline from acute care hospitals flowing. With full-year 2025 net operating revenue guidance hitting nearly $6 billion and Medicare still driving over 64.1% of their Q3 take, their model is a masterclass in payer concentration and operational scale. It's all about beds, brains, and billing. Dig into the nine building blocks below to see exactly how they manage the massive labor costs and regulatory tightrope to hit those targets.

Encompass Health Corporation (EHC) - Canvas Business Model: Key Partnerships

You're looking at the core relationships that fuel Encompass Health Corporation's (EHC) engine for growth and patient flow. These partnerships aren't just nice-to-haves; they are the structural supports for their national inpatient rehabilitation footprint. Honestly, the data shows a clear strategy: partner locally to scale nationally.

Joint ventures with acute care health systems (e.g., Lee Health)

Encompass Health Corporation has built a significant portion of its network through collaboration, dating back to 1991. As of early 2025, the network included more than 60 joint ventures with acute care providers. These arrangements allow EHC to focus on its expertise-inpatient rehabilitation-while freeing up acute partners to concentrate on their core business.

Recent examples show the scale of these commitments:

• A new freestanding, 50-bed inpatient rehabilitation hospital in Amarillo, Texas, announced in August 2025, in a joint venture with BSA Health System.
• Plans with Vanderbilt Health to open a 40-bed hospital in Lebanon, Tennessee, and a separate 50-bed hospital in Fishers, Indiana.

The company's list of partners is broad, spanning different ownership types, including academic health systems and not-for-profit entities. For instance, a Lee Health subsidiary is listed among their joint venture partners. This JV strategy is tied directly to capacity expansion; in 2025 alone, EHC planned to launch a 50-bed satellite hospital in partnership with acute care providers.

Primary referral relationships with acute care hospitals

The success of the joint ventures directly feeds into primary referral streams. By collaborating with acute providers, Encompass Health Corporation aims to capture qualified patients needing post-acute care, which helps partners manage challenges like length of stay and reducing hospital readmissions. This alignment is critical for volume, especially as EHC targets growth in underserved markets.

The operational results from these relationships in 2025 reflect strong patient flow:

Furthermore, EHC's focus on operational efficiency, which helps partners, is evident in their internal metrics. For example, contract labor costs saw a 33% drop due to improved workforce planning. That's a tangible benefit you can point to when discussing partnership value.

Strategic alliances with managed care organizations (MCOs)

Strategic payer diversification, particularly with Medicare Advantage (MA) plans, is a major catalyst. You can see the payoff in the numbers from Q1 2025. Medicare Advantage discharges accounted for 20% of total discharges, a massive jump from under 9% back in 2018. This shift is driven by moving contracts toward episodic payment models.

The financial alignment with these MCOs has improved significantly:

• The reimbursement gap between Medicare Advantage and Fee-for-Service narrowed to less than 2%.
• This is a substantial improvement from the gap being over 25% previously.

This focus on value-based care, which MCOs prioritize, helps EHC achieve higher patient retention and conversion rates. The company's occupancy rate hit a record high of 78.8% in Q1 2025, partly due to these strong payer relationships and investments in private rooms (now 56% of the portfolio).

Technology partners for clinical data and AI integration

While specific partner names weren't detailed in the latest filings, the strategy is clear: EHC is deploying predictive analytics to identify high-risk patients and reduce readmissions, aligning with MCO priorities. The company's goal is to optimize historical inpatient rehabilitation data to build predictive models that improve patient care and outcomes. This implies active partnerships in the data science and health tech space, even if the dollar amounts for those specific contracts aren't public.

Government regulatory bodies (CMS) for Medicare reimbursement

The relationship with the Centers for Medicare & Medicaid Services (CMS) is foundational, given that Medicare is a primary payor. EHC's operations are constantly adapting to regulatory changes, including the CMS inpatient rehabilitation review choice demonstration project, which introduces uncertainty regarding Medicare claim collectability. You have to watch this closely; regulatory uncertainty is a near-term risk.

For the fiscal year 2025 guidance, the company projected a net operating revenue between $5,800 million and $5,900 million. The proposed FY 2025 update to the Medicare payment rate for Inpatient Rehabilitation Facilities (IRFs) included a proposed payment rate increase of 2.8 percent. This rate is calculated based on the applicable market basket increase (projected at 3.2 percent) less an estimated productivity adjustment of 0.4 percentage points, as required by statute. The company's ability to manage costs, particularly labor, against these reimbursement rates is key to hitting their 2025 Adjusted EBITDA guidance of $1,160 million to $1,200 million.

Finance: draft 13-week cash view by Friday.

Encompass Health Corporation (EHC) - Canvas Business Model: Key Activities

You're looking at the core actions Encompass Health Corporation (EHC) takes every day to run its business, focusing on the numbers that define its scale and growth as of late 2025. These activities are what drive their financial results.

Operating and managing 170 inpatient rehabilitation hospitals

Encompass Health Corporation (EHC) is the largest owner and operator of inpatient rehabilitation hospitals in the United States. As of September 30, 2025, the company owned and operated 170 inpatient rehabilitation hospitals. 66 of these hospitals operate as joint ventures with acute care hospitals. These facilities are located across 39 states and Puerto Rico. The company employed more than 42,500 people nationwide as of that date. To give you a sense of market penetration, approximately one in three patients in the U.S. receiving inpatient rehabilitative care receive it through an Encompass Health rehabilitation hospital. The company is definitely focused on maintaining this massive footprint.

Here are some key operational metrics around patient volume:

• Patient discharges in Q3 2025 totaled 65,839.
• Same-store discharge growth for Q3 2025 was 2.9%.
• Net patient revenue per discharge in Q3 2025 was $21,679.
• The average patient age across all payors is 72.

Aggressive capacity expansion (new hospitals and bed additions)

Encompass Health Corporation (EHC) is actively growing its physical capacity to meet demand. The company plans to open 7 new de novo facilities and 1 satellite facility in 2025. New de novo facilities now open with about 50 beds, which is an increase from the previous 40-bed prototype. The average cost per bed for these new facilities is stabilizing around $1.2 million. Joint ventures remain a key strategy, representing 40% of portfolio hospitals due to their faster ramp-up potential. The company is also looking further out, with 10 de novo projects announced beyond 2025, representing an addition of 500 beds. That's serious long-term planning.

Capacity additions during the 2025 reporting periods include:

Delivering intensive, specialized rehabilitative treatment

The core service involves delivering intensive therapy. At Encompass Health Corporation (EHC) hospitals, patients typically receive three hours of therapy per day, five days a week, supported by 24/7 nursing care. This intensive approach yields strong results; as of March 2025, 84% of patients returned home upon discharge. Clinical expertise is formalized through accreditations. 147 hospitals hold one or more disease-specific certifications from The Joint Commission's Disease-Specific Care Certification Program. Specifically, 146 of their hospitals have the stroke rehabilitation accreditation. Furthermore, 96% of all hospitals with hip fracture rehabilitation accreditation are Encompass Health hospitals. These specialized capabilities help manage complex cases and support payer relations.

Managing complex payer relations and regulatory compliance

Managing payer mix and navigating regulatory environments is a constant activity. The payer mix has remained relatively stable, with Medicare accounting for 65% of volume over the last four years. Medicare Advantage discharges saw a significant increase of 12.5% in 2024. The payment differential for Medicare Advantage compared to fee-for-service is just over 3%. The company is actively addressing policy risks and anticipates the release of the preliminary Inpatient Rehabilitation Prospective Payment System (IRF PPS) rule for 2026. For the full year 2025, Encompass Health Corporation (EHC) projects its net operating revenue to range between $5.905 billion and $5.955 billion. Adjusted EBITDA for 2025 is forecasted to range from $1.235 billion to $1.255 billion. The operating margin for the company is reported at 17.29%.

Key 2025 Financial Projections (Full Year Guidance):

• Projected Net Operating Revenue: $5.905 billion to $5.955 billion
• Projected Adjusted EBITDA: $1.235 billion to $1.255 billion
• Projected Adjusted EPS from Continuing Operations: $5.22 to $5.37

Investing in clinical technology and data analytics

Encompass Health Corporation (EHC) leverages its large datasets to drive performance. The digital health strategy is based on using exceptionally large post-acute datasets alongside business and technology partners. This includes using proprietary operations management systems that provide real-time data for benchmarking and analysis across areas like readmission risk and therapy outcomes analysis. The company also signals its commitment to innovation through research funding. For 2025, the research grant program offers up to $60,000 in funding to support studies, a definite increase from the $50,000 total available in 2024. This investment focus aligns with the shift toward value-based care, where measurable outcomes are key to reimbursements. The company's Q3 2025 Adjusted EBITDA grew 11.4% year-over-year to $300.1 million. Finance: draft 13-week cash view by Friday.

Encompass Health Corporation (EHC) - Canvas Business Model: Key Resources

You're looking at the core assets that make Encompass Health Corporation run. These aren't just things they own; these are the things that actually deliver the value proposition in post-acute care. Honestly, it all starts with the physical footprint and the people who staff it.

Nationwide network of 170 inpatient rehabilitation hospitals

The sheer scale of the physical plant is a massive resource. As of September 30, 2025, Encompass Health Corporation owned and operated 170 inpatient rehabilitation hospitals across the United States. This network spans 39 states and Puerto Rico. You should note that this number is growing; in the third quarter of 2025 alone, they opened three new hospitals and added 39 beds to existing facilities.

Here's a quick breakdown of the network structure as of late 2025:

Highly specialized clinical staff and physician expertise

The people are definitely a key resource here. Encompass Health Corporation employed more than 42,500 people nationwide as of September 30, 2025. This expertise is validated through specific accreditations, which is a huge differentiator when dealing with referral sources.

The clinical specialization is concrete:

• 147 hospitals hold one or more disease-specific certifications from The Joint Commission's Program.
• 146 of their hospitals have the accreditation for stroke rehabilitation.
• They hold the accreditation for hip fracture rehabilitation in 96% of all hospitals that have it.

The demand for this expertise is reflected in patient volumes; for example, neurological conditions and stroke volume grew 126.7% in the second quarter of 2025.

Proprietary clinical data and patient outcome metrics

You can't manage what you don't measure, and Encompass Health Corporation uses its data systems to demonstrate value. In 2024, they reported an 88.7% discharge-to-community rate. Their proprietary systems helped achieve a 5% reduction in average patient length of stay for certain programs in 2024.

Operational performance in 2025 shows continued success in moving patients through the system:

• Q2 2025 total discharges grew 7.2%, with same-store growth at 4.7%.
• Q2 2025 net patient revenue per discharge grew 4.2%.
• Q3 2025 total discharges grew 5.0%, with same-store growth at 2.9%.

Financial capital for CapEx and de novo hospital development

Growth requires capital, and Encompass Health Corporation has been actively deploying it. In 2024, the company increased capacity by a total of 427 beds through new hospitals and additions. They reported spending approximately $600 million on property, plant, and equipment in 2024, which supports technology upgrades and facility enhancement. For 2025 development, management specifically added $5,000,000 to anticipated de novo spend to accelerate a land purchase.

The 2025 financial outlook reflects this investment strategy. The reaffirmed full-year 2025 guidance projects:

The updated guidance for Net Operating Revenue was between $5.85 billion and $5.925 billion.

Strong brand reputation in post-acute care

Reputation translates directly into preferred status with payers and referral partners. Encompass Health Corporation has been named 'America's Most Awarded Leader in Inpatient Rehabilitation' by Newsweek and Statista for the sixth consecutive year as of September 2025. Furthermore, the company is ranked as one of Fortune's World's Most Admired Companies™ and Forbes' Most Trusted Companies in America. For 2025, 66 Encompass Health hospitals were included on Newsweek and Statista's America's Best Physical Rehabilitation Centers list, which was the most hospitals included for any single provider.

Finance: draft 13-week cash view by Friday.

Encompass Health Corporation (EHC) - Canvas Business Model: Value Propositions

Superior patient outcomes

• Discharge to community rate (2024): 67.3%
• Discharge to acute care hospital (Lower is better)
• Discharge to skilled nursing facility (Lower is better)

Intensive, facility-based care

• Minimum of 3 hours of therapy per day
• Therapy provided 5 days each week
• 24/7 nursing care

Cost-effective care for payers

Encompass Health Corporation (EHC) delivers care that is financially advantageous for payors through operational efficiency, which is reflected in shorter lengths of stay compared to alternative settings.

Specialized treatment for complex conditions

The care model is designed for patients recovering from life-changing illnesses and injuries, with specific patient mix data showing high acuity needs.

• Stroke (RIC 01) admissions (2023): 17.8%
• Brain dysfunction (RIC 02/03) admissions (2023): 11.2%
• Conditions treated include brain injury, spinal cord injury, amputations, and complex orthopedic conditions

Connected Care, Superior Outcomes mission

This mission underpins the financial performance and market position, driving volume and revenue growth across the national network.

• Projected Full-Year 2025 Net Operating Revenue: $5.85 billion to $5.925 billion
• Total Discharges (Q3 2025): 65,839
• Network Size (Late 2025): 171 hospitals in 39 states and Puerto Rico

The company was named 'America's Most Awarded Leader in Inpatient Rehabilitation' by Newsweek and Statista for the sixth consecutive year in 2025.

Encompass Health Corporation (EHC) - Canvas Business Model: Customer Relationships

The core of Encompass Health Corporation (EHC) customer relationship is a high-touch, personalized, patient-centered care model. As of Q2 2025, Encompass Health Corporation reported a Net Promoter Score (NPS) of 76, reflecting exceptional patient satisfaction. The company's goal is to return more than 80% of its patients to their homes. Operationally, patients receive a minimum of three hours of therapy per day, five days a week, alongside 24/7 nursing care. As of September 30, 2025, Encompass Health Corporation operates 170 inpatient rehabilitation hospitals across 39 states and Puerto Rico. For the third quarter of 2025 alone, the company managed 65,839 patient discharges.

Here are some key operational metrics reflecting the patient relationship:

The relationship with external providers is managed through dedicated business development teams and clinical liaisons maintaining strong hospital relationships. This focus on partnerships is essential for driving referrals. In the third quarter of 2025, Encompass Health Corporation further increased its capacity by opening three new hospitals and adding 39 beds to existing facilities. The company was named a recipient of the 2025 NRC Health Excellence in Patient Experience Award, which honors organizations based on real-time patient feedback, specifically whether patients would recommend the provider.

Digital channels for patient and family engagement are supported by proprietary technology. Encompass Health Corporation uses its platform, Beacon, to consolidate data from various sources, including patient satisfaction scores, allowing leadership to drive best practices enterprise-wide. This data-driven approach contributed to a 5% reduction in average patient length of stay for specific rehabilitation programs in 2024 due to data-driven enhancements.

For long-term relationships with institutional investors, the ownership structure shows deep commitment from this segment. As of June 2025, Institutional Investors held 94.55% of the shares, with Mutual Funds holding 88.31%. Major institutional shareholders as of late 2025 include Vanguard Group Inc at 10.18% ownership and Blackrock Inc at 9.81% ownership. Insiders held an unchanged 3.00% stake in June 2025.

• The company operates 170 inpatient rehabilitation hospitals.
• The CPR program, focused on Comfort, Professionalism and Respect, is embedded across all hospitals.
• Encompass Health Corporation was named "America's Most Awarded Leader in Inpatient Rehabilitation" by Newsweek and Statista for the sixth consecutive year in 2025.
• The company raised its full-year 2025 net operating revenue guidance to between $5.85 billion and $5.925 billion.

Encompass Health Corporation (EHC) - Canvas Business Model: Channels

You're looking at how Encompass Health Corporation (EHC) gets its services in front of the people who need them. It's all about the pipeline, and for EHC, that pipeline is heavily dependent on established healthcare relationships.

The direct patient referrals from acute care hospitals form the bedrock of the entire operation. This channel is so critical that, based on available data, about 91% of Encompass Health Corporation admissions originate from these acute care settings. This reliance means the relationship management with those hospitals is a key driver of volume. To be fair, this number is based on 2022 Medicare claims data, but it illustrates the historical dominance of this referral source.

The company actively cultivates these relationships through partnerships. As of September 30, 2025, 66 of its inpatient rehabilitation hospitals operate as joint ventures with acute care providers. This structure embeds Encompass Health Corporation directly into the discharge planning process of its partners.

Beyond the direct hospital-to-hospital link, the physician and case manager referral networks are essential for capturing the remaining patient flow. These professionals are the gatekeepers who determine the appropriate post-acute setting for complex recoveries. Encompass Health Corporation emphasizes its clinical expertise, noting that 147 of its hospitals held one or more disease-specific certifications from The Joint Commission as of January 2025, which helps build trust with referring physicians.

The digital presence serves as the modern complement to these traditional channels. The company website and digital front door for consumer information are undergoing active refinement. The leadership team noted in August 2025 that decisions regarding the website platform were heavily driven by consumer behavior, specifically noting that 80% of people visiting the site use mobile devices. This digital hub is foundational for communication and marketing efforts, aiming to serve general information needs while also supporting decision-making for potential patients.

The sheer scale of the operation supports the reach of all these channels. Encompass Health Corporation maintains a national footprint across 39 states and Puerto Rico. This broad presence means the referral networks and digital tools must function consistently across diverse regional markets.

Here's a quick look at the operational scale supporting these channels as of late 2025:

The company continues to expand capacity to meet demand, which directly impacts the volume flowing through these channels. For instance, in Q3 2025, Encompass Health Corporation opened three new hospitals and added 39 beds to existing facilities.

The effectiveness of these channels is also reflected in patient outcomes, which feed back into referral trust:

• Returning more than 80% of patients to their homes (as of Q2 2025).
• Achieving a Net Promoter Score patient satisfaction of 76 (as of Q2 2025).
• Discharge-to-community rate reported at 88.7% in 2023.

Finance: draft the Q4 2025 referral source attribution breakdown by Friday.

Encompass Health Corporation (EHC) - Canvas Business Model: Customer Segments

You're looking at the core patient base for Encompass Health Corporation (EHC) as of late 2025. This is where the revenue actually comes from, and it's heavily weighted toward government payers.

The primary customer segment is comprised of patients requiring intensive post-acute rehabilitation following a major injury or illness. Encompass Health Corporation, the largest owner and operator of inpatient rehabilitation hospitals in the United States, serves patients recovering from conditions like stroke and hip fracture across its national footprint.

The payer mix, which dictates the financial relationship with these patients, is dominated by federal programs. For the third quarter ended September 30, 2025, the revenue breakdown by payer type is critical to understanding the business structure:

The operational performance within this segment is measured by patient throughput and quality outcomes. For instance, in Q3 2025, Encompass Health Corporation achieved a community discharge rate of 84.6%, which exceeds the industry average.

The referring sources are the gatekeepers to these patients. Encompass Health Corporation relies on strong relationships with:

• Referring acute care hospitals and health systems.
• The company operates 171 hospitals in 39 states and Puerto Rico as of Q3 2025.
• In Q3 2025, the company opened three new hospitals, including its first in Connecticut.
• The discharge to acute care hospital rate was 8.6% in Q3 2025.

To be defintely clear, the business is structured around serving high-acuity patients whose care is overwhelmingly paid for by Medicare and Medicare Advantage plans. The company's capacity expansion, adding beds throughout 2025, directly targets increasing the volume of these specific customer segments.

Finance: review the Q3 2025 revenue per discharge against the 2025 guidance for net patient revenue per discharge by Friday.

Encompass Health Corporation (EHC) - Canvas Business Model: Cost Structure

You're looking at the cost side of Encompass Health Corporation's (EHC) engine, the necessary outflows to keep those inpatient rehabilitation hospitals running and growing. Honestly, the biggest chunk of cash goes out the door for people-the doctors, nurses, therapists, and support staff. That's just the reality of a service-heavy business like this.

Here's the quick math on the major cost components based on the nine months ended September 30, 2025, which gives us a solid look at the current run rate. Remember, these are for the first nine months of 2025, not the full year.

The total operating expenses for the twelve months ending September 30, 2025, reached $4.794B, showing a year-over-year increase of 9.12%.

Debt servicing is a fixed, predictable cost, though it's not part of the operating expenses above. For the full year 2025, Encompass Health Corporation estimates its interest expense and amortization of debt discounts and fees to be approximately $125 million. Also estimated for 2025 is an additional $10 million for amortization of debt-related items.

Capital expenditures (CapEx) are a key focus for growth, which you see reflected in their plans. While a total 2025 CapEx number isn't explicitly provided in the latest guidance, the investment in new facilities is clear. Costs associated with building a new 50-bed Inpatient Rehabilitation Facility (IRF) are projected to be around $58.0 million for projects starting in the 2025-2026 timeframe. This typical project cost breaks down into:

• Construction, design, permitting, etc.: $47.0 million for 2025-2026.
• Land acquisition: $5.0 million.
• Equipment (including CIS): $6.0 million.

Costs associated with regulatory compliance and technology are embedded within the operating expenses, particularly General and Administrative expenses and Other operating expenses. Management has noted that climate-related laws and regulations have increased costs associated with compliance, and the company is investing in innovation and technology to improve operational effectiveness, which drives these specific cost lines up. For instance, new hospital openings in 2025 are expected to cause elevated pre-opening and ramp-up costs, primarily in the latter half of the year.

You'll want Finance to track the actual spend on new facility pre-opening expenses against the expected $2.5 million total pre-opening and ramp-up costs (salaries/wages/benefits of $1.5 million plus operating costs of $1.0 million) per new hospital.

Encompass Health Corporation (EHC) - Canvas Business Model: Revenue Streams

The revenue streams for Encompass Health Corporation (EHC) are fundamentally tied to the delivery of high-quality inpatient rehabilitation services across its national hospital network, supplemented by other healthcare services.

The core of Encompass Health Corporation (EHC)'s revenue generation comes from net operating revenue from inpatient rehabilitation services. This is the primary engine driving the company's financial performance, reflecting the volume of patients treated and the rates negotiated with payers.

Here is a look at the key financial projections and realized metrics as of late 2025:

The company's revenue realization is heavily dependent on its relationships and contracts with major third-party payers. These agreements dictate the reimbursement rates for the care provided.

Payments are received primarily from the following sources:

• Medicare, which operates under a prospective payment system based on case-mix groups.
• Medicare Advantage plans, which are a growing segment of the payer mix.
• Managed Care payers and private insurers, often paying on a per-day or per-discharge basis for a service package.

The company's Q3 2025 results showed a 9.4% increase in net operating revenue year-over-year, reaching $1,477.5 million, driven by a 5% increase in total discharges and a 3.3% rise in net revenue per discharge to $21,679. So, you can see the volume and rate increases are working together to build that top line.