Q4 2025 Encompass Health Corp Earnings Call Transcript
Key Points
- Encompass Health Corp (EHC) reported a 10.5% increase in revenue for 2025, driven by 6% discharge growth and improved pricing.
- EBITDA grew by 14.9% in 2025, benefiting from operating leverage and disciplined expense management.
- Premium labor costs decreased by over $21 million from 2024, even with increased capacity and patient numbers.
- The company added 517 beds in 2025, including 8 new hospitals, indicating strong investment in capacity expansion.
- Encompass Health Corp (EHC) maintained a strong balance sheet with a year-end net financial leverage of 1.9 times, allowing for continued investments and shareholder distributions.
- Concerns were raised about regulatory changes, specifically the extension of RCD and the initiation of the team model, which could impact operations.
- Medicare Advantage conversion rates dropped significantly in Q4, particularly with one national payer, potentially affecting patient admissions.
- The company faced challenges with Palmetto, a MAC in Alabama, which continues to non-affirm claims, impacting the affirmation rate.
- There were headwinds from unit consolidations and closures, such as in Cincinnati and Sewickley, affecting discharge growth.
- The company anticipates a 70-basis-point headwind for 2026 discharge growth due to unit closures and consolidations.
Good morning, ladies and gentlemen. Welcome to today's Encompass Health Fourth Quarter 2025 Earnings Conference Call. (Operator Instructions) Just a reminder, today's call is being recorded. And if you have any objections, you may disconnect at this time.
I will now turn the call over to Mr. Mark Miller, Encompass Health's Chief Investor Relations Officer. Mark, please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining Encompass Health's Fourth Quarter 2025 Earnings Call.
Before we begin, if you do not already have a copy, the fourth quarter earnings release, supplemental information and related Form 8-K filed with the SEC are available on our website at encompasshealth.com. On Page 2 of the supplemental information, you will find the safe harbor statements, which are also set forth in greater detail on the last page of the earnings release. During the call, we will make forward-looking statements, such as guidance and growth projections, which
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