Q1 2026 Encompass Health Corp Earnings Call Transcript
Key Points
- Encompass Health Corp (EHC) reported a 9% increase in first-quarter revenue and an 11.2% rise in adjusted EBITDA, leading to an upward revision of their 2026 guidance.
- The company achieved significant improvements in patient outcomes, with discharge community rates improving by 50 basis points to 84.5%, exceeding industry averages.
- EHC has successfully reduced RN turnover to 17.8%, the lowest since 2012, contributing to a 9.4% decline in premium labor spend compared to Q1 2025.
- The company is expanding its capacity with plans to open 7 new hospitals and add 100 to 150 beds to existing hospitals, addressing strong demand for inpatient rehabilitation services.
- EHC is actively investing in clinical staff development, which has led to increased participation in career ladder programs and improved staff retention.
- Bad debt expense increased by 20 basis points to 2.2%, primarily due to writing off claims from 2013 associated with a legacy audit appeal.
- The closure of certain IRF units impacted total and same-store discharge growth by approximately 85 basis points.
- Occupancy constraints in certain markets have become a challenge, with 35% of hospitals experiencing occupancy rates above 90%.
- Medicare Advantage (MA) trends continue to pose challenges, with aggressive utilization management from large national payers affecting patient admissions.
- The company faces regulatory challenges, including the implementation of new rules and the expansion of Review Choice Demonstration (RCD) into additional states.
Good morning, everyone, and welcome to the Encompass Health first quarter 2026 earnings conference call. (Operator Instructions)
Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mark Miller, Encompass Health's Chief Investor Relations Officer. Please go ahead.
Thank you, operator, and good morning, everyone. Thank you for joining Encompass Health's first quarter 2026 earnings call. Before we begin, if you do not already have a copy, the first 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 are subject to risks and
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