Encompass Health (EHC)2025-02-28 18:47Financial Performance - Total net operating revenues for 2024 reached 4,801.2 million in 2023[24]. - The number of discharges increased to 248,498 in 2024, compared to 229,480 in 2023, reflecting an 8.8% growth[24]. - The company has a strong balance sheet with approximately 78% of hospital real estate owned and no significant debt maturities until 2028[34]. - The company has a 944 million available for borrowing as of December 31, 2024[29]. - Medicare revenues account for approximately 82% of total revenues, with 65.1% from traditional Medicare and 16.8% from Medicare Advantage in 2024[59][60]. - The sources of revenue mix for 2024 shows a slight decrease in Medicaid revenues to 3.3% from 4.0% in 2023[60]. - Medicaid payments for specific discharges represented only 3.3% of consolidated net operating revenues for the year ended December 31, 2024[80]. - Medicaid discharges represented 5.6% of total inpatient discharges for the year ended December 31, 2024[80]. Operational Growth - In 2024, the company operated 166 inpatient rehabilitation hospitals, an increase from 161 in 2023 and 153 in 2022[24]. - The company aims to add 6 to 10 new inpatient rehabilitation hospitals and 80 to 120 beds to existing hospitals annually[30]. - The company has opened or acquired 71 new hospitals since 2012, increasing licensed beds by approximately 67%, or 4,438 beds[38]. - As of December 31, 2024, 143 out of 166 hospitals held stroke-specific certifications, indicating a focus on enhancing stroke care[27]. Employee Engagement and Development - As of December 31, 2024, the company employed approximately 40,000 individuals, with 23,564 full-time employees[40]. - The nurse turnover rate decreased to 20.4% in 2024 from 23.1% in 2023, while therapist turnover remained stable at 7.7%[50]. - The overall employee engagement score was 83.7% favorable in 2024, reflecting a small increase over 2023, with 87% participation in the survey[53]. - The company reimbursed over 4.0 million toward employees' student loan debt in 2024[51]. - The company has endowed five scholarships for students pursuing degrees in nursing and allied health fields[51]. - The company offers a 30% to 50% reduced tuition rate for nurses advancing their academic degrees[51]. - The company has invested in best-in-class technology for on-demand learning and development programs[52]. - The DE&I program achieved a favorable response rate of 83.1% for embracing diversity as a strength, compared to the industry benchmark of 78.9%[49]. - The company sponsored seven students from disadvantaged groups in partnership with Holy Family Cristo Rey Catholic High School in 2024[47]. Regulatory Compliance and Risks - The company is subject to audits by Medicare Administrative Contractors (MACs) and Recovery Audit Contractors (RACs), which can lead to adjustments in reimbursement[66]. - Compliance with the "60% Rule" is critical for facilities to maintain their classification as inpatient rehabilitation facilities (IRFs) and avoid reduced reimbursement rates[70]. - Future changes in Medicare reimbursement rates and regulations could materially affect the company's financial position and operations[65]. - The complexity of healthcare regulations, including the Stark law, poses challenges for compliance, and the company cannot assure that every relationship fully complies with these laws[106]. - Non-compliance with certification requirements may lead to ineligibility for Medicare or Medicaid reimbursement, and could result in substantial penalties[88]. - The company has developed operational systems to facilitate compliance with Medicare standards, but there is no assurance against allegations of noncompliance[91]. - The federal False Claims Act imposes penalties equal to three times the actual amount of overpayments plus up to approximately 100,000 for each violation plus tripled damages for improper claims, and may lead to exclusion from Medicare and Medicaid programs[98]. - The 2020 Stark Rule creates permanent exceptions for value-based compensation arrangements that aim to improve patient care and reduce costs, enhancing coordinated care agreements[105]. - The company maintains a comprehensive ethics and compliance program, including annual training for employees and a policy of non-retaliation for reporting compliance concerns[85]. - The company faces significant risks from increasing state and local regulations that may conflict with federal regulations, impacting operational compliance[84]. - Violations of the Stark law could have a material adverse effect on the company's business, financial position, and stock price[107]. - The company is subject to various federal and state privacy-related laws, which could impose additional penalties beyond HIPAA regulations[113]. - Penalties for HIPAA violations can reach approximately 49,000 to $2,135,000 depending on the level of culpability[112]. Market Conditions and Future Outlook - Approximately 54% of Medicare beneficiaries were enrolled in Medicare Advantage plans in 2024, with projections indicating this could rise to about 64% by 2034[77]. - The 2024 IRF Rule implemented a net 3.4% market basket increase effective for discharges between October 1, 2023, and September 30, 2024[72]. - The 2025 IRF Rule implemented a net 3.0% market basket increase effective for discharges between October 1, 2024, and September 30, 2025, with an expected net increase to Medicare payment rates of approximately 3.3%[73]. - In 2024, typical rate increases for managed care contracts ranged from 2-4%[76]. - The company has seen a growing percentage of revenue derived from Medicare Advantage payors, which typically reimburse less than traditional Medicare[77]. - The company faces risks from credit market uncertainty, which could adversely affect its financial condition and growth opportunities[262]. - The inability to obtain additional financing at reasonable costs could have a material adverse effect on the company's financial condition or growth opportunities[262]. - Future market shocks could lead to reduced availability of certain types of debt financing, impacting the company's business plan[262]. - The company monitors the financial strength of its depositories, creditors, and insurance carriers to mitigate risks associated with credit market uncertainty[263].